Against odds: local products squeezed off shelves; store-shelf bidding policies are hindering growth opportunities for local food producers, professor says. (Sault Ste Marie).
Marketing students at AUG are studying the purchasing policies of local grocers as part of an ongoing research project examining the issue of accessibility of local products in national chain stores.
And they believe there is enough evidence to call for a public inquiry into the practice of selling grocery store shelf space to the highest bidder, says AUG marketing professor Pelham Matthews.
"It's a practice that's stacked against small business," says Matthews, one that breeds less competition and reduces consumer choice.
In examining the city's economic diversification strategy, Pelham concludes the document was more geared toward attracting large out-of-town smokestack industries rather than encouraging economic growth among existing small- and medium-sized businesses.
Area companies such as Northern Quality Meats, Lock City Dairy, Superior Bakery and water bottlers Pure Lacqua are all viable local businesses, he says, but expansion is out of the question if they cannot get their product into retail stores.
So Matthews posed the question to his students: "Why can't you find local product on store shelves?"
Students began studying existing federal and provincial competition legislation before examining the purchasing policies and practices in four economic sectors: food, manufacturing, wood and retail.
While many grocery store managers were not easily forthcoming with details on their purchasing policies, Matthews and his assistant David Lind believe there is enough anecdotal information from small business owners to warrant government investigation.
Among the hurdles facing area producers is the grocers' shelving practices, says Matthews. Large multi-nationals spend millions of dollars on a provincial or regional basis bidding on shelf space in grocery chain stores, effectively shutting out local producers.
"It's an accepted practice in business," says Lind, an associate With Management and Marketing Research Group, who is assisting with the study. "What we're saying is it creates an unfair advantage and is anti-competitive."
"What's happened in the last 25 years," adds Matthews "is the big players have gotten bigger and established rules in their favour and established profitable relationships with their clients to keep the small (outfits) from getting bigger.
"This is the kind of gamesmanship that the (federal) Competition Act really doesn't address. Smart people can find the loopholes around the regulations.
With their early findings in hand, Matthews and Lind held a roundtable discussion in early March, which was attended by Sault MPP Tony Martin with representatives from the Sault Ste. Marie Chamber of Commerce, the Sault Ste. Marie Economic Development Corp. (EDC) and some small business owners. The discussion focused on the problems they face in the Sault marketplace.
From that meeting, the Sault EDC sent a letter on March 3 to A & P Canada president Eric Claus on behalf of Lock City owner Vic Fremlin reminding Claus that placing local products on store shelves is a 'win-win' situation. It supports local business, ensures a "reliable, flexible source" of product and enhances a company's corporate image, he noted in the letter.
"Certainly what we're hoping to do is raise the awareness of A & P of local products and to let them know we're standing behind our local producers," says Tom Hernden, the city's economic development officer, who had not received any response from the national chain by late March.
"Really the ultimate power lies within the consumers," says Hernden, "that's what forces these companies to make these decisions, that's where the true power lies.
"Small business growth plays an important role in economic development. Not only does it create local jobs and wealth, but assists us in attracting business from out-of-town. Typically they provide services that we can market to companies looking at Sault Ste. Marie from the outside."
Matthews says in order to compete, small producers must find better distribution methods to increase the convenience level for the consumer, such as creating a virtual marketplace or door-to-door delivery. As well, public education is key.
"You can't beat them at price...but you can out-promote them and educate the public with a grassroots approach that this is a local employer, they're your friends and neighbours, they pay taxes here and want to improve the-quality of life here."
A final report was expected to be compiled by late March, complete with a students' position paper that includes a brand awareness campaign and market penetration strategy for small business owners. Copies will be sent to the various community business and economic development stakeholders.
Sault Ste. Marie Top Employers Company Type of Business # of Empl. 1. Algoma Steel Manufacturing 3,500 2. Sault Ste. Marie Hospital Health Care 1,712 3. City of Sault Ste. Marie Municipal Gov't 1,165 4. Algoma District School Board Education 1,600 5. Huron-Superior Catholic School Education 900 Board 6. Ontario Lottery Corporation Lottery 842 7. NuComm International Call Centre 800 8. RMH Teleservices Call Centre 632 9. Kopash Sanitation Janitorial 500 10. St. Marys Paper Newsprint Mill 430 11. Community Living Algoma Education 425 12. Sault College of Applied Arts Education 370 13. Rome's Independent Grocer Grocery Store 370 14. MNR Provincial Gov't 360 15. Group Health Care Health Care 291 16. EDS-GM Roadside Call Centre 275 17. Algoma Central Railway Transportation 267 18. Canadian Tire Associate Retail 260 19. FJ Davey Home Seniors Home 215 20. Dept. National Defense Federal Gov't 194 Source: City of Sault Ste. Marie, www.sault-canada.com/business/ssm/facts
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|Publication:||Northern Ontario Business|
|Date:||Apr 1, 2003|
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