© Garner
Economics, LLC. All rights reserved.
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).
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| 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.
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