Area Development
{{RELATEDLINKS}}“Have you been busy recently?” is a question many of my friends and colleagues in the site selection/economic development profession frequently ask me. I usually explain to them that yes, I have been, due in large part to all the activity in the food industry, my particular industry of focus. “Makes sense” is a frequent response; “I guess everyone has to eat!!”

While we all do need to eat, the growth and activity in the food industry has been driven by major shifts in consumer demographics, health-related concerns, and buying patterns. This activity has kept many of those assisting food companies with location decisions engaged, and economic developers interested in how they can effectively voice their regions’ value proposition to attract companies involved in food processing and the ancillary businesses that make up the industry.

The presence of existing food clusters is also a critical factor being sought. What’s Happening in the Food Industry?
In order to put together a compelling package that is attractive to a food processing company, a fairly deep understanding of industry trends is paramount. Here are a few of the key drivers that have affected the industry most dramatically over the past few years and should continue to be of significant influence:

1. The rise of millennial spending — As the baby-boomer segment of the population falls to less than 20 percent by the year 2020, their spending on at-home food continues to drop as well, with some estimates as high as a $15 billion annual reduction. Filling that void are millennials, whose demographic segment will increase from 5 percent to almost 20 percent of the overall population between 2010 and 2020. More importantly, millennial spending on at-home food products increases at rates as high as $50 billion annually. The millennial segment has a distinctly different set of spending patterns, product interests, and shopping habits that are driving a great deal of change in the food processing industry. Millennials are:

2. Food loss and waste become “top-of-mind” to food manufacturers — A third of all food produced worldwide is lost or wasted during harvest/processing/distribution or at retail and food service. That’s enough to feed an estimated 870 million hungry people!

The desire to prevent loss by manufacturers is driving changes in production processes and packaging to meet changing consumption habits. This includes radical changes and technology advances in packaging, shelf stabilization methods, and container-sizing options, all of which can reduce waste and spoilage, while still offering the traditional product benefits.

3. Consumers want higher quality “food experiences.” 4. “Simple pleasures” at home… How Is This Changing the Focus of the Food Industry?
The examples of key trends listed above (along with countless others) drive a tremendous need for constant innovation among food companies. In order to survive and grow, these companies must be able to put new ideas into production quickly. Facilities that churn out a narrow mix of product “sku’s” are no longer viable for most food companies. Being able to quickly change or modify processing lines, ingredients used, waste streams, packaging materials and sizes, and brand messages and marketing tactics will continue to be viewed by food companies as critical to their success.

Location solutions that foster and support this need for innovation in as many ways as possible are becoming sought after, and economic developers who have identified various forms of food processing companies as target industries need to notice and articulate the way their own regions measure up to this overall set of requirements.

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.

A third of all food produced worldwide is lost or wasted during harvest/processing/distribution or at retail and food service. That’s enough to feed an estimated 870 million hungry people! Surrounding uses are also critical points to evaluate for food facilities. Existing buildings and candidate development sites will all be carefully scrutinized to determine what activities are currently ongoing in both adjacent space under roof and on properties in close proximity. Future uses that are governed by zoning and/or private restrictions and covenants will also be analyzed to both confirm whether a broad range of desired processing is allowed by the manufacturer and to assess whether there could be future threats in the form of incompatible uses that would be harmful to ingredients or to end-product being produced.

Local Support
The presence of existing food clusters — reflected in the form of legacy and recently located food-processing activities that have thrived — is also a critical factor being sought. An existing food industry presence will typically be an indicator of:

In addition, economic developers should be aware of local and regionally grown ingredients and other food product components (such as packaging supplies) that support a supply-chain model that draws from a more concentrated geography.

Tying It All Together
Continual product innovation, while delivering more products for less money, will remain a necessity for food processing companies over the foreseeable future. Economic developers who have identified food processing as a target industry stand a better chance for success by understanding the trends and resulting influences that are driving competitive success in the industry and shaping a value proposition centered on supporting innovation.