By Wade Williams, Vice President of Global Business Development, REDI Cincinnati
Cities around the world like Cincinnati that rely heavily on income or sales tax revenue have been economically impacted by the COVID-19 pandemic, especially vibrant areas like Over-the-Rhine, which is home to a variety of shops, bars, restaurants and theaters. Thankfully, the pre-pandemic performance of the jobs market and economy of the Cincinnati region – comprised of southwest Ohio, northern Kentucky and southeast Indiana – combined with significant regional advantages, have succeeded in maintaining the three-state region’s reputation as an ideal location for advanced manufacturing investment. In fact, with the development of COVID-19 medical treatments and a vaccine, several economists expect a stronger recovery for Cincinnati over the next eighteen months compared to other cities. And there’s no doubt that the revival will be fueled in part by innovative approaches to foreign direct investment and an unrelenting commitment to safeguarding the Cincinnati region’s status.
Location, Location, Location
Two years ago, the Cincinnati region celebrated nine consecutive years of positive growth with the highest rate among major metros in Ohio, Kentucky and Indiana. Between 2016 and 2019, the region actually ranked fifth in the U.S. for business attraction, retention, and expansion projects—many of which can be attributed to the more than 450 foreign firms that chose the region due to its logistics, resources, and financial incentives.
Cincinnati’s ability to compete with large cities like Chicago, New York, and Atlanta for foreign investment has a lot to do with the intersection of two rivers, three major highways, two class-A railways, and the Cincinnati/Northern Kentucky International Airport (CVG), as well as its proximity to most major cities and an estimated 70 perecent of U.S. buying power all within a day’s drive. Along with shipping giants DHL and the Amazon Prime Air Hub, these geographical and structural advantages have made the region one of the most connected and capable places for moving goods. This is a key consideration for foreign firms who primarily seek markets with easy access to customers and a supply chain.
“With many clients located in the eastern part of the U.S., and the majority of our suppliers in the Midwest, we identified Ohio as the most strategic location for logistics when it came time to expand our capacity and customer base with a second U.S. location,” says Antonio Pagano, Chief Executive Officer of Modula, Inc. an Italy-based manufacturer of automated storage systems that entered the U.S. market in 2001 and established its first U.S. manufacturing plant in 2015 in Lewiston, Maine. “Being near our suppliers and having efficient distribution channels to the rest of the U.S. is how we will continue to grow.”
In June 2019, long before the looming impact of a pandemic, Modula announced its plan to purchase the iconic Dayton Daily News building in the City of Franklin for its new manufacturing facility set to establish a production capacity of 2,000 vertical lift modules per year. While the original goal to be operational by September 2020 was delayed due to the impact of COVID-19, the pandemic has not faltered the company’s growth strategy and appreciation for what the region has to offer. Despite the challenges of the pandemic cutting company travel and delaying supplies and resources, Pagano says the majority of the facility is now complete and will be up and running at the start of 2021.
In mid-2020, right in the midst of the pandemic, Saica Group, one of the largest and most advanced European players in the development and production of recycled paper for corrugated packaging, announced their plans to establish their first North American facility in the Cincinnati region. On October 15, 2020, the Spain-based company broke ground on the $72 million U.S. plant at Hamilton’s Enterprise Park, which will include 350,000 square feet of manufacturing space and 17,400 square feet of office space. The company is hoping to be operational sometime in late 2021.
“For us, we were interested in finding a site suitable for building a plant of the scope we were planning, access to a quality group of talented people who could join our team, and proximity to potential customers across the Midwest region,” says Gonzalo Aragüés, Industrial Projects Manager, Saica U.S. “When we started looking for locations in the Midwest region, there were several things that stood out when we looked at the Cincinnati region—its industrial culture, its accessibility to the rest of the Midwest, and the experience and talent of the people.”
The Talent Pool Runs Deep
Speaking of talent, every manufacturing company needs well-trained employees. The Cincinnati region’s hundreds of thousands of workers, innovative work and education programs, and more than 26 technical centers, colleges and universities go a long way in attracting and acquiring new foreign investments. Ideal for maintaining a stable labor force in advanced manufacturing are regional programs like Ohio’s TechCred Program that helps Ohioans learn new skills and employers build strong workforces and Miami University’s Work+ Program that allows students to obtain their degree for free while working approximately 24 hours per week with a Work+ employer.
While the COVID-19 pandemic has adversely impacted unemployment rates
across the nation, it has also encumbered the ability of many U.S. companies to find talent. Companies across the tri-state have gotten creative during these challenging times by focusing on safety and demonstrating measures to ensure employee health, with some even advertising their safety protocols in their job postings. The region has also held drive-thru job fairs and events in large spaces with pre-screening and social distancing practices.
The prevailing community of investors, entrepreneurs, and foreign firms in the region is also instrumental in attracting additional foreign direct investment. “Cincinnati has a high percentage of European companies and professionals, and having that shared experience is extremely helpful as we determine how best to approach the process,” says Pagano. “Networking with these like-minded companies also helps us with hiring and operational strategies, as well as access to expertise.”
As Modula gears up for 2021 and beyond, they also have the benefit of partnership with the European American Chamber of Commerce of Greater Cincinnati that works to foster relationships and build connections between the region and Europe, as well as ongoing support from JobsOhio, REDI Cincinnati, and others that play leading roles in the economic development of the area and assist with workforce recruitment and training needs. With assistance from these partners, Modula’s decision to open their second U.S. facility in the region earned them a Job Creation Tax Credit from the State of Ohio totaling 1.52 percent over the next seven years.
Saica Group too sees a lot of value in the people of the region and will reap the benefits of an eight-year job creation tax credit from the Ohio Tax Credit Authority, as well as an economic development grant and a JobsOhio Workforce Grant and additional incentives from the city of Hamilton. The company expects to create 64 new jobs in the region, ranging from skilled operators, engineers and supply chain professionals, to sales, administration, and management.
“As a company, we have ambitious plans for growth. Expansion to the U.S. takes us to our 10th country. So, we don’t see this as just a new plant; we see this as the start of a new future for Saica,” says Aragüés. “Our values as a company are on par with the city of Hamilton and this region, with its proud history of manufacturing excellence. That’s one of the reasons we chose this area, and we will soon be looking for people who share our values and commitment to build their careers here.”
Money Always Talks
Ultimately, the decision for foreign firms to invest in a particular region mainly comes down to cost. From a low cost of living to the wide range of grants, financing programs, and tax incentives, the Cincinnati region has frequently been designated as one of the most cost-friendly metro areas to do business. It’s estimated that the overhead it takes to run a business here is about 40 percent less than in other major metros.
Another key financial benefit to the region is easy access to reliable utilities, with some of the most competitive natural gas and electricity prices in the country. Regional providers like Duke Energy have made significant investments to harden transmission and distribution systems against weather and other disruptions, as well as deploying advanced rapid restoration technology. The region is also one of the most water-rich in the nation, ensuring clean water for manufacturing and food processing investors like Ocado, a UK-based company and one of the world’s largest dedicated online grocery retailers who last year partnered with The Kroger Co. to break ground on a $55 million customer fulfillment center that aims to bring customers fresher food faster than ever before.
Critical to cost-effective business in the region is also affordable and reliable Internet service supported by dense fiber optic deployments with an average of two fiber strands per business address. Regional companies have the luxury of leveraging the nearby Amazon Web Service data pipeline and high-speed fiber optics from Cincinnati Bell who has invested $856 million in the region’s fiber deployment.
“While our new facility is not a complete duplication of our Maine facility, and both are important for the production of our automated storage solutions, the communication infrastructure is better in the Cincinnati region as we have dedicated fiber coming into the building,” says Pagano. “We have therefore decided to move our main networking equipment and servers to this new facility.”
It Takes a Village
Foreign direct investment in a region doesn’t just happen without effort and commitment on the part of the economic development community working to attract companies and provide the tools and assistance needed to ensure a successful venture. The Cincinnati region is no different and passionate community partners like JobsOhio, REDI Cincinnati, the European American Chamber of Commerce of Greater Cincinnati, and others working together have contributed to the area’s ranking as an economic development leader.
For foreign companies considering investing in the Cincinnati region, access to economic development leaders who can serve as the front door to the region and assist them through the process—from providing critical cost analysis and negotiating incentives, to site selection and access to the right workforce and resources—ultimately lowers risk and provides peace of mind.
“The high professionality of JobsOhio and REDI Cincinnati, who helped us through this process by organizing stakeholders and obtaining grants, has been extremely valuable and ultimately critical to ensuring that Modula will have a good impact on the local community,” says Pagano. “As the U.S. works to boost both the manufacturing and supply chain sectors coming out of the pandemic, we see an incredible potential growth for our automated storage solutions across many industries. We are excited about Cincinnati, and with the help from strategic partners, we will get plenty of exposure and support for our growth.”
To safeguard foreign investments that were underway prior to the COVID-19 pandemic and continue to move forward with new opportunities, REDI has leveraged an innovative approach to introducing the Cincinnati region to companies interested in expanding to the U.S. by deploying creative virtual site visits and meetings.
“Understanding that business conversations surrounding something as significant as investing in the U.S. is often easier among entities within the same culture, REDI’s approach to foreign direct investment involves working with our international economic development partners around the world who serve as ‘boots on the ground’ to open up conversations with foreign companies and get them thinking about Cincinnati as a potential location,” says Cierra Clymer, REDI Cincinnati’s international business development director. “With COVID-19 significantly limiting international travel, our local international economic development partners play a more critical role than ever in sustaining the region’s foreign direct investment success.”
Once foreign companies do make the decision to invest in the Cincinnati region to expand their U.S. operations, they also benefit from ongoing commitment by the area’s economic development partners who strive to keep companies thriving and maintain Cincinnati’s status. Through its Business Retention and Expansion (BR&E) program, REDI maintains ongoing contact with the region’s foreign companies to review successes and challenges, and they collaborate with local economic development partners across Southwest Ohio, Northern Kentucky, and Southeast Indiana to identify resources that may be available to assist companies with growth.
“While it has been challenging to work on this project in the middle of global pandemic, we’re extremely excited about the future and really appreciate the support we have received from so many great partners in Ohio to help us along the way,” says Aragüés. “REDI Cincinnati has been extremely helpful in connecting us to the many resources we need to be successful in bringing this project to the U.S., and we would not be opening this plant without their support.”