Rural business development requires a unique approach to all aspects of business, but rural business does not require that the business is a farm. Some country businesses, though, lend themselves uniquely well to being associated with agriculture. Canada’s three prairie provinces face unique challenges in growing a business that can compete in both rural and urban markets. Rural greenhouses are such projects. Whether located in Manitoba, Alberta, Saskatchewan, or even part of BC or Ontario, a properly planned greenhouse may be a lucrative and innovative industry for small towns, municipalities and community development corporations, particularly if those communities opt to work collaboratively.
Intuitively, the cost to ship items locally should be less than to ship over long distances. If you are carrying 33,000 pounds of produce one hundred kilometers, that should be much less than the cost of shipping that same weight 1,000 kilometers. As the calculation applies to fuel only, that assumption is true. But there are more factors at play.
The fuel efficiency and condition of transport vehicles are two considerations. Many of the international shipping companies specializing in produce (particularly from Texas and California) use high-efficiency trucks, while local transports often are diesel- or gas-guzzling older vehicles.
The second is handling time. Delivering one semi-load two thousand kilometers involves one act of loading and one of unloading. Smaller, local haulers may require multiple trips, multiple off- and on-loading. This time must also be considered in transportation costs.
However, long-haul transport usually does not involve cross-docking, which shares the time and cost of transportation. Also, local markets allow for more intense penetration of a given market.
With larger grower operations, an entire semi load of ripe and ready produce generally is available simultaneously, meaning that there is never any doubt as to whether there will be a full load to transport. Costs per kilo remain relatively constant, impacted only by fuel cost fluctuations and weather or road conditions.
Conversely, local operations can ensure that produce is picked, packed and transported at its peak of ripeness and flavour, increasing the quality available to local consumers.
Typical operating budgets for growers who ship produce farther than 500 kilometers on average, but less than 2,000 kilometers, show transportation costs to be about 3-4% of the revenues earned. They average twenty to forty cents per pound (44 – 88 cents per kilogram). These numbers are vey approximate, but a greenhouse with $400,000 in sales could expect transportation costs to be about $12 – 16,000. Those costs increase in winter conditions, or as distance increases.
Fuel costs per kilogram drop as the market becomes more local. Typically, a greenhouse supplying product in a 100-km radius can expect to reduce costs by $4 – 9,000, or roughly one percent. That reduction doubles for produce shipped from California or Mexico.
But local markets offer additional advantages, in addition to fuel savings. With quick turnaround times, growers can bring excess product or near-to-expiry goods to market quickly, reducing spoilage (1-2% of operating costs).
Identifying, securing and maintaining markets offers considerable cost savings to local growers and, particularly, cooperatives or community-owned businesses.
Once a client is established locally, there is not further cost for outreach. Outreach and customer identification may consume 3-5% of a retail supplier’s budget.
With locally grown goods, individuals may purchase point-of-production.
One of the major benefits of establishing local and regional greenhouses is that each of these community-based businesses may opt to specialize in specific products, then cross-dock to share distribution costs. Pooling products from several operations also enables the businesses to reach further afield with marketing, or gain leverage with bigger supermarkets in urban centres, allowing the individual greenhouses to expand further.
Even shareholders may benefit, by setting up and taking part in buying of the produce as part of a grower coop garden.
In short, the savings by marketing and distributing locally, using the community-owned model of greenhouse business, can total 11-14% of revenues. While that, alone, does not make greenhouse growing competitive with field-grown goods in southern USA and Mexico, when combined with other innovative cost saving strategies, can trim over 40% off a typical greenhouse budget. That combination definitely enables local community greenhouses to compete with imported goods, while also putting profits int local hands, instead of foreign pockets.