Photo courtesy of Choose Chicago
Chicago, the Netherlands and food
Everywhere and anywhere people enjoy food. Enjoying good food and drinks is universal. It’s something we all share. Something that is not quite as universal is the ability to produce great food and drinks or build scalable businesses around it. This ability is something that the Netherlands and Chicago have in common.
Therefore, the first blog about the opportunities for Dutch business in Chicago’s is centered on the food and beverage industry. Let’s dive right in!
Since the mid-19th century, the Chicago region has been a center for food production and distribution. This was the place where much of the Midwest’s agricultural output came to be processed, packaged and distributed to the marketplace.
Today, Chicago’s food and beverage industry is the second largest in the nation, trailing only Los Angeles. Approximately 4,500 firms make up the cluster, accounting for 130,000 employees and $32 billion in sales.
As such, Chicago’s food sector is a sizable industry in which Dutch food innovations can make their mark.
Chicago’s food cluster encompasses everything from farming to the initial processing of ingredients, to final processing and packaging for consumption to distribution to restaurants and stores.
Several other industries interface with this process, including suppliers of packaging materials, equipment, machinery and transportation services.
Density and diversity
Food and beverage manufacturing, along with food packaging, is highly concentrated in the Chicago region.
Chicago’s food cluster is well rounded, rather than focused around just one or two types of food. Subclusters are baked goods, specialty food and ingredients, beverage, meat, poultry and seafood processing, candy and chocolate, dairy products, packaged fruits and vegetables, milling and refining of cereals, oil seeds and sugar.
Moreover, all subclusters except for meat, poultry and seafood processing, are significantly concentrated in the Chicago region compared to the rest of the country, with candy and chocolate standing out.
In food manufacturing overall, and in most of the industry’s subsectors, Chicago’s firms have had above average productivity for much of the last 35 years. There is also an abundance of retailers, restaurants and chains. This density and diversity makes it and interesting ecosystem for many different food related startups and scale ups in the Netherlands that are looking to expand internationally.
Chicago, what else?
There are several reasons why Dutch startups and scale ups can consider choosing Chicago over, for example, the coasts as an initial point of entry.
It is found that companies launching from Chicago have more success entering the rest of the US market, as opposed to those launching from New York City or California. One of the reasons is Chicago’s central location. It has a lot of benefits for logistics and distribution to start centrally and then branch out. It doesn’t hurt either that Chicago is located on the main interstation of railroads connecting both coasts.
Another reason why international businesses scaling up from Chicago are more successful in leveraging the entire US market is that Chicago offers an ecosystem that is sufficiently challenging.
While the saying “if you can make it here, you can make it anywhere” is usually applied to New York City, it applies to Chicago when it comes to food. The market here doesn’t offer any false securities that more densely populated cities such as New York City can offer to startups selling food products.
With the mix of people living in Chicago and the crossover between urban and rural lifestyles, you can trust that if your product works here, it will most likely work anywhere else in the US.
This is not unlike the Dutch market, which is also often used by businesses to test their products as the Dutch population tends to be critical and not afraid to say what they think. It is assumed that if a product passes this test, scaling up to the rest of Europe is quite easily.
Yet another reason to go Chicago as opposed to the coasts is the booming food innovation ecosystem. Many large corporations, such as McDonald’s, are setting up their head offices here and more conferences and tradeshows are locating in Chicago to be close to the action.
It is comes as no surprise that Jan van Marwijk Kooy, a Dutch food business consultant whose main client is Eru, says that Chicago is becoming a food and beverage Walhalla.
The latest fashion
Some technologies are, or have recently become, of great interest to the food industry. This interest offers opportunity for Dutch innovators working in these fields:
- Packaging that adds value for customers through, for example, interaction, convenience, longer freshness or waste reduction
- Harnessing Big Data to enhance strategies and improve efficiency
- Mobile phone applications, crowdsourcing and gamification
- Internet-connected products, sensors, artificial intelligence and robotics
- Reducing food waste and energy use
- Smart logistics solutions such as “just in time” and “less than truckload” shipping
Customer is king
Not unlike in the Netherlands, emerging product areas and trends in the food space are:
- healthy food
- artisan food
- convenience food
- local, sustainable, humane and fair foods
- ethnic, spicy, blended flavors & indulgence foods
- customized and personalized foods
If you were wondering where these trends came from, you can thank the millennials among us. Like the new trends in food or not, customer is king.
Follow the money
The majority of food and beverage companies in Chicago are planning to increase investment in information technology (83%), equipment and machinery (72%), and to a lesser extent physical facilities and warehouses (56%).
More specifically, investments may include, in order of likelihood: mobility solutions, internet and web applications, business analytics, warehouse management systems, enterprise resource planning and customer-relationship management.
Does any of this sound like your business? Then follow the money!
Getting you through the Growing pains
While most small firms, regardless of industry, face challenges in scaling up, food firms encounter particular challenges.
Regulatory and other requirements for food business make developing products and entering the market harder. Meeting growing demand also requires upfront investments in equipment and staffing, well ahead of payments for products, creating a need for working capital.
Yet accessing financing can be a challenge for young food firms as food is also often a risky investment with relatively modest returns.
Luckily, Chicago is seeing a rise in local investors in the food sector and many organizations, and initiatives in Chicago’s food cluster are working to help food startups and scale ups through the difficulties that growing food-related companies are known to run into.
To name a few; The Hatchery (the fasted growing food incubator in the US), The Good Food Business Accelerator and Kitchen Chicago.
These organizations provide food related businesses with shared kitchen space, food-grade co-packing facilities, and access to capital, mentoring, network, potential customers, advocacy and more.
Have you become interested in Chicago as a potential scaling destination for your business?
Contact us! We are here to help!
In the meantime, get inspired by a selection of Chicago’s thriving food tech companies and startups:
Until our next blog!