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President, Garner Economics, LLC
If there is such a thing as a recession-proof industry, the Food and Beverage (F&B) Industry is it. During good times and bad times, people eat (and drink). Whether the economy is experiencing unprecedented growth or recession, folks continue to consume food and drink products. Some eat to live while others live to eat. Some eat in, while others eat out. Today, the F&B Industry continues to expand and to evolve in order to meet the ever-changing demands of consumers.
In the United States 30,135 companies are defined as F&B process manufacturers (up by more than 1,500 companies since 2010). These businesses employ more than 1.4 million employees. However, a 47,000 decrease in employees since 2010 demonstrates how innovative manufacturing processes and automation can mean fewer jobs. Where are the growth opportunities? Organics and naturals; ready-to-eat; health and wellness; ethnic; and comfort foods have seen the highest instances of development.
Economic development professionals that meet F&B company location requirements should actively recruit this viable industry sector. Water availability and capacity is the number one consideration in the location analysis process, followed by wastewater options and labor availability.
The following are the five key sectors that comprise the food processing industry:
· - Meat, Seafood and Poultry
· - Fruits and Vegetables
· - Beverages
· - Bakery
· - Dairy
California leads the way, followed by New York and Texas In the top 10 ranking of states with food processing facilities (see chart below).
|Click Chart to Enlarge|
As a firm that specializes in siting food-processing facilities, Garner Economics sees eight areas of growth opportunities and location trends in the F&B sector. They include:
11. Organics and Naturals. Once viewed as fads, organics and naturals are here to stay, despite the costs associated with growing and processing. United States Department of Agriculture guidelines limiting toxic or persistent fertilizers and pesticides have precluded large-scale corporate organics farming. Consequently, smaller farming operations produce organics, and the projects associated with them, too, are small in scope and size.
22. Specialized beverages. Infused drinks or nutraceuticals, such as vitamin water, green tea and fruit drinks, are showing considerable growth. Conversely, conventional soft drinks (sugar drinks) are indicating a history of flat or declining sales.
33. Ready-to-Eat. At the present time there is a high consumer demand for prepared foods. In the last decade, grocer freezer sections have expanded to accommodate a plethora of oven-ready meals. Companies that manufacture ready-to-eat meals typically employ sizeable kitchen staffs which process, prepare and cook the product prior to packaging. Having a culinary program in your community is a great tool in selling this opportunity to F&B companies that need those skill sets.
44. Private Label Brands. Economic developers should focus on grocers that have a private label brand processor. Cost conscience consumerism today has driven increasingly more grocers to manufacture their own label products, resulting in private brands occupying significant shelf space. (Publix, a grocery chain based in Lakeland, FL, has eleven product manufacturing facilities.)
55. Grow Local/Build Locally (a key location trend). Energy costs, particularly high fuel prices, are propelling manufacturing and distribution facilities, including food-processing companies, to carefully consider location decisions. Proximity to suppliers and consumers is central, evidenced by the trend in processing facilities being built near farms. Instead of from farm to table, it is from farm to plant. Companies with exorbitant annual expenditures in energy costs would naturally opt for locations close to major transportation arteries. This may change if oil prices continue to fall below $60 a barrel.
66. Health and Wellness (including animals). These products provide ingredients that target certain conditions, such as high cholesterol. They will remain popular with consumers as they age and become more concerned with daily health choices. More growth is expected in this subsector since the profit margins are greater for companies with these value-added items.
77. Age Awareness and Portion Control Products. Age awareness products address the nutritional needs of children, seniors and pets. Portion control products, such as 100-calorie snack pack foods, make it easy for consumers to monitor calories while eating on the go. Many processors are either retooling their product lines to accommodate consumer demand for this or building new facilities.
88. Ethnic Foods. Ethnic foods, especially Hispanic, account for the largest consumer growth in specialty foods. An expansive Hispanic market is responsible for the sizable growth in California facilities. Based on changes in U.S. demographics, this trend should continue.
The foremost issues facing F&B companies are food safety; energy and utility cost and availability; incentives; and supplier risk management.
Primary food safety concerns for food companies are contamination, product tampering and terrorist threats. A salmonella outbreak at an egg or peanut processor, for example, can create far-reaching problems for company, product and community. Garner Economics worked with a South Georgia community that experienced a salmonella outbreak in a peanut processing plant. Because the company was a dominant employer in town, the community was affected when the company ceased operations and ultimately went out of business.
F&B facilities carefully consider energy and utility costs, plus utility availability, when analyzing and executing location decisions. Higher energy costs have resulted in facilities strategically being placed close to interstate highways and major arteries. Water is a major utility component for food processing companies, utilized as an ingredient, a sanitizer agent, a cleaning tool, and as a mover of materials. Communities without excess water capacity will not be on company or consultant’s radar.
Incentives also can play a role in F&B facility location decisions. Because equipment costs often are more than buildings, companies value incentives. Finally, during this past recession, some food processor suppliers who were highly leveraged did not survive. As a result, some food processing companies had to scramble to find suppliers for needed product or commodities. There are more processors today that also will own or control the commodity and are better prepared to weather economic cycles.
In summary, Garner Economics sees continued growth annually in the following F&B Industry sectors: Organics and naturals; specialized beverages; ready-to-eat; private label brands; health and wellness; age awareness/portion control products and ethnic foods. States, regions and communities must strive to create innovative ways to differentiate themselves in an increasingly competitive F&B location field. Does your community have (at least) one food processor of moderate size? If the answer is, “yes,” the likelihood is there is that there is infrastructure to accommodate more.
About Jay Garner: Jay A. Garner, CEcD, CCE is the president and founder of Garner Economics, LLC, an economic development and site location consulting firm headquartered in Atlanta, GA, with representative offices in Berlin, Germany and Seoul, Korea. Jay often lectures and provides counsel on creating and implementing proactive global business development strategies and tactics. His firm is also a leader in providing assistance to corporate clients in their site selection process, such as Anchor Glass, Academy Sports, Hatfield Quality Meats, Stork Food Systems, Future Pipe Industries and others. Garner Economics and Primus builders have partnered to create one of the most extensive certification initiatives in the economic development and food/beverage industry. Their goal is to help communities prepare for the location of F&B projects, which also helps companies in that industry sector (many of whom are our current clients) understand that a community has met Primus / Garner's rigorous review requirements. To learn more about the Primus/Garner Food Site Certification designation, click here.