Last Sunday marked the unveiling of the weekly Smorgasburg food market with 80 vendors in downtown Los Angeles. It was a project in the making since last October, although the founders started working on it in earnest two months later.
Smorgasburg is the popular all-food market concept the duo launched in May 2011 (in Williamsburg on Saturdays and in Prospect Park on Sundays), three years after the arrival of their Brooklyn Flea, a flea market in Fort Greene on Saturdays and Dumbo on Sundays.
Smorgasburg is just one of the companies run by Butler, who lives in the Clinton Hill section of Brooklyn with his wife Kira, and children, 11 and 13; and Demby, 44, who dwells in Prospect Heights with wife Liza, and their children, 3 and 7.
Two years ago, they opened Berg’n in Crown Heights, a 9,000-square-foot beer hall with permanent food court of Smorgasburg food vendors. The space is at 899 Bergen Street between Classon and Franklin Avenues, a building Butler co-owns and where the pair has its offices.
Other markets include Grand Army Market, Seaport Smorgasburg and every summer four Flea/Smorgasburg food vendors serve at the Central Park SummerStage concert series.
Commercial Observer talked to the pair at Berg’n about how they met, who their market success stories are and the kinds of real estate deals they do.
CO: What’s been the most difficult thing you’ve had to deal with?
Butler: In New York City, real estate is at such a premium; that is the ongoing issue with a business that needs lot of space. So, we spend a lot of time and thought on planning our real estate, trying to anticipate problems. Lots of times we’ve only got spaces because they’re available temporarily, so we’ve had to do a lot of moving around.
Demby: We’re usually invited by a landlord that wants us to utilize their underutilized space. What they really mean by that is, “Bring thousands of people to a location the way you do.” In New York City, which is even denser than other cities, you’re going to have thousands of people in one location that was previously underutilized; it’s like a shock to the system. So that’s our biggest challenge.
Butler: If you look at the waterfront in Williamsburg—we were invited there in 2010 by Jeff Levine [of Douglaston Development] who is building all those towers there. At that point, very few people were going to the waterfront, because historically that’s a place where most of it was not publically accessible. But Jeff wanted to activate the area and make it seem like a place that was desirable, had life, activity. He invited us to do the market on the empty lot he had by the water. We were successful in bringing people there. They ended up building on that lot, so we moved to East River State Park, which is right next door. Smorgasburg started there.
The markets are all temporary. Why not establish them in a more permanent way?
Butler: Because it’s very expensive. We don’t want to pay market-rate prices for a space we use only one or two days a week.
Why not operate every day?
Butler: Because we wouldn’t get the crowds. You can do that if you can afford a place in Soho, but the rent there would be…
Demby: People come like it’s a festival. They go with their kids—they’re not going to go there on a Wednesday.
Butler: We tried in December 2011—we tried to keep it open as a holiday market on weekends and weekdays. It was at a development site for One Hanson Place. Even at prime Christmas shopping time, it wasn’t enough traffic.
How did you guys meet?
Butler: We met because Eric was the communications director for [then Brooklyn Borough President] Marty Markowitz. I had started a blog called Brownstoner in October 2004.
Demby: We emailed a bunch. Maybe around 2005 or 2006. We met at an event in Borough Hall—Taste of Brooklyn.
Butler: We spoke about working together on a different blog in an editorial capacity. It was for Brooklyn Record, another blog I was working on.
Demby: I was a journalist before working for Marty. At that point, I still thought of myself as a writer.
Butler: In 2007, I put an announcement on Brownstoner announcing launching a flea market in the spring. Eric saw it and reached out saying that he had been thinking about it too, so we talked about it.
Demby: So we met, talked about how we could open a flea market, capture this moment in Brooklyn since everyone was moving there. There were all of these cool people but nothing to do during the weekend. Etsy was still getting big. How do you capture this craft moment, food thing? That was the beginning of it.
How did you get the name Smorgasburg?
Butler: I just thought of it one night.
Demby: Sprung from the head of Zeus.
Butler: I was watching TV and thinking about names, and I dunno, I texted Eric and said it probably sounds kind of dorky, but what do you think?
Demby: We had a lot of bad names, like Food Fare.
These markets have taken off so well: What did it take to get them off the ground?
Butler: I think in both cases, certainly being at the right place at the right time helps. In both cases we were able to capture the zeitgeist a bit. In 2008, we captured the creativity, the entrepreneurialism as Eric was saying. By 2011 we started Smorgasburg and it was clear that Brooklyn was becoming—if it wasn’t already—the global center for food experimentation and food entrepreneurialism, too.
If you take a step back from what we’ve done, especially Smorgasburg, and look at it from an economic development angle, one of the coolest things we have done is create the biggest small business incubator in the city, sort of unwittingly. Hundreds of businesses have started at Smorgasburg, dozens have then gone on to open their own stores, restaurants, sell their products at Whole Foods.
What we did was we’ve lowered the cost of entry dramatically. Now you can get a couple of thousand dollars for equipment, pay $250 a day and some days have 20,000 people walk past you. If you’re doing well you make money and people will invest in your business, you get feedback from your customers and a huge marketing boost. If your goal is to open your restaurant, you start at Smorgasburg, and you get so many Facebook followers before you start your restaurant rather than opening it and hoping that people walk by. So it really puts you on a stage in a way.
What’s the application process?
Butler: They go to our website, fill out a questionnaire and put pictures and a description of what they do. Ones we think sound promising we invite to do a tasting. This past winter, we had only 10 new spots, or a dozen, at Smorgasburg Brooklyn because most people don’t leave because they’re doing well. So, over the six to nine months or so leading up to it we had 300 to 400 applications for 12 spots. We invited 70 to 80 to taste. It’s almost every day for lunch for three months.
Has there been anyone you’ve approached that has snubbed you?
Butler: Yeah, but most come to us. Snub would be the wrong word though because it’s a logistical challenge.
How do you curate the vendors?
Butler: We try to avoid duplication. We pick things that we think are good, interesting.
Demby: The vendors get it. When they come in for tasting they’re not like, “I love food, and I’m going to do food.” They come in and they’re like, “I’ve either worked at a Smorgasburg stand or been there 10 times and know what works and here’s what I’m going to do.” And we’re like, “Yes! Quail eggs on a stick? Of course, do that—it’s going to be successful.” Each year now, the level of sophistication, of research they do before they come in, really predetermines their success.
How do you guys compare to the traditional food halls?
Demby: The food hall does seem like they’re trading off Smorgasburg’s identity a little bit, you know. There are two things that are happening. People just have so much more expectation from food generally that they’re going to have choice. The idea of bounty has sort of taken hold where customers have the expectation that they’re going to have limitless choice and speed and quality and convenience. It’s not McDonald’s, but they want it fast like that. They want it to be cool and interesting and special and unique and always changing.
Butler: Also what has shifted is that developers have gotten the message—they were a little late. The more sophisticated developers view their ground-floor real estate as ways to maximize their profits on the upper floors. So they’ve been smart enough now to realize that it is worth it to take a little less rent for a cool use that is going to bring more people to the space and positively reflect the building rather than just sticking Duane Reade in because it’ll pay more rent. Food halls have become a common way to do that.
Who is the big Smorgasburg success story?
Butler: A couple of very notable ones. Mighty Quinn’s Barbeque; they started day one, rolled their smoker out in Williamsburg, 2011. Now they have, I dunno, seven or eight locations. Ramen Burger is pretty famous.
Demby: The Lumpia Shack guy who wins plenty of awards—he’s down at the seaport with us. Some other folks from the early days—Mast Brothers Chocolate sold there in 2008. There’s a place called Butter & Scotch, which is kind of a dessert bar in Crown Heights that makes the best birthday cake in New York City. There are two vendors from the market that both started there. One was called Kumquat Cupcakery, the other is called First Prize Pies. They joined together to form Butter & Scotch.
What kind of deals did you work out for the spaces in L.A. and in upstate New York?
Demby: They’re very large parcels where we’re invited. So the developers invest in the sites and give us a really good deal.
In L.A., the developer bought a 32-acre parcel of land downtown; it’s a little bit like Industry City. There’s a wholesale produce market that has been happening there for 100 years—one of the biggest in America. The developer invited us for this project called ROW DTLA, for our market there on Sundays, to generate interest about their location. It helps bring people down there, accelerate their leasing process. In return they’re making the site viable for us as a market, for electricity, for compliance with health department and fire department regulations. All these things cost money if the site isn’t set up for it. They’re making an investment to make it possible for us. We prefer that sort of arrangement. The kind of property we’d be buying for a market would be highly speculative.
How much of a break do they give you on rent?
Demby: It’s usually a great deal for a year, and then after a year we figure it out. These things, you just don’t know how it’s going to go. Those are both really big projects for us, and we want to make it successful. If they are, we will look at other places. We get a lot of inquiries from developers from Jersey City to Miami to New Orleans.
Butler: There are really 30 to 35 cities where Smorgasburg can work actually. It’s not just the four or five biggest cities.
What’s going to happen to brick-and-mortar stores in the age of online shopping?
Butler: I think it comes back to the idea that it’s so experiential and community-based. People still crave that experience. [At our markets], it’s like a town square—you’re bumping into people you know, you’ll feel like you’ve communicated with your neighbors.
Demby: You can argue that it has been successful because it’s a reaction to everything happening online—that you can still go somewhere where you bump into people, buy stuff from the people who are making it. If we went online and commercialized what we do, we’d lose everything that we are. That’s not what we do. We create environments.
Jonathan, how did you go from the person who writes to being written about?
Butler: I only sold Brownstoner last year. For seven of the eight years we had this, I had Brownstoner. It wasn’t about getting out. These things you can intellectualize later, in hindsight. So, at the time, it was just that Brooklyn seemed like a cool place to have a flea market. It was a brilliant way to monetize the media platform. There are only so many banner ads you can sell. Prior decades if we were to start a flea market, you’d be posting ads on telephone poles, hoping someone shows up. At that point Brownstoner was a big media platform in Brooklyn. After the first announcement of the market, we had about 80 to 90 vendors sign up in 48 hours. It’s using the media platform to build something else, to create value in other ways than advertising. If you look at media companies, there is an events component right? That was sort of what it was. Once we broke the news about it, other publications started writing about it. We had a huge competitive advantage. It did help that we had some sort of public standing. The blog helped create a public persona.
Why did you sell it?
Butler: Because the blog had become a mature business. It wasn’t going to grow anymore, or at least it wouldn’t grow under my leadership because I was so focused on our markets. The last couple of years I couldn’t do both. I didn’t have the time or passion to keep it growing. So I decided to sell it before it died.
Why did you establish it to begin with?
Butler: I was bored at work; I had been a journalist, too, and had moved to Brooklyn. My personality was a lot in it. It was just a way for me to take people along on a ride as I showed them Brooklyn. As it caught on, I realized that it could be my escape from Wall Street.
What is your sense of Brooklyn from a real estate perspective?
Butler: It certainly has gotten a lot more expensive—too expensive for my taste I would say. I stopped looking at listings a year ago.
What’s the Kingston Smorgasburg going to be like?
Butler: I’d liken the Kingston one to the Brooklyn one when we started it. We’re doing something formerly called Hutton Brickyard that is along the Hudson [River]. It is adaptive reuse of the site, old steel sheds and old buildings. From a preservation standpoint, it’s interesting—and also from an economic development standpoint. It was down on its luck for a couple of decades. People from Brooklyn are moving out there, buying a house is affordable. But it’s still a city, still a critical mass. It’s very accessible.
Demby: Downtown L.A. and this place have so much in common. It had also been down on its luck. Also there’s a 45-minute radius where there are a lot of people, and they want to see it succeed.