Essential Ingredients: Growing the Food and Beverage Cluster in the Milwaukee Region
1. ESSENTIAL INGREDIENTS:
GROWING THE FOOD & BEVERAGE CLUSTER IN THE MILWAUKEE REGION
DECEMBER 12, 2011
PREPARED BY:
DAVE BOEHM
FATIMA BENHADDOU
HEATHER GOETSCH
WILL KORT
2. Shelley Jurewicz
MMAC M7 Food Network
756 N. Milwaukee St., Ste. 400
Milwaukee, WI 53202
December 13th, 2011
Ms. Jurewicz:
In order to provide a recommendation on how the M7 can best proceed in advancing the region’s food and
beverage cluster, we conducted a thorough examination of three alternatives. Based on criteria chosen to
evaluate these solutions, we recommend that the M7 implement an “economic gardening” strategy primarily
focused on supporting entrepreneurs, developing new firms and nurturing existing high performing
companies, in addition to other measures. However, support for business startups and entrepreneurs has
historically not been a strong suit in the Milwaukee region. A recent study by the Public Policy Institute
highlights some of these issues and calls for greater coordination among the groups and institutions that
work in regional development. Although MMAC has been a leader in funding local startups, we have no
doubt that efforts to grow the region’s food cluster with a large entrepreneurial component will require
sustained commitment and creativity in leveraging funding and support.
These difficulties apply at the state level as well - Wisconsin has historically supported startup businesses
at a lower rate than other states, and lags behind many of the states in the region in this regard. However,
the newly renamed state Dept. of Commerce (now the Wisconsin Economic Development Corporation)
may be more committed to providing entrepreneurial assistance than it was in the past.
Regional cooperation may also be a stumbling block, as our recommendation to encourage the businesses
in the cluster to take advantage of Wisconsin’s status as an organic producer will require enhanced
coordination with agricultural producers located in different regions of the state. Again, historically, there
has been a divide between the Milwaukee region and other regions of the state, but if the Milwaukee food
and beverage cluster can help outstate farmers utilize their production capacities more fully, collaboration
should be welcomed. Finally, our recommendation to focus more heavily on organic and natural products is
likely to meet with resistance from both food processors and farmers, who may still view organic and
natural products as a niche market. However, recent sales trends for organic products, now totaling $21
billion annually, have continued their upward climb, even in the face of recession, and 78% of consumers
now buy organic products. Educating producers and processors about the revenue advantages of organic
will be critical in this regard.
We are confident that our recommendations for growing the region’s food and beverage cluster are sound.
We hope you find this report to be thorough and useful. Thank you for the opportunity to conduct an
analysis of alternatives for the M7. Please feel free to contact us with any questions.
Respectfully Submitted,
Dave Boehm
Fatima Benhaddou
Heather Goetsch
Will Kort
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3. EXECUTIVE SUMMARY
The challenge of this analysis was to identify the steps necessary for growing an industrial cluster in the
food and beverage industry. The Milwaukee M7 region is interested in attracting and growing a food and
beverage cluster that will increase the number of jobs available and the income generated in the sector.
Within this report, a number of alternatives were reviewed for their potential contribution to the cause.
Focus was directed towards the development of a food campus, concepts of economic gardening, re-
branding Milwaukee for business attraction, and the local movement supporting food and beverage
businesses. Each alternative addresses the corresponding attributes of the City of Milwaukee that will aid in
the effort to define and develop a food and beverage industrial cluster in the region.
In order to gauge the potential success of each alternative, measurable criteria were developed to allow for
the proper analysis of the alternative’s performance. The criteria selected for evaluation included:
Total Cost: The preferred alternative must cost no more than $1,000,000 per year.
Job Growth: The preferred alternative must add at least 976 food jobs by 2015.
Industry Payroll: The preferred alternative must increase industry payroll by $39 million by 2015.
Cost per Job: The preferred alternative must cost no more than $5,000 per job created.
Location Quotient: The preferred alternative must result in a 0.08 increase in the location quotient
for food and beverage processing in the Milwaukee Region by 2015.
These criteria were selected based on their comprehensive exploration of the alternative’s capabilities in
regards to the growth of the food and beverage industrial sector in the region. The alternative that was
found to perform optimally was the economic gardening approach. The economic gardening model
emphasizes supporting entrepreneurs and high-impact businesses to grow the economic cluster to critical
mass. The areas critical to growth are support services, networking, and providing competitive intelligence.
This alternative would result in a cost of $1,000,000 per year, 1216 food jobs added at a $2,467 cost per
job, a payroll increase of $48 million, and a location quotient increase of .10. The recommended course of
action includes focusing on start-up companies, young firms, and high-impact firms. Start-up firms are
those firms first created by people with ideas which lead to growth in later stages. Young firms are those
between 1-5 years, which have finally begun to make a profit and often rapidly expand during this time
frame. The final type is high-impact firms, also called “gazelles.” A gazelle is a firm that doubles in sales
every year for four consecutive years. Entrepreneurs for these companies are best fostered through
education programs, which can be supported through Milwaukee’s educational system.
Additionally, the final recommendation includes “buy local” strategies that increase focus on natural and
organic products, as well as vertical integration efforts targeted at local institutional buyers. Paradoxically,
the focus on healthy foods embodied in buy local campaigns highlights opportunities for the M7 region to
expand its offerings beyond the region, by exporting more natural and organic products. The combination of
the economic gardening alternative and “buy local” strategies is fully intended to address the challenge of
fostering the growth of a food and beverage industrial cluster in the Milwaukee region.
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4. PROBLEM DESCRIPTION
Fostering a hearty economy and creating significant job growth in a post-manufacturing “boom” is a difficult
task. Manufacturing industry has remained strong in the Milwaukee Region despite its decline in the
Midwest since the 1970s. The Milwaukee M7 region is strong in several areas: 1) water technologies, 2)
power, automation and controls, and 3) food and beverage processing. In fact, 253 food and beverage
firms in the region employ approximately 14,700 workers that constitute 9% of the region’s manufacturing
job base. Furthermore, in 2012, 70% of those firms expect their employment to grow, 94% expect to invest
in capital equipment, and 50% expect to expand their facilities. These businesses export up to 80% of their
products outside the region, indicating the strength of the export market in this sector.
The food and beverage processing “cluster” exists in the Milwaukee region because of the peripheral
support through local talent and education, access to the agricultural side of the food system continuum
within the region, and its access to Lake Michigan water.
Wisconsin is second only to California in the production of
vegetables and many of the local farmers till back almost one-
third of their crops back into the soil as waste simply because
they cannot find a market for the food late in the growing season.
On the talent side, the Milwaukee Region is first for the
concentration of food industry talent and second for the
concentration of food scientists. Additionally, Milwaukee Area
Technical College (MATC) is developing two degrees related to
the industry: 1) food manufacturing production, and 2) food
manufacturing quality/science. Relating to water, Milwaukee
ranks 39th for annual industrial water cost ($129,090 on
average). In addition, there is a surplus of entry level workers in
the region
In response to the recognized strength the region has in the food and beverage industry, the Milwaukee 7
developed the M7 Food Industry Network, led by Shelley Jurewicz, Vice President of the Metropolitan
Milwaukee Association of Commerce (MMAC), and an Advisory Council co-chaired by two industry leaders,
the president of Chr. Hansen and the co-owner of O&H Danish Bakery. The organization’s charge is “to
connect and engage food industry leaders to improve the Milwaukee Region as a place to expand, locate,
or start a food business.”
This report examines several potential alternatives that could take the region’s food and beverage cluster to
the next level, and help the region expand the number of jobs and total payroll in the sector, thus benefiting
the region’s economy and workers. A number of criteria were developed to evaluate the alternatives.
PROBLEM STATEMENT
The Milwaukee M7 region is interested in attracting and growing a food and beverage cluster that will
increase the number of jobs available and the income generated in the sector. This report will outline the
steps necessary for growing an industrial cluster in the food and beverage industry.
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5. MEASUREMENT CRITERIA
The preferred alternative must cost no more than $1,000,000 per year.
Total cost for economic development can reach to the hundreds of millions of dollars. But the M7 currently
has little budget for expanding the cluster. Given the size of the cluster in relation to other regional clusters,
$1,000,000 annually is an appropriate amount to invest. As a comparison, the M7 Water council is currently
funded at approximately $350,000 annually.
The preferred alternative must add 976 food jobs by 2015.
There is a current focus is on job creation across the country, given relatively high unemployment rates,
currently 8.6% nationally and 7.6% in Wisconsin. Wisconsin is particularly focused on job creation after
Scott Walker promised adding 62,500 jobs to Wisconsin each year between 2011 and 2015. With a CPS
estimated 2,822,655 jobs currently in Wisconsin, this is a 2.2% increase in jobs each year. Assuming
growth is consistent across all sectors, the Milwaukee area would need to add 976 food jobs by 2015 to
reach Governor Walker’s goal.
The preferred alternative must increase industry payroll by $39 million by 2015.
In addition to adding jobs, total industry payroll should increase substantially. With an average salary of
$40,136 and an increase of 976 jobs, payroll would increase by $39 million.
The preferred alternative must cost no more than $5,000 per job created.
In speaking with local economic developers, the cost of creating one job often costs $10,000. State
formulas vary between $5,000 and $10,000 per job. Given these standards, setting a conservative limit of
$5,000 per job created is prudent.
The preferred alternative must result in a 0.08 increase in the location quotient for food and
beverage processing in the Milwaukee Region by 2015.
The location quotient compares the percent employment in a place (the M7 region) with percent
employment nationwide in economic sectors. A number greater than one indicates that the place is likely
exporting products in that sector and is strong in that sector. The overall food manufacturing location
quotient for the Milwaukee Region is 1.29 and increasing this number will illustrate further growth in this
industry.
ALTERNATIVES
FOOD CAMPUS
The “Food Campus” alternative creates a physical food-centric business sector for industry to thrive (for
examples of other food campuses, refer to Appendix A). The purpose of the campus will be to stimulate
and enhance the industry’s vitality by localizing the supply chain. The core of the campus will be food
manufacturers and producers, with at least one large company as an anchor. The core will be supported by
suppliers, educational institutions, nonprofits, and local and state government. The location of the campus
should be in an area that already has a high concentration of food businesses and supporting industry,
such as the areas circled in figure on the following page. The creation of this campus would be funded by
attracting private investment.
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6. As a main facet of the alternative, the M7 Food Industry
Network would be incorporated as a nonprofit
organization supported by membership dues, grants,
and donations. The nonprofit would continue the work
the network is currently performing, but would include a
specific focus on the food campus. This would include:
supporting a communication and collaboration network
between businesses, facilitating meetings between
research institutions and specialists on the campus and
in the region, promoting the establishment of new food
companies, supporting the development of spin-offs
and start-ups, aiding business in procuring necessary
funding, and publicizing the campus and region. Finally,
the nonprofit would be charged with creating
partnerships between food businesses and local middle
and high schools to facilitate curriculum development
and internship or work-study opportunities, as well as
aid in the development of higher level food science
programs.
EVALUATION:
The alternative exceeds $1,000,000 in total cost.
The food campus alternative will greatly exceed the $1,000,000 total cost criterion, whether
building new or reusing existing buildings. Assuming the park is built new, the cost can be upward
of $165,720,000. This number assumes that the cost of building is around $82 per square foot, and
just over 2 million square feet of space is constructed.
The alternative will create more than 1,300 jobs.
The food campus alternative can create anywhere from 22,500 to 45,000. This assumes the
campus is on 50 acres and there are 100 new buildings (average 20,000 square feet).
The alternative will add $39 million to the industry payroll.
Based on the previous jobs calculations, and an average salary of $40,136, the food campus
alternative will add between $313 million (22,500 jobs) and $1.2 billion (45,000 jobs).
The alternative will cost more than $5,000 per job created.
The food campus will average $5,524 per job created (an average of the cost for 22,500 jobs and
45,000 jobs).
The alternative will increase the location quotient by far more than 0.08.
The food campus alternative will increase the location quotient from 1.29 to a minimum of 1.97
(22,500 jobs) and a maximum of 3.95 (45,000 jobs)
ECONOMIC GARDENING
The Food Cluster needs to include critical ingredients if a critical mass of food businesses is to be created.
The economic gardening model emphasizes supporting entrepreneurs and high-impact businesses to grow
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7. the economic cluster to critical mass. The areas critical to growth are support services, networking, and
providing competitive intelligence1.
Support services include legal, marketing, and accounting help that a new business owner may not know or
understand. Littleton, CO, the pioneer community of economic gardening, has become extremely proficient
at providing in-depth analysis of marketing and web presence for local companies. These tools help
businesses expand beyond their current level.
Networking is essential to new and growing businesses. This alternative provides linkage between these
businesses and resources that may be new to them, including resources that may not even necessarily be
available locally. Networking also includes fostering of community acceptance of the importance of
entrepreneurial growth and creating branding to promote business growth. The cluster would also provide
the voice through the correct channels for reduced barriers to market entry.
Competitive intelligence is timely, reliable, actionable information about market conditions that improve the
decision making capacities of entrepreneurs. It is important that the intelligence is not only available, but
usable by businesses. Intelligence catering should be done by seeking out the needs of a business and
then filtering data to meet those needs. Examples of competitive intelligence include GIS, economic
databases, and open source information such as Lexus Nexus.
EVALUATION:
The alternative would cost $1,000,000 per year.
Littleton Colorado increased the economic development budget from $70,000 to $600,000 over five
years. In the interest of growing the cluster more quickly than Littleton, a total investment of
$1,000,000 per year is proposed. This is equal to the threshold of $1,000,000 per year as set in the
criteria.
The alternative would add 1,216 food jobs by 2015.
Grow Florida is an entrepreneurial pilot program which incentivize communities to grow businesses
based on the Littleton model. The program created 1418 direct jobs as a result of a $3.5 million
investment. If the food cluster performed equally well, 1216 jobs would be created. This exceeds
the criterion minimum.
The alternative would increase industry payroll by $48 million by 2015.
Assuming jobs added meet the industry average of $40,136, payroll would increase by $48 million.
This exceeds the minimum payroll increase of $39 million.
The alternative would cost $2,467 per job created.
With $3 million in total cost over three years and an anticipated 1216 jobs created, the total cost
per job would be $2,467. This is less than half the threshold of $5,000 per job as required by the
criterion.
The alternative would result in a 0.10 increase in the location quotient for food and beverage
processing in the Milwaukee Region by 2015.
By adding 1216 food and beverage jobs to the region, location quotient would increase to 1.39, an
increase of 0.10. This exceeds the criterion minimum of 0.08.
1 International Economic Development Council. (2010). Unlocking entrepreneurship: a primer for economic developers. Washington, DC
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8. BUSINESS ATTRACTION
Milwaukee: Feeds and Supplies the World
In order to garner the potential of a food and beverage cluster that
allows for creative people to gather and learn, start a business, or
grow their industry, Milwaukee needs a renewed and innovative
spirit. The City has the potential to become a center for highly
innovative food and beverage industrial production and can act as
a catalyst for future growth in production, employment, and
attraction of businesses to the region. The City of Milwaukee and
the representatives of M7, along with other prominent members of
the food and beverage industry in Milwaukee, should highlight the
attributes of the City that make it a desirable locale for an
industry’s growth. In the early 20th century Milwaukee was known
nationally and internationally as the one who “Feeds and Supplies
the World”, due to all of the manufacturing and production in the
area. The purpose of this alternative’s approach will be to restore
this image to the region, and reintroduce Milwaukee as the food
and beverage industrial center for the nation. Certain qualities of
the City that should be highlighted to attract future business to the
area are as follows:
The readily available labor force with relevant skills for food and beverage production;
Quick and easy access to food and beverage research efforts;
Specialization in water research and conservation;
Easy access to high quality produce, locally grown and processed;
Growing presence of urban agriculture and aquaculture;
Large, former industrial regions of the city that can be re-purposed into food and beverage
manufacturing centers;
Existing framework of food and beverage companies, capable of aiding one another with waste
management and energy production;
Ease of distribution of product due to the developed transportation infrastructure of the city and the
state of Wisconsin; and
Educational support system available from multiple schools and universities in the Milwaukee
region.
The Milwaukee region currently has a total of 243 food and beverage companies. Significant industry
growth is expected in the next year, with 70% of companies projecting an increase in employment, 94%
expecting to increase investment in capital equipment, and 50% planning existing facility expansions. Local
movements in urban agriculture and locally grown produce are also spurring increased national attention
directed towards Milwaukee. Organizations that have originated in Milwaukee are at the forefront of their
specialty fields, with groups like Sweet Water Organics and Growing Power receiving substantial
recognition for their efforts in urban agriculture and aquaculture. The strength of organic production in
Milwaukee is becoming the city’s community identity.
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9. Incentives to Utilize Existing Building Stock
In an effort to draw businesses to Milwaukee’s existing food and beverage industry, the City of Milwaukee
will offer incentives to interested companies looking to locate in the City and that are willing to utilize the
existing building stock. Grants and forgivable loans will be provided for existing industries in the area that
expand their company while conserving energy and also adaptively reuse vacant manufacturing structures
in the City. Industrial buildings are well suited for retrofitting efforts that can accommodate incoming food
and beverage industries. For example, Sweet Water Organics transformed an abandoned industrial
building on the City’s south side into a working aquaponics facility and obtained a forgivable loan from the
City for expansion. The structure now contains a store and multiple vertical farming stations.
Marketing and Branding
To achieve the goal of growing jobs, payroll, and capital investment, the City of Milwaukee must undertake
a marketing campaign that will highlight the area and its contributions to the region. At the moment,
Milwaukee accounts for 9% of the regional manufacturing base. It also has a wide array of food and
beverage industries already located in its industry concentration. The purpose of this alternative will be to
grow this market by attracting new business to the region through a marketing campaign. Milwaukee’s
effort to develop a competitive food industry will be centered on a marketing campaign to highlight the
City’s attributes.
The campaign will require funds from private food and beverage companies, the city, and the Milwaukee 7.
Engaging stakeholders and securing buy-in is the first step for this alternative, followed by re-branding. Re-
branding Milwaukee will consist of reinvigorating the slogan “Milwaukee: Feeds and Supplies the World”
and utilizing it to identify Milwaukee’s prominence in the food and beverage industry. Effectiveness of the
campaign will be analyzed during a 3 to 5 year period in which increases in new business brought to the
area as well as the increase in existing food and beverage industry expansion and job growth will be
measured. Re-branding should be done with the assistance of a consulting or marketing firm with previous
success in city branding. Examples of similar campaigns in Milwaukee include Local First Milwaukee’s
initiative to market and re-brand in an effort to draw attention to the benefits and importance of locally-
owned independent businesses.
EVALUATION:
The alternative would cost more than $1,000,000 per year.
A city-wide marketing campaign would cost nearly $620,000 over a 5 year period. Incentives for
building reuse will cost the city $2,000,000 annually.
The alternative would add 1,600 food jobs by 2015.
With this alternative the City of Milwaukee is anticipating spending no more than $2,000,000
annually in an effort to increase employment in the food and beverage industry. With a limit of
$5,000 being spent per job created in the food and beverage industry, a total of 1600 jobs will be
created by 2015.
The alternative would increase industry payroll by $64 million by 2015.
Based on the previous jobs calculations, and an average salary of $40,136, this alternative will
increase payroll by $64,217,600 by 2015.
The alternative would cost $5,000 per job created.
The City of Milwaukee will cap expenditures per job created to $5,000. In this alternative $5,000
will be the maximum spent per job created.
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10. The alternative would result in a 0.13 increase in the location quotient for food and beverage
processing in the Milwaukee Region by 2015.
This alternative will increase the location quotient to 1.42, which is an increase of 0.13.
BUY LOCAL: ITS RELEVANCE TO THE FOOD AND BEVERAGE CLUSTER
Buy local movements have increased in popularity in the U.S. and other countries. Their purpose is to
support the local economy by encouraging people to shop at independently-owned local businesses. Civic
Economics is an economics analysis and strategic planning organization that has published a number of
studies assessing the benefits of locally owned, independent businesses. The firm has assessed the
impacts of buying local for the following measures:
Local Profit Retention,
Local Wages and Labor, and
Economic Output.
A 2007 report on Kent County, MI focused on the grocery, pharmacy, and restaurant sectors. Kent County,
which has a population of 600,000 and includes the city of Grand Rapids, had $8.4 billion in retail sales in
2007, including $2.2 billion in the food and pharmacy sectors. Using IMPLAN analysis, the study found that
$68 of every $100 spent at local merchants stayed in the community, versus $43 for every $100 spent at a
chain establishment. The study also found large advantages for local establishments in terms of total
employment and wages. For every $1 million in sales, the study found that grocery employment was 19%
higher, and total wages were 17% higher at locally-owned stores. Comparable figures for locally-owned
restaurants were 52% for both employment and wages. The study concluded by estimating that if 10% of
retail sales in the three categories were shifted to local merchants, the result would be an additional $53
million in wages and over 1600 new jobs, as well as $137 million in additional economic output, including
multiplier effects. With approximately $24 billion in annual food and beverage retail sales (2007 data), the
projected effects in the M7 region would be tripled compared to Grand Rapids. This would amount to
approximately $150 million in wages, 4800 new jobs, and $411 million in additional economic output.
However, the difficulty of shifting region-wide spending patterns by 10% should not be underestimated - 1%
is perhaps a more realistic figure, making the potential gains much less significant.
The local foods movement is a parallel and complementary development that seeks to encourage
consumers to choose locally produced foods and beverages. Proponents cite a number of benefits,
including supporting small farmers and local commerce, improved taste and freshness, the enhanced food
security that comes from “knowing your farmer,” and environmental and sustainability benefits. There are a
number of methods to implement buy local and eat local campaigns.
Marketing/Branding
Local First Milwaukee (formerly Our Milwaukee) utilizes a marketing and branding approach to increase
consumer awareness of locally-owned independent businesses. In addition to co-branding efforts, the
organization sponsors events, such as buy local fairs, while a complementary organization focused on
food, Eat Local Milwaukee, sponsors eat local challenges. The Local First model is a creation of BALLE
(Business Alliance for Local Living Economies - www.livingeconomies.org). Although sales impact data as
a result of the program are not readily available for Local First Milwaukee's 187 members, the
www.localfirstmilwaukee.com website averaged 350 hits per week in 2010 and has 2400 Facebook “likes.”
If the organization can shift local retail purchases from non-local to locally-owned enterprises, the likely
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11. impact on economic output, employment, and wages is likely to be proportional to the numbers cited in the
Grand Rapids study detailed above. However, it should be noted that these projections are speculative in
nature; even achieving a 1% shift in retail sales patterns would be a significant achievement. It should also
be noted that Grand Rapids, the site of the study, is home to BALLE, so the area probably has some
significant advantages in terms of institutional commitment to a buy local campaign.
Local Currencies
Local currencies are types of scrip that are accepted only at local businesses within limited geographically
defined areas, with the intent of strengthening local economies. There are local currency programs
operating in a number of U.S. regions, including Berkshire County, MA, where $2 million worth of
Berkshares changed hands in the first two years of the program. The concept is particularly popular in
Canada, which boasts at least eight programs operating currently, including Torontodollars, accepted by
over 150 businesses in that city. In Toronto, 10% of transactions are donated to community causes. In
Milwaukee, “River Currency” was proposed for the Riverwest neighborhood in 2008, but information on the
program is very limited. While alternative currencies have achieved ongoing success in many communities,
the scale of their impact on the local employment, wages, and economic output appears to be limited, at
best. In addition, the ongoing costs of administering these programs, as well as assigning organizational
responsibility for this function, are additional concerns.
Vertical Integration
Vertical integration is the linking of suppliers/producers, processors, distributors, and consumers through
formal organizations or comprehensive contractual arrangements. The Fifth Season Cooperative in Vernon
County, WI was organized in 2010 for the purpose of structuring coordination between producers,
processors, and institutional purchasers of food products. Its short term goals include increasing the
percentage of local food purchased by area institutional buyers by 3% - 10%, to help capture a portion of
the estimated $208 million that is currently spent on food from outside the region on an annual basis.
Startup costs were funded, in part, from a $2 million grant from the U.S. Economic Development
Administration, and $40,000 from the state’s Buy Local Buy Wisconsin grant program (BLBW). Similar
BLBW grants were used to fund the FEED Madison Small Producer Co-packing Service and the Dane
County Institutional Food Market Coalition. The latter project resulted in $1.2 million in additional sales, the
creation of 1.5 jobs, and the retention of 12.5 jobs. Large scale vertical integration has significant potential
for the M7’s food cluster, particularly in encouraging local institutions to source their foods and beverages
from local sources.
Natural/Organic Foods and Sustainability
Buy local campaigns targeting food and beverages are often not primarily focused on economic
development goals. Rather, they are typically spearheaded by groups and businesses, such as food
cooperatives, that are primarily focused on health and environmental sustainability. These efforts have the
complementary goals of promoting the consumption of wholesome, natural foods and reducing carbon
footprints by shortening food transportation networks. Organic production both reduces environmental
contamination from pesticides and results in a higher-value product that is preferred by many consumers.
In 2009, 78% of consumers purchased organic products. In addition, according to the USDA’s Economic
Research Service (ERS), “natural” and “organic” have ranked in the top 10 categories for new food produc t
package claims each year since 2001, and these categories, along with other health-related food
innovations, account for a significant proportion of new food product introductions (tables in appendix). The
growth in organic and natural categories continues largely unabated, averaging 20% annually. The
following is from a 2009 ERS report:
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12. Organic foods now occupy prominent shelf space in the produce and dairy aisles of most mainstream U.S. food
retailers, while offerings of organic meats, eggs, breads, grains, and beverages have increased. The marketing
boom has pushed retail sales of organic foods up to $21.1 billion in 2008 from $3.6 billion in 1997. Supermarkets,
club stores, big-box stores, and other food retailers carry organic products; many retailers have introduced lines of
organic private-label products; and manufacturers continue to introduce large numbers of new organic products.
Demand continues to outstrip supply. As shown in the chart, in 2002, net imports of organic products to the
U.S. were in the $1 billion range. Wisconsin is home to the second highest number of organic producers in
the U.S., behind California, a far larger and much more populous state.
The M7 region is also home to experts in the field of wholesale sales and marketing of natural and organic
products. Outpost Natural Foods General Manager, Pam Mehnert, is currently board president of the
National Cooperative Grocer Association (NCGA), which facilitates shared wholesale buying and shared
marketing for 160 cooperative storefronts across the U.S. With annual combined sales of $1.3 billion, the
“virtual chain” comprising the NCGA is the second largest retailer specializing in natural and organic food
sales in the U.S., behind Whole Foods. Outpost also has an innovative institutional food marketing
program, in which Outpost-branded products are placed in local hospitals cafeteria and break areas, as
well as a relationship with the Milwaukee Public Schools lunch program. In addition, George Simeon of the
CROPP cooperative in LaFarge, WI, has achieved great success in distributing and marketing organic
products, and is often tapped to give talks on these topics.
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13. Distribution
A few large distributors dominate distribution of natural and organic food products, so proximity to
distributors is a critical factor for natural and organic producers. The largest is United Natural Foods, Inc.
(UNFI), with annual sales of $1.3 billion. Its headquarters are in Rhode Island, and it has distribution hubs
across the country, including one in Iowa City. The second largest distributor is KeHe, an employee-owned
company with annual sales between $500 million and $1 billion. Its headquarters are in Romeoville, IL just
south of the M7 region. Wisconsin’s western region is also home to CROPP cooperative (Organic Valley
brands), a distributor with $690 million in annual sales.
Given Wisconsin’s rich tradition of organic agriculture, proximity to specialty distributors, and the higher
value associated with natural and organic products compared to their conventional counterparts, a focus on
natural and organic products is likely to pay big dividends for the M7 region’s food and beverage cluster.
Recommendations
From the discussion above, recommended “buy local” strategies include an increased focus on natural and
organic products, as well as vertical integration efforts targeted at local institutional buyers. Paradoxically,
the focus on healthy foods embodied in buy local campaigns highlights opportunities for the M7 region to
expand its offerings beyond the region, by exporting more natural and organic products. Given these
synergies, natural and organic food production is, well, a “natural” for the M7 region (view Appendix C for
sources and resources).
EVALUATION MATRIX
Selected Criteria Food Campus Economic Gardening Business Attraction
Total Cost $165,720,000 $1,000,000 $2,155,000
Job Growth 22,500 – 45,000 1,216 1,600
Industry Payroll $313M - $1.2B $48M $64M
Cost per Job $5,524 $2,467 $5,000
Location Quotient .68 – 2.66 .10 .13
KEY: Best Moderate Worst
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14. RECOMMENDATION
After evaluating the alternatives, the Economic Gardening alternative is the one that best meets stated
criteria and the one that is most feasible to implement in the near term. With a cost of $1,000,000 per year,
the alternative is a relatively low cost option. Most important, by creating 1216 food jobs at the cost of only
$2,467 per job, this alternative is very efficient.
In a very competitive market, conventional economic
strategies yield modest results. A focus on well-
established, older companies yields few results
because these companies add few jobs to the
economy. During the recent economic downturn,
almost all job losses can be attributed to large
companies, those with over 500 employees. A focus
on young companies has great potential because
this is where most jobs are created. From 1980 to
2005, almost all net job creation was from start-up
firms and young companies. Another important
aspect is job growth during recessionary times.
During recessions, new job growth typically remains
stable at young businesses while existing
businesses may lose jobs.
For economic gardening to be successful, the focus must be on start-ups, young firms, and high-impact
firms. Start-up firms are those firms first created by people with ideas. These firms are the seeds that lead
to growth in later stages. Young firms are those between 1-5 years old. These firms have finally begun to
make a profit and often rapidly expand during this time frame. The final type is high-impact firms, also
called “gazelles.” A gazelle is a firm that doubles in sales every year for four consecutive years.
Entrepreneurs are best fostered through education programs. Various programs geared towards high
school students increase the desire to become an entrepreneur. One such program by the Small Business
Administration increases the desire to start a business from 4% to over 14%. Another recommendation by
the IEDC is to create a local branding to help create a culture accepting of entrepreneurial efforts. Finally,
these firms often need help to setup a business plan, learn basic accounting, and understand tax filing
requirements.
Young firms and gazelles are best helped through technical assistance and networking. Legal services,
marketing, and competitive intelligence are crucial for competing in a global market. Because young firms
cannot afford these services, providing them is critical. Networking helps all firms by fostering awareness
and innovation, the primary driver behind the success of clusters. Gazelles are the best businesses to
have, but are very difficult for even skilled analysis to predict. The average gazelle is not a new startup, and
gazelles can be found in any region and sector. There is not a particular size for gazelles, and these firms
are responsible for almost the entire economic growth in the private sector. Instead of trying to pick
winners, it is more beneficial to create an environment that is fertile for potential gazelles to grow. By
increasing entrepreneurship and helping young firms, gazelles will grow organically.
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15. The overall impact of helping firms in an area is that other firms are
often attracted by the improved environment. In contrast, in a
business attraction model, firms are lured by incentives and not
helped again until they plan to move from the area. Economic
gardening instead helps firms to grow their business while in the area,
which creates local jobs and attracts other businesses naturally. This
approach is not only more ethical, but more effective and efficient.
There are key components found in the other alternatives that could
help to grow the food cluster. Despite its high cost, the Food Campus
has great potential to make a significant impact in the Milwaukee
region. This project should be considered complementary to economic
gardening, but is far more capital intensive.
Re-branding of the region is an important component of the business
attraction plan that should be considered. Judicious use of business
attraction through redevelopment incentives can also contribute to the
economic growth of the region, but at a higher cost per job than the
economic gardening approach. By targeting businesses that clearly fill
a gap for the cluster, the direct cost per job may be well worth the overall benefits to the cluster. Targeting
businesses that are young firms or potential gazelles looking to expand could be extremely beneficial.
The buy local alternative holds great promise for supplementing the Economic Gardening. With a push to
buy local, entrepreneurs will receive a significant boost from local residents. Incorporated with a branding
campaign, market shifts towards local purchases keeps money from leaving the region. This boosts both
payroll locally and sales. Finally, the organic advantage Wisconsin has over other regions can be exploited
through Economic Gardening. As a top producer of organic food and large industry growth, the food cluster
needs to take full advantage of this opportunity.
By focusing primarily on economic gardening and implementing select components from other alternatives,
a comprehensive approach to building a food cluster can be created. It is through integration of various
methods that economic development best occurs. This is possible even with limited funds if planned
correctly.
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16. APPENDICES
APPENDIX A: EXAMPLES OF FOOD CAMPUSES
Cross Hands Food Park, Ammanford, Carmarthenshire, UK - www.crosshandsfoodpark.com
Cross Hands Food Park is one in a portfolio of development sites in Carmarthenshire, all within minutes of
the M4 (highway) and a large workforce within short driving distance. A total of £50million is being invested
in the park with the aim of providing opportunities
for food producers and ancillary support
businesses to add value to the raw product. The
park is located centrally to agricultural and supplier
resources, thus reducing food miles for production.
The Food Park is strategically located near the
A48/M4 at Junction 49, which offers direct links
with the UK motorway network via the M4 and the
ongoing dualling of the A465 provides direct
access to markets in the Midlands. The M4 is part
of the arterial EuroRoute to and from Ireland,
across the UK and into the continent. The park is
also located near a main railway line and takes
advantage of available broadband and internet
technologies.
Food Business Parks, Bridgeton, New Jersey, USA - www.cityofbridgeton.com/foodbusiness-
parks.html
The City of Bridgeton has two business parks dedicated to the food industry. Food Business Park North
features 12 acres of available ground for food related or agribusiness. Food Business Park South serves as
a location for small to mid-sized companies whose site requirements are four acres or less. Both parks
benefit from a partnership with Rutgers
University Food Innovation Center. The
Food Innovation Center has been serving
clients from its offices in Bridgeton since
2001, and is now operating from a 23,000
square foot business incubator facility
located in Business Park North, which has
been operational since October 2008. The
new facility expands the capabilities of the
center and enables product design,
development, analysis, commercialization,
and ongoing manufacture of products for
sale to retail and food service markets.
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17. APPENDIX B: EXAMPLE OF OTHER FOOD CLUSTER INITIATIVES
Food Valley, Wageningen, Netherlands – www.foodvalley.nl/English/default.aspx
Food Valley stimulates innovation in the Dutch agro-food sector, with demand as its driving force. It acts on
its ‘conscience’: the needs expressed by the business community. It is a membership-based organization
with at least 12 employees managed by a board of directors. Food Valley’s purpose is to: 1) bring together
businesses and research institutes in goal-oriented clusters, 2) assist entrepreneurs in writing project
proposals and help procure available funding, 3) match Dutch and foreign visitors with potential business
partners or knowledge suppliers, 4) manage the Innovation Link, which helps individual food companies
with their innovation questions by putting them in touch with research institutes and their partners, 5)
encourage development of spin-offs and start-ups, such as the Food Valley Consortium, 6) support the
establishment of new food companies, and 7) serve as a forum for members to exchange knowledge and
ideas through the Food Valley Society.
Greater Hazleton Economic Development Food Processing Industry Partnership, Pennsylvania -
www.foodprocessingip.com
The Food Processing Industry
Partnership in Pennsylvania is a joint
effort of the Luzerne/Schuylkill,
Lackawanna, Northern Tier and Pocono
Counties Workforce Investment Boards
with the support of Pennsylvania
CareerLink. The partnership was created
to foster collaboration with the food
processing industry partners, workforce
investment agencies, local economic
development groups and educational
institutions. The mission of the
partnership is to align economic and
workforce development resources to meet
the needs of the companies within the food processing industry cluster with the career goals of its workers
and to attract and retain quality employers in Northeastern Pennsylvania.
APPENDIX C: SOURCES AND RESOURCE S FOR BUY LOCAL
Organic statistics: http://www.organicnewsroom.com/2011/11/seventyeight_percent_of_us_fam.html
Civic economics - buy local studies: http://civiceconomics.com/html/library.html and
http://www.ers.usda.gov/Publications/EIB58/
Health and wellness market research for the grocery industry - the Hartman Group:
http://www.hartman-group.com/
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18. New Economics Foundation - calculating the benefits of local: http://www.neweconomics.org/
BALLE - Business Alliance for Local Living Economies (local first organizations):
http://www.livingeconomies.org/
Marketing U.S. Organic Foods: Recent Trends From Farms to Consumers / EIB-58 Economic Research
Service / USDA, 2009.
Local Currencies: http://torontodollar.com/
LOCAL WORKS! Examining the impact of local business on the West Michigan economy
Civic Economics, 2007
BALLE food leakage calculator available for purchase at: http://www.livingeconomies.org/leakage-
calculators/food
Eat local campaign: http://www.eatlocalmilwaukee.org/index.html
Vertical Integration in the food industry: http://datcp.wi.gov/uploads/Business/pdf/09-
10AnnualImpactReport.pdf
http://www.veda-wi.org/News.html#rpub
TABLE 1—NEW FOOD AND BEVERAGE PRODUCT INTRODUCTIONS, 2006-2009
2006 2007 2008 2009
TOTAL
New products 20,228 24,236 22,566 19,047
Type of product PERCENT OF TOTAL
Candy, gum, and 29.7 29.3 26.6 25.5
snacks
Beverages 24.7 18.9 23.1 21.3
Condiments 7.5 11.2 8.7 9.7
Processed meat 7.9 8.7 8.5 7.2
Meals and 5.3 6.4 6.6 6.7
entrees
Fruit and 5.1 4.9 5.1 6.5
vegetables
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19. Dairy 5.4 4.8 4.7 4.8
Bakery foods 3.7 3.5 3.9 4.5
Pasta and rice 3.1 3.8 4.0 4.2
Baking 3.3 3.4 3.6 3.0
ingredients
Cereals 1.8 1.7 1.6 1.8
Desserts 0.9 1.1 0.9 1.6
Baby food 0.4 1.0 1.0 1.3
Soups 0.9 0.9 0.8 1.0
Meal 0.3 0.4 0.3 0.4
replacements
and special diet
foods
Source: Datamonitor.
In 2009, food categories with the largest shares of overall new product introductions include candy, gum,
and snacks; beverages; condiments; and processed meat. However, the share of new candy, gum, and
snack products introduced dropped from 2007 to 2009, as did the share of new condiments and processed
meat.
Advertisements touting a product’s attributes are conveyed on packages and in supporting literature. Based
on new product tags or claims (such as “organic”) tracked by Datamonitor, over 100 U.S. food and
beverage new product claims or tags were identified in 2009. Health and convenience-related attributes
accounted for 8 of the top 10 subject categories for ads on packages, and one-third of all new product
claims. Five categories, including “natural,” “organic,” “single serving,” “quick,” and “fresh,” have ranked
among the top 10 claims in every year since 2001.
TABLE 2—NUMBER OF NEW PRODUCT INTRODUCTIONS IN THE TOP 10 PRODUCT
CLAIM CATEGORIES FOR 2002 TO 20091
2 2002 2003 2004 2005 2006 2007 2008 2009
Tag or claim
NUMBER
Premium 905 1,589 1,568 2,106 2,645 3,552 3,362 2,336
Natural 1,245 1,380 1,364 1,612 1,664 2,335 2,123 1,894
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21. 1
Does not include associated stock keeping units (SKUs, or variations in size and
form). According to Datamonitor, the SKU count report may produce erroneous results
because a single new product introduction can have multiple SKUs, and each of these SKUs
may or may not have certain package tags.
2
A new product may have multiple tags or claims.
Source: Datamonitor.
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