Food 'Accelerators' and the $10 Bag of Pasta
by: Erica E. Phillips
Jan 07, 2015
Click here to view the full article on WSJ.com
TOPICS: Entry into the food industry, Production
SUMMARY: As tastes shift toward specialty foods, more "food startups" are entering the market. Nearly $570 million in venture capital has been invested in such firms over the past five years, a financial database shows.
CLASSROOM APPLICATION: Students can evaluate three issues with regard to the specialty food industry. First, with an increase in demand for locally-sourced, organic food, specialty producers are entering the market. Second, there are entry costs, in particular the costs involved with passing public health inspections. The article reports that Los Angeles County, in particular, is setting appropriate, lower-cost health standards for small food producers. Third, the article notes the construction of a food production center, L.A. Prep, to house as many as 50 businesses. Presumably, the center will provide economies of scale.
QUESTIONS:
1. (Introductory) What is the effect of the increased demand for locally-sourced, organic food on the prices of this type of food?
2. (Advanced) What is the effect of the increased demand for locally-sourced, organic food on entry into this segment of the food industry? What is the effect of entry into this segment on the prices of locally-sourced, organic food?
3. (Advanced) Will the producers of locally-sourced, organic food remain small?
by: Erica E. Phillips
Jan 07, 2015
Click here to view the full article on WSJ.com
TOPICS: Entry into the food industry, Production
SUMMARY: As tastes shift toward specialty foods, more "food startups" are entering the market. Nearly $570 million in venture capital has been invested in such firms over the past five years, a financial database shows.
CLASSROOM APPLICATION: Students can evaluate three issues with regard to the specialty food industry. First, with an increase in demand for locally-sourced, organic food, specialty producers are entering the market. Second, there are entry costs, in particular the costs involved with passing public health inspections. The article reports that Los Angeles County, in particular, is setting appropriate, lower-cost health standards for small food producers. Third, the article notes the construction of a food production center, L.A. Prep, to house as many as 50 businesses. Presumably, the center will provide economies of scale.
QUESTIONS:
1. (Introductory) What is the effect of the increased demand for locally-sourced, organic food on the prices of this type of food?
2. (Advanced) What is the effect of the increased demand for locally-sourced, organic food on entry into this segment of the food industry? What is the effect of entry into this segment on the prices of locally-sourced, organic food?
3. (Advanced) Will the producers of locally-sourced, organic food remain small?
Reviewed By: James Dearden, Lehigh University
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