Can New Englanders Grow and Process Most of their Food Regionally?

Start-up food companies are everywhere, but very few have their own production capacity. Funding organizations in New England hope to change that with an ambitious capitalization plan.

By Kevin T. Higgins, Managing Editor

High throughput is a defining feature of U.S. food manufacturing, and for good reason: Since the 1930s, public policy has been geared toward providing Americans with affordable and abundant food.

As the tug of higher quality and better-for-you food products attests, today’s trend is quite different. Many people are paying more for limited-quantity foods and beverages. Craft beer is the obvious example, but the shift goes far beyond beer. Centralized growing and processing of crops and livestock is giving way to regional and local production. A taste for exclusivity from those who can afford it is only one driver; food security, job creation and the dietary needs of financially strapped individuals also are contributing.

The U.S. Federal Reserve Board jumped into the locally grown and processed mix three years ago when discussions with USDA commenced on how to nourish the trend, particularly for low- and moderate-income households and communities. Knowledge and capital were identified as the key needs, and outreach meetings with impact investors, philanthropic groups and community development financial institutions have been hosted by half a dozen regional banks. The most ambitious effort grew from a November gathering hosted by the Federal Reserve Bank of Boston, where the 50 By 60 initiative was unveiled.

“Make no little plans,” Daniel Burnham advised, and the instigators of New England’s 50 By 60 plan took that to heart. Their goal is to grow and process at least half of the fruits, vegetables, meats and other foods consumed by 15 million New Englanders within the next 42 years. Presently, the region gets 10 percent of its diets from local farms and factories.

Coastal Enterprises Inc. (www.ceimaine.org) of Brunswick, Maine is one of the drivers behind 50 By 60. “It’s a totally daunting challenge,” allows Gray Harris, CEI’s senior program director-food systems and natural resources, “but you need a vision to inspire.” CEI has invested more than $18 million in food ventures since 2010, but that’s a drop in the bucket of what it is striving to provide.

One CEI success story is Blue Ox Malthouse (www.blueoxmalthouse.com) in Lisbon Falls, Maine. Founder Joel Alex’s idea of supplying malted barley to the state’s growing community of craft breweries was more dream than concept until CEI stepped in to help draft a business plan and arrange more than $1 million in financing.
Major malthouses like Great Western Maulting and Rahr Corp. spill more grain than Blue Ox processes, but the supply chain impact it could have appealed to CEI. It also met the first rule of capitalism: capitalists, aka investors, get paid.

“Malting is not an area where traditional lenders go,” points out Alex. “We had to be really creative in how we approached it." CEI and its fellow investors weigh risk and reward when making lending decisions, but they begin by asking about the socio-economic and sustainability impact of a potential investment.

In the case of Blue Ox, the impact begins with the farmers who convert acreage to high-value barley from commodity crops. Wood kiln makers that supplied some of the malthouse’s equipment now are migrating into other food equipment opportunities. And the state’s craft breweries that purchase $35 million worth of malt yearly now have an in-state option instead of a broker network that only diverts dollars from the local economy.

Beer isn’t for everybody, Harris laughs, and CEI prefers projects that deliver nutritious, affordable food to a wider audience. Craft beer also underscores a fundamental challenge: supporting farmers who can deliver quality food that can be sold at “a palatable price to the consumer.”

Tens of thousands of jobs have resulted from the 6,000-plus craft breweries that now operate in the U.S. Craft malthouses have contributed to the job stimulation. Only five existed in North America five years ago, according to Alex; today, there are more than 100. But the finished goods command a premium price, making the segment more of an outlier than a harbinger of a new food economy.

Attracting more impact investors is a top priority for Harris and 50 By 60. An even bigger one will be changing public policy. “The paradigm shift from Get Big or Get Out to supportable, regenerative businesses is huge,” she concedes.

Four decades may not be long enough for such a shift.

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