2007 Capital Spending Report

Economic uncertainty clouds 2008 capital forecast.

By Marty Weil, Contributing Editor

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Hormel Foods soon will break ground on a new production facility in Dubuque, Iowa. Total cost of the project is estimated at $89 million. “Consumer demand for shelf-stable microwave meals is exploding,” says Jeffrey Ettinger, chairman, president and CEO.“This investment will allow us to increase production capacity and continue our leadership through innovation and new products.”

Groundbreaking for the 327,000-sq.-ft. facility is scheduled for early this summer, and the plant is expected to be operational by November 2009. The deal is subject to the finalization of state and local incentives. Initially, a total of 180 new jobs will be created, with more expected in future phases.

Three U.S. Mars divisions are busy. Mars Petcare US broke ground in November on an $80 million new plant for Cesar Canine Cuisine Small Dogs food in Fort Smith, Ark. It should be done in mid-2009. Just this March, Mars Food US announced a $10 million expansion of its Greenville, Miss., plant that makes Uncle Ben’s 90-second Ready Rice. And Mars Snackfood US is still completing a $70 million expansion of its Elizabethtown, Pa., chocolate factory.

Riviana Foods announced it will construct a new 400,000-sq.- ft. rice processing and packaging plant and on-site warehousing/ distribution center on a 31-arce site located adjacent to its packaging facility in Memphis, Tenn. Construction will begin in the second quarter of 2008, with final completion anticipated by mid-2010. Local media estimate the cost at $67 million. “Development of this new facility is an important step in our ongoing effort to transform Riviana into the world’s most efficient, technically advanced rice company,” says Bastiaan de Zeeuw, president/CEO.

The Molson side of the Molson Coors house in October 2007 opened its first new brewery in 52 years. The Moncton, N ew Brunswick, facility cost $35 million. Coors’ Shenandoah, Va., brewery began operations early in 2007.

Several new plants, while not dedicated to food production,nonetheless are owned or partially financed by food processors and will use food plant waste and byproducts to make fuel.Tyson, along with Syntroleum Corp., announced the formation of Dynamic Fuels LLC, a joint venture and a plant in Geismar, La. It will produce renewable synthetic fuels (for diesel, jet and military fuels) from Tyson’s animal fat feedstock. “We anticipate total initial capital spending of approximately $75 million for the construction of the initial facility, which is 50 percent of the estimated cost to construct the first facility,” said a Tyson company spokesperson. Construction is expected to begin in fiscal 2008 and continue through fiscal 2009, with production targeted for 2010.

Environmental Power Corp. in December broke ground on a biogas facility adjacent to the JBS Swift beef processing facility in Grand Island, Neb. The plant should be operational by the end of this year and will use much of the plant’s waste products to offset an estimated 25 percent of the Swift plant’s natural gas requirements.

Ditto for Seaboard Foods. The company last year formed High Plains Bioenergy as a subsidiary and began building a biodiesel plant in Guymon, Okla., with a capacity to produce 30 million gallons annually. The renewable fuel plant will use animal fats – including pork fat, a byproduct from the Seaboard Foods’ Guymon pork processing plant – and vegetable oils as the feedstock for biodiesel. It should be operational by the end of this year.

Flowers Foods has earmarked approximately $19 million to build a 200,000-sq.- ft. bakery in Bardstown, Ky. According to Flowers’ annual report, it will produce breads and buns for markets in Tennessee, Kentucky, Ohio and Indiana. Construction began in January, and it is expected to open with one production line this fall, with a second line to be added at a later date.

Starbucks also is building. The coffee giant announced the construction of a coffee roasting and packaging facility. Construction began this year on the 117,000-sq.-ft. building, which is located in Saint Matthews, S.C. The facility is due to be operational in early 2009.

Expansion in a year of contraction While some prognosticators forecast economic contraction in 2008, the food industry has announced a rash of facility expansion projects. For instance, Kellogg plans to expand its Battle Creek, Mich., warehouse/R&D facility. The company will add 157,000 sq. ft. of additional space, which will accommodate up to 300 employees. Construction on the project is set to begin this quarter, with an expected completion date of third quarter 2009.

Construction is set to begin on the W.K. Kellogg Institute for Food and Nutrition Research in Battle Creek, Mich.

The expansion of the company’s global research center (W. K. Kellogg Institute for Food and Nutrition Research) combined with a new manufacturing facility in Kutno, Poland, represent approximately 15 percent of the company’s 2008 capital plan. “The facility in Poland will help us meet consumer demand for our ready-to-eat cereals in the emerging Central and Eastern European markets,” says the annual report. “The expansion of the W. K. Kellogg Institute … refl ects our commitment to research and innovation, which is a key driver to the growth of our business.”

Major expansions are in the works at Campbell Soup and its Pepperidge Farm unit. Campbell plans to expand and enhance its corporate headquarters in Camden, N.J., with construction expected to continue into fi scal years following 2008. Expansion of the company’s beverage production capacity also is on the docket. Meanwhile, Pepperidge Farm plans to increase its highcapacity bread production facility in Lakeland, Fla., to a total of 320,000 sq. ft. The expansion will increase the plant’s production capacity by 31 million loaves annually. (In neither case did Campbell reveal the cost of the expansions.)

Nestle will invest $60 million in its Jonesboro, Ark., with much of the increased space being handed over to Nation Pizza Products. The plant was built in 2003 and will be expanded by 50,000 sq. ft., creating 200 jobs. Nestle will make more Stouffers and Lean Cuisine pizza-like products there, with Nation Pizza operating parts of the expansion.

A water bottling plant in Latrobe, Pa., closed in November 2006 when LeNature was forced into bankruptcy, is being reopened by Pittsburgh-based grocer Giant Eagle.

Sargento Foods plans to spend $3 million to expand production facilities in Plymouth, Hilbert and Kiel, Wis.

Sanderson Farms disclosed in March it is evaluating sites in North Carolina for a possible new chicken processing plant, although no concrete plans have been made.

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