The natural and organic products industry continues to amass proof that it?s now operating with all the challenges and opportunities of more established industries.
One of those challenges is the massive task of relocating a business or undertaking a long-distance expansion. Relocation or expansion can ultimately mean more profits, but there are plenty of pitfalls along the way.
Natural and organic companies are beginning to attract interest from economic development offices. As cities and states actively court new businesses, they?re often ready to offer a multitude of incentives. Smart companies may be able to negotiate advantages that tip the scales in favor of a move, even if they?re comfortable where they are.
The courtship of Amy?s Kitchen
Nearly one-fifth of California businesses are planning to expand and/or relocate outside the state, according to the California Chamber of Commerce?s 13th Annual Business Climate Survey, released in April 2003. The cost of worker?s compensation tops the list of complaints about doing business in that state, and in response, California Gov. Arnold Schwarzenegger recently signed a reform bill. But dissatisfaction with the business and regulatory climate and economic pressures run deeper than a single issue, and many California businesses are at least willing to entertain a move.
Oregon has bid aggressively for some of those businesses. As the state identified industries that it wanted to attract, the natural and organic foods industry shined brightly. It matched the state?s existing ?clean, green, natural foods, healthy foods? culture and reputation, said Jerry Gardner, business development manager with the Oregon Department of Agriculture, and is clearly a part of the food processing sector in continuous growth instead of decline.
In fact, Oregon may be the first state to actively focus on natural and organics in its recruitment strategy. A targeted mailing to 250 California natural foods companies resulted in about 18 interested companies, said Gardner. He and others also attended Natural Products Expo West this year to woo companies directly. Relative to California, Oregon offers lower tax rates for companies, lower utility costs and other economic incentives; the state also has a history of success with native natural foods companies like Emerald Valley Kitchen, based in Eugene, Ore.
Right now, the belle of this ball is Amy?s Kitchen, an organic foods company based in Santa Rosa, Calif., with estimated sales of $100 million annually. The company that Chief Operating Officer Scott Reed describes as ?fiercely independent, and determined to stay so? is rapidly outgrowing its 107,000-square-foot plant, and began to look around for expansion sites both within and outside of California. As one recipient of Oregon?s appeal mailing, Amy?s has looked at that state as one of about 16 potential sites around the country.
The media caught wind of Amy?s Kitchen?s deliberations, resulting in an all-out charm war between Schwarzenegger and Oregon Gov. Ted Kulongoski. A March 26 Los Angeles Times story highlighted California?s efforts—including direct calls from Schwarzenegger to Amy?s co-founders Andy and Rachel Berliner—to keep Amy?s growth in the state. Oregon?s campaign, meanwhile, captured the interest of other companies; the Mulberry Street Juice Co., formerly of Chico, Calif., chose Medford, Ore., as its new home. Oregon is planning a second wave of recruitment appeals focusing on specialty foods companies in general.
Open for organic business
At least part of the credit for Oregon?s recognition of the industry should go to Bandon Organic Growers, a small nonprofit that assists southern Oregon farmers with organic certification and promotion of Oregon-grown organic produce.
With a multitude of local organic fruit and vegetable crops, the small town of Bandon actively recruits organic businesses that may want to be close to growers. ?Bring Your Organic Business to Bandon? invites a brochure. Tax-exempt land awaits a new organic warehouse, said Bandon Organic Growers Secretary/Treasurer Nancy Evans, when funding is secured.
?The state of Oregon, for the last 18 months to two years, has been looking at this as a potential way for rural communities to use their agricultural resources again,? Evans said. ?[Bandon] has a light industrial district with land that is tax-exempt, and the state would provide low-interest loans and tax benefits, so there are incentives there. I don?t know of any other city in the United States that has passed a [pro-organic-business] resolution like ours.?
It remains to be seen whether other states will so clearly identify natural and organic foods companies as desired residents. Expansion Management magazine (a Penton Media publication) offers an online guide to expansion and relocation services, including a chart of all 50 states? economic development Web sites (www.expansionmanagement.com). Potential relocators can also go to city or county sites on the Web to access information about real estate, land, taxes, zoning and permits, utility costs, and incentives.
Relocations and expansions aren?t just about money or tax benefits, of course. Moves affect quality of life, employee morale and other less quantifiable resources for quite some time after the boxes are unpacked. The abundance of opportunity that a move may offer must be carefully weighed against foreseeable and unforeseeable consequences. The questions are myriad and the landscape can shift quickly.
That?s why Amy?s Kitchen, for one, is taking its time in making its expansion decision. Despite ?busting at the seams,? Reed said, the company wants to grow responsibly and avoid mistakes it?s seen others make by growing too fast. ?As you might expect, when a business is faced with that dilemma, it?s a high-class problem,? Reed said. ?We want to make a very smart decision for Amy?s and for our employees.?
?Take your time [making a relocation or expansion decision],? said Amy?s Kitchen co-founder Andy Berliner. ?Really study things. As you dig deeper, things change. Take your time and really analyze it. One company I know of did the whole logistics, picked out the best spot in America, and it turned out they had only one rail supply line.?
Berliner also emphasizes a strong management team, good communication and a sharp sense of timing to make a successful move. ?You need strong management—strong enough to let people leave your operation to start a new one. You have to be at a certain point in your evolution to be comfortable with that.? And if you are at that point, there appear to be many states—Oregon among them—that will welcome you with open arms.
Elaine Lipson is a Colorado-based writer and the author of The Organic Foods Sourcebook (McGraw-Hill, 2001).
Natural Foods Merchandiser volume XXV/number 6/p. 39-40