Food Tech Startup Trend Takes Hold in Michigan

7/20/12Follow @XconomyDET

As concerns about the effects of globalization on the food supply and genetically modified “frankenfood” grow, locavores are having their moment in the spotlight. More and more, consumers want to know where their food comes from, and they want it to be fresh, local, and free of harmful chemicals. They’re also willing to pay a premium for it. According to Erika Block, founder of the Ann Arbor, MI-based start up LocalOrbit, the sale of local food has grown by 18 percent per year for a decade, while all other food sales have only grown by 1 percent. “There have been $8 billion in local food transactions already in this very early market,” she says.

Block is one of a growing number of food tech entrepreneurs that are getting in on the ground floor of this booming trend. She and other entrepreneurs like her see an opportunity particularly on the distribution end, where things have traditionally been handled with spreadsheets, faxes, and phone calls—not exactly the most efficient tools that our modern digital age has to offer.

While food tech has exploded in places like California, it’s is just beginning to take hold in Michigan, but we should expect the sector to heat up quickly considering Michigan’s national prominence in the agricultural sector. It’s the second largest industry in the state, contributing $71.3 billion annually to the state’s economy. Michigan is second only to California in terms of agricultural diversity, producing more than 200 commodities on a commercial basis. The state leads the nation in the production of 19 commodities, including tart cherries, blueberries, three kinds of dry beans, and cucumbers for pickles.

Block says that, to meet growing demand, many farmers and chefs have been building supply chains using rudimentary tools. “LocalOrbit has identified that this emerging sector needs its own tools,” she explains. “We provide software as a service and enable people to scale distribution and simplify what is now a scattered process.” Say a chef wants to start using local food on her menu. Block says the old way would involve picking up the phone and arranging 20 different deliveries, and juggling 20 different bills to pay for them. Block says LocalOrbit provides one-stop-shopping with an online platform that provides customized websites with e-commerce, management, and marketing tools to help streamline the local food supply chain.

Building local food supply chains is exactly what drew the University of Michigan’s Social Venture Fund to contribute $50,000 to a recent $225,000 seed round for Jack & Jake’s, a New Orleans-based startup connecting local farmers and fishers with the restaurants and institutions that want to buy their food. John Burns, the founder, comes from a farming background (the company is named after two mules that helped clear his father’s land on an island in the Mississippi River), but his passion is giving not only chefs and schools access to fresh foods, but also underserved neighborhoods. “The city of New Orleans lost 75 percent of its grocery stores after Hurricane Katrina,” he says. “I’m interested in giving people access to fresh, healthy food, which doesn’t have to be expensive. I watch local growers like my dad throw food away that’s better than the food on the store shelves.”

That’s part of the challenge, Burns says—getting the word out to farmers that they already have a better product that makes them competitive, and that a market exists where there’s a very strong demand for better food at a better price. “People feel local food is a safer product,” he adds. “People are concerned about their health, and they realize it has a lot to do with what we put into our bodies.”

Cara Rosean, founder of the Ann Arbor-based Real Time Farms, has a slightly larger goal: She’s creating a crowdsourced national food guide that includes sections for farms, farmers markets, food artisans, and consumers looking for restaurants that serve local food. “You enter in a ZIP code and you can explore the farms in your area, whether it’s to find stuff at a farmers market or to see sourcing at a local restaurant.” Farmers and eateries can include pictures, stories, and information about their growing practices in their online profiles. So far, Real Time Farms’ users have added more than 3,200 farms and 6,900 farmers markets across the nation.

Thanks to her Food Warrior internship program, Rosean sends groups out to different areas of the country and gives them 12 weeks to try to document the local food network. Every three months, she chooses five new cities. So far, more than 20 cities have been documented. She calls the East Coast “awesome,” and says one surprise was how much more robust the local food scene was in Los Angeles compared to the Bay Area. Michigan is also well-represented, and Rosean says she’s looking forward to going into areas, like Hawaii, that often don’t have as much access to the national supply chain.

But there’s another, equally important benefit to the local food movement besides health: what it’s doing to prop up small businesses. In Michigan, more than 90 percent of the state’s farmland is owned by families or individuals, and the numbers are growing. According to data from the 2007 USDA Census of Agriculture, 3,000 new farms were added in Michigan since the last numbers were tallied. In Detroit and other American city centers, urban farming is also enjoying a renaissance. “It strengthens local economies,” Block explains. “It’s not just a foodie thing—it’s really about economic development.”

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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  • http://twitter.com/ErikaBlock Erika Block

    Thanks for the great article, Sarah. I wanted to clarify a number: we’re talking about $8B in current *annual sales* – and growing! Increasing the amount of food that’s sourced locally is one of the great opportunities of the new economy.