Virginia Economic Review: First Quarter 2020

See what Virginia brings to the table

A M E R I C A’ S SEAFOOD LEADERS

FOCUS ON FRESH: V I R G I N I A ’ S S U P P LY CHAIN ADVANTAGE

V I R G I N I A’ S C R A F T BEVERAGE SURGE

C O N V E R S AT I O N S W IT H T H O U G HT L E A D E R S: James Rosenbaum, Northwestern University | Joel Salatin, Polyface Farms

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Situated on land that produced saltpeter during the American Revolution, Iron Heart Winery in Pulaski County has sold wine grapes since 2013 and began producing its own wine in 2016.

Contents 46 Completing the Chain From the port to cold storage to packaging, Virginia’s supply chain helps feed America and the world

56 From Grapes and Grain to Glass The resources, regulatory environment, and collaboration that feed Virginia’s surging craft beverage industry

68 America’s Seafood Leaders The nation’s third-largest seafoodproducing state, Virginia supplies the country with oysters, clams, and finfish

82 Virginia in Your Cup Behind facilities from coffee and tea titans, Hampton Roads stakes its claim as “Virginia’s Caffeine Capital”

86 A Sweet Boot Camp at Hershey’s The candy giant thought outside the box to expand its employment pool in Augusta County

4 Facts & Figures 6 Virginia Wins 10 What’s Next for the Food & Beverage Industry?

A Conversation With Top Site Consultants 18 What Virginia Brings to the Table 74 Beyond One-SizeFits-All College Dreams: A Conversation With James Rosenbaum 90 Selling Sustainability: A Conversation With Joel Salatin 98 Sauer Sells a Virginia Tradition Overseas

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Virginia Food and Beverage Makers Supply America’s Kitchens and Dining Tables FAMILIES ACROSS AMERICA CAN ASSEMBLE a full day of terrific food,

drink, and snacks featuring only products made in the Commonwealth of Virginia. For beverages, they could start the day with Green Mountain (produced in Isle of Wight County) or Massimo Zanetti coffee (Suffolk) and International Delight creamer (Rockingham County) before switching over to Coca-Cola (Roanoke) for lunch, and then finishing off the day with Budweiser (Williamsburg) or Miller Lite (Rockingham County). An afternoon snack spread could include Cheetos and Tostitos from Frito-Lay (Lynchburg) and Oreo and Chips Ahoy cookies and Ritz and Wheat Thins crackers from Mondelez (Henrico County), as well as Oatmeal Creme Pies and Swiss Rolls from Little Debbie (Augusta County).

And, of course, they could enjoy Virginia’s famous country ham from Smithfield Foods (Isle of Wight County).

These are just a few examples of the thousands of tasty food and beverage products made in Virginia.

craft beverage industry in Virginia over the past decade, as well as Virginia’s contributions to the seafood and coffee and tea industries.

Inside are discussions with leaders in the food and beverage industry, including a panel comprised of leading site selection consultants Brian Corde, Scott Kupperman, and Brandon Talbert, and a talk with Joel Salatin, owner and operator of Virginia’s Polyface Farms.

Finally, we connect with James Rosenbaum, professor of human development, social policy, and sociology at Northwestern University, who is known for his important research into gaps in the U.S. K-12 and higher ed systems that prevent many students from succeeding in school or in the labor market — as well as how to close those gaps.

We hope you enjoy this inside look at Virginia’s role in producing good food and drink for America’s tables.

Best regards,

In this issue of Virginia Economic Review, we explore why these leading companies and many others have chosen to operate alongside Virginia’s productive farms and world-class restaurants, including the supply-chain advantages that place the Commonwealth in a strong position to make and distribute those products.

We also highlight the explosion of the

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Stephen Moret President and CEO, Virginia Economic Development Partnership

The Pups and Pilsners beer festival in Arlington’s Crystal City neighborhood features a 10-station beer garden and 3 dogs. encourages attendees to bring their

Facts Figures E X A M P L E S O F V I R G I N I A' S A W A R D - W I N N I N G BEER, WINE, AND SPIRITS

WINE Wine Enthusiast — Highest-Rated Virginia Wines

King Family Vineyards Albemarle County 2015 Petit Verdot: 92 points (/100) 2016 Small Batch Series Viognier: 92 points 2015 Orange Viognier: 92 points 2014 Meritage: 91 points 2015 Meritage: 91 points

Barboursville Vineyards

SPIRITS World Whiskies Awards, 2019

Best American Blended Malt

American Distilling Institute Judging of Craft Spirits, 2019

Gold Medal

9-Year Straight Bourbon Whiskey Port Cask Finished Tarnished Truth Distilling, Virginia-Highland Whisky Virginia Distillery, Nelson County Virginia Beach The Fifty Best, 2019

Silver Medal

Platinum Rum Vitae Spirits Distillery, Charlottesville

Silver Medal

Silver Medal, White Rum

World Whiskies Awards, 2017

World’s Best NonKentucky Bourbon

Isaac Bowman Bourbon A. Smith Bowman Distillery, Spotsylvania County New York World Wine & Spirits Competition, 2018

Double Gold

Roundstone Rye “80 Proof” Catoctin Creek Distilling Company, Purcellville

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Caiseal Gin Caiseal Beer & Spirits Co., Hampton

Caiseal Vodka Caiseal Beer & Spirits Co., Hampton

Silver Medal

Boondoggler Blended Whiskey Filibuster Distillery, Shenandoah County

Silver Medal

Bourbon Whiskey Filibuster Distillery, Shenandoah County

Orange County 2014 Reserve Nebbiolo: 92 points 2010 Octagon: 91 points

Linden Vineyards

Fauquier County 2010 Boisseau Cabernet Sauvignon-Merlot: 92 points

U.S. Open Beer Championship, 2019

Gold Medal, German Lager/ Pilsner Lager Jump Olde Salem Brewing, Salem

U.S. Open Beer Championship, 2019

Gold Medal, Non-Whiskey Barrel Aged Beer Gusano Borracho Benchtop Brewing Co., Norfolk

BEER Great American Beer Festival, 2019

Gold Medal, German-Style Maerzen Oktoberfest Bear Chase Brewing Co., Loudoun County

Great American Beer Festival, 2019

Gold Medal, Kellerbier or Zwickelbier

U.S. Open Beer Championship, 2019

Gold Medal, Specialty IPA

Grapefruit Hoppocalypse Apocalypse Ale Works, Bedford County U.S. Open Beer Championship, 2019

Gold Medal, Experimental Beer Dreamsicle Apocalypse Ale Works, Bedford County

German Pilsner Port City Brewing Co., Alexandria

Great American Beer Festival, 2019

Gold Medal, Vienna-Style Lager

Jomo Starr Hill Brewery, Albemarle County World Beer Cup, 2018

Gold Medal, Irish-Style Red Ale

Bald Irishman Center of the Universe Brewing Co., Ashland U.S. Open Beer Championship, 2019

Gold Medal, Imperial Porter Knight of the Valley Front Royal Brewing Co., Front Royal U.S. Open Beer Championship, 2019

Gold Medal, Bohemian Pilsner Lager Bohemian Pilsner Ballad Brewing, Danville

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Virginia Wins

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raditional Medicinals will invest $29.7 million to establish a 125,000-sq.-ft. herbal tea manufacturing and processing operation in the Summit View Business Park in Franklin County in the Roanoke Region. Virginia successfully competed with North Carolina for the project, which will create 56 new jobs.

Founded and headquartered in Sebastopol, Calif., Traditional Medicinals is the leading seller of organic and Fair Trade Certified™ herbal teas in the United States and Canada.

The company manufactures more than 50 high-quality wellness teas, formulated by herbalists using pharmacopoeial-grade herbs.

Traditional Medicinals will be the third company to utilize the new Virginia Talent Accelerator Program, a collaboration between VEDP and the Virginia Community College System that accelerates new facility startups through the direct delivery of recruitment and training services that are fully customized to a company’s unique products, processes, equipment, standards, and culture. All program services are provided at no cost to qualified new and expanding companies as an incentive for job creation.

It was incredibly important that we found a location that embodied our company values. We’ve worked for decades to ensure that the work we do positively impacts both the environment and the people in the communities where we do business — both on a local level and in the 42 countries where we purchase herbs. We are proud to become a part of Franklin County and the greater Roanoke community and look forward to making a positive social business impact here.

BLAIR KELLISON CEO, Traditional Medicinals

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Selected Wins Greater Fredericksburg

Hampton Roads

New River Valley

TES

Acesur

The Patton Logistics Group

Greater Richmond

GMAX Industries

Northern Virginia

Jobs: 25 new jobs CapEx: $1.3M Locality: Spotsylvania County

ePac Flexible Packaging Jobs: 35 new jobs CapEx: $6.5M Locality: Henrico County

Wegmans

Jobs: 700 new jobs CapEx: $175M Locality: Hanover County

Greater Richmond/ Virginia's Gateway Region Carvana Co.

Jobs: 400 new jobs CapEx: $25M Locality: Chesterfield County

DuPont

Jobs: 60 new jobs CapEx: $75M Locality: Chesterfield County

Jobs: 29 new jobs CapEx: $11M Locality: City of Suffolk Jobs: 40 new jobs CapEx: $10.5M Locality: City of Franklin

InMotion Hosting, Inc.

Jobs: 50 new jobs CapEx: $12.2M Locality: City of Virginia Beach

TST Fabrications

Jobs: 34 new jobs CapEx: $4.1M Locality: City of Norfolk

I81-I77 Crossroads Blue Ridge Designs

Jobs: 118 new jobs CapEx: $2.3M Locality: Carroll County

Lynchburg Region Custom Truck One Source Jobs: 61 new jobs CapEx: $2.6M Locality: Bedford County

Jobs: 33 new jobs CapEx: $12M Locality: Pulaski County

Expel, Inc.

Jobs: 164 new jobs CapEx: $1.4M Locality: Fairfax County

Israel Aerospace Industries Ltd. Jobs: 50 new jobs Locality: Fairfax County

Macedon Technologies Jobs: 147 new jobs CapEx: $1.7M Locality: Fairfax County

Roanoke Region Mack Trucks

Jobs: 250 new jobs CapEx: $13M Locality: Roanoke County

Southern Virginia AeroFarms

Jobs: 92 new jobs CapEx: $42M Locality: Pittsylvania County

Flowers Foods

Jobs: 15 new jobs CapEx: $25M Locality: City of Lynchburg

Roanoke Region

New River Valley

Southwest Virginia I81-I77 Crossroads

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Northern Shenandoah Valley Washington, D.C.

Northern Virginia Shenandoah Valley

Central Virginia

Greater Fredericksburg

Greater Richmond

Northern Neck

Middle Peninsula

Lynchburg Region

Eastern Shore South Central Virginia

Southern Virginia

Virginia’s Gateway Region

Greater Williamsburg

Hampton Roads

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What's Next for the

Food & Beverage Industry?

A Conversation With Brian Corde, Scott Kupperman, and Brandon Talbert

Food and beverage processors operate in an industry where even the most successful companies depend on low margins and economies of scale. That means even the smallest advantage can be a differentiating factor when locating a new facility. VEDP President and CEO Stephen Moret spoke with three leading site consultants on the factors that make states and localities successful in attracting food and beverage projects.

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W H AT'S N E X T F O R T H E F O O D & B E V E R A G E I N D U S T RY?

BRIAN CORDE Co-founder and Managing Partner, Atlas Insight

SCOTT KUPPERMAN Founder, Kupperman Location Solutions

BRANDON TALBERT Managing Director, Austin Consulting

Stephen Moret: As you think about what you’re seeing in the food and beverage industry with your clients as well as what you see in the sector more broadly, what are you seeing out there as the major trends that will affect company operations and location decisions over the next few years in food and beverage specifically?

project I’m working on is looking for.

One is because the margins in this industry are terrible — low-cost locations, especially on the production side, are really becoming areas of focus, and any place that can offer very competitive costs relative to real estate, labor, utilities, and more generosity on the incentive side definitely should have an advantage.

Brian Corde: I think the changes that we’ve seen over the last couple of years have really formulated the trend that I think will continue over the next few years, and that is a lot of shifting in customer choice — a lot of what I’ll call lifestyle brands of companies popping up with products. And in addition to that, there’s been a very key consideration by companies to shorten their distribution model, not only from the standpoint of getting a product to customers in certain key areas, but then also the proximity of their manufacturing locations to their raw materials as consumers are forcing the change to fresher ingredients and more availability of those ingredients.

We’re seeing a major shift in the thought process on location of the manufacturing operations as well as the distribution networks, and I would expect that to continue.

The second thing is that almost any food and beverage company is obsessed with risk — both the risks associated with the time, costs, and resources required to get a new facility operational, finding a new location, and putting a facility in place, and certainly with the risk associated with operating it both in a safe and regulatorycompliant status. There’s been plenty of stories out there about companies that haven’t, and the damage done to those businesses can be tremendous.

Brandon Talbert: I think we’re seeing an unprecedented level of innovation in the food and beverage industry.

There are a few different reasons. One is the culinary bar has been raised here in the United States. People become exposed to new foods and there’s more of a willingness to try new things and to prepare new foods, so we see that trickle down into the manufacturing sector with a number of different factors that are driving that — everything from dietary preferences to allergies and just consumer awareness of what they’re consuming, more attention to the ingredients and clean-label products.

And you’re seeing manufacturers have to respond very quickly to that. There’s an increased level of focus on efficiency and being very cost-conscious, not only with transportation costs, but all operating costs.

Scott Kupperman: There are three kinds of general factors that I would say are common to what almost every

And then lastly, companies in the food and beverage industry right now are living and dying on their ability to put new ideas into production quickly, which is really what they call innovation. They’ve got to be incredibly nimble and responsive to consumer trends and demands and be able to change what they do in every regard very quickly. I always encourage people in economic development to think out of the box and tell a story about what resources their community has that can contribute to that need to innovate.

Moret: As you think about some of the site searches you’ve done recently and others that you’re anticipating doing, what are the main location criteria that companies are thinking about and how are they prioritizing those things?

Talbert: I’d say number one is labor.

We’ve seen clients that have had to really take a close look at their wages and benefits. In this market, the competition has been a challenge for many food companies, and I think companies have

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W H AT'S N E X T F O R T H E F O O D & B E V E R A G E I N D U S T RY?

There’s been a very key consideration by companies to shorten their distribution model, not only from the standpoint of getting a product to customers in certain key areas, but then also the proximity of their manufacturing locations to their raw materials as consumers are forcing the change to fresher ingredients and more availability of those ingredients.

BRIAN CORDE Co-Founder and Managing Partner, Atlas Insight

responded to that by trying to improve their wages, but also control their wages when looking at new locations. Not only that, but being able to find and being able to locate in places where they can ensure that they have an adequate labor force to support the project. A lot of companies in the industry have struggled with that.

That’s probably the biggest point of sensitivity for most companies when selecting a location.

Kupperman: More than ever, on a case-by-case basis, the mix of priorities changes from company to company, and sometimes from the same company year to year. And that’s always among the most critical parts of a project — working with your client to get their priorities straight.

Labor, real estate, and time to deliver the facility and the project are all critical factors. But more and more, I think it depends on whether or not the company has an outward-facing consumer brand that they want to protect and uphold and try to find an overall solution that can contribute to that.

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Moret: With those location criteria in mind, obviously you guys have traveled across the country quite a bit. You’ve met with regional groups, state groups, local groups. As you think about the range of experiences that you’ve had across the country, what do you think states and regions can do to better position themselves to attract the food and beverage industry in particular?

Kupperman: I always tell economic developers, “If you’re going to focus on this or any other target industry, you’ve got to tell a story. And do more than just put a load of data together and dump it in front of us.” I think especially in this industry, the basis of a compelling argument is to say, “We’ve got and can demonstrate a successful history of companies in the food and beverage industry already being here,” and “There’s all different types of manufacturing going on here and we want to show you that we have the capacity for more. More as it relates to real estate, labor, and community resources that

support a successful startup and stabilized operation.” You’ve got to put together a compelling story that demonstrates what availability you have and what skills are present and what training you have to further develop that market.

Food and beverage companies do not like pioneering and being the first going into an area where it’s been predominantly pharma or auto or textiles. They like going into a place knowing that they can minimize their risk by having resources already there to support their type of industry. If those factors are prevalent in your community, I think that’s a way to frame your argument to attract more.

Corde: I think that we’re seeing quite a bit of a desire for the clustering effect to take place. Demonstrating that there is a critical mass of professionals there that have a familiarity with this type of industry is really critical to achieving that success. In addition to that, I think if you’re thinking outside the box, the area that I think would be really important to

W H AT'S N E X T F O R T H E F O O D & B E V E R A G E I N D U S T RY?

focus in on is the complete supply chain analysis for a company. So it’s not just about the easy ones. Where are your customers? Where are your raw materials?

While those are extremely important, it’s also about how much opportunity is there for your entire process.

Is the packaging of those products readily available? Can we get bottling done, or can we get Tetra Pak products in there easily? And then in addition to that, there are opportunities for identification of logistical advantages. We know how critical logistics are as part of the food manufacturing supply chain. If there’s rail access and somebody that’s been producing a product, particularly by bringing in their raw materials via a truck before, but now you have the opportunity to bring in via rail, those can be significant game changers for those types of operations.

Talbert: There’s less perceived risk when you’re going into a community or region that has demonstrated that other food and beverage companies are operating successfully there — that they’re finding the people they need, that they’re able to find the utility capacity, particularly with some of the demands on certain food and beverage processes around water and wastewater that can be significant. That there’s a friendly operating environment and from a transportation standpoint, being able to benefit from areas that have a good supply of trucks and particularly with companies that ship a lot of their product in refrigerated trucks, access to those lanes can be a real advantage for locating nearby.

And in areas that don’t have other food plants, we’ve also seen some companies find success when you see an opportunity to differentiate yourself from other employers in the market. But I think the critical thing is that the community, the region, and the state had a supportive environment.

They’ve demonstrated that they understand what it takes to support these kinds of industry and they’ve expressed interest in locating there, and that sends a positive

message to companies that are really interested in these kinds of plants and in establishing a good relationship with the community long-term.

Moret: Are there infrastructure investments that could be made by a locality or state to help position an area to attract the food and beverage processing industry? Sometimes there are certain types of wastewater system parameters that could be helpful for some operations, for example.

Corde: That’s exactly where I would start, because I think those are the two biggest infrastructure needs that the community would have. Water and wastewater capacity are two critical elements of infrastructure that are definitely needed. There’s also a challenge right now with the availability of existing buildings. There just doesn’t seem to be a great amount of inventory in that space. And that can be a challenge. If you count that as an infrastructure item, having buildings that can be repurposed but that have the infrastructure that’s required already. And that could be electrical capacity and, again, water and wastewater capacity. Those are all, I think, critical components of infrastructure improvements that can be made to help ease the burden on the companies that are out there looking for new sites.

Kupperman: The answer is going to depend on, really, how much they want to invest. At the first level, having a handful of sites that have complete access and full utility infrastructure in place to the property perimeter. Certainly, including a pretty robust wastewater treatment system, public gas, public water and sewer, and enough power for a reasonably sized food processing project. To be able to have sites between 10 and 30 acres that really are well positioned for these types of companies would give many communities an advantage. We’re starting to see a lack of really viable near-term ready sites due to demand from a strong economy and a lack of investment in ready-to-go sites.

In the food industry in particular, if they want to take it one step further and they’re investing in real estate as an economic development tool, I would do a little bit of preliminary planning and try to create a property environment that has a significant amount of buffer around it. Many of these types of processing facilities are not going to do well in a very high-density park. Are they going to get excited about a park that has mixed uses with a potential threat of an incompatible use on the adjacent property coming up at some point in their future?

Some planning to show that there’s been thought around that both from a zoning or restrictive covenant standpoint and just size, offering some extra buffer and protection would be time and effort well spent.

Talbert: I would agree we’re seeing a serious shortage of suitable properties of ready-to-go properties, in the right locations. I think with a lot of these plants, they’re so specialized and it’s often more expensive to go in and renovate an existing building that doesn’t really meet the requirements. We’re seeing the trend towards more of these projects starting with greenfield in mind. With that, having an inventory of properties that are ready to go with all the utilities available, looking at your wastewater treatment plant and not just looking at the total capacity, but really looking at, is it designed to handle large volumes of organic waste associated with many food plants, not just domestic wastewater. Really knowing what your assets are and then looking at addressing some of those infrastructure deficiencies beforehand will get you more looks.

The cost of having to invest in a pretreatment facility can be millions of dollars and it’s not something that most companies want to have to do. So I think to the point about incompatible uses, having either planning in place to address that or being willing to impose restrictions that support concerns that a company may have. Whether it’s concern over allergens or heavy metals or really heavy industry that’s incompatible with these types of plants, even if it doesn’t exist today, being receptive to making those

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W H AT'S N E X T F O R T H E F O O D & B E V E R A G E I N D U S T RY?

Companies in the food and beverage industry right now are living and dying on their ability to put new ideas into production quickly. They’ve got to be incredibly nimble and responsive to consumer trends and demands and be able to change what they do in every regard very quickly.

SCOTT KUPPERMAN Founder, Kupperman Location Solutions

modifications is something that many companies in this industry are looking for.

Moret: I know you guys have experience with the Commonwealth. What qualities do you think help position Virginia as a good location for food and beverage processing sites?

Kupperman: I recently had my fourth project land in Virginia, and two out of those four have been companies based in California who have located their second facility in Virginia. You’re really well positioned to be central to the eastern half of the U.S. You’re a right-to-work state.

You’ve got good access to population centers north and south of you. One of your biggest assets is a good mix of both metropolitan areas that have low-cost blue-collar communities around them and then some really interesting and authentic smaller communities, especially in the western part of the state.

And I think companies from the West Coast or other parts of the country see value in coming to the beautiful part of your state,

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and communities that value a healthy, outdoor, authentic lifestyle, and community brands. I think the Shenandoah Valley has taken advantage of that. I think Roanoke, where the project I just worked on ended up, has a lot more runway and can capture more of those companies.

Talbert: From a distribution standpoint, we find ourselves looking at Virginia a lot of times for a single-plant strategy in the eastern U.S. or a single plant for a particular product line in the eastern U.S. because of your location. You’re very close to the East Coast, New York, D.C., and then from Virginia you’ve got good access to the Southeast and Midwest as well. When we run through the freight cost modeling on a lot of these types of scenarios, Virginia usually ranks very well.

Corde: Virginia is a state that has agricultural roots even going back to tobacco, and I think that plays heavily into the ability to attract and make those in the food industry feel very comfortable with the product that they’ll be able to find by locating there.

And then I certainly don’t want to downplay the importance of the water — not only the abundance of the water, but the quality of the water, too, has really set itself apart from a lot of the other areas across the country. For those that have real concerns or this is a critical part of their analysis, that water quality and water availability really will continue to drive quite a bit of looks your way.

Kupperman: Having a really solid port, for some companies, is going to be a big differentiator as well.

Moret: That’s a great point. Brian just came to visit The Port of Virginia recently. What were your impressions?

Corde: It was fantastic. In particular, the thing that’s so impressive to me is the amount of continuous investment at the port facility there. There is a real desire to continue to be a major player on the Eastern Seaboard. And in addition to that, the amount of technology that continues to be implemented in the port is just staggering to me. It’s really

an amazing facility. Great asset for the Commonwealth of Virginia.

within the state. And they look very favorably upon that.

Moret: As you think about talent, what talent considerations come into play for food and beverage operations, and are there things that states and educational partners can do to build a workforce for those types of projects? I’m also curious if there are any states or programs that you might cite that have impressed you in that respect.

And there are people at Virginia Tech who I’ve interacted with who get involved in economic development on behalf of that program and who do it extremely well, and make it very clear how companies can partner with the university to take advantage of what they have.

Talbert: It really runs the gamut.

You’re seeing the skill level required from operators, technicians, increase from what it’s been historically. And the area that, not unlike other industries, many food companies really have the most difficult time staffing are the positions associated with maintaining all of the equipment.

Particularly in some of these plants that are highly automated, have very expensive refrigeration equipment, having a skilled workforce and training programs to support those requirements is very important. And then at the managerial level, you see a lot of people in the food industry tend to move around. They’re pretty mobile.

Corde: Anytime we’re working with a food and beverage product, I would always say that food safety is their number one concern. Training at the university level for certain positions within the facility is extremely important to assure that those safety procedures are being developed and implemented and followed.

Even down to the production workers, having those training classes that are available regarding food safety I think is one of the critical things that we see from a production workforce standpoint that these companies are really interested in. So it is a top-down training model, starting with some of your degreed folks that might be in the facility extending to the maintenance personnel and having the ability to upkeep that equipment.

Being in an area that’s attractive for folks from different parts of the country, and even world, to relocate, and having the assets in place and community housing, in terms of community appeal and the type of amenities that people are looking for, can be a real big driver — particularly for some companies that are really concerned about making sure that they’re going to be able to relocate the talent that they may not be able to find in the marketplace.

Moret: Shifting gears again, you know Virginia has long been known for its wine operations, and recently we’ve seen an uptick in beer production as well over the last several years with craft beer.

To the extent you guys have worked on those types of projects, what factors do you see that play into those location decisions that may be a little different than more typical food and beverage processing operation?

Kupperman: One of the assets that you do have is the growth of the food science program at Virginia Tech. Not all companies are going to need people with that level of expertise or degree attainment. But most projects I work on really like to know that there are programs involved both as a means of getting talent and potentially a means to test or develop some of their products

Kupperman: Those types of companies are all about their brand.

And the few that I’ve worked with are extremely picky about where they go relative to, is there going to be some sort of energy behind their brand and that community based on who’s already there based on local demographics. Is there a flow of tourism in some way that they can piggyback on?

TOP 10 COLLEGES FOR FOOD SCIENCE AND NUTRITION Cornell University

Virginia Tech University of Texas at Austin Brigham Young University University of California, Davis Purdue University Tulane University Texas A&M University North Carolina State University New York University 15

W H AT'S N E X T F O R T H E F O O D & B E V E R A G E I N D U S T RY?

Brian Wiersema (right), pilot plant manager in Virginia Tech’s food science and technology department, tests the contents of a student-brewed beer.

A lot of those companies are now turning to craft cocktails and sparkling water, which are very high-growth segments in the beverage industry. It just doesn’t have to be beer. They’re going to be concerned with very similar things. Trying to further their brand and get some energy behind it based on where they are.

Talbert: A lot of companies in that segment of the beverage industry are very sensitive to brand and to cultural fit. And a lot of times that’s tied to the brand and it’s just tied to the culture of the company and the way they operate.

A lot of them have connectivity to the outdoors, particularly where you see a lot of these companies started out as startups and still have that startup culture in many ways. I think there’s still a lot of room for innovation in the industry.

You see in some states, particularly in the Southeast, just antiquated alcohol laws that restrict the company’s ability to distribute within the state the way they want to distribute, and in some cases, provide access to the public. And there’s been a lot of improvements with just the

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recent growth in the industry. I think Virginia was at the forefront of making some of those changes that really date back to the Prohibition era and making it a much more friendly environment.

project — even for a manufacturing operation. Because you’re going to need to make sure that you’re going to have that critical mass of people that are going to be there to work in your facility.

Moret: We often talk about quality of life issues. I’m curious how often you see that as an important site selection factor in the food and beverage industry.

At the end of the day, it doesn’t matter how cheap an area is. If you can’t get people to come to work and if you can’t get them to stay there, it’s just not going to work from a location standpoint. And so this is something that needs to be factored into the company’s model.

Corde: It comes down to talent, and quality of life is extremely important these days in the ability to attract and retain talent. There are obviously perception issues about the types of jobs that are offered in a manufacturing environment. But in addition to that, it’s also the location of some of those facilities. People want to live in places that they deem to be good places to live. And a lot of times we just don’t see too many manufacturing operations or enough manufacturing operations that are located in those areas. And because of that, I do think it’s extremely important to have quality of place as you’re looking at the factors to take into consideration during a site location

Moret: Was there anything else you think is important for our readers to know when it comes to this industry sector, from a site selection perspective?

Talbert: I think you can see there’s a lot of complexity that goes into the site selection process and balancing all of these factors.

I think it’s important for states and regions and communities that want to attract this industry to have a good understanding of their complexity and that there’s just a targeted strategy and resources available to support this type of development, and there’s a commitment to that.

W H AT'S N E X T F O R T H E F O O D & B E V E R A G E I N D U S T RY?

There’s less perceived risk when you’re going into a community or region that has demonstrated that other food and beverage companies are operating successfully there.

BRANDON TALBERT Managing Director, Austin Consulting

Kupperman: The number of economic development organizations that have reached out to me to say, “We’d like to improve the way we attract food and beverage companies to our part of the world,” has grown tremendously from all across the country in say the past two to four years. There just seems to have been a real increase in energy behind those efforts, and especially from some other states in the Mid-Atlantic, Southeast, some of your geographic neighbors. And these are not only state entities, but some of the big regional utility players — certainly, regional organizations and even smaller communities who may have had a couple of wins and want to further develop their cluster.

They say, “What can we do better? What should we have in place?” And one of the things I encourage them to do is assign somebody to really stay on top of the industry and understand what’s going on in the world of large and small companies in that industry — why margins are terrible, why there’s a lot of M&A activity, what segments are growing or are shrinking, or how agriculture factors

into all that. Because all those things are real-life decisions that put pressure on food and beverage companies and that they legitimately do worry about. And I’ve seen instances where economic developers who can talk shop more effectively with somebody like me or my clients in moments where they’re coming down to a shortlist decision, really make them feel differently about their ability to help them get through the process of delivering a facility there.

Corde: This is a segment that has been changing, evolving, and growing tremendously over the last few years.

Anybody that’s coming to the table now is really trying to play catchup at this point.

Fortunately for Virginia, they’re not in that position. You guys have been one of the leaders in this space and you’re kind of in the driver’s seat. But staying on top of this industry, continuing to watch it evolve, continuing to watch those trends, looking out for those companies that are starting out with a great product, a great idea, great marketing, watching them as they start their initial phases most likely in a co-packer type of environment,

watching that production start to grow, watching their product really start to gain some traction — those are, I think, the keys to staying on top of this industry and making sure that you’re finding those next generation of movers, those next generation of hot products — and really understanding which of those have staying power, which is most important.

Initial investment into this industry is tremendous. It’s not for the faint of heart.

You can’t just go to market, build a giant facility and say, “Okay, great, we’re going to produce this product and it’s going to be wildly successful.” These companies have to start small, have to start with co-packing relationships. The number of those facilities that are in Virginia already is a great start, because a lot of these products are already being produced in a startup phase there. But staying on top of those and really developing and cultivating those products and trying to keep them home could be a major win.

For the full interview, visit www.vedp.org/Podcasts

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What Virginia Brings to the Table Illustrative Examples 77

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COMPLETING THE CHAIN From the port to cold storage to packaging, Virginia’s supply chain helps feed America and the world

Virginia International Gateway, 47 Portsmouth

COMPLETING THE CHAIN

T

he information age has empowered consumers to demand more from their products. Deloitte’s 2019 Future of Fresh study found that twothirds of U.S. consumers have increased their spending on fresh food over the last two years. Sales of fresh food contributed to 49% of total fast-moving consumer goods growth across late 2017 and early 2018, according to a 2018 Nielsen consumer report.

With those evolving consumer preferences, companies must consider access to large markets and the flow of goods to those markets when making site location decisions. Virginia offers food and beverage processors a prime location within a day’s drive of 43% of the U.S. population, while its infrastructure fills in the gaps between producer and consumer, allowing freshness-minded consumers to select Virginia-produced foods with confidence. Virginia’s supply chain networks and their efficiency, safety, and diversity continue to attract — and retain — companies within the food and beverage industry.

PORT DELIVERS ON CARGO AND SUSTAINABILITY Virginia has six interstate highways and boasts two Class I railroads that connect to the Northeast and Midwest.

But the Commonwealth’s infrastructure advantages start with The Port of Virginia, ranked as one of the top six most advanced ports in the U.S.

by Global Trade magazine. The port is roughly halfway through a $1.5 billion improvement project that spans from terminal expansion and greater doublestack rail capacity to more space for refrigerated cargo and new cranes to dredging to become the deepest port on the East Coast.

“We are making strategic investments to be able to meet the needs of our customers, the cargo owners, and our partners today, tomorrow, and for decades to come,” said John Reinhart, CEO and executive director of the Virginia Port

48

Authority. “We are creating a world-class port that is delivering safe, efficient, and reliable service to all of our users. The Port of Virginia is growing, and these strategic investments will allow our users to grow in parallel over the long term.”

The port also helps fuel the state’s economy by moving cargo that results in job creation and economic investment throughout the state. In fiscal year 2019, the port moved more than 2.8 million 20foot containers (TEUs) filled with a variety of food, consumer goods, and agricultural products. Those goods and commodities moved to and from the port’s six terminals — four marine terminals in the Hampton Roads region, the Virginia Inland Port in Front Royal in the Northern Shenandoah Valley, and the Richmond Marine Terminal on the James River — via an expanding transportation network that reaches throughout the Mid-Atlantic and into the Midwest via trucks, double-stack trains, and barges. The port set a new annual record for container cargo volume in calendar year 2019, handling more than 2.9 million TEUs, a 3% increase over the previous year. The biggest gains came in barge volume, which was up more than 18%.

Having completed the U.S. Department of Agriculture’s Southeast In-Transit Cold Treatment Pilot program, importers of perishables from South American countries can also move their cargo through The Port of Virginia. Under the program, Virginia imports cold-treated containers of blueberries, citrus fruits, and grapes from Peru, blueberries and grapes from Uruguay, and apples, blueberries, and pears from Argentina. Previously, those fruits were required to enter Northeastern ports for cold treatment before being transported to Southern states.

“We moved nearly 70,000 containers of refrigerated goods last [fiscal] year, and through our investments, we have doubled our capacity to handle cold cargo,” Reinhart said. “This opens up many new possibilities for the ocean carriers and cold cargo owners.”

Private refrigerated warehouse owners are taking note of the port’s efforts and making parallel investments to handle the chilled and frozen cargo once it leaves the terminal.

“Virginia’s position in the logistics supply chain for food exports and imports is expanding,” Reinhart said. “This cargo is valuable to its owners and important to consumers, so it’s up to us to move it safely and reliably and develop long-term relationships to ensure growth in this segment of our business.”

COLD STORAGE KEEPS FOOD FRESH FOR DISTRIBUTION Virginia is also home to several cold storage warehouses from companies such as Cloverleaf Cold Storage (acquired by Americold in 2019), Preferred Freezer Services of Norfolk, InterChange Cold Storage, and Lineage Logistics, founded in Richmond in 1907 and now boasting nine facilities across Richmond and Hampton Roads serving the protein and produce markets.

“Some of our largest and most long-standing customers have major processing and manufacturing locations in the state, so our presence in nearby or adjacent locations allows us to create efficiencies across their extended supply chains,” said Mike McLendon, Lineage’s executive vice president of optimization and integration. “The Virginia Port Authority is also a fantastic partner in this effort, as our strategic port presence helps us connect our customers to global markets.”

InterChange Cold Storage recently invested $41.6 million in Rockingham County to build a 250,000-sq.-ft. state-ofthe-art cold storage and blast freezing facility. That facility will serve the nearby cluster of food and beverage companies in the Shenandoah Valley, which boasts four of the top five Virginia counties for agriculture and employs 13,000 workers in the industry. Companies including The Hershey Company, Nature’s Touch, Danone, Andros Foods, Shenandoah

XXXXXXXXXX

InterChange Cold Storage, 49 County Rockingham

Growers, and Cargill take advantage of those logistical advantages and the proximity to Interstate 81.

INFRASTRUCTURE ENABLES LOGISTICS ADVANTAGES ACROSS VIRGINIA

The region immediately surrounding the port, Hampton Roads, is home to Smithfield Foods, Kraft Foods, Unilever, and High Liner Foods, and offers more than 3 million square feet of freezer and cooler space within a 20-minute drive of the port’s deep water terminals.

Long-standing relationships and strong shipping infrastructure enable third-party logistics providers and other groups in the supply chain to collaborate and expand in the food and beverage market.

“In Hampton Roads, there is a robust tea and coffee roasting and packaging cluster, as well as pork processing and seafood processing,” said Tony Beck, senior

50

managing director for CBRE. “Proximity to The Port of Virginia has driven the establishment of refrigerated warehouses for blast freezing and storage of products for the international market and dry warehouses for handling water, wine and beer imports, and exports. We have also seen an increase in food packaging providers across the state.”

Moving west, Virginia’s Gateway Region, south of Richmond and about an hour

Norfolk International Terminals, Norfolk

This cargo is valuable to its owners and important to consumers, so it’s up to us to move it safely and reliably and develop long-term relationships to ensure growth in this segment of our business.

JOHN REINHART CEO and Executive Director, Virginia Port Authority

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Phoenix Packaging Operations, Pulaski County

west of the port, offers the strategic location and advanced transportation networks needed to efficiently move product. The heart of the region sits at the intersection of Interstates 95 and 85 and U.S. 460, which connects the area with Hampton Roads and The Port of Virginia. The region is also home to Norfolk Southern and CSX intersecting Class 1 rail services, while UPS and FedEx operate major hubs in the area, providing third-party logistics services.

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Companies taking advantage of that infrastructure include Campofrio, Boar’s Head, Goya, and Perdue.

Half an hour up I-95, Greater Richmond is home to the Richmond Marine Terminal, a multimodal freight and distribution center, as well as major food and beverage facilities, including Sabra Dipping Co., Mondelez, Stone Brewing, PepsiCo, and Tyson, among others. Food-related companies

have added a net 4,060 new jobs in Richmond, with 64 plant expansions and $1.2 billion in capital investment over the past 12 years.

Virginia experienced 10% growth in food-and-beverage-related projects from 2017–2018, according to research from ROI Marketing. In 2019, the state saw eight new construction projects in food and beverage, 14 equipment upgrades, 13 renovations, nine expansions, and five relocations.

COMPLETING THE CHAIN

From a logistics standpoint, not only does Virginia offer one of the largest deep water ports on the East Coast, but it also has one of the largest inland ports offering rail line connections for cost-saving intermodal shipping.

DENNIS MONDAY President, Friendship Industries, Inc.

COLLABORATION PROVIDES AMPLE MANUFACTURING OPPORTUNITIES “One of the biggest benefits of being in Virginia is simply the location on the Eastern Seaboard,” said Dennis Monday, president of Friendship Industries, Inc., a Harrisonburg-based contract manufacturer of retail-ready refrigerated products. “From a logistics standpoint, not only does Virginia offer one of the largest deep water ports on the East Coast, but it also has one of the largest inland ports offering rail line connections for costsaving intermodal shipping.

“In addition to this, several large shipping and fulfillment companies have settled in Virginia to take advantage of the I-81 corridor connecting them to the rest of the country in just a few short days of ground shipping, adding to the logistic benefits the state offers.”

That’s why co-packers continue to flourish in Virginia. Companies like Ashburn Sauce, Virginia Packing, and Southeast

Bottling & Beverage continue to grow and expand not only their manufacturing facilities, but also their portfolio of products and services to better cater to the ever-changing needs of the food and beverage industry.

Food and beverage suppliers, including packaging companies, have also found success in Virginia. Last year, Flow Alkaline Spring Water, which offers co-packing in Tetra Pak sustainable paperboard packaging, announced it would locate its first U.S. spring water manufacturing facility in Augusta County. TemperPack, a Richmond-based manufacturer of sustainable packaging technology for perishable goods, raised $10 million to further expand its operations and add jobs. In October, Mexico-based packaging company Cartograf announced plans to build a new manufacturing plant in Chesterfield County. Colombia-based Grupo Phoenix established its North American headquarters in Pulaski County in 2010 and has expanded that facility three

times since, most recently a $48 million expansion in 2017.

Symbiotic relationships have sprung up around large food processing companies.

In Wytheville, Amcor Rigid Plastics supplies bottles for the nearby Gatorade bottling plant. In Williamsburg, O-I Glass and the Ball Corporation manufacture bottles and cans for Anheuser-Busch beverages. These ecosystems have shortened the supply chain by serving processors and strengthened local economies.

Whether at restaurants or in grocery stores, U.S. consumers are making freshness, transparency, and sustainability priorities in their purchasing decisions.

Virginia’s proximity and accessibility to some of the country’s most populated areas makes it a prime location for food and beverage processors that need to move product in a safe, efficient manner, and the Commonwealth’s supply chain infrastructure delivers the food consumers want at the peak of freshness.

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Ten million gallons of water from Carvins Cove Reservoir in Roanoke County are filtered each day for business and residential customers of the Western Virginia Water Authority, providing water to citizens and businesses, including major food and beverage producers. In addition, the 12,700-acre Carvins Cove Natural Reserve, the second-largest city-owned park in the United States, provides water-based recreation opportunities, including boating, fishing, and stand-up paddleboarding.

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Ardent Craft Ales, Richmond

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FROM GRAPES AND GRAINS TO GLASS Virginia’s Surging Craft Beverage Industry VIRGINIA’S FIRST BRUSH WITH ALCOHOLIC BEVERAGE PRODUCTION came in

1620, when English settler George Thorpe distilled the first batch of corn whiskey in what would become the United States at the Jamestown settlement near Williamsburg. Two of the Commonwealth’s most famous residents, George Washington and Thomas Jefferson, attempted to distill beverages at their Virginia estates. Four centuries after Jamestown, the Commonwealth’s craft distilleries, wineries, and breweries are building on that history.

The Commonwealth has 291 vineyards and wineries, the sixth-highest total in the United States, and more than 70 distilleries, including the country’s largest craft producer of American single-malt whiskey (Virginia Distillery Company in Nelson County). Craft beer production has skyrocketed over the past decade to the point that VinePair.com, the internet’s most-read beverage website, ranked Richmond as the world’s top beer destination in 2018.

Virginia’s craft beverage producers are capitalizing on a national appetite for local products. A 2018 article in The Atlantic noted that the number of brewery establishments grew sixfold nationwide between 2008 and 2016 — during a time when U.S. beer consumption declined. In that article, Brewers Association Chief Economist Bart Watson said, “The craft beer movement was driven by consumer demand.” Craft distilleries, meanwhile, sold 7.2 million cases nationwide in 2017, with an annual growth rate of 23.7%, according to the American Craft Spirits Association’s Craft Spirits Data Project.

The keys to the rise of Virginia craft beverage production lie in a now-friendly regulatory environment, abundant resources, and an industry-wide spirit of collaboration.

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The Dog & Oyster Vineyard, Lancaster County

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TOP WINE P R O D U C I N G S TAT E S MOST GALLONS PRODUCED

MOST WINERIES P E R S TAT E

California 684.9M Washington 35.7M New York 28.5M Oregon 10.9M Texas 4.2M Michigan 2.8M Virginia 2.4M (tie) North Carolina 2.4M (tie) Illinois 2.4M (tie) Pennsylvania 2.1M

California 4,501 Oregon 793 Washington 792 New York 403 Texas 352 Virginia 291 Pennsylvania 285 Ohio 254 Michigan 191 North Carolina 171

Source: National Association of American Wineries, 2018

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FROM GRAPES & GRAINS TO GLASS

VIRGINIA WINE: FUELED BY COLLABORATION A collegial atmosphere has helped buoy the Virginia wine industry since the days when Jefferson made two unsuccessful attempts to cultivate wine grapes at Monticello, outside Charlottesville.

(The first attempt was cut short by the Revolutionary War; the second is generally attributed to a pest that was deadly to the European vitis vinifera grapes he planted.) “The Virginia wine industry is truly one of the most inclusive you’ll ever see. The concept of competition is absurd,” said George Hodson, CEO at Veritas Vineyards & Winery, located near the northern entrance to the Blue Ridge Parkway in Afton.

That atmosphere has enabled the wine industry to grow quickly, with the number of wineries in the Commonwealth nearly tripling since 2005. Hodson’s new sparkling winemaking equipment at Veritas should be ready to bubble up other wineries’ product on contract in time for the 2020 harvest. Another Charlottesville-area winemaker, Michael Shaps — who has expanded his Michael Shaps Wineworks production facilities four times in 12 years — is bringing another building online to make more wine for his neighboring vintners.

Currently, he has 15 contracted clients.

“It helps the growth of the industry,” Shaps said. “This allows people to develop vineyards without the millions of dollars they need to build a winery.”

Winemakers tend to support the use of land for growing grapes, not only as a way to bring jobs and economic opportunity to rural areas and bring younger generations back to their family farms, but as a way to preserve it from encroachment by developers and generate more tax revenue than they would by putting it out to pasture.

Christopher and Kiernan (Slater) Patusky brought their kids back to Kiernan’s 300-year-old family cattle and feed farm in Fauquier County in Northern Virginia to plant grapes and produce wine under

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the Slater Run label. Almost entirely run by the Patuskys and Kiernan’s relatives, six-year-old Slater Run will boast two production buildings and a new tasting facility later this year.

“It’s just a really, really important industry for these rural areas,” said Patusky, whose children constitute the family farm’s 11th generation. “These older farms are no longer as viable as they were, so agritourism is a great way to keep the agricultural lifestyle alive, active, and economically viable.”

“The idea of agriculture and good animal husbandry is that you bring that economic activity into a community,” said Jennifer McCloud, an entrepreneur who’s recently opened a culinary center called The Ag District to make and sell estate bread and cheese on her cattle farm and vineyard, Chrysalis Vineyards, in Middleburg in Northern Virginia.

McCloud primarily focuses on reviving the state’s nearly defunct native Norton grape, the world’s most disease-resistant varietal and once revered for its ability to make what judges at an 1873 competition in Vienna called “the best red wine of all nations.” In addition, McCloud says she’s the primary source of Alvariño grapes in America.

Generally, Viognier, Petit Verdot, Cabernet Franc, and Tannat grapes also grow well, and at Veritas, Hodson is in the process of branding a line of some of these otherwise underrepresented wines under the name True Heritage to sell exclusively for distribution as a way to expand recognition of Virginia wines outside their tasting rooms, where 90% of the state’s bottles are sold. According to the Virginia Wine Board Marketing Office, Virginia’s microclimates resemble the conditions of European grapegrowing regions in Southern France, Southern Italy, and parts of Spain.

But more often, Virginia’s vintners prefer to emphasize their own terroir — in whatever form that may take.

Michael Shaps Wineworks, Albemarle County

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The Veil62 Brewing Co., Richmond

FROM GRAPES & GRAINS TO GLASS

Chatham Vineyards on Church Creek sits on sandy, loamy soil that imparts “terrific” acidity and minerality to its “runaway” Church Creek Chardonnay, says co-owner Mills Wehner. Located in Machipongo in Northampton County, it also enjoys a rare proximity to the ocean.

“We’re deeply committed to the Eastern Shore of Virginia,” she said. “We sell the shore first, wine second.”

VIRGINIA CRAFT SPIRITS: LOCAL FOCUS LEADS TO BETTER PRODUCTS Like Chatham Vineyards, Virginia distilleries have a strong focus on locally sourced grains. According to a 2018 analysis prepared for the Virginia Distillers Association, Virginia’s craft distilleries source more than 70% of their agricultural ingredients in-state. “We get all of our corn and barley from Virginia,” said Tom Murray, whose MurLarkey Distilled Spirits in Prince William County has won 23 prestigious regional, national, and international awards and recognitions since opening in 2015.

In Charlottesville, Vitae Spirits Distillery varnishes its local credentials by emphasizing what co-owner Ian Glomski calls “community terroir.” As a gluten-free distillery that chiefly makes rum instead of grain spirits, it can’t source enough raw materials in Virginia to fulfill any traditional sense of terroir. Instead, he partners with a coffee roaster to make cold-brew coffee liqueur and a neighboring barbecue restaurant to grill the Louisiana sugarcane he uses to distill rum.

“There’s an influence of geography and geology, but it’s also the terroir of the community [in our rum],” said Glomski, a former professor of microbiology at the University of Virginia School of Medicine.

As Gareth Moore, founder of Virginia Distillery, said, “If you’re a grain farmer in Virginia selling outside of Virginia, you get a commodity price. But if a distillery wants to say it sources in Virginia, consumers see that as a differentiated product, and

the grain farmer gets a higher economic impact by selling to us. If you’re able to put that stamp on the bag that says 100% Virginia-grown grain, you’re able to get a bit of a premium.”

That reliance on local supplies extends beyond the grain being distilled. This year, Virginia will be able to even more directly connect with its 400-year-old whiskey tradition when Scotland’s famed Speyside Cooperage completes its $35 million investment in a new barrel cooperage in Smyth County and a stave mill in Washington County — both in the I81-I77 Crossroads region — to capitalize on the region’s abundance of white oak, the wood needed to age bourbon. The barrels should live long lives in Virginia, as distillers will likely pass used ones onto other producers in the brewing and winemaking businesses.

Just as Virginia’s wineries fulfill the dreams of Thomas Jefferson, the Commonwealth’s craft spirits also echo back to colonial days. George Washington operated a distillery at his estate at Mount Vernon in Fairfax County that was one of the United States’ largest whiskey distilleries at the time. The Mount Vernon conservators have reconstructed the distillery and produce small-batch whiskey on-site.

VIRGINIA CRAFT BEER: FILLING A CONSUMER NICHE Virginia’s burgeoning craft beer industry runs on the same generosity that drives whiskey barrels to flow from company to company. “Virginia is pretty friendly to breweries, quite famously. Richmond, specifically, has this great burgeoning community, and we’re interested in helping everybody succeed,” said Dominic Engels, CEO of Southern Californiabased Stone Brewing, which chose to locate its East Coast production brewery in Richmond after considering numerous other sites in more than 20 states. The company opens up the lab in its LEEDcertified facility to smaller breweries that can’t afford to equip themselves with as much technology.

V I R G I N I A' S CRAFT BEER SURGE Of all states with at least 100 craft breweries in 2018, Virginia experienced the third-largest growth in number of craft breweries from 2011 to 2018.

5.4x OHIO

5.4x FLORIDA

4.9x VIRGINIA

4.1x

NEW YORK

4.0x

M I N N E S OTA Source: Brewers Association, “State Craft 63 Beer Sales & Production Statistics, 2018”

TYPES OF DISTILLED SPIRITS PRODUCED IN VIRGINIA Whiskey Gin Rum Vodka Brandy Flavored Liqueurs Other 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Percentage of Distilleries Producing Source: College of William & Mary Raymond A. Mason School of Business, “The Economic and Regulatory Analysis of Virginia’s Distilled Spirits Industry,” January 2018

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George Washington operated a distillery at his estate at Mount Vernon in Fairfax County that was one of the largest whiskey distilleries in the country at the time, producing nearly 11,000 gallons in 1799. The conservators of the estate have reconstructed the distillery and produce small-batch whiskey on-site.

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FROM GRAPES & GRAINS TO GLASS

There’s an influence of geography and geology, but it’s also the terroir of the community [in our rum].

IAN GLOMSKI Owner, Vitae Spirits Distillery

The craft beer industry in Virginia took off following the passage of the “tasting room law,” which allowed breweries to sell beer by the glass at their brewing facilities, in 2012. At the time, there were 50 craft breweries in operation; that number has now grown to 280, 12th-most in the country, producing more than 400,000 barrels of beer annually.

Even in more urban parts of Virginia, brewers are doing what they can to take from and give back to the natural environment. Richmond — particularly the post-industrial Scott’s Addition neighborhood — has amassed nearly 40 breweries and an international reputation for great beer.

Repeatedly named among the best breweries on the planet by rating sites like RateBeer.com and other media, The Veil Brewing Co. captures the environment by naturally inoculating the beers they brew at one of their four current and planned

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locations. Rather than fermenting with packaged brewer’s yeast, head brewer Matt Tarpey lets his liquid sit in an open vessel overnight to capture the airborne yeast and bacteria that come in from outside, after which it ferments in a wooden barrel.

“We pump wort [unfermented beer] into a koelschip for 16 hours, and that’s when it’s inoculated by microflora,” Tarpey said.

Though brewers at the globally acclaimed Hardywood Park Craft Brewery, with two Richmond-area locations, probably aren’t putting Atlantic sturgeon in their beers, they are working to improve the fish’s ecosystem so that others might profit from it (and perhaps pair drinks with it).

Since 2013, Hardywood has donated $5 from the sale of every barrel of The Great Return IPA to its biggest charitable beneficiary, the James River Association.

“For decades, the James River used to be a way to get rid of waste for the

cities upriver from us,” said Hardywood co-owner Eric McKay. “The Atlantic sturgeon was thought to be long gone, and scientists couldn’t believe it when they spotted them spawning.”

A healthier natural environment leads successively to higher-quality ingredients, better-tasting product, more awards and acclaim, amplified visitation, higher sales and price points, an ability to command more respect in the marketplace, and broader economic expansion opportunities on the macro and micro levels.

That’s how craft beverage producers draw on the Commonwealth’s array of resources — prime conditions for sourcing ingredients, a collegial environment enabling friendly competition, and a population that’s thirsty for the next great flavors bubbling out of Virginia vats and stills.

In 1934, one day after the repeal of Prohibition, A. Smith Bowman began using his grain to distill Virginia Gentleman and Fairfax County whiskey in what is now Reston.

Now operating in Spotsylvania County, A. Smith Bowman Distillery produces bourbon, vodka, gin, rum, and cream liqueur. Its Abraham Bowman Port Finished Bourbon Whiskey was named “World’s Best Bourbon” by Whisky magazine in 2016, while its John J. Bowman Single Barrel Virginia Straight Bourbon Whiskey won the same award the next year.

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Rappahannock Oyster Co., Middlesex County

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America’s Seafood Leaders IT’S CHALLENGING TO REMEMBER

a time when Virginia — the nation’s third-largest seafood-producing state — wasn’t known for its flavorful, briny oysters and succulent clams, but the late 1990s and early 2000s were a dark era for shellfish producers.

Oysters, in particular, thanks to warming temperatures in the Chesapeake Bay, were dying off from diseases and a lack of solutions to treat them. Many oystermen — including third- and fourth-generation family businesses — closed their doors.

“It was a pretty desperate time. [We worried that] we were going to lose the Chesapeake Bay oyster industry because of disease,” said Bruce Vogt, president of Gloucester County-based Vogt Oyster Company (doing business as Big Island Aquaculture Oysters), which has been farming oysters for around 10 years.

That started to change in the early 2000s, when Dr. Stan Allen took over as director of the Virginia Institute of Marine Science’s (VIMS) Aquaculture Genetics and Breeding Technology Center and began genetically breeding oysters that would survive.

When Allen effectively produced diseaseresistant oysters around 2003, oyster hatcheries realized a resurgence. In 2005, when VIMS released its first survey of

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shellfish aquaculture production, the state produced around 800,000 individual half-shell oysters. That number has quickly grown over the years, reaching 40 million oysters worth an estimated $62.4 million in 2018. According to the U.S. Department of Agriculture’s 2018 Census of Aquaculture, one in every five American oysters sold in 2018 was harvested in Virginia.

same 2018 aquaculture census. Virginia is the top producer of hard clams in the U.S., producing around 200 million individual clams each year. All told, Virginia boasts 152 mollusk farms, nearly double the 80 in the Commonwealth in 2013 and trailing only Massachusetts’ 157. The Commonwealth’s $94.3 million in 2018 mollusk sales nearly tripled those in California, the second-highest state.

Virginia’s 134 oyster farms made up 70% of all aquaculture operations in the Commonwealth in 2018, according to the

And it’s not just shellfish that the state is known for. A variety of finfish such as striped bass and flounder also

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proliferate. Virginia is the nation’s third-largest seafood producer, with total landings of 363 million pounds in 2018, outpaced only by Alaska and Louisiana.

Sales of food fish in Virginia reached $15.4 million in 2018, up 35% over a five-year period.

The Port of Reedville on the Northern Neck was the fifth-largest port in the U.S. by volume of seafood landed in 2018. Meanwhile, the Seafood Industrial Park in Newport News has averaged in the top 10 nationally for

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Tangier Island Oyster Co., Tangier

2018 U.S. DOMESTIC SEAFOOD LANDINGS (POUNDS)

5.4B ALASKA

1B LOUISI AN A

363M VIRGINIA

320M 313M MISSISSIPPI

OREGON

Note: Data does not include seafood processed at sea.

Source: National Oceanic and Atmospheric Administration, “Fisheries of the United States,” 2018

value of seafood landed out of all seafood industrial parks. The massive park, home to a number of seafood and other water-dependent companies such as ice plants and boat-building businesses, provides full-service accommodations to the seafood industry, such as utility hook-ups and vessel fueling, service, and repair.

The state’s seafood industry is flourishing, leaders say, because of its favorable regulatory policies, its strong research support, and, of course, “the

largest estuaries in the U.S. to haul seafood from — the Chesapeake Bay and parts of the Atlantic Ocean,” said Mike Hutt, executive director of the Virginia Marine Products Board.

of our oysters,” Hutt said, while Ryan Croxton, owner of Rappahannock Oyster Co. in Middlesex County on the Middle Peninsula, says that most Asian customers prefer a sweeter oyster.

In addition, seafood sellers are effectively marketing their products within the state, across the United States and, in some cases, other countries. Virginia oyster producers are finding a lucrative market overseas, particularly in Europe and Southeast Asia. Asian consumers “love the flavor, texture, and affordability

Oyster companies have raised the value of their product over the years by branding their specific oysters and distinct flavor. “Now you see oysters that don’t say, ‘from the Chesapeake Bay.’ They market individual oysters,” said Michael Oesterling, executive director of Shellfish Growers of Virginia.

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Pleasure House Oysters, Virginia Beach

For example, Vogt’s website touts the fact that its master farmer, Daniel Vogt, pampers his “babies” with music and tumbling to “encourage deep cup growth for a meaty, juicy oyster.”

Virginia’s oyster industry has benefitted from Americans’ desire for raw oysters, which has surged in the past few years as consumers seek out one-of-a-kind food experiences. “Today, when you look at social media, you see people doing flights of oysters with different flavor profiles,” Hutt said.

Croxton has realized Americans’ growing desire to taste flavorful local oysters firsthand. The third-generation company

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ships its Rappahannock River oysters all over Virginia and the U.S., and to some foreign countries.

according to the National Oceanic and Atmospheric Administration’s “2018 Fisheries of the United States” report.

In 2011, the company opened Merroir, the first of its six restaurants and oyster bars in Virginia, Washington, D.C., Charleston, S.C., and Los Angeles.

It moves around 10 million half-shell oysters annually.

Oyster producers have worked hard for their current success, knocking on the doors of restaurants and attending food service and retail trade shows. Croxton attributes the growth to “grassroots efforts, farmers, and chefs preaching this gospel of a highly efficient form of aquaculture.”

“We have seen tremendous growth in the U.S. The market is nowhere near its peak,” Croxton said. “We eat so much more seafood than we used to per capita.” In fact, U.S. per capita seafood consumption hit the 16-pound mark for the first time in nearly a decade in 2017,

“It is very unlike a lot of aquaculture.

It’s not just ‘Do no harm,’ it’s also ‘Do good.’ That message resonates with chefs and with people who are getting into it,” Croxton said.

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Deborah Pratt, of Middlesex County on the Middle Peninsula, has won the National Oyster Shucking Championship Contest 11 times.

Pratt — known as the Black Pearl — and her sister, Clementine Macon, have made a collective 18 appearances in the World Oyster Opening Championship in Galway, Ireland.

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Beyond One-SizeFits-All College Dreams A Conversation With James Rosenbaum James Rosenbaum is a professor of human development, social policy, and sociology at Northwestern University’s Weinberg College of Arts and Sciences and a faculty fellow at the Institute for Policy Research. He specializes in research on work, education, and housing opportunities. His books include “Bridging the Gaps: College Pathways to Career Success” and “After Admission: From College Access to College Success.”

VEDP President and CEO Stephen Moret sat down with him to discuss how the traditional college model fails some students and what can be done to make it work better.

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Stephen Moret: You recently published a book with a couple of co-authors called “Bridging the Gaps: College Pathways to Career Success.” And in that book, you talk about three gaps: students taking courses without getting credits, students getting credits that didn’t count for credentials, and then getting credentials that don’t have payoffs in the labor market.

James Rosenbaum: The focus on gaps is important because we designed a higher education system for a certain group of students. We all know what college is. It’s the experience that we had, and that is in a traditional college with traditional procedures. Fortunately, we have expanded opportunities for college now to nearly everybody. It is astounding to see in the cohort of students we studied. They were seniors in 2004, and we looked at what happened to them over the next eight years.

Ninety percent of high school graduates go to college. They won’t go at once — the usual statistic is about two-thirds. But over the next few years, many more students realize, “I don’t have a chance unless I go to college,” and they change their mind.

They raise their expectations, and they go to college. The problem is, college has not been well designed for many of these students, and that leads to the gaps that you just mentioned.

Moret: Particularly the non-traditional sort of cohorts.

Rosenbaum: That’s exactly right. We have students who are motivated to go to college, and they could benefit from certain kinds of college, but we give them a one-size-fits-all model, and that doesn’t work very well for many students. And so we end up with students basically facing each of those gaps. Some of the gaps are of our own construction, where we have created a system which looked fine by our traditional criteria, but when matched against the new students, it doesn’t work.

And so, in essence, what’s useful about this perception about gaps is: We created them, we can un-create them, and we can actually see the ways to address the problems that we face.

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And here, the problems are very serious.

Community college is wonderful. It creates open access at very low cost and meets labor market demands. But community colleges have very poor rates of completion of any credential. And if you don’t complete a credential, you don’t get a payoff, and so we need to be able to rethink what we are doing here. What kind of college is going to be beneficial to the new kinds of students? There’s a lot that can be beneficial, and it turns out it’s worth more than we thought — what we call subbaccalaureate credentials: certificates and associate degrees. They have lower average earnings, and that’s well known. What’s not known is, the overlap of earnings with B.A.’s is enormously strong. The top 25% of people with a one-year certificate earn more than most B.A.’s earn — and on the other end, a very comparable figure, the bottom 25% of B.A.’s earn less than most certificate holders earn. And the findings are even stronger for associate degrees.

Moret: There are some reasons why these gaps occur. I suppose a lot of it, as you mentioned, is that we’ve focused on these traditional college students, and have perhaps not redesigned the system, or at least created pathways in the system sufficient to support those non-traditional students. But why do you think it’s taking so long for the United States to be able to shift toward a model that would better serve the broad array of students that higher education serves in this country?

Rosenbaum: I think one of the ironic features of the American system is: We are very idealistic, and we’re accomplishing a lot of our ideals. And so when I say 90% of high school graduates are going to college, think about your high school class and the diversity of interests and the diversity of skills in that. We are succeeding beyond anything I thought was possible in terms of getting people into college, and that’s a success that creates its own problems. And so part of our problem is just that. The other part is — and this is not a good thing — we often blame students for their failures, and often the deck is stacked against them. We

need to do a better job of understanding: To what extent are we putting people in a situation where they can’t win? And to what extent are there other options that are not usually thought of where they can win?

I think we’ve got some of the pieces in place, but we don’t have the advice in place. We don’t have the advising procedure in place. We totally skimp on investing in counselors and advisors and giving them the information they need to give good advice.

Moret: You mentioned the issue with counselors. As I look at the research that’s been done about higher education and the labor market, one of the most common broadly shared recommendations to make the system work better is to improve the availability and the quality of advising and coaching, both in K-12 and in college, and yet we don’t seem to be making much progress in that direction.

There’s some evidence that quite a bit of institutions are actually going the other direction. What has to happen to make some real progress in that area?

Rosenbaum: Well, there’s one thing that is well-known, and it’s very much true: The student caseload for counselors is abysmal. In high schools, it’s not good — 300 students to one counselor. In community colleges, it’s horrid — 1,000 students to one counselor. And that’s a low-ball number. There are many cases I know of 2,000, 3,000, or more. We do not have a counseling system in the community colleges, basically.

But the other piece is something we can do without very much cost. And that is: Devise systematic advice that we can give to students about what their options are, the advantages of those options, who they work particularly well for, and who they don’t work for, giving realistic advice in a systematic way. And here the kind of thing that researchers do, I think, can be very helpful, because researchers look at what actually happens. They don’t just look at what

A C O N V E R S AT I O N W I T H J A M E S R O S E N B A U M

TRADITIONAL COLLEGE PROCEDURES VERSUS N O N T R A D I T I O N A L P R O C E D U R E S U S E D B Y O C C U PA T I O N A L C O L L E G E S TRADITIONAL PROCEDURES...

NONTRADITIONAL PROCEDURES...

Defer payoffs

Lead to quick payoffs

Set up early obstacles (remedial courses)

Enable incremental success that delays obstacles

Are unnecesarily complex

Offer “package deal” pathways and preset time slots for courses

Leave students uninformed as they make course choices

Provide “guard rails” to help students make informed course choices

Encourage self-directed job search

Provide college-directed job choice and job search

Leave students uninformed as they make job choices

Provide job placement services to guide job choices and assist students with access to jobs

Source: James E. Rosenbaum, Caitlin E. Ahearn, and Janet E. Rosenbaum, “Bridging the Gaps: College Pathways to Career Success,” 2017

the goals are — they look at what actual outcomes are.

Moret: You also talk about something where there’s a lot of economies of scale with having just the information base.

You could almost imagine a technology solution there. Who has gotten closest to creating something like this that’s accessible to prospective college students?

Rosenbaum: Part of it is software.

Naviance’s software and other brands of college readiness software are often very useful for advising students about which colleges to apply to. And that kind of matching of students’ background achievement, programs of study, interests, geographical preferences, can be inputted into the software, and advice can be given.

Unfortunately, that doesn’t go far enough, and we really need to be developing software, and actually even sheets of paper, that would guide counselors to respond to students whose achievement is much below the usual average traditional college entrance achievement. And the alternative interests — the love of doing technical things, working with electronics,

working with mechanical things — these kinds of alternatives aren’t in the software that I know of, and yet they’re important for people’s choices.

We’ve gotten to a place where we’re admitting students, new kinds of students, and we haven’t gotten to the place where we can tell them where they can benefit, and where they can actually have their own interests and own abilities recognized.

Moret: The data sets that are currently available often talk about, “Well, here’s all the jobs and what they pay, and what the required education is,” let’s say, but there’s not enough of a sense of how you navigate from where you are today to these outcomes.

Rosenbaum: It’s absolutely a missing link, and it is a crucial link. Students want advice about these things. They want someone who knows them even a little bit, who can make a judgment about what’s an appropriate set of goals, what are alternative goals, and to work that through. And so students need that

kind of advice. The Bureau of Labor Statistics book — I don’t know if it’s still down on paper, but when it was down on paper, it was four inches thick of listing just jobs and aspects of jobs. And it’s overwhelming in a way that students can’t possibly cope with. We need to find ways to target more clearly and make those targets consistent with the local labor market.

Moret: I don’t know if you saw there was a recent piece that essentially made the case for a new learning ecosystem. And one of the key features of that, they called navigation. And it was this whole idea about helping individuals to assess where they are today, to understand the options available to them, and the different pathways to get there. And I certainly agree with you — the opportunity for a technology-enabled solution seems like a big part of it.

Rosenbaum: One of the counterparts of this is the college system, where we offer an overwhelming number of options for students to take without very much guidance. The gaps that you were

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mentioning earlier, many of them come from students making suboptimal choices that they couldn’t anticipate.

One of the recommendations that I’ve made in the past, and it’s now being adopted quite generally, is creating guided pathways. And these pathways are sought among the thousands of courses you can take, and say, “If you want this goal, here are the things you should do to achieve it. And this is when you should take this course. Taking them out of sequence often doesn’t work, and doesn’t give you credit, and leads to failure.” So regimenting the curriculum in a way that makes it clear: You choose your goal, ideally with some help from a counselor or advisor, and then the college will provide all of the steps in the right order that you need to get there.

Moret: In your most recent book, you talk a bit about the College Scorecard, and perhaps some benefits of it, but also some shortcomings of it. I don’t know if

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you’ve had a chance to peruse the new version, but in the last few months, a new version has come out. I’d be curious about what you see as the benefits of how it’s evolved, but also, could you elaborate a little bit on what you think could be done to improve it?

One of the things, for example, you talked about — earnings is certainly one relevant outcome, but there’s also non-monetary benefits of education and work that perhaps could be incorporated in some way.

Rosenbaum: The College Scorecard looks at easily measured features, and that comes out to getting a job, maybe getting a job in the right area, and earnings. And there’s much more that is important, especially in the early career. When you first start, we’ll often think, “Well, you want to get better earnings.” Turns out that’s often the wrong answer, that it’s better to choose to consider the tradeoff between earnings and getting training — get experiences that are going to be

valued. Students complain sometimes that the college aims them at lower earnings than they could get on their own. But the jobs they find on their own don’t give them relevant job experience and are going to be a dead end for their career.

College staff often actually know what are the good training experiences students could get in their first jobs that are going to lead to a much more successful career later. Aiming too much for high earnings in that first job can be a problem. I think the Scorecard is well-intentioned, and to some degree, can be used cautiously. But it’s not the whole story, and if followed too rigorously, particularly with high-stakes punishments, it could do damage.

Moret: As you rightly pointed out, there’s a huge distribution in the employment outcomes that individuals have. One of the areas of study that I think is getting a little bit more attention lately is the underemployment problem.

We have historically low unemployment,

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We need to do a better job of understanding: To what extent are we putting people in a situation where they can’t win? And to what extent are there other options that are not usually thought of where they can win?

JAMES ROSENBAUM Professor of Human Development, Social Policy, and Sociology, Northwestern University

but underemployment, even of bachelor’s grads, is quite material in the U.S. Some estimates are order of magnitude, 30% or so, of full-time employed adults in the U.S. with a bachelor’s degree or higher not working in a college-level occupation.

What do you think about the research in that area right now, and is there anything that you’ve gleaned about what you think could be done to kind of improve on that situation?

Rosenbaum: It’s a great question and very important. We have looked at the B.A. degree as offering a good education, but also, it’s offering high status. And we do that based on averages as if everybody was at an average. And there’s wide variation within the earnings of B.A.’s and in the earnings of other degrees as well, and it turns out that there’s an enormous overlap between these. So if we were just going on earnings, we would come to the conclusion that, mostly, it’s a big overlap. And students who choose

a B.A. are often not going to have higher earnings than someone with an associate degree, even though they’re spending many more years getting it.

And usually, if you take longer than four years to get your B.A., those last years are ones that you didn’t expect to have to be paying for. So there are a lot of problems with a B.A. that we are not very candid about, and as a result, students are caught shorthanded with not enough money, and not enough time, and promises they made to family, and promises they made to employers about how many years college would constrain their hours.

The underemployment also relates to field of study. Students with a B.A. come from various majors, and those majors change the outcomes enormously. And so, a major in a STEM field, everybody knows there’s great value in that. The average monetary value of a bachelor’s degree in English, or a bachelor’s degree in some other liberal arts field, may not be as great.

And this question of variation turns out to be especially important, actually, here.

But more important than earnings is: What’s the future trajectory, and to what extent are students going to be getting a good career that’s going to have a future?

And students often don’t understand that, and advisors are not very good about telling them, “It is crucial that you make a decision of getting a job that’s going to have a future for you.”

Moret: It gets back to helping people think about the choices that they make, and how they impact a future economic opportunity, if you will. Some other countries do perhaps a better job at this than we do. Can you talk a little bit about that?

Rosenbaum: Well, Germany certainly comes to mind. Germany has a total belief that young people can do a lot of things that we think they can’t do. And in Steve Hamilton’s study of German apprenticeships, he found 18-year-olds

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I think we’ve got some of the pieces in place, but we don’t have the advice in place. We don’t have the advising procedure in place. We totally skimp on investing in counselors and advisors and in giving them the information they need to give good advice.

JAMES ROSENBAUM Professor of Human Development, Social Policy, and Sociology, Northwestern University

who are not college educated doing clerical-type jobs of considerable responsibility. And he said, “We don’t think 18-year-olds can do that kind of thing in this country.” And so we sell short the students, we sell short the experiences they get, we underutilize them, and we under-train them. And so the German apprenticeship experience is one that tells us we could be doing a lot more, and it does require investment. Partly from employers, perhaps from the government, but somebody needs to make these investments. Because without these initial investments, we basically lose a lot of capability that we could have otherwise.

to do a good job, because then we’ll not come back with job openings next year.”

In Japan, there is a strong linkage between work and high school, and graduating students are recommended for certain jobs based upon their hard work and achievements in high school.

Rosenbaum: I don’t know why we don’t do it. We come closer to doing it for college graduates, but we still don’t do it.

It’s such a missing link, because workbound students don’t have incentives for getting good grades, employers don’t get valuable indicators of student work habits, and teachers give grades and ratings that students ignore and don’t work for.

Instead, we create competition among students on artificial criteria that don’t matter. They compete on grades. They compete on number of activities. You see these really amazing résumés, but none

Moret: In high school? Interesting.

Rosenbaum: And these were direct linkages, direct relationships, where a local employer would say, “Well, we’ll give you 20 slots. You nominate 20 people that you think are going to do a good job. Don’t recommend someone who’s not going

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Moret: Who’s doing the recommending?

Rosenbaum: The high school counselor evaluates the students based largely on their grades, and says, “These are the students we think will work hard and can do a good job.” But they won’t fill out their quota of 20 jobs with 20 people, if they don’t think they can handle it, because they don’t want to disappoint the employer.

Moret: Why don’t we do that in the U.S.?

of it tells us anything we want to know, what employers want to know, because they want to know about soft skills, they want to know about persistence, they want to know about attention to quality, they want to know about problem-solving.

None of those are in the résumé. All of those are things that faculty could make recommendations about students, and we don’t have a trusted linkage between teachers and employers, so we can’t convey that information.

What’s needed is a trusted relationship where the school says, “We like having this kind of relationship. We will treat it seriously. We will give grades and candid recommendations,” and employers will get valuable information, will hire students who work hard, and will come back to us next year.

Moret: One of our great ambitions in Virginia is, we really aspire to be the state that is the best in the country at this topic.

Essentially at the whole range of things we might put under the label of human capital development. And part of that is helping improve these connections, helping people to better navigate the opportunities available to them, and

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to pursue those. You articulate some fabulous ideas, not only in your most recent book, but in some of your past writing. Some of those have already been implemented in some places, and others are promising, based on research today.

Do you think colleges, states, and/or the federal government need to craft new structures to better enable these things to happen?

It seems to me there’s so many of these great ideas that just perhaps don’t have a champion to really make them happen.

And I wonder if part of the answer is some kind of structural shift.

Rosenbaum: I think that’s exactly right.

And that’s perhaps a weak point of the American system. We mistrust structure, we mistrust big government and big programs, and we love decentralization, we love individual initiative, and that’s not going to be enough. This is a big problem, and we have big things to do.

One of the biggest is alignment. We have very poor alignment between K-8 and high school, between high school and college, between two-year colleges and four-year colleges, and then between colleges and work. Without alignment, we’re at cross purposes.

And so we have high school exit exams, a wonderful idea for measuring the accomplishments of students.

Unfortunately, students will pass the high school exit exam, and three months later show up at a college where they fail the remedial placement exam. That’s poor interaction and alignment. And I wrote a piece recommending that we do alignment. Harper College in Illinois has actually done that.

Moret: Really?

Rosenbaum: The provost at Harper College, Judith Marwick, created an alignment system where the college remedial placement exam is given in 11th grade. All of a sudden, students got information about how prepared they are for college. And if students fail, that’s

great, that doesn’t matter, because they’ve got a whole year to work on it. And that’s what they do. They devote senior year to remedying the problems that students have, and they’re easily identified by this procedure. This alignment means that many more students enter college ready to do college-level work.

It also says, “We’ve got this missed opportunity. We’ve got the high school trying to prepare students, we just don’t have the right standards and curriculum in place.” This kind of alignment does that. Now you can do the same story for the next leap. The alignment between community college and four-year college is very poor. Four-year colleges allow students to transfer in, and they make it very difficult to get to actually do that.

And inevitably, students have taken many courses which don’t match the courses that the four-year college expects.

And even in the state of Illinois, where we have an articulation agreement, that only covers electives. It doesn’t cover the major. And so here we’ve got this act that was intended to make everything count, it doesn’t count for the major. General Ed may count, but your economics major, your economic courses, may not count at all. And it’s hard to anticipate that. At one four-year college, actually, the guy who is in charge of deciding which credits counted said his job was to give people the bad news that much of what they’ve got doesn’t count. And he said, “Maybe instead of that, I should be talking to entering community college students and telling them what they can take at that college that’s going to count at our college.” And so, basically, he’s turned his job into advising students that he didn’t even have yet. That kind of effort is rare.

The misalignment we usually find is just inexcusable, and it’s easily fixed, but it is rarely fixed, and we need to do more to make that alignment work.

Moret: Was there anything else that you you wanted to share, that you think we should have touched on that perhaps we didn’t?

Rosenbaum: One thing that I am struck by is, we talk about the choice of degree as if it’s an either/or.

Moret: You need a B.A. or less than B.A. — is that what you mean?

Rosenbaum: Yes, B.A. or an associate degree, or a certificate. It’s not either/ or. You can do both/and. And I think we need more strategies where students will not just choose a goal, but they’ll choose how to get to that goal. They may choose a BA, but do it by first getting a certificate, then getting an associate degree, then getting the BA. It may take a little longer, but it provides payoffs all the way along.

Moret: Off-ramps at every stage, basically.

Rosenbaum: That’s right. Students who have high risk of college being interrupted, students who have high risk of finding the courses too difficult, will get something along the way, even if they don’t get all the way to the BA. And it means that they have payoffs right away.

It means they have better earnings to support their college careers. It means that they’re getting a set of expertise that is valued from the very beginning. And we don’t do enough of that. It seems to me that incremental success is a great way to hedge your bets, and a great way to get payoffs, and to be able to leverage your job experiences with your training.

Moret: It’s a wonderful idea. I want to thank you so much for taking time to visit with us today, and especially for the really outstanding and important work that you’ve done and that you continue to do.

We’ve benefited from it in Virginia, I’ve benefited from it in my own career, and I’m looking forward to staying in touch in the years ahead.

Rosenbaum: Thank you. I enjoyed it also, Stephen.

For the full interview, visit www.vedp.org/Podcasts

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confluence of geographical, workforce, and other advantages has put Hampton Roads in a strong position in the caffeinated beverage industry. The region is home to a large tea processing and packaging plant, four coffee manufacturing facilities, and many support businesses in such areas as warehousing, machinery repair, and packaging supplies.

Over the years, the caffeine industry has grown into an economic engine in Hampton Roads and the City of Suffolk in particular. According to Harvard Business School data, Hampton Roads has the third-highest concentration of people employed in coffee and tea processing in the United States, trailing only Charlotte, N.C., and New York.

According to U.S. Census Bureau data, coffee ranked seventh among products imported into Virginia from 2015–2018, with more than $1.1 billion worth of beans entering the Commonwealth. About a third of all green coffee imported into the United States comes into the Mid-Atlantic region (The Port of Virginia, Baltimore, Savannah, Ga., and Charleston, S.C.).

WHERE IT ALL BEGAN The road to caffeine prominence began in 1955 when the Lipton Tea Company built a tea processing and packaging plant in Suffolk, now Lipton’s only processing plant in North America. That plant produces all Lipton tea bags sold in the United States. Lipton, which is owned by Unilever, invested $96 million to expand the plant in 2013.

Hills Bros. opened a manufacturing plant in Suffolk in 1986 that’s now owned by Massimo Zanetti Beverage USA, which also has a distribution center located in Portsmouth. The 355,000-sq.-ft. plant roasts enough beans daily for about 20 million cups of coffee and packages the ground or whole bean product into bags, cans, and single-serving cups.

In addition to Hills Bros., Massimo Zanetti’s lines of coffee include Chock full o’Nuts, Kauai Coffee, and Chase & Sanborn. The plant also produces coffee for about 30 private-label clients. In all, Massimo Zanetti produces hundreds of types of coffee from beans grown all over the world.

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Unilever, Suffolk

“There is not a country of origin you can name that we do not bring into the building,” said Charlie Cortellini, vice president of research and development at Massimo Zanetti.

East Coast and Midwest and railroads for the West Coast. The company also leases warehouse space in Missouri, Nevada, and New Jersey to stage its products close to customers in those regions.

Other coffee companies followed the path forged by Hills Bros. and Massimo Zanetti. The J.M. Smucker Company makes liquid coffee concentrate at its plant in Suffolk, and Keurig Dr Pepper roasts and packages coffee in nearby Isle of Wight County.

But the biggest asset for local coffee and tea producers in Hampton Roads is The Port of Virginia. Norfolk International Terminals and Virginia International Gateway, both located in Norfolk’s harbor, are entry points for green coffee beans (the raw form of the beans) and tea leaves arriving from overseas.

SUPPLY CHAIN ADVANTAGES AID INDUSTRY GROWTH One of the reasons the Hampton Roads region became a hub for coffee and tea is its location at the geographic center of the East Coast, with access to interstate highways and railroads. Massimo Zanetti moves finished coffee products from Suffolk to its warehouse in Portsmouth for distribution, using the highways for destinations on the

The willingness of officials at The Port of Virginia to expand into coffee beans in the 1980s impressed executives at Hills Bros. when they were searching for a site to build a coffee bean roasting facility, Cortellini recalls.

“That is one of the reasons we did settle in Suffolk. The Virginia Port

Authority was very interested in moving forward. It really was a good symbiotic relationship,” said Cortellini, a longtime employee who relocated from Hills Bros.’ New Jersey plant to the Suffolk operation when it opened.

The 25-mile distance between the Norfolk harbor and Suffolk means that Massimo Zanetti’s employees don’t have to worry about weather or traffic conditions delaying deliveries from coffee-heavy outof-state ports such as New York, Miami, or New Orleans. Since Massimo Zanetti schedules deliveries of beans on a just-intime basis, proximity is crucial. “You don’t want 500 people standing around waiting for a trailer,” Cortellini said.

BUILDING THE PORT OF VIRGINIA’S VOLUME After building its volume of coffee imports for several decades, The Port of Virginia was certified in 2016 as a delivery point

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for Arabica coffee beans traded through the Intercontinental Exchange’s “C” futures contracts.

The designation allows local exchangecertified warehouses to store the Arabica beans, giving Massimo Zanetti “a broader array of coffees that are available to us on a spot basis,” Cortellini said. Massimo Zanetti buys most of its beans through futures contracts, he adds.

The certified warehouses include Continental Terminals’ storage and distribution facilities in Suffolk and Chesapeake, RPM Warehousing & Transportation’s facility in Chesapeake, and the Pacorini Global Services facility in Suffolk.

In addition to location, another advantage of the Hampton Roads region is the workforce, because people have experience working in the coffee and tea industries.

As Cortellini explained, “The general knowledge of coffee and how you take it from green bean to finished good has definitely grown a lot since we started.”

PLANNING FOR THE FUTURE Suffolk uses its position in the industry to actively court coffee and tea producers. The idea to market itself as “Virginia’s Caffeine Capital” was sparked when Lipton decided to reinvest in its plant in 2013.

Suffolk’s coffee and tea status stems from numerous factors, from the faith shown

by Massimo Zanetti in the 1980s to the ICE designation. Existing infrastructure and proximity to other coffee-related businesses helps the city and the Hampton Roads region remain a major factor in the industry.

“You’ve got some of the largest brands and companies in the industry right here,” Brian Kubicki, vice president of business development for Massimo Zanetti, told The Virginian-Pilot in 2016.

“Folks who know coffee know that Hampton Roads is important.”

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Virginia Roasters Earn National Recognition for Quality WHILE HAMPTON ROADS is a major

player in the import sector of the coffee supply chain, roasters across Virginia are drawing notice for what they’re doing with beans closer to the end of the process.

Two Virginia roasters were ranked among the top 12 coffee roasters in the United States by Forbes in 2018.

Red Rooster Coffee opened in downtown Floyd in 2010 with values reflecting its small-town origins: quality, environmental stewardship, and family.

The company uses organic and fairtrade coffees whenever possible, with a particular focus on partnerships with farms that treat workers fairly.

“The way that specialty coffee is going to move forward in the world and replace plantation-style agribusiness in Brazil and Vietnam is that we have to be transparent about what we’re buying and why we buy the coffee that we buy,” said owner Haden PolsenoHensley. “We buy most of our coffee from a specialty coffee importer who has people on the ground who set price with the farmers or the export mill.

They come to an agreement about the size of the premium they’re going to pay, but they always pay a premium above the price on the commodities market.”

Red Rooster evolved from a small community coffee shop that was one of three in Floyd, a town of 450 people in the New River Valley. Polseno-Hensley realized that he needed a differentiating factor to draw business in a saturated market, and he settled on upping the quality of his brew.

“My early coffee was better than 95% of the coffee that you could buy,” he said. “But how do you get from that to roasting world-class coffee? It was many years of trial and error and tasting.”

Red Rooster Coffee, Floyd

Red Rooster sells its coffee at Fresh Market and Whole Foods locations in Virginia, Maryland, Delaware, and Washington, D.C., as well as several other stores and coffee shops in the region.

In addition to the Forbes honor, the company took first place in the Brewers Cup in the U.S. Coffee Champs qualifiers last year. Its cold brew won first place at Coffee Fest Baltimore in 2018, and its espresso earned the same honor at Coffee Fest NYC in 2016.

Lexington Coffee Roasters in the Shenandoah Valley also has plenty of accolades. Its coffees earned Golden Bean silver medals in 2016, 2017, and 2019, and its Tarime Tanzania came in at No. 4 in Coffee Review’s Top 30 Coffees of 2018.

Founded by California transplants Melissa and Terry Scholl in 1991, Lexington Coffee ships to wholesale consumers in the Mid-Atlantic area and individual consumers throughout the continental United States. Those policies are part of the company’s focus on freshness and quality. The company’s roasters choose green beans based on blind taste tests and reject 95% of what they sample.

With nearly 30 years of experience, the Scholls witnessed a sea change in the coffee industry as the beverage became a specialty good and consumers placed more of an emphasis on individual beans.

“As consumers began to be presented with the flavor nuances in different beans, to not think that all coffees tasted alike, farmers began to focus on producing better beans, and infrastructure developed to be able to import and access these beans,” Melissa Scholl said. “We have the ability to drill down to the very best beans in the first place.”

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The Hershey Company, Augusta County

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A Sweet Boot Camp at Hershey’s IN THE SPRING OF 2018, Kristen Wilson wanted to jump back into

full-time work after spending several years at home with her two children. Friends who worked at the Hershey Chocolate of Virginia facility in Augusta County told the 34-year-old about a manufacturing boot camp the company planned to launch that June.

Wilson could earn an hourly wage while attending the two-week training program, where she would learn what it takes to work the machines that churn out Almond Joy and Mounds chocolates. If she did well, she might get brought on full-time, most likely for a spot working on the second or third shift.

Wilson decided to go for it. “I’d never thought about making candy all night, but it sounded like a lot of fun to me,” she said.

FINDING THE RIGHT FIT Hiring quality employees for positions working production lines often presents a challenge for human resources teams.

A low unemployment rate means a smaller talent pool to choose from, explained Christi Branch, a training coordinator for The Hershey Company.

It doesn’t help that careers in the industry are a tough sell for many recent high school graduates and their parents, according to Debby Hopkins, chief workforce officer and program director at Shenandoah Valley Workforce Development Board, a non-profit based in Harrisonburg that provides services for employers and career seekers.

“Everybody thinks their kids should go to college, whether they're suited for it or not,” she said.

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XXXXXXXX

The Hershey Company, Augusta County

People are starting to hear about [the boot camp]. They know that if they do well, it can be a shortcut to a great job at Hershey.

DEBBY HOPKINS Chief Workforce Officer and Program Director, Shenandoah Valley Workforce Development Board

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Those who do apply for manufacturing jobs often lack the required skill sets.

“Because of automation, there’s quite a bit more technical understanding that has to be held by entry-level operators now than they ever needed before,” Hopkins said.

After some mulling, Hopkins hit on a solution. The workforce development board would launch a training program specifically designed to prepare workers to succeed on the Hershey production line.

Working with Hershey leaders, Hopkins set about trying to understand what helps production line workers do well at the job.

“They went to the line leaders,” Hopkins said of the Hershey employees working on the project. “They went to the supervisors and asked, ‘What makes people succeed and what makes them stay?’ We just kept talking and talking.”

Using financial assistance from the American Apprenticeship Initiative Grant from the U.S. Department of Labor, Hopkins designed a curriculum that would teach boot camp participants specifics about manufacturing, regulatory requirements, and safety, as well as soft skills, like what being punctual means at Hershey (being on the line, in uniform, 15 minutes before the start of the shift).

“When [the boot campers] walked out of there,” Hopkins said, “they understood what Hershey’s expectations were.”

Boot campers also get to spend time on the production floor at the facility — an essential element of the program as far as Branch is concerned.

“Manufacturing can be a little bit overwhelming and scary [at first],” she said. “It's a lot of equipment. It's a lot of noise.”

By getting a firsthand look at what the work is like, boot camp participants can decide whether or not it’s the job for

them. “Most businesses are wanting as many bodies as possible,” Branch said.

“We want somebody where it's a good fit for both of us.”

The program is geared toward recent high school graduates, individuals who are underemployed for any reason, and those with disabilities.

“You can just tell they’re so proud to get that full-time job,” Branch said of those who were hired.

In October 2019, 14 more candidates attended a third boot camp and all 14 were asked to come aboard at Hershey.

“I am absolutely in love with the boot camp,” Branch said.

Staff from The Wilson Workforce Rehabilitation Center, an Augusta County nonprofit that helps individuals with disabilities, works closely with the workforce development board on the boot camp. Several clients from Wilson have completed the training program and gone on to work at Hershey, which has an initiative called Abilities First that recognizes the company’s commitment to hiring individuals with disabilities and making sure they have the support and training necessary to be successful.

Hershey currently employs about 1,100 workers and plans to hire another 300 in 2020, according to Branch. In May, the company announced plans to invest $104 million to build a 111,000-sq.-ft. expansion which will include a Peanut Roasting Center for Excellence. To help with staffing, Hershey plans to hold one or two boot camps in 2020.

“It’s a neat opportunity for our employees to work with a diverse group,” Branch said.

An employee who starts out on the production line at Hershey will likely have a chance to move up the corporate ladder. The company prefers to promote candidates internally to management positions and offers tuition reimbursement for those who want to go back to school, as well as apprenticeships for different career fields at the company.

“We have huge opportunities here,” Branch said.

BUILDING A REPUTATION The first boot camp drew 11 participants, including Kristen Wilson.

She and six of her fellow boot camp participants were ultimately hired by Hershey, and they were later accepted into Hershey’s Industrial Manufacturing Technician apprenticeship, an 18-month program where apprentices can receive on-the-job training and over 200 hours of instruction. Upon completion, apprentices receive a journeyman card.

It didn’t take long for word to spread.

“People are starting to hear about it,” Hopkins said. “They know that if they do well, it can be a shortcut to a great job at Hershey.”

When organizers began advertising for a second boot camp held in June 2019, they had more than 200 interested candidates. After a robust screening process, 32 individuals were selected to attend the training. Of those, 21 became Hershey employees.

“We want a pipeline of people coming to us,” Branch said.

BRIGHT OUTLOOK

Wilson, who wants to retire from Hershey, hopes to one day be promoted to a team leader position. She’ll tell anyone who will listen that the boot camp is the best way to get a foot in the door at the company and that manufacturing is a great career.

“Don’t let it intimidate you. It’s not intimidating,” she said. “And if you get in, you do your job right, you work hard, it’s very rewarding.”

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Selling Sustainability A Conversation With Joel Salatin Joel Salatin is the owner and operator of Polyface Farms in Augusta County, which focuses on sustainable, environmentally friendly agriculture. He has authored 11 books, including “Salad Bar Beef,” “Pastured Poultry Profit$,” and “The Sheer Ecstasy of Being a Lunatic Farmer.” He was featured prominently in Michael Pollan’s New York Times best-seller “The Omnivore’s Dilemma” and the Academy Award-winning documentary “Food, Inc.” VEDP President and CEO Stephen Moret spoke with him about how he runs a successful farm without betraying his operating principles.

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Stephen Moret: Joel Salatin calls himself a Christian, libertarian, environmentalist, capitalist, lunatic farmer. Those who like him call him the most famous farmer in the world, the high priest or the pastor of the pasture, and the most eclectic thinker from Virginia since Thomas Jefferson. Can you share a little about the story of Polyface Farms?

Joel Salatin: Our family came to Virginia in 1961. My parents were from the Midwest. Dad flew in the Navy in World War II. After the war, he went to Indiana University, got a business administration degree, and then always had a dream of doing something in a developing country, so he went to Venezuela as a bilingual accountant with Texas Oil Company, and in seven years saved up enough to buy a 1,000-acre farm in the highlands of Venezuela, and we were there, going right along, until the Junta in 1959 of Perez Jimenez. We had left Texas Oil at that time. We were not diplomats, not missionaries, and were not tied with any American business.

We were just ex-pats out there on the land, which made us very vulnerable to the revolutionaries in the Junta, who of course hated Americans.

That was the beginning of the ugly American capitalist pig at that time, and so basically, we fled the back doors, the machine guns came in the front door, we lost everything, spent another year trying to get protection and stay, couldn’t make anything work, so we came back here in 1961 and settled here. So we settled here in Virginia on the most gullied rockpile, a little farm, 550 acres here in the Shenandoah Valley in Augusta County near Staunton, and initially began a lot of conservation work trying to stop the erosion. We just had rocks, and so the first 10 years were primarily conservation, and Dad sought counsel.

How do we make a living on a small farm?

We had numerous both public and private counselors come, and the universal advice was, “Graze the forest, borrow more money, plant corn, build silos, buy more

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chemicals.” And my grandfather had been a charter subscriber to Rodale’s Organic Gardening and Farming magazine in 1948, when it started, and had, a large compost pile and was very non-chemical at that time and Dad kind of got that environmental bent from him, and of course I got it from my dad. And so Dad instinctively knew that we couldn’t make enough volume to make it on low margin, which is of course what commodity agriculture runs on — high volume, low margin.

So from Sears & Roebuck, the big catalog, I got 50 little chicks and began a chicken enterprise at 10 years old. By the time I got to be about 12, 13, or 14 years old, and I had these eggs and I had a garden, I had my own little business enterprise going there, and Dad, again, saw the potential of direct marketing. We found this local market that was down to two elderly matrons, and we joined the curb market, and I was the main seller and I loved it.

We had to somehow figure out how to get a higher margin and wear all the hats of marketing, distribution, processing, so that we actually owned a brand, and so we started experimenting with all sorts of non-chemical farming methods those first 10 years. So by the time I was in high school, we had a plan. We needed to direct market, we needed to run the farm on carbon, not petroleum — or at least real-time carbon, not petroleum — and do more for ourselves. And with that background, when I came back from college, the mortgage was done. We didn’t owe any money and we were able to take this raw land, as poor as it was, and essentially build a pasture-based, multispeciated, direct-marketed, carbon-run farm on the raw land base.

And so all through from eighth grade through graduation from high school, every Saturday morning of the year, I’d get up at 4 a.m. and be down there selling stuff, selling what I had gardened. We had beef, pork, chicken, eggs, produce.

We milked a couple of Guernsey cows.

We could sell butter, buttermilk, cottage cheese, and did that throughout my school years. And that entrepreneurial, directmarket business interface, I wouldn’t trade it for a million dollars today. And the mentoring of these two elderly matron ladies who took me under their wing — they were probably in their 70s at the time and took me under their wing as a little 14-year-old, and shepherded me into how you display your stuff, how do you talk to happy customers and to disgruntled customers — it was just invaluable, and truly informed us.

Moret: It’s a remarkable story. How did your childhood growing up in that context inform your career path and how you thought about building the business?

Salatin: Dad was in business administration, he was an accountant, and very entrepreneurial out of the box.

He always said in his accounting practice, his goal was to always work himself out of a job. He wanted small businesses to do books in a way that they could understand and see their own numbers so they didn’t have to spend so much time on his professional expertise. And so that entrepreneurial spirit bled over into our family. My older brother started a rabbit enterprise when he was, I don’t know, 12 or so, and I turned 10 and I said, “Well, I want an enterprise,” and I had a greatuncle that had a chicken farm in Indiana.

Moret: Talk a little bit about the difference between how you run Polyface Farms, and how a more conventional farm might be operated.

Salatin: There are some pretty significant differences and if you boil them down to pretty simple ideas, the first thing is animals move. We live in a culture that doesn’t believe animals need to move, we can lock them up in feed lots and factory houses, and in tiny pens and they don’t have to move. But essentially, we’re looking at nature as a template, and it should give us all pause to realize that, 500 years ago, North America actually grew more animals, more nutrition, than it does today, even with modern methodology.

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It should give us all pause to realize that, 500 years ago, North America actually grew more animals, more nutrition, than it does today, even with modern methodology.

JOEL SALATIN Owner and Operator, Polyface Farms

And so we look to those patterns and say, “What were the templates of that abundance that greeted the Europeans when they arrived here with all the deer, the bison, the turkeys, the pheasants, the flocks of passenger pigeons that John James Audubon said in 1820 covered the sky for three days?” He couldn’t see the sun for the flock of birds that flew over. They weren’t chickens, but it was a lot of birds. If animals move, then you have to have mobile control, because the neighbors don’t want them, and we don’t have migratory things anymore.

So we’ve got to control them, we’ve got to have mobile water because they can’t always walk to the water, and we’ve got to have mobile shelter to protect them from the sun, for example, or inclement weather. And so mobility became, if animals are going to move, you need mobile infrastructure.

And sometimes I think they think we just sat down one day in a focus group and all got into a trance and said, “How can

we have a different-looking farm?” And actually, all the innovation that we’ve done in infrastructure has been a natural, physical function, or manifestation of a simple idea, looking at nature as a template and saying, “Oh, animals move.”

For example, even when we’re grazing the cows, we don’t just have a hundred acres with cows running around in them.

We’ll take 300, 400 head and put them in two acres for one day, and we move them every day like the ancient bison being pushed by wolves and flies to mob them up, and that creates a mosaic across the landscape where there’s always something growing, something mature, something blossoming, something dropping seeds, and so this stimulates the wildlife and the pollinators because there’s always something in bloom because of the mosaic effect of moving them across the landscape in a very systematic way.

So that’s one thing. Another one is that our fertility is based on carbon, and so we do have a lot of forest, a lot of woods, and rather than a fertilizer truck coming in,

we have a large industrial chipper that we then can chip diseased and crooked trees, and essentially weed the woodlot like you’d weed green beans.

And so those are just some basic things: carbon-centric, animals move, and then direct market. We’re not selling into a commodity stream. We actually have our own brand. We service 5,000 families, 50 restaurants, numerous institutions, and now we’re shipping nationally. That started last July.

Moret: The Polyface Farms website lists 10 guiding principles: No sales targets, no trademarks or patents, clearly defined market boundary, incentivize workforce, no initial public offerings, new advertising, stay within the ecological carrying capacity, people answer the phone, stay seasonal, and quality must always go up.

How do you bring those principles to life on a day-to-day basis in the company?

Salatin: Well, it ain’t easy. Let me give you an example: No sales targets. So how

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P O LY FA C E FA R M S G U I D I N G PRINCIPLES

No sales targets No trademarks or patents Clearly defined market boundary Incentivized work force No initial public offerings No advertising Stay within the ecological carrying capacity People answer the phone Stay seasonal Quality must always go up 94

do you run a business without a sales target? That’s such an elementary thing.

Let’s say we want to hit $3 million this year. What happens is, it tends to cheapen your view of a customer. The customer is now simply a notch, if you will, another notch as you move to your goal, as opposed to with no sales targets. So what do you have to do? Well, that means you have to actually look at your customer as a person. It’s a relationship, and so when our sales are down, we don’t look around and say, “Well, we must not be doing enough advertising.” We look around and say, “Why aren’t we making people happy anymore?” And that, I understand, is a nuance, and some people could accuse me of parsing semantics, but we think it’s a pretty big deal.

So we view sales not as something that we have manipulated, but as a manifestation of the whole persona that we’ve presented, and if we’re presenting an attractive, magnetic persona with obviously good service and a good product, then we think that it’s going to expand or grow or be wherever it’s supposed to be.

Moret: You’re located in the Shenandoah Valley of Virginia. How has that location contributed to your success and are there any enabling factors for food production or just general business operations inherent in that location?

Salatin: You know what they say? There are three things important about business: location, location, location. We are located strategically to be eight hours away from half of the nation’s population. We’re eight hours from Atlanta, we’re eight hours from New England, what, six, seven hours from New York? We’re strategically located that way. We’re on a dirt road in the middle of nowhere. It was wonderful to be able to do all this experimenting out of sight, out of mind, where people didn’t see your mistakes and failures.

We’re a destination place. We very much appreciate that. We’ve got a corn box for kids to play in, we’ve got a little

playground, we work at being peoplefriendly and -centric, we have a nice parking lot, we have a store here on the farm. We collaborate with neighbors, other people in the community, to offer what they have that we don’t have to complement the store so a person can come and get a lot more stuff than they would if we just sold our own things.

Moret: You guys were really ahead of the curve and advocating for what we now think of as the farm-to-table movement. Talk a little bit about that and whether has that been gratifying to see the popularization of that concept.

Salatin: We always said that we were about 10 to 15 years ahead of the curve, and so now, as that has matured and people are more and more — not everybody by any means, but more and more people — are aware that there is a difference in a potato, there is a difference in the steak, and we do care how the land is handled, where this was produced. It is incredibly gratifying and joyful to see. I enjoy seeing, if you will, this ripening of the movement into not just sitting around smoking dope and wearing peace symbol signs, but actually saying, “Okay, how can we participate in this?” We’re going to participate on farm tours, we’re going to participate with our money, we’re going to become patrons of a land-healing, nutrient-densifying movement, and that’s a wonderful trend. It’s extremely small still, but it has certainly gained traction and it’s definitely not going away. We simply see it growing a little bit each year.

Moret: Thinking about that, kind of building on that and shifting consumer preferences, what do you see as the next major trends for your space, and what are the issues that keep you and others in the industry up at night? What are you excited about?

Salatin: Let me do the good news first.

That the exciting thing now for the future is in fact that as the industry becomes worse and worse, and as the Uberization of everything accelerates, it is fragmenting

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[It’s] ultimately helpful and hopeful to see the number of people in the country that are looking for authenticity.

All the big brands are struggling now because people are beginning to realize that there’s something more to life than simply cheap pounds of stuff.

JOEL SALATIN Owner and Operator, Polyface Farms

commerce into niches of smaller brands and authenticity. This year, I think supposedly someday in the next four or five months, the millennials will pass the baby boomers in buying power. And if you read Simon Sinek, the guy who studies these things, his three catchwords of the millennial are community, care, and convenience.

So if you’re in marketing, if you’re in sales, you’d better be thinking all three of those very much drive the local, authentic, land-healing, networked, relational kind of marketing thing that we espouse. That’s an extremely hopeful thing. Remember, I cut my teeth on this back when the word “organic,” nobody even knew what it was.

Now it’s gone full circle, everybody found out what it was, then the government owned it and certified it, and now people are running away from it because of the compromise in the organic industry.

So it’s been interesting to watch that whole cycle move, but that’s ultimately helpful and

hopeful to see the number of people in the country that are looking for authenticity. All the big brands are struggling now because people are beginning to realize that there’s something more to life than simply cheap pounds of stuff.

What keeps me up is the steady march of government regulations and intrusion in business, in the marketplace, in licenses and forms and compliance, and now we’ve got the whole sales tax thing. It’s catching small businesses like us. That’s practically bankrupting us to try to stay compliant with, especially if you’re in shipping. Teresa and I started this business on a shoestring 40 years ago with no money, and that’s been a blessing because it made us hungry, which made us creative. You get really creative when you’re hungry.

Moret: One of the things I’ve really grown to appreciate over time, working with hundreds of companies, is just how a big company, it’s just a matter of

adding some other compliance person or staff, and they don’t even think about it, but sometimes small businesses, it can really, really be tough. Looking back a little bit, how did being profiled in “The Omnivore’s Dilemma” affect your reputation and the work you do at Polyface Farms?

Salatin: The trajectory of any business is never some straight linear thing from left to right, going across the graph.

It’s a sawtooth. It’s a stairstep, and so “Omnivore’s Dilemma,” for us, was definitely one of those vertical steps in our overall trajectory. We were rocking along, we were doing very well. I’d already written three or four books, and they’d been very well received by that time. So it wasn’t like some people think that “Omnivore’s Dilemma” made you.

No, it didn’t. The trajectory was moving.

What it was was one of those vertical spots in our overall trajectory. Would we be where we are today without it?

Probably not.

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We view where we are not as something that we have manipulated, but as a manifestation of the whole persona that we’ve presented, and if we’re presenting an attractive, magnetic persona with obviously good service and a good product, then we think that it’s going to expand or grow or be wherever it’s supposed to be.

JOEL SALATIN Owner and Operator, Polyface Farms

You can never go back and un-ring or re-ring a bell, so that is what it is. But “Omnivore’s Dilemma” definitely opened up platforms, opened up worlds for me, that we would not have had. It gave us a place of exposure and credibility in the overall authentic food movement that we certainly would not have had otherwise.

incredibly hopeful story in the late 1980s all right. A young couple without outside income earning a nice living on a small farm. And so we started getting publicity, media, different things, and then I started getting asked to speak at different conferences and things. And people were asking, “Well, how do you do this?”

Moret: In addition to your farming career, you have a fairly extensive sideline as a writer. I’m curious, what ideas have you focused on in your writing?

My writing came straight out of trying to serve people. Look, I can’t sit here, work outside all day, come in and spend three hours on the phone at night telling people how to build a chicken shelter.

And so I did the first book, “Pastured Poultry Profit$,” about the pastured broiler enterprise, strictly as a way to reduce the phone calls and say, “Look, just buy the book and it’ll go.” Well, the book sold, we self-published, and the thing, it just went. And so there’s a lot of money to be made in this, and so then the people started, “Well I got the chickens, but how do you do the cows?”

Salatin: As Teresa and I moved forward with the farm, my dad died very, very early in 1988. So he’s been gone for a long, long time, but we were moving. We didn’t know at first if we’d be successful, but we were, and the idea of a very, very small farm making a nice living and we weren’t rich, but we weren’t subsistence, either. We were putting money in the bank and it was all good. That was an

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And then I wrote the “Salad Bar Beef ” book. People still said, “Well, I don’t have beef or chicken. I just need to know how to start. How do you start farming?” And I did “You Can Farm: The Entrepreneur’s Guide to Start & Succeed in a Farming Enterprise.” And the books have simply followed what I feel like either our culture needs to hear, or what people tell me they need, or want to hear, what do they really need it. It’s about meeting needs, and this all boils back to service. If our life is really wrapped up in serving our fellow man, serving the needs of a community, our ear will be open and attuned to, “What is it the people need? What will serve them at this point?” And I’m sure I don’t always get it right, but that is the impetus for every title that I’ve written.

Moret: Was there anything that you wanted to say or cover that we didn’t talk about?

Salatin: As a shameless marketer, the only thing that I would like to say that we didn’t cover was that I don’t know how many folks are aware of the Mother Earth News magazine, which is kind of the flagship of the self-reliance, do-it-yourself homesteading movement.

Mother Earth News magazine does several fairs around the country. They’ve been doing these for about 10 years, and they always have them at fairgrounds, you know, public places. But for the first time in history, they’re going to

have a Mother Earth News fair on a farm this year, and it’s going to be here at Polyface on our farm, and they said to expect 10,000 people.

But we’d like to see this as a stake in the ground to all the naysayers who say, “Oh this is a little fringe movement. Who cares about whether a pig can express its pigness or whether a tomato is actually raised in compost or chemicals?” to put a stake in the ground and say, “No, this is serious.

We are serious.”

Moret: Well, Joel, congrats again on everything you all have achieved, we’re so proud to have Polyface Farms in the Commonwealth of Virginia. We appreciate the jobs and the economic activity that you guys drive. I hope I’ll have an opportunity to visit in person at some point.

Salatin: I look forward to it and look forward to having you.

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XXXXXXXX

Sauer Sells a Virginia Tradition Overseas

Sauer Brands, Inc., Richmond

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F

rom its humble 1887 beginnings selling food-flavoring extracts and spices from a pushcart on Richmond’s Broad Street, the company formerly known as The C.F. Sauer Company enters the new decade as Sauer Brands, Inc., a leading packaged-food manufacturer. Acquired in August 2019 by Charlotte, N.C.,-based Falfurrias Capital Partners, the previously family-owned company is primed for international business expansion with its famous Duke’s mayonnaise, in large part due to access to the Commonwealth’s international sales development resources and expert services.

“Approximately 90–95% of the world’s population lives outside the U.S., and about 70% of the world’s buying power is outside the U.S. as well. Mayonnaise is the bestselling condiment internationally,” said Rob Davenport, sales manager for business development for Sauer Brands, Inc. “So it makes sense that our company’s focus is on export — and with that product.”

In 1996, Sauer entered the export business with the acquisition of Alabama’s regional BAMA brand. However, Sauer’s other regional mayonnaise product, Duke’s, has experienced the most growth outside the Southeastern section of the U.S. As domestic demand grew for Duke’s, so did international appetites, solidifying it as the company’s flagship brand and paving a path for export expansion.

With increased overseas product demand came challenges, leading Sauer to seek professional export insight and assistance, as well as financial resources for global expansion.

AN EXTENSION OF A COMPANY’S BUSINESS ARM In 2012 the company found export help from the state, most notably VEDP’s Virginia Leaders in Export Trade (VALET) international business acceleration program. VALET assists companies throughout Virginia in advancing their international marketing activities and expanding worldwide business.

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SAUER SELLS A VIRGINIA TRADITION OVERSEAS

Sauer started out in the food and beverage industry selling extracts along Broad Street in Richmond in the early 1900s.

“I wanted to learn the craft of exporting, and VALET was the perfect program to help me learn. It was essentially two years of intense schooling on the export industry,” Davenport said.

For a company exporting primarily to western Africa with international sales hovering at the $15M mark, acceptance into the VALET program was a pivotal opportunity for Sauer to break into new markets, most notably Latin America, with entries into Mexico, Colombia, Peru, and Costa Rica. Next up: eventual expansion into Chile and Panama.

“VEDP’s international market entry research and access to global consultants were the primary resources we utilized.

It was important for us to understand in-country market conditions and the stability of governments — and to find possible distributors,” Davenport said.

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Before Sauer could crack into Latin American markets, the company needed a blueprint. Sauer developed a comprehensive market-entry strategy, as well as an international business plan, for exporting both Duke’s branded and private-label mayonnaise. In addition, the company went abroad for “boots on the ground” trade mission trips to Colombia and Costa Rica, providing Davenport face-to-face engagement with in-country export professionals.

“Sauer ultimately saw a 125% increase in international sales by utilizing the available resources and services to not only assist the company’s existing export business, but also to help with challenges in current markets, as well as to begin growth in new ones,” said Davenport.

Upon completion of the program in

SAUER SELLS A VIRGINIA TRADITION OVERSEAS

2014, Sauer kept Latin America squarely in its sights, even as the company pivoted toward the Middle East to capitalize on better opportunities using fewer company resources.

STANDING APART IN A COMPETITIVE MARKET

we use here in the U.S.” Davenport said. “Our next closest competitor is Hellmann’s brand. But even the Hellmann’s product produced in-country isn’t the same as you’ll find at your local grocery store in the U.S.”

Currently, Sauer’s annual international sales are $28 million, or 25–30% of total company sales, with distribution to 27 countries. BAMA and private-label mayonnaise represent the majority of the company’s exports, and the present focus of growth is the Duke’s brand.

In addition to standing apart from the competition in product taste, Sauer’s export model differs as well.

Based squarely on production — with distributors handling other areas, such as shipment and market promotion — Sauer’s approach allows the company both quality and product control.

Ultimately, when it comes to marketing Duke’s mayonnaise internationally, Sauer excels due to taste profile: The company does not adjust the product to fit a particular consumer market, but maintains the U.S. preference for fuller-fat, American-style mayonnaise.

This has assured Duke’s a secure place in the competitive condiment arena.

“Whether we’re talking about a regional brand or a U.S. national brand, each are generally manufactured somewhere close to the markets where they’re sold,” Davenport said. “So while we have competitors in every market, we stand out in the fact that we’re an imported, American-style mayonnaise going into these international markets.”

“Our biggest competitors are regionally based producers attempting to replicate our product at the local level because it’s what is expected and wanted. But the quality and taste are a little different because regional producers rely on locally sourced ingredients versus what

A TRADITIONAL VIRGINIA COMPANY SET FOR GROWTH As Sauer moves forward under its new ownership, the company has not lost sight of its deep Virginia roots. Sauer had been headquartered in Richmond for 132 years.

“We’re an old Virginia company that’s not going anywhere,” Davenport said. “It’s one of the reasons Falfurrias bought us.”

In addition to its well-known mayonnaise offerings, Sauer manufactures a broad line of flavor-enhancing condiments, spices, seasonings, and extracts that it sells in the South, Midwest, and West Coast. But the company’s international focus is clearly on condiments.

With the Falfurrias acquisition still playing out, the company’s objective remains the same: to grow international export business for mayonnaise, given the tremendous opportunity there. The main obstacle: managing capacity at the manufacturing facilities as the company grows.

“With yearly international growth ranging from 5–8% and a high dollar amount of sales on export, management’s intent is to grow branded business where the company can, grow private label where it makes sense, and grow the company itself,” Davenport said. “We may be a small company in terms of number of people, but we’re not a small company as far as annual sales. And thanks to the state resources, as well as peer companies in our industry, we’re growing and thriving.”

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Economic Development Partners in Virginia VEDP works in close partnership with local and regional economic development organizations. For a full list of local and regional partners, visit www.vedp.org/Regions In addition, VEDP regularly works with a wide network of statewide partners, including: State Leadership Partners

Project Delivery Partners

Governor

Center for Innovative Technology

General Assembly

Policy and Programmatic Partners GO Virginia

Virginia Department of Housing and Community Development

Major Employment and Investment (MEI) Commission

Colleges and universities across the Commonwealth (e.g., UVA, Virginia Tech, William & Mary)

Secretary of Commerce and Trade

CSX, Norfolk Southern, and short-line railroads

Virginia Department of Small Business and Supplier Diversity

Secretary of Finance

Dominion, AEP, and other electric utilities

Virginia Department of Taxation

The Port of Virginia

Virginia Department of Transportation

Virginia Community College System Virginia Department of Agriculture and Consumer Services

State Council of Higher Education for Virginia

Virginia Department of Rail and Public Transit

Virginia Agribusiness Council Virginia Association of Counties Virginia Business Council Virginia Business Higher Education Council Virginia Cable Telecommunications Association, Manufacturers Association, Virginia Maritime Association, Virginia Realtors Association, and many other trade associations

Virginia Tobacco Region Revitalization Commission Virginia Tourism Corporation

Virginia Department of Environmental Quality

Virginia Chamber of Commerce, as well as many local and regional chambers of commerce Virginia Economic Developers Association Virginia Farm Bureau Virginia Municipal League Virginia Planning District Commissions Virginia Rural Center

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Virginia’s Technology Councils

64

220

Roanoke Region New River Valley

460

23

58

Southwest Virginia

19

220

19

81

221

I81-I77 Crossroads 77 58

102

460

Northern Shenandoah Valley

7

Washington, D.C.

66 81

Northern Virginia

211 33

17

Shenandoah Valley

250

Greater Fredericksburg

Central Virginia

301

95 81

Northern Neck

33

64

29

17

15

360

Eastern Shore

Middle Peninsula 13

Greater Richmond Lynchburg Region

60 288

360

64

295

Greater Williamsburg

460

Virginia’s Gateway Region

460

29

501

South Central 360 Virginia

Southern Virginia

85

58

17

460

95

Hampton Roads

168

501

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Ritz Crackers, Wheat Thins Mondelez International Henrico County

Planters Mixed Nuts Kraft Foods City Of Suffolk

Octagon Barboursville Vineyards Orange County

Roasted Garlic Hummus Sabra Dipping Co. Chesterfield County Fiorucci Prosciutto, Fiorucci Genoa Salami, Fiorucci Hard Salami & Mozzarella Panino, Fiorucci Pepperoni & Mozzarella Panino Campofrio Food Group Chesterfield County Toll House Cookies Nestlé City Of Danville

Spicy Plum Chutney The Virginia Chutney Co. Rappahannock County

Stone IPA Stone Brewing City Of Richmond

John J. Bowman Single Barrel Virginia Straight Bourbon Whiskey A. Smith Bowman Distillery Spotsylvania County

Chesapeake Bay Oysters Cherrystone Aqua-Farms Northampton County

Cherry Tomatoes on the Vine Red Sun Farms Pulaski County

Baby Spinach, Baby Arugula, Mixed Greens Bright Farms Culpeper County Butter Lettuce Fresh2o Growers Culpeper County

Nilla Wafers, Oreos Mondelez International Henrico County White House Rolls Ukrop’s Homestyle Foods Henrico County Hickory Smoked Boneless Sliced Ham Smithfield Isle Of Wight County

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Little Debbie Swiss Rolls, Fudge Brownies McKee Foods Augusta County

Reese’s Pieces The Hershey Company Augusta County