Recent Trends in Food Related and Light Manufacturing Location Decisions; Why “Flexibility” is Critical

Scott KuppermanOwner

1Context & 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

Wake Everyone Up !!

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 FocusOf 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 industriesKnowing 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 - OwnerKupperman Location Solutions

W (224)-544-5540C (224)-224-2559E scott@kuppermanls.comwww.kuppermanls.com

Credits: Grant Thornton Study, FoodProcessing.com