A global trade war would spur investments by foreign food companies eager to lock in access to the U.S., Canada and Mexico. Even with a trade war, Love Beets likely will be spending capital dollars domestically. “We’ve got our eyes on Arizona, but that’s a few years away,” Cross says.
Gentle processes and nonthermal treatment complement consumer desire for healthier eating. An example is high-pressure processing. The value of HPP-pasteurized products is growing at a 25 percent annual clip, reports Mike Billig, vice president-business development manager at Hydrofresh HPP. The tolling operation commences production in May in a $10 million greenfield facility near Toledo, Ohio. Hydrofresh is a business unit of Keller Logistics, a cold storage and logistics firm.
“HPP tolling is very much driven by freight costs,” he explains, and Hydrofresh identified a 300-mile service void in northwest Ohio. Distribution logistics also were a factor in Nellson’s site selection – the company has two additional bar-production plants in Quebec.
OFD Foods provides a more extreme example of logistics-based site selection. Three plants are clustered on the Albany, Ore., campus of the company formerly known as Oregon Freeze Dry, one dedicated to food processing and the others to medical and nutraceutical products. “A decent amount of volume comes from customers shipping product (from eastern states) to Oregon for freeze-drying and then shipping it back,” notes Kelly Goforth, director-manufacturing. Later this year, transportation costs will drop dramatically when OFD opens a fourth plant in Henrietta, N.Y.
Goforth credits growing interest in healthy foods with all their nutritional benefits intact for capacity expansion by freeze-drying companies. The UK company Chaucer Foods opened its first U.S. facility three years ago in Forest Grove, Ore., signaling growing demand for the technology. Fruit is the dominant application, but the premium pet food category also is contributing to growth.
Some of the largest capital projects now under way involve pet food. Nestle Purina Petcare is building its first new U.S. plant in 20 years, a $320 million project in Hartwell, Ga. Champion Pet Foods is investing $178 million to add a third cook line at its two-year-old Auburn, Ky., facility.
Americans’ infatuation with pork continues. Several pork processing plants opened in recent years, with more on the way. Prestage Foods anticipates an early 2019 commissioning of its $300 million fresh pork facility in Eagle Grove, Iowa. Hormel and Butterball have expansion projects under way for bacon products.
Proximity to raw materials drives many site selection decisions, although other factors certainly play a role. Hometown pride is one. The founder of Lagunitas Brewing grew up in Chicago and built his second brewery in the Windy City, departing from the trend of West Coast craft beer companies constructing second plants in the southeastern states.The owner of Blue Marble Cocktails uprooted his Oregon manufacturing firm and relocated in Indianapolis, capital of his home state.
The market for packaged craft beer may have reached saturation, and sales of mainstream beer are on a slow but steady decline. Nonetheless, one of the industry’s biggest capital projects in history involves mass-produced suds: Mexico’s Nava Brewery, just south of the Rio Grande.
The first of three construction phases was complete when Anheuser Busch InBev was forced to sell the brewery in 2013 to Constellation Brands. In the fiscal year completed Feb. 28, Constellation poured $1-1.1 billion of additional capital into Nava; the prior year’s investment was $759.2 million, 84 percent of total corporate capital expenditures. From 2014-2021, Constellation estimates it will plow $3.9 billion into Nava.
Miller Coors is laying the groundwork for a new brewery scheduled to open in 2019 in British Columbia and another in 2021 in the Montreal area. Both replace aged breweries.
Manufacturers struggling for organic growth invest capital when it drives down production costs and boosts margins. A prime example is Kraft Heinz Co., which has closed seven facilities since the 2015 merger of Kraft and Heinz but still found $203 million to build a replacement plant in Davenport, Iowa.