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Made in MN 2009: Homegrown Holidays

November 20, 2009 By Lee Egerstrom, Economic Development Fellow & Katie Mertz, Undergraduate Research Fellow

Download full report  (pdf)

Read online at Scribd

 

Executive Summary
It's the time of year when people gather for holiday parties and receptions and to entertain. That means it is also time for Minnesota 2020 to renew its "buy local" campaign for the third year. A severe recession lingers despite some promising signs it may be bottoming out and a slow recovery may be starting. But "happy days" are not here again - at least not yet.

With that backdrop, the 2009 Buy Local report addresses how we consumers might stimulate our own local and state economies by focusing on four small but exciting sectors of the state's food and beverage economy. It also introduces a new study on import substitution and replacement that shows economic justification for promoting locally made and sold products.

The emphasis is on consumer behavior to benefit the state and local economies, but these issues also have public policy implications. How do state and local economic development planners and policy makers fashion plans to boost the local and state economy? In other words, how might Minnesota use targeted development to retain almost $1 for state and local economies for every $1 spent at the retail cash register?


Key Findings

1) The previously mentioned Andersonville study showed that 68 cents of locally purchased items stay in the local / state economy while only 43 cents of the retail dollar spent at chain, not locally owned stores stays at home. (Andersonville, Made in Minnesota: The Value of Buying Local This Holiday Season.)

2) Based on holiday retail industry projections for 2008, Minnesota would gain a $2 billion economic stimulus if Minnesotans targeted 25 percent of their holiday stopping to buying local. (Made in Minnesota 2008.)

But this year's report shows that consumers can help their state and local economies capture much more of the retail dollar by targeting their purchases as part of a Buy Local strategy.
 

3) Four unique local food and beverage industries show great potential for spurring the state and local economy - grapes (wines), beer, apples and cheese.

4) The multiplier effect of boosting the state and local economies is even greater when these high-quality, locally-produced products substitute and replace imported products - often of inferior quality - that send most of the consumers' retail dollars out of state. (Considering Regional Import Substitution and Replacement in Minnesota.)

 

Here is evidence:

5) The grape and wine industry had a $36.2 million impact on the Minnesota economy in 2007, according to University of Minnesota economic research that factored in the employment and business activity from grape growing, winery operations, winery-related tourism and retail sales. This included 155 jobs extending from tourism spending.

The spreading national popularity of Minnesota developed grape varieties and expansion underway within the Minnesota wine industry suggests impressive growth potential for this small sector of the Minnesota food and beverage industries.

6) The Minnesota beer industry is one of the state's oldest processing and manufacturing sectors, but is now in a regenerative stage. Beer is a $2.5 billion industry in Minnesota with most jobs provided by out of state and foreign brewers involving distribution and retailing. However, Minnesota brewers account for only about 4.5 percent of state beer sales but provide 324 jobs - the same number as the grape and winery sector. All Minnesota brewers operate within the high-quality craft beer sector of the industry - the sector showing great annual growth while total beer sales are relatively flat.

7) Minnesota apple orchard operators produce a crop of about $15 million annually, But despite this comparatively small industry, orchard operators and plant breeders across the nation are scrambling to duplicate the quality and reproduce the successful apple varieties that have been developed and issued by scientists at the University of Minnesota. Much research is still needed to breed cold storage (shelf life) capabilities into the Minnesota cold hardy apple varieties, and that will take public support. But with public support for research, the Minnesota apple industry can grow and prosper commensurate with its already established international reputation for quality.

8) The Minnesota dairy industry is huge - sixth largest in the nation - and it is old, dating back to early immigrant settlement. But it has a miniscule specialty, or artisan cheese industry, that is tailored to meeting market trends and consumer preferences tracked by academics (Iowa State University) and industry observers (International Dairy Foods Association). Only a dozen Minnesota farms and processing companies now make specialty and artisanal cheeses while Wisconsin has 80 of its 115 cheese factories now making at least one specialty cheese. Growth potential for Minnesota's dairy industry is statistically enormous.

 

Theoretical arguments:

9) Mertz, in her accompanying paper, shows a convincing argument that the multiplier effect for import substitution and replacement exceeds the benefits derived from export promotion and subsequent exports. That is where these four targeted Minnesota agriculture and food sectors contain such upside potential for both Minnesota consumers and policy makers.

These four sectors - their successes to date and future promise - show why a Buying Local strategy makes economic sense for the state and local communities. From a public policy perspective, economic development policies should be guided by questioning how any public assistance will build on a residual strength to return multiplier benefits from employment, direct economic activity, supplier activity, and how it might substitute or replace imports that drain our economy.

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