Food Organic

Food Organic

Fresh food, fresh ideas As people grow more health-conscious, restaurant and bar owners react. Serving organic food is one way to capitalize on a stronger consumer emphasis on health and separate your business from the competition Words by Christine Otsuka Photos by Dine.To

W

hile Magic Oven calls itself “hand-crafted pizza,” its claim to fame is a menu comprised of local and organic ingredients.

But the company wasn’t always organic. Owner Tony Sabherwal says when it initially opened in 1997, organic options weren’t available. Today, he 46 46

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uses 17 different suppliers to source his ingredient list.

With all the options out there for consumers, Sabherwal was looking for a way to differentiate himself from the Pizza Pizzas of the world.

Six years ago he made the switch to organic products and has since opened three more locations, bringing

his total to six. He’s currently working toward a fully organic menu. All his meats and cheese are organic and pizzas have the option of being made with organic spelt crust. The tomato sauce is made from non geneticallymodified tomatoes. They’re grown, plucked and then converted into sauce right away.

Food Organic

Sabherwal says it’s the niche that he appeals to, but he sees that niche becoming more and more mainstream every day. “I have friends and family who used to scoff at me when I used the word organic. Now I go to their homes and open their fridge and I notice a bag of organic milk.”

Up to a few years ago, Sabherwal says his clientele would have been those who are health aware or have dietary restrictions. But today, any educated, aware person is his target customer. “The average guy walking down the street – if he knows the difference between organic and non-organic, he’s my customer.”

Organic foods are grown without the use of conventional pesticides, artificial fertilizers, human waste or sewage sludge. They contain no chemical dyes, artificial flavours, nor synthetic additives, and therefore preserve the original taste.

Livestock are reared without the use of antibiotics or growth hormones, and in most countries, organic produce must not be genetically modified.

In Canada, the government has published a national organic standard for producers, but it is a guideline only; legislation is slated for June 2009.

There are six Magic Oven restaurants in Toronto

Canadian Organic Growers says the organic food category is showing tremendous growth.

“On average, retail sales of organic food across Canada grew 28 per cent between 2006 and 2005, which is absolutely astounding growth considering the food industry usually experiences growth in the order of one to two per

cent,” says Laura Telford, executive director at Canadian Organic Growers.

“Organics is the bright spot in the whole agro food industry.”

But Sabherwal says some people are just not willing to pay the price.

“I think that on average we lose about 15 per cent of sales over the phone – based on the price.”

between a fifth-generation distilled spirits company and a coop of over 900 Minnesota farmers who are stakeholders in the brand.

Each batch of Prairie is distilled as many times as necessary to yield the desired character and smoothness.

Prairie Organic Vodka is distilled in limited quantities in the same community in which the corn is raised.

Leftover corncobs and other biomass are converted on-site to

biogas energy for powering the stills.

In addition, the Distillers Dried Grains with Solubles (DDGS), a co-product of distillation, is returned to farms for reuse as feed. Prairie is packaged in an unfrosted, recyclable glass bottle, packed in a kraft cardboard box produced from sustainable forest wood pulp and employs organic inks on its paper labels.

Organic options Prairie Organic Vodka is one of a handful of spirits certified organic by the United States Department of Agriculture, which requires that the entire process, from the field all the way to the bottle, be completely free of chemical pesticides, herbicides, genetically modified seeds and artificial fertilizers or enzymes.

Prairie Organic Vodka is the result of a partnership

Prairie Organic Vodka is 40 per cent alcohol by volume and is currently available in BC, Alberta, Saskatchewan and Manitoba, and retails for around $36.99

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Food Organic

But once he gets over that initial hurdle with a customer, they’re convinced.

Niche market to mainstream Restaurant: Live Organic Food Bar in Toronto.

costs them cents, it puts things in perspective.”

Owner: Jennifer Italiano.

Why organic: While she knows there’s more money in serving non-organic food (“I probably have the highest food bills in all of Toronto”), she’s tapped into a niche market that is rapidly expanding. It’s a trend with staying power that creates a loyal following because of limited offerings.

Back story: She opened Live Organic Food Bar after running a catering business and a juice bar.

Menu: Her menu is based on the macrobiotic diet and divided between organic raw and cooked items.

Clientele: Students, moms, baby boomers, the wealthy, and “treehuggers,” as she puts it.

Seats: 40 in the winter; 80 in the summer.

Business: She tries to keep her food costs at 30 per cent; however, with organics, that’s not always possible.

Her juices for instance can cost her $3 to $4, and she charges $6.50.“I used to squirm when I raised my juice prices to $6.50, because it seems so expensive. But when you consider how many people go to Starbucks where they charge $5 for a latte, which is just regular milk and coffee and

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Consideration: Organics go bad faster, so food needs to be used quickly.

How to make it work: Pick a high-traffic location – since the markup isn’t as high as it is on non-organics, you need more volume. Live is off the beaten path and Italiano says that’s partially her downfall. She’s currently looking for another location. Stay competitive with other “healthy” restaurants, but don’t be afraid to charge more. “If you don’t charge enough you’ll end up undercutting yourself. Some people will pay for it, some won’t. But it’s definitely a niche market that’s becoming more mainstream.”

Cost comparison Compared to other independent specialty pizzerias, the price of his pizza is at least 25 per cent higher. For instance, a $25 large pizza might cost $30 or $35 at Magic Oven.

He pays double to three times the price for some of his ingredients. Ham can be bought for 99 cents a pound, but he pays $9.99 for organic. Regular processed mozzarella cheese can be bought for $8 or $9 a kilo. He pays $21 a kilo. The selling price reflects the increased cost of ingredients.

Sabherwal says for the average pizza place owner, their food cost is between 25 and 29 per cent. At a minimum, his food cost is 33 to 34 per cent. “I’ve definitely lost a few percentage points in profitability but I’ve also gained repeat business and a loyalty factor that I don’t think they can claim to have,” he says.

“The payback is the loyalty.”

There are a few pizzas that outsell all the others. The Euphoria Magic, loaded with chicken and vegetables is popular, as is organic spelt pasta. Meaty Magic, or meat lover’s pizza has four organic meats on it. It ranges in price from $19 for a small to $41 for a large pizza.

Sabherwal’s cost floats around $16.

All six Magic Oven restaurants offer a minimum of two organic beers, at least two organic wines, a minimum of

Food Organic

four organic soft drinks, spritzers or lemonades.

They use local breweries like Nicklebrook and Mill Street who have organic beer offerings and source organic wines through wine agents. Organic beers and wines form about 50 per cent of Sabherwal’s sales, yet he doesn’t mark them up, stating his margins for food and alcohol are the same. For instance, he works on a 30 to 35 per cent profit margin on the organic wine.

Supply and demand Organic suppliers are reaping the benefits of growing consumer demand.

Yet, restaurateurs only make up a small portion of organic suppliers’ clientele.

Cynthia Beretta, owner of Beretta

Organic Farms who serves Ontario – including Magic Oven – says about 10 per cent of her business comes from restaurants. “It’s growing, but slowly.

Restaurants are a little more price conscious. They generally stick to about 30 per cent food cost. Protein options are generally the largest cost for restaurants.

So higher-end restaurants use our products and can pass on the premium to the consumer.”

Depending on the item, organic meats can cost 15 to 20 per cent more than the non-organic version. Restaurateurs can get a reduced premium at Beretta in exchange for advertising space on their menus. Currently, Beretta moves a lot of ground beef, bacon, pork ribs and high end steaks.

Jennifer Pfennings of Pfennings Organic & More says restaurants make up less than 10 per cent of their business; however, it’s growing. “We get a lot of calls. We’ve never had the level of interest from restaurants as we have now,” she says.

Their most in-demand products are rainbow carrots, white carrots and parsnips – a chef favourite. The price varies with the season, the marketplace and the location. For instance, Pfennings says last fall, organic squash was retailing lower than conventional squash.

Lessons learned Sabherwal learned a tough lesson when he switched his three Magic Oven locations to a mainly organic menu.

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Food Organic “It’s an uphill battle. I don’t think anyone should try to do what we’ve tried to do.

Almost overnight our pizza went from being $21 to $41 (for a large) and I think we lost a lot of customers because the price shock was humungous. I think if I was to do this all over again I’d go with one item, two items, three items and offer the choice as opposed to making the whole menu organic.”

In the fall, he opened an Indian restaurant. There, he has been testing organically farmed salmon and wants to see whether or not his customers appreciate the item and the price. So far, he’s noticed that most people are willing to accept it. The salmon is priced at $18.95, while the average restaurant charges $14 for conventional salmon. The

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cost of the organic salmon is $6, compared to $2.50 for conventional salmon.

“The additional dollars we charge is really our cost on top of buying, so we’re not trying to make extra profit by selling organic, we’re just tacking on the extra cost to our price.”

Measuring success Sabherwal’s sales have grown by about 20 to 25 per cent over the transition period, and his costs have gone up, but not by that amount. “We’ve reached a great level,” says Sabherwal. “We have enough people to support us. If the average family has a four-week pizza cycle, we have enough families in that prime category. So even if they ordered every four weeks, we could still sustain

ourselves,” he says noting he has 80,000 to 100,000 names and phone numbers in the Magic Oven database.

One of the key measures of success, for Sabherwal, is that on average he says he receives one franchise inquiry a week.

“Most of the people who are inquiring are in the healthcare field – dieticians, nutritionists, or those who are very conscious of what they eat and drink. And I think we’re their only choice if they want to do something organic and grassroots.

We have two franchises that will open next year and we’re looking at about 30 locations that will open in the Greater Toronto Area over the next few years.”

If expansion is a measure of success, Sabherwal certainly must be doing something right. 