By Jay Garner, President, Garner Economics LLC
One thing is for certain, you can count on change being a dynamic influence in how food and beverage processors operate. Why? Because consumer preferences constantly evolve, and consumers drive food and beverage output.
Food and Beverage Facilities and Jobs by the Numbers
First, let’s look at the statistics of where these companies are located and how many people they employ.
Food processing is defined by the North American Industry Classification System (NAICS) code of 311. Beverage manufacturing is comprised of code 312. Combined, this sector in 2016 had 41,046 processing facilities, employing 1,748,503 people in the U.S. (BLS).
California leads the U.S. with the most facilities and employment, primarily because of its strong farming output in the Central Valley.
The top metro areas for food manufacturing, covering all activity under NAICS code 311 Food Manufacturing, are generally the most populous MSAs (metropolitan statistical areas) across the nation. All but one of the metro areas on the ranking below are within the top sixteen MSAs as ranked by population. However, there’s more to this story.
If we review the regions based on the concentration—also called Location Quotient (LQ)—the ranking becomes a vastly different list. These metros tend to be small or mid-sized with regards to population, but have a high concentration of food manufacturing workers.
Gainesville, Georgia tops this list, with more than ten thousand employees in the MSA and a LQ of 11.51 (primarily poultry related). The remaining nine areas are dispersed around the country, from Gettysburg, Pennsylvania to central California’s Hanford.
Current Trends for Food and Beverage
Looking to 2017’s trends for consumer demand and subsequent food manufacturing response, it’s all about healthier eating. The demand for specialty foods has seen a steep increase. These include products that are allergen-free, gluten-free, organic and natural foods. This change in consumer demands has forced producers to make profound changes to manufacturing processes and ingredients. This particularly reflects the tastes of millennials, who are especially inclined to pursue healthy, specialty foods to fit their lifestyle and preferences.
A report from the Association of Packaging and Processing Technologies notes that these additional global consumer trends which will influence processors include:
- A growing middle class – expected to double by 2030, with Asia as a significant consumer of value-added nutritional food.
- On-the-go eating has consumers looking for portion control and convenience.
- Evening and relaxation foods with quick preparation times are growing.
- Clean labels – 37 percent of U.S. consumers find it important to understand ingredients on food labels. 91 percent believe that products with recognizable ingredients are healthier.
- The rise in organic food demand has fueled >10 percent annual growth in organic foods, although organic food sales make up only five percent of the total market.
- Sugar is increasingly being eliminated or reduced in foods, corresponding with a rise in natural sweeteners.
- The United Nations predicts food production needs to increase by as much as 70 percent from 2010 to 2050 to meet growing demand.
- Beverage has seen the most growth in the number of establishments at 63.4 percent in 2015. The bulk of this growth is attributed to the explosion of breweries and distilleries across the country.
Sustainability and its impact on growers, processors and food retailers will grow in the consumer market for years to come. Food retailers have focused on luring customers through promises of animal welfare improvements and environmental stewardship rather than just new menu items. Recently, Fortune Magazine did a feature on McDonald’s and its sustainable beef initiative. Globally, McDonald’s is one of the largest beef purchasers. They define sustainable beef as socially responsible, environmentally sound, and economically viable. That includes maintaining or improving soil health and air quality as well as protecting water. McDonald’s is a giant in a crowded field of restaurant conglomerates. When McDonald’s announced that it would serve only cage-free eggs, nearly 200 companies followed suit. Watch for more F&B companies to follow the trend of sustainability, as long as it does not adversely impact their already thin profit margins.
As it relates to F&B companies and their siting requirements, these variables are still a constant, with the following modifications:
- Food safety continues to be the number one consideration for all food companies, for obvious reasons. 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 the company, product and the 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 adversely affected when the company ceased operations and ultimately went out of business.
- Food manufacturers predict increasing automation and robotics; there is a need for more flexible machinery to run manufacturing lines more efficiently. Food processors are, for the most part, advanced manufacturers. They use innovative technologies in their processes and as a result, easily classify in that nebulous term of advanced manufacturing. It should be noted that this can easily translate to more facilities and fewer employees, as a result of how technology is changing the labor landscape.
- Energy costs still drive locations, as it relates to calculating the cost of receiving the commodity, the finished product and then distribution of the final product to the customer. 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 being strategically placed close to interstate highways and major arteries.
- Water is typically the number one location element in the search process. 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. And, water rates will clearly drive locations of F&B companies that are large water users. No water availability – no project.
- High ceiling heights should be considered the norm—34 feet or higher. Having the utilities drop from the ceiling is now standard, along with non-porous walls and an extensive floor drainage system.
- Cost control is still King! In a 2016 survey by FoodProcessing.com, the cost for F&B companies was considered the second-most important consideration, just after food safety. These include items such as labor costs, utilities, taxes, occupancy costs, etc. This bodes well for smaller and sometimes more rural communities that typically are able to show a cost savings, versus having a plant in a larger, more urban environment.
Manufacturing Priorities (2016 FoodProcessing.com)
How We See It: A Final Word
Garner Economics sees continued growth in organics and naturals, specialized beverages that are sugar-free, distilleries and craft breweries, healthy ready-to-eat, private label brands, age awareness/portion control products and ethnic foods, especially Hispanic. 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 one food processor of moderate size? If the answer is “yes,” the likelihood is there that the infrastructure exists 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, Georgia, with representative offices in Berlin, Germany; Seoul, Korea and North Carolina. 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, Hill’s Pet Foods, Stork Food Systems, Future Pipe Industries and others. Garner Economics and Primus Builders have partnered to create one of the most extensive site 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’s site or building has met Primus/Garner's rigorous review requirements. To learn more about the Primus/Garner Food Site Certification designation, see the link at http://www.garnereconomics.com/images/case-studies/FoodSiteCert_0916.pdf.
