January 23, 2006
Greenhouse effect | A Massachusetts-based entrepreneur eyes Madison as a new tomato hot spot
By Joseph R. Thompson
Ever since 1820, when Col. Robert Gibbon Johnson stood on the steps of the Salem, Mass. courthouse and ate a basket of tomatoes in front of 2,000 spectators to prove they weren't poisonous, the fruit has been a staple of the American diet. The average American consumes roughly 20 pounds of fresh-market tomatoes each year, according to U.S. Department of Agriculture statistics, which adds up to about 5.7 billion pounds of tomatoes consumed annually.
In all, the U.S. grows 64% of the tomatoes it consumes. But during the winter, when domestic production dips, more than half of the fresh-market tomatoes consumed in this country are imported from Holland, Israel, Spain and Mexico.
Now, Massachusetts-based entrepreneur Paul Sellew is betting more than $20 million that by growing tomatoes in Maine he can offer a lower cost product than those flown into
the country. By October, Sellew's company, U.S. Functional Foods, plans to open a 24-acre glass greenhouse in Madison capable of growing millions of pounds of vine-ripened tomatoes a year. (Sellew declined to offer specific production figures). His target market includes New England supermarkets and regional foodservice providers. "Tomatoes are a global commodity [and] we're trying to change that," said Sellew. "This global sourcing and flying vegetables all around the world in airplanes, cross-country trucks and ships ˆ we think that trend is going to go away and be replaced with locally grown food for local markets."
USFF plans to break ground in March for the greenhouse and be up and running in six months, at which point Sellew hopes lower transportation costs to the New England market will allow him to sell for lower prices. Other advantages he cites for his Madison location are low electricity costs, access to a large workforce and tax incentives through potential Pine Tree Zone certification and Madison's Tax Increment Financing district.
But while Sellew will be able to control the growing conditions in his greenhouse, USFF's success will also depend on weathering changes in the fresh tomato market. Between 1990 and 2003, North American greenhouse tomato production ˆ including Mexico and Canada ˆ increased from "negligible amounts" to 528,078 metric tons annually, according to a 2005 USDA study. But Linda Calvin, an agricultural economist for the USDA's Economic Research Service who coauthored that report, said the growth also coincided with significant industry shifts.
For example, four years ago Calvin noticed a spike in growth of tomatoes on the vine (TOVs), a variety developed in Italy in the early 1990s that became a huge success in the United States. Between 1999 and 2003, TOVs' share of the market jumped from 13% to 24%.
That increase in production, however, led to a price drop in the summer of 2004, growers told Calvin (specific price data is not available in the report). As a result, she said, growers are now experimenting with new varieties and markets ˆ such as cherry tomatoes on the vine ˆ to tap the industry's opportunities while mitigating its risks. "People keep trying to figure out where the high-price niche is," said Calvin.
Breaking in
To tap the tomato market, Sellew ˆ whose agriculture background includes founding Earthgro Inc. in Lebanon, Conn., which was the second largest producer of compost in the country until the Scotts Company bought it in 1998 ˆ thinks that USFF's niche will be regional marketing. Compared to European producers, Sellew expects to offer lower prices and more rapid deliveries because of his proximity to customers. "We will be shipping a few hundred miles compared to a few thousand miles," Sellew said. However, he would not offer a ballpark estimate of how much lower his shipping costs could be, citing the disparity in current shipping costs from various overseas locations.
Along with potentially cheaper transportation costs, Sellew said another important benefit of his location is low electricity prices offered by Madison Electric Works. MEW currently offers power at 8.5 cents per kilowatt-hour. The average price for power in New England in 2004, according to the Energy Information Administration, was 10.51 cents per kilowatt-hour.
USFF also plans to implement a relatively inexpensive, naturally-based Integrated Pest Management system, which would replace the use of pesticides that can cost as much as $100 an acre to apply, according to Dr. Jennifer Grant, the assistant director of the New York State IPM program at Cornell University.
Once he's harvested a crop, though, Sellew must find customers among New England's grocery stores and food service companies ˆ and that could mean convincing buyers to give up their proven sources. Bonnie Clariot, produce manager for The Whole Grocer in Portland, said she buys tomatoes from California and Florida during the winter months at around $20.00 for 50 pounds. "What I look for is a nice colored tomato and the histories I've had with that particular tomato," said Clariot. "So if I buy from a particular company that has proven that most of the time they're really good tomatoes, then I'll keep buying from that particular company or farm."
If USFF can crack that market, it has the potential to be the largest greenhouse produce operation in Maine. But it won't be the first. Scott Howard's Olivia's Garden produces about 70,000 pounds of tomatoes, basil and salad mixes from an 18,000-square-foot greenhouse at Pineland Farms in New Gloucester. He currently supplies Portland-area stores such as Hannaford and Wild Oats, and is unsure exactly how USFF's operation might affect his business. "We'll adapt, but I'm sure it'll have an impact in someway," said Howard.
Organic farmer Eliot Coleman, owner of Four Season Farm in Harborside, also is watching the development of USFF's greenhouse ˆ out of his interest as both an environmentalist and a tomato producer. Several years ago Coleman coined the phrase "authentic food," as an alternative to the organic label he saw being used by more large, industrial food producers. Citing his belief that a local grower produces a higher-quality product, he defined "authentic" food as that which is grown within a 50-mile radius of where it's sold.
While USFF's market is not limited to the 50-mile radius, Coleman sees the company's regional focus as a positive step. "I think that's fine," he said, "especially with 24 acres of tomatoes ˆ they're going to need quite a span to sell them in."
But Coleman's farm currently has a quarter-acre of greenhouses that grow a variety of vegetables, including seedling tomatoes in the spring. Last year, Four Season Farm grossed $105,000, selling mostly wholesale to stores and restaurants. When asked if he was worried about the potential competition, Coleman laughed. "I love competition," he said. "It keeps me on my toes."
In all, the U.S. grows 64% of the tomatoes it consumes. But during the winter, when domestic production dips, more than half of the fresh-market tomatoes consumed in this country are imported from Holland, Israel, Spain and Mexico.
Now, Massachusetts-based entrepreneur Paul Sellew is betting more than $20 million that by growing tomatoes in Maine he can offer a lower cost product than those flown into
the country. By October, Sellew's company, U.S. Functional Foods, plans to open a 24-acre glass greenhouse in Madison capable of growing millions of pounds of vine-ripened tomatoes a year. (Sellew declined to offer specific production figures). His target market includes New England supermarkets and regional foodservice providers. "Tomatoes are a global commodity [and] we're trying to change that," said Sellew. "This global sourcing and flying vegetables all around the world in airplanes, cross-country trucks and ships ˆ we think that trend is going to go away and be replaced with locally grown food for local markets."
USFF plans to break ground in March for the greenhouse and be up and running in six months, at which point Sellew hopes lower transportation costs to the New England market will allow him to sell for lower prices. Other advantages he cites for his Madison location are low electricity costs, access to a large workforce and tax incentives through potential Pine Tree Zone certification and Madison's Tax Increment Financing district.
But while Sellew will be able to control the growing conditions in his greenhouse, USFF's success will also depend on weathering changes in the fresh tomato market. Between 1990 and 2003, North American greenhouse tomato production ˆ including Mexico and Canada ˆ increased from "negligible amounts" to 528,078 metric tons annually, according to a 2005 USDA study. But Linda Calvin, an agricultural economist for the USDA's Economic Research Service who coauthored that report, said the growth also coincided with significant industry shifts.
For example, four years ago Calvin noticed a spike in growth of tomatoes on the vine (TOVs), a variety developed in Italy in the early 1990s that became a huge success in the United States. Between 1999 and 2003, TOVs' share of the market jumped from 13% to 24%.
That increase in production, however, led to a price drop in the summer of 2004, growers told Calvin (specific price data is not available in the report). As a result, she said, growers are now experimenting with new varieties and markets ˆ such as cherry tomatoes on the vine ˆ to tap the industry's opportunities while mitigating its risks. "People keep trying to figure out where the high-price niche is," said Calvin.
Breaking in
To tap the tomato market, Sellew ˆ whose agriculture background includes founding Earthgro Inc. in Lebanon, Conn., which was the second largest producer of compost in the country until the Scotts Company bought it in 1998 ˆ thinks that USFF's niche will be regional marketing. Compared to European producers, Sellew expects to offer lower prices and more rapid deliveries because of his proximity to customers. "We will be shipping a few hundred miles compared to a few thousand miles," Sellew said. However, he would not offer a ballpark estimate of how much lower his shipping costs could be, citing the disparity in current shipping costs from various overseas locations.
Along with potentially cheaper transportation costs, Sellew said another important benefit of his location is low electricity prices offered by Madison Electric Works. MEW currently offers power at 8.5 cents per kilowatt-hour. The average price for power in New England in 2004, according to the Energy Information Administration, was 10.51 cents per kilowatt-hour.
USFF also plans to implement a relatively inexpensive, naturally-based Integrated Pest Management system, which would replace the use of pesticides that can cost as much as $100 an acre to apply, according to Dr. Jennifer Grant, the assistant director of the New York State IPM program at Cornell University.
Once he's harvested a crop, though, Sellew must find customers among New England's grocery stores and food service companies ˆ and that could mean convincing buyers to give up their proven sources. Bonnie Clariot, produce manager for The Whole Grocer in Portland, said she buys tomatoes from California and Florida during the winter months at around $20.00 for 50 pounds. "What I look for is a nice colored tomato and the histories I've had with that particular tomato," said Clariot. "So if I buy from a particular company that has proven that most of the time they're really good tomatoes, then I'll keep buying from that particular company or farm."
If USFF can crack that market, it has the potential to be the largest greenhouse produce operation in Maine. But it won't be the first. Scott Howard's Olivia's Garden produces about 70,000 pounds of tomatoes, basil and salad mixes from an 18,000-square-foot greenhouse at Pineland Farms in New Gloucester. He currently supplies Portland-area stores such as Hannaford and Wild Oats, and is unsure exactly how USFF's operation might affect his business. "We'll adapt, but I'm sure it'll have an impact in someway," said Howard.
Organic farmer Eliot Coleman, owner of Four Season Farm in Harborside, also is watching the development of USFF's greenhouse ˆ out of his interest as both an environmentalist and a tomato producer. Several years ago Coleman coined the phrase "authentic food," as an alternative to the organic label he saw being used by more large, industrial food producers. Citing his belief that a local grower produces a higher-quality product, he defined "authentic" food as that which is grown within a 50-mile radius of where it's sold.
While USFF's market is not limited to the 50-mile radius, Coleman sees the company's regional focus as a positive step. "I think that's fine," he said, "especially with 24 acres of tomatoes ˆ they're going to need quite a span to sell them in."
But Coleman's farm currently has a quarter-acre of greenhouses that grow a variety of vegetables, including seedling tomatoes in the spring. Last year, Four Season Farm grossed $105,000, selling mostly wholesale to stores and restaurants. When asked if he was worried about the potential competition, Coleman laughed. "I love competition," he said. "It keeps me on my toes."
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