November 27, 2006
The cluster effect | Maine's specialty food producers see benefits in becoming a more organized, collaborative group, but wonder who has time to lead the charge
By Whit Richardson
When Carol Tanner and Dennis Proctor founded their mustard and sauce business, Mother's Mountain, in Falmouth 25 years ago, there wasn't much of a specialty food industry in the state. "Specialty food to the general public 25 years ago was Gulden's spicy mustard," Proctor says.
But these days, Portland Beer Mustard from Mother's Mountain and a host of other specialty products from Maine are crowding supermarket and gourmet food store shelves across the country. In 2003, Maine's specialty food producers employed 5,428 people, an increase of 700 jobs from 1990, according to data prepared by Michael Porter, a Harvard Business School professor and director of its Institute for Strategy and Competitiveness.
Seeing promise in that growth, the Augusta-based Small Enterprise Growth Fund and Portland-based CEI Community Ventures in October organized a forum on the state's specialty food industry at Bowdoin College. The Maine Food for Thought Forum, as it was called, sought to marry the existing growth of the industry with the idea of investing in "clusters" ˆ geographic concentrations of businesses within the same field. The idea of economic clusters is not new, but it has more often been applied to high-tech sectors and more established industries. Think of Silicon Valley or Hollywood ˆ both support a concentrated group of similar businesses with a crop of highly trained employees, many of which go on to found other successful companies, often in the same region, further strengthening the cluster.
The forum offered 120 business owners and others connected to the specialty food industry a chance to discuss how their individual reputations in the market could bolster the entire industry and create further economic growth ˆ something Maine is uniquely positioned to do, says Michael Burgmaier of CEI Community Ventures. "People are looking for authenticity in a lot of the new brands and Maine really has that to offer," he says. "We felt Maine was potentially missing something here."
As a venture capitalist, Burgmaier says small specialty food businesses frequently approach him with requests for funding. Unfortunately, because venture capital is usually targeted toward companies ready for big growth and with experienced management teams, only one in 50 of these businesses are suitable to receive venture capital, he says. (CEI Community Ventures has invested in Look's Gourmet Food Co. in Whiting.) The rest must settle for bootstrapping to grow their business. "But we saw that they could grow together and help each other grow," Burgmaier says.
And the role of clusters in economic development has recently come into focus in Maine. Earlier this year, the state's boat building and composite materials industries received a $15 million cluster development grant from the U.S. Department of Labor to invest in research and development, workforce training and business assistance. Then, in October, the Brookings Institution released its report on the state's economy, "Charting Maine's Future," which recommends the state create a $20 million cluster development fund to invest in traditional and emerging industries. "It's not about single, silver-bullet solutions," says Mark Muro, policy director at Brookings' Metropolitan Policy Program and lead author of "Charting Maine's Future." "It's like tilling a garden. It's not just about making sure Stonewall Kitchen becomes a behemoth nationally, it's about seeing what can be done to make this a richer area for lots of companies of different sizes."
The forum got people in the industry talking about the concept. Though hesitant at first, attendees began sharing needs, opinions and ideas for what was possible ˆ a conversation that continued long after the forum had officially ended. Consensus seemed to form around the idea that a more organized food cluster could increase buying power and distribution capabilities, offer a forum to share information and help market the Maine specialty foods brand.
Attempts at such collaboration have occurred in the past: The industry has an ad hoc, volunteer-led trade association, the Maine Gourmet and Specialty Food Producers, which has been around in one form or another for at least 18 years. It has notched some recent achievements, such as creating a Maine pavilion at the New York Fancy Food Show last July. But the organization doesn't have much momentum. Its website, www.mgsfp.org, has been down for the past several weeks and Proctor ˆ who is a past president of the Maine Food Processors Association, a predecessor to the current association ˆ says it has hemorrhaged paying members because companies weren't seeing any return from it.
And therein lies the dilemma: These mostly small-business owners, while acknowledging the benefits a more organized cluster could produce, hesitate to take time away from their own companies to work toward that long-term goal. So for all the excitement around the cluster approach, some in the industry wonder how Maine's specialty food producers will capitalize on it. "We have lots of lofty ideas but no one has the time," says Cal Hancock, president of Hancock Gourmet Lobster Co. in Cundy's Harbor.
Market ˆ and marketing ˆ clout
Don Morrison, owner of Morrison's Maine Course, is one business owner intrigued by the idea of a cluster. His company produces fish and clam chowders and lobster stew at his 7,500-square-foot facility on the Portland waterfront. Since starting his business three years ago, he has increased his annual sales to roughly $500,000 and distributes his products online and in stores as far south as Washington, D.C.
To meet that demand, he usually needs to send one or two pallets of products down to Boston a few times a month. The problem is getting them there. "Barber Foods has no problem filling a truck," Morrison says of the Portland-based chicken products company. "But people like myself, shipping one or two pallets, it's much more difficult."
He often shares space with Portland-based seafood supplier Browne Trading Co., his former employer, which sends two trucks to Boston a day. That works for now, but Morrison could envision Maine's specialty food businesses pooling their resources and hiring a truck for regular deliveries to Boston.
A shared truck also could return with bulk supplies ordered on behalf of several Maine businesses, like shrink-wrap for packaging, Morrison says. "That volume discount could be huge," Morrison says.
In a survey of attendees at the Food for Thought forum, 78% said they thought they could save money through group purchasing, and Proctor from Mother's Mountain agrees. He recently ordered 14 pallets of glass jars from China. But if he had teamed with other Maine companies to create a larger order he figures he could have saved two to three cents a jar. For his recent order of roughly 58,000 jars, that would mean savings of up to $1,700. "And any penny or nickel you can keep goes right to your bottom line," says Proctor.
Others in the industry think marketing the "Maine-made" brand could be one of the biggest benefits of a cluster, whether that means continuing to organize a collective presence at trade shows or pooling resources to buy a full-page ad promoting Maine specialty foods in a national gourmet magazine. "I think [organizing the cluster] can help with the brand of Maine food, there's no doubt about that," says Hancock. "It could attract people who might not necessarily know about a variety of Maine specialty foods [and] it would raise the level of awareness about what's going on in the state."
Economic experts agree. Muro of the Brookings Institution says an important cluster activity for any Maine consumer industry is branding those companies and products as part of the "mystique of Maine." "You want to find the advantages that the other guy doesn't have, and one would note that organic production is not itself inherently unique, great taste isn't necessarily unique, but the other guy doesn't have Maine," he says.
Trying to create momentum
Maine's food companies could look to the composites and boat building industries for an example of how an organized cluster can attract federal grants and be stronger than the sum of its parts. But the recent Brookings' report noted the relative weakness of trade associations in Maine ˆ and made strengthening those associations one of the goals of its recommended $20 million cluster development fund. Muro says, however, that the government should not simply decide which clusters it thinks are important, but let industry-led clusters compete for grants.
A state needs to let clusters self-organize and rise to the top, says Karen Gordon Mills, a Brunswick resident who was the keynote speaker at the Food for Thought forum. Mills is managing director of Solera Capital LLC, a New York-based investment firm that owns organic food labels such as Annie's Homegrown, famous for its purple box of macaroni and cheese. That's why the first step in organizing a potential specialty food cluster in Maine was bringing many players together to discuss the concept and see where leadership would come from, says Mills.
As a member of the steering committee of the North Star Alliance, the industry-led group responsible for the $15 million grant received by the composites and boat building industries, Mills has been through the process of cluster development before. She notes three things that can help solidify a cluster: workforce development, which could mean instruction in food safety or opening incubator kitchens; investing in research and development; and market development, or branding Maine specialty foods. "We found in boat building that branding Maine-built boats and going to boat shows and talking about the benefits of a boat from Maine was demand creation for the whole sector," Mills says.
Hoping to capitalize on the interest generated at the forum, Mills has offered to host another meeting of specialty food businesses to prioritize further steps. First on the industry's agenda, she says, will be looking into a potential cluster enhancement grant from the Maine Technology Institute.
Mills also says there are several federal agencies that would be interested in tapping into such a cluster once it was organized. Right now, Maine's specialty food cluster is not visible, she says, because of its small scale, and as a result is missing potential funding opportunities. "These are clearly avenues where we can probably get more visibility and get better access as a cluster than we can as individual companies," Mills says.
For Proctor of Mother's Mountain, the recent forum at Bowdoin was the third "get-you-all-excited, food-people gathering" he has attended since becoming involved in the trade association about 15 years ago. Because he's seen similar efforts dwindle away, Proctor says he's reserving comment until he actually sees momentum. "It's really nice to get together and brainstorm and get some feedback from other people who are experiencing the same thing," Proctor says. "But the problem still lingers of who's going to do the work, who's going to manage this, who's going to pay for this. This has always been an issue."
But these days, Portland Beer Mustard from Mother's Mountain and a host of other specialty products from Maine are crowding supermarket and gourmet food store shelves across the country. In 2003, Maine's specialty food producers employed 5,428 people, an increase of 700 jobs from 1990, according to data prepared by Michael Porter, a Harvard Business School professor and director of its Institute for Strategy and Competitiveness.
Seeing promise in that growth, the Augusta-based Small Enterprise Growth Fund and Portland-based CEI Community Ventures in October organized a forum on the state's specialty food industry at Bowdoin College. The Maine Food for Thought Forum, as it was called, sought to marry the existing growth of the industry with the idea of investing in "clusters" ˆ geographic concentrations of businesses within the same field. The idea of economic clusters is not new, but it has more often been applied to high-tech sectors and more established industries. Think of Silicon Valley or Hollywood ˆ both support a concentrated group of similar businesses with a crop of highly trained employees, many of which go on to found other successful companies, often in the same region, further strengthening the cluster.
The forum offered 120 business owners and others connected to the specialty food industry a chance to discuss how their individual reputations in the market could bolster the entire industry and create further economic growth ˆ something Maine is uniquely positioned to do, says Michael Burgmaier of CEI Community Ventures. "People are looking for authenticity in a lot of the new brands and Maine really has that to offer," he says. "We felt Maine was potentially missing something here."
As a venture capitalist, Burgmaier says small specialty food businesses frequently approach him with requests for funding. Unfortunately, because venture capital is usually targeted toward companies ready for big growth and with experienced management teams, only one in 50 of these businesses are suitable to receive venture capital, he says. (CEI Community Ventures has invested in Look's Gourmet Food Co. in Whiting.) The rest must settle for bootstrapping to grow their business. "But we saw that they could grow together and help each other grow," Burgmaier says.
And the role of clusters in economic development has recently come into focus in Maine. Earlier this year, the state's boat building and composite materials industries received a $15 million cluster development grant from the U.S. Department of Labor to invest in research and development, workforce training and business assistance. Then, in October, the Brookings Institution released its report on the state's economy, "Charting Maine's Future," which recommends the state create a $20 million cluster development fund to invest in traditional and emerging industries. "It's not about single, silver-bullet solutions," says Mark Muro, policy director at Brookings' Metropolitan Policy Program and lead author of "Charting Maine's Future." "It's like tilling a garden. It's not just about making sure Stonewall Kitchen becomes a behemoth nationally, it's about seeing what can be done to make this a richer area for lots of companies of different sizes."
The forum got people in the industry talking about the concept. Though hesitant at first, attendees began sharing needs, opinions and ideas for what was possible ˆ a conversation that continued long after the forum had officially ended. Consensus seemed to form around the idea that a more organized food cluster could increase buying power and distribution capabilities, offer a forum to share information and help market the Maine specialty foods brand.
Attempts at such collaboration have occurred in the past: The industry has an ad hoc, volunteer-led trade association, the Maine Gourmet and Specialty Food Producers, which has been around in one form or another for at least 18 years. It has notched some recent achievements, such as creating a Maine pavilion at the New York Fancy Food Show last July. But the organization doesn't have much momentum. Its website, www.mgsfp.org, has been down for the past several weeks and Proctor ˆ who is a past president of the Maine Food Processors Association, a predecessor to the current association ˆ says it has hemorrhaged paying members because companies weren't seeing any return from it.
And therein lies the dilemma: These mostly small-business owners, while acknowledging the benefits a more organized cluster could produce, hesitate to take time away from their own companies to work toward that long-term goal. So for all the excitement around the cluster approach, some in the industry wonder how Maine's specialty food producers will capitalize on it. "We have lots of lofty ideas but no one has the time," says Cal Hancock, president of Hancock Gourmet Lobster Co. in Cundy's Harbor.
Market ˆ and marketing ˆ clout
Don Morrison, owner of Morrison's Maine Course, is one business owner intrigued by the idea of a cluster. His company produces fish and clam chowders and lobster stew at his 7,500-square-foot facility on the Portland waterfront. Since starting his business three years ago, he has increased his annual sales to roughly $500,000 and distributes his products online and in stores as far south as Washington, D.C.
To meet that demand, he usually needs to send one or two pallets of products down to Boston a few times a month. The problem is getting them there. "Barber Foods has no problem filling a truck," Morrison says of the Portland-based chicken products company. "But people like myself, shipping one or two pallets, it's much more difficult."
He often shares space with Portland-based seafood supplier Browne Trading Co., his former employer, which sends two trucks to Boston a day. That works for now, but Morrison could envision Maine's specialty food businesses pooling their resources and hiring a truck for regular deliveries to Boston.
A shared truck also could return with bulk supplies ordered on behalf of several Maine businesses, like shrink-wrap for packaging, Morrison says. "That volume discount could be huge," Morrison says.
In a survey of attendees at the Food for Thought forum, 78% said they thought they could save money through group purchasing, and Proctor from Mother's Mountain agrees. He recently ordered 14 pallets of glass jars from China. But if he had teamed with other Maine companies to create a larger order he figures he could have saved two to three cents a jar. For his recent order of roughly 58,000 jars, that would mean savings of up to $1,700. "And any penny or nickel you can keep goes right to your bottom line," says Proctor.
Others in the industry think marketing the "Maine-made" brand could be one of the biggest benefits of a cluster, whether that means continuing to organize a collective presence at trade shows or pooling resources to buy a full-page ad promoting Maine specialty foods in a national gourmet magazine. "I think [organizing the cluster] can help with the brand of Maine food, there's no doubt about that," says Hancock. "It could attract people who might not necessarily know about a variety of Maine specialty foods [and] it would raise the level of awareness about what's going on in the state."
Economic experts agree. Muro of the Brookings Institution says an important cluster activity for any Maine consumer industry is branding those companies and products as part of the "mystique of Maine." "You want to find the advantages that the other guy doesn't have, and one would note that organic production is not itself inherently unique, great taste isn't necessarily unique, but the other guy doesn't have Maine," he says.
Trying to create momentum
Maine's food companies could look to the composites and boat building industries for an example of how an organized cluster can attract federal grants and be stronger than the sum of its parts. But the recent Brookings' report noted the relative weakness of trade associations in Maine ˆ and made strengthening those associations one of the goals of its recommended $20 million cluster development fund. Muro says, however, that the government should not simply decide which clusters it thinks are important, but let industry-led clusters compete for grants.
A state needs to let clusters self-organize and rise to the top, says Karen Gordon Mills, a Brunswick resident who was the keynote speaker at the Food for Thought forum. Mills is managing director of Solera Capital LLC, a New York-based investment firm that owns organic food labels such as Annie's Homegrown, famous for its purple box of macaroni and cheese. That's why the first step in organizing a potential specialty food cluster in Maine was bringing many players together to discuss the concept and see where leadership would come from, says Mills.
As a member of the steering committee of the North Star Alliance, the industry-led group responsible for the $15 million grant received by the composites and boat building industries, Mills has been through the process of cluster development before. She notes three things that can help solidify a cluster: workforce development, which could mean instruction in food safety or opening incubator kitchens; investing in research and development; and market development, or branding Maine specialty foods. "We found in boat building that branding Maine-built boats and going to boat shows and talking about the benefits of a boat from Maine was demand creation for the whole sector," Mills says.
Hoping to capitalize on the interest generated at the forum, Mills has offered to host another meeting of specialty food businesses to prioritize further steps. First on the industry's agenda, she says, will be looking into a potential cluster enhancement grant from the Maine Technology Institute.
Mills also says there are several federal agencies that would be interested in tapping into such a cluster once it was organized. Right now, Maine's specialty food cluster is not visible, she says, because of its small scale, and as a result is missing potential funding opportunities. "These are clearly avenues where we can probably get more visibility and get better access as a cluster than we can as individual companies," Mills says.
For Proctor of Mother's Mountain, the recent forum at Bowdoin was the third "get-you-all-excited, food-people gathering" he has attended since becoming involved in the trade association about 15 years ago. Because he's seen similar efforts dwindle away, Proctor says he's reserving comment until he actually sees momentum. "It's really nice to get together and brainstorm and get some feedback from other people who are experiencing the same thing," Proctor says. "But the problem still lingers of who's going to do the work, who's going to manage this, who's going to pay for this. This has always been an issue."
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