Is Brooklyn Becoming the Silicon Valley of Food?

 

Something is happening in Brooklyn. In Manhattan Beach, small food producers line up to use Kingsborough Community College’s kitchen space. Every weekend, Manhattanites take the train to DUMBO and Williamsburg to taste handmade fare at Smorgasburg. Purveyors from across Brooklyn have joined forces to create an artisan food cooperative. In Brooklyn, food is big business for small businesses.

It is no secret that if you have a brilliant idea for a technology start-up, Silicon Valley is the place to be.  The proximity to like-minded individuals, funding and innovation is compelling enough to draw wannabe entrepreneurs from across the globe. Is Brooklyn becoming the Silicon Valley of food?

Clusters like Silicon Valley occur when like-minded people are able to gather and share ideas. In the Brooklyn food scene, Smorgasburg is a center of such gathering. Eric Demby is the co-founder of this weekend food market in DUMBO and Williamsburg that has helped popularize the artisan food culture in Brooklyn. “It’s like we’ve been there for years and the environment is just perfect for the market,” Demby said in an email. “We love that kind of integration.” The numbers back up Demby’s optimism about growth in food retail. Between 2008 and 2012, the number of permits issued by the state for food retailers increased by 25%.

Smorgasburg not only lets retailers find a customer base; the market is also a key way for local producers to meet each other. In 2011, Monika Luczak scaled back her hours as an attorney to create Saucy by Nature, a line of travel inspired sauces, with her close friend Przemek Adolf. At Smorgasburg they met other artisan purveyors who were facing similar business challenges. In 2012, Luczak and Adolf founded Fare Trade NYC with several of the companies they met.

Fare Trade NYC is a grassroots alliance that aims to help its 16 founding micro-businesses expand in the short term and remain sustainable in the long term. The plan is to share spaces at food markets, share ingredient sourcing to increase bulk orders and cut costs, and share connections for distribution. But an aspect that many founding members of Fare Trade NYC seemed most excited about was the open forum for general discussion and advice.

“Przemek and I have learned that there are constant things to learn and there is really nowhere to go that can guide someone on this journey,” Luczak said. “There’s really no infrastructure for helping businesses grow from start to sustainability. That’s what we wanted to do and since it didn’t exist, we had to start it.”

Rachael Mamane, founder of Brooklyn Bouillon, moved to Brooklyn from Seattle expressly to find supportive communities like Fare Trade NYC. “I know what I’ve done inside of two years – building a concept and now shopping it – I would have never been able to achieve that in Seattle in such a short time.”

Interest in cooperative organizations like Fare Trade is high because of the economic demands facing small artisan producers. Small profit margins mean that most artisan producers cannot support themselves through their business alone, at least not at first. Demby said of the vendors at Smorgasburg, “the vast majority still have other sources of income.”

Alex Crosier, a member of Fare Trade and owner of Granola Lab, is not yet ready to leave her part-time job at New York University librarian. “To simply let go of all other forms of income is scary,” Crosier said. “I want to be creative and do something on my own and I’m not fearful of taking risks and chances, but I am fearful of financial risks.”

The new wave of food entrepreneurs are the progeny of the recession. As companies downsized or reduced benefits, many workers leapt into self-employment. Paige McCurdy-Flynn, co-founder of Cookie Fairy Sweets, enrolled in culinary school after being let go from her job at Fortune Magazine. Chris Woehrle, co-founder of Kings County Jerky Company, quit his job as an art director in the music industry when he realized he wanted to do something different with his life. Since he loved food, the obvious move was imminent.

“I think it’s a nationwide phenomenon,” said Susie Wyshak, a Bay Area consultant to food entrepreneurs and author of nuttyfig.com, a food business blog. “People realize life is short or they lost their job and they wanted to start over and now it’s easier to get visibility online – it’s that perfect storm.” Research supports the anecdotal evidence. A Pew Study published in 2009 found that self-employed people were not only significantly happier, they were also more likely to work because they wanted to rather than because they needed the money.

But passion alone isn’t enough. Even for those who did the research, wrote the business plans, and crossed the t’s and dotted the i’s, hurdles emerged.

Michelle Lewis owns Spoonable, a line of caramel sauces, but previously had an artisan dog food line that folded due to logistical woes like high shipping costs and short shelf life. By contrast, Spoonable is a non-perishable product, which Lewis said makes for easier handling.

Small food producers also face cash-flow problems, as distributors can pay them weeks after the product is shipped. “It’s a fine balance,” said Crista Freeman of Phin & Phebes, a Brooklyn-based premium ice cream producer. “We want to produce when we’re just running out to keep cash flow at an optimum.”

The greatest challenge of all, however, may be finding an affordable kitchen in which to manufacture the product. To legally sell any food product in the state of New York, the Department of Agriculture and Markets must approve the producer for a 20-C license, which entails production in a certified commercial kitchen.

In Brooklyn, the explosion of producers has caused both private and public organizations to invest in filling this need for production space. Several locations around the city now offer rentable commercial kitchen spaces for small food producers and more are coming. In Brooklyn, Acumen Capital recently bought an unused Pfizer development in South Williamsburg for $26 million and created commercial kitchens for local producers.

Other commercial kitchen spaces are in food incubators, which offer both kitchen space and business advice at a more reasonable price. Often, government funding subsidizes the food incubator fees. In early 2012, Brooklyn announced that it would invest over $1 million of public funds in a culinary incubator with cooperative work-space and education center 3rd Ward.

Nearby, The Entrepreneur’s Space in Long Island City is yet another incubator for small businesses that offers commercial kitchen space, offices and business lectures. It is supported by the Queens Economic Development Corporation in cooperation with Katherine Gregory, a longtime consultant on food incubators. Gregory said that small-scale food production is growing in Brooklyn. She estimated that of the 170 businesses that contract with The Entrepreneur Space, nearly 40 percent travel from Brooklyn.

Kingsborough County Community College also offers space for rental through its Culinary Arts program’s Entrepreneur Zone kitchen, which functions like an incubator with an emphasis on education. Kate Wayler, professor and director of operations for the program, says that when start-ups fail, it is usually due to an unsustainable business plan or lack of funding. “People don’t know how expensive it is to do business, let alone do business in New York,” Wayler said.

But still the demand for usable kitchen space outstrips supply – many of these incubators have a waiting list.

The incubators help the producers, but are the government and community likewise benefitting from the investment? Marty Markowitz, Brooklyn Borough President, is vocal about the positive impact that incubators will have on the borough’s economy. In a written statement his office said that the forthcoming 3rd Ward incubator would “help create much-needed jobs by providing affordable space, business acumen, as well as the equipment necessary to help a small business get off the ground.” The $1.5 million grant Markowitz is giving 3rd Ward is just one part of a larger effort by Mayor Bloomberg to create a network of incubators throughout the city that will nurture and sustain entrepreneurial growth. In Brooklyn, there is hope that incubators will help the borough become an East Coast center of innovation.

But the return on investment from incubators is still up for debate. The giant companies that produced the wealth floating around Silicon Valley – Facebook, Google, Apple – were born in dorm rooms, garages and basements, not incubators . Often it’s the companies that struggle outside of incubators that thrive in the end, said Martin Kenney, a professor of Human and Community Development at UC Davis who has studied the culture of Silicon Valley.

“The incubator analogy is that this is a little thing that can’t survive on its own so we need to keep it there and nurture it,” said Kenney. “The Valley in general has been more get-out-there-in-the-cruel-world-and-see-if-you-can-make-it. If you can’t make it you’re better off dead. Once a baby has gone through that extremely ruthless, cruel environment, once it’s ready to go out in the world it’s usually extremely virulent and cuts through the tender incubator babies.”

As the Fare Trade NYC members readily admit, food is not a high-margin industry, especially for small artisan producers. But that doesn’t mean that producers aren’t contributing to the community. “From a social welfare perspective you may be keeping these firms alive and they’re employing people with great jobs and they make the social ambiance better so you may have a bunch of social welfare benefits that go beyond the pure market benefits,” Kenney said. In contrast, the tech industry that fuels Silicon Valley has some of the highest margins and rates of innovation in the country but a less robust social ambiance.

However, the factors that contribute to Silicon Valley’s success, such as talented labor force, dissemination of information and access to funding, are all present in the current Brooklyn food scene.

Ashish Dua, a partner at Acumen Capital involved in the restructuring of the Pfizer complex, said that one of the companies leasing at development, Steve’s Craft Ice Cream, transferred from Long Island in part because of the readily available local labor. “When they found out about our building and the skilled labor in Brooklyn they decided to locate here, for the jobs,” he said.

For new producers entering the food world from other industries, proximity to a food artisan community can be a deciding factor when deciding where to start their business. Rising real estate prices in Manhattan recent years pushed low-earning entrepreneurs into the other boroughs. Cultural cache attracts those young, creative workers to Brooklyn. “Brooklyn has a mojo we don’t have,” said Rob MacKay, Director of Public Relations for Queens Economic Development Corporation, of his rival borough. As Brooklyn pervaded the cultural consciousness, food became its calling card. There’s even a restaurant called The Brooklyneer in lower Manhattan.

“Brooklyn Flea was a siren. It didn’t start out as a food-centric piece, but then the food caught attention. It became a food destination,” said Joan Bartolomeo, of the Brooklyn Economic Development Corporation. “Brooklyn is food-centric – people think Brooklyn, they think food.”

Just as Silicon Valley has its finger on the newest apps, kale was big in Brooklyn before it showed up on menus across middle America. Support organizations like Fare Trade NYC and kitchen incubators provide the necessary resources for entrepreneurs struggling to navigate health certifications and distribution channels.  Incubators also play a key part in teaching how to navigate health codes and formulate business plans.

Equally crucial to Brooklyn’s position as the Silicon Valley of food may be its proximity to one of the largest markets of food consumers in the world: the New York City Metropolitan area. Not only are there millions of people in New York, an ever-increasing number of them self-identify as foodies. Convincing customers to buy a $8 jar of artisanal honey or a $16 pack of organic jerky, price points found at Brooklyn’s Smorgasburg food market, is a challenge. It is only feasible if the consumer can distinguish a valid reason why these products are worth the additional cost.

A similar concentration of discerning customers helped Silicon Valley products rise to prominence. “In the Valley if you’ve got a new chip, some of the most discriminating customers in the world are right there,” said Kenney. The iPhone, for example, benefitted from having IDEO’s tech-savvy designers in the area to test it out. New York City, with its comparable concentration of wealth and hyper-knowledge about the food world, is able to refine food ideas on a highly discriminating audience.

Publications like Eater NY, TastingTable, Underground Eats, Chowhound, Serious Eats and the Edible series are just some of the media outlets devoted to helping New Yorkers navigate the food landscape and understand the added value of an artisanal doughnut or a free-range egg. All of these media outlets sprang up within the last 10 years. “During those boom years we educated the consumer to quality products, about gluten-free, organic, vegan, vegetarianism,” said Kathrine Gregory. “While since the recession the disposable income has greatly reduced, what has not been reduced is the knowledge and the desire for having these products.You’re not going to untrain the consumer and they’re not going to give up quality.”

Eric Demby, co-founder of the Brooklyn Flea and Smorgasburg, remains optimistic about the future prospects for the New York food scene. “The popularity of out and other markets and the media attention are just the beginning of a long shift toward local production and the popularity of Brooklyn and New York City-based food,” he said in an email. “Why shouldn’t New York be the best in the world at making food, like we are at everything else?”