25 June 2020

WRITER: Meredith Booth

South Australia’s healthy food production ecosystem gives UniSA researchers food for thought on marketing best practice to ensure regional communities continue to grow.  


Strong local food production brings enormous societal benefits for regional communities, yet Australia's current retail landscape favours large players, leaving local producers vulnerable.


Exploring marketing and distribution strategies can help local retailers identify more sustainable pathways to retail, as well as options for product extension and more targeted communications. Together these can protect the long-term livelihoods of regional communities.

South Australia’s healthy food production ecosystem gives UniSA researchers food for thought on marketing best practice to ensure regional communities continue to grow.

Barossa Valley Cheese Company founder Victoria McClurg is proud of her part of the tapestry of enterprise being woven in Australia’s world-famous wine region.

Since 2003, the cheese maker has opened a ‘cheese cellar’ in Angaston, employed 16 people and has increased the milk sourced from local Nietschke family dairy farm, its sole supplier, from 300 litres to almost 10,000 litres a week.

“We wanted to add to the tapestry of offerings, so that our region continues to grow and thrive,’’ the winemaker-turned-cheesemaker says. “I believe we need that diversity.”

McClurg hopes to grow her near $2 million turnover business through the sale of her cheese range via independent grocers and gourmet stores around Australia, but is not interested in breaking into Australia’s retail duopoly Coles and Woolworths.

“We want to grow a little bit, but we’re not looking to be massive. The importance is that we’re a profitable business, we keep people employed and give them a sense of value in the community,’’ McClurg says. “That, for me, is the stuff that makes me proud. We are feeding back into the community and we’re a destination for people visiting the Barossa Valley.’’

Pathway from Paddock to Plate

While McClurg’s journey from paddock to plate and supermarket shelf has been successful, other small producers can stumble, which is why UniSA’s Ehrenberg-Bass Institute for Marketing Science is examining the issue.

Associate Professor Svetlana Bogomolova leads a cross-disciplinary project investigating challenges and opportunities for local food producers in a supply chain.

“Strong local food production brings enormous societal benefits, such as supporting local employment and regional economies, environmental benefits associated with low food miles, and superior freshness, quality and nutritional value for food on consumer tables,” Assoc Prof Bogomolova says.

“But despite these benefits, there are major challenges for local producers – predominantly, the nature of the Australian retail landscape.”

Dominated by very large players, large suppliers get retailers’ preferences. Plus, as consumers and retailers have learned to expect consistent supply throughout the year, it’s harder for smaller players to supply to large retail chains. Add to this seasonal unavailability and perishable nature of local food, and the uphill battle is evident.

“High production and labour costs result in higher prices for consumers, which becomes a challenge for local producers as they’re priced out of the market,” Assoc Prof Bogomolova says. “But the good news is that our research shows that there are multiple opportunities for remedying this situation.

“Local producers can add value to raw produce through further processing, such as making olive oil from olives, or apple puree from apples. This not only extends the shelf life of the product but reduces waste (from misshapen produce that is not visually ‘retail quality’), as well as cutting storage and transport costs.

“Consequently, producers can charge a premium for what otherwise would have been a commodity-level price.”

Understanding the various pathways to retail can help local retailers create a more sustainable supply network, which helps to protect the long-term livelihoods of regional communities.

“Our research shows that the pathway often starts with the farm-gate and honesty box; progresses to farmers markets; then moves to small, then larger independent retailers (such as Foodland or IGA); and finally, to state or national supermarkets. Understanding the whole path and finding a ‘sweet spot’ for each business is critical.

Understanding the whole path and finding a ‘sweet spot’ for each business is critical.

 “Investigating alternative ‘paths to plate’ can also be a win-win for local suppliers and operators. When local producers supply a local cafe, restaurant or winery, they gain the benefits of a reliable and ongoing contract. Similarly, local operators benefit from presenting fresh, local products to their customers, which not only enhances the local brand, but also that of the region – and this has ongoing positive effects for the sustainability of tourism and trade.”

Raising consumer awareness of the benefits of buying local for their families, regions, state and country – is right at the heart of this project.

“Small business holds a crucial role in the South Australian economy – as consumers, we can all play our part in supporting them,” Assoc Prof Bogomolova says.

“Small business comprises around 60 per cent of business in Australia, and employs around 4.8 million people. If we are to retain a healthy, equitable and productive economy, we cannot afford to overlook smaller players.”

She says consumer awareness campaigns should be done at all levels – from government-run campaigns to the ‘grass roots’, and across all supply chain players.

“This is about increasing both mental and physical availability of local foods,” she says. “‘Mental availability’ means the idea to ‘buy local’ is well synced with consumers’ minds; and ‘physical availability’ of local products means that they are available everywhere, making purchasing in a store or restaurant easier. This is key to clever and successful marketing.’’


Buying local

Buying local campaigns such as I Choose SA and Eat Local in South Australia can be a powerful promotion for quality produce, supporting fair pay, lower environmental footprints and lifting social benefits to a community.

Fleurieu Milk Company general manager Nick Hutchinson, who contributed to the Ehrenberg-Bass Institute’s study, says the Myponga dairy producer’s revenues have climbed 48 per cent to $13 million last financial year, thanks to strong demand from restaurant and cafe customers, as well as independent supermarkets.

The Myponga company employs 51 people and supports many more jobs in the community. It now exports its fresh milk and yoghurt daily to Singapore and supplies petrol station giant OTR, but chooses not to supply to the retail duopoly of Coles and Woolworths.

It’s currently expanding its supplier base and is paying sustainable prices to new farmers who have had their prices squeezed by the major retailers in the well-documented milk price wars.

“Consumers are certainly aware of the negative media surrounding the major supermarkets and the dairy industry, yet for us, the issue has simply driven people to ask questions about our brand and the result has been actually positive for Fleurieu Milk,’’ Hutchinson says.

Findings from the Ehrenberg-Bass Institute research were also included in the 2017 South Australian Parliamentary inquiry: From Paddock to Plate - a Fair Return for Producers. The inquiry sought to improve retail pathways for South Australia’s small producers who contribute to the State’s $12 billion in sales from forestry, wine and food sales.

Among them were better advocacy for producers from government agencies and the small business commissioner; demonstrating the benefits of cooperatives to increase market power; awarding more and smaller grants to aspiring producers; removing legislative barriers; and strengthening the Grocery Code of Conduct.

Currently under review, the code is expected to change its good-faith provisions to include fair outcomes for suppliers, particularly in light of the price wars with major retailers, experienced by the dairy industry and other suppliers.

South Australian Small Business Commissioner John Chapman, has said that retail behemoth Coles had cast aside its corporate values of social responsibility and caring for the community, and used its market power to bully suppliers into paying to keep their items stocked on shelves.

Corporate values, used to “evoke a feel-good factor” for customers, were ignored in order to cut costs, Chapman has said.

Not all small producers want to supply the big retailers. The State’s strong independent retailers – Foodland, Foodworks, and Drakes – have about one third market share, making them a good target for smaller producers. But getting into them can still be a challenge. So, what can local producers do?


Independent retailers have influence

Foodland Marketing Manager Nicole Richards, who moved to the retailer 18 months ago after completing her UniSA Master’s thesis on the local food supply chain with the Ehrenberg-Bass Institute, says while South Australia’s local food industry is healthy, there are opportunities for small producers to grow.

 “A common challenge for local producers is being able to maintain a consistent supply to supermarkets, especially with all the storage, logistics and costs that this entails,” Richards says. “By amalgamating resources, through cooperatives, local producers can achieve economies of scale, helping them to afford services like marketing to improve their business. Cooperatives offer realistic solutions for local business growth.”

Richards says she’s excited to be working for a company that cares about local producers and has The Mighty South Aussies as its positioning statement.

“Foodland is a big supporter of the I Choose SA campaign. We essentially own this space. It’s something we’re all passionate about and we put a lot of resources into supporting local products with advertising.”

The retailer also supports local suppliers through its Foodland Brand range – where more than 50 per cent are sourced from South Australian suppliers, including honey from Kangaroo Island and olive oil from the Limestone Coast.

Typically, more supermarket-owned brands mean lower prices for consumers and greater retailer margins, which can impact Australian suppliers as their branded products are delisted and supermarkets seek out cheaper manufacturers overseas. Yet for Foodland, it’s all about supporting ‘home grown’ products and ensuring local producers have a place in the retail environment.

“The economic and social benefits of supporting local ventures is incredibly important for the social fabric of regional areas, boosting regional employment and fostering important social interaction among communities,” Richards says. “The ‘door is always open’ for local producers and any new player who seeks an opportunity to stock their goods. Our store managers often try positioning a local product in a different aisle, or test products, packaging and pricing with consumers, just to give the local producer a fair go.

“There’s something about relying on others in your community for something as important as food, which fosters that interaction and brings people together. It’s such an important social benefit.’’ 

Tips for local producers:

Add value to raw products
Processing primary foods can expand a product’s shelf life, reduce costs for storage, wastage and transportation. You can also charge more for your end-product.

Explore opportunities on a pathway to retail
Understanding the pathway from paddock to plate will help identify the ‘sweet spot’ for your business – the whole pathway is not for
every business.

Investigate alternative supply options
Your ‘path to plate’ could benefit from supplying local restaurants, providing you with a secure and reliable income and local businesses with fresh, local produce.

Smart marketing
Think creatively about distribution and communication strategies to ensure your product is in the mind and space of potential customers — they'll be more likely to think of you when they’re ready to buy.

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