Kirk Kemp says a buy-local trend has boosted his company’s sales.
Ontario’s apple industry was facing serious challenges four years ago when Mike Gibson and Kirk Kemp acquired full control over Algoma Orchards, Ltd., of Newcastle, Ontario, Canada, from the previous owner.
Many of those challenges persist, in the form of government red tape, intense competition, and low prices. Bearing acreage in the province has dropped from 25,000 acres in 1999 to 15,400 acres in 2008, while packers and processors have shut down under the pressure.
But in the midst of the challenges, Algoma Orchards is stepping forward with a three-phase expansion plan and dense new plantings on the back of strong demand for local fruit. A new, 95,000-square-foot packing house overlooking Lake Ontario opened this summer, and work has started on a second phase that will add an additional 16,000 square feet. A third phase is planned that will ultimately give Algoma 161,000 square feet of space.
“[We] just wanted to expand our production without running 24/7,” Kemp said of the plant, which sells a million boxes of apples annually to some of the province’s biggest grocers as well as buyers in the United States, United Kingdom, Mexico, the Caribbean, and South America. They also wanted to adopt new technology so they could pack fruit more efficiently and offer a fresher, safer, more uniform-quality product.
Algoma has been boosting the density in its 500 acres of apple orchards, which primarily produce standard Ontario varieties such as McIntosh and Empire, as well as newer varieties including Gala and Honeycrisp.
The recent shift among consumers to buy locally has helped boost sales by up to 15 percent in the past two years, Kemp says. Algoma has also been successful in adding new retail clients to its distribution list, all of which are helping support the business’s growth in an environment that’s battered a lot of growers.
“We can double our production tomorrow and still not have enough fruit,” Kemp boasted.
It adds up to a revitalization for a battered industry that Kemp believes gave away market share for far too long by growing varieties the consumer just didn’t want. Honeycrisp and other varieties have helped change that, and the investment Algoma is making in its business is sending a signal to other growers that there’s life yet in the Ontario apple business.
The industry has been shrinking, but Kemp said growers have seen the investment he and his partner have made and their confidence in the future of the industry, and it’s inspiring them to make investments in their own businesses and plant more orchard.
Brian Gilroy, chair of Ontario Apple Growers, said high production costsespecially a minimum wage that’s risen 50 percent since 2002, and currently sits at $9.50 an hourhave made times tough for growers.
What sets Algoma apart is the investment it’s making in technology to cut labor costs. The new plant represents a capital investment of $15 million Canadian (roughly U.S.$13 million) in land and construction, but the savings in labor costs will have an immediate benefit.
“The key to any business activity is cost of production plus a reasonable profit, and for apple growers, it’s been very challenging to make your cost of production,” Gilroy said.
Algoma’s sorting and packing line, a Pomone III Universal, is the first of its kind in North America. Manufactured in France by MAF-Roda, the system can handle up to 50,000 pounds of apples an hour. Apples moving through six runs are each digitally imaged 54 times as they move through the system. The images are analyzed for defects down to an eighth of an inch, and then directed into one of 15 flumes for packing with fruit of the same grade.
The sophistication and efficiency of the system won it the prize for innovation at the Sifel showcase of fruit and vegetable production techniques in France in 2006.
The new packing line requires just four of Algoma’s 50 employees to operate.
“It’s exciting technology,” Gilroy said. “We have to continually keep our labor cost down as labor increases in cost. To bring a technology like this to the fore is, I think, a good thing.”
Kemp believes the new plant positions Algoma to serve buyers for the foreseeable future.
Originally located 20 miles west in the Toronto suburb of Whitby, Algoma primarily packed other growers’ fruit prior to a merger with Twin Brand Orchards Inc. of Newcastle in 1999 that brought Gibson’s family into the business. Kemp, also an apple grower (the license plate on his truck reads “APPLEMAN”), joined the business two years later.
When the partners acquired full control over the company in 2005, plans for orchards with 1,000 trees an acre and the new plant shifted into high gear. Newcastle was a logical location because it was close to the majority of its own orchards, and offered prime access to Highway 401, the main route through eastern Ontario to Toronto.
“We moved over here closer to our farms, and that makes for a better carbon footprint,” Kemp said. “Most of the fruit won’t even be put on a truck. It’ll just be placed on the wagon and brought in. So, it just made sense.”