Where Have All the Food Plants Gone?

Feb. 18, 2014

Half the U.S. facilities registered with FDA were purged in October 2012. Fortunately, some small, family operations survived the cut.

One of the provisions in the federal Public Health Security and Bioterrorism Preparedness and Response Act of 2002 was the creation of a registry of all production facilities, domestic and foreign, that produced food and beverage products consumed in the U.S. FDA initially guessed the registry would include 400,000 food plants, evenly divided between foreign and domestic, though some believed the number could be several multiples higher.

A year after the registration deadline, less than half that number were in the FDA’s registry, though the number swelled when people understood the consequences of noncompliance would be the same as trying to sell meat or poultry that wasn’t USDA inspected. When I checked with FDA four years ago, the domestic total stood at 157,633; two years ago, it had climbed to 166,852.

The tally seemed a little high, and the trend a bit illogical—surely the number of old and mothballed food plants that close each year exceeds the number of greenfields built. Figuring it was time for another update, I contacted FDA to get the latest count. I also asked if the production plants could be segregated from the DCs, warehouses, cold storage facilities and other support sites. They could, and the new numbers were surprising: 79,844 total U.S. sites, less than half the previous count. Of those, 17,811 actually make human consumables. (The comparable offshore numbers are 114,403 and 47,646.)

That kind of a change demands verification, and an FDA spokesman did so. The falloff occurred in October 2012, when FDA required companies to reregister their buildings, he explained, resulting “in a significant decrease in the number of firms registered.”

Maybe the first round of registrations included companies that were exempt because they were really farms, or they were too small to engage in interstate commerce, or sold directly to people, instead of through a retailer or foodservice operator. Still, almost 80,000 food factories is a big number, particularly when you consider the combined production facilities of the 30 largest food processors—every company with $4 billion-plus in annual sales—only numbers around 1,300.

If you travel around the Midwest, you find food processors in almost every community. During a recent trip in Northwest Ohio, I visited the largest plant in the Campbell Soup network, in Napoleon, Ohio, a facility so large that the plant manager described it in terms of total acreage under roof. At the other end of the scale was Ballreich Bros. Inc., a third-generation family operation in Tiffin, Ohio. “We’re literally in the back yard of my grandfather’s home,” owner Brian Reis proclaimed with more than a hint of pride in his voice.

Established in 1923 literally in the family’s garage, the potato chip maker is a throwback to a period before zoning laws in smalltown America. The garage is still there, though processing and raw-ingredient handling is carried out in additions to the original structure. The plant sits in a residential neighborhood, grandfathered into the rhythm of a Midwestern town. The second generation of managers were content to make a modest living and only fried chips for 18 weeks of the year, but retailers want their shelves filled for 52. When Brian Reis left a corporate job in heavy equipment and returned to the family business, he plunged into Marketing 101. “We had nobody in sales, so took it on,” he explains. In 2006, he bought out 16 family shareholders and became the sole proprietor, along with wife Linda. Along the way to building sales to $9 million annually, he received a family business of the year award from the Cleveland district of the Small Business Administration and has struck deals with area sports clubs like the Toledo Mud Hens to be their “official” potato chip.

The Ballreich operation was an interesting juxtaposition with the previous stop on the tour. Bob Evans Farms Inc., best known for the 561 family-style restaurants it operates, is investing heavily in production of value-added foods. In 2012, it acquired Kettle Creations, another family-owned business (though with deeper pockets than the Reises) that built a processing facility in Lima, Ohio. Kettle Creations also relies on the humble spud, mashing and cooking them for filling in sealed trays for retail and 5 lb. totes for restaurant use. Whereas a vision system at Bob Evans inspects cubed potatoes for imperfections as they speed by on a 48 inch belt, Ballreich relies on the human eye. Operators stand on an elevated platform, monitoring peeled potatoes and plucking those with dark spots and other flaws, deftly carving away the blemishes before returning them to the flow to the slicer.

Downstream from the fryer, operators perform a similar visual QA check before the chips reach one of seven vertical form/fill/seal machines. Finished product then drops through a hole in the wall to the manual casepacking operation below. When the plant is humming, production tops out at 2,000 lbs. of finished goods an hour.

Small companies drive innovation because they are less risk averse than large ones. The trailer lift in Ballreich’s receiving bay was one of the first such installations in the country back in the 1960s, boasts Reich, and the “marcelled” style of cut used to create chips is a point of distinction that sets his chips apart. His daughter patented a Flavor Your Own microwavable product that comes with three seasonings that people add to their taste and create hot chips (think Jiffy Pop). Unfortunately, the firm hasn’t gotten retailer buy-in, but that hasn’t stopped Ballreich from continued innovations (it was one of the first producers of sweet potato chips, which have become its fourth biggest seller).

Quality is a synonym for consistency manufacturing, and companies like Coke, McDonald’s and Frito-Lay have built empires based on products with unparalleled sameness, no matter where in the world they are made. Mediocrity can be consistent, and the public’s understanding of quality is different than manufacturers’ view. Ballreich chips come with variations, but their taste has helped the company build a loyal base of fans. Reis prefers to view minimal automation as a plus—“there’s so much more you pack by hand,” he says. He wants to build on the firm’s success and sees the cultivation of more DSD routes as the key to growth. But it takes more than a truck and a driver: a route salesman needs time to build a profitable route, and buying time requires capital. Unfortunately for Reis, he can’t find a banker willing to extend credit for unsecured operating costs, frustrating his expansion efforts.

Ninety years ago, domestic food processing looked more like Ballreich than Bob Evans and Kraft do today. Reis understands that standing pat is not an option. If Ballreich Bros. is going to provide a hometown alternative to Frito-Lay and honest employment for future generations of the family, he must grow the business. Otherwise, this chip maker will join the 87,008 food plants that disappeared from the FDA registrar 16 months ago.

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