“We have considerable excess water and waste-water processing capacity, ideal for most food processors.”
“There is a considerable amount of (insert crop(s) here) grown in our region. We’re a great place to further process and refine consumer products that rely on those ingredients.”
“Our region has a number of shovel-ready/certified sites that are perfect for food processors.”
While assumptions like those above are well intentioned and very understandable, the truth is that a far more complex and dynamic set of needs and factors are driving food industry requirements at this moment in time. Today’s food industry needs to innovate and be as nimble as possible in their manufacturing operations.
What’s happening in the food industry today?
As a whole, the food industry is in an incredibly dynamic state, with constant change the only predictable norm. There are a variety of factors that have created this situation, many driven by the changing way our population chooses and consumes what is called “at-home food,” i.e., not consumed in a restaurant or establishment outside the home.
Food companies of all sizes and the incredibly savvy and astute marketing professionals who market their products look to satisfy growing demand for products that address increasingly specific health, ethnic, portion control, dietary, freshness, and ingredient demands. Waste reduction, labeling/packaging transparency, food safety and reliable ingredient sourcing, and delivery options via e-commerce have all become major drivers that food companies have strived to address, with varied success.
With retailers increasingly pressuring “big brand” package food companies to lower their pricing, margins have become exceedingly thin and are driving the need for growth in sales among categories where sales have been flat or declining over the past four years. This has created considerable acquisition activity of growth brands being acquired by larger brands of holding companies, hungry for products that will drive growth in sales. This has been especially true in the grocery categories where average annual unit sales have increased over recent years; salty snacks and coffee are two examples.
When working with economic developers, food processing companies should look for an industry-specific value proposition supported with compelling data and local insight. In addition to acquisitions and brands re-shuffling/pruning in ways to appeal to changing consumer demands, larger firms are also focusing heavily on cost cutting. Evidence that “big food” is under profit pressure is reflected in changes in CEO leadership. Since the spring of 2016, the food and beverage manufacturers with global food and beverage sales rankings of 1, 3, 4 10, 11, 19, 43, 52, 58, 69 & 74 have all changed chief executive officers.
What does all this mean for site selection?
The factors noted above (along with countless others) drive a tremendous need for constant innovation among food companies. Critical needs change from project to project and very often among the same companies with new requirements only several years removed from the last site search. The days of making one or a very limited number of products in a facility have been replaced by the need to quickly put new ideas and concepts into production, with minimal disruption and new investment. Being able to quickly change or modify processing lines, ingredients used, waste streams, packaging materials and sizes, brand messages, and marketing tactics will continue to be viewed by food companies as critical to their success. Comprehensive location solutions that foster and support this need for innovation and doing more with less, in as many ways as possible, are becoming sought after. Economic development representatives who contribute to food processors’ overall set of requirements have an opportunity to stand apart.
Clearly, the regional mix of labor skills and availability will play a major role in food facilities’ operational success as defined above. The labor-related aspect of site selection will and should be of major concern, and food processing companies are well advised to work with economic development teams who can convey both meaningful data and anecdotal evidence of viable, project-specific workforce availability and cost. Other non-labor-related resources that would serve to promote the level of innovation described above must also be taken into consideration.
Consider “hard assets.”
Property solutions, as one would expect, play a critical role in driving the ability to innovate. Most food processing is done through a production process that takes the form of a processing line, where raw ingredients are ultimately turned into finished form, and packaged in various sizes and quantities. The ability to quickly modify these lines inside a facility where there is ample column spacing, clear height, utility distribution, water and sewer supply and discharge locations, structural capacity (floor and ceiling) dock locations, and exterior space for large process utility equipment and vehicular movement should all be considered competitive advantages that support innovative manufacturing.
Economic development representatives who contribute to food processors’ overall set of requirements have an opportunity to stand apart. Many economic developers ask whether the lack of a viable existing building is a “death blow” to their chances of landing a food-related project. In some cases it may be, but due to an increasing lack of these types of facilities nationwide, vacant land sites with near-term/low-risk development potential are often considered and selected.
When looking for a site for their next food processing facility, companies should focus on obtaining from economic developers site-related property information and an overall value proposition centered on minimizing both delivery and operating risk. At a minimum, this should include demonstrating all or as much of the following as possible:
Typical “minimum” information requirements for further consideration:
- Food processing uses allowed under the current zoning district and restrictive covenants, should they exist
- Immediately surrounding uses (both existing and planned) that are free of all but the lowest density residential uses, active airport runway departure or approach flight paths, larger retail uses, schools and high occupancy institutions, and any industrial uses that emit an odor, dust, contaminant, etc.
- Meaningful detail on the status of existing access and comprehensive utility infrastructure (it’s not just about water and sewer!)
- If a land site is being considered, confirmation as to whether the current property owner will sell the property without further involvement in the construction/development process
- Significant due diligence information that serves to demonstrate with current documentation areas that are free of development restrictions, such as delineated or likely wetlands and buffer zones, easements, rights-of-way, flood plain zones, endangered species, historic artifacts, and known or likely environmental contamination
The presence of existing food clusters, reflected in the form of legacy and, more recently, settled food processing entities that have thrived, is also a critical factor. Food processors should look to economic development teams that can explain how their respective organizations provided support and contributed to overcoming challenges realized in startup and or/ stabilized operations.
An existing food industry presence will typically be an indicator of the following factors, all of which could serve to contribute to operating innovation:
- A labor pool with relevant skill sets and experience in an increasingly complex and capital-intensive manufacturing environment
- Workforce training resources that can support the industry-specific needs of food manufacturers, which now include elevated needs for skills associated with high-speed automation, robotics, increasingly stringent and complex sanitation and cleanliness requirements, and energy-efficient production processes
- A regulatory environment (at both the state and local level) that has experience in approvals required both to construct and operate food processing facilities and the various utility requirements, emissions, and waste streams that are often associated with their operations
- A local presence of suppliers, contractors and technicians who can install, maintain, and maximize energy efficiency required for critical process utility systems and specialized production equipment, which is increasing in sophistication
- Incentive packages geared to assist manufacturing by offering programs that mitigate infrastructure upgrade costs, reduce taxes on real property and machinery and tools, and support training