Overview of the Business

Blueberry Acres is a Nova Scotia based operation and an affiliate of Nova Agri Inc., an agricultural packaging and marketing company located in the Annapolis Valley. The Nova Agri group of companies has several enterprises including Dykeview Farms established in 1970 when it predominately produced tobacco but today producers potatoes, onions, carrots, corn wheat and soybeans; Salad Acres, a muck soil operations which grows lettuce, romaine, bokchov and onions; and Blueberry Acres, the blueberry enterprise. Nova Agri itself was established in 1985 as a separate packing and marketing company. It provides a range of services including cold and CA storage, grading, pre-cooling, packaging and marketing for its own production as well as for local area growers. In total, the Nova Agri Group farms in excess of 2,000 acres.

High bush blueberries are a cultivated crop that is grown to supply the fresh blueberry market. Within Canada, most of the production is located in the Fraser Valley, British Columbia with the remaining acreage found in Ontario, Quebec and the Atlantic provinces. Blueberries also grow wild. These are known as low-bush blueberries and for the most part are sold as an ingredient into the processed food market including jams, yogurts, pie-filling, cereals and baked goods.

The high bush blueberry plant is a woody shrub that ranges in height from four to eight feet upon maturity. The plants themselves are spaced at approximately three to four feet intervals in rows which stand eight to twelve feet apart. Blueberries are native to poor quality soils that are low in pH. The plants themselves prefer drier ground and have a shallow root system. Once planted, the blueberry will produce a crop in year three, reaching peak yields of approximately 8,000 pounds per acre after eight or more years. Harvesting is either done by hand or mechanically on larger operations. This begins in early August and is usually complete by October in Nova Scotia.

Currently Blueberry Acres grows 140 acres of blueberries on three individual sites and supplies berries to the Canadian domestic market as well as exporting to the U.S., U.K., and Iceland. It is now Nova Scotia’s largest highbush blueberry producer. Overall the Blueberry Acre story is an interesting one that combines challenge, set backs and triumphs. Throughout these turns, the success of the operation can be attributed to three prevailing factors:

• An entrepreneur with a determination to succeed – indeed, Mr. Earl Kidston is that entrepreneur who is driven by a vision to be a category and marketing leader in the choice of products his operation produces and markets. This is true for several products that Nova Agri markets and also the case for blueberries.

• A commitment to marketing – while blueberries are a relatively recent addition to the product mix, Nova Agri Inc. has a depth of experience in the marketing of fresh produce. More significantly, it has deep appreciation for the differences between production and marketing, so much so that it established a marketing division distinct from the historical production operation.

• Continuous adaptation to opportunity and change – Nova Agri Inc. is keenly aware that the marketplace and the demand for products are in a continuous state of change. Thus, the company has a bias for change as it constantly evaluates product lines and continually reassesses strategies and tactics within those markets. Mr. Kidston describes the approach as follows:

“ We believe that at all times we need one engine coming, one engine going and one engine running at full speed.”

In other words, always plan to introduce something new, discontinue something that has been successful in the past but no longer contributing enough and work hard to make sure the rest of your business is going strong.

Marketing Strategy

The demand for fresh blueberries has always been steady, albeit highly seasonal, by virtue of when the product comes onto the market as it is harvested. This occurs in the late summer and early fall in Nova Scotia.

In recent years however, interest in fresh blueberries has been heightened by the recognition that they contain an abundant source of antioxidants. Research shows that people who have diets rich in antioxidants have a lower incidence of certain cancers and cardio-vascular disease. Additionally, antioxidants are considered as an effective ‘age delay’ and slow such impairments as memory loss, reduced motor coordination and eye-sight. Consequently the current demand for blueberries is strong and appears to be on the increase.

Blueberry Acres’ overriding marketing strategy is to position the blueberry as a fresh healthy product. The essence of this strategy is described by the following simple message:

“Handpicked from our garden to you!”

The fulfillment of the fresh promise further requires an effective logistics system comprising the following steps:

1. Harvesting at peak quality.
2. Rapid cooling subsequent to harvest. Thus berries must be moved quickly from the field into a storage area.
3. Sorting and cleaning.
4. Packaging into convenient packaging for each particular market including the use of Controlled Atmosphere (CA) packaging. To this end, Nova Agri has conducted considerable research to enable prolonged freshness. Working with researchers from Agriculture and Agri-Food Canada, Nova Agri has successfully developed packaging technology that is able to maintain freshness for several weeks, thereby extending the shelf life of the product.
5. Good logistics including shipping within a controlled temperature cool chain environment.

Blueberry Acres focuses on three export markets:

1. The Boston Fresh Market – historically this has been the company’s largest and most significant market. The actual transactions occur through a dedicated broker who works with an agent in what is known as the Chelsea market. Until five years ago, Blueberry Acres’ entire crop was exported to this market. However, with the growth of appreciation for cultivated berries in Canada and the decline of the U.S. dollar, the company has diversified its markets. At the present time, Boston represents approximately 50% of Blueberry Acres’ sales. All products are delivered using refrigerated trucks.
2. United Kingdom – this is a more recent market for Blueberry Acres. The company supplies several major retailers and is also working with a food service company that supplies the high-end hotel market. The strategy in the U.K. has two interesting features. First it takes advantage of being a late season supplier. In this regard, Blueberry Acres enters the market as supplies from early season sources such as Poland begin to decline. Thus it is able to extend its customers’ season as well as command premium pricing. Secondly, Blueberry Acres works with a knowledgeable third-party consultant who seeks out opportunity and monitors market conditions in addition to being a very capable marketer. The product is shipped by air and directly transferred into the customer’s logistics system.
3. Iceland - similar strategy as for the U.K.

In addition to export sales, Blueberry Acres supplies two major domestic retailers. This has developed over the last few years. Interestingly, the largest retailer in Canada has recently been marketing Nova’s berries in upper Canada as well as the Atlantic region. This is an important development for Blueberry Acres but it also important to maintain a balanced approach to marketing, always cognizant of pricing and trends. The domestic market is important but Blueberry Acres must maintain its export markets and not lose links to international markets which serves as a basis for learning. For example, current food safety and logistics systems now in place are the result of the U.K. relationship. Thus it is feared that the loss of key export customers could in fact diminish long-term competitiveness, given the positive learning experience to date.

Blueberry Acres has also established a very successful U Pick enterprise. This creates local profile and supplies some local demand although it accounts for less than 10% of total sales. The U Pick opportunity is advertised by means of local signage, a call line as well as on the website. The information on the website advises prospective pickers of availability, what to wear, upcoming weather conditions and, most importantly, directions to where they are to gather.

Marketing History

Blueberries are a relatively recent addition to the Nova Agri line of products. To understand how and why blueberries were successfully added to the portfolio, it is useful to examine the history of the farming operation and how it has evolved over time.

The original farm, known as Dykeview Farms Ltd., was founded by the Kidston family and based in Port Williams, Nova Scotia. The current operators are the fifth generation, which includes the three brothers – Earl, Bob and Neil Kidston. Note: The operation is undergoing some ownership changes presently. Earl and Bob continue to be involved; four of the operation’s managers have been added as new owners.

About 200 acres in size, the farm originally grew potatoes, apples, grains, forages and beef cattle. Over the years however, Dykeview went through several phases of growth and crop changes. In 1976 for example, Dykeview stopped growing tobacco, and added beans and peas to the crop mixture. The family also established a hog-finishing enterprise with the purchase of 400 hogs. This eventually grew to become one of the province’s largest hog operations with more that 7,000 head per year. However, with changing markets and a vastly restructured Canadian hog processing sector, the hog operation was discontinued in 2005.

In 1985, anticipating that the market for fresh produce would grow, the Kidston’s formed Nova Agri Inc. to operate as the marketing arm of the farming enterprise. This was an important strategic decision that recognized the distinct difference between marketing and production. To quote Earl Kidston:

“ The producer celebrates when he sees a good crop. The marketer celebrates when he makes a sale! The two are very different.”

Thus Nova Agri focused its attention on markets and customers, while Dykeview Farms focused on production. Accordingly each operation had separate staff, albeit the two divisions were closely interrelated.

Nova Agri entered the blueberry business by ‘default’ in 1991. At that time, the future of the apple enterprise continued to look dim after years of unprofitability. In response, Nova undertook a detailed market analysis of new vegetable prospects and identified onions and celery to be opportunity crops. Just then a third opportunity arose. A local blueberry operation (some 50 acres of highbush blueberries) ran into severe financial difficulty and the farm became the property of a financial institution. The Nova Scotia Provincial Department of Agriculture, keen to see this enterprise continue as part of a broader diversification strategy, actively sought out a qualified successor. Nova Agri was approach to take over the enterprise.

Seeing that blueberries might serve to replace the apple enterprise, Nova agreed to the proposal subject to two conditions: (1) begin by paying interest only during a two-year period in which the economics would be challenged; and (2) renegotiate after two years. In other words, Nova Agri agreed to ‘test drive’ the operation before making any major long-term commitments.

Thus began the blueberry business. And the beginning of many challenges which included:

• The need to replace and reseed approximately one third of the original 50 acres. It quickly became apparent that this portion of the blueberry stock was in bad shape.

• Reassessing and replacing the U.S. brokerage firm that had been working with the original operator. As the business developed, Earl Kidston grew to distrust the broker and took steps to replace him. This was done by meeting with the actual agent serving the customers and selecting a replacement that met with both the agents and Nova Agri’s satisfaction.

• The total loss of the blueberry processing plant due to fire. This major set back occurred in 1993 and represented the fourth major fire on Nova Agri/Dykeview operations. This in turn created major problems with the insurance company and the ability to collect as well as re-insure.

• Significant changes in logistics. At one time, Nova Agri did its own trucking to Boston. However rising costs and the need to attract back hauls made private trucking uneconomic. Currently all trucking is done on a custom basis. While this is more efficient, Kidston points out that it also leaves Blueberry Acres in a more vulnerable state. For example, every truck passes several potential suppliers of blueberries in Atlantic Canada and Maine as it travels to Boston. So what makes you different? And why should buyers deal with you? These are challenges that must constantly be kept in mind as one strives for continued relevance and competitiveness.

Most importantly however, the Kidston’s could see that blueberries could make a profitable contribution to their operation. Furthermore they saw the opportunity to become a major player in line with their vision and began a program of expansion.

Current State of the Business

Currently Blueberry Acres is the largest marketer of highbush blueberries in Eastern Canada.Total annual sales are in the order of $3 million. This represents approximately 20% of their total produce business.

Overall Nova Agri Inc. is committed to a diversification strategy to manage both production and market risk. The strategy is driven by this vision: “to be recognized as a world leader in Atlantic Canada in our fields of endeavor.” In other words, Nova Agri strives to be a category leader in whatever it produces and markets. This gives it critical mass in dealing with wholesalers and retailers. Within Atlantic Canada, it does so with several produce items including table potatoes, onions and blueberries.

Recently Nova Agri has added a high-quality country restaurant called “Between the Bushes.” This represents a new retail venture and a ‘face’ for the Nova Agri group of companies to the local community. As well, the restaurant provides an opportunity to measure direct customer response to new products that are being developed.

Key Information Sources/Influences

The success and style of Blueberry Acres as part of the Nova Agri group of companies embodies a number of influences and information sources. Earl Kidston identified the following:

1. His father – probably the most significant advice that Earl received came from his father many years ago who said: “Don’t grow what you can’t sell!” This simple guiding principle has been key to how decisions have been made. Thus the operation is constantly evaluating and assessing opportunities, recognizing that what sells today may not sell tomorrow.
2. Study success but study failure even more closely – It is through failure that you learn the most. This is perhaps the result of Nova Agri’s direct experience and the observation of experience taking place around it.
3. Surround yourself with good people – the ability to recognize problems and find solutions are greatly enhanced by the quality of the people you have working with you.
4. Follow your product to market – Much can be learned by observing how your product moves to market and what obstacles or barriers it may encounter. See how it moves, how it is handled and where you can add value. (Note: it was during a trip to Boston where Earl realized how easily Blueberry Acres product could be replaced especially if quality is substandard).
5. Learn from your customers and your markets – Earl Kidston pointed out that one of the benefits of being an exporter is that “you learn new things that you are able to apply to your own market.” For example, Blueberry Acres has learned about technology, food safety and product research. Without the export experience, this learning opportunity would not have occurred in such a timely manner.

Key Challenges

Blueberry Acres identified a number of major challenges that it faces:

· Changing currency values – the rapid change in the rise of the Canadian dollar had clearly provided a challenge. The team reacted to this and grew the local domestic market more aggressively. in order to remain profitable. However, it is interesting to note that the challenge has not materialized to the degree expected. The North American market in fact is really one market. Although a higher Canadian dollar has resulted in significantly much more competitive imports, the price for blueberries has stabilized between the two countries leaving no large advantage to either market over the other as the result of the currency change.

· The shifting and ever-changing retail market. A major concern within the food industry is the trend on the part of large grocery chains to reduce the number of suppliers. This places small- to medium-size suppliers such as Nova Agri at risk. This risk can only be overcome by increasing size, and thereby critical mass or providing products that are unique and not easily replaced. Both strategies are difficult to achieve. The solution is clearly for the producer to offer and be of more value to the market. Value manifests itself not only in product and quality but increasingly in services such as guaranteed food safety and continuity procurement and supply

· Further to the previous trend, major grocer chains are also looking for suppliers that are able to ‘manage the category.’ Increasingly, grocers see themselves as merchandisers leaving the entire category management requirement in the hands of selected qualified suppliers. This places even greater pressure on smaller suppliers. In effect, this is part of a broader globalization trend where suppliers are playing larger roles. For example, it is now common practice in the developed markets for a third-party supplier to produce, gather and import the entire year-round supply of certain fresh fruits or vegetables for a single retailer. This trend is clearly a concern and opportunity for regional suppliers such as Nova Agri located in Atlantic Canada.

Lessons Learned

The Blueberry Acres case offers a number of lessons for exporters and would-be exporters. While the full nature of the marketing relationships between Blueberry Acres and its brokers or agents are not disclosed for proprietary reasons, the following lessons are noted:

1. Before you build an export business, make sure you have a sound domestic business – this is Earl Kidston’s foremost recommendation. Interestingly, Blueberry Acres began entirely as an export-focused business and hence this recommendation appears contradictory. However, one must consider that blueberries are only one enterprise in a much larger operation that had a large domestic base. Thus it was able to bear the risk of this export venture as well as draw on an already established marketing experience.
2. Diversify and evaluate – in a highly competitive and ever changing business, always examine what new markets or products you should enter, what you should hold and what you should discontinue. Don’t depend on just one crop. Clearly the Nova Agri experience bears testimony to this adage.
3. Separate marketing from production – perhaps one of the most valuable lessons from the Nova Agri Inc. experience is how the company recognizes that marketing takes a distinctly different mind set from that of production. Earl Kidston points out without equivocation: “Don’t assume that a good producer will make a good marketer. In fact, most often they do not!”
4. Work with third-party consultants or agents if you can – this approach has worked well for Blueberry Acres in the U.K. where they work with an experienced food industry consultant on a fee-for-service basis. According to Earl Kidson this arrangement provides for better information and advice. Brokers by comparison provide price and volume information where as third-party consultants can provide more detailed understanding of market opportunities. This arrangement enabled Blueberry Acres to identify the ‘late season’ opportunity which may have otherwise gone undetected.

Final Note

Export marketing often requires special financial instruments to set up accounts and/or ensure timely payment. The most detailed of these is the irrevocable and confirmed letter of credit. This requires the buyer to set up payment with a bank in the destination country that in turn notifies a Canadian bank of the conditions of payment. In effect, the exporter will receive payment upon presentation of required documents to verify that the agreed sale and movement of goods has been transacted.

Export insurance is also a tool worthy of consideration for the new exporter. In Canada the Export Development Corporation offers such insurance in many markets. However it must be noted that insurance will not protect you against claims based on quality, whether legitimate or from

Any prospective exporter is advised to consult with the export department of any major Canadian bank to explore options. Also consult with an experienced freight forwarder and/or export broker who are also valuable sources of information.