Innovation: St. Paul specialty food market tests new model

What if grocery stores gave 100 percent of every sale back to the person or family who makes the food?

How many more local food startups could then actually make a living wage, thought Kayla Yang-Best, who has been producing and selling Asian broth and meal kits based on her Hmong family recipes for the past three years.

Her dream was realized two months ago when she opened the doors of Seasoned Specialty Food Market at 1136 Grand Av. in St. Paul. The store, tucked into an old home along this retail corridor, is a first.

It operates under a co-retailing business model that seeks to give shelf space and bigger profits to small food growers and makers. Seasoned sells locally grown and locally made products and returns all the money from sales back to the maker.

In its simplest form, co-retailing is when two or more companies share a retail space to save on rent and other associated costs. It is more commonly seen with clothing companies or in a gift shop format.

Yang-Best has a somewhat different concept. Rather than just splitting all the costs between multiple companies, she developed a fee-based model. She charges producers a flat rate to shelf, market and sell their products. With that money, she manages all the administrative stress — from paying the bills to marketing to hiring and paying staff. Every penny of every sale goes back to the producer who made that item.

"All they have to do is take on that risk of supporting this community," Yang-Best said. A six-month term is $360 and a 12-month term is $480. A maker is charged $5 a month for each additional product they want to sell in the market. These fees cover the costs of keeping the store open.

Yang-Best has not found anyone else doing this in the food space. "We are not a farmers market. We are basically a grocery store," Yang-Best said. "But we have a very different relationship with our partners."

The idea for the store was born out of frustration. As a local food maker, Yang-Best was not able to make money on her products if she sold in a grocery store. Her bone broths, for instance, take 8-10 hours to make, and that's not including packing and transporting. When she calculated the cost of that individual care, the price was too high for grocers to be interested, and the percentage of each sale the grocers require would take too much off her profit.

"Then, I would just be working for free to feed people," Yang-Best said.

She started having conversations with other small local makers like herself, and many said they would be interested in joining a co-retailing concept that supported small, artisanal food makers.

"I never heard of co-retailing. I just made that up out of necessity," she said. "You have these questions and you try to figure out how to make it work."

In building the business, Yang-Best drew on her diverse career experiences ranging from corporate responsibility at Cargill Inc., the Minnetonka-based agribusiness, to the Bush Foundation, which gives community development grants.

Seasoned has three primary revenue streams: co-retailing, a walk-in deli counter and renting out its upstairs event space. The store is breaking even. It has 15 co-retailers for a total of 45 products, ranging from elderberry juice from Iowa's River Hills Harvest to La Perla tortillas made in Minneapolis.

"You can't really do a pure co-retailer without a variety of revenue sources. You have to be really creative about it," she said.

She is also drawing on her own family heritage. Her mother was an entrepreneur, running a tiny pho cart in a refugee camp in northern Thailand before her parents moved to Oshkosh, Wis. Yang-Best grew up picking vegetables and cooking dishes infused with flavors from Southeast Asia.

Love of that freshness inspired her to create her Spice Kitchen Pho Noodle Kit, which started her down the co-retailing path.

In the next two years, Yang-Best hopes the store is selling products from at least 80 percent local growers and makers. Right now, Seasoned has partnerships with some small out-of-state food companies because not everything can be grown and made in Minnesota, and Yang-Best wants the store to eventually be a one-stop grocery shop.

In five years, she hopes Seasoned is selling 100 percent local products. Longer term, Yang-Best envisions half a dozen stores like Seasoned throughout the state.

"Minnesota is so rich in culture — think of the Scandinavian and African heritages," she said. "Co-retailing is about preserving that culture. It's about quality of life and the richness of local culture, and I think food is at the heart of culture."

Kristen Leigh Painter • 612-673-4767