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New distribution model helps fishery business expand beyond B.C. borders

Partnership model allowed Skipper Otto’s, a community supported fisheries business, meet demand from outside of British Columbia

THE CHALLENGE

Just over a year ago, Sonia and Shaun Strobel decided to expand their community supported fisheries business, Skipper Otto's, beyond British Columbia's borders.

Unofficially, they were already there. The business had ballooned from 40 people buying fish from a locker on Granville Island to more than 1,000 members, buying thousands of pounds of seafood, across Western Canada.

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They needed a plan. "Our business caught on like a house on fire and created this monster we had to deal with," says Ms. Strobel.

They needed a distributor and, more importantly, they needed that distribution element of the business to uphold the sustainable, transparent model they had built with Skipper Otto.

"The whole point of our business was to shorten the supply chain," she says. "So we had to ask ourselves, 'How do we expand and grow without jeopardizing all that we've come to be known for over the years?'"

THE BACKGROUND

Sonia and Shaun started their sustainable seafood business, Skipper Otto's Community Supported Fishery (CSF), in 2008 with the objective to support local fishermen–like Shaun's father, Otto.

Otto fished the B.C. coast since the 1960s, but like many of the local fishermen was being priced out by the larger companies. The development of the CSF was to help local fisheries through tightened supply chains, but also to do for fishermen what Community Supported Agriculture (CSA) had done to support farmers.

Every year, before the fishing season starts on June 1, members buy shares of any size in $100 increments in exchange for wild, sustainable and locally caught seafood. Skipper Otto was the first membership-based business of its kind in Canada and the second in the world.

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Skipper Otto immediately attracted clients from Vancouver and the Lower Mainland. But the growth rate was swift and costs skyrocketed when demand grew from customers several provinces away.

"When we needed to provide seafood to members in Saskatoon and Regina, Shaun rented a refrigerated truck and drove there and did distributions out of that," says Ms. Strobel. "This is certainly the most expensive way to operate and was a huge drain on the core business, which is securing fish and getting customers excited."

This wasn't a sustainable distribution method, in more ways than one. "We needed to keep the costs down, so we could pay ourselves salaries that are sustainable," says Ms. Strobel. "We knew we had to grow to cover all of our costs, but we had to do it in a way that included paying our employees a fair salary. If that's not the case then what have we really created?"

THE SOLUTION

Partnering with the right associates changed everything. "The turning point was finding smaller partners with similar values, that are malleable and have a system that can mesh with ours," says Ms. Strobel.

In 2014, they were sharing workspace with some fellow social ventures as part of the Coast Capital Savings Innovation Hub, an accelerator program at the Sauder School of Business. A couple of those ventures turned out to be their first partners.

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One was Fresh Roots, a team of urban farmers that let Skipper Otto's members pick up fish orders at their veggie box pick-up points – and to reciprocate, Skipper Otto stocked some of Fresh Roots' greens at their own locations. "This gave us an extra pick-up location without the staffing costs," Ms. Strobel says.

Another was a courier company called Zipments, which now does home deliveries for Skipper Otto customers. Ms. Strobel and her team quickly saw that partnerships were the solution they had been looking for: by working with Fresh Roots and Zipments, and another CSA called Urban Digs that runs a farm in Burnaby, it became far easier to reach their customers.

The company recently decided to build on their success and take their partnership distribution model to other cities across Western Canada.

THE RESULT

"The system we had in the past meant we couldn't grow beyond a certain point," says Ms. Strobel. Now all of that has changed as out-of-town customers have a host of options for pick-up or delivery.

Regina is the perfect example of how the distribution shift has improved costs and the service to customers with more frequent pick-up options. A newly expanded organic food retail store, Body Fuel Organics, will offer pickups to Skipper Otto customers once a month, rather than twice a year. The store has walk-in freezers so Skipper Otto can use existing frozen food shippers to ship directly to the Regina store.

While there is a small cost in some cases, Ms. Strobel says it's more than worth it. "I'm already looking at the numbers and my mouth is dropping at the difference and cost savings," she says.

Several local organic grocery chains have jumped on board to work with Skipper Otto. "Community Natural Foods in Calgary and the Organic Box in Edmonton just love what we're doing and they are really looking for that transparency in the supply chain," she explains.

"And the room for expansion is huge in those existing cities," she adds. "I see no reason why we can't take this model to larger cities in other parts of the country and replicate it."

James Tansey is an associate professor and executive director of the Sauder School of Business Centre for Social Innovation and Impact Investing.

This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They now appear every Tuesday on the Report on Small Business website.

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