Recent Trends in Food Related and Light Manufacturing Location Decisions; Why “Flexibility” is Critical
Scott KuppermanOwner
1Context & Goals for Discussion;
- Recognize that changes in economic conditions and consumer tastes have had major impact on food processing and other light manufacturing based industries
- Share observations on how the concept of “Flexibility” has risen in importance
- Define what Flexibility means relative to a location solution- Provide you with a potential way to differentiate your regions value proposition
Wake Everyone Up !!
The Food Industry in 2012 and beyond …..
What’s Going On ??????
- Changing Tastes & Expectations !!- Baby Boomers (ages 48 – 66) want healthy choices and preventative products to feed expectations of longer lifespan. - Millennial’ s (ages 16 – 30) want health & wellness products, convenience, increasingly use technology to learn where and how it’s produced, care about environmental
responsibility and are highly brand “dis-loyal”.
The Food Industry in 2012 and beyond …..
What’s Going On ?????? (Pt. 2)
-Highly volatile costs of production ….- Commodity prices increased 8.5% in 2010 and 16% in 2011- Worldwide economic instability continues- Energy prices continue to remain high and un-predictable
The Food Industry in 2012 and beyond …..
What’s Going On ?????? (Pt. 3)
- Food Safety will continue to increase in importance;
- 2011 Food Safety Modernization Act (FSMA) shifts focus from contamination response to contamination prevention.
- FSMA requires plans to be implemented by mid 2012; increased FDA inspections already reported and increase in re-calls expected.
The Food Industry in 2012 and beyond …..
What’s Going On ?????? (Pt. 4)
- In spite of all this, growth is forecast for the industry…- Recent survey indicated that 90% of F&B manufacturers
expect sales to increase for 2012.- 75% of respondents expect to increase production or at
least maintain 2011 levels.- M&A activity in the US increased in 2011 for third
straight year.
How this is changing the FocusOf Food (& others in light manufacturing)
industry;- Continual product innovation a necessity !!- Increased focus on safety, tracking, ingredient sourcing- Sustainable production practices, focus on energy
management are critical- Branding which defines a consumer experience and use
of social media to connect directly with consumers are vital to success, especially in light of increased private label competition
- Specialty and middle market stores gaining in popularity; taking market share from supermarkets
How are food processors (and their site consultants) addressing these changes in their decision making ?
Focusing on comprehensive solutions which offer maximum flexibility relative to;
- Real Estate- Labor- Permitting & Entitlements- Taxation & Incentives- Local Resources & Professional Support- Branding & Cultural image
- How is “Flexibility” being defined in decision making ? - Which of these does your location have to offer ?
“Flexible” Property Solutions;- Include well defined expansion and/or exit strategies- Maintain a significant buffer from residential, retail, office uses- Don’t mix incompatible uses within, or adjacent to facility- Offer clear heights of 25’ +- Have robust & up-gradable utility infrastructure (electric, gas,
water, sewer, waste water capacity)- Include a minimum 150 parking spaces, plus expansion area
- Feature large column grids, minimal existing partitions
- Offer significant structural capacity of roof/wall systems, floors - Are not overly burdened by private use
restrictions (CCR’s)
Key Labor factors which promote Flexibility;- Right to Work states and/or lack of union presence - Vocational training programs in tune with recent trends in automation, food safety compliance, process engineering, equipment maintenance, energy efficiency- 4 year colleges in region with strong programs in food science,
packaging, product development, marketing (including use of social media !) or similar programs in regional industry of focus
- Nearby military facilities with recurring veteran population entering workforce
- Evidence of similar companies who can voice success in hiring and maintaining capable workforce
- Recent layoffs in similar industries, resulting in under-employment
Entitlements and Permitting;most overlooked aspect of Flexibility; - How reliable and predictable are your processes ?- Are permitting entities contracted out or are they municipal or
state employees ?- Are key permitting individuals aligned with ED goals ? Will they
“show well” in an introductory meeting ?- Do you know of key permits which require long lead times ? Are
you able to offer expertise to help mitigate ?- What would other local firms say about their experience with your
jurisdiction ?
Taxation and Incentives; Flexibility concerns…..- How flexible are incentives; what if we go beyond our original
commitments ?- Is there a means of mitigating property taxes on equipment and
machinery ?- If we cannot use tax credits offered against state corporate taxes
since we don’t generate a significant liability, what other assistance will you provide ?
- What help can you provide for current and future infrastructure needs and will you be able to deliver ?- How difficult will compliance process be for HR, accounting/finance staff ?
Local Resources and Professional Support;- Do they exist and how “plugged in” are you to the following;
- Design, engineering, construction firms- Attorneys who specialize in RE transactional work,
entitlements & zoning, incentive documentation, environmental law, tax and municipal finance
- Specialty consulting firms focusing on air emissions, energy efficiency/sustainable design, traffic consultants, waste-water specialists
- Temporary staffing agencies who focus on industrial sector - Search firms that focus on senior technical specialists and
facility leadership positions within key industriesKnowing there are quality choices in resources above is critical “Flexibility” differentiator
Branding and Culture; Promotes Innovation- Can you provide examples of other companies within industry
that have been able to grow strong brand identity ?- Will local population embrace product and be proud it’s made
in their community ????- Are there local resources, landmarks, institutions which can
be used by a company to help differentiate products thru marketing efforts ?
- Does local workforce have evident history of loyalty and buying into team oriented environment and embracing “it’s not just about me” concept ?
- Do you have property solutions for companies that want location to be a reflection of their brand ?
Closing Thoughts;* Food processors and many light manufacturing based companies are facing dramatically shifting conditions, it’s never been more difficult to build and sustain success than it is today* In order to be successful, they must be able to react, innovate and execute on a faster pace than ever before* Location solutions must recognize and contribute to operating and financial flexibility* Consider and be able to effectively convey what your region has to offer and recognize that for many companies, these factors can be a major differentiator
Questions……………
Contact Information;Scott Kupperman - OwnerKupperman Location Solutions
W (224)-544-5540C (224)-224-2559E [email protected]
Credits: Grant Thornton Study, FoodProcessing.com