By Don Schjeldahl, Principal, DSG Advisors
Agribusiness/food processing, like many industries, is no stranger to shifting economies forcing the repurposing or closing of facilities. Aging production technologies, volatile raw material supplies, and shifting consumer preferences and markets are among the many factors that propel the industry. The ability of a company to adapt to change means producers can extend the life of facilities and protect market share.
There are obvious advantages for corporate managers to carefully consider the attributes of candidate locations when deciding where to invest in new or expanding facilities. Increasingly important is the need for decision makers to identify communities that track the changing needs of niche sectors, and adjust offerings accordingly. A facility located in one of these communities is more likely to achieve long-term success by reducing risk from swings in technology, markets, raw materials, and other forces.
This article identifies metrics for measuring sustainable communities across a spectrum of markets and production types. Two regions, Western New York and Southern Idaho, are held up as examples of locations that get it right for agribusiness.
The Need to Innovate
Agribusiness, like all industry, operates in a world of continuous change. Over the long term, only the nimble survive. Innovation and adaptability are everyday challenges for the food industry. Consider the industry drivers below.
A long-wave trend in consumer preferences is for food to be more nutritious, fresher and better tasting made from crops grown closer to the market. And, oh yes, all of this while keeping costs low. Figure 1 illustrates the resulting trajectory for various agribusiness production models. Companies are pressured to produce more varieties of fresher foods closer to markets.
The challenge for entrepreneurs, who are already guided by farm-to-table, local, and organic, is to achieve production efficiency without losing product quality. For large producers, the challenge is to maintain the efficiency of large scale production while sourcing local and satisfying new product specifications, perhaps through locating smaller facilities close to markets, or employing production technologies that permits more flexibility in product output.
New Location Model for Agribusiness
Corporate managers are accustomed to making decisions on where to expand or develop new facilities. The starting point is typically a concise list of commonly used location factors. Presented below are five factors that land near the top of every location search, in agribusiness and in other industries. Of course, the relative importance of one factor over another varies from project to project, as illustrated below.
These starting point factors alone are not enough to satisfy the location demands that stem from shifting economies. Not all places that satisfy common factors are well suited for supporting the requirements of a changing operating environment.
Only locations that can accommodate evolving agribusiness needs will succeed in hosting sustainable and profitable facilities over the long-term. Consequently, a more refined set of requirements is needed to separate a long list of potential locations to a short list of best locations.
Obviously, the term “agribusiness” encompasses a broad array of raw materials, finished products and facility types. Communities and regions who successfully target agribusiness understand the specific needs of niche cluster opportunities. Preferred communities engage in initiatives driven by a commitment to support their agribusiness cluster needs, now and into the future.
These initiatives typically involve collaboration – some combination of local companies, state and federal agencies, public and private utilities, farmers, and colleges and universities. Efforts that support agribusiness clusters vary from location to location. A growing number of communities are engaging in initiatives built around niche cluster needs. Programs beneficial to agribusiness include those listed below.
Successful Agribusiness Clusters are Supported by Local and Regional Economic Development Initiatives
Fertile Ground for Agribusiness
North America is rich with agribusiness communities, many of which are supportive of growing the local economy. This article highlights two regions, recently investigated, that demonstrate a strength for combining economic development readiness with a culture of innovation to create fertile ground for agribusiness expansion.
The two regions are Western New York including the nine county Greater Rochester region, and southern Idaho including the seven county Twin Falls Southern Idaho region. Both regions have a reputation for leadership in the cultivation of agribusiness expansion through innovation and mastery of economic development process.
Both regions satisfy basic location criteria of an abundant supply of clean, reliable, and reasonably priced water, agribusiness appropriate waste water treatment capability, fertile soils well suited to a broad spectrum of crops, concentrations of dairy cows and cattle, good transportation infrastructure, a workforce accustomed to the rigors of agribusiness operations, and a well established agribusiness supply chain.
These regions stand out from many competitors because of the extra things they can offer agribusiness. For instance, both regions are supported by best-in-class university research, in New York from Cornell and in Idaho the University of Idaho. Agribusiness in each state also benefits from state policies that encourage and reward agribusiness innovation.
Scaling up Production in New York
The agribusiness success story in New York covers the gambit, from large scale producers to startups looking for a market. Barilla, LiDestri, Kraft, Constellation, and Rich’s are large companies who have come to the region to take advantage of the fertile agribusiness environment.
Home grown business is another side to the Western New York story. Startups now working to reach bigger markets include Red Jacket Orchards (cold pressed, unfiltered, natural fruit juices, no additives), Love Beets (marinated fresh beets and beet juices), Stony Brook Oils (seed snacks and culinary oils from squash, flax, and sunflower) and Cheribundi (tart cherry and other juices geared to competitive athletes and health conscious consumers).
These startups have been, and continue to be, aided by the work done at Cornell University’s Agricultural Experiment Station in Geneva, NY. Cornell scientists work with agricultural producers, food businesses and farm families throughout the state to capitalize on new food and agricultural opportunities.
Red Jacket Orchard’s owner Brian Nicholson reports, “Cornell researchers have been invaluable in helping the many fruit growers in the region address challenges of extremes in weather, insects and disease brought on by climate change.”
Cheribundi and Stony Brook Oils started at the Cornell’s Technology Farm, a 72-acre research park dedicated to food and agriculture company incubation. The Farm offers incubator and production accelerator space for startups, and shovel ready sites for companies graduating into commercialization. The community of Geneva operates a fully-licensed test kitchen located nearby. Other partners include Rochester Institute of Technology (RIT) and Greater Rochester Enterprise, among others.
Economic development stakeholders in nearby Livingston County, just south of Rochester, have initiated a public/private partnership that will bring together nontraditional groups to strengthen the local economy. The group is funding the development of a soy bean crushing facility that will serve the growing demand for soy oil while raising the incomes of small farmers.
The same group is attempting to lure farmers into growing more barley for the burgeoning craft beer industry. Until now, farmers wanting to grow barley for use by craft brewers were discouraged by an absence of malting operations geared to small growers. The community is sponsoring development of and will operate a local malting facility.
Enhancing the Value Chain
Like the folks in Livingston County, regional economic development partners in Southern Idaho are actively engaged in expanding the agribusiness value chain. The difference is scale. Western New York is riding a crest of rapid growth in startups, southern Idaho is home to a robust agribusiness economy of large farms and production facilities.
The region is both rich in assets suited to large agribusiness and strategically guided with good resource management. The Snake River Aquifer provides clean, abundant, reliable, and inexpensive water. Low cost electric power, mostly hydro power, combines with modern waste water systems designed to support agribusiness operations.
Knowing how to take care of assets is an important component in maintaining a sustainable agribusiness economy. Southern Idaho’s economy has been agriculture focused since the early 20th century when water was brought to the dessert.
Over the decades, leadership has learned that to sustain the agribusiness economy, careful management of resources is required. This is a lesson not learned soon enough in some other parts of the country. An influx of out-of-state dairy cows and cattle to Southern Idaho, starting in earnest in the early 1990s, was in large part the result of unsustainable use of resources.
The 400,000 cows in the seven-county region, also known as the Magic Valley have attracted many companies including Jerome Cheese, Idaho Milk Products, Dairy Gold, and Chobani.
Agribusiness in Southern Idaho has evolved to include an integrated value chain – upstream state-of-the-art animal feeds, dairy operations, food products, and downstream biodegradable packaging and expeditated food centric rail deliveries to eastern U.S. markets.
Strong agribusiness communities are often home to partnerships that create and maintain a region’s competitive edge. The Center for Agriculture, Food and the Environment (CAFE), now under development near Twin Falls, is a prime example. A consortium of public and corporate stakeholders, led by the University of Idaho, is behind the $45 million research facility. The center will focus on environmental solutions, economic development, and educational opportunities to ensure the sustainability of livestock, crop agriculture and food processing in Idaho.
Engaged Communities Yield Agribusiness Success
Achieving longevity in agribusiness/food processing is no accident. With growing industry volatility, success requires corporate managers to be comprehensive when evaluating location alternatives for new investments.
The best locations are those that track changing needs of agribusiness and adjust offerings to ensure the community can meet corporate needs. Investment in one of these communities is more likely to yield long-term success by reducing risk from swings in technology, markets, raw materials, and other forces.
Bio: Don Schjeldahl is founder of DSG Advisors, a consulting practice that assists corporate clients in developing location strategy and site selection for manufacturing, distribution, and office facilities. Prior to this, Don served for 27 years as a site consultant and practice leader for The Austin Company, Cleveland, OH. Don recently spent 18 months working for Sierra Nevada Brewing on their Mills River, NC brewery construction project where he supported sustainability initiatives. Mr. Schjeldahl has for more than a decade focused on markets associated with the new energy economy and corporate sustainability. Mr. Schjeldahl has performed or directed nearly 300 location strategy assignments, working throughout North America, Mexico, and Europe.