Is there a dearth of shared commercial kitchens to meet the needs of Minnesota’s growing cottage food industry in the state’s rural areas?
Why are commercial kitchens closing in the Twin Cities metro area?
How should an early-stage business owner approach a life-cycle analysis?
These are a few of the questions the Agricultural Utilization Research Institute (AURI) set out to answer in its annual Agricultural Innovation Partnership (AIP) program.
Each year, AURI solicits submissions from businesses, researchers, entrepreneurs and producers, encouraging them to submit a proposal across several hand-picked topic areas. AURI reviews and selects projects based on the submissions most closely aligned with identified knowledge gaps and its mission of supporting innovation and creating long-term economic impact for the state of Minnesota.
This year, there were six categories that AURI prioritized for exploration. Two projects were selected: (1) a research project on the economics of shared use commercial kitchens and (2) a guide to the basics of life-cycle analysis.
Both projects were selected after conferring with stakeholders, including clients, collaborators and partners, to understand information gaps in the food and agriculture sector. The aim of these initiatives is to identify areas where AURI can create impact, explained AURI’s Senior Director of Business Development and Commercialization, Jen Wagner-Lahr.
“Our staff capacity was a big determining factor on the projects we selected this year. We are very intentional to make sure we are using our resources and the expertise we have in the most effective way,” she said.
Shared-use commercial kitchens are critical for home-based food businesses to ramp up production to meet growing demand. In recent years, several commercial kitchens have gone out of business or changed hands. Further, AURI has heard that there are not enough shared-use commercial kitchens to meet growing demand in some rural Minnesota areas. A thorough study of the economics of shared-use commercial kitchens, with a focus on rural areas, is a time sensitive project of significant benefit to entrepreneurs and emerging businesses as the state’s economy continues to emerge from the COVID-19 pandemic, said AURI’s Business Development Director for Food, Jason Robinson. Finding and being able to afford commercial kitchen space is a much larger challenge for businesses outside of the Twin Cities metro area, he stated.
“What we’ve seen is that it’s not overly difficult to get commercial kitchen space in the Twin Cities or in some of the other urban areas. But once you get outside of those urban areas, it becomes much more difficult,” Robinson said.
The study is looking to answer a few important questions. First, why have some established commercial kitchen businesses closed in the state in the past few years? What are the challenges to making commercial kitchens financially viable, especially with the perception that there is not enough commercial kitchen space to meet demand from emerging businesses?
“The goal of this project is to understand the economics of the business model and why the marketplace may not have enough [commercial kitchen] space.”
He revealed the audience for the report is scaling food and beverage businesses looking to move from a home-based operation into a shared space to prepare food products or meals. Robinson estimates there are nearly 6,000 cottage food businesses in Minnesota. Cottage food business owners do not need a license from the state to operate out of their homes. And while they do need to be registered with the state of Minnesota, they are not inspected by regulators.
“There are many early-stage entrepreneurs that are looking to launch into a wholesale food business. Some of them are content working in their home kitchen, but there is also a segment that is looking to operate in shared-use commercial space,” Robinson said. “We have done a lot of work to understand the landscape for food and beverage manufacturing in Minnesota with a focus on scaling businesses. We are continuing to explore the questions, issues and ongoing needs for food entrepreneurs to better understand how AURI can support them.”
AURI is partnering with Clutch Performance, a Minneapolis-based food marketing firm, and the Food Works Group, an advisory firm serving food businesses, on the report. The partners will conduct a series of interviews with commercial kitchen business owners, regional entrepreneurial support organizations, legislators, real estate experts, financial lending sources and others across the state. These interviews will be conducted to gain a better understanding of the legal, regulatory, financial and geographical issues at play for both commercial kitchens and aspiring food businesses.
The issues that emerge will likely be both universal to the state and specific to a region, said Troy Schroeder, President of Clutch.
“We are hoping to be able to validate and test the hypothesis and assumptions we have heard on both sides of this equation. The first question is ‘is there a gap between demand and supply of commercial kitchen space?’ and then ‘What are some potential next steps to address some of these issues that come to light during the research and conversations?’” Schroeder said.
Robinson stated that AURI was deliberate in working with a broad spectrum of partners to ensure the research and subsequent report is as robust as possible. The project underscores the strength of AURI’s connections in the ecosystem.
“We don’t just work in a silo with one organization. We are taking a systemic approach with several subject matter experts to help us solve these challenges for our scaling food and beverage businesses,” he said. “With this project we hope to uncover information gaps and critical business factors as well as develop recommendations to better support this industry segment.”
The second AIP project is a primer for entrepreneurs and businesses who are considering hiring a consultant to conduct a life-cycle analysis of a product. In a life-cycle analysis, researchers quantify the environmental impacts that result from the production and use of a product to create a ‘cradle to grave’ assessment of the product. Using this data, life-cycle analyses can formulate an estimate of a product’s carbon footprint, as well as its impact on water and air quality.
These analyses are becoming more common, and in some cases even required for business owners seeking funding. They also often entail a significant investment in time and money.
The goal of the project is to help businesses develop a productive relationship with a life-cycle analysis consultant and gain a solid understanding of the questions they should consider before the process starts and as it continues.
“There is a gap in knowledge in the marketplace, especially at the early-stage with respect to life-cycle analysis,” said Luca Zullo, AURI’s Senior Director of Science and Technology. “It is not a complex process to go through for an entrepreneur, but it is a confusing topic, and it can be easy to lose track of some of the most important information. We felt it was important for our clients and others to have a basic understanding of what these analyses can deliver and also better understand the common pitfalls.”
The guide will provide information on how the life-cycle analysis can be applied once completed and how a business can use it to differentiate its products in the marketplace. The report will also include questions a business owner should ask of a life-cycle consultant before starting a project as well as during the process.
“A life-cycle analysis can be a powerful marketing tool in the food space. Entrepreneurs want to show they have a climate-friendly and planet-friendly product,” Zullo said. To be able to do so they need to understand what the data is telling them as well as the language and the boundaries of these reports. What AURI has set out to do with this project is to advance conversations and provide the framework for a business to make some early decisions.”
AURI partnered with technical consultant Evalueserve on the project.
Ag Innovation Partnership
This is the fifth installment of the AIP. The program was designed to catalyze innovation, generate new ideas and support collaborative partnerships across Minnesota’s value-added agricultural industry.
The projects selected to the AIP program receive funding and time from AURI. Successful applicants contribute in-kind match for at least 25 percent of the value of the project. The information generated through the AIP is publicly available to help producers, entrepreneurs, businesses and agricultural processors explore opportunities and technologies across several value-added areas. A variety of channels are used for public dissemination, including AURI Connects.
Past research through the program produced applied research studies, as well as guides and tools to help businesses utilizing the state’s agricultural products.