More food manufacturing could unlock billions for Minnesota economy

Just a 5% increase in Minnesota food and beverage manufacturing could put an additional $11 billion into the state economy and create more than 160,000 jobs.

The demand from small and mid-sized brands, and the availability of manufacturing space, may already be there to make that happen, says a recent report from the Minnesota Department of Agriculture and the nonprofit Agricultural Utilization Research Institute (AURI).

But the connections aren't being made.

"Co-manufacturers across the state have significant amounts of underutilized capacity," the report said. "Brands and co-manufacturers appear to have difficulty finding one another."

Minnesota hosts a number of startup-supporting, food-focused resources. Yet entrepreneurs are often left fending for themselves when the time comes to scale up.

"It's a huge gap we have for our food and ag entrepreneurs," Allison Hohn, executive director of Grow North, said at an AURI forum this week. "They start making products at home, go to a commercial kitchen, try to graduate to a co-manufacturer who can make it for them and find they're not at a size to do that."

As a result, brands get stuck at smaller stages. They are unable to keep up with the demands of major retailers and so are unable to grow to the point where manufacturers will take a chance on them.

The AURI/Department of Agriculture study was launched in response to this "perceived lack of capacity or access to affordable, right-sized manufacturing options in Minnesota for growing, ready-to-scale small food and beverage businesses."

The industry is in need of a coordinated effort — like a Medical Alley for food businesses — to help homegrown brands level up.

"The entire landscape stands to benefit from increased connectivity and dynamism via a statewide system that supports innovation, growth and resilience," the study said.

FoodOps, a Minnesota-based consultancy, works to connect food entrepreneurs to manufacturers but focuses its efforts on midsize companies that have already reached or neared $1 million in yearly revenue.

"There's a lot of manufacturing and a lot of entrepreneurs," FoodOps president John Castillo said, "but there's no one-stop shop for them to connect."

He said the Upper Harbor Terminal project in Minneapolis — where a shared food manufacturing facility is planned — could be the missing step that helps brands establish themselves before larger manufacturing outfits take them on.

The report said public and private investments, tax reform and "modernized and standardized data practices that make information sharing more equitable and accessible" may be key to competing with other cities and states that have greater coordination in the food industry.

"From a policy standpoint, there are many ways to invest in food and beverage manufacturing in Minnesota — financing, education, incubation, administration, legislation, infrastructure and many more," the study said, reiterating the benefit from such investments: "Minnesotans, on average, reap more economic reward from investments in the food and beverage manufacturing industry than from any other industry in the state."