Food Processing 2016 Industry Report - Area Development by Area Development

2016

foodprocessing

The Changing Needs of an Evolving Industry

Maintaining the â&#x20AC;&#x153;Cold Supply Chainâ&#x20AC;?

Food Industry Responds to Transformative Change

AREADEVELOPMENT S I T E

A N D

F A C I L I T Y

P L A N N I N G

Protecting the Food Chain

Optimizing Supply Chain Strategies

Special Supplement to Area Development Magazine

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EDITOR’S NOTE

CONTENTS

According to WeiserMazars’ 2016 U.S. Food & Beverage Industry Study, most food and beverage companies anticipate a significant increase in sales this year. Sales are expected to increase 14 percent, say survey respondents who were drawn from more than 200 companies across the food and beverage industry sector.

FOOD MANUFACTURING INDUSTRY RESPONDS TO TRANSFORMATIVE CHANGE The CRE industry sees site selection shifts, challenges, and creative solutions for the food manufacturing industry.

One particular concern to both small and large food and beverage companies is the Food Safety Modernization Act and the many new regulations the act spells out. Companies need to take more preventative measures to ensure food safety, rather than being reactionary when problems arise. New automated methods of data collection and analysis are helping food and beverage companies to achieve the goals of maintaining food safety while also protecting their businesses. Consumers’ demand for more fresh and organic foods is another challenge for the food and beverage industry. Over the past decade, consumption of fresh foods has grown by more than 20 percent. Consumers want to know where their food is coming from. This presents unique challenges for this industry’s supply chain, which is unlike that of any other industry. Both the point of manufacture and the point of sourcing of raw materials need to be taken into account when setting up distribution centers. In addition to these considerations, finding the right talent and partnering with researchers/universities and other entities come into play. Innovations and opportunities in the food and beverage industry have made the job of finding the right location more important than ever before. We hope that the articles in our second annual Food Processing supplement, as well as information that can be obtained from the sponsoring organizations, will help guide forward-thinking food and beverage companies in their next location or expansion decision.

Editor

PUBLISHER: Dennis J. Shea ART & DESIGN: Patricia Zedalis EDITOR: Geraldine Gambale PRODUCTION MANAGER: Jessica Whitebook FINANCE: Mary Paulsen PRODUCTION ASSISTANT: Talea Gormican

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OPTIMIZING FOOD PROCESSORS’ SUPPLY CHAIN STRATEGIES The right distribution center (DC) site selection strategy for food and beverage companies can optimize their entire supply chain.

11 PROTECTING THE FOOD CHAIN Data collection, analysis, and automation are improving food safety and quality in the U.S.

THE CHANGING NEEDS OF AN EVOLVING FOOD INDUSTRY The innovations and opportunities in the food industry will create new challenges for location decision-makers.

MAINTAINING THE “COLD SUPPLY CHAIN” FROM MANUFACTURER TO CONSUMER Having a food defense plan helps suppliers, distributors, and operators maintain the safety of the food products they handle, as well as helping protect everyone’s business.

19 SPONSORS DIRECTORY

ADVERTISING: Bill Bakewicz Valerie Krpata

DIGITAL MEDIA MANAGER: Justin Shea BUSINESS DEVELOPMENT: Matthew Shea WEB DESIGNER: Carmela Emerson

BUSINESS SERVICES: Barbara Olsen

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FOOD MANUFACTURING INDUSTRY RESPONDS TO TRANSFORMATIVE CHANGE By Ken Reiff, Managing Director, and Chris Copenhaver, Director; Co-Leaders, Food and Beverage Practice Group, Cushman & Wakefield

he CRE industry sees site selection shifts, challenges, and creative solutions for the food manufacturing industry. Stringent regulations and evolving food preferences have challenged food and beverage manufacturers to prioritize consumer and environmental health. Plant efficiency has become critical to long-term survival as producers pursue both traditional and new, faster growing distribution channels. Food systems, cold storage facilities, and the transportation infrastructure for temperature-sensitive commodities have become more complex. Perhaps most transformative of all, changing consumption patterns have altered the very nature of food manufacturing. According to the latest data from the Bureau of Labor Statistics, food and beverage manufacturing accounted

U.S. - Food Manufacturing

for more than 1.5 million wage-and-salary jobs in the United States in 2015. Construction and expansion of food processing plants not only play a major role in providing markets with employment opportunities but also have a significant and direct impact on the industrial real estate sector. This article will explore paradigm shifts in food processing, how they are impacting site selection, and the resulting opportunities for property owners and investors. Drivers of Change

â&#x20AC;˘ FOOD SAFETY AND REGULATION: Food safety is job number one for food and beverage manufacturers and, with longer supply chains and more complex food sourcing, that job is becoming more complicated. January 2016 marked the fifth anniversary of passage of the Food Safety Modernization Act (FSMA), and with enforcement of FSMA regulations beginning to phase in, manufacturers are focused intently on it. The FSMA is a paradigm shift for the industry. Along with the FSMA, the FDA is moving Companies from the old food safety approach that reacted to potential harm to a new, preventive framework that puts greater responsibility on the food industry. â&#x20AC;˘ PLANT EFFICIENCY: Efficient plant production has always been important, but it is becoming critical to long-term survival as producers pursue both traditional and new, faster-growing distribution channels. Incorporating more technology into food production and packaging processes is becoming more widespread.

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Among the technologies making their way to the production line are advanced robotics capable of automating manual processes; sensors incorporated into labels; packaging to determine product freshness; and information systems that offer solutions to specific pain points. Equipment and production line operations are also becoming more complex with the increased interest in organic and natural foods, which must be handled differently. • COLD STORAGE: Over the past five years, public refrigeration space increased 2 percent and private space increased 5.3 percent. Alongside the growth in cold storage is increased demand for transportation infrastructure capable of handling temperature-sensitive products. Consumer demand for locally sourced foods, along with the desire for freshness, has changed the way in which food is packaged and is a major force in the requirement for refrigerated space. Energy consumption has also hit the forefront for cold storage providers, as it comprises a substantial portion of operating costs. Although the focus on energy consumption itself is not new, the tools and strategies to achieve it keep evolving. • THE YOUNG AND THE OLD: Given the highly competitive nature of food manufacturing, capturing the favor of millennials — the manufacturers are fastest-growing consumer gravitating toward new segment — may be the product, i.e., modern biggest challenge facing facilities constructed food executives. Given to create efficiencies. the sheer number of millennials, as they go so goes the food industry. Case in point, over the past decade, consumption of fresh foods grew by more than 20 percent, and millennials are a big reason why. Another group driving change in food and consumption patterns is the baby boomers. This generational group is aging, retiring, and developing health ailments, all of which are typically associated with major changes in approach to food and beverage consumption. Taken together, consumers are increasingly more concerned as to where their food is coming from: is it sustainable and is it good for them?

From 2011 to 2015, 1,691 food processing project announcements were made, including 1,033 expansions and 658 new projects. In 2015 alone, 249 expansion projects and 155 new projects were announced — the largest total food manufacturing project announcements in the past five years. We expect this trend to continue, with the 2016 tally surpassing that number. When it comes to locating plants in this “brave new world,” many larger food manufacturers are gravitating to new product. Major players want modern facilities constructed to create efficiencies in their specific operations, with buildings designed around operations rather than fitting them into a box. They are not as interested in redeveloping older manufacturing facilities, which generally lack enough parking and/or where land for expansion is not available or has been encroached upon with expanding municipalities. Existing assets are not sized to meet their requirements, and bringing them up to current standards can be cost-prohibitive. Notable new projects include Duke Food’s 150,000square-foot plant in Texas and Clif Bar’s 300,000-squarefoot bakery in Twin Falls, Idaho. Many newly announced projects result from the drive by food manufacturers to gain efficiency following mergers and acquisitions. They

Many

larger food

Clif Bar’s new $90 million facility in Twin Falls, Idaho, is a sustainabilityfocused facility that uses biophilic design, which connects people in buildings with nature and the well-being it provides.

are closing smaller (older) plants and constructing larger regional facilities. A prime example involves the recent acquisition of Friendly’s Ice Cream, LLC by Dean Foods and the closure of facilities in Orem, Utah; Buena Park, Calif.; and New Orleans, Louisiana; and the transfer of those operations to St. George, Utah.

Growth and Priorities

As the economy continues to strengthen, and in response to the food and beverage manufacturing industry’s revolution, manufacturing inventory is growing at an accelerated pace in key markets across the United States.

Challenges and Solutions

This trending, in turn, has led to the obsolescence of many manufacturing plants. It has become increasingly challenging to secure new manufacturing tenants for

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higher capital investments needed. What is the next chapter for these properties? We are seeing several stories unfold. The first involves strong momentum among local and regional food processors. These smaller manufacturing operations are far more likely to consider secondgeneration product, provided the geography and the building bones meet their needs. For example, our team is marketing a 129,600-square-foot facility in western Georgia. The seller is an international frozen food processing company that supplies frozen products to major chains; the company recently built a new, larger facility to accommodate organic growth. The older facility is being pursued by several regional users for whom an affordable retrofit of the building would accommodate their needs. Investors are also repurposing Aerial image of Boar’s Head operation adjacent to the Henry County shell buildings speculatively. A perfect exbuilding ample is a former Miller International Foods bakery located in Lithonia, Ga. Earlier this year, Mark Cusumano, Henry County,” Murphy emphasizes. president and CEO of FW Warehous“They would never have visited if we ing, purchased the 180,000-squaredidn’t have a shell building available.” foot building at auction for pennies Jerry Szatan, a site location strateon the dollar of reproduction cost. gist with over 25 years of experience, Like most factories, the facility was notes, “A shell building is like an ante cut up into sections to accommodate in a poker game. Without an ante, a different stages of product processcommunity can’t play. A shell building. The new ownership blew out the ing may be the factor that earns the walls and reconditioned the floors community a site visit. If the company to accommodate a warehouse/disinvests in the community, even when tribution use. The lower cost basis the plans do not involve the shell justified the capital investment to building, the project has earned back repurpose the property, which was the developer’s expense.” quickly re-tenanted by Home Chef, The Henry County structure is a meal kit delivery service, under a one of three available shell buildings long-term lease. located in Hoosier Energy’s electric Both cases illustrate how availterritory in southern Indiana. The able facilities are being targeted by other two structures are located near companies that are retrofitting for Columbus and North Vernon. other food uses. Demand for existThough the Henry County shell ing, older plants is also being driven building remains unoccupied, its exisby emerging industries, which may tence has “significantly increased visits use second-generation product as a to our community,” says Murphy. stepping-stone for growth. Boar’s Head opened its new distriWhen repurposing manufacturbution center in 2015, and already ing product, the existing infrastrucplans to add another 39,000 square ture often helps determine the feet to its campus. Between the two future use. For instance, a former projects, Boar’s Head will spend $90 ice cream manufacturing property million and create over 300 jobs. Not in Sacramento, Calif., now houses a a bad return on investment for a shell craft brewery, a cold storage facilbuilding. ity, and a specialty meatpacking

these assets because the work needed to meet a new tenant’s layout and use can be cost- and time-consuming. This is especially true for cold storage facilities that have gone dark. Once buildings are vacant and not seen by a maintenance tech daily, they tend to deteriorate very quickly, which can complicate the re-commissioning and recertification process, with

Shell Buildings Are a Win-Win Investment

hell buildings (also known as spec buildings) are pre-constructed, incomplete structures built to incentivize growth. Expandable, and highly customizable, shell buildings target businesses that want to act fast and move quickly into a new building constructed to modern building codes. At first glance, it appears the only way a developer can recoup their investment is to lease or sell as fast as possible, making a shell building a high-risk venture. But the reality is quite different. In 2012, the New Castle, Indiana/ Henry County Economic Development Corporation invested in the development of a 50,000-square-foot shell building at its industrial park located near I-70. Though the building is still unoccupied, it has already justified its existence. “The shell building is an investment in product,” says Corey Murphy, president of the New Castle/Henry County Economic Development Corporation. “It’s one of the most effective ways to market your community.” In 2014, Boar’s Head Brand, a national distributor of meats and cheeses, planned to open a manufacturing and research facility in the Midwest. Henry County submitted its shell building for consideration. After visiting the building, Boar’s Head opted to purchase land across the road to construct a new 150,000-square-foot facility. “Boar’s Head fell in love with

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Municipal utility rates

and permitting policies should be major considerations along with labor availability and costs.

operation. The new tenants benefit from the heavy power, freezer space, and water and water discharge capacity built into the original use. In Baltimore, a 161,000-square-foot former margarine production plant now houses a commercial laundry operation (another heavy water intake and discharge use). Leveraging Opportunity

Locating Near Agricultural Resources, Fresh Water

aving a good supply chain is an important component of cost management for every manufacturer. Food processors that locate in an area with rich soil and abundant water can maximize the quality of their supply while minimizing their costs. Cayuga County touches eight lakes, including three of the Finger Lakes and a Great Lake, boasting the most miles of freshwater frontage of any county in New York State (NYS). Additionally, the area enjoys steady precipitation with 147 days with measureable rainfall annually. This access to abundant fresh water and rich soil has gifted Cayuga County with a very long history of farming. According to the 2012 Census of Agriculture, Cayuga County’s 238,444 acres of farmland produced $293.5 million in market value of products sold. Since Cayuga County produces the second-largest amount of milk from cows in NYS, a cooperative of local farmers recently built a milk-processing facility, Cayuga Milk Ingredients,

What are the key takeaways for property owners and investors? Ground-up development is the choice of major food manufacturers. At the same time, we are seeing a strengthening market for re-tenanting existing manufacturing facilities with regional food processing companies, or repurposing properties for other uses (particularly those requiring robust utilities infrastructure and permitting). When assessing the viability of a property for a pure food manufacturing reboot, it all comes down to cost of replacement. Does the price tag of installing new equipment and amenities justify the investment? Does the building have the right bones, such as slanted floors with working drains? Can it support modern loading and offer ample truck parking? Looking deeper, why was the property shut down in the first place? Was it shuttered appropriately, with compressors purged correctly and pest control preventatives put in place? Location is also key. Municipal utility rates and permitting policies should be major considerations, along with the availability and cost of labor. Proximity to highways/freeways and rail is paramount for efficient product distribution. This is more pertinent today than ever before, as many food manufacturers are consolidating their distribution networks to gain supply-chain

This 2016 aerial view shows the construction of Grober Nutrition (bottom) and the completed Cayuga Milk Ingredients (top).

in the Cayuga County Industrial Park. This plant then attracted a second milk processor, Grober Nutrition. Cayuga County is first in soybean production in NYS and has additional land available in the park, leaving an untapped opportunity for soybean processors. With agricultural based resources such as Cornell University, a local Cornell Cooperative Extension, the Central New York Technology Development Organization, and an established Soil & Water Conservation District, there are a tremendous amount of informational resources already available. Furthermore, the Cayuga Economic Development Agency is the one stop for business assistance for any company looking to expand or relocate to Cayuga County, providing access to a host of local, state, and federal incentives.

efficiencies. If food is no longer a viable option, will the space work for a different type of manufacturing? Better yet, does it provide competitive advantage in terms of inplace systems or permits? Does it offer the kind of closein access to population centers — or shipping hubs — that the red-hot e-commerce sector is seeking as it works to meet next-day and same-day delivery demand? In that case, a manufacturing-to-warehouse adaptation might be a lucrative answer. Looking ahead, we anticipate that this “next chapter” momentum for older manufacturing product will continue to grow as property owners — and tenants — seek creative solutions to meet diverse demand in supplyconstricted markets nationwide. FP

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OPTIMIZING FOOD PROCESSORS’ SUPPLY CHAIN STRATEGIES By Jim Arnold, Executive Vice President – Sales and Operations, Supply Chain, XPO Logistics

he right distribution center (DC) site selection strategy for food and beverage companies can optimize their entire supply chain. In the logistics space, multiple factors can impact a location strategy for distribution centers. Real estate and staffing costs, transportation capacity, labor quality, export strategies, tax implications, and training incentives are just a few of the issues that are universal to all industries. The food and beverage industry has the additional challenges of sensitive product requirements and more frequent volume surges. Given the extensive product diversity in the food and beverage industry, it shouldn’t be surprising to learn that the logistics needs of companies vary greatly. Just visit your local supermarket: you’ll find not only fresh produce and fresh meat, but also canned produce and pre-packaged meat. There are countess variations of cereal, snack bars, beer and soda, bread, dairy, and more. One Industry, Multiple Needs

This diversity makes it untenable to assign “one size fits all” solutions by vertical. Two obvious examples are the concepts of freshness and shelf life, and their importance in time-to-market. A household gadget slated for retail shelves can take two days in transit by truck and still be acceptable to retailers, whereas the identical transit time to the same destination can be disastrous for the

Facility requirements for the food and beverage industry can vary greatly depending on product specifics, but quality-control and food-safety considerations are universal.

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food and beverage supply chain. Knowing the particulars of a client’s needs, the regulations it operates under, and the expectations of end customers determines the type of solution a company requires. For example, at XPO we run a distribution center (DC) for a baked goods client that essentially operates as a cross-dock. Fresh goods come in daily from the bakery and are staged for outbound delivery. By closing time the DC is empty, until the process starts over again the next morning. Conversely, companies that manufacture and sell pasta, pre-packaged snacks, candy bars, and sports drinks need to maintain large safety stocks due to the nature of their products. This requires a different type of facility, warehouse technology, and distribution plan. For many types of logistics, it’s important to locate DC facilities near major ports; but that’s not necessarily the case in the food and beverage industry. Generally speaking, the food and beverage industry has a smaller percentage of import products than, say, technology, textiles, or consumer packaged goods. There are exceptions of course, such as wine from France, olives from Italy, and fresh produce from South America. Selective imports, coupled with an increasing number of exports, particularly in the cold chain, point to the need for at least some port interaction. But by and large, food and beverage products are sourced and manufactured within the country of consumption, with relatively modest cross-border flows. This impacts the distribution strategies utilized by the food and beverage industry. When considering population density and rapid transit, the five primary distribution hubs for the United States shouldn’t need any explanation: the Northeast, the Southeast (Atlanta), Dallas/Ft. Worth, Chicagoland, and Southern California. These five areas service more than 75 percent of the domestic population and have been staple locales in the great majority of supply chains for decades. Here again, the food and beverage industry diverges from the norm. The two main differences with the food and beverage industry are the greater emphases placed on (1) the point of manufacture and (2) the point of sourcing raw materials. A real-world example would be one of our larger food and beverage clients, who selected central Iowa as the site for its in-plant distribution center. This DC is close enough to Midwest distribution hubs to facilitate outbound transportation of products, while also being close enough to the raw materials used to manufacture

those products. The proximity of raw materials reduces the time and costs associated with procuring ingredients. First and Foremost A Strategy, Not a Physical Asset

Cost will always play an important role in the positioning of distribution centers. Does a company want one central DC or multiple locations? Maybe it needs one in every major region in the U.S. How does the math work out? The more DCs a company has, the lower its overall transportation costs will be – but that can be offset by the amount of inventory those centers need to carry. This decision is something a company and its supplychain providers should collaborate on. The size and scope of a company’s business and the size and geographies of its customer markets are core indicators of how many DCs are needed. For example, if a company is running a regional chain of grocery stores, it can probably make do

A skilled, dedicated

workforce is an essential component of keeping a supply chain moving.

Forestry Resources Attract Food And Beverage Businesses

hat do forestry resources have to do with the food and beverage industry? It turns out…a lot. For example, thoughts of Kentucky’s primary economic drivers typically focus on bourbon, horses, and automobiles. However, one day soon, it also could become known for ice cream sticks. Euro Sticks Group — a French family-owned manufacturer of ice cream and coffee stir sticks — announced plans in June to establish its U.S. affiliate, North American Sticks, in the Southeast Kentucky Business Park in Corbin, which will employ 90 and manufacture some two billion ice cream and coffee stir sticks annually! Eastern Kentucky’s rich supply of beech trees helped attract Euro Sticks, as the hardwood is known for its strength and largely lacks odor and flavor. “Abundant beech resources and the availability of quality manpower were major factors in our decision to locate our new plant in Kentucky,” says Frédéric Debacker, Euro Sticks president and owner. “We look forward to operating a successful manufacturing operation that contributes to the Kentucky economy.” The rapid growth in the world’s thirst for bourbon also has increased the demand for bourbon and whiskey barrels made from Kentucky wood. American Stave Company LLC recently announced plans for a second mill in Kentucky to manufacture barrel staves. The Benton location will add 40 additional jobs. These two new companies, plus

with one DC. A nationwide beverage company will need more distribution points if its products are produced by local manufacturing and bottling ventures. However, the size and scope of these local DCs can be smaller than central distribution facilities. Companies that manufacture private-label (store brand) products tend to prefer distribution centers closer to the point of manufacture than to the food and beverage clients they serve. That’s because private-label manufacturers could add or lose a contract at any time. Positioning DCs close to individual clients could create unnecessary exposure to risk.

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a variety of others, have brought additional attention to Kentucky’s immense resources for wood manufacturing. Kentucky has the second most diverse hardwood species mix in the nation and 12.4 million acres of forestland; that’s 48 percent of the state. That underused market, combined with the state’s logistical and distribution advantages and workforce, has led to several new and expansion projects within the wood manufacturing industry of late. In the last two-and-a-half years alone, wood manufacturers have announced nearly 60 new locations and expansions in the Commonwealth, accounting for more than $140 million in investments and 1,500 new jobs. “People don’t always realize the contribution that wood products make to the food and beverage industry,” says the Kentucky Cabinet for Economic Development’s Joe Lilly. “Proper management of our abundant forest land is just another tremendous asset we have to offer food and beverage industries looking for a place to grow or expand. The growth of the wood manufacturing industry in Kentucky is certainly a trend we intend to capitalize on and build upon into the future.”

The worldwide popularity of Kentuckymade bourbon whiskey has greatly increased demand for bourbon barrels made from Kentucky wood.

Labor: the Engine Behind Successful Logistics

Another significant decision point in DC strategies is the ability to source quality labor. This issue has universal relevance, regardless of industry. A skilled, dedicated

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workforce is an essential component of keeping a supply chain moving. For companies that experience seasonal surges, flexible access to a reliable source of labor is also important. The frequency of these peaks can determine how heavily a food and beverage company should weight the labor pool in site selection. Candy manufacturers are a good example of this. Many candy companies plan on at least four surges a year: Valentine’s Day, Easter, Halloween, and Christmas. In almost all of these instances, companies not only ship heavier volumes of “normal” products, they also produce and ship unique products tied to the holidays — heart-shaped for Valentine’s Day, egg-shaped for Easter, volume packs of small bars for Halloween, and seasonally unique products and packaging for the holiday season. To add to these challenges, a “normal” candy bar typically has a longer shelf life than its seasonal counterpart, which has an abridged time in market. Even a small logistics delay due to a labor shortage can be extremely costly to the manufacturer. One way XPO has been successful in mitigating labor issues is by structuring logistics operations in campus-like environments. This allows us to pair food and beverage clients with clients from other industries that have

complementary peak seasons. We also cross-train our labor force and shift labor between client supply chains as needed. Labor in any industry is stabilized by retention, and the campus solution has proven effective in retaining many good logistics workers who might otherwise have left after seasonal employment. Finally, in addition to location, the size of the proposed distribution center and its ability to expand are important considerations. Mergers and acquisitions are becoming the norm in many industries today. Some longstanding companies are joining with their peers, and startups are opting to be acquired rather than go public. If a company expands its market offering with the acquisition of a brand, competitor, or supplier — or divests operations to reduce its market offering — the supply chain strategy should be rethought and the distribution capacity reshaped as soon as practicable. In the end, the site selection decision comes down to the specific needs of the company, the profile of its consumers, and its time-to-market requirements for each channel, including e-commerce. It’s a good practice to make these decisions with the input of one or more experienced supply-chain providers who understand the many unique attributes of food and beverage distribution. FP

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01/02/16 8:05 PM

PROTECTING THE FOOD CHAIN

ata collection, analysis, and automation are improving food safety and quality in the U.S. Today’s demanding consumer is challenging food safety and quality standards like never before. The growing demand for food and beverages that are free of allergens, gluten, pesticides, and GMOs are pushing food and beverage producers to redesign their quality and safety programs. And, today’s consumer not only demands the foods they consume to be free of certain ingredients or contaminants — they want proof.1 Add to that increasingly stringent regulatory standards required by the Global Food Safety Initiative (GFSI)2 and the Food Safety Modernization Act (FSMA),3 and it’s never been a more challenging time to be in the food and beverage business. Transparency and traceability of ingredients are simply a must for producers that want to maintain customer satisfaction while meeting increasingly stringent regulatory standards. The USDA recalled4 over 21 million pounds of meat and egg foods in 2015. Undeclared allergens were the leading cause, accounting for nearly half of these recalls. Delivering the highest-quality foods that are safe for customers to consume continues to be priority5 number one for U.S. food and beverage producers, and the focus is on preventing quality and safety breaches rather than reacting to them. As one might expect, the U.S. food and beverage industry is rising to the occasion,6 tackling the increas-

Today’s food and beverage producers use advanced operating systems to collect, analyze, and store massive amounts of data from automated equipment across food production lines.

ing regulatory challenges and rising consumer demands head on. One key way they are doing so is by improving the way safety and quality data is collected and analyzed during the manufacturing process. Barry Maxon is founder and president of Safety Chain (www.safetychain.com) — a company that provides software solutions to help food and beverage producers automate and collect data from the continuum of their food safety and quality programs. According to Maxon, the move from manual collection of data on food and beverage production lines to automated data collection has been the most significant and impactful change in food safety and quality over the last two decades. He says that, historically, food quality and safety information was checked and collected using pens, paper, and spreadsheets, and then stored in filing cabinets to be accessed at a later date for audits or in case of a recall. “It was very difficult to measure the effectiveness of food safety and quality because, fundamentally, the data of all of these different processes were locked up in paper files and spreadsheets that didn’t have any ability to connect the dots,” says Maxon. “When you’re managing a manual process on paper, things fall through the cracks. Trends aren’t seen soon enough, and so you wind up being very reactionary as opposed to preventative, which is the whole thrust of GFSI standards and the Food Safety Modernization Act — to make your food safety programs much more preventative versus reactionary.” Maxon says most of today’s food and beverage producers have transitioned from a manual approach to an automated one, using advanced operating systems to collect, analyze, and store massive amounts of data from automated equipment across food production lines. But today’s food and beverage producers have taken it a step further and want what he calls “harmonization”7 in their data collection processes, across all of their facilities. “Harmonization is more than just doing things the same way,” says Maxon. “Harmonization is the ability to actually monitor that data collection is being done and being done correctly. Harmonization is going a step beyond a standard. It’s ensuring closed-loop management to make sure your programs are actually being implemented effectively in the proper way.” Now, with more data at their fingertips, food and beverage producers can extract and analyze data like never before. Maxon says his company’s operating system allows producers to capture every food and safety quality event,

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Food and beverage producers are redeveloping their quality and safety programs.

“Most industrial regions have to chemically treat their water supply to make it pure enough for their uses, but we don’t,” says Joseph Brake, vice president and general manager of Bethlehem, Pa.-based Coca-Cola Bottling of the Lehigh Valley. For food and beverage companies, water is vital, and the beverage maker had such confidence in the Lehigh Valley’s water purity that it invested $46 million in 2012 to expand its Coca-Cola Refreshments syrup plant in Upper Macungie Township. This allowed Coca-Cola to add several new manufacturing lines, including Powerade, Vitaminwater, and Fuze, and to boost employment. “Our local bottling plant undergoes three audits for environmental compliance, safety, and quality,” Brake says. “We must meet or exceed CocaCola’s standards. The corporation can order a shutdown of our plant to make adjustments, but that has never happened to us. Our plant’s record has been exemplary for the 98 years we have been in operation.” While some communities might not consider a wastewater treatment plant an “attraction,” a pre-treatment plant built in the 1990s in Upper Macungie Township is a huge draw for food and beverage makers. The plant cleans waste before it enters local sewer lines, saving these industries the high cost of building and operating their own pre-treatment facilities.

in computer technology, like desktop computers and cell phones. As the availability of technology increases, the cost of these systems decreases. “A couple of decades ago, it might cost hundreds of thousands of dollars to implement such a system, but now, it can be done for under $10,000,” he says. “And what used to fill a room is now sitting on your desk.” Maxon concurs, and adds that it’s important to look at the cost of adopting automation software in the context of a return on investment. “It’s really not an operating expense when you look at a return on investment model,” he says. “I would encourage companies to take a practical look at it because, if they’re not doing it today, they’re running a significant risk in liability by not adding preventative controls.” FP

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When Ocean Spray sought to build a high-volume processing plant for its brand-name line of juices and drinks, it also chose Pennsylvania’s Lehigh Valley. In 2014, the Massachusettsbased cooperative cut the ribbon on a $110 million, 315,000-square-foot bottling facility in Upper Macungie Township. Besides its size and capacity, the plant incorporates a variety of state-of-the-art innovations, including an ultra-pure, highly secure blending room. “About 40 percent of what Ocean Spray makes and sells passes through our facility,” says Tim Haggerty, plant director. The new facility replaced Ocean Spray’s first processing plant — an outdated facility in Bordentown, N.J., that could no longer meet production requirements. Ocean Spray and Coca-Cola have plenty of company in the Lehigh Valley including Bimbo Bakeries, the U.S. arm of Mexico’s Grupo Bimbo and the corporate parent for such iconic American brands as Entenmann’s, Thomas’, Arnold, and Sara Lee, among others. And across the street from Ocean Spray’s Macungie Township plant is Nestle Waters — a firm whose very name reflects one of the major reasons why so many food and beverage makers call the Lehigh Valley home: water.

Water Is Vital for Food and Beverage Companies

©Marco Calderon

expose that data through a variety of views, and analyze the data in real time. “Was the metal detector check done on time? Was there a third-party laboratory analysis of a sample that indicated a positive for E-coli, or any other microbiological contaminant? Was a net-weight sample taken and was it within parameters, or not?” says Maxon of some of the questions that can now be answered, and answered quickly. Food and beverage producers that have been resistant to change might say integrating sophisticated data collection operating systems is cost-prohibitive, but experts in the industry disagree. Dan Schuster is a senior process control engineer for Schenck Process (www.schenckprocess.us), a global market leader in measuring and process technologies in industrial weighing, feeding, screening, and automation equipment. He says the cost of even the most sophisticated data collection system has followed advances

This article originally appeared in the May/June 2016 issue of the GrayWay, published by Gray Construction. 1

www.foodsafetynews.com/2016/03/public-demands-what-feds-suggest-traceability-via-foodlabels/#.VzsmU4QrKUk http://www.mygfsi.com/ 3 http://www.fda.gov/Food/GuidanceRegulation/FSMA/ 4 http://www.fsis.usda.gov/wps/portal/fsis/topics/recalls-and-public-health-alerts/recall-summaries 5 http://www.foodengineeringmag.com/articles/95789-th-annual-plant-construction-survey-projects-peak-as-consumer-demands-grow 6 http://www.processingmagazine.com/automation-expenditures-in-food-beverage-industry-to-top7-billion-by-2016-report-predicts/ 7 http://tfig.unece.org/contents/data-harmonization.htm 2

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THE CHANGING NEEDS OF AN EVOLVING FOOD INDUSTRY By Michele Brown, President and CEO, Choose New Jersey, Inc.

he innovations and opportunities in the food industry will create new challenges for location decision-makers. No doubt, the food industry is evolving. Driven by consumer demand for healthier, tastier, fresher options, food companies are pushing the boundaries of innovation to stay competitive in a rapidly changing marketplace. The industry’s most forward-thinking companies are taking innovation a step further, pioneering the food frontier of tomorrow. These trail-blazing companies are exploring the power of nutrition to change the course of health management, creating a new industry at the intersection of food and bioscience. What are the implications for location decision-makers? While the criteria for the selection of a location will continue to vary from company to company, priorities in site selection may shift based on the changing needs of an industry in evolution, but are always driven by talent. Availability of Highly Educated, Specialized Talent

The availability of highly educated, specialized talent may become increasingly important in years ahead. It’s certainly already a reality for food industry innovators. For example, Swiss food giant, Nestlè, scoured the globe for a site for its new Health Science research home, where it will explore the therapeutic role of nutri-

tion and develop new nutritional therapies. In the end, it all boiled down to one critical factor: the commercial and technical competence of the workforce. It’s not surprising. The company already has a product line that includes nutritional therapies for chronic medical conditions, but there are other emerging opportunities Nestlè has set its sights to capture. From the treatment of Alzheimer’s to the underlying causes of gastrointestinal disorders, Nestlè is investing in research and leveraging cutting-edge scientific discovery to develop therapies that have the potential to change healthcare delivery. To achieve its vision and maintain its status as an innovation leader, the company recognized that the ability to recruit the researchers and scientists that will ultimately accelerate scientific breakthroughs would be difficult in many otherwise appealing locations. That factor ultimately guided the decision to select a location in the heart of a major biopharmaceutical corridor, where recruiting a team of experienced scientists and researchers was achievable. Nestlè is not alone in making access to talent one of the primary site selection criteria today. Many of the world’s leading food companies, including Mondelez, Unilever, and Pinnacle Food Group, have established their R&D operations in innovation hot spots, where access to the talent they require for discovery is readily available. While the need for highly specialized scientific talent doesn’t diminish the need for expertise in production, quality assurance, and distribution for many food companies, even these fields require a more sophisticated workforce than in years past. With technology and automation driving the efficiency of all industries, many food companies are favoring locations where tech-savvy workers are plentiful. There’s little doubt that access to a highly educated workforce with technology acumen will become an increasingly important site selection criterion in years to come. Access to Partnering Opportunities

Access to a highly educated workforce and specialized talent will become increasingly important to innovative food companies.

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Access to partners and an ecosystem that supports innovation has long been important to life sciences companies. It also has become increasingly important to food companies, especially those that focus on innovation. As pioneering food companies increase their collaboration to accelerate scientific breakthroughs and launch new products, easy access to partners in other industries,

as well as leading universities, is becoming as important a site search criteria to some companies as access to other suppliers and vendors. For example, Chromocell Corporation, a biotech company that began its life in a life science incubator, has become a go-to partner for some of the food industry’s leaders. While its founders never intended for the company to be part of the food revolution, its 120 scientists and researchers are now collaborating with food and beverage leaders like Nestlè, Kraft Foods, and Coca-Cola to increase the perception of sweetness and saltiness in food. Many food companies also are stepping up their partnerships with flavor and fragrance companies like Firmenich, Symrise, and International Flavors & Fragrances, whose microbiologists, biochemists, and other scientists are not only involved in cutting-edge research to make food taste better, but are developing new solutions for healthier food. Other food companies are turning to the research departments or specialized innovation centers of universities. As a result, they are selecting locations that put collaboration within easy reach. For example, more than 1,500 food companies have tapped into the services and support of the Food Innovation Center (FIC), a unique business incubation and accelerator program, which is part of the New Jersey Agricultural Experiment Station (NJAES) at Rutgers, the State University of New Jersey. The technical and business support offered there includes the ability other industries is to conduct research and test batches in state-ofbecoming an important the-art USDA and FDAsearch criteria. inspected food processing facilities, which has proven valuable to both established and start-up companies. In fact, Dr. Schär, a manufacturer of gluten-free bread products based in Italy, was one of many companies to launch its first products for the U.S. market at FIC. The center has proven such a valuable partner that the company chose to open its first U.S. production facility a few miles away.

Easy access to

— even same-day — delivery without the expense associated with long-distance shipping. For many, the only answer to keeping costs in check is selecting a location that offers convenient and broad access to the markets they want to reach. In a global economy, sometimes that’s easier said than done since consumers, retailers, and suppliers can be located in the same city, across the country, or around that world. That’s one of the reasons why the U.S. Northeast corridor, one of the most concentrated consumer markets in the world, has become a popular landing place for many food companies. For companies that rely on shipping or receiving goods from around the world, access to air/sea connections is also a consideration. In fact, a location near a port with opportunities for sea, rail, road, and air connections becomes a necessary site selection consideration for companies that have global operations and customers. When a company has locations around the world, access to passenger air service also becomes important to facilitate broader collaboration between global team members. Finally, food companies may require access to regulatory and financial centers as part of normal business operations. In some case, access to these resources also becomes a factor in the location decision. One thing is certain. The innovations and opportunities in the food industry will create new challenges for location decision-makers. But it will be a win/win for those companies that can capitalize on its evolution and all of us who will have access to healthier, tastier, fresher food .FP

partners in

Location Even More Critical

Location has always been an important factor in site selection decisions. However, as food innovators strive to bring heathier, fresher foods to market, location decisions will become even more critical. For many companies, one of the biggest hurdles to profitable growth is distribution. And even food companies on the cutting edge of innovation sometimes struggle with meeting consumer expectations for speedy

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MAINTAINING THE “COLD SUPPLY CHAIN” FROM MANUFACTURER TO CONSUMER By Elise Couston, SIOR, Senior Managing Director, Newmark Grubb Knight Frank

aving a food defense plan helps suppliers, distributors, and operators maintain the safety of the food products they handle, as well as helping protect everyone’s business. The focus for a successful food protection program is twofold and includes both food defense and food safety. “Food defense” means preventing intentional infiltration by physical, chemical, biological, or radiological factors. “Food safety” refers to protecting food against unintentional contamination. A basic and essential component of our food delivery system is the distribution of ingredients and products. This is why it is vitally important for food distributors and companies to know their suppliers and understand the food protection measures being used. There are three food categories that are considered to be especially vulnerable to contamination. Meat or dairy products, which are highly perishable, must be monitored closely because of their relatively short shelf lives. The second category includes produce and nuts, which can originate from multiple suppliers and then mixed and packaged multiple times, which requires extensive human interaction with the product. And third, secondary ingredients such as peanut butter,

seasonings, and breadings are also highly susceptible to contamination. The Food and Drug Administration’s Center for Food Safety and Applied Nutrition (CFSAN)1 has introduced several initiatives designed to help suppliers, distributors, and operators with food defenses. Those initiatives are ALERT (targeting food service managers), FIRST (aimed at employees, the first line of defense), and CARVER+Shock, a comprehensive online planning tool to help companies set food defense priorities. Information about all of them can be downloaded from the CFSAN website. The Food Safety Modernization Act (FSMA)

The FDA’s recent Food Safety Modernization Act (FSMA) is the most extensive reform of U.S. food safety laws in 70+ years. Its objective is to assure the safety of food throughout the supply chain through the introduction of new requirements to food manufacturers, processors, transporters, and distributors. The FSMA legislation consists of seven new regulations. The key regulation around food transportation is the Sanitary Transportation of Human and Animal Food (sometimes referred to as SFTA — the Sanitary Food Transport Act), which includes the following requirements: • Temperature control/tracking: For refrigerated products, every storage compartment must be precooled and have a temperature monitoring device. Shippers must also define temperature conditions that must be met throughout transportation. • Cleanliness: Vehicles must be maintained in a sanitary condition, and are subject to inspection. Loading/unloading stations must be provided with handwashing facilities. • Temperature certification/data exchange: A log of temperature conditions for the duration of the transportation must be provided to the receiver/shipper by the carrier upon request. • Training: Carriers must provide basic sanitary transportation practice training

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to their personnel. • Data retention: All data records must be maintained for a period of 12 months. FSMA will impact almost everyone involved in the U.S. food supply chain. Sanitary Transport of Human and Animal Food (STHAF)

Any food transportation company with revenues over $500,000 that operates as a shipper, carrier, or receiver must comply with the Sanitary Transport of Human and Animal Food (STHAF) rules, as follows:

Both food defense

and food safety are included in successful food protection programs.

• A shipper is a person who initiates a shipment of food by motor or rail vehicle. Shippers are frequently the manufacturers or processors of food. They are responsible

for supply chain functions initiated by a shipper even if they are performed by another person, such as a person who only holds food and physically transfers it onto a vehicle arranged for by the shipper. • A carrier is a person who owns, leases, or is otherwise ultimately responsible for the use of a motor vehicle or rail vehicle to transport food. The carrier is responsible for all functions assigned to a carrier even if they are performed by other people such as a driver. • A receiver is any person who receives food after transportation, whether or not that person represents the final point of receipt for the food. A receiver does not include an individual consumer or others who are not in the business of distributing food. According to the Centers for Disease Control and Prevention, about 48 million people get sick, 128,000 are hospitalized, and 3,000 die each year from foodborne diseases. With proper food handling and transportation practices, these incidents are largely preventable. With the proposed Sanitary Transport of Human and Animal Food act (STHAF), the U.S. government is introducing new rules and regulations to assure the safety of food throughout the supply chain. These directives

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will create new requirements for food manufacturers, processors, transporters, and distributors that must be followed. Besides the obvious benefits of compliance to customers and consumers, shippers and carriers who do not comply can be subject to a wide range of penalties. The final rules for the Sanitary Transport of Human and Animal Food (STHAF) were published on April 16, 2016. There will be a 12-month adoption period with the final rules expected to become effective as of March 31, 2017. FP 1

http://www.fda.gov/AboutFDA/CentersOffices/OfficeofFoods/ CFSAN/WhatWeDo/

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government is introducing rules to assure the safety of food throughout the supply chain with the STHAF.

Satisfying Food Processors’ R&D and Power Needs

ompanies within the food processing industry rely on institutions of higher education for research and development, as well as providing a source of skilled workers. One company that got its start with the help of the Food Processing Center at the University of Nebraska-Lincoln is Apollo Food Group, LLC, which produces and markets frozen Greek yogurt under the brand name Yasso™. Nebraska provides many advantages to food processors of all sizes, including its central geographic location with access to I-80, the most traveled east-west interstate highway; a highquality, productive workforce with low turnover and absenteeism rates; and reliable supplies of affordable energy that are particularly important to the food processing industry. Nebraska’s electric rates for typical industrial customers are 21 percent lower than the U.S. average and are among the lowest in the lower 48 states.

Nebraska is the only state in the nation with electric service provided entirely by public power. The Nebraska Public Power District (NPPD) is the state’s largest electric utility, serving 86 of the state’s 93 counties with a diverse mix of fuels. Together with its public power partners, NPPD has developed a large customer economic development incentive electric rate that offers energy at a discounted price for a fixed period of time. Other incentives are offered for energy-efficiency programs. For example, Open Range Beef’s meat processing plant in Gordon recently received an incentive from NPPD to improve the efficiency of the compressed air system used in its operations, thereby reducing electricity use.

Find the Right Location for Your Next Project. FacilityLocations is a GIS map-driven, online economic development directory used to research potential locations during the business re-location or expansion process.

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