Show me the money
High tax rates and strict regulations work against greenfield projects in the Golden State. For example, the California Transparency in Supply Chains Act requires some managers to be trained in rooting out human trafficking and slavery in supply chains. Add in severely crimped water supplies, and even California firms are thinking twice about building there. In the case of Clif Bar, the new bakery is being built in Twin Falls, Idaho, about 700 miles northeast of its Emeryville, Calif., headquarters.
All western states want to host food companies that are eager to tap into the California market but don’t want to manufacture there. The Southern Idaho Economic Development Organization has been the most successful, luring seven food projects in 2013 worth a combined $800 million, including Clif Bar.
Chobani’s Greek yogurt was the most notable production facility to come on line last year, but 450,000 milking cows and a million head of cattle in the region appeal to both dairy processors and packers, notes Jan Rogers, the organization’s executive director.
“In a lot of cases, raw materials make us attractive to food,” says Rogers. “It’s not just about the money: you have to have a strong business proposition.” Some communities in her region have voted to tax themselves for expanded wastewater treatment in anticipation of attracting manufacturers.
The state does not disclose the financial assistance it provides to manufacturers who locate or expand in Idaho, though the legislature is poised to approve an economic incentive package, and development authorities make full use of TIF and community block grants, says Rogers. “I don’t consider those incentives; they’re necessary to move a project forward.”
Small government and free enterprise rhetoric aside, North and South Carolina have been notably aggressive in offering financial inducements to manufacturers as they try to replace lost jobs in furniture-making and textile production. Georgia also is sweetening financial lures.
To attract RC Creations, a subsidiary of Acme Smoked Fish Corp., North Carolina development authorities assembled a $15 million package of tax breaks, worker training programs and wastewater facility construction. The Brooklyn-based firm will invest $28.5 million in construction and equipment for the plant, 600 miles from its headquarters.
“Indiana will never do that; we’re not the writers of big incentive checks,” insists John Sampson, president of the Northeast Indiana Regional Partnership in Fort Wayne, Ind. “Government officials run on job creation, and we’re focused on grooming qualified talent to fill those jobs.”
After a spate of new plants and major expansions, his region is running low on shovel-ready sites for food, although there is activity in shell-building programs. A 200,000-sq.-ft. industrial spec building is being built in Blufton, Ind., Sampson says, and though it may be more space than most food companies require, the shell will accelerate start-up for the manufacturer who ultimately buys it.
Indiana, Michigan, Ohio and Wisconsin are actively soliciting food ventures, says Nay, and the common link is water. Unlike California’s Central Valley, the Great Lakes states do not anticipate a water shortage anytime soon.
Water also is a selling point for Pennsylvania’s Lehigh Valley. The two counties in the region could tap the aquifer below them for 150 million gallons a day, but only 68 million gallons currently is being used, according to Don Cunningham, president and CEO of Lehigh Valley Economic Development. The availability of developed sites and natural resources has attracted several beverage bottlers to the area, and fracking operations in western Pennsylvania promise the availability of inexpensive natural gas for years to come.
Logistics, utilities, transportation, skilled workers — the factors that drive new plants and capital expansions in food production are constant. The motives for undertaking them also are constant: meeting increased demand, moving from commodities to value-added production and tapping into an emerging opportunity. Fortunately in U.S. food & beverage, there always is new demand and shifting trends and a need for a place to make the product.