Grocery Stores and Retail and Environment and Real Estate & Retail and Small Business

Farm Fresh clients pay a premium to support local growers, organics

March 24, 2008

When he was 8, Matt Ewer hauled a Radio Flyer wagon loaded with sweet corn door to door in Marion, selling produce to neighbors. Now 30, he runs an online grocery business with his wife, "basically doing the same thing."

The Indianapolis couple launched Farm Fresh Delivery LLC in July. With nearly 500 subscribers already, the business is blooming in a segment where many large, mass-market retailers failed during the dot-com bust.

Farm Fresh delivers organically grown--and, when possible, locally grown--food to homes and businesses throughout central Indiana.

Customers subscribe via www.farmfreshdelivery.com and can either get a standard bin of produce or customize orders to include everything from honey to mushrooms to canned tomato sauce.

Regular produce deliveries are made weekly or biweekly. The bins cost $25 to $49. A $35 bin, for example, will include a mix of organic fruits and veggies. Clients can switch out produce and add on other grocery items, like milk or bread, for an extra charge.

Ewer studied environmental science at Indiana University and managed organic farms in Bloomington and Seattle before moving to Indianapolis to launch Farm Fresh.

In Seattle, he grew Full Circle Farm's home-delivery base from 75 customers to 3,000 and started a delivery service to Alaska from scratch. But he and his wife, Elizabeth Blessing, 30, returned to Indiana last year to be close to family and their network of friends in the farming community. When he got back, Ewer sent a letter to every organic farmer he knew of, telling them of his business plans.

"The ones who took our vision seriously and sought the opportunity are still with us today," he said.

Farm Fresh began making deliveries to about 50 subscribers in July with Ewer behind the wheel. The company started with a truck and van he already owned and strict rules about getting local, high-quality produce.

Startup costs were about $50,000. Ewer declined to disclose revenue, but said the company has not yet broken even.

Produce on a mission

Ewer's interest in agriculture is in his blood. His family owns farmland it leases out near Warren, and he spent many summers helping on the farm.

His grandfather was a lawyer who worked to help farmers keep their land during the Great Depression. His father owns an accounting firm in Marion that does the books for several farmers.

Ewer himself is a jack of all trades who enjoys farming and coordinating suppliers. He even wrote the software for Farm Fresh's online ordering system.

All the better to fulfill Farm Fresh's mission: to give consumers access to food grown locally with environmentally friendly farming methods. At the same time, he wants to provide growers access to retail markets.

"We want to build the vendors so they can grow along with our company," Ewer said. "That's the ultimate goal."

So far, it's working. Sheridan-based Homestead Growers, for example, said Farm Fresh is its largest outlet, topping the sales made through farmers' markets and a co-op program. Homestead produces a veritable harvest of offerings, including beans, peppers, beets, cucumbers, onions, greens, melons and herbs.

Co-owner Steve Spencer said he gets calls all the time from people with big ideas on how to sell his farm's produce. But Ewer's call stood out because he had the experience and tech savvy to pull it all together.

"He's pushed us to expand our business," Spencer said.

And by carrying Homestead's winter products--including mushrooms, pasta sauces and mushroom patties--Farm Fresh has helped stabilize the farm's year-round income.

"It's been a big blessing to us," Spencer said.

Farm Fresh also carries dairy products from Zionsville-based Traders Point Creamery.

"They're one of my best local customers," said creamery saleswoman Katy Jones, adding that the delivery service's weekly order usually equals that of the best-selling Marsh store. Farm Fresh customers can add the creamery's milk, yogurt and cheese to their produce orders.

"I think it pushes new people to try our products," Jones said.

Although customers pay a premium over non-organic, supermarket offerings, fans said it's worth the cost. A recent $35 produce bin included russet potatoes, a white onion, garlic, broccoli, carrots, spinach, pears, apples, tangelos, oranges and green leaf lettuce.

"I know it's organic and that Matt's trading fairly with the farmers he deals with," said Mary Hayes, an education worker for the Indiana Department of Natural Resources. She and several colleagues get a group delivery at their office.

A thinned field

Nationally, the online grocery delivery business is in its second go-around. In the late 1990s, several companies--flush with money from investors willing to back anything Internet-related--popped up offering online delivery services meant to compete with the broad offerings of traditional grocery stores.

But when the profits didn't roll in, many collapsed. California-based Webvan Group shut down in 2001, the same year a Netherlands-based company bought and scaled back Illinois-based Peapod Inc.'s service.

Locally, Marsh Supermarkets rolled out an online ordering and home-delivery option in 1995 but shuttered it in early 2003 due to "a substantial increase in technology cost from vendors," spokeswoman Connie Gardner said.

"It was very hard to do [online grocery delivery] in a profitable manner," said Bill Greer, spokesman for Virginia-based Food Marketing Institute.

Labor--to pick and pack the orders--and transportation costs often added up to more of a premium than consumers would pay. Plus, many of the companies had their origins in the tech industry rather than groceries.

"The original entrepreneurs had no real food retailing background and underestimated costs," he said.

Now a second wave of online options is surfacing, many of which offer niche products such as organic food that consumers will pay extra to get. Amazon, which sold its produce delivery service in 2001, now is trying again in Seattle.

While online ordering makes up only 1 percent of all grocery purchases, it still amounted to $6.1 billion in spending nationwide in 2007, according to New York-based JupiterResearch LLC. And that's expected to hit $13.3 billion in annual revenue by 2012.

"The bust was way long ago and the industry has seen steady increases since then," said Patty Freeman Evans, Jupiter's senior analyst for retail.

Experts don't expect the segment to ever be a huge portion of grocery purchases, in part because consumers always will need to make a dash to the store to get last-minute items or squeeze the melons themselves.

But niche players have room to thrive, Evans said, especially because supermarket chains are not making "a huge effort against them."

In Indianapolis, there are at least three companies trying to win a share of the market. Hoosier Organic Connection, which also started in July, has about 40 delivery subscribers. Your Groceries to Go offers a mass-market approach, offering a wide range of choices, not focusing on organic and artisan foods.

Sowing seeds for the future
 

Ewer said he thinks Farm Fresh's subscriber list easily could hit 1,000 by the company's one-year anniversary.

He attends many conferences on sustainable agriculture, given his belief that the company should educate the public on healthy growing methods. But those trips have another payoff, too: customers. Farm Fresh also gets a boost from vendors, such as Traders Point, who hype the delivery service as an additional retail outlet in their communications with customers.

The toughest challenge so far, Ewer said, has been battling the elements.

"The snow's been tough," he said, citing extra costs for vehicle maintenance and longer delivery times.

On the plus side, more people have signed up this winter to avoid braving the elements. "Wintertime isn't a bad time to have people drop things right at your house," Ewer said.

Another challenge has been coordinating the drop-offs by vendors, most of which are small businesses themselves. In such "mom-and-pop" businesses, if one person's out sick, deliveries often run late or have to be rescheduled.

"There's no magic truck that pulls up to" unload everything, Ewer said. He tries to be flexible with vendors, but he's had to stress the importance of timely deliveries to keep the business on schedule.

Despite the challenges, the growth has been substantial and Ewer hopes it soon will be enough to fund his plans to branch out into other arenas. He wants to be the conduit to deliver locally grown food to school-lunch programs as well as to prisons and state hospitals.

"There's got to be some way we can come up with healthier options for children in Indiana," Ewer said.

He also wants to start an organic farm to supplement vendors' offerings. And eventually, he'd like to delve into value-added products, such as freezing locally grown sweet corn or making jarred salsa, pestos, guacamole and pico de gallo.

"Opportunities are pretty limitless right now," Ewer said.

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