"We've wedged out our own niche in that market, the fresh component of that market," says CEO Jeff York. "We want to be a complementary retailer, as opposed to a one-stop destination."
Named one of Canada's 50 Best Managed Companies by Deloitte and CIBC in 2010, Farm Boy currently boasts 11 stores in Ottawa and Cornwall and employs 1,500 people. The grocer plans to open another store this summer in Orleans and hire an additional 125 employees.
Farm Boy deliberately chooses not to clutter its outlets with the same brands sold by national grocers such as Loblaws and Sobeys, focusing instead on filling a market niche.
Nevertheless, the company still competes for consumer dollars and, in the low-margin grocery industry, faces a disadvantage since it doesn't have the same economies of scale that allow larger corporations to purchase wholesale products at lower prices.
But Barry Nabatian, director of the market research division at Shore Tanner & Associates, notes smaller chains and independent stores can act more nimbly.
"When a company is small, it can be a lot more efficient (and) can make decisions faster," something the larger chains cannot do, he says.
Additionally, they're able to buy more local products and offer consumers fresher food, in contrast to large chains that rely on mass-production industrial farms, Mr. Nabatian says.
Companies such as Farm Boy also have less complex supply chains, which are easier to manage and lead to lower overhead costs.
But there are unavoidable challenges. Like all grocers, Farm Boy is facing higher prices for coffee, meat, dairy and grain products, says Mr. York.
"The Canadian consumer is going to see higher prices. The costs coming across cannot be absorbed in a low-margin business," he says.
Meanwhile, there are new entrants in the grocery business as retailers such as Walmart, Canadian Tire and drug stores begin carrying food products.
Mr. Nabatian predicts Farm Boy will survive the squeeze because it is big enough that it won't be wiped out by the larger retailers, but small enough not to be held back by its own "bureaucracy."
For his part, Mr. York says Farm Boy will mitigate the impact of rising food prices by opening more stores so it can purchase products at lower prices.
As city planners promote urban intensification, Farm Boy is looking at introducing smaller stores to the downtown core, says Mr. York, adding the company also has its eye on expanding to Kingston.
.jpg)
