Agri-preneurs are growing a fresh kind of business

Sunday, August 1, 2010
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SECTION D
MoneyWise
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IN MY OPINION
RON STODGHILL
Smaller
firms need
help: Sales
Bank of America’s publicity
machine kicked into full gear
last week, spooning dollops of
cheerful news onto America’s
beleaguered small businesses.
The biggest, by far, was this:
After pledging to boost its
lending to small businesses by
$5 billion, the bank hit $45.4 billion in the first half of this year,
or $9 billion more than it
loaned during the same period
last year.
If that wasn’t enough, BofA
also announced a grant aimed
at pumping $100 million in
loans to some 8,000 small businesses that have failed to secure loans directly from banks.
“We are feeling good about
where we are, in spite of the
challenging
environment,”
Robb Hilson, BofA’s top small
business executive, said in an
interview.
Elsewhere, the small business spigots seem to be opening, too.
Wells Fargo, JP Morgan
Chase and Citigroup each last
quarter reported increases in
small business loans by 30 percent or more. Even President
Barack Obama is pushing for
$12 billion in tax breaks, loosened terms for Small Business
Administration BA loans, and a
$30 billion fund to aid community banks.
Yet despite all that dust being kicked up, here’s the rub:
The nation’s small businesses
are feeling downright crummy
about their future – at least in
the short term.
According to the latest Wells
Fargo/Gallup survey, confidence among small business
owners is worse than it’s been
in seven years. The index was
down to 28 this month, after
peaking at 114 in 2006. The survey, which polled more than
600 small business owners in
50 states, indicated that even
though concerns about credit
availability are fading, there’s
still plenty of angst over less
revenue, cash flow, capital
spending and hiring.
For instance, only 13 percent
expect to add to their payrolls
this quarter, compared with 18
percent last quarter. Some 43
percent of respondents predicted a rise in cash flow this
quarter, down from 53 percent
last quarter.
The result of such malaise is
downward pressure on loan
applications. In fact, most of
BofA’s increase in small business loans this year was in renewals, rather than new loans.
On Friday, the government
reported 2.4 percent economic
growth for the second quarter,
slimmer than most analysts
had forecasted. Until the economy takes a decidedly positive
turn, BofA, for one, isn’t expecting small businesses to be
line up for a loan, Hilson said.
“Things are better than they
were a year ago, but there is
still so much uncertainty,” he
said.
He added: “Top-line revenue
is the issue. It’s challenged
their ability or their desire to
borrow. At worst, they’re tentative, and at best there’s still a
fear factor. Many small business owners are just accumulating and hoarding cash.”
In the end, it’ll take sales to
break through the fear factor
gripping small businesses. David Darnell, BofA’s president
of Global Commercial Banking, said it best in one of the
bank’s many self-congratulatory news releases last week:
“These businesses have
weathered enormously difficult conditions. During that
time, they have very clearly
told us that while getting loans
is important, what they continue to need most is more demand for their goods and serv-
PHOTOS BY JEFF SINER – [email protected]
Kate Brun, owner of Lucky Leaf Gardens of Harrisburg, grows microgreens – all manner of vegetables and herbs shortly after they sprout from tiny seeds in
her greenhouse. Among her varieties are snow pea tendrils, left, and Detroit beets. She sells her produce to restaurants and at area farmers markets
Agri-preneurs are growing
a fresh kind of business
Homemade and home-grown produce is a trend
for consumers – and a new breed of capitalists.
By Jen Aronoff
[email protected]
In shallow trays of organic soil at her
greenhouse in Harrisburg, onetime real
estate agent Kate Brun is cultivating a
business: growing and selling microgreens, tiny herbs and vegetables harvested when their first leaves appear.
Not even a year old, her company is already taking root – part of a wave of the
homemade and home-grown springing
up in Charlotte and across the country.
Two factors have combined to propel
the trend, experts say: the increasingly
popular local-food movement, and a recession that’s prompted people to consider different ways to earn a living.
“We really are going to need more producers who are willing to grow for this
kind of market,” says Nancy Creamer, director of the Center for Environmental
Farming Systems at N.C. State University.
“There’s sometimes a learning curve and
some barriers, but I think there’s a lot of
interest and a lot of opportunity.”
That’s how Brun, a 35-year-old mother
of two, sees it. “It’s finding something,
having faith in what you’ve got and having the courage to go do it. I never enjoyed going to work until now.”
The overall number of farms in North
Carolina declined 2 percent in the most
recent U.S. Census of Agriculture – to
52,913 in 2007, compared with the previous count in 2002. But the number of
small producers, on plots up to 9 acres,
jumped 25 percent, to about 5,000. The
SEE FRESH, 2D
Brun also sells microgreen mixes. Her Deli Mix consists of mustard,
broccoli, cabbage and cauliflower.
Savvy shoppers will try to
leverage tax-free weekend
How much you save next weekend
depends largely on what you buy.
Life insurance
survivors told
to bank cash
Report: Some insurance firms profit by
keeping the money in their accounts.
By Sue Stock
[email protected]
By Alexis Leondis and
Margaret Collins
The back-to-school sales tax holidays in the
Carolinas appeal to two of our most primal
Bloomberg News
desires: to stick it to Uncle Sam and to score a
bargain.
That’s why the annual holidays have been
such a hit with shoppers even as they acknowledge the savings might not be all that
dramatic.
“We might save $20, if we saved that
much,” said Debbie Welch, a Raleigh mom.
“It’s the deals that we go for more than anything.”
And that’s really the crux of it for shoppers.
Now – nine years after the first holiday in
North Carolina – they know that how much
you rack up in savings depends largely on
what you buy. But even for those who don’t
plan to buy big-ticket items such as computers, the weekend can pay off in other ways.
The tax-free holidays begin Friday in both
North and South Carolina.
SEE TAX-FREE, 3D
MAKING PLANS
BARGAIN HUNTING Tips for getting the best savings for
tax-free weekend. 4D
DETAILS Times you can shop and what qualifies. 4D
Life insurance beneficiaries seeking federal protection for their money should take their proceeds
straight to the bank rather than risk losing their
cash by letting insurers hold onto it.
Policyholders may assume when buying life insurance that beneficiaries will get the payouts in a
single bank check. That may not be the case,
Bloomberg Markets magazine reports in its September issue. Insurance companies such as Prudential Financial Inc. profit by holding onto the
money in their own accounts and issuing checkbooks, essentially IOUs, for survivors to access
their money.
“The language they use at the time is all couched
in reassuring phrases – let me give you the security
of not having to make an investment choice,” said
Lawrence Baxter, professor of the practice of law at
Duke University School of Law in Durham. “It leverages off of that state of emotional distress.”
After a loved one passes away, survivors must
file a claim and provide a death certificate, according to Bob Hunter, director of insurance for the
Consumer Federation of America in Washington.
The insurer will then contact the beneficiaries
with options for payment, which usually include
keeping the money in an account with the insurance company, Baxter said.
SEE BENEFICIARIES, 2D
2D
Sunday, August 1, 2010 ■ ■ ■
FRESH
• from 1D
pattern has continued since
then, observers say.
Area farmers markets and
agricultural extension offices
report a boom in inquiries
about growing and selling local
produce, as well as new producers entering the arena.
There’s a 78-person waiting list
for spots at the certified organic incubator farm in Cabarrus
County, which began in 2008,
county extension director
Debbie Bost says.
The innovative project now
has 16 farmers working up to a
third of an acre apiece, learning
about sustainable-food practices and gaining experience so
they can one day farm land of
their own. The participants are
ages 18 to 59, with a range of education levels. Some are there
full-time; others work elsewhere, too, including at Wells
Fargo, US Airways and Carolinas Medical Center, Bost says.
Brun had always enjoyed
gardening and began growing
microgreens for her family last
summer. By that point, the
economy had taken a toll on
both her husband’s construction management and contracting company and on her
part-time work as a real estate
agent, so she mulled whether
there was a way to make money from something she loved.
Inspired by a friend in California who had done the same,
she decided she could sell what
she grew. Her husband, Marc,
installed plumbing in the
greenhouse at the back of their
home, Brun set up shelves for
her trays of soil, and she began
experimenting with the plants,
trying different seeds and
learning about how they grew.
This spring, she launched
her company, Lucky Leaf Gardens – the moniker inspired by
her maiden name, Lachance,
French for “luck.” She checked
with the N.C. Department of
Agriculture about reselling
and food safety requirements,
and headed to a restaurant sup-
BUSINESS
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ply store to buy packaging and
labels. To come up with a logo
and website, she hired professional designers, because she
wanted her brand to be viewed
as legitimate from the start.
Initial startup took about
$2,000, helped by the fact that
she already had the greenhouse. But additional costs
keep cropping up, she says. She
needs a larger refrigerator in
her greenhouse, and it will also
cost money to expand her
greenhouse space eventually.
“This is very business-oriented for me,” she says. “It’s
not just a hobby, digging in the
dirt.”
The 10% Campaign
Marketing, branding
Marketing and branding are
key for the new agri-preneurs,
though they can be unfamiliar
territory for traditional farmers used to focusing on production, says Carl Pless Jr., a
Cabarrus agricultural extension agent.
“There’s a lot of stuff involved in that,” he says. “Most
are finding they spend as much
time marketing as they did
growing it in the first place.”
“You have to be a jack of all
trades,” N.C. State’s Creamer
notes. “Not only do you have to
be a farmer, you need to be a
marketer, a people person, web
savvy.”
But, she says, that diversity
and challenge is also part of
why farming appeals to people.
At the same time, Pless says,
it’s important to back up the
marketing with knowledge and
top-notch products. “So many
people think you can just
throw seed in (the soil), work it
any old time,” he says. “That’s
not the case.”
Brun ate her microgreens at
home and liked their burst of
vitamins, nutrients and flavor
that foreshadow what the
leaves will become – radishes,
cauliflower, broccoli or arugula, to name just a few. But she
sought a chef’s opinion before
venturing out. When a Concord chef provided positive
feedback, it helped convince
Brun that she had something
BENEFICIARIES
• from 1D
“It’s very easy for trusted companies to mislead nave customers, and
life insurance companies are trusted,”
said Daniel Kahneman, a professor of
psychology and public affairs at the
Woodrow Wilson School of Public
and International Affairs at Princeton
University and a Nobel Prize winner.
“The fact that they seem to be outside
the regulatory reach is shocking.”
Insurance companies may be violating a federal bank law, Bloomberg
Markets reported. A 1933 statute
makes it a felony for any company to
accept deposits without state or federal authorization.
The insurer accounts aren’t guaranteed by the Federal Deposit Insurance Corp.
The insurers place death benefits
in interest-bearing accounts and issue
IOUs to survivors. Insurers market
the accounts as a service to allow bereaved beneficiaries time to think
about what they’ll do with the payout.
Carriers make money by investing the
funds in bonds and keeping the difference between returns and the interest
they credit to the accounts.
Beneficiaries can withdraw some
or all of the money immediately from
the account by writing a check to
themselves and depositing or cashing
it at their local bank, Bob DeFillippo, a
JEFF SINER – [email protected]
Kate Brun offers a popcorn shoot to a customer at the Harrisburg Farmers Market.
restaurateurs wanted.
Now, she provides microgreens to about 10 area restaurants, which use them to garnish and enhance meats and
appetizers. She also sells them
at the Harrisburg Farmers
Market on Monday afternoons. She makes sales and delivery trips several times a
week, dropping off orders and
visiting other nearby restaurants to make her pitch.
On a recent, sticky afternoon, she hopped out of her
white Ford Escape to drop off
greens at one of her earliest
customers, Bistro La Bon in
Plaza-Midwood. She toted a
rolling, soft-sided cooler behind her like luggage.
Inside, she handed chef
James Swofford four plastic
containers, containing sunflower sprouts, mustard mix
and sweet pea tendrils. After
inspecting the goods, he took a
couple of her cards. “You
should be getting some calls.”
At Dandelion Market on
West Fifth Street, Brun met
with executive chef Katie For-
spokesman for Newark, N.J.-based
Prudential said in an e-mail. There are
no fees associated with receiving a
lump-sum check, which is typically
sent within three days following approval of a claim, he said.
There are 1 million death-benefit
accounts totaling $28 billion managed
by insurers that aren’t actually sitting
in a bank backed by the FDIC, Bloomberg Markets reported. The FDIC insures accounts up to $250,000 for
each depositor and potentially more
depending on how accounts are
opened.
About 40 percent of these so-called
retained-asset accounts at the insurance companies still have money in
them a year later, which means they’re
receiving interest rates as low as 0.5
percent without FDIC protection, according to Bloomberg Markets.
Prudential’s
general
account
earned 4.4 percent last year, mostly
from bond investments, based on U.S.
Securities and Exchange Commission
filings. Since the checks may resemble actual bank checks, beneficiaries
often assume the money is actually in
bank-insured accounts when it isn’t.
“Leaving it with the insurance company is not going to give you more
money – don’t let them hold onto it,”
said Hunter of the Consumer Federation of America.
Capital One Financial Corp. has a
high-yield money-market account
yielding 1.10 percent, according to the
muzis, presenting her with little sample cups of greens to try.
Her pitch: We’re local, we’re
fresh – delivered on the day the
greens are harvested, and new
customers get 20 percent off
the first month.
“Mmm, they look beautiful,”
Formuzis said, picking up pea
tendrils to smell and taste. “It
reminds me of eating it just off
the pod.”
Brun promised to follow up.
“This is wonderful,” Formuzis said. “We’ll definitely be using you for a lot of things. We
like it to be a little unique.”
Not every restaurant signs
on, but a chef has never turned
down at least a meeting, Brun
says. She expects that’s because her product fills a distinctive niche.
That’s crucial for a new business trying to carve out a spot
in the marketplace. It also
makes it easier to land a spot at
a farmers market – as opposed
to, say, selling corn and tomatoes, says Lynn Caldwell, manager of Atherton Market in
South End. “Figure out what
McLean, Va.-based bank’s website.
For those who don’t need the money
immediately, a 3-year money-market
certificate offered by the Pentagon
Federal Credit Union for a $1,000
minimum deposit, is yielding 2.25 percent annually, according to their website.
Insurers can fail
Policyholders shouldn’t assume
that insurance companies don’t fail,
said Baxter, the law professor. And
when they do, state insurance departments are supposed to back life insurance policies by raising money from
other insurers that do business in
their state.
The checkbooks are “a pretty widely accepted way of paying death benefits,” said Paul Graham, vice president
of insurance regulation and chief actuary for the American Council of Life
Insurers, a Washington-based trade
group. “We actually think it’s a benefit
to the beneficiaries to have these accounts.”
Some states will take the proceeds
if an account is idle for a certain
amount of time. In New York, funds
that haven’t been touched for more
than three years may be turned over
to the state.
Six states including North Carolina
had rules regarding retained-asset accounts as of July 2009, requiring insurers to disclose fees and interest
rates and tell survivors they can with-
the trends are,” she advises.
“Like, instead of cupcakes, do
gluten-free cookies.”
The eat-local movement
is getting a big push this
summer in North Carolina.
It comes courtesy of the
Center for Environmental
Farming Systems, based at
N.C. State, Charlotte-based
Compass Group, the American arm of the world’s
largest foodservice company, and the N.C. Cooperative Extension Service.
The group has launched
a campaign to encourage
consumers to spend 10
percent of their food dollars on local producers and
related businesses, with
the aim of boosting awareness of local foods, spurring economic development and improving health.
For its part, Compass
plans to develop a “farmto-institution” buying program and source 10 percent of the produce it
serves in N.C. accounts
from local farmers.
Details: www.nc10per
cent.com
Challenges to growth
It can be difficult for nascent
farmers to find the labor and
infrastructure required to
reach beyond farmers markets
to larger institutions, says
Christy Shi, co-founder of
Know Your Foods, a Davidsonbased group dedicated to rebuilding the local food system.
More entrepreneurs will be
needed to serve as middlemen
between farmers and customers, processing and distributing local food, she says. “Even
though everyone’s got the energy and the enthusiasm, it’s
not sustainable if the infrastructure in the middle is not
present…(a farmers market)
can’t be the only way people
get access to local food.”
Another issue, she says, is
that new producers are not
necessarily entering the market fast enough to make up for
older farmers leaving the field;
the average age of an N.C.
draw all money by writing a single
check, according to the National Association of Insurance Commissioners.
The Department of Veterans Affairs and the New York State Insurance Department said last week they
will investigate the practice of life insurance companies directing benefits
into their corporate accounts.
New York Attorney General Andrew Cuomo began a fraud probe into
the life insurance industry and subpoenaed several insurers including
New York-based MetLife Inc. and
Prudential for information about
profits on death benefits retained
from families of deceased policyholders including military personnel.
USAA policy
USAA Life Insurance Company, a
subsidiary of San Antonio-based
USAA, has a payout policy that differs
from some other insurers. The company says its benefits are paid in a
lump sum or deposited into the company’s savings bank, which is FDIC insured, said Eric Smith, president of
USAA Life. The firm provides insurance primarily to the military and
their families.
“It isn’t unusual for beneficiaries to
be distraught, depressed and confused, and they don’t know what they
want to do,” so they end up keeping
the funds in these accounts, said
Smith.
farmer is 57.
Even though her business
still has plenty of room to grow,
Brun is already encountering
some of those challenges. To
head out on her recent delivery
run, she had to hire a babysitter; if she had more time, she
says, she could do more with
Lucky Leaf, but she has to balance it with family life. The
business doesn’t provide
enough money to live on, she
says, but it is profitable and has
added some cushion to the
family budget.
It’s also somewhat bittersweet, she says, to be providing
something so seemingly in demand as her hardworking husband continues to find so few
construction jobs.
Her goal, she says, is to make
Lucky Leaf a family business
that lasts. Just like her plants,
it’s young – but enough, for
now, to sprout some hope.
N.C. has disclosure laws
North Carolina is one of six
states with laws that require life
insurers to provide beneficiaries
with details about retained asset
accounts, which insurers manage
for relatives when policyholders
die.
Retained asset accounts resemble a bank account; beneficiaries can withdraw money from
them using drafts, which look like
checks. But unlike bank accounts,
these accounts are not insured by
the FDIC.
State law requires life insurance
companies to tell survivors they
have the option of withdrawing the
entire sum from the account by
writing a single draft check. Insurers also must warn the beneficiary about time delays in completing account transactions,
which can take longer than they
would at a bank, said Kristin Milam, a spokeswoman for the N.C.
Department of Insurance.
The law also requires insurers to
disclose account interest rates and
the methodology used to determine the rates, and to tell beneficiaries that interest earned on the
account could be taxable.
South Carolina does not have
any rules regarding retained asset
accounts. — DANIELLE KUCERA