The organic, natural and specialty foods segments have experienced phenomenal growth in recent years, which in turn has opened up a new customer base for transportation and logistics providers who are able to meet the high-level demands associated with this niche.
While some mainstream logistics service providers have created specific business units to handle organic and specialty products, other companies are entirely devoted to the space.
Distribution 2000, based in Romeoville, IL, is one example. The company started in 1995 with 3PL and public warehousing services, says president Marc Risser. At the time, “we were trying to be everything to everyone,” he says, which wasn’t a sustainable business model in such an extremely competitive market.
Fortunately, the company had some “early success” with several food customers, which was instrumental in helping Distribution 2000 “grow and mature as a business,” says Risser. Then in 2004, the company made a strategic decision to go after more food customers “and never turned back,” he adds.
To meet the needs of its organic and specialty food customers, Distribution 2000 operates an FDA-registered food grade warehouse that is USDA National Organic Program (NOP) compliance audited by Oregon Tilth Certified Organic (OTCO). The 3PL is also a member of the Organic Trade Association, says Risser.
“We maintain a very safe environment for our customers’ products,” Risser emphasizes, including the avoidance of fumigants, sanitizers, and caustic solutions, which in a food environment can be challenging. The key is prevention—keeping insects and rodents outside of the facility to begin with, he explains.
Under the USDA’s National Organic Program, certified handlers are also required to prevent the commingling of organic with non-organic products and protect organic products from contact with prohibited substances.
All of these extra steps are very important to Distribution 2000’s customers. “If a company is involved with certified organic products, it stands to reason that they would partner with a certified organic warehouse to make sure that the last mile in the supply chain is not going to undermine the integrity of their product,” says Risser. “These companies hold themselves to a higher standard” and they expect the same from their logistics and distribution partners.
Likewise, it takes commitment on the part of a logistics partner to target the organic and specialty foods segments. “Overall, organics are still a relatively small segment,” notes Risser. “A lot of the bigger 3PLs really don’t understand it and perhaps aren’t even interested in it. When you can fill up 20 warehouses around the country with a customer like Unilever, why would a 3PL want to service a small organics customer whose sales are only $50 million annually?”
In fact, when it comes to providing transportation and logistics services to the organics and specialty foods segments, “You really have to have passion to do this,” concedes Brian McCarthy, senior vice president of operations at Nature’s Best, the largest privately-owned wholesaler-distributor of organic and natural products in the U.S. He agrees that the extra steps—and investments—required to serve this segment well are a genuine barrier to a lot of other distribution organizations.
It’s not sexy; it’s inventory management
In McCarthy’s opinion, the key to success comes down to one thing, and that’s “inventory management.” Unlike so many other food products that are engineered for an extended shelf life, organic and natural foods have a very limited window of optimum freshness.
“For companies like Nature’s Best, it means having systems and controls in place to move organic and natural inventory through the supply chain in a manner that ensures food stays safe and fresh,” he says.