Last month the Hudson Valley Startup Fund (HVSF), a regional source of venture capital, announced it had made an investment in Consolidated Harvest Company (CHC), a distributor focused on meeting the demand for locally grown food in the greater New York metropolitan area. According to Michael Waterman, president of Canopy Holdings, CHC’s parent entity, HVSF and individual members of its investment group have put $350,000 into the venture. That investment was part of CHC’s raising of $1.5 million in venture money, completed in July. The new capital, HVSF said, would “fund future growth and the development of a new, more user-friendly mobile interface to meet customer expectations.”
Consolidated Harvest owns Hudson Valley Harvest, the local food distributor in the former IBM plant in the Town of Ulster. It also owns Field Goods in Athens, which uses a community-agriculture model to deliver weekly food products to more than 20,000 families at 1000 dropoff points in the region.
Other businesses have recently been folded into Hudson Valley Harvest. Trusted Harvest handled non-local shelf-stable organic products. Angello’s Distributing was a small Germantown food distributor. A distribution service formerly called Local Bushel delivered produce and ingredients to restaurants and wholesale buyers.
The goal, said Waterman, is to bring these businesses together to help them become more financially sustainable. Consolidated Harvest, he said, is less about growing in scale and more about building a long-term outlet for farmers.
Under a recent reorganization, Hudson Valley Harvest consists of three divisions. The Wholesale Channel is run by HVH co-founder and one-time Rosendale restaurateur Sam Ullman. The Retail Channel (the expanded Field Goods network) is run by Jesse Tolz, a former Ghent farmer. And Donna Williams, the entrepreneurial founder of Field Goods, is manager of the Operations Group. All three report to Mike Waterman.
Realizing the potential branding strength to membership in a network of local farms, the local effort has always stressed its farmer-centered roots. “Hannaford knows HVH brings people into the store, so they put local stuff at the center of the store,” Paul Alward, a founder now no longer with HVH, once observed. “We’re not a regular green bean. We’re local, traceable, sustainable.”
In 2011 New Paltz farmer Paul Alward, Bywater Bistro proprietor Sam Ullman and self-described “health nut” Joe Katona had teamed up with financier John Fitzgibbons to found Hudson Valley Harvest. They wanted the Hudson Valley to develop the kind of brand identity and degree of market organization in order to compete successfully with giant non-local producers and distributors. Hudson Valley Harvest has operated year-round since then from its leased headquarters in TechCity in the Town of Ulster.
When it comes to food distribution, a customer-first business gospel has its weaknesses. In a careful interview with the Hudson River Flows website, Mike Waterman recently laid down the gauntlet. “There are a lot of things that happen when you focus on the customer first that are not conducive to building a truly regenerative food system over the long term,” he said. For the food-distributing middleman, building up partnerships and relationships with the region’s farmers comes first.
“We need to educate our customers as to why there are longer lead times for certain harvest-to-order products and why it may not be as consistent and reliable as non-local product,” he said. Satisfying the customer remains the goal, but a balance must be struck between what’s best for the farms and what’s best for the customers.
According to its current website. HVH works with 73 farms, all but eight of them in the Hudson Valley. The list includes many of the most familiar local farms.
Higher standards are also necessary for the farmer as well. “Being local isn’t enough,” Waterman told me in an interview in Kingston last Thursday. “You have to be reliable and convenient as well. And you have to provide quality.”
Waterman sees an information-sharing platform used by all the players in the local food system as being of great benefit to them all. Institutional customers could participate, too. Complete transparency with information could be a transformative asset in the food business.
There are other ways that he sees CHC playing the role of honest broker between farmer and customer. Perhaps the most basic is the distributor assuming more risks with perishable inventory. The food distributor carrying a level of inventory of a day or two would reduce lead times and increase fulfillment. National distributors do that — but at a cost of food quality. Most local distributors are too small to deal with inventory problems. Having access to more customers would help CHC manage that kind of risk.
John Bowler Fitzgibbons is a central figure in the world of Hudson Valley food distribution. His Wikipedia listing describes him as an American entrepreneur and philanthropist. “Fitzgibbons has been active in the global energy markets since the early 1990s,” it said. “Currently, Fitzgibbons serves as the chairman and CEO of Basin Holdings, a global energy and industrial holding company he founded in 2010.” He is also an owner and partner in other firms, including a real-estate development company, Brookline Real Estate Holdings, and an investment fund, Deerpath Capital, that has made over two billion dollars in loans to small and mid-sized firms in the past twelve years.
Expanding beyond his lucrative involvement In Russian energy projects after the dissolution of the Soviet Union in 2001 (he is chairman of Integra Holdings, an oilfield services company active in Russia), Fitzgibbons in 2003 bought a large working farm in Pine Plains on which he raised pigs. Expanding into pork production, he became concerned about distribution. As a co-founder of Hudson Valley Harvest, he provided patient support, a wider perspective and financial backing.
Fitzgibbons does other things than run his various businesses. He’s chair of the SUNY Research Foundation, vice-president of the Cancer Research Institute and a member of the Council of Foreign Relations.
Starting in a finance job in New York City immediately after graduation from college in 2011, Mike Waterman met Fitzgibbons, and has worked for him in various capacities since. Starting as an investment associate at Basin Holding, he became in succession a vice-president, president of a division of another Fitzgibbons enterprise, head of mergers and acquisitions for Basin, and finally head of Canopy Holdings.
According to Waterman, Fitzgibbons never lost his appetite for investment in the Hudson Valley food distribution business. He himself invested more capital, and he brought in other local food advocates and investors. There was a renewed sense of commitment centered around a strategy of further acquisition. Mike Waterman was brought in to combine the disparate parts of the expanded food distribution organization and to integrate them into a more coherent and sustainable whole.
Socially responsible investors consider both financial return and social/environmental good. Both are necessary for genuine sustainability. What’s important for the residents of the Hudson Valley is whether these investments advance appropriate regional economic development. Like the other investors in Consolidated Harvest Company, the managers of the Hudson Valley Startup Fund have come to the conclusion that they do.
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