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Understanding the ChallengesFacing the Food ManufacturingIndustryAdesoji O. Adelaja a b , Rodolfo M. Nayga Jr. c , BrianJ. Schilling b & Karen Rose Tank ba Ecopolicy Centerb Department of Agricultural, Food and ResourceEconomics , Rutgers University , New Brunswick, NJ,USAc Department of Agricultural Economics andDirector, Center for Consumer and Food MarketingIssues , Texas A&M University , College Station, TX,77843, USAPublished online: 11 Oct 2008.

To cite this article: Adesoji O. Adelaja , Rodolfo M. Nayga Jr. , Brian J. Schilling &Karen Rose Tank (2000) Understanding the Challenges Facing the Food ManufacturingIndustry, Journal of Food Products Marketing, 6:2, 35-55, DOI: 10.1300/J038v06n02_04

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Understanding the ChallengesFacing the Food Manufacturing Industry

Adesoji O. AdelajaRodolfo M. Nayga, Jr.Brian J. SchillingKaren Rose Tank

ABSTRACT. The Northeast’s share of US food processing activity hasdecreased significantly over the last three decades as many food proc-essing firms have exited the region and located elsewhere, particularlyin the South and the West. This decline has been most severe in NewJersey, the state that is frequently cited as having the most stringentbusiness and regulatory climate in the nation. To investigate why foodprocessors have found the New Jersey environment to be so unfriendly,this study organized focus groups of food processing industry execu-tives, trade organizations and researchers. The findings suggest that thearea of environmental and other regulation is the most problematic forfood processors. Other areas of concern include, in order of importance,taxation and fiscal problems, economic barriers to development andexpansion, high cost of doing business, education, training and laborconcerns, communication and public relations, and transportation.Policy makers in New Jersey, and in other northeastern states facingsimilar food processing declines, interested in the retention and eco-nomic development of food processing firms need to be cognizant ofthe impediments currently constraining the industry. Industry-basedpublic policy recommendations for enhancing the business climate for

Adesoji O. Adelaja is Associate Director of the Ecopolicy Center and Professorand Chair of the Department of Agricultural, Food and Resource Economics, Rut-gers University, New Brunswick, NJ.

Brian J. Schilling and Karen Rose Tank are, respectively, Research Economistand Food Policy Program Manager at the Department of Agricultural, Food andResource Economics, Rutgers University, New Brunswick, NJ.

Rodolfo M. Nayga, Jr. is Associate Professor, Department of Agricultural Eco-nomics and Director, Center for Consumer and Food Marketing Issues, Texas A&MUniversity, College Station, TX 77843.

Journal of Food Products Marketing, Vol. 6(2) 2000E 2000 by The Haworth Press, Inc. All rights reserved. 35

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JOURNAL OF FOOD PRODUCTS MARKETING36

food processors are presented. [Article copies available for a fee from TheHaworth Document Delivery Service: 1-800-342-9678. E-mail address: <getinfo@haworthpressinc.com> Website: <http://www.haworthpressinc.com>]

KEYWORDS. Food processing, manufacturing, public policy

INTRODUCTION

Food processing refers to the economic sector that combines agri-cultural, seafood, natural, synthetic and/or chemical products withvarious forms of management, capital and labor in producing andprocessing value added food, confectionery and beverage products,food ingredients, food flavors and extract and other edibles that meetconsumer food and refreshment needs and preferences (Adelaja1988). Food processing activities, which are covered under US Stan-dard Industrial Classification Code 20 (SIC 20), occupy a central placein the US food production and distribution complex, as well as in thenational manufacturing industry. With US food processing industrysales at about $410 billion and value added at $160 billion, the roughly21,000 firms in the industry employed about 1.5 million workers andpaid out $36.8 billion in wages in 1992 (U.S. Department of Com-merce, Census of Manufactures). Food processing therefore accountsfor about 8.9 percent of total employment, 11.0 percent of total valueadded and 13.5 percent of total gross sales in the US manufacturingsector.The importance of food processing activities to the economy is a

national phenomenon. Food is obviously a necessity and, increasingly,much of the food consumed today requires some form of processing(Connors et al. 1985; Marion 1986; Connors 1988). There is a distincttrend in food demand toward foods satisfying consumer preferencesfor convenience, health, freshness, quality, and taste (Senauer, Aspand Kinsey 1991; Adelaja et al. 1997). This necessitates continuousinnovations in food processing (e.g., in terms of food packaging,increasing shelf life, etc.) and responsiveness to changing consumerinterests. According to the 1995 Annual Survey of Manufactures, foodprocessing ranks second among US manufacturing sectors in terms ofsales (slightly behind transportation equipment manufacturing), sec-ond (after chemicals manufacturing) in terms of value added, and

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fourth (after industrial machinery manufacturing, printing and pub-lishing, and electronics and electrical equipment manufacturing) interms of employment. Food processing is also one of the anchors ofthe food complex (agriculture, food wholesale and food retail) whichin aggregate represents a substantial portion of the US economy.Despite its national prominence, however, considerable variation

exists in the status and trends in the industry at the regional level. Forinstance, while the South has increased its share of the US industry,the Northeast’s share of the industry has been declining. In fact moststates in the Northeast have lost food processors in recent decades andhave lost them at a rate which has exceeded the rate of loss for allmanufacturing. The loss in the Northeast is often attributed to the factthat the region is the most regulated and has the highest cost of doingbusiness in the Nation. These conditions are attributable to the highlycongested, densely populated, highly industrialized, and highly urban-ized nature of the region. New Jersey’s food processing industry ex-emplifies not only the decline of the northeastern food processingsector, but is indeed at the forefront in terms of the pressures facingfood processors.In the near future, many northeastern states will experience what

New Jersey food processors are now experiencing. The objectives ofthis study are to identify the factors perceived by food processingcompany executives and representatives as the most pressing prob-lems they face which contribute to the exodus of food processingfirms from New Jersey and to offer policy recommendations for re-versing the downward trend in the industry. Specifically, focus isplaced on those factors which may be addressed by state-level policy.At a time when economic development, business retention and recruit-ment, and job creation are high priorities for state-level policy makers,it is envisioned that such information would provide a useful frame-work from which to re-evaluate the effectiveness of current state pro-grams designed to support the food processing industry as well as todevelop strategies for improving the business climate facing the indus-try and promoting industry expansion.

FOOD PROCESSING INDUSTRY DECLINE

Historically, the Northeast maintained a buoyant food processingindustry. A number of favorable conditions existed that fortified the

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industry for many years, including the region’s high population densi-ty, high per capita income, and proximity to major food brokers and tomajor ports (Connor 1988). As demonstrated in Table 1, however, theregion’s share of the US industry declined continuously over the lastthree to four decades as many processing firms and activities migratedto other regions. Between 1967 and 1992, for example, the Northeast’sshare of national food processing shipments dropped from 18.51 per-cent to 13.34 percent while the share of value added dropped from22.11 percent to 15.11 percent. During this period, the Northeast’sshare of food processing employment also fell from 21.56 percent to14.13 percent while the share of payroll fell from 22.23 percent to15.96 percent. Obviously, major regional shifts have been occurringwithin the food processing industry.Table 2 further illustrates the regional shifts that occurred within the

US food processing sector from 1982 to 1992. While food processingemployment in the Midwest remained fairly level between 1982 and1992, employment in the South and West increased by 6.5 and 5.2percent, respectively. In contrast, employment in the Northeast’s foodprocessing industry dropped by 12.5 percent during this period.1 Areview of sales figures yields similar relationships. Growth in the(nominal) value of processed food shipments in the Northeast laggedsubstantially behind the other regions.

TABLE 1. Contributions of the Northeast Region to the US Food ProcessingIndustry (1967-1992).

Northeast’s Contribution(in % terms) to: 1967 1972 1977 1982 1987 1992

United States Population 24.41 23.88 22.78 21.27 20.66 20.04

US Food Manufacturing 23.61 22.39 21.21 20.20 20.17 19.53Establishments

US Food ManufacturingEmployment 21.56 19.77 17.50 16.30 15.86 14.13

US Food Manufacturing Value of 18.51 16.80 15.42 14.58 14.82 13.34Shipments

US Food Manufacturing Payroll 22.23 20.65 18.10 16.77 17.15 15.96

US Food Manufacturing ValueAdded 22.11 20.24 18.16 17.37 16.95 15.11

Source: U.S. Department of Commerce, Census of Manufacturers (various years).

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TABLE 2. Regional Distribution of US Food Manufacturing Employment andSales (1982-1992).

Employment (thousands)

Region 1982 1992 Change Pct. ChangeMidwest 460.3 458.9 --1.4 --0.3Northeast 242.5 212.3 --30.2 --12.5South 482.9 514.1 +31.2 +6.5West 301.8 317.5 +15.7 +5.2

Value of Shipments ($ millions)

Region 1982 1992 Change Pct. ChangeMidwest $108,110 $154,379 +$46,269 +42.8Northeast $40,888 $54,260 +$13,372 +32.7South $80,373 $120,973 +$40,599 +50.5West $51,158 $77,278 +$26,120 +51.1

Source: U.S. Department of Commerce, 1982 and 1992 Census of Manufacturers.

The region’s declining share of US population may explain some ofthis decline. However, other factors must have played a role since thepopulation declines are outpaced by the decline in economic activity.Among the other factors that have been identified as contributors tothe region’s declining competitiveness in food processing includechanges in the regional distribution of income, changes in the econom-ics of transportation, rising labor costs, declining work ethic, changesin labor productivity, rising costs of doing business, declining avail-ability of water and waste disposal infrastructure, and the increasingstringency of environmental regulations (Lopez and Henderson 1988;Adelaja 1988).New Jersey’s condition is often perceived to be harsher than other

states in the region. The state of New Jersey epitomizes the recentflight of food processors from the Northeast. Despite the prospects forgrowth in food processing, over the last several decades New Jerseyhas fallen from a position of national competitiveness in food process-ing. This decline has been not only in absolute terms, but also relativeto the Northeast and to the Nation. As shown in Table 3, New Jersey’sshares of US and Northeast food processing value added, value ofshipments, and employment all fell between 1967 and 1992. For ex-ample, in 1967, New Jersey’s food manufacturing activities were dis-proportionately high relative to its population; the state accounted for3.54 percent of the US population in 1967 but accounted for 3.68percent of total employment and 3.80 percent of sales in the US foodprocessing industry. By 1992, however, the level of food processing

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TABLE 3. New Jersey’s Contribution to the Regional and National FoodManufacturing Industry, 1967-1991.

New Jersey’s Contribution(in % terms) to: 1967 1972 1977 1982 1987 1992

United States Population 3.54 3.53 3.39 3.20 3.15 3.07

US Food Manufacturing 2.92 3.07 2.82 2.81 2.86 2.72Establishments

US Food Manufacturing Employment 3.68 3.42 2.84 2.63 2.49 2.23

US Food Manufacturing Value of 3.80 3.35 3.15 2.87 2.74 2.37Shipments

US Food Manufacturing Payroll 4.19 3.92 3.21 3.04 3.03 2.78

US Food Manufacturing Value Added 4.72 4.25 3.56 3.69 3.45 2.87

Northeast Population 14.50 14.78 14.87 15.06 15.26 15.30

NE Food Manufacturing 12.35 13.69 13.32 13.89 14.19 13.94Establishments

NE Food Manufacturing Employment 17.08 17.31 16.24 16.12 15.71 15.78

NE Food Manufacturing Value of 20.54 19.92 20.41 19.67 18.47 17.78Shipments

NE Food Manufacturing Payroll 18.84 18.96 17.76 18.11 17.67 17.44

NE Food Manufacturing Value Added 21.36 20.99 19.60 21.27 20.34 19.01

Source: U.S. Department of Commerce, Census of Manufacturers (various years).

activity in the state fell to a level much lower than would be suggestedby the state’s contribution to the national population.It is noteworthy that although manufacturing in general is declining

in the region, the decline in food processing activity is occurring at amore rapid rate. As shown in Table 4, over the long term, the rate ofdecline of food manufacturing activities has exceeded that ofmanufacturing in general. For example, the number of food manufac-turing establishments declined by 40.2 percent between 1967 and1992 while the number of total manufacturing establishments droppedby only 9.9 percent. Food processing employment also dropped rela-tively more than total manufacturing employment; food processingemployment dropped by 44.6 percent while total manufacturing em-ployment fell by 34.9 percent. Similarly, the nominal growth in foodprocessing payroll, value of shipments, and value added all lagged

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TABLE 4. Decline in New Jersey Manufacturing: Food Processing versus AllManufacturing.

Number of Establishments

1967 1992 Pct. ChangeFood Processing 948 589 --40.19All Manufacturing 14,740 14,442 --9.93

Employment

1967 1992 Pct. ChangeFood Processing 60,500 36,100 --44.63All Manufacturing 881,300 690,800 --34.88

Payroll ($ millions)

1967 1992 Pct. ChangeFood Processing 421.7 917.4 142.76All Manufacturing 6,325.4 18,549.9 225.88

Value of Shipments ($ millions)

1967 1992 Pct. ChangeFood Processing 3,192.8 9,030.2 202.10All Manufacturing 25,761.2 82,451.0 236.84

Value Added ($ millions)

1967 1992 Pct. ChangeFood Processing 1,256.5 4,192.7 259.38All Manufacturing 12,738.2 42,526.6 261.47

Source: U.S. Department of Commerce, Census of Manufacturers (various years).

behind the growth experienced in the aggregate manufacturing sector.These figures might suggest that unique features exist in food process-ing that have rendered the industry vulnerable.

APPROACH TO STUDY

To qualitatively examine the impediments currently constrainingthe food processing industry, professionally moderated focus groupscomprising executives from food processing companies, representa-tives of industry trade organizations, and other industry affiliates wereconvened by the authors in February of 1995. One focus group com-prised South Jersey processors which were largely smaller companies.North Jersey processors were comprised largely of predominantlylarge companies such as Nabisco, PCP Best Foods and Goya. A thirdfocus group comprised flavors and extracts manufacturers since this

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segment of the industry seems to be buoyant relative to other segmentsof the food processing industry. Approximately 55 companies wereinvolved in the three focus groups, representing a wide range of com-pany sizes and product lines. Focus group participants comprisedseveral large, national businesses as well as small New Jersey-basedcompanies. A study advisory group was assembled to guide the selec-tion of companies in order to adequately represent the New Jerseyfood processing industry.Participants were asked to identify perceived obstacles to the per-

formance and expansion of the food processing industry in NewJersey and to also synthesize a series of state-level policy recommen-dations designed to ameliorate such impediments. The problems iden-tified by these focus groups of industry representatives as well aspotential policy options are presented in the remainder of this paper.

INDUSTRY VIEWS ON THE CHALLENGES FACING FOODPROCESSING FIRMS IN NEW JERSEY

To identify the factors causing the erosion of New Jersey’s foodprocessing industry vis-à-vis other states, study participants represent-ing various segments of the industry were asked to rank, in order ofseverity, the challenges facing their industry. The major areas of con-cern expressed by industry representatives, ranked in order of per-ceived importance, were: (1) regulation, (2) taxation and fiscal issues,(3) economic and market barriers to development, (4) costs of doingbusiness, (5) education, training and labor quality, (6) public relationsand image and (7) transportation.

Regulatory Climate

New Jersey’s regulatory environment is often perceived by busi-nesses as being the most stringent in the nation. It was cited by indus-try representatives as the most significant deterrence to industrygrowth. Enforcement of regulations by the Department of Environ-mental Protection (DEP) was said to be punitive, imposing excessivefines and permit fees on industry. Whereas one might anticipate aregulatory approach designed to encourage compliance and correctviolations, the approach in New Jersey was perceived as being de-

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signed for the generation of revenue from fees and fines. Specificareas of concern expressed by industry representatives include regula-tions governing air pollution and water pollution, and solid wastedisposal. In addition, the regulatory power retained by each of NewJersey’s 567 municipalities and the ‘‘home rule’’ nature of New Jerseywas said to create additional levels of regulation and bureaucracy.

Air Pollution

The industry recognized the need for and supported regulationsdesigned to control air pollution. Most of New Jersey’s air pollutionstandards are believed to be more stringent than national standards.Higher standards effectively raise compliance costs in the state andreduce industry competitiveness relative to industries located in otherstates. New Jersey’s air pollution standards and their enforcementwere perceived by industry representatives to be more punitive thancorrective. Rather than encouraging compliance, the DEP is viewed asa bureaucracy whose primary role appears to be fine and fee collec-tion. Fees and fines in New Jersey were cited by focus group partici-pants as being exorbitant and at least 100 percent higher than those inmost other states. Furthermore, odor regulations, which are particular-ly pertinent to some food processors, are said to be poorly defined inthe state. Fines are said to be levied for ordinary complaints regardlessof intent or degree of violation. Focus group participants reported thatDEP personnel have limited knowledge of the industry, as evidencedby the regulation of food items and food waste as toxic or hazardoussubstances, despite the fact that most foods do not contain dangeroussubstances.Industry representatives felt that New Jersey has adopted an ap-

proach of resolving air pollution by over-regulating industry. Califor-nia, on the other hand, requires all state residents to assume the re-sponsibility of combating air pollution (e.g., imposing lower leadgasoline on consumers, as well as regulating industry). In southernNew Jersey, many food processors are adversely affected by the asso-ciation of Cumberland and Salem counties with Philadelphia for thepurpose of establishing clean air standards. Finally, permit acquisitionin New Jersey was reported to be extremely expensive and time con-suming and was viewed as an inflexible and hostile process. The DEP

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was criticized by industry representatives for poor internal commu-nication and for its lack of communication with industry.

Water Pollution

Industry representatives indicated that there is excessive enforce-ment of clean water regulations. They reported that fines are automati-cally levied for water pollution violations without consideration ofintent or magnitude of the infraction. Study participants indicate thatfines may reach $20,000 per day for exceeding permitted effluentstandards and sometimes 30 day fines are levied for a one day viola-tion. Similarly, companies experiencing occasional violations of waterpollution standards over a period of time are said to be fined althoughaverage pollution over the period is within acceptable parameters.Industry representatives reported that DEP even levies fines for gram-matical or syntax mistakes on monthly DMR forms. Another criticisminvolved the length of time required to receive test results back and thefact that during this time fines continue to accrue.Industry representatives argue that permit acquisition is an unneces-

sarily long, costly and energy consuming process (one processor indi-cated a waiting period of over four years for a permit while anotherparticipant represented a company whose handling of wastewater ac-counts for 20 percent of the company’s total operating costs). Industryrepresentatives maintained that compounding the issue is the fact thatthe DEP is constantly revising water pollution regulations and inade-quately communicates these changes to the industry. They also ex-pressed concern that the state’s existing wastewater infrastructure isinsufficient and that the state under-invests in technology to improvewater recycling.

Sold Waste Disposal

Industry representatives cited the inadequacy of landfills and theinsufficient number of incinerators as problems facing the food proc-essing industry. It was similarly felt that there is inadequate capacity toprocess waste and compost on farmland. Focus group participantsagain reported that, despite some improvement, the permitting processis too slow. Companies attempting to utilize innovative approaches towaste management are not being encouraged but are, in fact, beingdiscouraged due to the imposition of restrictions.

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Home Rule

Industry representatives argued there are too many levels of bureau-cracy in the state during permitting processes. Each tier has separaterequirements and demands additional paperwork. One representativereported that 54 permits were required to initiate a building construc-tion. The multiplicity of state and local requirements lacks harmoniza-tion and lends itself to the promulgation of micro-management ofenvironmental laws.

Taxation and Fiscal Issues

Industry representatives cited high property taxes and utility taxesas impediments to the industry. It was argued that industrial and com-mercial properties pay for residential services. Specifically, it was feltthat there are too many school districts in the state (617 districts for567 municipalities) and that services and administrative efforts areduplicated. It was noted by one participant that New Jersey has themost school districts per capita in the nation. Industry representativesalso argued that utility taxes are too high in the state.

Economic and Market Barriers to Development

Representatives of the food processing industry expressed dissatis-faction with the Economic Development Authority (EDA), citing theirloan process as a hindrance to growth. It was argued that while otherstates actively encourage and recruit businesses, New Jersey appearsnot to recognize the importance of businesses and has even adopted anattitude perceived as antagonistic. Many food processors in NewJersey indicate that the primary reason for remaining in the state is thelevel of capital investment in place. Without such ties to the state,many food processors indicate they would leave New Jersey and es-tablish businesses in other states.

Economic Development Authority

Obtaining EDA loans was seen to be conditioned on utilizing unionlabor. Considering that union wages are higher than non-union wages,forcing businesses to hire union workers imposes higher costs and

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subsequently provides a disincentive to apply for EDA loans. Further-more, focus group participants indicate that EDA loans are generallyunavailable to small businesses. In short, dissatisfaction was ex-pressed with the EDA and the agency’s loan application process wasseen as more of a hassle than a benefit.

Economic Development Initiatives

Industry representatives felt there is little incentive for research anddevelopment investment in the state and that New Jersey offers limitedloan guarantees for smaller businesses. Generally, the expense ofconstructing new plants (primarily due to permit fees) in New Jersey isextremely high vis-à-vis other states. As a result, it is both easier andcheaper to establish businesses in other states. Similarly, laws in thestate requiring the payment of prevailing wages are said to preventsubcontracting and effectively raise costs.

State Attitude Toward Business

It was indicated that whereas other states have personnel in place toassist industry, New Jersey offers no such assistance to its businesses.While no technical assistance is available in New Jersey to aid indus-try compliance with the state’s laws and regulations, North Carolina,in contrast, was said to provide technical assistance to potential busi-nesses and fosters rapid establishment of new firms. It was also indi-cated that New Jersey does not treat businesses like customers.

Costs of Doing Business

It was indicated that the cost of doing business in New Jersey isextremely high. Insurance, for instance, was cited as being both ex-pensive and difficult to obtain. New Jersey was said to have alienatedinsurance companies, making the cost of insurance high. Vehicle in-surance on corporate or fleet cars, for example, was said to be nearlytwice as expensive as insurance on personal cars. With the highestminimum wage in the nation, New Jersey labor was also said to beexpensive relative to other states. The cost of other factors of produc-tion were similarly viewed as being higher in New Jersey.

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Education, Training and Labor Quality

Industry representatives expressed concern about the unavailabilityof quality labor in New Jersey to fill lower skill and lower wage jobs.Specifically mentioned was the poor work ethic and poor educationalbackground of many entry level employees. It was felt that highschools are not doing an adequate job of training non-college boundstudents and are not instilling a good work ethic in the state’s youngpeople. Tardiness, irresponsibility, poor attitudes and poor disciplineare a few of the criticisms and concerns expressed by industry repre-sentatives in regard to the industry’s entry level workforce. Trainingnew employees is a time consuming and expensive task which isexacerbated by the high labor turnover rate (estimated by focus groupparticipants to be roughly 20 percent annually) in the industry. Onerepresentative of the processing industry estimated that out of 100people interviewed for a job: 50 percent refuse to undergo a drug test;25 percent of those taking a drug test fail; and the majority of theremainder that pass the drug test fail the written test. At the end of theprocess only about five are hired, three of which do not report to workon the first day.

Public Relations and Image

Focus group participants did not feel that the food processing indus-try suffered from a bad image in the state, with the exception of flavorsand extracts companies which are often erroneously associated withchemical manufacturing. However, it was said that there is limitedpublic awareness of the food industry, with most people failing torealize that food processing rivals the pharmaceutical and telecommu-nication industries in size. Industry representatives felt the state is notdoing an adequate job of promoting the food industry in general andfood processing in particular.

Transportation

Industry representatives indicated there is too much traffic conges-tion in New Jersey and that road infrastructure is out-dated. While thenumber of cars in New Jersey has doubled between 1980 and 1995,the number of miles of road has remained unchanged. The design of

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industrial park access is viewed as poor and more transport is requiredbetween the state’s cities. Specifically, east-west transit is lacking inNew Jersey. Coordination is similarly lacking as an excessive numberof trucks return empty following deliveries.

VALIDATION OF INDUSTRY CONCERNS

In an attempt to validate or refute some of the concerns expressedby representatives of the food processing industry, the authors as-sembled cross section data on key environmental regulation, cost ofdoing business, labor quality, transportation, taxation, and fiscal andother economic development related variables across all 50 states. Toassess the conduciveness of the state’s business climate to food proc-essing activity, various measures of environmental quality, infrastruc-ture capacity, business costs, and other variables pertinent to foodprocessors are presented for New Jersey relative to other U.S. states inTable 5. To provide a broader perspective on the regional businessclimate, the rank of selected northeastern states, as well as the averagerank of all states in the Northeast, are also presented for each variable.For instance, the average annual salary in New Jersey is 4th highest inthe nation. Overall, employees in the Northeast are typically highlypaid in relation to workers in other parts of the US (the mean rank foraverage annual salary of all Northeast states is 15.1). More strikingly,four of the five states with the highest average annual salaries arelocated in the Northeast.Data in Table 5 suggest that New Jersey and other states in the

Northeast are deficient, vis-à-vis states outside of the region, in termsof infrastructure capacity. The current interstate highway systems inNew Jersey and several other states in the region are considered to bein relatively poor shape relative to states in other regions. In fact, fourof the northeastern states are in the top ten states in terms of thepercentage of interstate highway mileage assessed as being in poorcondition. Similarly, on a regional basis, existing bridges tend to be inpoor condition (six northeastern states are among the 10 states with themost deficient bridge system.) Finally, in terms of the need for addi-tional sewage treatment plants (normalized on a per capita basis), datasuggest that New Jersey, and the Northeast in general, are consider-ably worse off than most other states in the nation. Of the ten states

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TABLE5.Rank of theNortheast andNewJersey forSelectedBusinessClimateVariables.

Rank

Average forNew Northeast

Business Climate Variable Measure Jersey States Selected Northeast States

Highway Deficiencya 1 = low; 50 = high 25 30.7 NH-50; Rl-49; PA-44; ME-41

Bridge Deficiencyb 1 = low; 50 = high 44 41.3 NY-50; MA-48; Rl-47; VT-45;CT-40

Sewage Needs 1 = low; 50 high 45 41.0 MA-50; NY-49; NH-48; CT-44; VT43; RI-42

Avg. Annual Payd 1 = high; 50 = low 4 15.1 CT-2; NY-3; MA-5

Energy Costse 1 = low; 50 = high 45 44.6 RI-50; NY-49; CT-47; MA-46; NH-43; ME42; VT-40

Superfund Sitesf 1 = few; 50 =many 47 37.1 NH-49; VT-48; Rl-45

Hazardous Waste 1 = low; 50 high 48 21.4 CT-42Generationg

Air Qualityh 1 = high quality; 48 35.4 NY-49; CT-47; RI-43; ME-4250 = poor quality

Environmental 1 = high; 50 low 12 22.4 VT-3Expenditures per Capitai

Population Densityj 1 = low, 50 high 50 39.0 RI-49; MA-48; CT- 47; NY-45; PA-42

Motor Vehicle 1 = low, 50 high 49 38.1 CT-47; MA-45; Rl-44; NY-Registrations/Mile of 41Highwayk

a Represents the percentage of interstate highway mileage rated in poor condition (1989).b Represents the percentage of bridges on and off the federal aid system rated as deficient (1990).c Represents the estimated need for sewage treatment plants measures in dollars per capita (1989).d Represent the average annual pay for all workers covered by unemployment insurance (1991).e Represents the average cost (in cents) of electricity per kilowatt hour (1991).f’ Represents the number of superfund sites per one million population (1992).g Represent the quantity of hazardous waste (in metric tons) generated per capita (1989).hRepresentsameasureof thedegree towhich state residents live in areas that exceednational ambient airquality standards for ozone and/or carbon monoxide (1990-1991).i Represents state expenditures on environmental programs (1991).j Represents the number of residents per acre (1992).k Represents the number of motor vehicle registrations per highway mile (1992).

Source: Adelaja, 1997 (Unpublished Data).

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JOURNAL OF FOOD PRODUCTS MARKETING50

with the greatest need for increased sewage treatment infrastructure,seven are located in the Northeast.Assuming a correlation exists between the degree of environmental

problems and the stringency of the environmental regulatory climate,Table 5 offers some insight into the regulatory constraints faced byfood processors in New Jersey and the region. The degrees of environ-mental degradation and waste generation are used as proxies to mea-sure the extent to which the environment is already compromised. Theaverage rank of the northeastern states in terms of the percentage ofresidents living in area with air quality below national ambient stan-dards for ozone and carbon monoxide is 35.4. New Jersey is amongthe worst states from the standpoint of residents living in non-com-pliance areas. Similarly, the Northeast has a relatively large number ofSuperfund sites (when normalized on a per capita basis). New Jersey,New Hampshire, Rhode Island, and Vermont have among the highestnumber of Superfund sites per capita in the nation. Hazardous wastegeneration is also high in some northeastern states vis-à-vis otherstates in the nation.Given the intensity of environmental problems in New Jersey and

the rest of the region, it may be expected that the environmentalregulatory climate of these states would be relatively stringent. Anoth-er measure indicating the severity of environmental regulation in NewJersey, and more generally the region, is per capita environmentalexpenditures. New Jersey has the 12th highest per capita expenditureon environmental programs in the nation. Overall, states in the North-east generally expend more, on a per capita basis, on environmentalprograms than the typical US state.The Northeast is often cited as being densely populated and plagued

by traffic congestion. New Jersey is, in fact, the most densely popu-lated state in the nation. Overall, the region has six of the 10 mostdensely populated states in the nation. Motor vehicle congestion alsoappears to be particularly high in the region. When measured in termsof motor vehicle registrations per mile of highway, New Jersey is themost congested state in the continental US. The average ranking of allNortheast states is 38.1, indicating that the region has an exceptionallyhigh degree of transportation congestion relative to other parts of thecountry.A statistical review of selected measures of the business and regula-

tory climate of New Jersey and other northeastern states suggests that

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Adelaja et al. 51

food processors in the region do indeed face more challenging condi-tions than their counterparts in other parts of the country and offerssome substantiation of the concerns articulated by industry representa-tives participating in this study. Many states in the Northeast appear tohave deficiencies in the types of infrastructure needed by food proces-sors for production and distribution. The highly developed nature ofthe region, coupled with a long history of industrialization and densestate populations, has encouraged the adoption of stringent regulatorystandards to protect environmental integrity but has simultaneouslyimpacted the ability of firms to conduct business in the region.

PUBLIC POLICY RECOMMENDATIONS OF INDUSTRY

Many of the concerns expressed by food processing representativessuggest that a new policy paradigm might be in order in the state andthat a private sector/government initiative might be required to stemthe tide of economic decline faced by the industry. The state of NewJersey has recently implemented various initiatives and programs toimprove the business climate in the state and the competitiveness offirms in New Jersey. While most of these initiatives are not industryspecific, many would certainly apply to the food processing sector.The STARR report details some of these policy reform initiatives.While some of the recommendations provided by representatives ofthe food processing industry are already being implemented throughthese recent initiatives, this report presents the full scope of recom-mendations as suggested by industry sources.The following is a list of public policy recommendations generated

by representatives of New Jersey’s food processing industry to createa more hospitable business climate in the state.

S A state review and evaluation of all regulations relevant to foodprocessing;

S A relaxing of state standards exceeding federal standards to thefederal level;

S The establishment of a Food Industry Ombudsman within theDEP to assist with regulatory mitigation and compliance;

S The development of a Permit Information Assistance programwithin the DEP to assist firms in the food industry during permitacquisition;

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S State protection of its industrial base from onerous pollutionstandards;

S Clearer definition of state air and water pollution problems, solu-tions and standards;

S Adoption of a geographical or regional organization for the DEP;S State allowance of Jumbo Site Permits or bubble permits ratherthan individual permits;

S Streamlining the permitting process;S Management of reports and permits related to water quality bylocal sewerage authorities;

S State development of long range plans for handling waste waterand building incinerators;

S Increased public-private cooperation in the development ofmethods for disposal of non-toxic wastes from food processing;

S Development of more realistic emission thresholds;S Reclassification of food waste so that it is not classified as toxicwaste;

S State assistance for seafood processors to facilitate the adoptionof state-of-the-art technologies for treating processing effluent;

S Enrollment of DEP personnel in Continuing Education classes;S Increased harmonization of state, county and local regulations;S Consolidation and regionalization of school districts;S State tax incentives processors to improve on-the-job training;S State loan guarantees to small businesses and small expansionprojects;

S State incentives for research and development as well as newbusinesses and venture capital projects;

S Increased state programs to stimulate industry development;S Establishment of a state industrial development agency to advo-cate for industry;

S State support of efforts in Washington to reduce tariffs in foreigncountries;

S Summit meeting between the food processing and insurance in-dustries;

S Re-examination of utility costs and taxes;S Formation of a partnership between the education system and in-dustry to improve educational standards;

S Provision of supplemental funding for on-the-job training;

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S State development of tax incentives for producers to implementon the job training, apprenticeship programs and vocational pro-grams;

S State acknowledgment promotion of the importance of the foodindustry as a key component of the state economy;

S Enhanced publicity of the opportunities in the food processingindustry;

S Increased public transportation between New Jersey cities;S Establishment of a train route to Newark airport.

CONCLUDING REMARKS

The information above suggests that food processors in New Jerseyface a number of challenges which affect their interstate competitive-ness and undermine job retention efforts of state government. Despiteits steady decline, the food processing industry has been a large con-tributor to New Jersey’s economy and a major component of thestate’s $92.4 billion manufacturing industry. In 1995, food processingcontributed more than $9.4 billion to the state’s economy andemployed approximately 32,300 production and non-productionworkers. Food processing accounted for 5.9 percent of total employ-ment; 4.7 percent of total payroll; 8.1 percent of production workeremployment; 9.2 percent of value added; 11.2 percent of the cost ofmaterials used; and 14.0 percent of new capital expenditures in themanufacturing segment of New Jersey’s economy in 1995.Despite the exit of firms from the state, New Jersey still appears to

possess features conducive to a vibrant food processing industry. Ac-cording to industry sources, 35 of the top 100 food companies in theUS are within 60 miles of Central New Jersey. New Jersey, in fact,remains one of the leading states in the production of flavors andextracts, syrups, macaroni and spaghetti, coffee, cookies and cannedsoup. Economic development efforts centered around the food indus-try must be cognizant of these opportunities.To facilitate a successful state initiative to retain and recruit food

processing firms, it is necessary to understand the challenges currentlyimpeding existing firms and prompting others to relocate to otherstates. It is anticipated that the type of approach utilized in this studywould offer policy makers interested in designing retention and re-

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cruitment initiatives as well as economic development programs asound information base upon which to act. In addition, this studyhighlights the role universities may play in promoting economic de-velopment within the food industry. Adelaja (1997) argues that theprimary university response to food companies has too often been thetransmission of technical expertise; university-based economic andpolicy research has often been lacking. The lessons learned from thisstudy in fact support this argument, suggesting a disjointedness be-tween the needs of food processors and university support. It is hopedthat this study will demonstrate the expanded role universities can playin serving food industry clientele.

NOTE

1. Virtually all of the Northeast states experienced declines in food processingemployment between 1982 and 1992. New Hampshire and Vermont experienced netincreases in employment, however, the food processing industries in these states arerelatively small.

REFERENCES

Adelaja, Adesoji. O. ‘‘New Challenges Facing Agricultural and Resource EconomicsDepartments in the Twenty-First Century.’’ Agricultural and Resource EconomicsReview, Vol. 26(2) (1997), 3-16.

Adelaja, Adesoji O. 1988. ‘‘The Agriculture and Food Complex of New Jersey.’’Report prepared for the New Jersey Department of Agriculture. New JerseyAgricultural Experiment Station Publication No. SR-02521-1-88, Rutgers Univer-sity, New Brunswick, NJ, June 1988.

Adelaja, Adesoji O., Ramu Govindasamy, Maurice Hartley, Elizabeth Lambert, Jo-seph Robles, Brian Schilling, and Kevin Sullivan. 1997. ‘‘Enhancing the Marketfor Nutraceuticals in the Mid-Atlantic Region: Interim Report.’’ Report preparedfor the USDA. New Jersey Agricultural Experiment Station Publication No.SR-02512-1-97, Rutgers University, New Brunswick, NJ, October 1997.

Adelaja, Adesoji O., Brian J. Schilling and George Horzepa. 1994. ‘‘The Agriculture,Agribusiness and Fisheries Industries of New Jersey: Profiles, Economic Con-tributions, Major Issues and Policy Recommendations.’’ Report prepared for theNew Jersey Economic Master Plan Commission: Task Force on Agriculture,Agribusiness and Fisheries, Trenton, NJ, October 1994.

Adelaja, Adesoji O. 1997. Unpublished data.Connor, John M. 1988. Food Processing: An Industrial Powerhouse in Transition.

Lexington, Massachusetts, Lexington Books, 1988.Connor, John M., Richard T. Rogers, Bruce W. Marion and Willard F. Mueller. 1985.

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The Food Manufacturing Industries: Structure, Strategies, Performance, and Pol-icies. Lexington, Massachusetts, Lexington Books, 1985.

Lopez, Rigoberto A. and Nona R. Henderson. 1988. ‘‘Impediments to IncreasedAgricultural and Seafood Processing in New Jersey.’’ Report prepared for theNew Jersey Department of Agriculture. New Jersey Agricultural ExperimentStation Publication No. P-02261-1-88, Rutgers University, New Brunswick, NewJersey, April 1988.

Marion, Bruce W. 1986. The Organization and Performance of the U.S. Food System.Lexington, Massachusetts, Lexington Books, 1986.

New Jersey Department of State, Office of the Business Ombudsman. 1995. ‘‘TheSTARR Report: Strategy to Advance Regulatory Reform.’’ Trenton, NJ, July1995.

Senauer, Ben, Elaine Asp and Jean Kinsey. 1991. Food Trends and the ChangingConsumer. Eagan Press, St. Paul, Minnesota.

United States Department of Commerce, Bureau of Census. 1995 Annual Survey ofManufactures.

United States Department of Commerce, Bureau of Census. (Various years). Censusof Manufacturers.

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