DAVID GREENE, host:

At the other end of the economy from multi-billion-dollar enterprises like the nation's defense companies are America's small businesses. They are critical to the economy, especially as a source of jobs. But the recession has been hard on them. Consumers are not spending; banks aren't lending.

This week, we're reporting on hurdles facing small businesses who are trying to expand. Today's story comes to us from Queens, New York, where an ice manufacturer is trying not to be frozen out by the competition.

Beth Fertig of member station WNYC reports.

BETH FERTIG: Ice is just frozen water, right? Well, not if you're John Natuzzi, Jr.

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JOHN NATUZZI, JR. (Natuzzi Brothers Ice Company): It is a luxury, because our ice is crystal clear and it's, it's a premium product in my eyes.

FERTIG: If Natuzzi sounds like a salesman, that's because ice is his family's business. The 26-year-old is standing on the factory floor of Natuzzi Brothers Ice Company, in Queens. He's been working here since he was 19. And he's now taking over for his ailing father.

Nearby, tall blue cylindrical tanks are freezing purified city tap water. The ice is chopped up while still in the tanks and then sent to a bagging machine.

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FERTIG: When Natuzzi's great-grandfather started this company more than half a century ago, the trade was dominated by Italian immigrants who delivered big slabs of ice to homes, bars and restaurants. Today, Natuzzi Brothers makes its own ice and sells it to stores, blood banks, the U.S. Open tennis tournament, and the airline JetBlue.

Here on a loading dock at JFK airport, workers are hauling Natuzzi's ice out of freezers onto catering trucks. The ice will be used by thirsty JetBlue passengers.

Mr. NATUZZI: It's close to, I'd say, about five percent of our business. They bring in the revenue to say the least.

FERTIG: Natuzzi says he makes six to seven million dollars a year in revenue, and he'd like to make more. Ideally, one way to do that would be to sell to big supermarkets. But he shows me why that's not possible.

At a Waldbaum's supermarket on Long Island, Natuzzi points to a freezer filled with ice made by a big Canadian competitor, Arctic Glacier.

Mr. NATUZZI: Most of the products now are outsourced and coming from out of state and coming from bigger organizations. And it's really not beneficial for any small business, because they're not able to do business within the community.

FERTIG: In the past 15 years, the number of ice wholesalers like Natuzzi Brothers has shrunk from around 3000 to just around 500, according to the International Packaged Ice Association. Executive director Jane McEwan says that's because chain stores like Walmart don't want multiple vendors.

Ms. JANE MCEWAN (Executive Director, International Packaged Ice Association): When they went to consolidated purchasing, it caused a lot of the wholesale ice producers to lose their local Walmarts as a customer.

FERTIG: McEwan says almost half of the wholesale ice market is now controlled by three big companies. They're so dominant they've been investigated by antitrust regulators for price fixing - and two of the companies paid settlements. This level of consolidation is unusual, says Awi Federgruen, a professor at Columbia Business School in New York. That's partly due to the nature of the product.

AWI FEDERGRUEN (Professor, Columbia Business School): Relatively speaking, as you can imagine, a product like packaged ice - how much of a difference really could there be between one type of packaged ice and the other?

FERTIG: Natuzzi Brothers isn't just up against big ice companies. A lot of its competition comes from gas stations, convenience stores, and any small retailer with an icemaker that can bag its own product.

After growing up in the ice industry, John Natuzzi appears pretty cool about the hard road ahead. He says ice is something people will always need. So he's trying to increase business with existing customers, while also seeking out new ones.

Mr. NATUZZI: We've partnered with some ice cream distributors and they're able to utilize their networks. And it's working well for us. You know, you've got to be creative nowadays.

FERTIG: Still, he says he can't even think of passing his family's company on to a fifth generation - if there is one someday.

Mr. NATUZZI: I wouldn't imagine passing this along to anybody at the moment, given the state of the economy. You know, there's a lot of different things out there that we need to really put under our belt before I would consider doing something like that.

FERTIG: Right now, he says, he's simply hoping for a long hot summer.

For NPR News, I'm Beth Fertig in New York.

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