Report on Co-Packing for Brooklyn Food Manufacturers

7/22/2019 Report on Co-Packing for Brooklyn Food Manufacturers

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STEPHEN T. LEVIN

NEW YORK CITY

COUNCIL MEMBER

33RD DISTRICT,

BROOKLYN

OCTOBER 28, 2013

CO-PACKINGfOR BROOKLYN

fOOD mANufACTuReRS

RePORT ON


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C0-PACKING For Brooklyn Food Manufacturers

CONTRIBuTORS

1

ADDITIONAL CONTRIBuTORS: Harry Rosenblum, Eric Demby, Chris Woehrle, Kari Morris,

Miquela Craytor, Lydia Downing, Alissa Weiss, Hunter Goldman, Katie Codey, Monica Foskett,

Andrew Steininger, Carlo Scissura and Cailtin Dourmashkin

RAmI meTALPRjEC MAAGER

KImBeRLY GOLEAD PLC ER

CARINA GARCIAPLC ER

BeNeDICT JOSONER

mATT OJALAEDR

AShLeY ThOmPSONEDR

ANTONIO m. RODRIGuezREPR DESG & LA


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C0-PACKING For Brooklyn Food Manufacturers 3

fORewARD

exeCuTIve SummARY

INTRODuCTION

SuRveY BACKGROuND AND meThODOLOGY

ReSPONDeNT PROfILe

SuRveY fINDINGS

I. CuRReNT LImITATIONS

II. eCONOmIC GROwTh

III. BROOKLYN mATTeRS

Iv. A SOLuTION

fOOD CATeGORY PROfILeS

CONDImeNTS, SAuCeS, AND SYRuPS

BAKeD GOODS

meATS AND SeAfOOD

ReCOmmeNDATIONS

CONCLuSION

SeLeCT SuRveY ReSPONDeNTS

SuRveY

TABLe Of CONTeNTS

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For those of us interested in good food, there is no better place to live than ew ork City.

ncreasingly -- thanks to food manufacturers from the City expanding their businesses -- more

and more amazing food products that you could once only get here can now be enoyed across

the country. Brooklyn has been responsible for much of this output and has, over the past few

years, been the home to an explosion of local, artisanal food manufacturers who are making a

name for themselves not only in ew ork, but nationally and even globally.

et, despite the boom of the Brooklyn food manufacturing industry, consistently hear from

small business owners leading this food movement that they are having difculty expanding

their businesses. here is a demand for more of their products and a desire for their businesses

to grow, but there have not always been good answers as to how to make that happen. Brooklyn

food manufacturers are outgrowing their current facilities, have limited access to kitchen

space and appropriate equipment, or are simply unable to nd a manufacturing space that

suits their needs.

n order to help meet the needs of Brooklyn food manufacturers -- business leaders who play a

vital role in our local economy -- my ofce has worked with organizations like the Brooklyn

Chamber of Commerce, Pratt Center for Community Development, and the East Williamsburg

Valley ndustrial Development Corporation, along with government partners like Brooklyn

Borough President Marty Markowitz, Assemblyman joe Lentol, the ofce of C Council SpeakerChristine Quinn, and the Economic Development Corporation to explore new ideas that can help

build on the growth of the industry thus far. his report explores one such idea: a Brooklyn based

co-packing facility that can be utilized by food manufacturers from across the borough.

he Brooklyn food manufacturing industry is strong. Whether it is through the introduction of

a co-packing facility or the implementation of other innovative ideas, we can make it even

stronger. am proud to work alongside the food manufacturers of Brooklyn and am excited to

see how the industry can thrive as we continue to work together.

Stpn T. Lin

ew ork City Council Member

33rd District, Brooklyn

forord ro Concil mbr Stpn T. Lin

410 Atlantic An Brooklyn, NY 11217 [email protected] (718) 875-5200


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ExEcutivE SummaryAs one o the astest-growing industries in Brooklyn, ood manuacturing has contributed greatly to the economic

growth o the borough in recent years. The strength o the Brooklyn ood manuacturing industry is refected in its gross

sales and reach outside the borough, as well as the jobs it has generated in a time o high unemployment. Despite this

strength, many Brooklyn ood businesses have reported a number o challenges in growing their business.

In May 2013, Council Member Stephen Levin sent a survey to Brooklyn ood manuacturers to assess their production

needs and level o interest in a local co-packing (contract packing) facility, which manuactures and packages oods

or other products or their clients, that could potentially address production issues. The businesses were asked about

their level o interest in co-packing; business size and labor prole; product, equipment, and ingredient specications;

type o acilities currently utilized or production; shel stability and storage requirements, and interest in pick and pack

services. The results were tabulated in July 2013 with the intent o presenting them to stakeholders or eedback nec-

essary to determine the viability o Brooklyn co-packing.

Based on our results, we ound that current limitations in acilities, projected growth, and a desire to be in Brooklyn are all

contributing actors in a general dissatisaction among ood entrepreneurs with their current situation. We ound that ood

manuacturers do in act want a co-packing acility allowing them to increase business fexibility and cut overhead costs:

1. 68% o respondents eel their current manuacturing acilities limit their production capacity.

2. 31% o respondents expect their gross sales to all between $500,000 and $1 million or more in 2013.

62% expect their gross sales to all within this range in 2015.

3. 60% o respondents said it was o signicance or their production acility to be in Brooklyn.

4. 45% o respondents are very interested in a Brooklyn-based co-packing acility while an additional

16% would sign up now i the option were available.

In addition to our ndings, this report oers three visions or a co-packing acility based on the ood products that had

the largest representation in the survey: condiments, sauces, and syrups; baked goods, and meats and seaood. It also

oers ve paths or the implementation o such a acility:

1. The NYC Economic Development Corporation (EDC) commits to releasing an Request or

Expression o Interest (RFEI) to be ollowed by a Request or Proposals (RFP) or a Brooklyn based

co-packing acility.

2. EDC or the NYC Small Business Services (SBS) provides a subsidy to Brooklyn based

Victoria Co-Packing in order to allow them to accommodate smaller quantity runs or local ood

manuacturers.

3. Local not or prot applies or city capital unding to go towards the build out and purchase equipmentor a space to be used as a co-packing acility.

4. Private party applies or IDA unding in order to help create a co-packing acility.

5. Food manuacturing cooperative creates a member based co-packing acility.

It is our hope that this report will be inormative and highlight the importance o co-packing to Brooklyn and NYCs

ood industry and greater economy.

7


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C0-PACKING For Brooklyn Food Manufacturers8

1 Brooklyn Labor Market Review, Brooklyn Chamber o Commerce, Winter 2012, http://www.ibrooklyn.com/CWT/EXTERNAL/WCPAGES/WCMEDIA/DOCUMENTS/BLMR%20WINTER%202012%20FINAL.PDF 2 Ibid.

3 Copacker Wikipedia: The Free Encyclopedia. Wikimedia Foundation, Inc., 13 July. 2013. 4 Paul Young. Q & A: Co-Packing As A Competitive Advantage, Manuacturing.net, August 23, 2011, http://www.manuacturing.net/articles/2011/08/q-%26-a-co-packing-as-a-competitive-advantage.

introductionFood manuacturing has become one o the astest-growing industries in Brooklyn. Once thought o as a niche market,

Brooklyn artisanal ood manuacturing businesses have integrated into the mainstream. Brooklyn has become a brand,

and provides a cachet or consumers who wish to buy locally produced and distributed ood products.

The strength o the Brooklyn ood manuacturing industry is evident in its gross sales and its reach outside o the borough.Nearly a quarter o the output o Brooklyn ood and beverage manuacturers is sold outside o the borough, with $326

million in domestic sales occurring outside o Brooklyn and $134 million o that output exported outside o the U.S. 1

Growth in the industry also means jobs or the residents o Brooklyn. In 2011, there were 372 ood manuacturers employing

5,650 workers and an additional 377 Brooklyn ood manuacturing businesses who do not report any employees.2 The

ood manuacturing business in Brooklyn has only continued to grow since 2011.

But despite the strength of the Brooklyn food manufacturing industry, these companies still face a number of challenges

in growing their business; chief among them is a limited amount of space to manufacture their product.

Small ood manuacturers continual growth is refected in their long term plans to develop and expand their acilities.

In a separate survey conducted by Council Member Stephen Levin in May 2012, 52% o small ood manuacturers that

responded indicated that their current acility is not sucient to accommodate their business or the next two years and60% o respondents are searching or larger or more appropriate production acilities.

Respondents to the May 2012 survey also indicated that Brooklyn matters. The importance o having a Brooklyn-branded

product was seen as important by 90% o respondents looking or space in Brooklyn. At the same time however, 77% o

respondents are having diculty nding an aordable space in Brooklyn to work rom. One respondent said, We had a

7,000 sq oot warehouse that we outgrew and moved production outside the city due to cost.

While there is a desire to produce in Brooklyn, available spaces are either too costly or have little to no inrastructure.

Commercial kitchens require costly capital expenditures and must meet the standards o the US Department o Agri-

culture (USDA). Most o the available industrial spaces were historically used as warehouses and storage and need a ull

rehabilitation. With increased interest in Brooklyn neighborhoods driving up market rents, landlords rarely need to oer

to make capital improvements in order to draw tenants. These actors have already lured ood businesses outside o

the borough and, let unchecked, could potentially drive more companies to more aordable cities. When asked about

aspects o their business that would be able to grow better outside NYC, one respondent replied, Everything is cheaper

outside NYC so naturally the bottom line is not quite so deep i one moves production outside o the city.

With a desire to stay in Brooklyn and a need for more space, a solution is needed for Brooklyn food manufacturers to al-

low them to stay in Brooklyn and continue to grow their thriving businesses.

One possible solution that has been articulated recently is the establishment o a co-packing acility in Brooklyn that would

be able to meet many o the production needs o the burgeoning Brooklyn ood manuacturing industry. A co-packer, or

contract-packager, manuacturers and packages ood or other products or clients under contract with the hiring company to

manuacture as though the products were made directly by the hiring company.3 Co-packing allows ood manuacturers to

increase business fexibility and cut overhead costs as the acility already has the expertise, resources and sta in place.4

To better understand the desire or such a acility in Brooklyn and what it might look like, a survey was sent to Brooklyn

ood manuacturers by Council Member Stephen Levin in May 2013. This report examines the ndings rom this survey

and outlines recommendations based on the ndings.


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SurvEy Background and mEthodologyThrough discussions with many new Brooklyn ood businesses, it became clear that the lack o aordable production

space and the high capital costs involved in outtting a space are the most critical inhibitors to strong business growth

or Brooklyn-based manuacturers. In May 2013, Council Member Stephen Levin sent a survey to Brooklyn ood manu-

acturers to assess the production needs o Brooklyn ood manuacturers and level o interest in a local co-packing

acility that could potentially address production issues.

The survey was sent out in May 2013 to over a hundred ood manuacturers over the internet, o which 70+ responded

between May 1, 2013 and July 1, 2013. Participants were identied by telephone, e-mail and in person, by Council

Member Stephen Levin and his sta, at Smorgasburg Flea booths and other locations which are representative o

the burgeoning Brooklyn ood scene. The East Williamsburg Valley Industrial Development Corporation (EWVIDCO),

Brooklyn Chamber o Commerce, Brooklyn Kitchen, The Brooklyn Flea, and the oce o New York City Council Speaker

Christine Quinn were also instrumental in identiying survey participants.

The survey contained 53 questions about the nature o the respondents business and interest in a co-packing acility in

Brooklyn. (See Appendix for the complete survey.) It asked respondents to rank their level o interest in Brooklyn co-pack-

ing and how important it is or their production acility to be in Brooklyn. It also asked respondents how many employees

they have, the percentage o cost o goods allocated to labor and production, and whether they are interested in addi-

tional services such as pick-and-pack or wholesale and online orders. These and other questions are critical to our under-standing o whether a Brooklyn co-packing acility would be easible and desirable -- and i it is, what it should look like.

rESpondEnt profilEThe 70+ businesses that participated in the survey are predominantly emerging companies that employ 10 people

or ewer. While the majority o respondents (66%) were companies that either produced in Brooklyn or were based

in Brooklyn but produced their project outside o Brooklyn, the survey also attracted a number o respondents rom

outside the borough. There were nine (9) respondents who either produced in or were based in Manhattan as well as

15 respondents who manuacture their product in Long Island City rom incubators such as The Entrepreneur Space

and Organic Food Incubator. O these 15 respondents, six (6) have oces in Brooklyn while three (3) have oces in

Manhattan. O the businesses that were based in Brooklyn, 38% have production acilities outside the borough.

O the businesses that participated in this study, the ood

categories with the largest representation are Meats/Sea-

ood (22%), Baked Goods (26%), and Condiments, Sauces,

and Syrups (38%). This inormation is important because

co-packing operators and ood entrepreneurs have advised

against a one size ts all type o acility, instead advocating

or a acility that specializes in one category o ood prod-

ucts. A specialized acility would reduce the cost o equip-

ment and increase trust among manuacturers who value

eciency and expertise.

A handul o respondents outside the norm o the oodmanuacturing business opened our eyes to additional pos-

sibilities as we looked urther into co-packing. These include

S.W. Basics, a cosmetics company that uses vegetables ex-

clusively in their products; Bartleby and Sage, which special-

izes in catering and event planning; and Jersey Lynne Farms,

a wholesale ood distributor in Canarsie looking to establish

a private label. These unexpected responses suggest that

other businesses besides those that we are targeting will be

interested in using a co-packing acility.

9

What podcts do yo podc?


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5 Stephen Kleege, A Tight Lid On Food Artisanals, Crains New York, March 10, 2013, http://www.crainsnewyork.com/arti-cle/20130310/HOSPITALITY_TOURISM/303109990#article_tab. 6 Kleege, A Tight Lid On Food Artisanals.

10

SurvEy findingSIn conducting the survey, we sought to determine whether or not a co-packing acility would be a viable solution to many

o the challenges local ood manuacturers ace today. We rst sought to identiy and understand the nature o these

obstacles by asking about the production needs and challenges o Brooklyn-brand ood businesses. We ound that current

limitations in acilities, projected growth, and a desire to be in Brooklyn are all contributing actors in a general dissatisac-

tion among ood entrepreneurs with their current situation.

I. Curren LIIIn

52% o rspondnts lt tir crrnt acility cold not scintly accoodat tir bsinss or t

nt to yars, and 60% said ty r actily sarcing or largr or or appropriat acilitis.

Liitd accss to sard kitcn spac ans tat all prodction as to b don at spcic ors and

ood prodcrs sotis do not gt t sits tat ar bst or tir scdl.

Or ridg liits t aont o ingrdints tat can a rady to go. Or storag spac liits t

inntory can a on and. Or orkbnc liits o otn can do a prodction rn.

Kari Morris, Morris Kitchen

Chie among our ndings was that Brooklyn ood manuacturers have had diculty nding needed space in Brooklyn

to conduct their business. Our study ound that they have had diculty nding suitable real estate to expand, and are

having trouble expanding within the spaces they are currently located as their businesses continue to grow.

Food businesses in Brooklyn ace many diculties nding suitable real estate. In the May 2012 survey, which ocused

more broadly on the Brooklyn ood manuacturing industry, 68% o respondents reported that they were looking or

space in Brooklyn; however, 52% indicated that nding aordable space was an issue. Citywide, the vacancy rate or

industrial space is about 4%, and rents range rom about $11 to $20 per square oot. 5 Most available kitchen and retail

spaces have little to no inrastructure and

require costly capital expenditures that can

run up to $200,000 or more or stoves,

rerigerators and other required equip-

ment.6 Meat businesses in particular also

need acilities that are USDA-compliant,

which necessitates even greater capital

investment.

Accommodating growth is another

contributing actor to the search or new

space. In 2012, 52% o respondents elt

their current acility could not suciently

accommodate their business or the next

two years, and 60% said they were ac-

tively searching or larger or more appro-

priate acilities. As the suitability o a oodbusinesss space is strongly correlated

with the size and requency o its pro-

duction runs, it is not surprising that we

ound in 2013 that 68% o respondents

eel their current manuacturing acilities

limit their production capacity.

Do yo fl yo ct mafactigviomt limits gowth?

YeS NO

Notyt

,butm

ightint

hfutu

rNot

sur


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7Is Manuacturing Back in Brooklyn? Center or an Urban Future, March 2013 http://nycuture.org/data/ino/is-manuacturing-back-in-brooklyn 8 Brooklyn Labor Market Review, Brooklyn Chamber o Commerce, Winter 2012

Many ood entrepreneurs nd themselves articially inhibiting growth because o space and time limitations. When asked

what type o acilities they use or manuacturing, 34% o respondents report commercial kitchens and 11% report incu-

bators -- in other words, shared spaces. Limited access to shared kitchen space means that all production has to be done

at specic hours and ood producers sometimes do not get the shits that are best or their schedule. One respondent

says, Kitchen closes at 5 so my vegetable deliveries sometimes cannot get there on time and have to be delivered at my

apartment. Right now, I can handle that because I am small, but in a couple o months that wont be possible anymore.

Sometimes the appropriate equipment is unavailable in shared kitchens, which means ood producers cannot make asmuch o their product even i demand is high. One respondent notes, We do not have a stable temperature room or

ermentation. We do not have a comprehensive ltration system, bottling machine, or label machine. Another says, We

do not have sucient ovens or racks to bake more than we currently do. Even i equipment is available, access is oten

limited because o space and time constraints. With many ood manuacturers unable to invest in the equipment they

need, they have no choice but to keep runs articially small.

Lack o control over production space also limits the amount o inventory that can be bought and product that can be stored. In

situations where ingredients need to be rozen or rerigerated, lack o control could mean spoiled supplies and wasted unds.

II. eCnIC GrW

31% o Brooklyn ood bsinsss pct tir gross sals to all btn $500,000 and $1 illion or orin 2013, and 62% pct tir gross sals to all itin tis rang in 2015. I ts bsinsss rain in

Brooklyn, tir total gross arnings ill dobl, ro $21 illion in 2013 to $42 illion in 2015.

wil only 10% o rspondnts pct to prodc 100,000 nits or or in 2013, tis nbr is pctd

to tripl by 2015. Today, 20% o sry rspondnts ar prodcing daily; tis nbr is pctd to or

tan dobl by 2015, it 47% o rspondnts projcting tat ty ill b prodcing daily itin to yars.

Our study also ound that the Brooklyn ood manuacturing industry is growing. Once thought o as a niche market,

Brooklyn artisanal ood businesses have integrated into more mainstream outlets. Whole Foods recently unveiled a

partnership with Smorgasburg to eature a new vendor every month on the second foor o their Bowery location. Cen-

tral Parks Summerstage and Prospect Parks Bandshell use small, Brooklyn-based ood manuacturers or their events

throughout the summer. Companies such as Morris Kitchen, which began as an artisanal syrups vendor at Smorgasburg,

have expanded and are now receiving orders rom major retailers such as Whole Foods and Williams-Sonoma.

While Brooklyns manuacturing sector has suered signicant job losses in recent years, its ood manuacturing sub-

sector has managed to retain and even add jobs to the economy. From 2000-2010 Brooklyn lost nearly 24,000 manu-

acturing jobs7 and yet the ood manuacturing sector has consistently employed around 6,000 people throughout that

time period. In 2011 there were 372 Brooklyn ood manuacturers employing 5,650 workers plus an additional 377 ood

manuacturing businesses that did not report employees, about one third more than a decade ago.8 And these businesses

are growing- when asked about their employment projections in 2012, respondents expected to add a total o 62 new ull

time jobs and 80 new part time jobs by May 2013, resulting in a 53% growth in ull time jobs and 63% growth in part

time jobs. The average respondent employs 3 people ull time.

The strength o the Brooklyn ood manuacturing industry is evident in its gross sales and reach outside o the borough.Nearly a quarter o the output o Brooklyn ood and beverage manuacturers is sold outside o the borough, with $326

million in domestic sales occurring outside o Brooklyn and $134 million exported outside o the U.S.7 These gures are

only expected to increase over the next two years and beyond. 31% o Brooklyn ood businesses expect their gross sales to

all between $500,000 and $1 million or more in 2013, and 62% expect their gross sales to all within this range in 2015. I

these businesses remain in Brooklyn, their total gross earnings will double, rom $21 million in 2013 to $42 million in 2015.

11


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What do yo pojct yogoss sals to b ovth xt 3 yas?

What is th pojctd fqcy of yo podct s ov th xt 3 yas?

NumBeR Of ReSPONDeNTS

PeRCeNTAGe Of ReSPONDeNTS

NumBeR Of ReSPONDeNTS

What is th pojctd siz of yo podct s ov th xt 3 yas?


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The continued growth o Brooklyn ood businesses is also

refected in their projections or production capacity. While

only 10% o respondents expect to produce 100,000 units

or more in 2013, this number is expected to triple by 2015.

Today, 20% o survey respondents are producing daily;

this number is expected to more than double by 2015, with

47% o respondents projecting that they will be producing

daily within two years.

Sustained economic growth requires production acilities and

tools that meet businesss varied needs. When asked about

the type o acilities they currently use, 34% o respondents

report shared commercial kitchens; 27% use co-packers (all

outside o NYC), 21% use privately operated kitchens, and

11% use incubators. The ve most widely used equipment

items are sheet trays (49%), mixers (43%), bottling equipment (38%), a brand o ood processor called the Robot Coupe (35%),

and speed racks (30%). Packaging options range rom glass jars (24%) to plastic containers (22%) to sealed pouches (20%).

Storage is important or the growth o ood businesses as it ensures the reshness and saety o ingredients and nished products.

In addition to the 38% o respondents whose ingredients require room temperature storage, 40% rerigerate their ingredients and

22% reeze them. The breakdown or storing nished products is similar: 44% o respondents need their products to be stored atroom temperature, 34% need their products to be rerigerated, and 21% manuacture products that require reezing.

Food entrepreneurs are very interested in reeing up time and

capital to increase their growth potential. 80% are interested in

a wholesale pick and pack ulllment service while 82% are

interested in a pick and pack service or online orders. I these

services were made available, ood entrepreneurs would have

more time to devote to business development while putting dis-

tribution in the hands o a acility that can bring them to market.

A respondent says, As we increase production, we will need to

ocus less on sel-distribution and more on sales and having our

product managed/distributed by third party networks.

III. BrkLn er

w old lo to b clos to r or prodcts ar

anactrd. w startd aking or prodct in

Brooklyn and ar basd r.

Jessica Quon & Sabrina Valle, The Jam Stand

Our study ound that ood producers want their acilities to be in

Brooklyn. When asked how important it is or their production acility

to be in Brooklyn, 60% o respondents said it was o signicance.

The reasons or this are myriad. By being closer to their product,

ood entrepreneurs can exercise more control over quality and pro-

vide direction to their labor orce. Quality control and assurance is

a top priority or these businesses, many o whom believe that their

business growth is most attributable to the high quality o their

products, and thereore believe that being in closer geographic

proximity to their production acility enables them to have ar more

control over the quality o their product. One respondent says, Dis-

tance is very dicult. [Employees] do not understand what were

trying to do, and they work at a dierent pace than we do.

13

What id of facility do yo ctlys to ma yo podcts?

ow impotat is it foyo podctio facilityto b i Booly?

1 Ver Irn 5 n Irn LL

ow impotat is Booly to yo bad imag?

NOT AT ALL exTRemeLY


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Moreover, ood producers take pride in their identity

as Brooklyn-based businesses. When asked how

important Brooklyn is to their brand image, approxi-

mately 70% said very important or extremely

important. Meanwhile, businesses that do not pro-

duce in Brooklyn -- whether they originated there or

are eyeing the cache o the Brooklyn brand -- aspire

to claim this identity or themselves. Food producersalso value the community o like-minded individuals

that comprise the entrepreneurial spirit o Brooklyn.

No matter how we look at the data, it is apparent that

Brooklyn matters to ood manuacturing businesses.

IV. LuIn

wn askd o intrstd ty r in a Brooklyn-basd co-packing acility, 45% o rspondnts said

ty r ry intrstd, il an additional 16% old sign p no i t option r aailabl.

The challenges that Brooklyn ood

entrepreneurs ace call or a solution

that will better serve their needs

and promote the continual growth

o the ood manuacturing industry.

Our ndings show that these

entrepreneurs want a co-packing

acility as that solution.

When asked how interested they

were in a Brooklyn-based co-packing

acility, 45% o respondents said they

were very interested, while an addi-

tional 16% would sign up now i the

option were available. Moreover, at a

workshop sponsored by the Brooklyn

Chamber o Commerce on February 26, 2013, many entrepreneurs argued that city tax breaks and other incentives

were needed to attract co-packing and that having such a acility in Brooklyn would be wonderul.9

Further analysis o the survey ound that a Brooklyn based co-packing acility would attract the 62% o businesses that

currently produce in the borough. O these businesses, 63% said that they were either very interested or answered

sign me up now or copacking. Moreover, 83% eel their current acilities are limiting growth, leaving them in dan-

ger o moving production elsewhere i they cannot nd suitable space in Brooklyn. Establishing a co-packing acility

in Brooklyn that can accommodate their growth would enable them to continue producing in the borough; otherwise,

these businesses will continue to look elsewhere or acilities that do.

A co-packing acility in Brooklyn would also attract the 40% o businesses that do not produce in Brooklyn. O these

businesses, 66% would either sign up now or be very interested in a co-packing acility. Furthermore, hal o the

respondents who believe it is o signicance or their production acility to be in Brooklyn do not currently produce in the

borough, and approximately 80% o this group is interested in a Brooklyn-based co-packer. Many o these businesses

began producing in Brooklyn but space limitations orced many to leave. Increasing space and production capacity would

allow them to return to Brooklyn.

14

o what dg do yoattibt th gowth of yocompay to th qality ofyo podct?

9 Kleege, A TIght Lid On Food Artisanals.

Wold yo b itstd i a Booly-basd co-pacig facility?

Not sure [15](need to know more)

Not interested [4]

Interested [7]

Very Interested [33] Sign me up [12]

Like the idea ingeneral but wont workfor my business [2]


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Two companies that currently use out o state co-packers, Brewla Inc. and The Brooklyn Salsa Company, stated that they

would sign up now i a acility was available in Brooklyn. While these companies are still considered small, employing

ewer than 10 employees, they have enjoyed steady growth over the past ew years. Brooklyn Salsa is sold in 800+ stores

in New York City and has over 1,200 accounts nationwide, including the New York City stores. They are also sold in Lon-

don, Tokyo and now Thailand. This refects the enormous growth potential that co-packing has to oer, and why a acility

in Brooklyn would be a welcome addition to the boroughs ood chain.

It is worth mentioning that co-packing already exists in Brooklyn in the orm o Victoria Fine Foods. However, Victoriahas not, as o yet, been willing to accommodate the smaller production runs o many emerging ood businesses.

Smaller runs require more requent production changeover than do larger runs and that turnover accounts or a

decrease in protability or larger co-packers. Emerging Brooklyn ood manuacturers have tried to meet the minimum

number o units required o Victoria clientele, but their quantities remain too low. Unless this changes, Brooklyn runs

the risk o losing out on millions o dollars in economic growth that continues development o the ood manuacturing

industry would bring.

food catEgory profilESIt should be clear that in advocating or a co-packing acility we are not advocating or one that can meet the needs o

every type o ood producer and product. Food manuacturers have repeatedly stated that the quality o their product

is paramount and that quality suers when a acility is making baked goods one minute, sauces the next, and someother type o ood right ater that. Aside rom the higher costs associated with equipping a kitchen or manuacturing a

variety o ood products, the main concern is that in trying to serve every need, product quality will suer.

Specialization is the key in co-packing and thereore we believe that a potential Brooklyn co-packer should specialize

in one particular ood category. Given that the majority o the companies we have surveyed have been making either

condiments/sauces/syrups, baked goods, or meats/sh, it is recommended that one o these three categories be

prioritized or co-packing. Further analysis would have to be done by a prospective co-packer to determine which

category would be the most viable.

CnDIen, uCe, nD ru

At 38% o respondents, producers o condiments, sauces, and syrups had by

ar had the largest representation in the survey; it would thereore tap into a

very large market. One respondent says, I eel to help the most people pos-

sible you guys should ocus on bottling - jams, pickles, sauces and etc. Thats

your biggest market - those people will always be popping up.

A co-packing acility or these products would eature the ollowing equipment

needs: bottling equipment (74%), mixers (50%), and a type o ood processor

called a Robot Coupe (50%). Since 55% o condiments, sauces, and syrups

producers already use co-packing outside o New York City, it stands to

reason that they would be interested in transerring operations to a co-packing

acility closer to home.

Meanwhile, the industry will only continue to grow. The average condiments,

sauces, and syrups producer expects to increase their run size over the next

two years. Whereas only 20% o producers expect to manuacture more than 50,000 units in 2013, 51% expect to all

into this range in 2015. Moreover, the requency with which producers manuacture is also expected to increase. Only

21% o businesses are producing on a daily schedule in 2013, but 57% expect to be producing daily in 2015.

A acility that serves the condiments, sauces, and syrups producers has the greatest potential to contribute to Brooklyns

economy. These ood manuacturers already generate $6.4 million in gross sales; by 2015, this is expected to rise to $9.6

million, an increase o 50%.

15

What facilitis do yo s?

ANSweR %

OTheR (plas spciy) 0%

INCuBATOR 8%

PRIvATeLY OPeRATeDKITCheN

19%

ShAReDCOmmeRCIALKITCheN

42%

CO-PACKING fACILITY 46%


18/32


BkeD GD

Baked goods producers ace restrictions on equipment that limit their production run sizes. The three most important

equipment needs or baked goods producers are sheet trays (89%), speed racks (61%), and mixers (61%), all o which

come in varying sizes and quantities and need to be upgraded to accommodate growth. One respondent says, Our small

kitchen-aid stand mixer limits batch size, and commercial licensing is not

available at home. Another says, We do not have access to anything larger

than 60 quart mixers. With this in mind, it is no wonder that 77% o baked

goods producers believe their current acilities limit business development.

A co-packing acility that serves baked goods producers would acilitate

growth in production capacity. With easier access to suitable equipment,

more producers will be able to manuacture on a daily basis. When surveyed

about the expected requency o their production, 33% o respondents said

they would be producing daily in 2013, while 57% expect to be producing

daily in 2015. This, compounded with the 17% increase in respondents who

expect to be producing more than 100,000 units over the next two years,

will surely acilitate the rapid expansion o these businesses.

What is yo pojctd siz ov th xt 3 yas?

What is yo pojctd fqcy ov th xt 3 yas?

Do yo bliv yo ctmafactig viomt

limits gowth?

ANSweR %

YeS 77%

NO 15%

NOT YeT BuT mIGhT INThe fuTuRe

0%

NOT SuRe 8%


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Based on our respondent projections, baked goods would bring in $7 million annually by 2015, a 23% increase over

the current output o $5.7 million. Although this growth is not as large as that o condiments, sauces, and syrups

producers, it is still signicant enough to warrant consideration.

e nD eD

A acility that serves meat and seaood producers would be the only co-packing acility in New York State or meat. As

47% o meat and seaood producers are already using co-packing, it stands to reason that they would be very interested

in utilizing a local acility. Moreover, because o the niche this acility would ll, many businesses in upstate New York or

New Jersey would also be interested in utilizing it, bringing additional growth to Brooklyn.

Because the majority o meat and seaood products are not shel stable (67%), it is important that a co-packing

acility has ample space or reezing and especially rerigerating. Moreover, many meat businesses have expressed

interest in a USDA acility. According to one respondent, I I could operate in a USDA acility, I could increase my

sales 10 old immediately.

17

What is th

pojctdfqcy ofyo podct ov thxt 3 yas?

What is th pojctdsiz of yo podct ov th xt 3 yas?


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Although there are a smaller number o meat manu-

acturers than those o the previous two ood catego-

ries, the industry still has the potential or enormous

growth Whereas no respondents reported run sizes

o 100,000 units or more in 2013, 20% expect their

run sizes to increase to this range by 2015. Likewise,

whereas 25% o meat and seaood manuacturers

are producing daily in 2013, 63% who are expect toproduce on a daily schedule in 2015.

A co-packing acility that serves meat and seaood

producers would ll a niche and bring in the exiles o

an industry that generates $4.7 million in gross sales

annually, a gure that is expected to increase by 28%

to $6 million in 2015.

18

Is yo podct shlf stabl?

If ot shlf stabl, what typ of stoag dos it qi?

What is thpojctdfqcy ofyo podct ov thxt 3 yas?

What is thpojctd sizof yo podct ov thxt 3 yas?

ANSweR %

YeS 61%

NO 39%

ANSweR %

fROzeN 40%

RefRIGeRATeD 60%


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rEcommEndationSFood manuacturing is an integral part o NYCs economy and the increase o new ood manuacturing businesses,

particularly in Brooklyn, has had a positive impact on local employment and economic growth. What is also clear is that

many o these new ood manuacturers either lack adequate production acilities right now or will run out o space soon-

or simply be orced to keep production levels articially low due to space constraints. In order to grow, many o these

businesses have had to manuacture their products outside o New York and this exodus will continue i steps are nottaken to address these constraints.

Co-packing has become an increasingly appealing option or Brooklyn ood manuacturers looking to grow, and stay, in the

borough. Given their desire to manuacture in Brooklyn and all that entails- local jobs, better quality control, more centralized

operations- it is recommended that the City should work to help create the conditions that would allow a co-packing acility

to exist in Brooklyn in the near uture. Based on our ndings we recommend that this acility produce only one type o ood

product to optimize quality and eciency. Outlined below are ve ways that we believe that this can be accomplished.

1. The NYC Economic Development Corporation (EDC) commits to releasing an Request for Expression

of Interest (RFEI) to be followed by a Request for Proposals (RFP).

2. EDC or the NYC Small Business Services (SBS) provides a subsidy to Victoria Co-Packing in order

to allow them to accommodate smaller quantity runs for local food manufacturers.

3. Local not for prot applies for city capital funding to go towards the build out and purchase equipment

for a space to be used as a co-packing facility.

4. Private party applies for IDA funding in order to help create a co-packing facility.

5. Food manufacturing cooperative creates a member based co-packing facility.

OPTION #1 - eCONOmIC DeveLOPmeNT CORPORATION (eDC) COmmITS TO ReLeASING A RequeST fORexPReSSION Of INTeReST (RfeI) TO Be fOLLOweD BY A RequeST fOR PROPOSALS (RfP)

As ood manuacturing represents a critical subsector o the NYC economy, we believe that EDC has a material interest

in the continued health and success o these businesses. EDC is not only in a unique position to urther this policy goal

but has in act been very supportive o the ood manuacturing industry over the past ew years. In addition to hosting the

NYC Food Manuacturers Expo and initiating the NYC Food Manuacturers Growth Fund, among other eorts, EDC has

been supportive o eorts t o urther explore co-packing in Brooklyn.

Given this support and their overall expertise in economic development initiatives, we recommend that EDC put out a

Request or Expression o Interest (RFEI) that will help determine the level o interest in the creation o a Brooklyn based

co-packing acility. Based on the responses to the RFEI, EDC could then either contract directly with one o the respon-

dents or release a Request or Proposals (RFP) that is guided and shaped by the responses to the RFEI.

OPTION #2 - eDC OR The NYC SmALL BuSINeSS SeRvICeS (SBS) PROvIDeS A SuBSIDY TO vICTORIAfINe fOODS IN ORDeR TO ALLOw Them TO ACCOmmODATe SmALLeR quANTITY RuNS fOR LOCAL

fOOD mANufACTuReRS

Victoria Fine Foods is a sauce manuacturer located on E. 100th Street in Brooklyn that, in addition to producing its own

private label sauces, oers co-packing services to outside companies. Unortunately, the minimum quantities that Victoria

requires have been out o the reach o most o the newer Brooklyn ood manuacturers. In order or Victoria to meet

these companies needs, it would be necessary to provide a subsidy to oset the additional costs o the more requent


22/32


turnovers that smaller quantities require. As the largest group o survey respondents were businesses that made sauces,

syrups, jam, and jellies, utilizing existing acilities, at least in the short term, would be an ecient way to expand produc-

tion. In order to determine the appropriate level o subsidy, discussions would need to take place between EDC and/or

SBS and Victoria Fine Foods. As companies grow, they would be able to increase their quantities, thereby decreasing the

amount o subsidy needed. A subsidy to Victoria could also serve as a short-term bridge solution until a permanent acil-

ity that meets the needs o smaller manuacturers can be constructed.

OPTION #3 - LOCAL NOT-fOR-PROfIT OR DeveLOPmeNT AGeNCY eNTITY APPLIeS fOR CITY CAPITAL fuNDINGfOR The BuILD OuT Of A fACILITY AND/OR TO PuRChASe equIPmeNT fOR A CO-PACKING fACILITY

Brooklyn is home to many local development agencies that work to encourage business growth both borough-wide and,

more crucially, in the communities where they are located. A co-packing acility that serves local small businesses would

create local, blue collar jobs and in so doing will help revitalize communities, particularly those where unemployment is high.

A local not or or prot or development agency could apply or city capital unding in order to help nance equipment

purchases and space buildout. These unds would signicantly lower an operators initial capital investment which will

then enable them to work with local, growing companies, who produce smaller and less requent production runs.

OPTION #4 - A fOR-PROfIT eNTITY APPLIeS fOR INDuSTRIAL DeveLOPmeNT AGeNCY (IDA) fINANCINGASSISTANCe IN ORDeR TO heLP BuILD OuT A CO-PACKING fACILITY

The NYC IDA oers various industrial incentive programs that encourage manuacturing by oering various tax exemp-

tions or tax exempt bond nancing on capital upgrades that are deemed necessary to help industrial businesses grow in

New York City. In this scenario, a private party would seek unding rom the IDA in order to help oset the costs o build-

ing out a property that they own to be used as a co-packing acility.

One situation in which this might occur is i the private party is already a ood manuacturer who is looking to expand the

acility that they already have in order to accommodate a co-packing acility or otherwise need help in purchasing the

equipment that would allow or the type o production that a particular co-packing acility would require. The private party

could then either manage the acility themselves or bring in an outside operator to manage the operations.

OPTION #5 - fOOD mANufACTuRING COOPeRATIve CReATeS A memBeR-BASeD CO-PACKING fACILITY

This scenario was suggested by a number o the ood manuacturing businesses that participated in the survey. A coop-

erative co-packing acility would be run and managed by a ew select businesses that would nd a space and purchase

the necessary equipment needed to operate a co-packing acility. The group would begin small but include enough mem-

bers to help spread the capital costs while ensuring that the members were committed and were producing enough runs

to justiy the costs involved in tting out and managing a acility o this kind. Once eciently managed, the membership

would increase, thereby lowering the costs or all while also adding additional services.

concluSionIt is our hope that this report not only quanties the signicant impact that emerging ood manuacturers are

having on Brooklyns economy, but also that it spurs additional investment by public and private stakeholders.As we move towards a new mayoral administration in January 2014, we believe that it is crucial to lay out a

ramework or creating a Brooklyn-based co-packing acility.

We believe that now is the time or action. The longer it takes or a co-packing acility to launch, the more

Brooklyns talented ood entrepreneurs will look to other cities and states to manuacture the products that

were inspired by New York City. This is a critical opportunity that the city cannot aord to miss and we hope

that this report can play a role in helping these small businesses to grow and succeed in Brooklyn, where they

want to be and where they belong.


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24/32


SElEct SurvEy rESpondEntS


25/32



26/32



27/32


COuNCIL memBeR STePheN LevIN

* Rird

Plas proid yor na *

his is a required question

wat is t na o yor bsinss? *

Pon Nbr *

wat is yor bsinsss bsit? *

wat is yor bsinss ail addrss? *

Location o r yo prodc yor prodct (Address and Zip Code) *

wr ar yor ocs locatd (if different from previous answer)?

council mEmBEr StEphEn lEvin'S

co-packing SurvEy for Brooklyn

food manufacturErS

Der rIenD,

After hearing from many of the new Brooklyn food businesses that have started up in the past few years, it

has become clear that the lack of affordable production space and the high capital costs involved in outtting

a space are the most critical inhibitors to strong business growth and, in fact, of a Brooklyn food businesses

ability to remain and succeed in Brooklyn. ne possible solution that has been articulated recently is the

establishment of a co-packing facility (a company that manufactures and packages foods or other products for

their clients), located in Brooklyn, that would be able to meet many of the production needs of the burgeoningBrooklyn food manufacturing industry.

What this survey hopes to assess is what the production needs of Brooklyn food manufacturers are and

whether or not a co-packing facility would be a feasible solution that would help meet those needs. Addition-

ally, if co-packing is determined to be a worthwhile option for Brooklyn food manufacturers then what kind

of co-packing facility would make the most sense and what types of businesses would it serve? What kind

of equipment would be needed? Would it specialize in baked goods or perhaps sauces? How much storage

space would be necessary? How many runs would a typical business make in a year and in what quantities?

hese and other questions are critical to our understanding of whether or not a Brooklyn co-packing facility

would be feasible and desirable and if it is, what it would look like.

hank you for taking the time to ll out this survey.

f you have any questions please feel free to reach out to my legislative director, Rai mtal, at (212)788-7348

or by email at [email protected]. As always, can be reached by email at [email protected].


28/32


ho iportant is it or yor prodction acility to b locatd in Brooklyn? *

Very important 1 2 3 4 5 ot at all important

Select a value from a range of 1 to 5.

wat kind o acility do yo crrntly s to ak yor prodcts? *

Privately operated kitchen

Shared commercial kitchen

Co-packing facility

ncubator

ther (please specify)

wat prodct(s) do yo prodc? Cck all tat apply. *

Baked goods

Beer, wine or spirits

Beverages (other)

Condiments, sauces and syrups

Ethnic foods

jams/jellies

Meats/Seafood

Picked produce

Sweets

ther

wat ajor ingrdints do yo s? Cck all tat apply. *

Fresh Fruits

Fresh Vegetables

Meat

Dry ngredients

Liquid ngredients

ther

wat kind o containr/packaging dos yor prodct co in

(glass jar, cardboard bo, sald poc, plastic, clar saran-typ rap, tc.)?

Cardboard box

Clear saran-type wrap

Glass ar

Sealed pouch

Plastic


wat is t typ o closr?

Cork

Crown Cap Heat sealed or vacuum sealed

Plasticol cap (for hot ll)

Plastic

Sticher


Is an additional tapr idnt rap applid?

es

o


29/32


ho any labls ar on ac nit?

1

2

3+

Ar t cass labld?

es

o

Is it sl stabl? *

es

o

I so, or o long? *

I not sl stabl, at catgory is it?

Frozen

Refrigerated

Do yo apply a "Bst by" or "Sll by" dat it a stickr or a dat stap? es

o

wat typ o storag do yor ingrdints rir? Cck all tat apply. *

Frozen

Refrigerated

Room emperature

wat typ o storag dos t nisd prodct(s) rir? *

Frozen

Refrigerated

Room emperature

ho any pallts o spac do yo nd or ingrdints or an arag prodction rn?

(1-3) (4-7) (8-12) (13-20)

Frozen

Refrigerated

Dry

wat ipnt do yo s/rir or ac prodct? Cck all tat apply. * Blast freezer Bottling equipment

Bowl chopper Brewing/fermentation equipment

Casing stuffer Colloid mill

Commercial smoker Conveyor oven

Cryogenic freezer Dehydrator

Fermentation chamber Filter concentrator

Filtration equipment Freeze dryer

Fryer Grinder

Mixer Pasta machine


30/32


Plate pasteurizer Piston ller

Reverse osmosis equipment Robo Coup

Sheet trays Speed racks (how many?)

Slicer Spray dryer

Stovetop win srew extruder

Vaccum chamber Vita prep


Do yo s hPP (hig Prssr Pastriation)?

es

o

Plas dscrib yor typical rn si today:

(Size of nits (weight or volume), nits per case, Cases or units per run, Gallons of product per run)

ho any Stock Kp units (SKu) do yo a?

wat is t projctd rncy o yor prodct rns in 2013



wat is t projctd si o yor prodct rns in 2013 (nits, cass, gallons)?



ho any 'prson ors' dos it crrntly tak to prodc on rn o yor prodct?

Do yo bli tat yor crrnt anactring nironnt liits yor rn si/rncy?

I so, y? I not, y not?

Plas stiat t nbr o pallts o storag yo old nd or an arag prodction rn.

Do yo a any spcial rirnts? (i.e. gluten free, nut free, allergen free, kosher, halal, etc)

wat agncy/agncis rglat t prodct(s) yo prodc?

State Department of Agriculture and Markets

Food and Drug Administration (FDA)

S Department of Agriculture (SDA)

Department of Health and Mental Hygiene (DHMH)

Alcohol and obacco ax and rade Bureau (B)

Ar tr any spcial actors/isss inold in yor prodction procss? I ys, plas dscrib.

es

o

Do yo a a bsinss plan?

es

o

wat do yo projct yor gross sals to b in 2013?


31/32




wold yo b abl to t a ini o 3,000 nits pr rn?

es

o

ho any ll ti and part ti ploys do yo crrntly a?

wat prcntag o yor cost o goods sold (COGS) gos to labor?

20%

30%

40%

50%+

wat prcntag o yor cost o goods sold (COGS) gos to prodction?

20%

30%

40% 50%

Do yo nd a haard analysis and critical control points (hACCP) plan?

es

o

wold yo b intrstd in prodcing yor prodct at a Brooklyn-basd co-packr? *

Sign me up now

Very interested

nterested

ot sure (need to know more)

Like the idea in general but won't work for my business

ot interested

wold yo b intrstd in a pick and pack sric or olsal?

es

o

wold yo b intrstd in a pack and pack sric or onlin ordrs?

es

o

Plas add any additional conts, concrns, or stions tat yo igt a concrning a Brooklyn

basd co-packing acility.


32/32

Documents

Report on Co-Packing for Brooklyn Food Manufacturers