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Decision Makers

Food wholesaler Flanagan launches an online e-commerce forum designed to connect small, local food growers directly with purchasing outlets

Barry Reid, Flanagan’s vice-president for sales and marketing, stands in the company’s warehouse distribution centre in Kitchener, Ont. The company has an inventory of about 10,000 warehoused products.

As a Canadian-owned, independent food wholesaler that deals with thousands of clients, Flanagan Foodservice Inc. is looking to help further Ontarians' connection to local food producers.

The Kitchener, Ont.-based company is in its 40th year of operation, and its 550 employees serve about 6,000 restaurants and food distributors across Ontario through an inventory of about 10,000 warehoused products.

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Recognizing that this inventory – drawn mainly from large, well-established food providers – represents merely the tip of the iceberg when it comes to Ontario's diverse food offerings, Flanagan recently launched Flanagan Market, an online e-commerce forum.

Designed to connect small, local food growers directly with purchasing outlets, Flanagan Market went live on May 29, and has 28 producers listed, from New Hamburg, Ont.'s Mountainoak Cheese Ltd. to Toronto's Bee Local 416 natural honey.

"It's really trying to promote the whole local aspect and the site connects the farmers and the producers with restaurants that we service across Ontario," says Barry Reid, Flanagan's vice-president for sales and marketing.

Flanagan serves about 6,000 restaurants and food distributors across Ontario. Its inventory is drawn mainly from large, well-established food providers, so the company recently launched Flanagan Market, an online e-commerce forum built by Kitchener-based software company Local Line, which is designed to connect small, local food growers directly with purchasing outlets.

"You may have a restaurant in Windsor that is interested in a local product that might be kind of unique but local in Ottawa, for instance."

Companies that want to get involved sign up through the website, adding the products that they are offering and their delivery schedule. It is then up to Flanagan to choose whether it wants to list that company; Flanagan has a number of prerequisites, such as companies must be established businesses and food-safety certified.

Mr. Reid says that Flanagan takes a small administration fee for the service, adding that making money was not the impetus for the concept; rather it was designed to help bring local farmers to market and possibly increase the scope of what Flanagan can offer its customers.

"The difficult part of the decision is you're kind of opening yourself up to your competition," he says. "Although it's smaller competition to us, it's still competition and we felt, why not embrace that and down the road these suppliers may become suppliers of ours because the volume starts growing."

Flanagan Market was built by Local Line, a Kitchener-based software company that specializes in building online marketplaces for food businesses. It was actually Local Line that approached Flanagan about putting together Flanagan Market, and it just so happened that a Flanagan survey of its customers had revealed that a sizeable chunk of them wanted access to more local food.

Flanagan’s e-commerce initiative may boost its brand, increasing customer loyalty as it increases the options available to them, says Diego Reyes, the director of e-commerce agency Odegi, in Vaughan, Ont.

Local food is more than just farmers' markets that are popular among foodies and those who enjoy the experience, says Cole Jones, chief executive officer of Local Line. "It's a very powerful way to build food systems and re-engineer local supply chains."

As he explains, the idea is almost identical to a farmers' market. For instance, if a farmer shows up at St. Lawrence Market in Toronto on Saturday morning, he has his products, he sets his price, does his best deal and the market will pay what it decides to pay.

"Exact same thing here," Mr. Jones says. "We just thought conceptually Flanagan is this great big market, they have all these customers that come to them and look for the kind of products that [they] have."

Diego Reyes, the director of e-commerce agency Odegi, in Vaughan, Ont., says that the greatest impact that the decision may have on Flanagan might be in its brand in the eyes of its customers, increasing loyalty as it increases the options available to them.

One of Odegi's clients sells grass-fed beef in the United States and Mr. Reyes says that 95 per cent of the company's sales are derived online.

"If you look at digital commerce, it's growing," he says. "Canada's behind, so I think this is definitely the right approach for this company and it's just going to create a great opportunity for them and improve their customer service overall and build brand affinity."

Flanagan Market also helps differentiate the company from its competition.

Flanagan’s e-commerce market also helps differentiate the company from its competition, according to Odegi‘s Mr. Mr. Reyes. Here, pickers use scanners to help track down the correct product for the correct restaurant inside Flanagan’s warehouse distribution centre in Kitchener, Ont.

"They're thinking digital, that's where everything is, that's where customers are and I think it's a great strategy," Mr. Reyes says.

One concern would revolve around the size of the companies being listed on Flanagan Market. While they would benefit from the opportunity to get in touch with a larger audience, being able to fulfill orders, particularly shipping and delivery, may prove problematic.

"Let's say I'm a farmer with strawberries and I drive to the market," says Becky Reuber, professor of strategic management at the University of Toronto's Rotman School of Management.

"I might be able to sell all my weekly strawberries there. If I'm driving all my weekly strawberries to seven or eight restaurants and stores and households and whatever it may be, that's another cost for me which may actually be higher."

One other issue would be the consequences of companies potentially not being able to make good on their promised deliveries. Though Flanagan Market may be acting as a go-between, with the guarantee of the Flanagan name, the company needs to be sure of the reliability of the suppliers it allows to be listed on its digital marketplace.

"If they put them up on their website in their marketplace, Flanagan's name is on it," says Maureen McCabe of McCabe Marketing in Toronto. "So it's not just a question of Flanagan's offering this marketplace but they're doing some vetting of who they're putting there."

Customer complaints could hurt Flanagan’s branding, she says, “but there are upsides if they can manage it correctly.”