The next startup company to rise on Long Island may not come from some biotech lab or whiz kid's dorm room. Rather, it may emerge from the silty clay soil of the East End.
It's there, amid pastoral vineyards and dusty potato farms, that a budding community of upstart food companies is taking hold. Capitalizing on a booming appetite for local and niche foods, dozens of Long Island entrepreneurs have jumped into the scrappy business of making artisanal pickles, potato chips, muffins and just about anything else that can be jarred, bagged or bottled.
Long Island, of course, already has well-established wine, fishing and farming industries. But now small-batch food processors are showing promise too, experts say, fueled by the proliferation of green markets, rising demand for specialty products at grocery chains and the advent of public and private programs to support aspiring food entrepreneurs.
"Believe it or not, this is a growing industry on Long Island," said Joe Gergela, executive director of the Long Island Farm Bureau.
The rise of niche foods
These epicurean upstarts are part of both the national farm-to-table trend and a nascent entrepreneurial movement here on Long Island. For years, local government and business leaders have hoped tech and biology startups would blossom in Nassau and Suffolk counties and replace jobs lost in the aerospace industry. Yet it turns out a key piece of Long Island's entrepreneurial future may lie in the region's agricultural past.
"Some of the most talented entrepreneurs we have are involved in food companies," said Mark Lesko, executive director of Accelerate Long Island, which promotes the growth of local startups.
Local and artisanal foods have become big business nationwide as Whole Foods Market and others have demonstrated that small-batch products have mainstream appeal. The number of Americans who say they occasionally look for food with locally grown ingredients has quadrupled in the past five years, to an estimated 106 million, according to a study released this month by the Specialty Food Association, a trade group.
Yet that trend doesn't mean food startups are harvesting cash. Their margins are low. Competition is high. And government regulations are strict. Consequently, many fold before turning a profit.
"Even once you make a profit, you might not make a living," said Beth Linskey, co-chairwoman of the Small Scale Food Processors Association of New York. "Anyone who goes into this should have two incomes."
On Long Island, one of the engines behind the food-startup movement is in a low-slung brick building near the eastern terminus of the Long Island Expressway, where Suffolk County's subdivisions give way to farms and country lanes.
The facility, called the Calverton Business Incubator, is run by Stony Brook University and it opened an 8,400-square-foot addition last year to provide industrial cooking space for startups. The idea is that food entrepreneurs -- or foodpreneurs, as some call themselves -- rent space hourly instead of paying thousands for their own kitchen.
Inside, rooms are lined with stainless steel ovens, big as elevators. Pots and pans clanged in industrial sinks during a recent visit. One room overflowed with the soft aroma of fresh muffins. The next smelled sharply of vinegar, as Robert Schaefer dumped cucumbers into a salty bath.
Schaefer, a veteran chef, is among 20 or so entrepreneurs using the kitchens. He launched his company, Divine Brine, after growing too many Kirby cucumbers in 2008 in his Huntington Station backyard. At first he gave his horseradish dill pickles and eggplant caponata away as gifts. Now Schaefer buys cucumbers from local farms, and has six employees and 25 products in 90 local stores, including Whole Foods and Uncle Giuseppe's.
The company, he said, is just picking up speed.
"We are kind of sitting on a time bomb right now," Schaefer said, his white chef's coat speckled with dill fronds.
But it hasn't been easy. After three years, Schaefer is just on the brink of making his first profit. Meanwhile, he keeps the company afloat with his own cash and a $50,000 line of credit from M&T Bank.
Raising capital is hard for any startup. But it's especially tough for food companies, experts said. That's in part because food has humble profit potential as compared to, say, tech. Yes, food can make it big. But few, if any, investors talk about organic salsa or gluten-free cookie startups as being the next Twitter or Facebook. So while an entire industry has emerged to supply venture capital to tech companies, food entrepreneurs tend to fund themselves.
"A technology company looking for $1 million probably has an easier time than a small food company only looking for $50,000," said Monique Gablenz, who runs the Calverton incubator.
Yet the buzz over artisanal food is starting to grow loud enough for funders to notice.
Several Silicon Valley venture capital powerhouses have backed food companies in recent years, including Khosla Ventures, whose head Vinod Khosla co-founded Sun Microsystems. And Long Island's David Calone, who runs Jove Equity Partners of Setauket, has backed two food companies in Colorado: Jones Scones and Wild Ride Beef Jerky.
"Food is an enormous, growing and rapidly changing market," Calone said. "New products and ideas can break through and create significant returns on investment."
In the bakery aisle of an Iavarone Bros. grocery store off Jericho Turnpike in Woodbury, Rebecca Castellano smiled behind a folding table and offered samples.
"They are soy-free gluten-free dairy-free muffins," said Castellano, a nutritionist who founded Rachel Lu Foods in 2011 after two of her five children were diagnosed with celiac disease.
She started baking muffins at her Wantagh home, selling them at a local smoothie shop. Now she churns out 4,000-plus a week at the Calverton incubator and, starting next month, will be on the shelves at ShopRite and Whole Foods. But that doesn't mean she's made it big.
Castellano draws no salary. And she has no employees. She does the baking, the marketing, the everything. "I'm wearing 1,000 hats," she said.
History of tasty upstarts
Food companies have found success on Long Island before. Uncle Wally's Muffins (co-founded by Famous Amos cookies creator Wally Amos) hails from here, employing about 160 people at facilities in Shirley and Ronkonkoma. Martin and Carol Sidor, meanwhile, have been frying North Fork Potato Chips down the street from their Mattituck farm since 2004.
In many ways, Long Island could be an ideal spot for food startups, experts say. The population is large and, on average, affluent enough to splurge on specialty foods. Farms are here. Manhattan is close. And each summer, wealthy tastemakers flock to the East End.
Consider the rise of Tate's Bake Shop. Kathleen King had been in business less than a month in 1980 when Florence Fabricant, a New York Times food writer, walked into her Southampton store and wound up writing a story. Three decades later, King has 150 employees. Her cookies are sold in 50 states.
"If I started someplace different," she said, "I might not have been so successful."
Food-processing facility at the Calverton Business Incubator
8,400: Square feet for food processing
90 minutes: Time required by the facility's blast chiller to bring several hundred pounds of food from 160 degrees to 38 degrees
19: Companies using the space
8 feet, 1/2 inch: Height of double-rack ovens, which can cook 24 sheet pans at a time
4: Food preparation areas, including one gluten-free space
2: Walk-in refrigerators
SOURCE: CALVERTON BUSINESS INCUBATOR