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Catering to Boutiques

A special case in the food sector is Vermont's nurturing of boutique food start-ups. Although it has plentiful fresh water, locally grown produce and numerous dairy farms, the state can't offer low wages or transportation costs, so instead the focus has been on building on the mystique of Vermont as a brand. "I have heard anecdotally that putting 'made in Vermont' on the label will increase sales and prices of food products by 20 percent," says Robert Miller, Vermont's commissioner of economic development. "We work on leveraging that brand identity with promotion."

King Arthur Flour, a Norwich, Vt.-based company which moved from Massachusetts in 1984, has catalog sales of $8 million to out-of-state residents who hanker for the brand, which comes in packages labelled with the state seal of Vermont. Shipping a bag of flour costs more than the flour, but the "Vermont mystique" makes it worthwhile to customers. The brand is now distributed in all 50 states. The company recently received $481,000 in state payroll and investment tax incentives to upgrade its catalog operations and retail store and to build a teaching center.

Vermont, with a rich tradition both of agriculture and specialty foods companies from Cabot to Ben & Jerry's, offers a state college food science infrastructure centered at the University of Vermont's Center of Excellence in Food Science in Burlington. In addition, the state offers food companies a wide array of technical and financial support. "Food has been a historically strong industry here, and we've identified it as a high priority," says Miller. "We may not be widely recognized as a great area to do business, but the Vermont brand is sovereign. Also, because of technological advances, site selection for start-ups often comes down to where the entrepreneur wants to live."

Scott Stillman is a native Vermonter who has received numerous pitches from other states to move his Fairfax, Vt.-based high-end frozen food operation, Cuisine Suis Vide. "I've gotten offers from states up and down the East Coast, but my gut says to stay put," he says. "It's a quality-of-life issue."

Vermont is helping Stillman make that decision economically justifiable. Cuisine Suis Vide is the anchor tenant in the Vermont Food Venture Center, an incubator for start-up food companies, offering business and technical services and state-of-the-art equipment. The state also offers low-cost start-up loans. Black River Produce in Proctorsville, the largest buyer of Vermont-grown fruits and vegetables, is adding 5,000 sq. ft. (465 sq. m.) to its facility with the help of $194,000 in state tax incentives.

Vermont is a special case of a growing national trend toward interest in regional specialties and unique, boutique food items. Although electronic commerce still only accounts for a tiny proportion of food sales, such food shopping sites as GreatFood.com, specializing in retail and wholesale specialty food items from all over the country, support locally grown niche players by expanding their access to national markets without burdening them with a national infrastructure. For the Krafts and the Nestles of the world, site location is a logical process of weighing economic drivers. For the regional gourmet food producer, "production often started in the entrepreneur's kitchen, and the products take on the personality of the area," says Bill Cuff, president of GreatFood.com.

These regional players may outgrow the founder's kitchen, but staying in the area in which they were born has market value. "People want their lobster to come from Maine, and their crab cakes from Maryland," says Cuff. "There's no doubt that there's an increasing interest in food with unique, local character. It's considered to be upscale and high-quality."