Australia’s food and grocery sector is a $ 114 billion industry, but mostly in the hands of a few major players.
Figures from IBIS World show that in most food sectors, a handful of large companies generate more than 50 percent of industry revenues, while thousands of small producers generate less than half.
Alex Stefan believes he has the solution to this $ 50 billion problem. Stefan has worked in the food industry for 25 years, and his family long before. Having experienced the âoverwhelming dependenceâ of manufacturers on large distributors and supermarkets, he decided to do something about it.
He founded Oomami, the world’s first social market for small-scale food producers, which aims to bring the farmers’ market experience online and make it as convenient for consumers to source directly from producers as they are to shop. shopping at one of the major online grocery stores. retailers.
The soon-to-be-launched market in Australia has even caught the attention of celebrity chef Matt Moran, an investor in the company and a strong supporter of the farm-to-table approach, which calls small-scale food producers the ” backbone âof this country.
Stefan tells Inside FMCG what is it about.
“If a distributor or a supermarket does not want to accept products [from a small producer] so they can’t grow their business, âStefan explains. “I’ve also seen situations where distributors have had their products stored in supermarkets, and then when that distributor or that supermarket decides that they no longer want to stock that product or that brand, the business basically goes bankrupt.”
“In 2019, that shouldn’t be the case given that we have these technologies where manufacturers can go directly to consumers and bypass the distributor.”
The relationship between manufacturers and retailers was once again in the spotlight recently when a supply problem between the âbig twoâ supermarkets in April left many consumers without access to popular products.
“While [the big supermarkets] can take a lot of volume and a business could potentially grow quite quickly, the downside is that profitability crumbles because the prices they pay are actually very low. And not only the prices, but the payment terms are also quite onerous.
Oomami operates on a model similar to e-commerce giants Amazon and eBay, charging a monthly fee to use the platform and a commission on each product sold.
Manufacturers deliver the product to a warehouse, and then the customer determines the success of that product or line.
âIt becomes an exclusive relationship between the manufacturer and the consumer. On Oomami, they deliver whatever product they want to deliver, they fix it however they want, and then the market will determine whether that business or product will be successful or not.
But many brands already operate their own direct-to-consumer websites, so how is that different?
âWhile most manufacturers actually have a website, the volume of products they sell through that website is minimal. The reason is that consumers won’t go to 20 different websites for their weekly groceries and they won’t want to receive 20 separate deliveries and pay for them too.
âWhat we’re trying to do is create a level of convenience comparable to going to Coles Online, for example, where you have thousands of products on one website, and when you place your order, you receive it in one box. “
And it’s not just the food – Oomami covers every category a traditional supermarket would cover, so consumers don’t have to shop in more than one location.
Stefan says Oomami is not designed to compete with the big supermarkets. In fact, none of the products on Oomami are available from Coles and Woolworths.
âIf a product is sold by one of the major retailers, in fact, we won’t stock it. In this case, they’re already doing pretty well anyway. We maintain a point of difference. We help all the small producers who are really trying to develop their brand and give consumers access to products that they would not usually have access to elsewhere.
The platform aims to open up the market so that consumers can buy from any small producer in the country.
“A Perth customer, for example, can access a niche product made by a small producer in Melbourne that would typically only be available to people in Melbourne.”
Oomami has warehouses across the country and has outsourced all warehousing and logistics to third parties. It combines orders from various producers that are shipped across the country to keep costs down.
A Roy Morgan study released this week showed that agribusiness companies struggle to earn consumer trust, ranking at the bottom of the trust scale with a score below five. Stefan says this declining corporate confidence has been a huge driver behind Oomami.
âIf you look at the statistics of farmers’ markets over the past 10 years, you can see that they have grown in popularity quite dramatically. People want to know where their food comes from. People want to support small farmers.
He also pointed to the negative press regarding the behavior of large supermarkets towards farmers in recent times.
âThe problem is, even though people are aware of these issues and have had the goodwill to want to support producers, the technology has not kept pace and there has not really been a way for consumers. to easily access products made by small producers or at least as easily as going to an online Coles for example. But now there is.
The social aspect
What sets Oomami apart from other online grocery stores, beyond the fact that it only offers products from small food producers, is the social bond it maintains between consumers and producers.
âThis is one aspect of the platform that I am very proud of,â Stefan says of the communication tool. He wanted to bring the farmers market experience to consumers online.
âThe difference with buying at a farmers market is that [consumers can] interact with the people who actually make the products. On the Oomami platform, we wanted to recreate a digital or online version of the farmer’s market experience where [consumers] can actually become friendly with the producers.
âWe believe that this interaction will actually result in more sales. It is both a utility to make the experience more enjoyable and a way to help producers better promote their products and their brand.
So how does it rank on the delivery front? As large retailers know too well, today’s consumers demand a fast, cost-effective delivery system.
âDelivery is usually made within 48 hours and all deliveries come from the local warehouse. When you browse the site, you usually only see the products that are in your local warehouse.
There is a flat fee of $ 15 for retail orders, with free shipping for wholesale orders over $ 200.
Stefan expects the market to be up and running within the next three months and plans to expand the platform beyond Australia.
âWe are currently in beta testing, we have about a thousand products on the platform right now. We want to increase this number of products to several thousand.
âEarly next year, we plan to launch in New Zealand and Singapore, and then we look at North America beyond that,â he added.