Crain's Detroit Business, Aug. 8, 2016 issue by Crain's Detroit Business

Michigan colleges are leaders in the number of Pell Grants received for inmate job training, Page 3 AUGUST 8 - 14, 2016

Garden City Hospital builds its footprint, reputation By Jay Greene jgreene@crain.com

The fastest-growing hospital company in the country is doubling down on its investments and partnerships in Michigan. Garden City Hospital will begin its planned $35 million renovation project this fall that will further add to its local community hospital reputation, said Saju George, CEO of Garden City. As part of California-based Prime Healthcare’s Midwest region of eight hospitals, Garden City is one of two Prime hospitals in Michigan. The second is the former Novi-based Trinity Health hospital in Port Huron, the newly named Lake Huron Medical Center. Prime is eyeing acquisitions of other hospitals in Michigan, said George, and talking with hospitals in Southeast Michigan about innovative clinical partnerships. He declined to name the hospitals or health care systems involved in talks. “We have spent $15 million on immediate efficiency and care coordination improvements the last two years” since Prime acquired the 67-year-old hospital founded by several osteopathic doctors, said George, the former Ascension Health Michigan executive who became CEO last year. Garden City was formerly a nonprofit independent hospital. “We got a lot of input from the community, employees and medical staff before we did anything,” he said. “We made immediate improvements in information technology and invested a lot of money in bedside computers for charting.” Garden City’s three-year, $35 million renovation program will replace all semi-private patient rooms with private rooms, double the size

Menu for change Special 14-page report starts on Page 11 • Details about the Aug. 22 Crain’s Food Summit, Page 22 Michigan’s food economy is changing. The local-food movement is sprouting new opportunities for entrepreneurs, whether they’re farmers, manufacturers, retailers or restaurateurs. New distribution models are creating opportunities for state farmers. Efforts are underway to attract more manufacturing and processing plants that make the food that feeds millions. And bootstrapped success stories like Ferndale’s Garden Fresh are inspiring startups all over the state.

State, farming industry leaders hunger for more food processors to invest By Sherri Welch swelch@crain.com

Michigan is a leader in producing many foods, from blueberries to bell peppers, but an important strategy in growing the state’s food economy is gaining market share with food processing opportunities. Among them: processing some of the state’s superfluous milk supply now shipped to other markets into new dairy products, turning soybeans into meal — to help meet an expected increase in demand tied to the state’s growing livestock herds — and transforming corn crops into animal feed and ethanol. Also brewing: strong demand for Michigan hops for craft beer. As with many food business opportunities, there are hurdles.

SEE HOSPITAL, PAGE 29

NEWSPAPER

SEE FOOD, PAGE 32

PHOTO BY JACOB LEWKOW; PIE, ELLEN’S BAKERY AND CAFE

crainsdetroit.com Vol. 32 No 32

Michigan’s peninsula footprint can make shipping products costly, and sufficient electrical, gas and water infrastructure isn't always available in the rural areas closest to crops. And, in general, the state’s significant food industry is frequently overshadowed by manufacturing companies when it comes to incentives. But those working to expand food processing in Michigan say it’s important to stay, well, hungry for processing deals as part of a broader push to promote more jobs up and down the food supply chain. “Food processing is the best way to deliver additional value to the farmers and to the communities that are home to the food processors,” said Mike DiBernardo, who joined

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Second Stage: Choosing inside jobs or outside work When a company must decide between doling out work internally or outsourcing a job, there are many factors to consider, among them budget and culture, Page 25

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MICHIGAN

BRIEFS Obama finds inspiration in Grand Rapids-made rug

A Grand Rapids rug business recently got an unexpected plug — direct from the Oval Office. During a recent interview with CBS’ “Face the Nation” about his legacy, President Barack Obama was asked what art in that office he would reflect upon on his last day in power, MLive.com reported. His response was the carpet beneath his feet, a handmade wool rug crafted in the Furniture City by designers and artisans of Scott Group Studio. The 23- by 30-foot oval rug features five quotes around the perimeter by former presidents and Martin Luther King Jr. “I will tell you that I’ll probably look at the carpet because ... I still remember thinking about those quotes from Teddy Roosevelt, JFK and Martin Luther King and I’ll wonder if I did everything I could to stay true to those quotes,” Obama said. “And hopefully I did.” The rug was developed in conjunction with Los Angeles designer Michael S. Smith, who has led many of the White House design

projects during the Obama administration. “Anytime you can be mentioned positively, that is great,” said Mike Ruggeri, Scott Group’s co-owner and president. “And when the president of the United States mentions you, that is really great.” If the next administration redecorates the office, which is tradition, Obama’s rug will go into the archives of the National Park Service, Ruggeri said. But, he added, there is a possibility it would become available for a future Obama presidential library or museum.

MICH-CELLANEOUS n Battle Creek-based food maker

Kellogg Co. said it has decided to

close an Indiana snack plant next year in a move to reduce production capacity, AP reported. The company said the plant in Seelyville, about 75 miles west of Indianapolis, is expected to finish closing by September 2017, and that about 150 jobs will be affected. n Dow Corning Corp. officials have formally notified the state of plans to lay off 348 employees from two mid-Michigan sites, MLive.com re-

ported. A Worker Adjustment and Retraining Notification Act notice filed in late July said Dow Corning will restructure operations at its corporate center in Bay County’s Williams Township and its Bay City site. The layoffs are expected to be permanent. On June 1, Midland-based Dow Chemical Co. assumed full control of its 73-year joint venture with Corning Inc., becoming the full owner of Dow Corning’s silicones business. Dow is merging with chemical giant DuPont. n More than 8 percent of entrepreneurs in Michigan were born in another country, and their companies accounted for more than $600 million in business income in 2014, a new report shows. “The Contributions of New Americans in Michigan” was authored by the Partnership for a New American Economy, a group of more than 500

American mayors and business leaders and highlights the economic contributions of immigrants in Michigan, including entrepreneurship, income, tax revenue and employment. n More than $1.2 million from the Flint-based Ruth Mott Foundation will help fund a mobile health clinic amid that city’s crisis with lead-tainted water, a job training program for at-risk youth and neighborhood improvement projects, AP reported. n A group has launched a new attempt to require Michigan employers to provide paid sick time, AP

reported. The Board of State Canvassers approved proposed ballot wording submitted by Raise Michigan to create the “Earned Sick Time Act.” The group must collect more than 250,000 valid signatures to send the proposed legislation to the Legislature. If lawmakers reject the legislation or don’t act, the question will go on the November 2018 ballot. Under the plan, employees would earn one hour of sick time for every 30 hours worked. Employees of larger businesses would be able to use up to 72 hours each year, and employees of small businesses would normally be restricted to up to 40 hours. n Progressive AE, the Grand Rapids architectural firm that designed Frederik Meijer Gardens & Sculpture Park and other high-profile West Michigan destinations, is merging with ai Design Group, a design firm based in Charlotte, N.C., that is known for its work on race tracks, MLive.com reported. They will have a combined workforce of 200 people doing work across 48 states. n Lansing-area-based Auto-Owners Insurance is boosting IT operations with the opening of a West Michigan technology office in Grand Rapids, MLive.com reported. The Delta Township insurer expects to hire 35 people, mainly software developers, for the new branch office. n John Dunn, the president of Western Michigan University, is retir-

INSIDE THIS ISSUE

CALENDAR ........................................28 CLASSIFIED ADS..............................29 DEALS & DETAILS............................28 KEITH CRAIN....................................... 8 MARY KRAMER .................................. 8 OPINION .............................................. 8 PEOPLE ..............................................28 RUMBLINGS ......................................34 WEEK ON THE WEB .........................34

COMPANY INDEX: SEE PAGE 30 ing next year after 10 years in the job. Dunn announced last week he will serve through June 2017 and then become president emeritus for a year, AP reported. n The U.S. Department of Homeland Security has identified a different kind of threat in West Michigan, MiBiz reported. The federal agency filed an opposition to an application by Grand Haven-based Grand Armory Brewing Co. to trademark the phrase “Coast Guard City,” which it used in the name of a signature beer brewed for the Grand Haven Coast Guard Festival. The label for the Coast Guard City Pale Ale features the likeness of a U.S. Coast Guard vessel set amid waves, barley spikes and a sunset. Homeland Security said the application infringes on existing marks and that the use of the Coast Guard name is restricted under federal law.

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Michigan colleges leaders in offering Pell Grants to prisoners By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

LANSING — Several years ago, as administrators at Jackson College prepared to offer courses to inmates at a state prison, they weren’t optimistic about success. The community college in Jackson County had educated inmates for decades, but stopped in the mid1990s when a federal law change prohibited incarcerated students from receiving Pell Grants. This time around, administrators thought the first class of 18 prisoners paying their own way would be the most academically disadvantaged students they’d ever taught. They planned remedial courses and lev-

eled their expectations. That inaugural class in 2012 eventually grew to about 400 prisoners today, partly due to additional grants. Those students would not only raise the bar, but shatter it, said Todd Butler, the college’s dean of arts and sciences. Inmates make up about 3 percent of Jackson College’s part-time student population, Butler said, but 46 percent of the parttime dean’s list. Their success rate on their first attempt at completing a developmental math class is near 100 percent, compared to 54 percent of on-campus students. Butler said instructors attribute the difference in part to a noticeably strong work ethic among incarcer-

ated students. “It’s that moment when we begin to pull (back) that curtain of our own imagination,” Butler said, “and say, ‘I didn’t realize that this level of potential existed.’” Jackson College has been a leader among higher education institutions in Michigan in teaching prisoners while they’re behind bars. Offering college classes in prison is one piece of a broader approach within state corrections departments nationally — and particularly in Michigan — to try to increase inmates’ employment opportunities post-release and lessen the chances they’ll get locked up again. The college is one of three in

Michigan, and more than 60 across the country, to be chosen to participate in a U.S. Department of Education pilot program that will waive restrictions on federal Pell Grants for prisoners in order to find out whether more prisoners will pursue education if they have financial assistance. Jackson College was slotted for 1,305 Pell Grants, more than SEE GRANT, PAGE 31

Gary McKissack, an inmate at the Richard A. Handlon Correctional Facility in Ionia, participates in a

welding training program as part of the Michigan Department of Corrections’ new Vocational Village program.

LINDSAY VANHULLE

WSU sees financial concerns lightening

Dual view of auto horizon

Officials: Enrollment, med school fixes keys to turnaround By Chad Halcom chalcom@crain.com

Plymouth-based Varroc Lighting’s new system uses a cluster of nearly 40 LED lights. A number of them turn off automatically to avoid blinding other drivers by creating a black box effect around the approaching or followed vehicle. VARROC LIGHTING

Fear of recession clouds technology excitement at industry conference By Dustin Walsh dwalsh@crain.com

The mood at last week’s annual automotive business conference, called Management Briefing Seminars, ranged from energetic on new technology to somber over looming concerns about North American auto sales. The conference, held at the Grand Traverse Resort in Acme and organized by the Center for Automotive Research, provided ample opportunity for industry executives to highlight new advancements in auto tech, while forecasters and economists warned of an impending slump. “We’re still looking for the risk of recession in

the 2019 time frame,” Jeff Schuster, senior vice president of forecasting for Troy-based LMC Automotive US Inc., told attendees. “We see a flat market this year and next year, and very, very low levels of (production) growth going forward.” Schuster said there are growing risks from rising incentives, longer-term loans, growing reliance on fleet sales and leasing. So far, those risks remain on the horizon, but they aren’t likely to stay there, he said. While the forecasts are gloomy for North America, the rest of the world may pick up the sales slack. Schuster said he still believes worldwide

global production will hit 91 million units this year and exceed 100 million units by 2019. “We see both (gross domestic product) and light-vehicle sales growth averaging right around the 2.7 percent level,” for at least the next five to seven years, Schuster said. This bodes well for the suppliers and automakers whose advanced products are set to hit the market in the next few years. For example, Praveen Singh, vice president of Southfield-based Lear Corp.’s new connectivity business, said the supplier is only a few years away from offering to customers a

MUST READS OF THE WEEK Separate courses

Sharing rides

Ready to pay

Diversified to spin off its Bagger

Splt-Lyft pact to aid Beaumont

MLS expansion fee boost won’t

Dave’s business, Page 6

Health patients, Page 4

faze Gilbert-Gores bid, Page 4

SEE AUTO, PAGE 30

Wayne State University officials think the clouds that bond rating agencies see looming over their finances will soon lift, as deficit spending to subsidize construction and its School of Medicine winds down. S&P Global Ratings earlier this summer downgraded Wayne State from an AA- to an A+ rating, while Moody's Investors Service Inc. maintained an Aa3 but lowered its outlook from stable to negative, on $101 million of bonds refinanced in June and more than $400 million in total debt the university carries. Although the refinancing gave WSU lower interest rates and freed up funds to retire debt principal, both agencies warned that the university has depleted some cash reserves on construction projects and subsidies to offset budget deficits in the medical school. “Despite receipt of flat state operating appropriations and better-than-projected tuition revenues, the university’s financial operations are expected to be negative in fiscal SEE WSU, PAGE 33

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MLS expansion fee increase won’t faze Gores-Gilbert bid By Bill Shea bshea@crain.com

Major League Soccer’s disclosure last week that it could nearly double its expansion fee to around $200 million hasn’t dampened Tom Gores and Dan Gilbert’s interest in owning a team in Detroit. Gores’ point man on the MLS bid, Palace Sports & Entertainment Vice Chairman Arn Tellem, noted in a statement to Crain’s on Friday that the league hasn’t formalized its process for when it will expand, how the process will work — or how much new owners will pay. “Our enthusiasm for bringing MLS soccer to Detroit has not changed, and we look forward to working closely with MLS on the bid process once it begins,” he said. MLS Deputy Commissioner Mark Abbott in a statement last week signaled that the expansion fee could increase to as much as $200 million. “There has been incredible interest from cities across the country in acquiring a Major League Soccer ex-

pansion club, and we continue to have productive discussions with a number of prospective ownership groups,” Abbott said in a league statement. “Following the board of governors meeting, the league is continuing to work on the timetable and the details, including pricing, for future expansion, and no decisions have been made. Based on the increasing value of MLS clubs, expansion fees could be as high as $200 million.” MLS has 20 clubs and four in the expansion process that will begin play over the next few years: Atlanta, Los Angeles, Minnesota and Miami. Along with Detroit, Sacramento and St. Louis have been reported as likely expansion cities. Owners of the Los Angeles FC reportedly paid a $110 million expansion fee for their club, which begins play in 2018. Minnesota United FC, which begins play in 2017 or 2018, reportedly paid $100 million. New York City FC’s ownership reportedly paid a $100 million expansion fee, while Orlando City FC’s paid $70 million.

New York and Orlando began play last year, and future teams in addition to Minnesota and Los Angeles include Atlanta in 2017 and Miami once a stadium deal is formalized. Gores and Gilbert — estimated to be worth $3.3 billion and $5.1 billion, respectively, by Forbes — announced their interest in owning an MLS team in Detroit in April at a news conference attended by MLS Commissioner Don Garber, who spoke glowingly about a team in this market. The Gores-Gilbert group, which could eventually include other investors, said it wants to build a 500,000-square-foot soccer-specific stadium, which likely will seat around 24,000 and would cost $225 million to $250 million, on the 15 acres underneath the unfinished Wayne County jail project site — prime downtown real estate on Gratiot Avenue at I-375. The $1 billion plan, designed by Detroit-based Rossetti Associates Inc., includes three 18- to 28-story glass towers along with retail, bars and restaurants. The aim is to have a stadium open by 2020, but a major roadblock is that Wayne County owns the jail site and said last month it intends to complete the project. Work on the jail was halted because of a $100 million cost overrun in July 2013.

Wayne County Executive Warren Evans has said he intends to work with the Gores-Gilbert group, but his priority is getting a justice complex built. The Gores-Gilbert group still is focused on the jail site for a stadium, but is believed to be considering alternative locations. “We believe the right development for that site is something that enhances the city and fuels the continued revitalization of Detroit,” Matt Cullen, one of Gilbert’s longtime top lieutenants and principal with his Rock Ventures LLC, said in a statement. “We remain committed to exploring an exciting and distinct large-scale development that will bring jobs, an increased tax base and substantial economic activity to our burgeoning urban core. And as such, we will continue working side by side with Wayne County throughout this process to ensure maximum positive benefit for the community.” Evans previously has said the two requirements for having the Gilbert-Gores project move forward are that Wayne County gets a new jail without additional cost to county taxpayers and that a reasonable offer for the site be received by the late summer or early fall, which is when he said the county expects to issue a request for qualifications to finish the project. The county

re-confirmed last week the plans for an RFQ. An MLS club, even at $200 million, is less expensive than the billionaires’ other pro sports ventures: Gores bought the National Basketball Association’s Detroit Pistons for $325 million in 2011, and Gilbert purchased the Cleveland Cavaliers for $375 million in 2005. The average MLS club is worth $157 million, according to the most recent valuations from Forbes.com, and the most valuable club was Seattle at $245 million. The soccer league has a far lower barrier to entry than its U.S. major league counterparts. National Football League expansion is pegged at $1 billion, and the fee to relocate the St. Louis Rams to Los Angeles was $550 million this year. MLS is a single-entity business, meaning all teams are owned by the league and all players are its employees rather than employed by the club. MLS pays the players. Team “owners” pay an investment fee to MLS for the right to operate a team in a geographic area. They become league shareholders rather than franchise owners. Teams keep their own books and budgets. MLS has publicly said it continues to lose money — as much as $100 million annually. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

Beaumont Health patients to benefit from Splt ride-share pact with Lyft By Tom Henderson thenderson@crain.com

Local patients of Beaumont Health will be part of the first wave

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of a service contract reached between ride-sharing companies Splt and Lyft. Splt, a graduate of last summer’s Techstars Mobility incubator program at Ford Field in Detroit, is expected to announce Monday that it has signed a contract with Lyft, the San Francisco-based ride-share company, to provide transportation for senior citizens to their non-emergency medical appointments. The service is scheduled to begin this fall with patients of Beaumont Health. Splt founder and CEO Anya Babbitt said she wants to roll out the service with health care systems throughout the Midwest this year and next and then go nationwide. She said Lyft will provide the drivers. Splt will do the scheduling and handle insurance reimbursement, Medicare qualifications and reporting to health care systems. Splt was founded as an appbased way for companies to launch ride-share programs for employees. Current customers include DTE Energy, Honda Manufacturing of Ohio and Magna International of America Inc.

Babbitt said the partnership with Lyft won’t require seniors to use smartphones. She said Splt has developed a system that will allow patients to Anya Babbitt: schedule rides Wants to roll out service with health through a website, by text mescare systems. saging or by phone calls. “More seniors are using smartphones, but they won’t need to have one,” Babbitt told Crain’s last week while in Palo Alto, Calif., at a pitch event to would-be investors. She said Splt is raising a funding round of $500,000 to $1 million, which she hopes to close in the next three months. “This deal lets Lyft focus on its core business, and it lets Splt focus on our core business, which is helping people connect to share rides,” said Babbitt. “It’s our mission to connect people and communities through effective, affordable, safe and accessible transportation, and Splt’s concept is a great way to deliver our services to the underserved,” said Gyre Renwick, head of enter-

prise health care partnerships at Lyft, in a news release. “We look forward to working with Splt with our non-emergency medical transportation companies in Michigan and beyond,” said Dr. Paul LaCasse, vice president of the post-acute care division and diversified business operations at Beaumont Health. Babbitt said she is hiring four software developers and two operations and business development employees to manage the increase in business, which she expects to mean an increase in revenue of $20 million over the next year. She declined to reveal current revenue. In April, Splt won the $100,000 Pritzker Foundation Award at the sixth annual Clean Energy Trust Challenge in Chicago. In May, Splt pitched to venture capitalists at the annual Google Demo Day in Mountain Valley, Calif., having won the Detroit Demo Day contest at Grand Circus in March. As part of her participation in last summer's Techstars program, Splt got $120,000 in funding from Detroit-based Fontinalis Partners LLC and Basking Ridge, N.J.-based Verizon Ventures. Tom Henderson: (313) 446-0337 Twitter: @tomhenderson2

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Diversified to spin off Bagger Dave’s By Sherri Welch swelch@crain.com

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Southfield-based Diversified Restaurant Holdings Inc. plans to split

into two separate, publicly traded companies through the tax-free spinoff of its Bagger Dave’s business to its stockholders. Diversified (NASDAQ: SAUC) plans to continue operating as the largest franchisee of Buffalo Wild Wings. “Over the last year, we invested considerable resources and time to improve the Bagger Dave’s concept, which included rationalizing underperforming locations, making changes in management and improvements in operations while enhancing our customer touch points,” Chairman, President and CEO Michael Ansley said. “The greater focus on our BWW business and its significantly larger size limits the attention and resources we can apply to Bagger Dave’s, which ultimately restricts our ability to build on the recent success of its redefined concept. As an independent company, we believe Bagger Dave’s will be in a much better position to leverage its redefined concept to drive growth.” The two businesses are distinct in many respects, he said, including: n BWW is a franchise brand, and Diversified owns the Bagger Dave’s brand. n BWW is a mature brand, while Bagger Dave’s is still in its early stages. n Bagger Dave’s has a more complex menu and complex food preparation processes and requires different management and personnel. The company to be formed with the proposed spinoff of the Bagger Dave’s business will own and operate 19 Bagger Dave’s restaurants, which had revenue of $10.7 million in the first half of 2016. It will trade in the over-the-counter market. Diversified said it plans to continue to own and operate its 64 franchised BWW restaurants and be listed on the NASDAQ exchange. The spinoff plan will be subject to its board’s approval and customary regulatory requirements, it said, with completion of the spinoff expected during the fourth quarter. In its results for the second quarter ended June 26, released last week, Diversified reported $46.39 million in revenue, up nearly 26 percent from the same quarter of 2015. Its total operating expenses rose 7 percent to $45.4 million. It narrowed its net loss during the quarter to $182,000 compared to a net loss of $3.3 million during the year-earlier quarter. Revenue grew, Diversified said, with the addition of 15 new restaurants and increased menu pricing. The company had 83 total restaurants at the end of the quarter. Its Buffalo Wild Wings business accounted for 88 percent of sales during the quarter; Bagger Dave’s contributed nearly 12 percent.

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OPINION Keep state’s food economy growing

ime was, big food companies kept the sources of their farm ingredients secret. Michigan corn or Iowa? Or even Mexican? You wouldn't really know. That was before consumers got very interested in where their food was coming from. Consider some facts in this week’s Food Economy report: A poultry farm near Saranac supplies nearly 100 million dozen eggs to McDonald’s, enough for a billion Egg McMuffins. Yoplait has been making yogurt in Reed City since 1975. Sugar beets from the Bay City-based, grower-owned Michigan Sugar Co. produce about 1 billion pounds of the sweet stuff every year under the Pioneer Sugar and Big Chief Sugar brands. Yes, Michigan is a manufacturing powMore erhouse, but the food economy is alive and well — and growing. attention is The same farm-to-table movement that needed by is propelling an explosion in foodie-favored restaurants in Detroit is evident economic across the state. And to make it even strondevelopers at ger, the state should welcome more prothe state and cessinging and distribution deals between Michigan-made companies. This is a new local levels. form of manufacturing, and builds on a strong Michigan heritage. Take the vision for Detroit’s Eastern Market, chronicled on Page 13. Plans call for expanding the boundaries of the district by up to five times, eventually to include many more food processors and distributors. The plans will kick off with the redevelopment of a large building just east of Roma Café. The old building could be multi-tenant, with space for food processing or distribution, retail and restaurants. Around the state, a lot of work is underway to match growers to distributors and processors and create linkages, and to give budding food entrepreneurs help navigating state and federal red tape. But more attention is needed by economic developers at the state and local levels, with clear paths to find the licensing, financing and other must-haves for new food enterprise. Some of the major grocery chains, like Meijer, have demonstrated the ability to shepherd Michigan-made food products, helping small companies grow to scale. Other chains could take note. Investors should give food opportunities a closer look. Food processing businesses, in particular, can create new manufacturing jobs to replace some that have faded away in automotive downsizing. A plant is a plant, whether it’s for camshafts or for pickles. The annual aggregate value of agricultural production in Michigan is already more than $8.5 billion. Imagine the possibilities of Michigan’s food economy with more effort given to “home-cooked” deals.

Award marks 35 years of honoring women

n 1981, Martha Mertz, a successful real estate developer in Okemos, was invited to join the all-male board of the Lansing Regional Chamber of Commerce. “After about a year, I decided to nominate several women from our community to join me, so I wouldn’t be a singular voice,” Mertz said last week. “My male colleagues told me: ‘Martha, women aren’t leaders.’ And the funny thing is, we didn’t think we were, either.” Only once in 75 years of the chamber’s history had a woman received an award or recognition, Mertz learned. So she decided to create an award specifically for high-achieving women. “I didn’t want to wait another 75,” she says today. Thus, the ATHENA award was born, honoring women based on three criteria: achieving excellence in a profession; giving back to community with time or talent; and opening leadership opportunities for others, especially women. More than 1,000 people attended that first awards luncheon honoring two outstanding women in the Lansing area; Oldsmobile sponsored that first event and helped Mertz grow

the initiative through chambers of commerce across the country. Next month, the now-international ATHENA organization will return to Lansing for its 35th leadership conference. Attendees of the Sept. 25-27 event will draw from the United States, Canada and even China. Metro Detroit’s own Florine Mark, who owns the largest franchise in Weight Watchers International Inc., will receive ATHENA’s top award. Other honorees include Flint pediatrician Mona Hanna-At-

tisha and anti-sexual assault activists Annie Clark and Andrea Pino. Ashley Judd, actress and activist, is the keynote speaker. Meanwhile, in Grand Rapids, public broadcaster Shelley Irwin, an alumna of WJR-AM in Detroit, will be the 2016 ATHENA honoree at the Sept. 15 luncheon sponsored by the Grand Rapids Area Chamber of Commerce. In Detroit, Heather Paquette recently concluded an eight-year stint on ATHENA’s international board, serving as board chair for two years. Paquette is Michigan managing partner for the audit, tax and finance consulting firm KPMG. She and her mother received international ATHENA awards 20 years apart, making them the awards’ only mother-daughter honorees. “As I noted in my acceptance speech, ATHENA leaders raise ATHENA leaders,” Paquette says. And those two women Mertz nominated at that first ATHENA event 35 years ago? One became Michigan’s first female U.S. senator, Debbie Stabenow; the other, Dawn Springer, became chief of staff at Lansing’s Sparrow Hospital.

with quieter and more powerful jet engines, the excitement has, if anything, increased. And there are now three unique classes with nonstop action all day long. I am excited and pleased that the organizers asked me to be the grand marshal, because our company, Crain Communications, is celebrating our 100th anniversary as well. Any way you look at it, 100 years is quite an accomplishment, whether it is Gold Cup racing or publishing. We haven’t had the roar or the excitement that the races have, but I couldn’t help but notice that we

published Automotive News during the war. It told its readers exactly where those engines were built — engines that were destined to power those Gold Cup boats years later. Watching the races is an exciting time. Whether you bought a frontrow seat or simply enjoy watching from the shore, it’s another “must” event in the summer in Detroit. I can’t wait. I sure wouldn't miss it. Celebrating the 100th anniversary of the Gold Cup and our company is going to be very exciting. I’ll see you there.

MARY KRAMER Publisher

Mary Kramer is publisher of Crain’s Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com.

A great celebration — for 100 years Just about a month ago, the 100th Indianapolis 500 was celebrated at the Brickyard. It was a historic event with a huge crowd. Now it is Detroit’s turn. This year from Aug. 26-28, Detroit will celebrate the 100th anniversary of racing in the Gold Cup on the Detroit River. There are few, if any, races that have as much history as the Gold Cup and the city of Detroit. A century of Gold Cup racing on the Detroit River is certainly worth a huge celebration. All you have to do is take a look at the colorful history of the boats and the drivers who have participated over the

KEITH CRAIN Editor in chief

years, and you quickly understand the impact of this racing series and Detroit’s contribution. It would be equally important to pay tribute to all the brave souls who lost their lives participating in

this exciting but dangerous event. Many great names have graced these waters, names like Guy Lombardo or Gar Wood, and boat owners from decades ago, in addition to all the drivers and famous boats from yesteryear. Once again, with the generosity of GM and the UAW, we will be able to watch some of the most thrilling boat races in the nation. And following the lead of the Belle Isle Grand Prix, admission on Friday will be free for all. Although some of us might miss the roar of World War II 16-cylinder engines that have been replaced

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

Evangelical Homes gets new name, property, foundation By Jay Greene jgreene@crain.com

After 137 years, Evangelical Homes of Michigan has a new name, EHM Senior Solutions, along with a signifi-

cant new building project in the works: the redevelopment of the St. Vincent and Sarah Fisher Center site in Farmington Hills. CEO and President Denise Rabidoux said the Saline-based organization wants it known that it offers a range of services to seniors and their families, whether in their homes or in facilities. “In the 1970s, the only answer for older adults was to stay at home until you couldn’t manage anymore and then look at long-term care placement,” said Rabidoux. As part of the renaming, EHM is launching a two-year, $500,000 rebranding campaign. “We have an array of services no matter what your income is, rich or poor, or whether you are gay, lesbian or transvestite, whether it is mom in a skilled nursing home or rehabilitation facility, or dad or grandpa in home health, or your aunt with a telemonitoring provider, we are serving the entire family unit,” Rabidoux said. “We are not really just nursing homes anymore.” Rabidoux also said EHM Senior Services will unveil an interactive website in the next three months and has opened a toll-free line, which is (866) 734-1566. “We hope to serve 10,000 older adults in the near future.”

CultureSource, Crain’s to team for arts, cultural listings, preview section Crain’s Detroit Business and CultureSource, the nonprofit member-

ship organization for arts and cultural groups, have a new partnership. Crain’s will add CultureSource’s listings of arts and cultural events to crainsdetroit.com and will feature CultureSource listings on its “10 Things to Do” feature. And on Sept. 12, Crain’s will publish a special section, a fall/winter “arts and culture preview.” Crain’s is offering nonprofit advertising rates exclusively to CultureSource members in that section and throughout the year. “This makes perfect sense to collaborate,” said Crain’s Publisher Mary Kramer. Pam Iacobelli, president and CEO of CultureSource, said CultureSource is “excited and proud to partner with Crain’s in this unique way and to help build awareness of the arts, culture and creative community for millions of readers.” For information, visit www.culturesource.org. For information about advertising opportunities in the Sept. 12 guide, contact Crain’s Advertising Director Matt Langan at mlangan@crain.com. For information about editorial coverage in the section, contact Editor Jennette Smith, at jhsmith@crain.com.

Evangelical Homes earlier this year acquired the 31-acre former site of the St. Vincent and Sarah Fisher Center, at the northwest corner of 12 Mile and Inkster roads, from St. John Providence Health System. The new St. Vincent and Sarah Fisher Center moved to Detroit in 2006. While the purchase price of the property was not disclosed, Rabidoux said once the newly named Sarah Fisher Senior Living Community

is open sometime in 2020, pending city zoning and land use approvals, new construction costs for the project could run about $40 million. In 2011, St. John Providence paid

the Daughters of Charity of St. Vincent de Paul, which founded the

center, $1 million for the property and has invested several hundred thousand dollars to maintain it. Rabidoux said Evangelical Homes had sought property in Oakland County to expand services during the past eight years. Earlier this year, it acquired the St. Joseph Mercy Saline health building from St. Joseph Mercy Ann Arbor and now operates a large senior center. “There are 17 buildings on the historical site,” Rabidoux said. “We are going to preserve three of them: the gym, chapel and the administra-

tive building in which the children and families came to meet with the sister running the community.” EHM plans to offer services including adult day programs; 354 independent living, assisted living and memory loss clinic units; residential and family support services; and brownstone condominiums. Royal Oak-based Fusco, Shaffer & Pappas Inc. is serving as the consulting architects, with the senior living campus market feasibility study completed by Plante Moran. EHM also plans to create the Evangelical Homes of Michigan Foundation, a new Michigan nonprofit

corporation. Articles of incorporation papers are expected to be filed shortly. By 2021, the foundation aims to raise $12.5 million. Said Rabidoux: “We had charitable gifts coming in to the endowment fund, under $1,000, and most were about $100. Some donors who believe in our mission feel more comfortable donating into a foundation.” She said it is possible EHM will add another 10 staffers to the four employees already engaged in managing the endowment fund. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

“HOW DOES DTE ENERGY KEEP NATURAL GAS SAFE?” Customer safety is our highest priority. That is why we take many precautions when delivering natural gas to over 1.2 million homes and businesses across the state. We inspect nearly 10,000 miles of pipeline each year using advanced technologies, and modernize about 100 miles of pipeline annually. We also add an ingredient that makes natural gas smell like rotten eggs, making it easily identifiable in the case of a leak. If you smell natural gas or suspect a leak, do not use electronic devices or open flames, leave the area immediately, and call DTE Energy at 800.947.5000 24 hours a day.

DBpageAD_DBpageAD.qxd 8/1/2016 11:58 AM Page 1

Bodega Bootcamp teaches business skills to Michigan’s startup grocers Michigan Good Food Fund grows healthy food access across the state. By Amy Haimerl

nside a small brick building in the Corktown neighborhood of Detroit, a plan is hatching that will bring the building full circle and turn the former Bagley Trumbull Market, which was more liquor store than market, into the Farmer’s Hand—a year-round farmers market and café offering fresh, healthy, and locally grown food. Co-founders Kiki Louya and Rohani Foulkes met earlier this year and decided to team up. While they both had food industry experience, they lacked retail savvy, so it was fortuitous when they heard about Bodega Bootcamp, a one-day crash course provided by the Michigan Good Food Fund. The Fund had heard from a number of startup grocers and wanted to help them accelerate their business planning because such enterprises fit with the Fund’s work providing financing and business assistance to good food enterprises in Michigan. The Fund brought in James Johnson-Piett of Urbane Development to host a Bodega Bootcamp for five startups: The Farmer’s Hand, Chene Street Grocers, and Detroit People’s Food Co-op in Detroit, The Local Grocer in Flint, and a new store in Jackson supported by Bridgepoint Development. “Since the Fund launched, we’ve received a number of inquiries from startup grocery projects committed to putting healthy food at the center of their stores,” said Oran Hesterman, CEO of Fair Food Network, a core Michigan Good Food Fund partner. “Through the Bodega Bootcamp, we were able

to help these entrepreneurs build their business acumen so they can translate their ideas into success in the marketplace.”

they were not alone. “Something that came out of the Bootcamp was the fact that there was a need for [this training] to exist,” says Foulkes.

The Bootcamp takes entrepreneurs through the nitty gritty of running a store—from reading income statements to predicting expenses to properly pricing and determining proﬁt margins.

www.MIGoodFoodFund.org

“When I talk to nascent-stage entrepreneurs, they have this grand vision of what they want to do,” says Johnson-Piett. “The question is whether or not your vision has been deﬁned by the marketplace.” Malik Yakini is taking this question seriously. As the executive director of the Detroit Black Community Food Security Network, he is working with the community to open the Detroit People’s Food Co-op in Detroit’s North End neighborhood to provide a community-owned outpost of healthy food plus a gathering space in an otherwise underserved area of the city. Such expansive thinking tied with alternative funding and ownership models makes Detroit unique. “Detroit has one of the best infrastructures for support in this space,” says Johnson-Piett. Foulkes and Louya are counting on that. The Bootcamp helped them develop their benchmarks for ﬁnancial success, see where they will be able to connect with other resources, and really understand their value proposition to the consumer. But most importantly, they liked being in a room with other entrepreneurs and understanding

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY

From state to plate

PHOTO BY JACOB LEWKOW / STYLING BY STEVE D’AGOSTINO OF TINO FRIENDLY FOODS AND GAYLE HALEBIAN LEWKOW / PIE BAKED BY ELLEN’S BAKERY AND CAFE

Michigan-grown fare fills appetites of national food companies By Sherri Welch swelch@crain.com

If you’ve ever driven on the back roads near Frankenmuth, it’s no secret that wheat farmers in the area are growing for Battle Creek-based Kellogg Co. It’s right there on signs posted among the rows of grain. Frankenmuth-based Star of the West Milling Co., which purchases wheat from farmers and processes it into whole-grain and flour products for companies like Kellogg, puts up to 150 of the signs in the fields. Farmers in the state’s Saginaw Valley and Thumb regions grow a soft white winter wheat that’s different from most other wheats, said Michael Fassezke, vice president of Star of the West’s flour milling division. “It is the wheat of choice for the cereal industry,” he said, with color and flavor more suited for whole-grain use. And Michigan is the only place growing it outside of Washington, Oregon and Idaho, Fassezke said.

Local growers “are typically real proud that they’ve been chosen to put a sign in their field ... that their wheat is destined for the Kellogg Co.,” he said. Traditionally, many national food companies haven’t disclosed where their products come from for competitive reasons, said Jim Byrum, president of the East Lansing-based Michigan Agri-Business Association. “But we are now finding some of the big companies want to identify, especially if they’re sourcing products locally.” Herbruck’s Poultry Ranch Inc., a 58-yearold, family-owned and -operated farm in Saranac near Grand Rapids, is one of McDonald’s largest egg suppliers in the country. It supplies 94.2 million dozen eggs to the chain each year, according to the Michigan Department of Agriculture. “Michigan eggs wind up in virtually every McMuffin east of the Mississippi River and some beyond that,” Byrum said. Herbruck’s, the state’s largest egg producer and 12th-largest in the country, also sup-

plies Meijer, Kroger and other major retailers with private-label and Eggland’s Best eggs, in both raw and hard-boiled form, said Greg Herbruck, corporate vice president. It connected with McDonald’s through Minneapolis-based Cargill Inc., a global provider of food, agricultural, financial and industrial products and services and one of the largest grain brokers in the world, he said. As Cargill put together a deal to supply eggs to McDonald’s about 20 years ago, Herbruck’s sold it an egg processing plant in Lake Odessa to make egg products. And Herbruck’s remains one of the main suppliers of eggs to that plant, Herbruck said. Eggs aren’t the only Michigan-grown products you’ll find when you walk into McDonald’s. Peterson Farms Inc. in the village of Shelby on the state’s far west side, was one of the pioneers of supplying apple slices to McDonald’s, Byrum said, and a lot of its baked SEE GROWERS, PAGE 12

Coming Aug. 22 At the Crain’s Food Summit, key players from local companies will gather at Eastern Market to discuss the state’s food ecosystem. For more information, see Page 22.

Inside this section  Garden Fresh Gourmet’s new owner launches expansion in Ferndale, Page 16  Detroit plots course on land use as leader in urban farming, Page 19  10 steps to grow a food business, Page 23

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY

GROWERS FROM PAGE 11

goods are made with Michigan wheat flour. And Butterball Farms Inc. in Grand Rapids supplies the butter pats for your pancakes and biscuits at the chain’s restaurants. There’s a long list of additional commodities McDonald’s is sourcing from Michigan each year, according to the Department of Agriculture: n 43.9 million pounds of soybeans. n 42.2 million pounds of cucumbers. n 25.9 million pounds of corn. n 19.2 million pounds of apples. n 8.4 million gallons of milk. n 4.5 million pounds of beef. n 2.8 million pounds of blueberries. n 2.4 million pounds of oats. Also in the mix are canola, cheese, cherries, chicken and onions. And that’s just McDonald’s. “If you look at all fast-food retailers, Michigan has a big piece in those, certainly in the region and from here to the south and east,” Byrum said. If you buy a sandwich with pickles in virtually any fast-food chain east of the Mississippi — as well as some nationwide — those pickles came from Michigan, he said. The state’s pickling companies, which can be found across the Lower Peninsula, include: Vlasic Pickles Co. in Imlay City, McClure’s Pickles in Detroit, Mr. Chips Inc. in Pinconning, Swanson Pickle Co. in Ravenna near Muskegon and Hausbeck Pickle Co. in Saginaw. On the sweeter side of things, Michigan Sugar Co., a grower-owned sugar cooperative in Bay City, is the third-largest beet sugar processor in the U.S., producing more than 1 billion pounds of sugar, on average, each year. Sold into both the wholesale and retail markets under the Pioneer Sugar and Big Chief Sugar brands, its product is sourced by food companies around the country, Byrum said, for use in everything from ice cream and doughnuts to cereal and pies. “There are a couple of other northern sugar providers, but Michigan is one of the largest,” he said. Michigan is known as a potato production state primarily for potato chips but also the bags of potatoes you can buy in grocery stores, Byrum said. Frito-Lay North America Inc. in Plano, Texas; Bay City-based Made Rite Potato Chip Co.; Better Made Potato Chips Inc. and Uncle Ray’s Potato Chips in Detroit; and Traverse City-based Great Lakes Potato Chip Co., which sells into both the retail and food services indus-

JACOB LEWKOW

Pickling is big business in Michigan: In fact, virtually all of the fast-food chain sandwich pickles east of the Mississippi are made in the state. tries, are among the brands using potatoes from the Great Lakes State. Farmers in a number of areas — including the Thumb, the state’s west side, south near Three Rivers and in the western Upper Peninsula — grow potatoes, said Jamie Zmitko-Somers, international marketing program manager for the Department of Agriculture. Yogurt fans may be surprised to know Yoplait has been made in Reed City since 1975 after Otsegobased Michigan Cottage Cheese Co. acquired the U.S. licensing rights to make and market the French brand in the U.S. After two years of negotiations, Minneapolis-based General Mills Inc. acquired the exclusive rights to market the brand in the U.S. in October 1977 when it signed a franchise agreement with Sociéte de Diffusion de Marque, also known as Sodima, a cooperative of six dairy farmers in France. It also acquired the Reed City yogurt plant from Michigan Cottage Cheese and continues to make Yoplait there, as well as at other U.S. plants. Cooperative Elevator Co., a large cooperative owned by farmers handling grains and beans in Pigeon, sells wheat to Mondelez Global LLC in Toledo, which makes Triscuits and other Nabisco products, Byrum said. On the dried bean front, Michigan supplies a lot of beans to Knoxville-based Bush Brothers & Co. for its well-known Bush’s Best beans, Zmitko-Somers said. And much of the applesauce for sale in stores is made from Michigan apples, she said. “A lot of our companies produce stuff here, like apple sauce, that is sold under pri

“It’s Michigan product in a lot of the products (sold) nationally.” Jamie Zmitko-Somers, Department of Agriculture

STAR OF THE WEST MILLING CO.

A private farm along one of the back roads near Frankenmuth is among the Michigan suppliers of wheat to Kellogg Co. vate label ... for companies like Meijer or Spartan,” she said.

Indian Summer Premium Apple Juice is also grown, harvested, pro-

duced and packed in Ludington, and Chelsea Milling Co. in Chelsea uses Michigan wheat to make its Jiffy Mix products, Zmitko-Somers said. Gerber, which began making baby food in Fremont in 1927 and today operates as a division of Nestle, sources a lot of Michigan-grown products, she said. There’s also FlatOut bread, produced in Saline and acquired by Columbus, Ohio-based Lancaster Colony Corp. last year, and Garden Fresh Gourmet salsa, hummus, dips and chips, produced in Ferndale and acquired last year by Campbell Soup Co. (NYSE: CPB), that are sold around the world. Michigan produces about 75 percent of the country’s tart cherries, Zmitko-Somers said. Nearly all of

them are processed in the state into dried fruit or canned pie filling made by Honee Bear Canning in Lawton and Elk Rapids-based Burnette Foods Inc. for sale under brands like Duncan Hines’ Comstock label. Burnette also processes maraschino cherries, applesauce and juice, fruit cups, green beans, fresh pumpkin, dry pack beans, potatoes, asparagus, cherries and fried apples for sale under various labels. Last year, Seneca Foods Corp. (NASDAQ: SENEA, SENEB) acquired Gray & Co., the world’s leading provider of maraschino cherries and one of the largest providers of candied fruit from its plant in Hart. “The major corporations and brands don’t necessarily want you to know that someone else makes the product, but it’s Michigan product in a lot of the products (sold) nationally,” Zmitko-Somers said. Sherri Welch: (313) 446-1694 Twitter: @sherriwelch

“If you look at all fast-food retailers, Michigan has a big piece in those.” Jim Byrum, Michigan Agri-Business Association

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAINâ&#x20AC;&#x2122;S MICHIGAN BUSINESS: FOOD ECONOMY

Eastern Market looks to be 5 times bigger by â&#x20AC;&#x2122;25 By Sherri Welch

ing on a $5.5 million budget for fiscal 2017, is investing just over $150,000 in the various studies, with support from the state of Michigan, the New Economy Initiative and the

swelch@crain.com

Eastern Market, already the largest historic public market district in the country, is looking to expand its footprint to more than five times its current size, roughly 250 acres, by 2025. The growth is needed, Eastern Market believes, to give food distributors and processors a place to move into modern facilities as new federal safe food handling requirements are phased in. Eastern Market Corp., the nonprofit overseeing the Detroit market district, envisions shared infrastructure that could help draw new companies and re-purpose the old buildings that food companies vacate to help meet rising demand from retailers, restaurants, entertainment venues and others looking to come into the market. â&#x20AC;&#x153;If we donâ&#x20AC;&#x2122;t take advantage of this opportunity, how many more times in our lifetime will we have the ability to take advantage of the vacant land?â&#x20AC;? said Mike DiBernardo, Eastern Marketâ&#x20AC;&#x2122;s director of food innovation programs. The food industry wasnâ&#x20AC;&#x2122;t really on the cityâ&#x20AC;&#x2122;s radar initially, he said. But Eastern Marketâ&#x20AC;&#x2122;s 2025 strategic plan formally released in April â&#x20AC;&#x153;helped bring the food industry to the forefront, showing there is opportunity.â&#x20AC;? As the market awaits completion of studies it commissioned to look at land acquisition and use and constructing a new wholesale produce terminal, the city has begun its own study on the prospects for food as an economic development strategy, especially around Eastern Market, DiBernardo said. The Boston Consulting Group in Troy is working with the city of Detroit, pro bono, to help develop a cluster-based approach to economic development in the city, with food development a key piece of that strategy, he said. â&#x20AC;&#x153;Working with BCG ensures that we are all on the same page about how to best achieve our goals,â&#x20AC;? Jed Howbert, executive director, jobs and economic development for the city, said in an email. Eastern Market is developing the plan to expand the district as retail and residential redevelopment on the west side of I-75, and to a lesser degree within the market itself, draws nearer. The city in June applied for up to $30 million in federal financing through the U.S. Department of Housing and Urban Developmentâ&#x20AC;&#x2122;s Choice Neighborhoods Program to put toward an approximately $300 million project expected to bring more than 1,000 new housing units and tens of thousands of square feet of retail space to Brush Park and Eastern Market. New mixed-income housing would be focused on about 25 acres on the site of the former Brewster-Douglass projects on the west side of I-75 in Brush Park and on the

Fred A. and Barbara M. Erb Family Foundation. The John S. and James L. Knight Foundation and Kresge Foundation are also providing support for

JACOB LEWKOW

Eastern Market wants to expand to meet the rising demand from retailers,

restaurants and others interested in moving into the market. east side of I-75 in Eastern Market at a site fronting Russell Street and in Shed 4 where upper lofts are envisioned. The Choice Neighborhoods project doesnâ&#x20AC;&#x2122;t overlap any of the 200 or so acres of land Eastern Market hopes to acquire or jointly develop in its bid to expand the district, DiBernardo said. The current 43-acre Eastern Market district is bounded roughly by Mack Avenue to the north, I-75 to the west, St. Aubin Street to the east and Gratiot Avenue to the south. Eastern Market hopes to expand north of its current boundaries. The marketâ&#x20AC;&#x2122;s expansion vision is the centerpiece of its 2025 strategic plan. New federal food requirements being phased in as part of the 2011 Food Safety Modernization Act require temperature controls for produce. Food handlers in the market will either need to do costly updates or move to modern sites, DiBernardo said. About 30 food companies are interested in locating in the new food innovation zone, he said. A second driver of the marketâ&#x20AC;&#x2122;s expansion plans is demand from a number of businesses looking to move into the market. The old build-

ings that food processors and distributors currently occupy in Eastern Market could turn to new uses such as retail, restaurants and entertainment venues such as wineries and breweries, DiBernardo said. Moving the truck traffic inherent to a working food district to the perimeter of the district could help alleviate concerns about the mixture of foot traffic and truck traffic, he said. The area targeted for what Eastern Market has dubbed its food innovation zone is a mix of property owned by the city, the Detroit Land Bank and private owners. The market estimates roughly a third of it is held by private interests, DiBernardo said. Eight produce companies run the 300,000-square-foot Detroit Produce Terminal, located on 26 acres on West Fort Street, roughly eight miles from Eastern Market. The terminal would need to spend $15 million just to meet the new federal requirements, and in the end would still have a â&#x20AC;&#x153;1925 facility that isnâ&#x20AC;&#x2122;t energy efficient and is terrible with regard to material logistics,â&#x20AC;? Eastern Market President Dan Carmody said in December when Crainâ&#x20AC;&#x2122;s first reported on the marketâ&#x20AC;&#x2122;s expansion plans. Eastern Market, which is operat-

the larger plan. As the studies are completed, the market is in the process of creating a nonprofit development entity with its own board comprised of property developers and community residents. That entity will seek a for-profit developer to team up with the market on the innovation zone. The redevelopment of the old Detroit Water Board building in Eastern Market just east of Roma Cafe at Erskine and Orleans streets is the first step in Eastern Marketâ&#x20AC;&#x2122;s 2025 strategy, DiBernardo said. The city and Eastern Market are talking with two developers who went through the bidding process to

purchase and redevelop the vacant building. Under the terms of the purchase order, the developer buying the building would earmark 15,000 square feet of space that Eastern Market can turn into an accelerator for second-stage food processors. Eastern Market will also work with the developer to identify businesses that could work in the 100,000-square-foot, high-ceiling building. The old building could be multitenant, with space for food processing and/or food distribution, retail and one or more restaurants, DiBernardo said, given its proximity to the Dequindre Cut and the central area of Eastern Market. â&#x20AC;&#x153;Once you start something like this, (the larger plan) is then believable and real,â&#x20AC;? DiBernardo said. â&#x20AC;&#x153;This building becomes a viable part of the Eastern Market district, and then we start moving on to the next steps.â&#x20AC;?

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY

Food hubs create buzz in state’s distribution system By Marti Benedetti mbenedetti@crain.com

Ever wonder how those plump, sweet Michigan blueberries or perfect heads of lettuce get to the produce department of your neighborhood grocery store? There’s a good chance food hub employees picked up the berries from a local farmer and distributed them to your market. Food hubs are a fairly new creation, and no two are alike. But they are catching on, and new ones are cropping up throughout the state. The hubs — businesses that manage the gathering and distribution of food products whose origins are clear — are receiving increased attention from diverse stakeholders who see them as the road to economic growth and social and environmental change. They do that by connecting the distribution dots between farmers, often small operations that big distributors wouldn’t do business with, and the wholesale and retail customers looking for locally grown food. In the process, they often embrace a social mission to bring fresh food to underserved areas. The early hubs started in 2008, but the movement really took off in 2011. Now there are eight that focus on gathering and distributing local and

Michigan-based food, said Rich Pirog, director of Michigan State Univer-

sity Center for Regional Food Systems

in East Lansing. On average, a food hub employs about 20 people, six full time and 14 part time. There are other distributors that carry local and Michigan foods, but they also source globally. Food hubs focus on food from local and regional sources. Hubs tend to be an even mix of for profit or nonprofit. Seventy-five percent of the hubs are breaking even or better. In 2015, 113 food hubs in the United States reported gross revenue more than $370 million, according to the 2015 National Food Hub Survey, a collaboration of MSU’s Center for Regional Food Systems and The Wallace Center at Winrock International. The benefits of hubs include fresher food for consumers and an avenue for farmers to grow their businesses and keep future generations of farmers employed. The average age of farmers in the state and nationally is 58, said Lynne Brown, program launch specialist and general manager of food hub Grow Eastern Market in Detroit. So there’s a potential crisis if these farmers reach a certain age and close their farms. “We want to grow a stable food system.”

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Food hubs connect the dots between farmers and the wholesale and retail customers looking for locally grown food. Brown said the for-profit food hub that is part of nonprofit Eastern Market started in May. It was set up for profit so when it starts making money in two to three years it can give dividends back to farms. Grow Eastern Market took 14-16

months to launch and derives its products from 30 farms within 125 miles of Eastern Market. “We have a lot of meetings throughout the year to get farmers and buyers together,” said Brown, whose job involves going to the

farms and fostering relationships. She also is in touch with local restaurant chefs, who make specific requests for items she delivers. “About 50 percent of farmers bring their goods to Eastern Market, and the other half take produce for

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY their customers,” she said. Brown recently was in her SUV driving to meet with farmer partners in Imlay City to pick up spinach and green tomatoes requested by a Detroit chef. Having face-to-face contact is how she develops relationships with Michigan farmers. Some chefs and entrepreneurs show up at Eastern Market between midnight and 4 a.m. to get the produce they need so distribution can go either way. She said customers also include grocery stores, school systems and colleges such as Schoolcraft College in Livonia for their culinary classes. “The average food travels 1,500 miles to its destination,” Brown said. “Our goal is to change that to 50 to 100 miles.” Besides Eastern Market’s Grow Eastern Market, the largest food hub in the state is Cherry Capital Foods in Traverse City. Evan Smith, executive director of policy and outreach at Cherry Capital, said the structure and organization of food hubs vary. For-profit Cherry Capital operates primarily as a distribution market with 16 refrigeration vehicles that transport food from Michigan farmers to customers such as Kroger, Whole Foods, Tom’s, restaurants, hospitals, colleges and other institutions. While its primary locale in Traverse City is in a former hockey arena, it shares warehouse space in

Okemos, which delivers food south of Lansing. It controls Earthy Delights, an import/export business, there as well. The Traverse City warehouse is vast — 60,000 square feet, Smith said. Cherry Capital took the old arena locker rooms and re-purposed them into rentable food units with refrigeration. Fledgling businesses can set up shop there to launch new products. Smith said the trucks, which Cherry Capital routes around the state, pick up produce from farms, meat from food processors and jams and salsas from producers and bring them to its two facilities, where it distributes the products all over the state. Cherry Capital has 65 employees in both facilities. Impressive, Smith said, because it had five employees eight years ago. Sales have grown 45 percent in five to six years, and he projected $7 million in sales this year. Yvette Berman, CEO of for-profit Harvest Michigan in Pontiac, is one of the smaller hubs but also one of the oldest. It started in 2008 as a business-to-business hub, but since 2014 has been a hybrid hub serving both business-to-business and businessto-end users. Its plan is to develop a product package containing staples such as cucumbers, green beans and carrots for sale through Community Supported Agriculture (CSA) sites or gro-

cery chains. “And we’re working hard to develop our own brand,” she said. Harvest Michigan operates with five to seven employees and a few volunteers.

Food hub challenges Food hubs have their challenges. Smith said he worries about the enforcement of food safety regulations, getting people to think about what they eat, investing in state roads to improve transportation for food-delivery vehicles, and dealing with growth issues. “We would like to see more meat processing in the state,” Smith said. “We produced a million hogs in Michigan, and they went to Iowa for processing.” Clemens Food Group in Pennsylvania is building a pork processing plant in Coldwater Township. According to Marty Gerencer, principal of Morse Marketing Connections LLC, a Norton Shores-based food systems consulting business, the challenge is how long it takes to connect small growers to new markets. “How do we help food deserts?” MSU’s Pirog said the interest in local food has sharply increased in the last 20 years. “Food hubs that emerged out of the local food movement are gaining in popularity,” he said. Simultaneously, he sees a decline in CSAsand farmers markets. Pirog said food hub managers are now being certified and trained pro-

fessionally by programs such as the one at the University of Vermont. So far, those who attended said they learned a lot. Food hub employees are working in a relatively new profession, which requires a unique set of skills. Those include professional logistics and distribution, warehousing acumen, food marketing and sales, food processing, food retail, management, and strategic planning. Food hub managers also need to learn the ropes of safety certification, auditing procedures, personnel management and post-harvest handling of fresh produce. “There’s a fine balance in making ends meet,” Gerencer said. “We are asking our food hubs to do a lot. We help them to meet the need of food access to low income communities — it’s a different model.” The 2015 National Food Survey reported that “food hubs have additional financial challenges that come from embracing environmental and social missions...managing grant and donation revenue, and ensuring that people, animals and the environment are not exploited in the business process.”

Farmers mesh with hubs Vicki and Tom Zilke, owners of Zilke Vegetable Farm in Milan, are pleased

with what the hubs provide. The mission of food hubs meshes with Vicki’s philosophy of food justice. More than 95 percent of food

HEALTHY FOOD FOR ALL Detroit’s food ecosystem is a model for communities across Michigan to strengthen their “value chain” of local food systems: + From seed to table; + Through sustainable production, farmers markets, institutional procurement and cooperatives; + Fair treatment of farmers; and + Investment in local economies.

The W.K. Kellogg Foundation supports a food system that provides better access to healthy foods, addresses the impact of poverty and inequity on health, education and the economy for all children, families and communities.

Vicki and Tom Zilke: Pleased with what hubs provide to their farm.

hubs work to improve human health in their communities or region as part of daily operations and programs, according to the 2015 National Food Hub Survey. Vicki and her husband have made farming a second career. She was a nurse practitioner; he was a landscaper. “I’m certainly a farmer, but also an advocate of healthy food for all,” she said. On 27 acres near where Washtenaw and Monroe counties meet, the couple grow sweet corn, tomatoes, kale, lettuce, and other vegetables. They also operate a farm stand. Zilke Vegetable Farm has 15 to 18 full- and part-time employees. Vicki favors giving jobs to local teens who, in turn, learn about healthy food. She relies on food hubs such as Grow Eastern Market to assist them in growing their business. “Food hubs solve (the concern) that you will have enough purchasers even if you have 500 pounds of food,” thereby eliminating food waste, Tom Zilke said.

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAINâ&#x20AC;&#x2122;S MICHIGAN BUSINESS: FOOD ECONOMY

Campbell launches expansion, new products at Garden Fresh By Sherri Welch swelch@crain.com

Just over a year after acquiring

Garden Fresh Gourmet in Ferndale, Campbell Soup Co. (NYSE: CPB) is

launching the first phase of investment on the Garden Fresh campus with a $7 million expansion. Construction of a 20,000-squarefoot addition to what was originally the hummus plant could begin as early as this week, according to Ferndale officials. To make room for the addition, Campbell demolished the former Detroit Gear & Spline Co. building at 1515 Bonner St. in early July. It had been using the building as a maintenance site, said Todd Putman, general manager of Garden Fresh, which operates as part of Campbellâ&#x20AC;&#x2122;s C-Fresh division. He expects the addition, which will bring the building to nearly 72,000 square feet, to take six to nine months to complete. It will provide space for expanded storage and, with the addition of new equipment, increased capacity to produce Garden Fresh salsa, hummus and dips. As part of the initial investment, Campbell has upgraded the Wi-Fi in the Garden Fresh buildings, Putman said. And itâ&#x20AC;&#x2122;s in the process of adopting a new IT system to in-

LARRY PEPLIN

Garden Fresh co-founder Jack Aronson has agreed to stay on as consultant to the

operations for another year.

crease quality and inventory management capabilities. The project is the first phase of a $20 million investment in the Ferndale operation, something Garden Fresh pledged as part of its $231 million purchase of the company and its commitment to keeping its operations in Michigan. â&#x20AC;&#x153;We very much intend to live and thrive in Ferndale. Weâ&#x20AC;&#x2122;re making investments ... in our capability and

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capacity to be able to grow the brand out of Ferndale,â&#x20AC;? Putman said. Even so, Garden Fresh is not about efficiencies, he said. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s about an artisanal product that will always be made in small batches.â&#x20AC;? There are other ways to gain efficiencies, like putting salsa on the back of a truck with carrots and bringing Campbellâ&#x20AC;&#x2122;s buying power to bear for things like computers, he said.

But to ensure Garden Fresh Salsa is made the same way 20 years from now, Campbell videotaped Garden Fresh co-founder Jack Aronson making it, Putman said. Operating as part of the C-Fresh platform has enabled Garden Fresh to launch a number of new products. A year ago, Garden Fresh had just three organic products, said Regan Phillips, head of communications and public relations for the C-Fresh division. Since then, itâ&#x20AC;&#x2122;s launched 15 new organic Garden Fresh products, along with 12 new conventional hummus and salsa products. At the same time, its increasing its market penetration by leveraging the C-Fresh divisionâ&#x20AC;&#x2122;s reach, supply and distribution network, Phillips said. â&#x20AC;&#x153;Jack really wanted us to push stronger into organic salsa and hummus,â&#x20AC;? Putman said, and the company has done that by introducing new snack packs of hummus as well as larger size organic salsa and hummus, such as an organic version of Jackâ&#x20AC;&#x2122;s Special salsa as well as the conventional version. â&#x20AC;&#x153;We took conventional salsa, hummus flavors and created organic sisters or brothers. Itâ&#x20AC;&#x2122;s very much on trend,â&#x20AC;? he said. â&#x20AC;&#x153;Jack said, â&#x20AC;&#x2DC;I think organics are

going to be big.â&#x20AC;&#x2122; And it looks like he was right again.â&#x20AC;? Aronson also wanted to introduce a green salsa with avocado, Putman said, adding that keeping avocado from browning over time is hard. But the Garden Fresh team figured it out and introduced that version in May in Michigan and in Wal-Mart on the West Coast. So far, itâ&#x20AC;&#x2122;s selling better than red medium and mild of Jackâ&#x20AC;&#x2122;s Special. â&#x20AC;&#x153;Whenever we do research on the brand, we do a wave in Detroit/Ferndale and a wave in Chicago, Kansas City or the West Coast,â&#x20AC;? Putman said. â&#x20AC;&#x153;That enables us to see what our heartland market is saying and what our new markets are saying.â&#x20AC;? To build on the support Garden Fresh Gourmet founders Jack and Annette Aronson have been given in Ferndale and other parts of metro Detroit, the companyâ&#x20AC;&#x2122;s new owner in April launched Campbellâ&#x20AC;&#x2122;s Healthy Communities Metro Detroit, a program that focuses on public-private collaboration to improve the health of young people in its home communities. Led by the Aronsonsâ&#x20AC;&#x2122; daughter Melanie Mena as director of community engagement for C-Fresh, the program is focused on increasing access to affordable, healthy food; increasing nutrition and health education; and engaging the public to help create and sustain a healthy community. The coupleâ&#x20AC;&#x2122;s son, Trevor Aronson, also remains director of operations for Garden Fresh. And Jack Aronson himself has agreed to stay on for another year as a consultant. â&#x20AC;&#x153;We find that as we expand ... to the West Coast and Texas ... the story and product of Jack and Annette and what they created is resonating with new customers,â&#x20AC;? Putman said. Garden Fresh Gourmetâ&#x20AC;&#x2122;s founders will always be on the packaging, and they and the small Ferndale restaurant where it all began will always be part of the back story, he said. The new products launched under Campbellâ&#x20AC;&#x2122;s ownership â&#x20AC;&#x153;were an extension of what we were working on,â&#x20AC;? Aronson said. â&#x20AC;&#x153;Their team has brought those to the market. And they include me on a lot of these products, which has been fun. ... Iâ&#x20AC;&#x2122;m extremely satisfied with what theyâ&#x20AC;&#x2122;ve done in the last year.â&#x20AC;? Campbell promised a lot when it bought Garden Fresh, he said. â&#x20AC;&#x153;Denise Morrison (president and CEO of Campbell) told me theyâ&#x20AC;&#x2122;d keep the plant in Ferndale ... retain the workforce. You donâ&#x20AC;&#x2122;t put something like that in writing. We trusted her.â&#x20AC;? Since then, Campbell has given Garden Fresh workers two raises, better insurance and an extra 15-minute break every day, Aronson said. â&#x20AC;&#x153;They have done so much since they bought the place. ... They promised a lot, and theyâ&#x20AC;&#x2122;ve over-delivered.â&#x20AC;? Sherri Welch: (313) 446-1694 Twitter: @sherriwelch

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY

MSU’s new food processing center to aid second-stage biz By Sherri Welch swelch@crain.com

The Michigan State University Product Center hopes to break ground this fall on a new processing center that will allow second-stage food companies to test new products and markets before making sizable investments. As planned, the $8 million Food Processing and Innovation Center will meet all state and federal food-processing requirements and licensing to let companies lease capacity and sell products made at the center. The center is destined for an MSU-owned building in a business park south of the university’s East Lansing campus, pending final approvals for an additional $1.6 million needed for the Matthew project from Birbeck: Center university trust- will help food ees at their Sep- companies grow. tember meeting, said Matthew Birbeck, senior project director of the food processing center. The center is intended to solve a

MICHIGAN STATE UNIVERSITY PRODUCT CENTER

Michigan State University Product Center plans to convert an existing building on

the university’s campus into a food processing center.

Rapids-based architectural and engineering firm, was the designer of the new center. Birbeck said the contractor chosen for the project won’t be announced publicly until the final funding is approved. MSU believes the center will be the only fully licensed, food-processing facility of its kind tied to a U.S. university, Birbeck said. The MSU Product Center team worked with MSU food scientists and packaging experts and regulatory representatives from the Michigan Depart-

condundrum often facing food companies that want to grow, Birbeck said. “Do you expand your existing line or open a new store or take a risk and move to a new product? You really have to think carefully about how you’re going to spend your money.” The new processing center will be available for a company to use for three or seven days or however long it needs, he said. Renovations to turn an existing building into a state-of-the-art food processing center can start as soon as the funding is approved, Birbeck said, with an expected opening in the late spring or early summer next year. Dan Vos Construction, a Grand

ment of Agriculture and Rural Development and the U.S. Department of Agriculture to ensure the facility

will meet all standards and compliance for a modern facility. There are co-packers, but with

them, “you don’t control the process … because you’re not allowed on the floor,” Birbeck said. By leasing space at the food product innovation center, food companies basically own the facility for the time they have leased it. “The idea is that once you’ve proved your (product) is successful in the marketplace, you go back to your facility with all the knowledge and a list of the equipment you’ll need” to move forward, Birbeck said. The MSU Product Center had letters of intent from 10 Michigan companies as of late July, with commitments to lease the facility for a collective minimum of 221 days over the first two years, Birbeck said. The center will include two large pieces of equipment: a spiral freezer to cool food quickly at very low temperatures, and a retort, which cooks prepackaged products in jars or pouches at precise temperatures. It will also include multiple standard pieces of equipment to process everything from meat to seafood to bakery items, along with packaging lines and a stateof-the-art ready-to-eat room, a chilled, designated clean area where foods that are ready-to-eat (like sandwiches) can be made

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and packaged, with sophisticated temperature controls to keep the room clean of pathogens and allergens, Birbeck said. “We’ve catered the center to 80 percent of the needs of the food processing industry ... within Michigan, the Great Lakes region and beyond,” he said. Leasing costs for the center are projected to be $3,000-$6,000 per day, depending on which equipment is being used, Birbeck said. Launched 13 years ago, the MSU Product Center has traditionally focused on assisting food entrepreneurs, providing them with consultation on everything from supply chain to label design and helping connect them with distributors and retailers. Its efforts have always been around stage-one food companies, defined by Birbeck as “a client flying by the seat of their pants ... someone who is just getting up and running, in proof of concept, the smallest echelon of business doing farmers markets and things like that.” When the recession hit, the MSU Product Center found that second-stage businesses with five to 50 employees and $5 million to $50 million in business were hurting just as much as the startups, Birbeck said. The product center launched its Advanced Growth Services work four years ago to assist second-stage food companies. Feedback from those companies “helped us to understand these new businesses had nowhere to go in order to mitigate risk while accelerating expansion, Birbeck said. Among them was Honor-based Food for Thought Inc., which makes shelf-stable organic and conventional products such as preserves, salsas, dressings and mustards under the Food for Thought and Esch Road brands. The 21-year-old company is located not far from Sleeping Bear Dunes National Lakeshore, employs about 20 and has $1 million to $3 million in annual revenue, said Gregory Young, partner and CEO. MSU’s new Food Processing Innovation Center will enable Food for Thought to test new products with new technology before it invests in either. “This proof of concept capability is something that we continue to struggle with. (It) inhibits our speed and ability to grow into additional products and technologies,” Young said. It will also enable the company to define standardized processes, quality verification standards, workflow and final layouts before it makes investments, while benefiting from the expertise of the MSU Product Center, Young said. “In addition, the early product we get from running at the FPIC gives us a chance to further test the market farther upstream in the development process than we might normally be able to do.” Sherri Welch: (313) 446-1694 Twitter: @sherriwelch

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY

Growing pains

Detroit plots course on land use as leader in urban farming By Marti Benedetti mbenedetti@crain.com

“Here, try this,” said Detroit farmer Greg Willerer, plucking a sprig of Osaka purple mustard from the acre of land he farms in the city’s north Corktown neighborhood. Willerer, owner of Brother Nature Produce, is one of dozens of Detroit farmers trying to carve a living. Greens like this, and other boutique produce such as tangy sorrel and baby Chinese cabbage, are cropping up in gardens and farms all around Detroit. City farmers are growing more exotic greens and herbs to meet the demands of residents and the city’s trendy restaurants. Willerer sells his produce at the Eastern Market on Saturday mornings and by filling orders for customers such as Brooklyn Street Local, Craft Work and St. CeCe’s. He relies on coffee grounds and other biodegradable waste from local restaurants to add to the compost piles that are scattered around the land where he owns two houses and their side lots. He is farming on additional lots on the block and would like to buy them, but, he said, the Detroit Land Bank Authority won’t return his calls. Willerer and other farmers are eager to expand land ownership in a city that is a national leader in urban farming. But city planners don’t have green thumbs when it comes to figuring out how much of the vacant land should be farmed and how much preserved for other uses. Tyson Gersh, co-founder of the Michigan Urban Farming Initiative in the city’s north end, is another frustrated farmer. “I’ve had quite a few dealings with the land bank, and none of them are positive.” Gersh said his farm is made up of 30 parcels, or about 1.5 acres. He has acquired half of it. The Detroit Land Bank Authority won’t sell him the other parcels. “We’ve invested (thousands of) volunteer hours here,” he said. Craig Fahle, spokesperson for the city’s land bank, said it is aware that people in the city are farming on land that is not theirs. “The land bank is happy to help people rejuvenate their neighborhoods,” as long as they work with the city, he said. It sells land through its side-lot program, its nonprofit Community Partner Program and to faith-based organizations. Among the projects it has partnered with are Eden Gardens’ community garden and education project, Matrix Human Services’ outdoor learning center, Wolverine Human Services’ orchard and garden project, and Young Nation’s urban art project. If someone wants to buy 10 or more lots of city land, the Detroit City Council needs to approve it, Fahle added. Maurice Cox, director of Detroit

Planning and Development, said in an

email that currently there is not a map specifying where farms should be. “The ag ordinance does not designate a specific zoning category for indoor and outdoor agriculture, but allows some form in most zoning districts,” he said. He said the city has not yet deter-

mined whether a percentage of land will be dedicated to agriculture. “The city is looking at proposals on a case-by-case basis and within the context of the area in which the project is proposed. Local advocates of urban farming and urban farmers have identified 3 to 5 acres as optimal size for a larger-scale urban farm,” Cox said.

RecoveryPark Farms For-profit RecoveryPark Farms is an example of how to turn a formerly urban area over to farming, Fahle said. The $30 million capital investment project on Detroit’s lower east

side plans to turn 22 blocks, or a 105-acre footprint, into a center for urban agriculture with employment for ex-offenders, recovering addicts and others with barriers to employment. Forty of the acres are cityowned, said Gary Wozniak, president and CEO of RecoveryPark, a nonprofit that owns RecoveryPark Farms. Construction of the project is expected to start this summer. Of the 105 acres, 20 percent is infrastructure such as roads, sidewalks and parking areas; 40 percent is city land; and 40 percent is private land that the project hopes to acquire over the next five years. SEE URBAN, PAGE 20

MARTI BENEDETTI

Wendy Casey is internship coordinator of D-Town Farm in Detroit.

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: RETAIL REPORT

URBAN FROM PAGE 19

Scattered throughout on the park site are fewer than 30 houses and commercial buildings. Wozniak said the site used to contain 851 structures. Unoccupied houses will most likely be torn down by Reclaim Detroit. “We don’t want anyone who is here to leave. Instead, we want to strengthen the fabric of the buildings already here,” Wozniak said. RecoveryPark Farms has hired an organic farmer and a hydroponic grower. Produce will be grown via hydroponics in greenhouses covering 15 acres of the property. Wozniak said the benefits of growing produce through hydroponics is higher quality and more plentiful crops. Hoop houses and high tunnels, which are highly sturdy growing structures, are planned for 9 acres. The 1920s Chene-Ferry Market, which will be restored, will be a central part of the project. RecoveryPark’s East Grand Boulevard pilot program’s customers currently are local restaurants. Specialty produce such as albino beets, Asian green mixes and striped carrots are being sold to 15 Detroit-area restaurants. Over the next five years, RecoveryPark Farms has a distribution agreement to sell to more than 400 businesses statewide. Detroit-based Del Bene has been

contracted to transport the produce. The goal will be to get food delivered in 24 to 48 hours, when it is freshest. “Detroit needs an economic base. Farming, in general, adds to the economic profile,” Wozniak said. “Residents need access to good jobs, and this area has good public transportation.” Malik Yakini, founder and executive director of the Detroit Black Community Food Security Network, which operates the 7-acre nonprofit D-Town Farm in Detroit, started it in 2008 with 2 acres in the 200-acre Meyers Tree Nursery, part of Rouge Park. The city used to plant trees there to transplant in Detroit neighborhoods. That job has been inherited by the Greening of Detroit. D-Town’s customers are those who shop at the farm on Saturdays and Sundays and those who buy from them at the Wayne State University farmers market on Wednesdays. The farm has five staff and five interns. Yakini said D-Town, the largest farm in the city, is a production farm and an education facility. “We are focusing on getting more African-Americans involved in this industry so they have greater self-reliance,” he said. “African-Americans often associate farming with slavery, and an important part of our work is to (change) that thinking. We teach that farming was part of our culture 7,000 years ago.”

LARRY PEPLIN

Greg Willerer, owner of Brother Nature Produce, harvests some

leafy greens for a local restaurant. He farms in the city’s north Corktown neighborhood and is one of dozens of Detroit farmers trying to carve out a living.

Detroit urban farming leader

D-Town has four hoop houses and four large quadrants of farmland. By using solar panels for some

of its power, a rainwater retention pond and an off-the-grid energy station, the farm is self-sufficient.

The Leader in Shareholder Rights

All the activity around Detroit’s farm industry has picked up in recent years. Michigan State University agriculture Professor Bill Knudson said urban farming is taking off around the country, yet Detroit seems to be the leader. Yet the economics of farming are challenging, he said. “The reality is after several years of good commodity prices for farmers, commodity prices are going down while their costs for fertilizer, seeds and land are falling at a much slower rate,” which is squeezing their profits, he said. Only part of what shoppers pay for produce goes to the farmer. U.S. Sen. Debbie Stabenow, a proponent of growing Michigan’s food economy, said Detroit leads the country in urban farming. “When I took over as a (ranking member of the U.S. Senate Committee on Agriculture, Nutrition and Forestry), I started talking about urban farms to people in other states,” she said. “They asked, ‘Why are you talking to us? You have the urban farming leaders in Detroit.’” Stabenow has heard concerns from city farmers who have not been able to buy more land for farming. “It is part of what I consider a natural tension as the city grapples with redevelopment,” she said. “There should be good planning, not hit and miss.” Dan Carmody, Eastern Market president, said Detroit is a national leader in urban farming because of “the sheer number of people participating in it.” He said there are 20,000 people working on 1,400 gardens or growing sites in the city. The way urban farmers should acquire land has been “an issue percolating for a while,” he said, adding that the city is in the midst of creating another ordinance around chickens, goats and other animals. Detroit changed its zoning ordinance in March 2013 to expand farming. “The city land bank has the herculean task of repurposing 96,000 vacant lots,” Carmody said. “Urban agriculture is part of the answer, but not the whole answer.” He said several of the farms and organizations are doing a good job. Among those are Greening of Detroit, Brother Nature Produce, Capuchin Soup Kitchen’s Earthworks Urban Farm, and Rising Pheasant Farms. “At the market, we see our role as working with all these farms to create products,” he said.

DBpageAD_DBpageAD.qxd 8/4/2016 2:37 PM Page 1

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY

Crain’s forum examines food economy By Daniel Duggan dduggan@crain.com

The consumers have spoken, and they are looking for local food. With that disruption, new business models are evolving and existing business models are adapting. To bring this topic to life, Crain’s is launching the Crain’s Food Summit on Aug. 22 to focus on the ways the food economy is changing and adapting. Participants can hear from large national companies such as Campbell Soup Co. as well as local businesses such as the popular restaurant Detroit Vegan Soul. As part of the event, the first Crain’s Investor Forum will be a chance for potential investors to hear from local companies in the food sector. (See story, this page.) Speakers will weigh in on a range of food issues in panel discussions moderated by reporters and editors from Crain’s. The keynote panel will bring three national brands together on stage to focus on the ways that global food brands are connecting with local communities. Speaking will be Jeffrey Dunn, president of the Campbell Fresh division of Camden, N.J.-based Campbell Soup Co.; Kirk Sabiston, senior manager of mergers and acquisitions for Minneapolis-based General Mills Inc.; and Rick Wion, senior director of corporate engagement for Battle Creek-based Kellogg Co. Three panels will dive into the topic of consumer demand in three niches: agriculture, food product entrepreneurs and the world of retailers and restaurants. It's crucial to bring those groups together when possible, said Erika Block, founder and CEO of Ann Arbor-based Local Orbit, one of the speakers. Buyers, she said, often say that suppliers don’t offer enough local food. But suppliers say the orders are too small. “The key is communication,” she said. “If we are working on the communication problem, we can be working on the supply and demand problem." Dan Carmody, president of Eastern Market Corp., which has worked with Crain's to create the event, said the food sysem is a path to jobs and wealth for the region. “Intense connectivity between local producers, processors, distributors, retailers and consumers foster food system innovation,” he said. The speaker lineup includes: n Erika Block, founder/ CEO, Local Orbit n Malik Yakini, executive director, Detroit Black Community Food Security Network and the D-Town urban farm n Jim Byrum, president, Michigan Agri-Business Association n Lydia Gutierrez, co-founder/ president, Hacienda Mexican Foods n Brenda Reau, senior associate director, MSU Product Center n Dan Fone, Global Business Development – Food, NSF International n Jim Hiller, former owner, Hiller’s Markets n Kirsten Ussery, owner, Detroit Vegan Soul n Dan Carmody, president, Eastern Market Corp. n Mary Donnell, program manager, Michigan Good Food Fund and Capital Impact Partners

Homegrown businesses expand state’s food market From toffee to popcorn to (yes) crickets, Michigan’s food businesses are growing. A dozen of them will pitch their businesses at Crain’s Food Summit Aug. 22 at Eastern Market. From more than 50 applications, we and a team of food industry experts picked a selection in three categories: social impact, startups and growth companies. Here’s a closer look at some businesses that offer a cross-section of what Michigan’s food entrepreneurs are up to.

SOCIAL IMPACT Eden Urban Farms LLC

STARTUPS

GROWTH COMPANIES Detroit Bold Coffee Co.

Detroit

Highland Park

Owners: Kimberly Buffington, CEO; Ocie Irons, COO; Brian Surowiec, CFO

Owner: A.J. O’Neil

What they do: Startup that aims to grow produce in an indoor hydroponic farm in Detroit’s Corktown neighborhood. Plans to distribute food through nonprofit partners such as MercyWorks, MACC Development and Forgotten Harvest, with the aim of starting more farms through Detroit’s underserved neighborhoods. Website: www.edenurbanfarms.com

Zilke Vegetable Farm LLC Milan Owners: Vicki and Tom Zilke What they do: Vegetable farm that started by selling produce at a farm stand and through community-supported agriculture subscriptions, and now through institutional sales to University of Michigan Dining Services, Eastern Michigan Dining, local restaurants and grocers, and the new Grow Eastern Market food hub. Also distributes fresh food through twice-weekly MHealthy produce markets at the University of Michigan.

Green Oak Township

What they do: Coffee brand that pitches itself as a “working-class” cup of coffee. Founder A.J. O’Neil, former owner of Ferndale’s AJ’s Cafe, started the brand three years ago. Roasted by Highland Park’s Becharas Brothers Inc., the brand has grown into distribution at Meijer, Kroger, Westborn Market and other retailers.

Owner: Mark Sarafa

Website: www.detroitboldcoffee.com

Pop Daddy Popcorn Inc.

What they do: Locally grown and manufactured bagged popcorn. In fewer than three years, Pop Daddy has landed distribution in Meijer, Kroger and Wal-Mart stores, among others. Sources its popcorn from an Ann Arbor farm and pops it in olive oil, aiming to lure customers looking for healthy snacks. The company is now test-marketing seasoned pretzels as well. Website: www.popdaddypopcorn.com

Grand Traverse Pasta Co. LLC Traverse City Owner: Bill Koucky

Website: www.zilkevegetablefarm.com

The Local Grocer Flint Owners: Erin Caudell and Franklin Pleasant (pictured) What they do: Grocery store featuring Michigan products and produce that had its roots in a front-yard garden that grew into a small farm and stand at the Flint Farmers’ Market. Has expanded to sell products from eight small farmers and more than 30 small companies that produce all-natural food, body care and home products. Planning to launch a nonprofit partnership for a mobile vegetable van. Website: www.thelocalgrocer.com

Detroit Food Academy Detroit Executive director: Jen Rusciano What they do: Nonprofit whose program works with young people to create their own food business projects. Has grown since its 2011 founding to encompass 10 high schools with more than 200 participants. DFA students created and launched Mitten Bites, a granola bar featuring Michigan fruits and local ingredients now sold in more than 50 retail locations, including every Whole Foods Market in the state. Website: detroitfoodacademy.com

Detroit.

What they do: Has its roots in Grand Traverse Culinary Oils, which processes sunflower and canola seeds into culinary oils. Two years ago, it began processing locally grown wheat into stone-ground flour, and earlier this year started making pasta from that flour. Is aiming to open a pasta-making operation in the Eastern Market area of

Website: www.gtculinaryoils.com

Old World Gluten-Free LLC St. Clair Shores Owner: Alicia Bemiss What they do: Makes and sells pierogis made from a mix of flours that contain no wheat or gluten. Bemiss was inspired by a desire to share her family’s Polish heritage among family members, including her child who has celiac disease, which makes the body unable to tolerate gluten. The pierogi are sold at about 40 stores in metro Detroit, and the company has received its first orders from Whole Foods Market. Website: www.oldworldglutenfree.com

Detroit Ento Detroit Owners: Anthony Hatinger, Theodore Kozerski What they do: Startup that aims to create and sell sustainable protein sourced from crickets and other insects. The company is working to create a facility to grow crickets and process them into a protein powder for human food, livestock and pharmaceuticals. The use of Insects as a food source is slowly gaining acceptance in the U.S., but the company notes that there are few suppliers. Website: www.facebook.com/detroitento

Great Lakes Potato Chip Co. Traverse City Owner: Edward Girrbach What they do: Maker of locally sourced kettle-style skin-on potato chips. Founded six years ago, the company has surpassed $3 million in revenue with distribution at Kroger and Spartan stores and Tom’s and many other chains. Is aiming to move into a larger facility with upgraded equipment. Website: greatlakespotatochips.com

Edibles Rex Detroit Owner: Tammy Tedesco What they do: Catering company that has grown over 23 years into providing food service to Detroit schools. This year, it was awarded the contract for the summer “Eat Up and Meet Up” school food program. Sources its fruits and vegetables from Eastern Market, and all dairy and groceries from Michigan companies. In 2014, received a $250,000 grant from Chase Bank, partly to build out its Good Food Village, an Eastern Market location intended to serve as a hub for food businesses. Website: www.ediblesrex.com

Dave’s Sweet Tooth Harrison Township Owner: Andrew Chmielewski What they do: Michigan-made almond toffee sold in pouches. Andrew Chmielewski started the company and named it for his father, who was known for his homemade toffee recipe. Over five years, the company has grown to 12 employees and received a big boost when featured on “Good Morning America” earlier this year. Website: www.davessweettooth.com

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY REPORT

Advice for would-be food entrepreneurs

10 steps on how to grow a business By Rachelle Damico

Special to Crain's Detroit Business

Now may be the time for Michigan entrepreneurs interested in entering the food business to tap their potential. “Over the past six (or) seven years, there has been a tremendous increase in locally grown and processed products in Michigan,” said Brenda Reau, senior associate director for Michigan State University’s Product Center, which has helped hundreds of entrepreneurs develop and commercialize products. Local brands on supermarket shelves such as Hamtramck-based McClure’s Pickles are thriving, but building a successful business does not happen overnight. “It tends to have a lower profit margin, so if you want to make any significant amount of money, you’re going to have to scale up,” Reau said. For advice and tips on how to establish and grow a successful food business, Crain’s talked to local food companies and experts.

1. Ensure there’s a market for your product. You need more than a great recipe — a lot more. Andrew Chmielewski, founder and CEO of Harrison Township-based toffee company Dave’s Sweet Tooth LLC, has sales in more than 2,000 stores in 14 states including Whole Foods Market and Fresh Thyme Market. The business employs 12 and is projected to surpass $500,000 in sales this year. He said many food entrepreneurs have a good recipe, but don’t have business acumen on how to gauge a possibly saturated market. There are already a number of granola and hot sauce companies, for example, competing for the same shelf space. A written business plan is necessary for both strategic planning and sharing with lenders in the event a business wants to borrow money and should include a company’s target market, financial projections and product pricing detail. Jill Bommarito, CEO and founder of St. Clair Shores-based Ethel’s Edibles Gluten Free Baking Co. LLC, said many startup food entrepreneurs charge twice the amount of raw materials, but should be charging more. “If you’re going to succeed, employ people and grow, you have to be profitable,” she said. “You have to set aside

money to pay yourself as well — 90 percent of entrepreneurs I know do not.”

2. Learn who regulates your product. Food companies face regulations and licensing requirements specific to the nature of the food business. Building relationships with local food-regulation representatives can ensure paperwork is done in a timely and legal manner. A baked goods company, for example, can contact a local representative from the Michigan Department of Agriculture and Rural Development for help answering legal questions and navigating licensing. Resources like MSU’s Product Center can also help navigate the regulatory maze and offer consulting services at no cost.

3. Find a licensed food space. Many food entrepreneurs begin making their products at home. Michigan’s Cottage Food Law allows food entrepreneurs to produce certain types of foods at home without being licensed by the Department of Agriculture and Rural Development, but there are limitations. Only certain types of products apply — such as jams, baked goods and teas — and the law prohibits annual sales exceeding $20,000 for home-produced foods. Food entrepreneurs looking to expand should search for a licensed commercial food space — such as a baking facility, church or hall that can be rented. Incubator kitchens can also be a cost-effective option that allows entrepreneurs to rent space, and often include equipment. Detroit Kitchen Connect, in partnership with Eastern Market Corp., helps connect food entrepreneurs with incubator kitchens. Eastern Market’s Shed 5 provides a community kitchen for food entrepreneurs as well. Location should also be considered, as well as competitors in the area. Alexandra Clark, founder of Hamtramck-based Bon Bon Bon LLC, grew up in Plymouth, but chose Hamtramck for her location. “At the time I opened my chocolate shop, there were five in Plymouth, so it wasn’t an option,” said Clark, who employs nine and sold about 100,000 bonbons this year.

4. Source ingredients and equipment. When it comes to purchasing equip-

ment, start with what you need first, rather than purchasing what you think you’ll need in the future. “It’s tragic to me when I see entrepreneurs who will spend a bunch of money on equipment that are way beyond where they need to be,” said Jess Sanchez-McClary, founder and CEO of McClary Bros., which makes drinking vinegars served in more 1,000 locations and in 27 states. Bommarito of Ethel’s Edibles said to be profitable, entrepreneurs should never be paying retail for raw materials. Seek wholesale or direct sources. “If you’re going to Kroger to buy your chocolate chips, you’re in trouble,” she said.

5. Pay attention to packaging. A food product should be marketable both on and off the shelf. Working with a graphic designer will help create unique packaging that can make your product stand out. Sanchez-McClary worked with a graphic designer to create the current McClary Bros. label, which evokes a 19th century vibe. Clark, who self-funded Bon Bon Bon, uses recyclable cardboard because it keeps the chocolate fresh, is environmentally friendly and is cost-effective.

6. Market test your product Consumers are more likely to buy a product if they have an opportunity to taste it. Bring samples to the farmers market, do product demonstrations at stores and take advantage of craft shows, festivals and local holiday events. Joseph McClure, co-founder of McClure’s Pickles, said most food entrepreneurs gain initial exposure and sales from farmers markets. Online marketing, such as social media work, is another way to reach customers and gain direct sales.

7. Build relationships with retailers. Visit local stores, build contacts with managers and allow them to taste test your product. Bring a sales sheet that outlines product attributes, packaging and how it’s distributed. That’s how Scott Owens of Dearborn-based Owens Family Foods LLC, which makes Scotty O’Hotty brand hot sauces, first landed on Westborn Market Group’s

shelves.“I went in, talked to the manger, brought samples, and once they tasted it, they liked it,” Owens said. Last year, the company sold 83,000 bottles of sauce, and expects an increase of 240,000 bottles sold with the addition of Kroger Co. and Meijer Inc. shelves.

8. Network. One of the biggest challenges for food startups is food sourcing. New companies tend to have less buying power, making it harder to contract the amount of materials needed. Building contacts with local farmers can help you leverage. Trade shows and industry events are also a way to network with other entrepreneurs and be in front of buyers.

9. Go at your own pace. Common issues many food companies face include cash flow, and growing too fast. Food entrepreneurs should focus on growing at a sensible pace and establishing solid footing before considering leasing space or buying more equipment. “I’ve seen a lot of people outgrow their initial production facility and aren’t sure where to go, or don’t have the resources to expand to a larger facility,” said Michael Geiger, business adviser for Goldman Sachs Group Inc.’s 10,000 Small Businesses program at Wayne State University, which has helped about a dozen food entrepreneurs navigate their growth plan.

10. Consider paying someone else to distribute your product. In startup mode, most food entrepreneurs distribute and package their products themselves because they do not have the margin to hire an outside company, but growing companies may find hiring a distributor is more efficient. Bommarito discovered that hiring a distributor saved her about a 4 percent margin increase. “It’s a much better use of your time, the company’s time and putting people to work at what they’re best at,” she said.

 For more tips for food entrepreneurs, visit crainsdetroit.com/foodeconomy.

PHOTO BY JACOB LEWKOW

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY

How entrepreneurs compete for grocer shelf space By Marti Benedetti mbenedetti@crain.com

Mark Tomas compares growing a successful food product to “running a marathon at sprinter speed.” The founder and owner of Bloomfield Township-based Rib Rack Distributing LLC, a manufacturer of barbecue sauces, marinades, spice rubs and tenderizers, would know. He has been “running” since his product was chosen for the shelves of Grand Rapids-based Meijer stores five years ago. “We started one small batch at a time, and built our company store by store starting with small, local grocers,” he said. “Getting your first large retailer is very important — if you do well there, the other chains will start calling.” Rib Rack now is in Kroger, Publix, Albertsons, Whole Foods and Sprouts, in 50 states and is the fastest-growing BBQ brand in the country. Breaking into the big leagues is more difficult now than when Tomas started in 2011. Competition is stiffer because of the sheer number of food entrepreneurs vying to get their products from a private kitchen to the shelves of a major grocer, according to those in the grocery business. But there is a silver lining: increasing demand among big chains for products they can adver-

tise as local. Picking winning products is the job of the major grocery chain’s buyers, said Pete Heinz, director of grocery merchandising for Meijer. “We have 20 buyers in grocery.” A major local venue for buyers is the Making It in Michigan Marketplace Trade Show at the Michigan State University Product Center in November. Organizers are expecting more than 200 vendors this year. Meijer will be using the show to establish its 2017 selection of Michigan-made products for more than 100 stores across the state. Kroger spokesman Ken McClure said in an email that the retailer also starts many of its local relationships at the event. The two biggest national trade shows for food entrepreneurs trying to sell their wares is Expo West in Anaheim, Calif., which specializes in natural and organic products, and the Fancy Food Show in New York and San Francisco. Heinz said that when Meijer buyers go to a show, they are looking for local products that are following trends, such as products that give back to the community — especially popular with millennials — or anything related to craft brewing or artisanship. “We try to give them a chance if

we can,” Heinz said. “Buyers love looking at these products and, if the businessperson is passionate, we will give them a try. But sometimes they just aren’t ready. Then we send them to (MSU) for help.” Matthew Birbeck, senior project director for the Food Processing and Innovation Center at the MSU Product Center, said consumers are looking for products that “have unique attributes, anything made with Michigan-grown products.” The most popular items chosen by grocers are “shelf stable or have an extended shelf life,” such as jams, jellies, syrups and mustards and popcorn and tortilla chips. Product trends continue to evolve. Last year, products created around chiles were the rage. This year, he is seeing that “soups are in vogue as is drinking vinegar and fermented foods such as kimchi, pickles and pickled (vegetables). There's often a probiotic or health attribute involved.” MSU's trade show at the Product Center can help young businesses get their products to the marketplace, he said. The show allows them to sell their products to the public or grocery buyers. The first show was eight years ago and featured 30 vendors; this year it will have 200 vendors. Roughly 150 buyers come to

RIB RACK DISTRIBUTING LLC

Rib Rack shares Meijer shelf space with

its BBQ sauce competitors.

look at the new products. “Pete (Heinz) is now making this the designated show for Meijer to find its products,” Birbeck said. “So if chosen, an entrepreneur gets their product on the shelf at a Meijer, Kroger, Westborn Market or Hollywood Market. They all attend, which makes it Michigan's largest specialty food show. My job is to help them with due diligence.” Birbeck said getting a product in a regional market such as Westborn is an excellent and manageable way to start.

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One thing companies do wrong is underestimate the amount of product required for entry into even a limited number of our locations, McClure said. “We commonly start new products out in 10 to 40 of our stores, depending on the product and region, and require that some form of distribution system is in place. Many small companies may not have the production ability to meet the demand necessary for that commitment.” While there are opportunities at trade shows and with buyers, not everyone has an easy time of getting their product on the grocery shelves. Motor City Popcorn owner Ronier Golightly founded his business four years ago, and his popcorn has landed in some stores. It can be found at Detroit Metropolitan Airport, Hollywood Market in Royal Oak, several Detroit-area gas stations, and Red Truck Fresh Produce in Eastern Market. But he can't crack the majors. “My experience is those stores don't want to work with individual companies,” he said. “Imagine if every brand brought their product to (the big stores) and they had to cut a check for each brand. So the big grocers want me to get a distributor, but when I approach a distributor, they want to know who else is selling with me. Everyone wants to wait for someone else to make the first move.” Golightly said his strategy now is to improve marketing his popcorn and to have his own kitchen space, which will give the brand greater professionalism. “I have a couple distributors who have shown some interest, but they think I should have my own building,” he said. He now uses the kitchen in a Royal Oak church. Birbeck said popcorn and chips are saturated categories, making it harder for them to get shelf space. “The big players tend to get the shelf space. That is such a competitive market,” he said. Davita Davison, director of marketing and communications for Food Lab Detroit, said food business people need to understand it can take years to land real estate on grocery store shelves. "They start out selling their products at farmers markets," she said. Food Lab Detroit plays the role of concierge by guiding food producers to where they need to go and who they need to meet to reach their goals, she said. Food Lab has 202 Detroit-area businesses. Davison said small food businesses need to realize that giant companies such as Campbell Soup Co.’s multiple brands get the prime space at the grocery stores. “The big brands have a stranglehold on the stores,” she said. But grocers such as Meijer and Whole Foods make an effort to carve out sections of their stores for local brands.” “Meijer has been terrific,” Tomas said. “They like the fact that we are local, have great products and a loyal customer base.”

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

SPECIAL REPORT: SECOND STAGE

Inside jobs or outside work? By Rachelle Damico

Special to Crain’s Detroit Business

JACOB LEWKOW

Tim Smith, CEO of Skidmore Studio, decided to outsource the code-intensive side of the company’s website. “We only do what we’re experts at. ... If we can focus all our energy on the creative, we can do better work.”

How do you know whether to dole out work internally, or hire an outside company? Jane Owen, president of Vistage Michigan, a peer-to-peer business coaching organization in St. Clair Shores, says there are many factors to consider. A business should first recognize if it has the budget and capability to understand the process in-house, Owen said. “Outsourcing of a subject-matter expert can be much more efficient,” she said. “It reduces overhead costs internally and allows you to have flexibility in your staffing — you’re not paying for any kind of benefits or all the back end in costs when you have an employee.” These are factors Tim Smith, owner and CEO of Skidmore Studio, considered when it came to outsourcing Options for his Detroit-based n Skidmore goes design firm, which outside, Page 26 specializes in brandn Hohauser brings ing for millennials. task inside, Page 27 “The hard costs are only the tip of the icen Sigma picks both berg,” Smith said. “It’s options, Page 27 about expertise and the quality of work.” Owen said companies should consider insourcing when they have grown enough to afford the overhead costs, or when it’s important that the business process is closely connected to the culture of the company. “You have a lot more control in terms of quality,” she said. “When you outsource, you lose the ability to connect the culture you’re creating internally, and it’s harder to ensure that you’re always delivering the same kind of quality you would want to have connected to your company.” Culture played a major factor in the decision by Troy-based executive recruiting firm Harvey Hohauser & Associates LLC to bring in employees to do a service that was previously outsourced. “It solidifies more when they’re here every day and I’m telling them about interactions I have with the client,” CEO Todd Hohauser said. In this month’s Second Stage, Crain’s talked to three companies to find out how they made decisions when it came to insourcing versus outsourcing.

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

SPECIAL REPORT: SECOND STAGE

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Skidmore Studio outsources coding, PR By Rachelle Damico

Special to Crain’s Detroit Business

Advertising and design firm Skidmore Studio sticks solely to the cre-

ative side of things. The Detroit-based company, which specializes in branding for millennials, keeps all design-related business functions in-house — including branding ideas, strategizing and the creative execution for design. “We only do what we’re experts at,” said Tim Smith, owner and CEO. “There’s a philosophy internally that if we can focus all of our energy on the creative, we can do better work.” Skidmore outsources everything else — which can include photographers, website developers and even public relations work. The company has 19 employees and reached about $7 million in revenue last year. “A lot of these decisions go to a respect for the kind of work that goes into it,” Smith said. “That’s what they do every day and they’re great at it, and I want that to come in return — I don’t think a PR firm is the best place to go for your design work.” He said Skidmore always focused on design internally, but it took a few years for the company to define what constitutes creative work. Previously, Skidmore outsourced website developers to create the company’s website, but realized the front-end design — how the user interacts with the website — was more on the creative side and in the company’s area of expertise. Rather than hire a vendor to do a complete website build, Skidmore now outsources back-end developers only — the more code-intensive side of website building required to make the website work. This would give Skidmore more control over how the users interact with the company’s website. “Front-end designers sometimes misinterpret the original intent in the navigation or the user experience, and we had to go back three or four times to get that intent right,” Smith said. “We decided it’s more efficient to have that in our own shop, so when the user gets to it, they have that experience that was imagined.” There were challenges along the way. Smith said he has hired vendors that showed a good product but weren’t able to go back and recreate it when needed. In the past, Skidmore’s client wanted to add a new field to Skidmore’s website database after it was completed. When an outsourced web developer went back to make changes, it couldn’t replicate the database programming language, leaving Skidmore to rebuild the code onto the existing database. “That becomes the studio’s expense, so you have to be careful

JACOB LEWKOW

Tim Smith is owner and CEO of advertising and design firm Skidmore Studio.

when you’re making certain assurances to your clients because you’re accountable to those,” Smith said. “When you outsource, you need to make sure those people are accountable to you.”

Lessons learned Smith now vets vendors by interviewing employers and asking specific questions about their work processes. “If I would have focused more on how different perspective vendors got to that end product, I would have saved a lot of heartache and learning along the way,” he said. Smith said he saves hundreds of thousands of dollars a year by outsourcing web development alone, because it would take a staff of six or seven people to do the work effectively. That means getting staffers up to speed on programming language, mobile versus desktop, and more. “Think about the gain of working with an expert you can outsource and trust, and they’ll actually save money along the way that are going to come in a lot of intangible gray areas that are difficult to measure but very accretive to the bottom line,” Smith said. “Many times, business owners will look at a hard-line cost of — if I pay (a staff member) a salary of X amount of dollars a year, that’s going to save me money — but the end cost of that decision is that they’re hiring somebody that’s either new or not as good, and they lose the expertise.”

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

SPECIAL REPORT: SECOND STAGE “I wanted to bring it in-house so it was more effective and I could have control over it.” Todd Hohauser, CEO, Harvey Hohauser & Associates LLC

Executive recruiting firm brings search process in-house By Rachelle Damico

Special to Crain’s Detroit Business

Todd Hohauser, CEO of Troybased executive recruiting firm Harvey Hohauser & Associates LLC, saw an opportunity to expand his father’s business after the company had been outsourcing an integral part of its business process. The second-generation family business recruits executives and business leaders. These are for positions with starting salaries at $200,000 per year or more. The company has 11 employees and works with businesses mainly between $30 million and $500 million in revenue. For more than 15 years, the company outsourced external name generators — researchers that find potential candidates that match a company’s needs and culture by using job-searching tools such as LinkedIn, Hoover’s and ReferenceUSA. Once the candidates are located, they provide their information to executive recruiters at Harvey Hohauser & Associates, who connect with the candidates. “Finding the right person that not only matches the knowledge, skills and abilities your client needs, but also matches their culture, is very tough,” Hohauser said. The company had been using third-party name generation services in places such as New York or Texas, which Hohauser said made it more difficult for researchers to understand the culture of the company’s clients. “It doesn’t click as well as when I have people here with me every day to talk about the culture of our clients,” he said. “We were still doing our job and delivering candidates, but it was taking longer.” Hohauser hired two external name generators he found by tapping networking connections and using his own outsourced recruiter. “I wanted to bring it in-house so it was more effective and I could have control over it,” he said. Hohauser figures the company has saved millions of dollars by insourcing because the business is filling searches quicker and more effectively; turnaround time is about 100 hours per executive search. “We have more repeat business

now,” he said. “We can focus our efforts more on client services.” Hohauser said outsourcing initially helped the company expand, but having employees internally allows the company to bring more accurate candidates to clients. “Doing outsourcing in the beginning helped us gather momentum and set us up to then hire our own internal people,” Hohauser said. “Insourcing really helps when you’re trying to keep propriety knowledge inside of your company, or to control a certain process.”

Decision time: Make or buy Sigma International goes outside for software engineering, other services By Rachelle Damico

Special to Crain’s Detroit Business

Christopher Naidoo, founder and CEO of Livonia-based automotive manufacturer Sigma International Inc., credited the tier-one supplier’s growth to a combination of insourcing and outsourcing. “Anything we undertake is always a make-versus-buy decision,” Naidoo said. “Is it cheaper for us to make it in-house, or is it cheaper for us to source it?” Sigma’s core technologies are injection molding, decorative plating, LED lighting and painting. The company and its strategic alliances have an employee count of more than 400, and international locations in South Africa, Mexico, China and South Korea and soon will expand to India. Its customers include FCA US LLC, General Motors Co. and Ford Motor Co.

Naidoo said Sigma has seen a 40 percent to 50 percent growth increase in the past six years, insourcing anything connected to its core technologies and outsourcing business functions that don’t provide a capital investment or dis-

tract from their area of expertise. “Stick with your core strength and continue to broaden and strengthen that,” Naidoo Christopher said. “For items Naidoo: Stick with that are not core strength. called to you, look to the outside for companies that are experts in that field.” Sigma ships its own products to its customers regionally and internationally, giving the company a competitive edge. That includes items many automotive manufacturing companies don’t want to deal with, such as an auto interior console part that may stack awkwardly due to its complex shape. Because of the unique shipping specifications, Sigma can only fit about 10 or 15 items in a shipment at a time. “In those cases, we’d make the decision to do that ourselves, be-

cause we know logistically we will be at a better position to ship it to our customers,” Naidoo said. Sigma outsources engineering service providers that provide software specific to an automotive company’s needs. Since different automotive companies require different engineering design work, it would be too costly for the company to invest in it on its own. “If we had to invest our own capital into it, we may not see a return in our investment,” Naidoo said. “We’d also have to train someone to teach them new technology versus going out and buying it from somebody else.” Naidoo said that when it comes to insourcing versus outsourcing, companies should keep in mind their reputations are on the line either way. “At the end of the day, you have the ultimate responsibility when you’re providing this component to somebody else,” he said. “If somebody doesn’t perform, you’re ultimately responsible. It’s your name on it — your financial risk— and you take on the liability.”

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

CALENDAR WEDNESDAY AUG. 10

Geo-Targeting Your Audience. 11:30

a.m.-1 p.m. Troy Chamber of Commerce. Brian Blau, Quell Communications Group, will walk attendees through a digital marketing program to target specific audiences. Troy School District Services Center. $28; $18 Troy Chamber members. Add $5 for registering on day of event. Contact: Jaimi Brook, phone: (248) 641-8151; email: theteam@troychamber.com.

THURSDAY AUG. 11

ASE Talent Symposium. 7:15 a.m.4:15 p.m. American Society of Employers. Talent acquisition, management and development practices will be topics. Aaron Olson, Northwestern University instructor, chief talent officer and author of Leading With Strategic Thinking, will speak on “Developing Strategic Leadership: The Key to Competing.” Starr Shafer, president of StarResults and senior consultant with Career Systems International, will speak on “Develop Your Employees or Someone Else Will.” Management Education Center, Troy. $219 ASE members; $259 nonmembers. Contact: Dan Van Slambrook, phone: (248) 223-8008, or Ed Holinski, phone: (248) 223-8017. Website: aseonline.org.

DEALS & DETAILS CONTRACTS

Simons Michelson Zieve Inc., Troy, an

advertising agency, has added

General RV Center, Wixom, to its list

of clients. Websites: smz.com, generalrv.com.

Truven Health Analytics, Ann Arbor, an IBM company, has partnered with Allen Technologies Inc., Austin,

Texas, to integrate Truven’s medication essential fact sheets into Allen’s E3 patient engagement products to give patients access to information about their prescribed medications. Websites: truvenhealth.com, engagewithallen.com.

MOVES

Tanoury, Nauts, McKinney & Garbarino PLLC has moved its law office

from 333 W. Fort St., Suite 1800, Detroit, to 38777 Six Mile Road, Suite 101, Livonia. Phone (313) 964-4500. Website: tnmglaw.com.

NEW PRODUCTS

Ally Financial Inc., Detroit, and Detroit Water Ice Factory, Detroit,

announced a new water ice flavor called Ally Caring Coconut, with proceeds going to benefit the Detroit community as part of its 313 pledge. Websites: ally.com, detroitwaterice.com.

DESïN LLC, Bloomfield Hills, a robotic products firm, launched Obi, a robotic device to give individuals with physical challenges the ability to take control of their meals. Website: meetobi.com. 88 Health Products, Ann Arbor, a nutraceuticals and topical solutions company, has announced FrutosAid brand xylose isomerase supplement to address fructose malabsorption, a dietary fructose intolerance. Website: 88healthproducts.com.

NEW SERVICES

Haley Mechanical, Dexter, a plumb-

ing, HVAC and electrical services provider, announced the addition of Air Scrubber Plus, a home purification system, to its services. Website: haleymechanical.com.

SME, Dearborn, an organization

(formerly the Society of Manufacturing Engineers) that trains and develops manufacturing workforce, has launched a high school membership program to educate the next generation on the value of manufacturing and encourage careers in the field. Website: sme.org.

Meijer Inc., Grand Rapids, added curbside service to its Rochester Hills location. Customers can shop online and pick up their groceries curbside without leaving their vehicles. Website: Meijer.com.

MedNetOne Health Solutions, Rochester Hills, a physician organization, announced its diabetes prevention program, a lifestyle and diabetes intervention plan aimed at preventing Type II diabetes. Website: mednetone.net. Advanced Manufacturing Media,

Dearborn, a manufacturing news and technology information source that is a division of SME, has launched a new website, advancedmanufacturing.org. It encompasses original and live reports about manufacturing, including content from magazines Manufacturing Engineering and Smart Manufacturing, the podcast Advanced Manufacturing Now, SME’s industry yearbook series, and highlights from SME’s scholarly journals. Website: sme.org.

STARTUPS

A World of Relaxation, Southfield, a

therapeutic massage clinic, has opened at 24901 Northwestern Highway, Suite 315, Southfield. Phone: (947) 282-8872. Website: aworldofrelaxation.com.

Deals & Details guidelines. Email cdbdepartments@crain.com. Use any Deals & Details item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.

ADVERTISEMENT SECTION

FINANCE Christopher Soupal

Senior Vice President, National Sales Director, SBA Division Crestmark Bank

HEALTH CARE

Michael Jasperson Vice President, Eastern Region Priority Health Jasperson will oversee business development, sales and product growth in southeast Michigan. Jasperson was the vice president business development, chief marketing officer for Hospice of Michigan leading sales and marketing strategies for the state-wide organization. Prior to that, Jasperson was regional sales manager for Blue Cross Blue Shield of Michigan where he led a team charged with establishing and maintaining relationships with hospitals, the Michigan Health & Hospital Association.

Crestmark promoted Christopher Soupal to senior vice president, national sales director of its SBA Division. He joined Crestmark in 2014 to help launch the SBA Division, and his efforts have been integral in its growth from de novo to the rank of the 72nd largest SBA lender in the U.S. Soupal has more than 20 years’ experience in finance, and is a graduate of Ferris State and the executive management program at the College of Business at University of Notre Dame.

CONSTRUCTION Rod Elgie

Chief Operating Officer White Construction White Construction is pleased to welcome back Rod Elgie as Chief Operating Officer. Rod was formerly Vice President of Construction Operations for White from 2001 to 2007. Rod’s return to White signals a renewed commitment to providing the highest caliber of operational excellence, innovation and investment in talent.

INSURANCE Richard McGregor President

Guy Hurley Richard McGregor has been elevated to president of Guy Hurley’s Troy office after serving as vice president since 2009. With 23 years of insurance industry management experience, he will assist CEO Paul Hurley in leading the insurance and surety firm, building innovative risk management solutions. McGregor will continue to manage the firm’s insurance service offerings, which include property/ casualty, professional liability, cyber and captive, in addition to surety and claims advocacy.

MANUFACTURING Adam J. Wilson Director of Brand Experience Carhartt, Inc. Carhartt has hired Adam J. Wilson as its new director of brand experience. Wilson is responsible for all Carhartt-branded experiences, content, and marketing campaigns, with PR, entertainment marketing, brand advertising & media reporting to him.

PEOPLE: SPOTLIGHT St. Vincent de Paul names executive director The Society of St. Vincent de Paul of the Archdiocese of Detroit has named Kelly Services Inc. executive

Christopher Stark as

executive director, effective Sept. 1. Stark, 51, succeeds Bill Brazier, 65, Christopher Stark who is retiring after leading the nonprofit for more than 12 years. Brazier previously told Crain’s he plans to remain in the area and volunteer for the charity. Stark, who joined Kelly Services in 1999 as a branch manager, most recently served as global practice consultant for the Troy-based company. He is an ordained permanent deacon in the archdiocese and serves in that role at St. Thomas More Catholic Church in Troy. St. Vincent de Paul provides food, shelter, medical and dental care, utility assistance, disaster relief and emergency support to nearly 300,000 households each year. It operates 11 thrift stores and donation centers to produce revenue to support its mission.

Ex-Rock Ventures exec named foundation VP Lisa Dancsok, formerly a vice president at Rock Ventures LLC, will join the Detroit-based

Community Foundation for Southeast Michigan as

vice president of marketing and communications, effective Aug. 15. Lisa Dancsok Dancsok, 55, was vice president of corporate philanthropy, marketing and communications at Detroit-based Rock Ventures. She also has served as senior vice president of marketing and legislative affairs at the Michigan Economic Development Corp. and as managing partner of D&D Advisors and held senior-level positions at Blue Cross Blue Shield of Michigan.

Logicalis Group names Brandtneris U.S. CFO The Logicalis Group, an international IT and managed-services provider, has appointed Sally Brandtneris as CFO in the United States. She will continue to work out of Logicalis' Bloomfield Hills office. Brandtneris, most recently vice president and CFO for Stefanini IT Solutions, was a finalist in the 2015 Crain’s CFO of the Year Awards.

HOSPITAL FROM PAGE 1

of its pharmacy and radiology departments, expand ancillary services and create a new intensive care unit. The hospital also will add a second state-of-the-art cardiac catherization laboratory, expand the entry lobby and cafeteria on the first floor and renovate the emergency department. â&#x20AC;&#x153;We had high length of stay in the ER. It was eight hours; now it is three hours on average,â&#x20AC;? George said. â&#x20AC;&#x153;Our goal is to improve time and outcomes.â&#x20AC;? So far under Prime management, George said, Garden City has been recognized by national quality organizations like Leapfrog Group, Healthgrades and the state's largest health insurer, Blue Cross Blue Shield of Michigan, which awarded the hospital with a distinction award for maternity care and hip and knee replacement program. â&#x20AC;&#x153;This shows the staffâ&#x20AC;&#x2122;s commitment to the deal. We are finally getting recognized for our hard work,â&#x20AC;? he said. George said that when he was hired by Prime as chief administrative officer in November 2014, he had never heard of the for-profit company founded in 2001 by Prem Reddy, an internist turned business-

Saju George: Wants to work collaboratively with other hospitals.

man. Prime now is the fastest-growing health care company in the U.S. with 43 hospitals in 14 states. George spent five years with Saginaw-based

St. Maryâ&#x20AC;&#x2122;s of Michigan Health System, serving

as administrative director, after starting his health care career as a physical therapist in 1996. He recently hired former Ascension Health executive Gina Butcher as CFO. While Prime hospitals have won numerous national awards and quality recognitions, the U.S. Department of Justice in late June agreed to take up a false claims act whistleblower lawsuit filed by a former case manager. The allegations include that Prime hospitals in California pressured ER doctors to admit patients without sufficient medical necessity instead of holding them in the ER for observation. George deferred comment to Prime corporate, which released the following statement to Crainâ&#x20AC;&#x2122;s: â&#x20AC;&#x153;Prime Healthcare denies the allegations and remains committed to providing quality care that patients need and deserve. Prime Healthcare

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said. Yusuf Hai, managing director of business advisory services with Southfield-based CIG Capital Advisors, said Garden City needs additional business relationships with nearby hospitals to generate sufficient revenue for long-term growth. â&#x20AC;&#x153;They are doing better internally, cutting the (financial) bleeding and have stabilized operations,â&#x20AC;? Hai said. â&#x20AC;&#x153;I am not sure Prime can make too much money off that location because they are a lone hospitalâ&#x20AC;? in a market dominated by regional system-owned hospitals. â&#x20AC;&#x153;One or another of the other players in the market will probably make a play for them,â&#x20AC;? Hai said. â&#x20AC;&#x153;There are multiple conversations going on. Garden City has improved to the point where they might be appealing to a larger system.â&#x20AC;? Hai said Beaumont Health makes the most sense to acquire Garden City. Beaumont officials said there are no current talks with Garden City. But on Prime adding other Michigan hospitals, George said the company is interested in expanding in Michigan. There are no talks in Southeast Michigan, he said. â&#x20AC;&#x153;Prime has 43 hospitals now,â&#x20AC;? George said. â&#x20AC;&#x153;We were the 30th two years ago. We have the fastest growth in the U.S.â&#x20AC;?

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As part of the turnaround, George is discussing clinical collaborations with hospitals and health care systems in Southeast Michigan. â&#x20AC;&#x153;We are surrounded by big systems and want to work collaboratively with them. We have (clinical services) that donâ&#x20AC;&#x2122;t belong here and we wonâ&#x20AC;&#x2122;t do ... pediatrics and neurology. We are a teaching hospital, but we need to partner with other hospitals on clinical care.â&#x20AC;? The closest other hospitals to Garden City are St. Mary Mercy Livonia, which is part of St. Joseph Mercy Health System; Beaumont Hospital Wayne (formerly Oakwood Wayne Hospital); Beaumont Hospital Farmington Hills (formerly Botsford Hospital); and Henry Ford Wyandotte Hospital. Beaumont Hospital Dearborn has an agreement with Garden City for neonatal support, neonatal intensive care unit services and neurosurgery residents who rotate at the hospital. Henry Ford and St. Joseph officials said there are no talks with Garden City. George declined to offer more specifics, citing ongoing talks. But he suggested that Garden City doctors could refer certain patients to more advanced hospitals with high technology and specialized services for treatment and be seen at Garden City for follow-up care. â&#x20AC;&#x153;Patients donâ&#x20AC;&#x2122;t like to travel. They like to stay local when they can,â&#x20AC;? he

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is confident that it will prevail and be found to have completely complied with all federal regulations regarding Medicare inpatient admissions.â&#x20AC;? But from a financial standpoint, Prime and George have turned around Garden City in revenue, profitability and patient volume, George said. â&#x20AC;&#x153;We have taken 11 percent of costs of the hospital,â&#x20AC;? he said. â&#x20AC;&#x153;2014 was a positive year and 2015 was a good yearâ&#x20AC;? financially. Financial reports for 2015 and 2016 were not yet available. During the 15-month period from Sept. 30, 2013, to Dec. 31, 2014, Garden City earned net income of $17.9 million on net patient revenue of $175.8 million, Garden City officials confirmed. This contrasts with $8 million in operating losses in 2012 and 2013, according to Cost Report Data, a Louisville, Ky.-based consulting firm. â&#x20AC;&#x153;We have had patient volume increases every year from 2013 to 2016 and also improvements in efficiencies because of better care coordination,â&#x20AC;? George said. For example, inpatient length of stay was cut to 3.4 days this year compared with six days in 2013, he said. â&#x20AC;&#x153;We have had good positive impact from Healthy Michigan (Medicaid expansion in 2014),â&#x20AC;? George said. â&#x20AC;&#x153;Charity care has become Medicaid.â&#x20AC;?

Page 29

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6 CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

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AUTO

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FROM PAGE 3

completely integrated modular unit that connects vehicles to infrastructure, other vehicles and the cloud. The unit will upgrade the hardware easily, focused on security and software capable of over-the-air updates. The city of Detroit will play a major role in Lear’s success, or failure, in the connectivity space. Lear’s infrastructure technology, which it gained in the acquisition of former Silicon Valley startup Arada

component in the 125-mile test-bed of installations from I-96 near General Motors’ Milford Proving Grounds, I-94 from Ann Arbor to metro Detroit, U.S. 23 from Ann Arbor to Brighton, and elsewhere. Its systems also are used in downtown Detroit. “Detroit is the only downtown in the country with a network deployment,” Singh said. “We’re currently looking to work with the city on creating connected buses, etc.” Plymouth-based Varroc Lighting Systems Inc., the U.S. unit of India’s Varroc Group that was formed from

INDEX TO COMPANIES

These companies have significant mention in this week’s Crain’s Detroit Business: Brother Nature Produce .....................................19

Harvey Hohauser & Associates .................25, 27

Cascade Engineering .......................................... 31

Herbruck’s Poultry Ranch ...................................11

Cherry Capital Foods .......................................... 15

Jackson College .....................................................3

CultureSource ....................................................... 9

Lear ..........................................................................3

Dave’s Sweet Tooth ............................................ 22

LMC Automotive US ..............................................3

Detroit Bold Coffee ............................................ 22

The Local Grocer ................................................. 22

Detroit Ento ......................................................... 22

Michigan Agri-Business Association .......... 11, 32

Detroit Food Academy ....................................... 22

Michigan Department of Agriculture ......... 11, 32

Diversified Restaurant Holdings ........................ 6

Michigan Department of Corrections .............. 31

D-Town Farm .......................................................20

Michigan State University ..................... 14, 18, 22

Eastern Market Corp. .......................................... 13

Michigan Urban Farming Initative ....................19

Eden Urban Farms LLC ...................................... 22

Motor City Popcorn ............................................ 24

Edibles Rex ........................................................... 22

Old World Gluten-Free LLC ................................ 22

EHM Senior Solutions .......................................... 9

Pop Daddy Popcorn ........................................... 22

Evangelical Homes of Michigan ......................... 9

RecoveryPark Farms ...........................................19

Food for Thought .................................................18

Rib Rack Distributing LLC .................................. 24

Food Lab Detroit ................................................. 24

Sigma International ............................................27

Garden City Hospital ............................................. 1

Skidmore Studio .......................................... 25, 26

Garden Fresh Gourmet .......................................16

Splt ......................................................................... 4

Grand Traverse Pasta LLC ................................. 22

Star of the West Milling .......................................11

Great Lakes Potato Chip ................................... 22

Varroc Lighting Systems ...................................30

Grow Eastern Market ..........................................14

Wayne State University ........................................3

Harvest Michigan ................................................ 15

Zilke Vegetable Farm LLC ............................ 15, 22

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the $92 million acquisition of Visteon Corp.’s lighting division in 2012, discussed its new adaptive drive beam headlamp system. The new lighting system, called ADB, adapts to the environment. Specifically, the cluster of LED lights turn on and off individual lights to avoid blinding other drivers. Scott Montessi, director of product development for Varroc Lighting, said six or seven of the nearly 40 LED-lights system are switched off to create a black-box effect around vehicles in the beam of light. (Photo, Page 3) “We’re in the middle of a renaissance for (automotive) lighting,” Montessi said. “Lamps have been the same for nearly 60 years, but LEDs and new technologies are changing the landscape.” The ADB system uses cameras equipped on vehicles with advanced safety functions — such as lane-departure warning and emergency-braking systems — that can detect light coming from other vehicles. The technology will be on European models next year. Meanwhile, the supplier has joined a push to get U.S. regulators to adopt European standards for a new lighting technology. Audi AG and Toyota Motor Corp. have been proponents of the technology. Toyota even petitioned the National Highway Traffic Safety Administration to mandate, or allow,

ADB systems in the U.S. Montessi said he expects U.S. regulators to draft rules allowing ADB systems in the next 12-18 months. To battle any oncoming recession in North America, Michigan went on the offensive by signing a memorandum of understanding with Ontario to increase the region’s competitiveness in the automotive industry. The agreement is designed to create best practices, cohesive public policy, increased supply chain integration and technology transfer agreements, the state said last week. Gov. Rick Snyder and Ontario Premier Kathleen Wynne signed the agreement on Aug. 3. Ontario and Michigan account for more than 26 percent of vehicle production in the Great Lakes region. Trade between the two regions in 2015 totaled $74 billion, the state said. “Collaborating to improve the auto sector is a great use of resources that will lead to continued growth and job creation in both economies,” Snyder said in a statement. “Sharing best practices and integrating our supply chains will advance Michigan’s and Ontario’s positions as leaders in the auto industry.” The announcement comes amid labor talks between Canada’s largest private union, Unifor, and the Detroit 3. The result could ultimately define how much auto production remains in Ontario. The current labor agreement expires Sept. 19. Wynne said Ontario and Michigan must find a niche in the marketplace to attract new auto investment in the region, pointing to an “educated workforce” as an example. Automotive News contributed to this report.

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

GRANT

inmates at the Thumb Correctional Facility in Lapeer, while Delta Col-

FROM PAGE 3

any other selected college or university in the nation, according to the department. Mott Community College in Flint and Delta College near Bay City also were chosen to participate. Michigan is second only to Texas in the total number of Pell Grants received. The three schools will teach students at a number of state prisons, including the Detroit Re-entry Center on Ryan Road and Macomb Correctional Facility in New Haven, according to the federal government. State corrections officials and college administrators hope the program will be a catalyst for reduced recidivism, as they work to send paroled ex-offenders back into their communities with education, skills training — and job opportunities. The last remains challenging. Many employers still hesitate to hire candidates with felony convictions, though proponents say there are signs that more are becoming receptive to the idea. For instance, a movement to remove the check box

At a glance The U.S. Department of Education has awarded more than 60 U.S. colleges and universities the ability to offer Pell Grants to inmates in state and federal prisons in order to study whether participation in higher education while in prison increases with financial aid. Here’s how many grants states won: Texas: 2,544 Michigan: 1,475

New York: 1,110 Ohio: 1,040 Connecticut: 801 New Jersey: 598 California: 582 Alabama: 556 Arkansas: 400 Iowa: 314 Oklahoma: 279 Wisconsin: 250 West Virginia: 215 Maryland: 209 Virginia: 187 Oregon: 186 South Carolina: 180 Washington: 135 Pennsylvania: 115 Minnesota: 100 Indiana: 100 Illinois: 86 Massachusetts: 72 Vermont: 56 Florida: 50 Nebraska: 30 Maine: 25 Total Pell Grants: 11,695 Source: U.S. Department of Education

lege won 15 slots to teach general management and small-business programs at Saginaw Correctional Facility, administrators at both schools testified.

Taking a chance

MICHIGAN DEPARTMENT OF CORRECTIONS

Jackson College held a ceremony for graduates at the Parnall Correctional Facility in

in May. The college has been a leader in Michigan in teaching prisoners.

on job applications that requires candidates to disclose their criminal records up front — which often prevents a paroled prisoner from landing an interview — is gaining traction. “Prior to this, I just never dreamed — I never knew — what capable people were waiting behind those bars for an opportunity,” Butler said. “If I didn’t know that, how can I blame any employer out there for thinking the same thing?”

A way out In 1994, Congress passed a provision in a federal crime bill that prohibited inmates from receiving Pell Grants while in prison. The Obama administration last year announced the new pilot program, called Second Chance Pell, that will waive the restrictions on incarcerated students in an effort to determine the link between access to financial aid and participation in higher education. The selected colleges were named in June. To qualify, prisoners must be within five years of release. Federal Pell Grants are worth up to $5,815 per student this year, based in part on financial need, the cost to attend classes and a student’s full- or parttime status. A few years ago, Michigan was one of three states, including New Jersey and North Carolina, chosen to participate in a five-year effort called Pathways from Prison to Postsecondary Education. Sponsored by the New York-based nonprofit Vera Institute of Justice and funded by several foundations — including the Battle Creek-based W.K. Kellogg Foundation and the Ford Foundation, based in New York City — the Pathways pilot offered inmates within two years of their release date in Pontiac and Kalamazoo the chance to take college classes and receive other support services. Researchers will follow the inmates for two years once they’re paroled. Jackson College also participated in the Pathways project; some of those students not yet released are expected to transition into the Pell program, Butler said. “It’s all about breaking the cycle of incarceration and (creating) of-

fender success. And I believe that the key to that is education and employment,” said Heidi Washington, director of the Michigan Department of Corrections. “How could we expect people who, by and large, come from environments which are not comparable to the environment that many of us came from ... to get out of prison and be successful without these tools?” In 2013, Santa Monica, Calif.-based research organization Rand Corp. released a study financed by the U.S. Department of Justice that analyzed existing research on the relationship between higher education and recidivism. Its authors concluded that inmates who received career or college education while incarcerated had up to a 43 percent lower chance of another offense than their counterparts did. Michigan’s Corrections Department this spring launched a residential vocational training program at a state prison in Ionia that simulates a workday while offering inmates the chance to learn skilled trades in carpentry, plumbing and electrical work, automotive technology, CNC machining and welding. A second location will open at Parnall Correctional Facility near Jackson. All participants in Vocational Village, as it’s called, live together in the same housing unit designed to create a supportive learning environment. Washington said her department hopes to replicate the idea with the Pell Grant students. The model makes Michigan a “national leader” in prisoner education and rehabilitation, she testified last week before a state Senate committee. Jackson College will offer an associate of arts degree, an associate in applied science degree in business administration and an associate degree in general studies, along with a certificate in business, Butler said. Jackson will hire instructors to teach inside a number of state prisons, including the Women’s Huron Valley Correctional Facility in Washtenaw County. Mott Community College received 155 grants and will offer two certificate programs in business to

The ultimate goal of all of the education and training efforts, proponents say, is for ex-offenders to land jobs that in turn can help them support their families and communities and lower the risk of committing another crime. Some companies have taken chances on job candidates with felony records; Sakthi Automotive Group USA Inc., a subsidiary of India-based supplier Sakthi Group, has hired dozens of ex-offenders as the company expands in southwest Detroit. CEO Lalit Verma has said he finds paroled prisoners to be among his most dedicated workers. In Grand Rapids, Cascade Engineering Inc. has opted to wait to ask about an applicant’s criminal record until the company is ready to extend a job offer. And even then, the information is shared only with corporate executives, said Mark Miller, Cascade’s president and CEO, who

oversees a $400 million group of 10 companies and 1,700 employees. Cascade has hired “hundreds” of ex-offenders, some of whom work in leadership and executive positions, Miller testified before the Senate committee last week. “We’re confronted with a bubble, and that bubble is moving through the system right now. And we need to replace the bubble with competent technical skills and capable individuals,” Miller said, adding that the company sees an untapped labor pool in ex-offenders and supports the Pell Grant pilot. “For us, this is very simple: Going back to the battle for talent, I would argue that this is mission critical for the state of Michigan.” Washington said the Corrections Department is making a deliberate effort to reach out to employers by inviting them to tour the Vocational Village and by taking inmates’ resumes to manufacturing expos. “There’s always been a stigma. That’s always been one of the biggest challenges for anybody coming out of prison,” she said. “We’re not waiting for employers to come to us. We’re out seeking employers.” Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

Progress. At the heart of West Michigan’s economic development, Lakers are a vital force. Throughout the region and state, Lakers live, work, and lead, helping create solutions that drive growth forward. As a major university, Grand Valley’s economic impact is substantial. As a talent resource, Lakers are uniquely prepared to meet the challenges of a changing world. That’s the Laker Effect.

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

FOOD FROM PAGE 1

Eastern Market Corp. in Detroit as di-

rector of food innovation programs after 15 years with the Michigan De-

partment of Agriculture and Rural Development as an economic develop-

ment specialist. “It enables a farmer to sell more of his crop,” he said, creating demand not just for the product in its own right, but also as an ingredient in other products. With rising transportation costs and the Food Safety Modernization Act ramping up responsibilities for growers, processors and distributors, “it’s becoming much more important to monitor more fully through the food chain, from grower to table,” said Kurt Brauer, partner and chairman of the agribusiness and food industry group at Warner Norcross & Judd LLP in Southfield. That may be spurring food processors to look at their footprint and consider expansions and relocations, and Michigan is in the mix. In the Michigan Economic Development Corp.’s view, the state’s location makes it a prime candidate for new processing, said Tony Vernaci, vice president of global business development. “If you draw a circle around Michigan, within a 500-mile radius you hit more than 50 percent of the

U.S. and Canadian population,” he said. Coupled with the number-one border crossing in North America between Detroit and Windsor, those are strong selling points for Michigan, Vernaci said. At its core, food processing takes a product like an apple from its natural state into something more. It could be apple slices sold as part of a Happy Meal at McDonald’s, applesauce, apple cider vinegar or chopped apple bits to flavor a granola bar. According to U.S. census data for 2010, Michigan ranked No. 19 for agri-food processing with $14.13 billion in food shipments that year. In 2014, the most recent year available, the total value of cash receipts for all agricultural production in Michigan, from livestock to milk, produce and tulip bulbs, was $8.54 billion, according to the U.S. Department of Agriculture. Michigan ranked No. 19 in the farm-level value of all agricultural commodities produced that year based on data collected by the USDA, said Marty Saffell, statistician specialist for the state Department of Agriculture. Federal numbers don’t break out rankings for broad commodity groups, but based on 2015 data, Saffell said, Michigan ranked seventh in the country for the farm-level value of fruits and vegetables sold into the fresh market for consumption, with total sales of $514 million. And

it ranked sixth in the country last year for the farm-level value of produce sold into the processed market, with $360 million in total revenue. Michigan is second only to California in the diversity of fruits, vegetables and other agricultural products it grows or harvests, from cherries to potatoes to pumpkins, honey and maple syrup, according to the USDA. And Michigan’s food processing roots run nearly as deep, bringing increased economic activity for farmers, cities and the state as a whole, through household names like Better Made Potato Chips, McClure’s and Vlasic pickles, Kellogg, Seneca juices and Yoplait. “Michigan has … had to work harder than other states because of limitations,” including a shorter growing season and different soil types that can help or hurt production, said Jim Byrum, president of the East Lansing-based Michigan Agri-Business Association. At the same time, microclimates like those in the northwest and western portions of the state help moderate temperatures on the high and low extremes, providing the opportunity for fruit production, “There’s always opportunity; that’s part of the entrepreneurial spirit here,” Byrum said.

Pure dairy? One area presenting opportunities for increased processing is the

state’s dairy industry. Dairy farmers from drought-ravaged California, the Netherlands and Belgium are increasingly locating their herds here, Byrum said. “Cows like Michigan better. … They produce more milk because it’s cooler and more moderate in temperatures,” he said. Large retailers have begun operating dairies here to capitalize on the milk supply. The Kroger Co. of Michigan operates Michigan Dairy LLC in Livonia, a milk processing and bottling plant. And four years ago, Meijer Inc. acquired a share of Bareman’s Dairy and launched the Purple Cow Creamery, investing $8 million to expand the family-owned dairy in Holland to process white and chocolate milk for Meijer stores across the state. With the increased dairy farmer presence and milk production comes opportunity for processing ancillary products as well, Brauer said. “There are several yogurt and cheese makers looking to locate or expand in Michigan,” he said. There’s also a growing market for new dairy-based products. Continental Dairy Facilities LLC last year began producing FairLife for Coca-Cola Co. Distributed through Coke’s Minute Maid division, which has a plant in Paw Paw, the reconstituted milk product boasts higher protein, less fat and more calcium than regular milk, appealing to consumers on high-protein diets.

The launch came two years after Continental began producing Core Power, a high protein milk shake aimed at fitness enthusiasts, from its Coopersville plant on the state’s west side, for Coca-Cola.

Michigan soy sauce? In the corn field, there’s a resurgence of companies looking at ethanol in fuel, Brauer said. And when it comes to soybeans, most of the 100 million bushels or so grown in Michigan each year are sent to other states to be processed. Some comes back into the state to feed animals. As a new Clemens Food Group pork processing plant ramps up in Coldwater Township, demand is expected to surge for animal feed made from corn and soybeans to feed the growing number of hogs raised in the state. Processing soybeans into meal in Michigan could also offer opportunities to begin making products new to the state, such as soy sauce, DiBernardo said. Zeeland Farm Services near Grand Rapids contracts with soybean growers and grows its own crop to make soybean meal. It then ships that to Asia for use in soy sauce and tofu and uses a portion of it to make animal feed, DiBernardo said. “That’s an example of an exported product that presents an opportunity to make a value-added product like soy sauce here,” he said. Crops like tomatoes and peppers are also processed in other states,

Thank You! Felicia Brabec

Executive, Wayne County

Warren Evans

Executive, Macomb County

Mark Hackel

Mayor, City of Detroit

Mike Duggan

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Executive, Oakland County

L. Brooks Patterson

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

Brauer said. They, too, present processing opportunities, especially given that Michigan is home to families that have done that work, processing pickles, asparagus and potatoes.

Bean counters Michigan, meanwhile, produces more dried beans than what is being consumed domestically in the U.S., said Jamie Zmitko-Somers, international marketing program manager for the state Department of Agriculture. To sell more of their crops, growers are exporting them to Mexico, Central America, the Caribbean, Italy and the United Kingdom. “Our Michigan processors have a great relationship with Busch’s and others, but ... there’s a lot of production here. We certainly would look for opportunities for companies to come and use and process dried beans here in Michigan,” Zmitko-Somers said. Using surplus beans to produce new products, such as bean flour, is already being looked at, she said. “Millennials are not eating canned cherry pie filing any more,” she said. “And a lot of them aren’t necessarily eating canned beans anymore. They’re looking for ways to eat these foods in a more wholesome way, like using dried bean flour in a meat substitute or using tart cherry juice concentrate with health benefits for muscle recovery in (other products).” The MEDC sees opportunities in attracting juice processors to Michigan, given the yields of apples and cherries the state produces, Vernaci said. And there are opportunities for both growing hops and processing them as the craft beer industry grows. Michigan may be fertile ground for crops, but the same can be said

WSU

FROM PAGE 3

2016...,” the S&P report states. “(T)he university intends to subsidize anticipated losses at its School of Medicine and an affiliated entity related to a major ongoing restructuring at these entities, which includes several governance changes and elimination of tenured faculty positions.” The student enrollment figure for fall 2015, the latest WSU said was available, shows 27,200, a drop of about 400 from the total enrollment — undergraduate, graduate and professional students enrolled in fall 2014. In fall 2011, the Michigan Higher Education Institutional Data Inventory logged WSU at 29,786. The S&P report also notes WSU could “potentially” issue bonds in late 2017 or early 2018 to support the Mike Ilitch School of Business construction project in District Detroit, something it has hoped to tackle largely with donor gifts, or toward part of a science and engineering building renovation. Susan Burns, vice president of development an alumni affairs at WSU, said the school could bond up to $14 million toward a total $59 million Ilitch project cost — or less, if donations cover more. The university reported just over

Other challenges in locating closer to crops in the state’s rural areas are energy and water infrastructure. Food processing plants are high utility consumers, Brauer said, and there are sometimes challenges of getting adequate natural gas and electricity. In 2014, grain farmers in the thumb area, dependent on heat and fans to dry their grain in the silos, faced natural gas shortages as homeowners turned their dials up amid uncharacteristically frigid temperatures that winter. While abundant, our water is not equally distributed across the state, so getting it to where it’s needed can be a challenge, Brauer said. But the bigger issue is on the sewer side of the water lines, industry experts said. Fats, greases and oil that are byproducts of food processing need to be removed before the water is returned to the general water supply, and often, municipalities do not have the capacity or system in place to clean that water. It can be expensive to put those sewer lines in. Local and state governments

“have to be sensitive to and mindful that if they expect companies to pay for public infrastructure, that’s a competitive disadvantage over ... other states,” DiBernardo said. Companies “understand the things they have to do inside of their ‘box,’but paying for infrastructure that comes to their property line is a disadvantage” for Michigan, he said. “Other states are willing to make that investment.” The Department of Agriculture is funding research to look at anaerobic digesters and other ways to more cost-effectively treat water at company facilities, Zmitko-Somers said. Economic incentives available to food processors range from block grant funding to business development grants and loans to renaissance-zone designations that exempt companies from property tax for up to 15 years. There are, however, only a couple of those left, Brauer said. But on a positive note, the state’s personal property tax phase-out for most businesses in 2014 means the expensive food processing equipment and machinery companies house in their facilities here won’t be taxed. That — along with Michigan’s stance as a right-to-work state — has helped the state become more competitive, Brauer said. Because manufacturing in areas such as automotive and aviation is Michigan’s greatest strength, there are more incentives put behind those types of projects, Vernaci said. Still, the state does see the potential for increased food processing. The MEDC is working to understand supply chain gaps, and, in the meantime, is focusing on helping grow the food processing operations already here. Through the Pure Michigan Business Connect pro-

gram, it’s connecting food growers and buyers. And it’s assisting local companies with exporting their products to other countries. In the case of Clemens Food Group and its plan for a new pork processing plant, company, local and state officials had “thoughtful conversation about what they needed to deal with water and wastewater for the plant,” said DiBernardo, who, while at the Department of Agriculture, was a part of piecing together $12.5 million in community block development grant funds to bring the Pennsylvania-based pork processor to Southwest Michigan. The funds helped to support infrastructure, land acquisition, workforce development and on-the-job training for the 550,000-square-foot Clemens pork processing site now under construction. Clemens’ investment in the project is expected to total up to $255.7 million. Clemens is working with Kellogg Community College and the Branch Area Career Center to develop courses to train an estimated 810 employees on the equipment and expertise needed to be eligible for skilled trades careers with the company. Attracting a large processing plant like the one Clemens is building is rare, Byrum said. “Very few companies are going to come out and build a brand new green field plant in an area where they aren’t familiar,” he said. Much of the growth in processing in Michigan will be organic, he said, noting that those just starting out in the food industry tend to launch companies in their own backyard. “That’s why we need to do more economic gardening for folks already in Michigan,” Byrum said.

$124 million in unrestricted net assets at the end of fiscal 2015, down $31 million from the previous year, and over two years it had made capital expenditures of $69.3 million for a new Integrative Biosciences Center building, plus $30.8 million for renovations to its student center building. The ratings services had expressed some concern about the university’s “spend down of financial reserves” and overall weaker credit position. William Decatur, WSU vice president for business operations and CFO-treasurer, said the university found some new stability in enrollment and expects an increase in student retention this coming fall, bolstering tuition revenue. But he also predicts some of the medical school-related budgets could be balanced during the fiscal year that begins Oct. 1. David Hefner, vice president of health affairs at WSU, said a combined $32 million budget deficit in fiscal 2015 across the School of Medicine, the University Physician Group and the Fund for Medical Research and Education could narrow to as little as $16 million combined for the fiscal year ending next month. But that is subject to a fiscal 2016 audit to be completed at the end of the calendar year. The university is wrapping up the

first year of a three-year turnaround plan for those three units, and Hefner said some segments could cross the net-zero mark next year to become cash-flow positive in fiscal 2018. But he declined to elaborate, particularly about the dozens of reportedly unproductive faculty members that Hefner and medical school dean Jack Sobel addressed in a March letter to the faculty, other than to say there is “lots of progress” on that issue in recent weeks. He and Decatur also said the university is implementing new management and accountability measures within the administration that are expected to help. Decatur called it a “responsibility-centered management model” that Ohio University adopted during his tenure as senior vice president of finance and administration there, and that Virginia Commonwealth University was also developing when he left that school last year to assume his WSU post. Also, Wayne State’s six-year graduation rate was 35 percent last year for students who enrolled in 2009, a 9 percentage-point increase since 2011, and Monica Brockmeyer, associate provost for student success, said it expects to hit its 38 percent goal next month when the next set of graduation figures is complete. Decatur said the school is doing better in recent years at regional

and some out-of-state student recruitment, which helps stabilize enrollment and revenue — a practical necessity, since all Michigan colleges are facing a dwindling crop of local high school graduates. John Axe, a Detroit-based attorney at Clark Hill PLC who specializes in bond financesaid bond debt like the kind WSU carries is sometimes an easier proposition for larger universities with national attraction, like the University of Michigan, versus regional colleges. “Generally speaking, in order to borrow, you should have some revenue coming from the specific building, depending on what you’re putting up for debt service. And ordinarily what universities bond are dormitories, sports stadiums with a ticket gate, and other facilities that generate a revenue stream,” he said. “And in that sense a (University of Michigan) will have less trouble than Michigan State, and they’ll both have less trouble than other schools, because of the options you have.” Moody’s also noted that “the university’s ambitious strategic plan will place additional pressure on operations and financial reserves,” but that stabilizing enrollment and more geographic diversity among the students it attracts could eventually generate a credit rating upgrade.

for its challenges. Food processors and farmers are increasingly sensitive to the rising costs of transporting produce from the field to the factory, Brauer said. As a result, they are increasingly looking to locate their facilities closer to growers. Most other states have continuous rail from east to west, he said. “In Michigan, you’ve got a lot of north-to-south traffic before you can go east or west.” And it’s the same thing with Michigan’s interstate highways, making the logistics of shipping food products tougher and more costly, Brauer said.

Power issues

Sherri Welch: (313) 446-1694 Twitter: @sherriwelch

www.crainsdetroit.com Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Director, Digital Strategy, Audience Development Nancy Hanus, (313) 446-1621 or nhanus@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Managing Editor/Custom and Special Projects Daniel Duggan, (313) 446-0414 or dduggan@crain.com Assistant Managing Editor Kristin Bull, (313) 446-1608 or kbull@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior Editor Gary Piatek, (313) 446-0357 or gpiatek@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

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WEEK Ford uses Olympics to drive Snapchat presence

ord Motor Co. is about to make

its most aggressive play yet on Snapchat, and the automaker is using the Olympics to launch the campaign. Although not an official sponsor for the current summer games, the Dearborn-based automaker has come up with a creative workaround for the campaign, which spotlights the 2017 Ford Escape SUV, Advertising Age reports. Ford has created more than 30 Snap ads — the 10-second ads that appear within Snapchat stories — that make veiled but recognizable Olympic references.

COMPANY NEWS

n Beaumont Health plans to redevelop its 183,000-square-foot Northwood Shopping Center in Royal Oak into a commercial retail development, pending city approval. n Birmingham-based Conway MacKenzie Inc. is expanding with the addition of a Dallas-based valuation and opinion services practice. n The Battle Creek-based W.K. Kellogg Foundation awarded a three-year, $2.5 million grant to City Connect Detroit to help sustain Detroit’s youth employment system. City Connect is among the participating agencies in the Grow Detroit’s Young Talent program. n Ontario-based Martinrea International Inc. will close its Detroit-based Martinrea Hot Stampings Inc. plant. The first stage of layoffs was already announced to begin Aug. 31; the next stage begins Sept. 26. Up to 122 jobs will be lost. n Northville-based auto parts supplier ZF North America Inc. is recalling 505,000 control sensors in the U.S. because they can make some nine-speed transmissions shift into neutral without warning. n Union Partners I LLC, an Oak Brook, Ill.-based investment

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 8 , 2 0 1 6

ON THE WEB JULY 30-AUG. 5

Detroit Digits A numbers-driven look at last week's headlines:

$107,000

The amount of revenue sharing money to be split among the nearly 500 investors in Detroit City Football Club’s project to renovate Keyworth Stadium in Hamtramck. The semipro soccer club had launched a grass-roots campaign that raised $725,500.

$4.4 million

The planned cost of the renovation by Bloomfield Hills-based MJR Theatres Inc. to the Cinemark Movies 16 theater in Warren, which will reopen under the MJR Digital Cinema banner in February.

$173.8 million

The estimated maximum value of the University of Michigan’s athletics deal with Oregon-based Nike Inc. UM’s new football uniforms — the first to sport Nike’s Michael Jordan “Jumpman” logo — were unveiled during a media event in Detroit last week.

holding company, acquired Royal Oak-based Berg Steel Corp. Financials were not disclosed. n Of the 38 branches scheduled to be closed in Michigan following the $3.4 billion acquisition by Columbus-Ohio-based Huntington Bancshares Inc. of Akron, Ohiobased FirstMerit Corp., six are in Oakland County (Commerce Township, Farmington Hills, Rochester, Troy and two in Novi); three in Macomb County (Romeo, Clinton Township and Shelby Township); and one each in Wayne County (Canton Township) and Washtenaw County (Manchester). n Detroit-based Quicken Loans Inc. topped the J.D. Power 2016

CHRIS EHRMANN/CRAIN’S DETROIT BUSINESS

The final structural steel beam is raised to be placed on top of the Little Caesars Arena in downtown Detroit last week. More than 7,500 pieces of steel have been placed on the 819,000-square-foot structure since October by Detroit-based Midwest Steel and Iron Workers Local 25, with more than 540 construction workers helping to build the $627.5 million, 20,000-seat future home of the Detroit Red Wings. What’s next? Building the elevators and escalators, parking structure and pedestrian bridge linking parking to the arena.

ranking of national primary mortgage servicing providers. n Calexico, the New York City-based restaurant chain known for its California-Mexican style food and cocktails, is to open inside the One Campus Martius building in downtown Detroit on Aug. 11. n A groundbreaking was held in Ypsilanti for a $17.2 million, 86-unit affordable-housing community called New Parkridge, developed by the Ypsilanti Housing Commission and Chesapeake Community Advisors. UnitedHealthcare is investing $8 million in the project, set for completion in fall 2017. n A $2.5 million gift to United Methodist Retirement Communities

by Ann Arbor philanthropists Tom and Debby McMullen will fund construction of a wellness and aquatic center on its main campus in Chelsea. n The Detroit Tigers’ spring training home in Florida is getting a longer name: Publix Field at Joker Marchant Stadium. The name change comes after Lakelandbased chain Publix Super Markets Inc. agreed to pay $3 million over 15 years for naming rights. n Jimmy Walker’s victory at the PGA Championship was a marketing win for Farmington Hills-based wholesale insurance broker and underwriting manager Burns & Wilcox, whose logo was emblazoned on the golfer’s shirt due to a sponsorship deal signed last year.

OTHER NEWS

n Creation of a committee with veto power over funding allocations for metro Detroit’s transportation systems was the compromise that broke a deadlock for a regional transit tax to go on the November ballot. The Regional Transit Authority of Southeast Michigan’s board voted for a bylaw change that allowed it to unanimously agree to send the ballot language for a 1.2-mill, 20-year transit tax to the state board of canvassers for approval ahead of the Aug. 16 deadline to get issues on the Nov. 8 ballot. n Jim Wright, a Detroit Building Authority deputy director, resigned and was replaced by Timothy Palazzolo, a demolition operations manager. The city’s demolition program has been under federal and local investigation for several months amid cost concerns. n A $75.5 million plan by Vancouver real estate investor Ron Lanthier to purchase and renovate the historic Buhl Building in downtown Detroit has collapsed. Sources told Crain’s that financial snags torpedoed the deal. n Voters in Wayne, Oakland and Macomb counties approved a tax renewal for the Detroit Zoo, and U.S. Rep. John Conyers, the longest-serving member of the U.S. House, defeated Detroit City Clerk Janice Winfrey in the heavily Democratic 13th District primary. No incumbent Michigan House candidates lost in the state primary election.

RUMBLINGS Bloomfield Park site has new name, new plan

he long-anticipated build-out of the former Bloomfield Park site at Telegraph and Square Lake roads is finally on the docket. Demolition is expected to begin within 90 days at the Village at Bloomfield site in Bloomfield Township and Pontiac, according to the project’s developer, Redico LLC. Redico President, CEO and COO Dale Watchowski said last week that construction at the Village at Bloomfield, which is the new name of the half-built development, will begin this year as well. The project is expected to include up to 300,000 square feet of new retail space — including a movie theater and

grocery store — along with 300 to 350 residential units. Redico and California-based Pacific Coast Capital Partners LLC

purchased the site last year after the previous owner waived redemption rights to the property. The Village at Bloomfield, the architect of which is Detroit-based SmithGroup JJR Inc., is expected to cost approximately $180 million. Construction was halted at the half-completed, 18-building Bloomfield Park complex in November 2008 after the project faced financial and legal challenges under previous ownership.

Mudgie’s sells 3,500 lobster rolls during its big week Those tapped into Detroit’s dining scene — or those who appreciate fresh seafood — were well aware of the hype surrounding Corktown sandwich shop Mudgie’s “Lobstah Roll Week” July 25-31. Mudgie’s had lines around the building of more than 100 people, averaged sales of 80 lobster rolls an hour and introduced “shifts” that broke up the day into two parts as a way to ensure there were lobster rolls available for people who came at dinnertime and that the staff could get a rest, said Greg Mudge, owner of Mudgie’s. Over the week, the restaurant sold 3,500 lobster rolls and reached sales of $20,000 a day, compared to $4,000-$5,000 on an average day for the restaurant. Mudge said after introducing “Lobstah Roll Week” four to five years ago, sales of the rolls have increased 20 percent year over year. He ordered 850 pounds of Maine lobster — which was shipped in daily — for this year’s event. Mudge ordered the lobster weeks in

MUDGIE’S

Mudgie’s in Corktown sold about 80

lobster rolls an hour during its “Lobstah Roll Week” last month.

advance, anticipating a 20 percent increase over last year, but instead reached a 40 percent spike in sales. Mudge said the restaurant had to stop taking carryout orders for lobster rolls early in the week because people would order 20 rolls at a time. He said customers were bribing staff with $100 in cash for a lobster roll, and customers who weren’t able to get a lobster roll before Mudgie’s ran out would attempt to buy lobster rolls from other diners.

1,500 tickets sold to hear Trump at Detroit Economic Club The Detroit Economic Club sold roughly 1,500 tickets to hear Republican presidential nominee Donald Trump speak about the economy on Monday. That was the tally after ticket sales closed midday Friday, said Matt Friedman, a spokesman for the economic club. The venue, the Detroit Marriott Renaissance Center, has capacity for 2,000. Trump’s campaign told the economic club only that it planned a “major” speech focused on the economy, Friedman said. The event is open to Detroit Economic Club members and their guests. The club’s invitation to Trump was among several extended to presidential candidates during the primary season. Democratic

nominee Hillary Clinton also has been invited to speak. The controversial New York businessman has rankled many in the GOP with recent comments about veterans and his decision not to endorse some top Republican lawmakers in primary races. The economic club has hosted previous presidential candidates, including U.S. Sen. Marco Rubio of Florida, former Florida Gov. Jeb Bush, Ohio Gov. John Kasich and then-U.S. Sen. Barack Obama from Illinois in 2007. The Detroit Economic Club does not take a position on candidates, Friedman said, adding: “It’s about providing members with direct access to newsmakers to discuss important issues.”

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