Recent Trends in Food Related and Light Manufacturing Location Decisions; Why “Flexibility” is Critical Scott Kupperman Owner 1 Context & 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 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 Focus Of 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 industries Knowing 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 - Owner Kupperman Location Solutions W (224)-544-5540 C (224)-224-2559 E scott@kuppermanls.com www.kuppermanls.com Credits: Grant Thornton Study, FoodProcessing.com