Progress 10/01/07 to 09/30/10
Outputs
OUTPUTS: The viability of manufacturing in New York State is of growing concern and policy makers are increasingly looking towards ag-based manufacturing to better take advantage of the large agricultural production sectors in the state. A firm survey to nearly 4,000 food and beverage (FnB) manufacturers in the state was conducted. The enumeration of firms contains the most up to date inventory of state food processing firms. The results of the data collected have provided invaluable information on the effect of alternative business factors on performance, as well as the ability to identify important firm, market, spatial factors affecting firm growth. Through four follow up regional focus groups, several barriers to growth were clearly identified and prioritized. Significant opportunities were also identified, but to realize them, there is a need for available investment in marketing and customer development. It was also clear from focus groups that there is a need for proactive strategies by firms that go beyond existing government programs; in particular, more firm emphasis on working and learning from others through stronger collaborations and networks. Econometric growth models estimated using the survey data indicated that lower growth rates for more established firms may highlight a priority cohort to address firm retention. Higher growth for larger firms may also indicate capital constraints for smaller firms looking to expand. Nearness to markets was found to be highly beneficial, with local agricultural production and growing population centers associated with larger rates of growth. Negative population density effects and limited downstream cluster benefits may be indicating constraints within urban areas due to non-manufacturing activities that congest infrastructure. Finally, concentrations of manufacturers in rural areas may face negative competition effects that are more substantial than agglomeration benefits. With growing interest in local food systems within smaller, rural communities, community planners and plant executives need to be aware of competition issues and consider developing policy or operational procedures that reinforce holistic food-systems planning and the availability of collaborative firm activities that can offset negative competition effects. As access to raw agricultural inputs appears to be highly beneficial to manufacturers, policies or collaborative firm activities that address these upstream markets may also be beneficial. Several additional outputs are in process as this report is compiled (additional funding has been secured). A journal article focusing on agglomeration economies and firm growth will be submitted to a top economics and regional development journal. A full project report/extension bulletin is nearing completion that describes project activities and outcomes, as well as detailed sub-industry fact sheets with implications for sector development. Finally, we are planning a symposium in 2011 that will highlight the results of this project, as well as highlight success stories from the field regarding program participation and collaborative firm activities. PARTICIPANTS: All project investigators were involved in organizing and delivering workshops to the project's advisory council members, as well as developing and facilitating the regional focus groups with over 50 participating food and beverage processors in New York State. The project's advisory council met annually, providing key input on project activities and review of project outputs and research results. Advisory council members represented several private food and beverage processing firms in the state, as well as representation from the New York State Department of Agriculture and Markets, New York Farm Bureau, New York Food Policy Council, Cornell Agriculture and Food Technology Park, Empire State Development, and the College of Agriculture and Life Sciences at Cornell University. Over 50 processing firms participated in the regional focus groups that were conducted in Watkins Glen, Batavia, Cicero, and New York City. Processing industries represented by advisory council members or focus group participants included: dairy, meats, fruits and vegetables, grapes and wine, grains and oilseeds, seafood, nonalcoholic beverages, maple, and specialty/niche products. A graduate research assistant conducted research towards his Masters thesis as part of this project, supervised by the lead project investigator, including assisting investigators with the plant enumeration, survey, and economic analysis. Subsequently, his thesis was awarded the top Masters thesis of 2010 by the Food Distribution and Research Society. Investigators gave 26 presentations about the project and its results to industry, extension, and academic audiences; and contributed to 13 publications in various industry, extension, and academic outputs. A forthcoming symposium on food and beverage manufacturing in New York State (supported by additional funding) will bring together academics, policy officials, educators, and industry stakeholders to highlight the results of this project and success stories from the field involving public policies and firm interventions. Concluding group activities will prioritize future activities to address barriers to growth and opportunities to further expand on. TARGET AUDIENCES: Individual beneficiaries include food manufacturing firms that will benefit from a better understanding of their competitive advantages and opportunities to improve market coordination, investment, and business structures. Trade associations and supporting sectors will benefit from identifying improved market linkages and supply chain management efficiencies. Policy recommendations will benefit state and economic development agencies in designing improved regulations, planning tools, and research initiatives that benefit the firm stakeholders. Improving the viability for food manufacturing in NY will benefit farmers and related industries along the supply chain that rely on the processing sector to provide a consistent market for their product and an available, consumer driven product. PROJECT MODIFICATIONS: Due to the additional time needed to enumerate firms and administer the extensive firm-level survey, a limited number of outputs were not completed by the end of the project reporting period. As such, these additional outputs are in process as this report is compiled (additional funding has been secured to support these activities). First, a journal article focusing on agglomeration economies and firm growth in the New York Food and Beverage Manufacturing Sector will be submitted soon to a top economics and regional development journal. A full project report is being developed as a departmental Extension Bulletin that will completely describe the key components of the project activities and outcomes. Detailed sub-industry fact sheets are being developed with specific industry detail and implications for sector development. Several trade articles and presentations are also planned for industry stakeholders. Finally, we are planning a NYS food and beverage manufacturing symposium in 2011 that will highlight the results of this project, as well as showcase success stories from the field regarding program participation and collaborative firm activities. The forum will provide a beneficial platform for discussion with policy personnel, development agencies, and food processors.
Impacts
Based on the firm survey conducted, business environment factors were analyzed. The factors rated as most beneficial concerned cooperative marketing and technical assistance, and infrastructure and market access; while state business costs and regulation were rated the most harmful. State incentive programs and workforce availability were rated as slightly beneficial. Prioritized barriers to growth and competitiveness were: high state taxes and insurance costs, increasing state licensing/inspection fees, impending regulations on labor and wages, and availability and retention of workforce. Prioritized opportunities were: growing demand for local and environmentally-friendly foods, supply chain innovations with distributors, current product line growth, and sector partnering, across products, retail events, and transportation/delivery. Prioritized firm strategies were: better utilization of service agency vendors, stronger industry association activities for education and product promotion, and further development of firm networks. Prioritized policy strategies were: more focus on food and beverage manufacturing, address overall NYS fiscal problems, comprehensive regulatory review to reduce duplicative reporting to multiple agencies, and increase state promotion of industry. Firm growth across sectors was highly heterogeneous, but recent growth rates were highest in more non-traditional sectors that included specialty or niche manufacturers. If targeted industry efforts are considered, bakery operations, meat processing, and sugar/confectionary firms had significantly lower growth rates. Evidence indicated that little incentives exist for older firms to maintain the size of their operations, relative to policy programs aimed at new start-ups or expansions of firms to create jobs. Additional policies focused on employee seniority incentives may be helpful for improving long-term viability of these firms. The results highlighted difficulties faced by smaller firms looking to increase plant size, but may be limited in doing so due to capital constraints. As such, the results provide evidence of a need for additional support mechanisms to achieve higher growth rates by beginning/small firms. Increased access to agricultural inputs and growing populations were important upstream and downstream factors to improve growth. Strong agricultural production sectors thereby reinforce stronger downstream ag-based manufacturing enterprises. In addition, within-industry firm clustering effects varied significantly between rural and urban areas. In rural areas, increased firm concentration reduced revenue growth rates in comparison to their urban counterparts, presumably from higher competition effects with local firms primarily serving local markets. In total, 18 industry/extension presentations were given, including workshops to the project's advisory council and to regional focus groups. Eight presentations were also given to academic audiences. The results of this project contribute importantly to more-informed firm management, industry association, and public policy decisions aimed at improving firm viability and sector performance.
Publications
- Hall, J.S. and Schmit, T.M. 2010. Agglomeration Economies and Firm Growth in the New York Food and Beverage Manufacturing Sector. Abstract, Agricultural and Resource Economics Review 39(3):585.
- Park, K., Schmit, T.M., Henehan, B.M., and Hall, J.S. 2010. Assessing the Future of Food and Beverage Manufacturing in New York State. Abstract, Journal of Food Distribution Research 41(1):24. Food Distribution and Research Society.
- Hall, J.S. 2010. The Impacts of Agglomeration Economies and Market Access on Firm Growth: An Empirical Assessment of Food and Beverage Manufacturing in New York State. MS Thesis, Charles H. Dyson School of Applied Economics and Management, Cornell University.
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Progress 10/01/08 to 09/30/09
Outputs
OUTPUTS: The competitiveness of food and beverage manufacturing establishments in NYS relative to other regional or national firms is of growing concern. The purpose of this research is to provide an economic analysis of the food manufacturing industry in NY, identify strategic advantages and barriers to growth, and develop recommendations for firms and public policy makers to improve the competitiveness and business climate for food manufacturing in NYS. A database of nearly 4000 current food and beverage manufacturers in NYS was developed and formed the basis for a firm-level survey that was mailed out in the spring of 2009. The survey contained questions regarding establishment demographics, customer types, effects of the business environment and of consumer trends; firm collaborations or alliances, and past and future expected growth rates. A cumulative logit growth model of food and beverage manufacturing establishments was estimated to understand the primary factors affecting food manufacturing firm growth in NYS, by industry sector, and including the influence of upstream, within-stream, and downstream agglomeration economies; i.e., the influence on growth of firm location decisions near input supply sources, other food manufacturing firms, and wholesale/retail buyer markets, respectively. Additional efforts in this project have addressed the growing influence and demand for locally processed foods and beverages and marketed through direct channels such as farmers' markets. A comprehensive survey of vendors and markets in northern New York was conducted to evaluate how local food processors can improve the performance and long-run success of these smaller food processing enterprises. Econometric models were developed that estimate the important factors affecting vendor performance, both in terms of sales per customer and vendor self-reported profit satisfaction. Eight extension presentations have been given to various stakeholder groups, including to the project stakeholder advisory council, Cornell Cooperative Extension Ag and Food Systems In-Service training, the New York State Association of Meat Processors, and the CALS Economic and Community Development Working Group. Five presentations were also given at at professional research meetings, including the Food Distribution Research Society and the Agricultural and Applied Economics Association. The research has also supported a graduate research assistant. All project information and outputs are disseminated online through the Cornell Program on Agribusiness and Economic Development website at www.agribusiness.cornell.edu. PARTICIPANTS: Project Advisory Council Members: James P. Finkle, Constellation Brands; James Trezise, NY Wine and Grape Foundation; Jim Kloman, Frito Lay; Roger C. Tollefsen, New York Seafood Council; Raymond L. Dyke, Agri-Mark (McCadam); Kim Pickard-Dudley, Upstate Niagara Cooperative, Inc.; Jeff Sokal, Steuben Foods; Francois LaChance, Star of the West Milling Co.; Robert Norris, Dr Pepper Snapple Group; David Skinner, Clinton's Ditch Cooperative; Brent Roggie, National Grape Cooperative, Welchs Inc.; Lyle Merle, Merle Maple Farm; Dennis R. Beedham, Allens Inc.; Chris and Bernadette Wilson, Wilson Beef Farms; Julie Suarez, NY Farm Bureau and NY Food Policy Council; Steve Isaacs, Cornell Agriculture & Food Technology Park; Stephen McGrattan, NYS Dept of Agriculture and Markets; Jim Jacob, Empire State Development; Jennifer Drumluk (ex officio), Corporate Relations, CALS. TARGET AUDIENCES: The project advisory council guides work plan development, evaluation and review of research results. Members were recruited from several areas including government, economic development, manufacturing, trade associations, and wholesale and retail firms. Project members have extensive industry and outreach experience and will be utilized as a resource for enumerating manufacturing firms, identifying key issues, and facilitating outreach opportunities. Information will be solicited directly from food manufacturing firms through surveys and focus groups. Firm and policy recommendations will be communicated to stakeholders through written reports, educational materials, and presentations at industry meetings and state and economic development agencies. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The development of the database of food and beverage manufacturing establishments in NYS provides the most up to date inventory of food processing firms. The usefulness of the database has already been reflected in multiple requests to utilize the database, from other academic and stakeholder audiences. The firm-level survey revealed that the importance of alternative business factors in the state varied considerably by industry sector and firm size, thus providing heretofore unavailable information useful in developing appropriate firm or policy strategies. Fruit and vegetable, alcoholic beverage, and maple processors appear to benefit the most from cooperative marketing and technical assistance; and the seafood industry rates infrastructure and market access the highest, but ranks the lowest for beneficial business incentive programs. In addition, nonalcoholic beverage and other food processors appear to benefit relatively more from workforce availability and development programs. In relation to firm size, non-employee firms appear to benefit more from cooperative marketing and technical assistance programs; whereas large firms receive more benefit from infrastructure and market access, business incentive programs, and workforce availability and development. Mid-size firms appear to have the most difficulty with state business costs and regulations. Within-stream agglomeration economies were found to be large and positive for establishments in urban areas, but were negative in rural areas. Firm location near similar manufacturing firms in urban areas has clear benefits regarding shared infrastructure, but more rural areas face higher levels of competition over limited resources. Down-stream agglomeration economies were not significant, however, upstream agglomeration economies were. As such, it is more important for food manufacturing firms to be located near bulky input supplies than to end-use product markets where transportation may be more efficient. As a result of the survey, a representative cross section of food and beverage manufacturing firms are being invited to participate in regional focus groups to follow up on survey results and to further identify current firm strengths, advantages, weaknesses, and barriers affecting the health of the NYS food and beverage industry.Based on the econometric estimation of local food processors and vendors performance through farmers markets, distinct differences in satisfaction and sales performance across products sold highlights the difficulty for managers in providing a wide range of food products to customers, while maintaining diverse vendor satisfaction. However, overall vendor performance would appear to be enhanced by considering farmers' markets within a broader marketing strategy, and concentrating on a limited number of larger markets, with sufficient amenities, and a variety of production-based vendors. Finally, growth in new farmers' markets in the region appears to have a competitive effect on established markets, emphasizing the need for effective market advertising and consideration of new market features or activities to maintain and improve market attendance.
Publications
- Park, K., Schmit, T.M., Henehan, B.H., and Hall, J. 2009. Assessing the Future of Food and Beverage Manufacturing in NYS. Conference Proceedings (abstract), Food Distribution Research Society Annual Meeting, Denver, CO.
- Henehan, B.M. and Schmit, T.M. 2009. Serving Member Interests in Changing Markets: A Case Study of Pro-Fac Cooperative, Chapter 4 In M. Fulton and B. Hueth (eds.), Co-operative Conversions, Failures and Restructurings: Case Studies and Lessons from U.S. and Canadian Agriculture. Knowledge Impact in Society, Saskatoon, Saskatchewan, p. 53-70.
- Henehan, B.M. and Schmit, T.M. (2009). Serving Member Interests in Changing Markets: A Case Study of Pro-Fac Cooperative. Journal of Cooperatives 23:53-70.
- Logozar, B. and Schmit. 2009. Assessing the Success of Farmers Markets in Northern New York: A Survey of Vendors, Customers, and Market Managers. Extension Bulletin 2009-08, Department of Applied Economics and Management, Cornell University.
- Schmit, T.M., Gomez, M.I., and Logozar, B. 2009. Drivers of Vendor Satisfaction and Performance at Farmers Markets. Smart Marketing, Department of Applied Economics and Management, Cornell University.
- Logozar, B. and Schmit, T.M. 2009. Assessing the Success of Farmers Markets in Northern New York: A Survey of Customers. Farmers Market Forum, Farmers Market Federation of New York, 14(2): 11-14.
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Progress 10/01/07 to 09/30/08
Outputs
OUTPUTS: A unique state- and 10-region-level economic dataset on New York food and beverage manufacturing firms was developed utilizing multiple sources of secondary data, including industry, sector, and sub-sector level data on employment, output, compensation, and firm establishments. Inter-related ag-based industries both upstream and downstream in the food value chain are also incorporated into the data. The data will be analyzed further in the second year to estimate current contributions to the State economy, to identify regional areas of specialization and competitiveness, and to assess inter-industry linkages, opportunities, and barriers to development. Presentations utilizing the data were presented to the North Country Regional Food Initiative Team, at the Cornell Cooperative Extensions Agricultural and Food Systems In-service Conference, and at a Polish-American seminar held at the Agricultural University of Poznan in Poland. A 19-member project Advisory Council was formed representing all major agricultural production industries in the state, including dairy, fruits and vegetables, grains, beverages and juices, wine, meats, and seafood. The Council includes farmer owned, cooperative, and private manufacturing firms, both large and small manufacturers, and firms with local, regional, domestic, and international operating areas. In addition, state and university economic development agencies and the Department of Agriculture and Markets are represented. The inaugural Advisory council meeting was held in July 2008 to provide information to the council, and to receive critical feedback on project objectives and plan of work. All project investigators presented research results and participated in discussions. The Council also assisted with the development and pre-testing of the firm-level survey that will be administered in January 2009. An establishment-level database of food and beverage manufacturing firms was developed to identify all currently operating facilities in the state. Over 3,000 plants have been included in the database. A plant survey will be administered to all enumerated plants in early 2009. The draft survey was developed in Fall 2008 and is currently being pre-tested by participating project collaborators. The survey will gather important information on plant characteristics, input procurement and product distribution areas, operational structures, capital investment plans, and prospects for business growth and retention. PARTICIPANTS: Project Advisory Council Members: James P. Finkle, Constellation Brands; James Trezise, NY Wine and Grape Foundation; Jim Kloman, Frito Lay; Roger C. Tollefsen, New York Seafood Council; Raymond L. Dyke, Agri-Mark (McCadam); Kim Pickard-Dudley, Upstate Niagara Cooperative, Inc.; Jeff Sokal, Steuben Foods; Francois LaChance, Star of the West Milling Co.; Robert Norris, Dr Pepper Snapple Group; David Skinner, Clinton's Ditch Cooperative; Brent Roggie, National Grape Cooperative, Welchs Inc.; Lyle Merle, Merle Maple Farm; Dennis R. Beedham, Allens Inc.; Chris and Bernadette Wilson, Wilson Beef Farms; Julie Suarez, NY Farm Bureau and NY Food Policy Council; Steve Isaacs, Cornell Agriculture & Food Technology Park; Stephen McGrattan, NYS Dept of Agriculture and Markets; Jim Jacob, Empire State Development; Jennifer Drumluk (ex officio), Corporate Relations, CALS. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
Professional research and extension presentations have increased the knowledge base of industry professionals, extension educators, and economic development researchers. Data analysis was presented to North Country educators and research staff and will be utilized in the development of economic indicators to track industry development. A second presentation at Cornell Cooperative Extension's In-Service training conference focused on methods by which to assess regional agricultural cluster competitiveness, including ag-based manufacturing, and identifying opportunities and barriers to growth. Such information will be utilized in the development of educational materials directed towards the general public and economic development and public policy agencies and stakeholders. While the location was is Poland, Cornell students and faculty participated in a Polish-American seminar focused on challenges in the agri-food sector and rural communities. Presentations were made that included a presentation that identified agribusiness contributions and inter-industry linkages in the New York State Economy, with particular emphasis to the food and beverage manufacturing industries. Both the Cornell and Polish students and faculty gained and increased appreciation of the level of impact ag-based manufacturing plays in the New York State economy that can be utilized in their further studies and research. The research on which this presentation was based was also published in the Economic Series Yearbook publications for the University. The annual project Advisory Council meeting began this past summer. While the objectives of the meeting were focused particularly on the research project, the discussions between Council members and research staff were very productive and provided key information and insights to all in attendance to take back to their firms or organizations. With the assistance and direction from the Project Advisory council meeting, the firm survey was developed by the research staff and is expected to result in a number of impacts and benefits for the industry study including: estimating the current level of economic contributions the industry makes to the New York State economy, identifying current opportunities for business retention and growth, potential strategies to improve firm competitiveness, and market barriers hindering firm performance; and offering policy makers and business managers valuable information that will enhance the business climate in New York State and enhance the future success of the industry.
Publications
- Schmit, T.M. and Bills, N.L. 2008 Agribusiness contributions and inter-industry linkages in the New York State economy. Yearbooks of Agricultural Univ. of Poznan: Econ. Series 6(385):119-142.
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