Winning a premium from grocery customers with a vast array of quality products sustains local artisan producers nationwide. Andrew Patterson learns how it can be done in a market dominated by tough corporate giants

Winning a premium from grocery customers with a vast array of quality products sustains local artisan producers nationwide. Andrew Patterson learns how it can be done in a market dominated by tough corporate giants

By Andrew Patterson

Despite tougher economic times, the competition for the food dollar has never been more intense.

Gone are the days of supermarkets stocked with only the basics, replaced by an array of pre-packaged meals, organic soups and gourmet cheeses that has made shopping for food a much more pleasurable, if sometimes a slightly bewildering experience.

Each week a proliferation of enticing products vies for our attention while all the time the healthy food message becomes ever more elevated in our minds.

Now a new breed of food shopper has begun to emerge.

Educated, food conscious and frequently with higher discretionary income, there’s plenty of competition for their spending power.

While the traditional supermarket chains continue to dominate the retail food landscape, competition from farmers markets and several recent start-ups is bringing a much needed shake up to the cosy duopoly that currently exists.

A new retail concept Farro Fresh is the latest retailer to challenge the status quo recently opening its third branch in the upmarket Auckland suburb of Grey Lynn, ironically just a couple of hundred metres from its local Countdown competitor.

Founded by husband and wife team James and Janene Draper the business has grown by an impressive 60% each year since its launch in 2006 with its vast array of locally produced food offerings that almost gives it the feel of a sophisticated indoor farmers market.

“We’d lived in Wellington for a few years and had seen the success of upmarket food retailer Moore Wilson’s” says Janene Draper. “There was really nothing like it in Auckland where you had a whole range of local food products under one roof. You’d have to buy bread from one shop, meat from another and produce from somewhere else and yet there was this growing customer segment who really wanted to buy from local suppliers.”

What has made shops like Farro Fresh particularly popular with customers is the vast array of products they stock made by local artisan producers.

Unlike high volume manufacturers, these suppliers instead place a much greater emphasis on quality over quantity; something for which customers are increasingly willing to pay a premium.

“It’s been a crucial aspect of our business because as a company we really want to champion NZ artisan suppliers.”

“Often they can’t get into the supermarkets because they’re just starting out and we’re a good stepping stone for them to get in front of shoppers. It’s what we feel is fantastic about NZ the fact that there are so many wonderfully passionate producers out there but most of them often really struggle with selling their wares. Our philosophy is that if it’s being made well in NZ, we’ll stock it over an overseas product.”

Competition

So are supermarkets seen as competitors or complimentary operators, given Farro Fresh’s exclusive focus on food?

“We don’t set out to target our locations near supermarkets at all. Finding the right site is always the most difficult aspect of establishing a new branch.”

“We find most of our customers would tend to do their regular weekly shop with us first and then do their big shop at one of the major supermarket chains because we only stock around 40% of the average weekly shopping basket.”

“However, what we’ve noticed is that once they do start to shop with us they find our produce and meat often ends up being better value than the supermarkets. Often that leads to them changing the pattern in the way they shop.”

Having the look of an upmarket retailer can often lead to misleading perceptions around pricing, something Janene Draper is quick to dispel.

“It can be a perception that many people have when they first walk into our stores that everything is going to be that much more expensive.”

“It’s only when they actually start their shopping that they find our prices compare very favourably with the supermarkets. The thing is that we do stock a much more extensive range of premium products so there is always that temptation to add to your basket perhaps as a result of meeting a supplier at one of our in-store tastings.”

When it comes to marketing, the two supermarket chains are some of the biggest advertisers in the country. Without the dollars to compete, Farro Fresh relies heavily on word of mouth for its advertising.

“We recently surveyed some of our customers and found that recommendations from friends and colleagues was one of the main reasons people had found out about us. It’s been a very effective form of advertising for us.”

“We’ve just started doing a bit on social media as well but its early days for us using that medium.”

Customer Engagement

Wander around Farro Fresh and there’s a good chance you’ll have the chance to meet a couple of local producers and taste their wares making the whole shopping experience that much more engaging and more akin to that of a farmers market.

Janene Draper says it’s been a key aspect of the Farro Fresh philosophy.

“My analogy is the difference between tasting a bit of cheese and knowing nothing about the origins or composition of that cheese and coming into the store and meeting the producer. Then you discover the cheese comes from his herd of 40 goats and as a result you’re going to enjoy and appreciate that cheese a whole lot more when you’re serving it to friends and family at the table. For us it’s really all about sharing and if you can share in that experience your loyalty to that product is likely to be much greater.”

So is there such a thing as a typical Farro Fresh customer?

“They do tend to come from a higher socio-economic group. Generally they’re tertiary educated, care a lot about what they eat and they’re interested in knowing the story behind the food that they’re eating.

The healthy food message also tends to be another strong point of leverage. “We tend to look for products with fewer additives in them. For instance we only stock free range eggs and free range chickens and that’s obviously consistent with our core philosophy around product integrity.”

Farro Fresh is also soon set to launch a new tagging system that will include details about the origin of the product allowing customers to find out exactly its place of origin.

“These days people are definitely more interested in what they’re eating and its point of origin. We also find customers are a lot more interested in sustainability and just generally caring a lot more about what they’re consuming.”

Expansion

With three branches so far established in Auckland it seems the tougher economic times haven’t impacted on plans for further expansion in the future.

“We never really had a detailed expansion plan. We just opened our first store and things went from there. My husband, who co-founded the business with me, had the business background and I had a passion for food and se we really just dived in.”

“In some ways the recession has possibly worked in our favour in that people aren’t eating out so much so they’re more inclined to treat themselves a bit on weekends or maybe host a dinner for a few friends. As a result, we’ve seen a bit of a change in our shopping patterns over the last few years where we used to be really busy on the weekends and quieter during the week and that has moved forwards to the point where people are shopping more on a Monday.”

With an annual growth rate of 65% the business has enjoyed steady growth despite the challenging retail environment but as Janene Draper points out, it hasn’t all been smooth sailing, particularly during the early stages.

“If I was being really honest, knowing what I do now, I’m not sure I’d want to go through it all again. The first two years were just so hard. We were getting people coming in and we didn’t have enough stock on the shelves, we needed more infrastructure and the banks were starting to say “no” when we hadn’t quite got over that critical threshold. However, once we did start to get over that hump we were away.”

“There were also issues around establishing a point of sale system because we had lots of small suppliers who didn’t even produce their product with a barcode.”

Product Range

With so many new artisan suppliers constantly emerging producing everything from honey to herb products there is a constant challenge to find sufficient shelf space to stock everything. “We constantly have to re-evaluate what we stock because we’re being approached all the time by new suppliers keen to get a foot in the door. But equally, when we find something we like we have the advantage of being able to move very quickly and we can have it on our shelves in a matter of days.”

“Many of these suppliers are opting for a lifestyle business. I was at a Farmers Market in the Hawkes Bay recently and of the 40 suppliers there 23 of them were already regular suppliers.”

While Farro Fresh doesn’t have the buying power of the large supermarket chains they are adamant that their margins aren’t that much different to their larger competitors; despite having significantly fewer stores.

“We tend to work on as lower margins as we can so we can pass the savings on to customers. What we do find is that many suppliers get really excited at the fact that they can get into the supermarkets and think that they’ve really made it when they do so. However, what they find is that staying there is equally difficult. Countdown regularly advertises about having 100 new products into store every week. Of course the other side of that is that there are 100 products that have fallen off the back end."

“So for them it comes down to volume being moved on the shelf to determine if suppliers remain on their books, which is very different to our approach.”

Staff

With almost 200 staff on its payroll, Farro Fresh is attracting a new breed of highly knowledgeable staff.

“Having a passion for food is obviously vital. We have quite a few staff who have previously been chefs and others who have worked in the hospitality sector and have opted for a job with less intrusive hours. We also invest a lot in our staff with on-going training as well as getting suppliers in to talk to our staff about their products."

And there might be more jobs going at Farro Fresh in 2013 with plans for another Auckland store in the wings.

“We’d like to do another store next year so definitely watch this space.” Food lovers in other parts of the country will be hoping the business decides to spread its wings nationally.

KEY FACTS

Stores: 3 (all in Auckland)
Founded: 2006
Staff: 190
Turnover: Not disclosed
Annual growth rate: 65%
Profitable: Yes
Ownership: Private

 

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