Making Money in the Green Economy

Dominique Kostelac, CEO of Arganica, holds one of his company's signature produce boxes on his family farm in Advance Mills, Va.

Local food entrepreneur Dominique Kostelac brings business savvy to the farm. “It’s not a big hug-fest like a lot of people in the green world think it should be.”

Dominique Kostelac was poised to close a deal on a $9.8 million property in Washington, D.C., when the economy forced him out of the real estate game. He says he can still remember the day when banks stopped lending.

Most of his savings disappeared soon after that day in 2007.

“I was holding that property for $75,000 a month, waiting, waiting, waiting,” Kostelac said of the investment that ended his life as a real estate developer. “Now somebody else is waiting.”

Kostelac found a new livelihood back on the family farm. The days of multi-million dollar real estate deals have given way to deals with local farmers over golden beets and sea beans. He is now the CEO of Arganica Farm Club, a local food network that delivers fresh, local, and organic food to D.C.-area residents. But don’t mistake him for a granola-eating green activist. He’s building what he calls a “local food network on steroids” with a competitive, entrepreneurial spirit he borrows from his previous work.

Kostelac isn’t built for waiting. Not long after the real estate market crashed, he saw a business opportunity in a regular family activity—making maple syrup. When his former construction workers called him looking for a job, he put them to work cutting wood and cooking down the syrup from his maple trees.

Then came the first of many flashes of inspiration. Kostelac realized he could sell the bundles of firewood to local general stores. He quickly realized he could expand that operation and sell, and deliver, firewood to customers in Washington, D.C., who didn’t have easy access to firewood.

The inspiration kept coming.

“He’s a 10 ideas a day kind of guy,” says Kostelac’s wife, Rachel.

[audio:http://www.jonlhussey.com/blog/wp-content/uploads/2010/12/How_Arganica_Started1.mp3|titles=How Arganica Got Started]
Kostelac tells the story of his journey from D.C. real estate developer to farm entrepreneur.

Why not sell the homemade maple syrup to customers in Washington, D.C. as well? Since moving from Washington, D.C., to their farm in Advance Mills, Va., in 2005, the family has enjoyed the fruits of the land around them—harvesting grapes and eating from their garden.

He saw a business opportunity in that experience, too.

On Oct. 9, 2009, two years after leaving the world of real estate development, Kostelac launched Arganica.

A Local Food Network on Steroids

Kostelac is an imposing figure. At 6-foot-6, he covers ground quickly, moving from his farmhouse and across the grounds of his farm in long strides as he oversees his growing operation. In a red, checkered lumberjack shirt, he bears a striking resemblance to Paul Bunyan.

Though there is little farming going on at the Kostelac’s 33-acres of land, there is plenty to oversee.

Arganica works with a network of more than 1,000 farmers and local food producers to provide customers in northern Virginia, southern Maryland, and Washington, D.C., with a large selection of fresh and local food. Customers—who pay $80 for a three-month membership, $140 for a six-month membership, and $250 for an annual membership—are emailed an order form every Sunday night. Members pay competitive prices for all of the products Arganica carries with discounts for annual members.

The customer selects a week’s worth of vegetables, meat, seafood, even local wine in an the excel spreadsheet, emails it back to Arganica, and the order arrives at their doorstep on Thursday evening in a signature Arganica box.

“When I go to the grocery store, I get in a rut and end up buying the same stuff all the time,” says Amy Throndsen, a D.C. resident who has been an Arganica customer since January. “Having the variety and convenience is very appealing. I tell everybody about it.”

The variety at Arganica is expanding every week. Kostelac says the basics—potatoes (sweet, fingerling, Yukon gold), tomatoes, cucumbers, mushrooms—are still his most popular items, but customers can order from a list of vegetables, meats, breads, grains, pastas, coffee—just about anything you can buy at a grocery store.

To get that variety of local food to hundreds of customers while it’s still fresh, the Arganica team spends Wednesdays rushing between area farms and producers to pick up the products. A steady stream of deliveries come in throughout the day, food is dropped off at the distribution center (a renovated farmhouse garage), and sorted for packing.

The distribution center is unfinished, with exposed drywall and taped seams awaiting plaster. The decor could serve as a reminder for Kostelac of his old life and a sign of the rapid growth in his present life.

“Just a couple of months ago, we didn’t have a walk-in freezer here,” said Alex Johnston, a University of Virginia student who works part-time for Arganica.

Johnston, who helps to pack Arganica boxes on Wednesdays and gets them to the delivery team on Thursdays, is himself a local food eater. Since discovering the wealth of food available at farmers’ markets in Richmond, Va., Johnston has become part of a growing trend of people who only eat local or organic food.

Kostelac is riding the crest of that trend. It is not unheard of to see the Arganica customer base grow 20 percent in a week, he says.

Local Food Sales Are Up in a Down Economy

Scott Barao of Hedgeapple Farm in Buckeystown, Md. has been selling organic, grass-fed beef to customers from the Washington, D.C. area since 2007. Despite the recession, he has seen a steady increase in the total number of cattle sold annually and the average amount a customer spends per visit, which has risen from $45 in 2007 to $78 in 2010. Kostelac has seen similar numbers with Arganica. Today, the average Arganica customer spends $84 per order.

If there is money to be made in the local food movement, Kostelac will find it.

In his old life, the 47-year-old self-taught entrepreneur amassed $20 million in property buying and rehabbing historic townhouses in the Mount Pleasant, Adams Morgan, and Shaw neighborhoods of Washington, D.C..

A lifelong love of building led Kostelac to study architecture at Virginia Tech. But he wasn’t always an entrepreneur.

“When I met him, he was a shirtless artist,” Rachel says. “He had a policy that he would only work three days a week. The rest of the week he would leave for being artistic.”

In the Mount Pleasant neighborhood of Washington, D.C.—where the Kostelacs raised their three children: Nathan, Summer, and Tommy—Dominique was surrounded by historic townhouses that spoke to his passion for history, building, and design.

That passion led him into the world of real estate development. But when he hit legal and zoning issues, banks stopped lending, and debt ate away at his savings, Kostelac quickly turned to another lifelong passion—food.

[audio:http://www.jonlhussey.com/blog/wp-content/uploads/2010/12/love-of-food1.mp3|titles=Love of Food]
Dominique Kostelac explains the love of food he and his brother Tom shared from a young age.

When the idea for Arganica first hit him, Kostelac ran it by his brother, Tom, who has is own design company in Prague, Czech Republic, and shares Dominique’s love of food and business.

“While Dominique may have ’10 ideas a day’ this one stuck out as both extremely viable as well as potentially explosive,” Tom Kostelac said in an email. “I really believe it is.”

The Kostelacs are banking on Dominique’s explosive idea. His brother has now stepped away from day-to-day operations at his design company to assist in his Arganica’s operations—helping from Prague with delivery routes, website development, and design.

Both Kostelac brothers think they’ve identified a market experiencing a surge in interest.

Other area farmers agree.

“People want a natural diet,” said Dr. Scott Barao, who runs Hedgeapple Farm in Buckeystown, Md., 50 miles outside of the nation’s capital. “It’s a huge and growing segment. People want to know they are getting food from a local producer where they can see the farm.”

Are We Winning?

On Wednesday, Dec. 8, the growing pains of Arganica’s small operation could be felt on the farm. Two days earlier, the company offered huge discounts on one-month, two-month, and six-month memberships through the D.C. online coupon site, Living Social. (Full disclosure: I am an Arganica member. I signed up for the service in March through a similar promotion with the online coupon site, Deals for Deeds.)

Sarah Yates, who describes herself as Arganica’s “utility infielder,” is busy handling marketing, social media, and customer relations. The 24-year-old says she was up until almost midnight handling questions from new members. Arganica’s Facebook page had more than 4,000 views in one day.

Yates is huddled into a small room in the farmhouse where Arganica’s core team is working: Rachel Kostelac, bookkeeper; Doug Jones, office administrator; and Monica Daniels, office manager.

Despite the overwhelming influx of work, the team is upbeat. The Living Social deal brought in 584 new members. Kostelac says they currently have more than 1,000 members, but he will not say how much more. He would like to see 10,000 Arganica members by 2011.

“Many years of my life with him have been nerve-wracking,” Rachel says, “but his enthusiasm is contagious and that’s what keeps us going.”

Moments later, Dominique walks through the door.

“Are we winning?,” he asks.

“We’re going to win even if it puts me six feet under,” Daniels replies.

2 thoughts on “Making Money in the Green Economy

  1. Jon I finally read this. What a great story, I really liked it, and I enjoyed it even more with all the additional embedded interactive tools you’ve added. Its like “this american life” in “print”.

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