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Getting Ready for Prime Time

Henderson says established food processors are trying to move into new markets to make strong regional brands into national ones. "One trend is to try to make everything in one spot and transport it to all markets, and another is to set up multiple plants to serve each region," he explains. Wherever they set up, says Henderson, most food industry players need a low-wage work force, convenient packaging and machine maintenance suppliers, available water and cheap power.

KMB Produce, a Dallas-based packer of fresh fruits and vegetables, recently set up a 125,000-sq.-ft. (11,600-sq.-m.) facility in the Atlanta Ga. area, from which it distributes primarily California-grown produce. "This area made sense in terms of the relative cost of construction, availability of labor and friendly business climate," explains Tom Lovelace, CEO. "It was also a key geographic location to serve our customers in the Southeast. We need to be within 10 hours of our customers." California, with its long growing season and huge agricultural output, is the leading food processing state in the nation. Increasingly, California is building up the number of companies providing value-added food processing, as well as simple produce packing. Kern County, in the heart of the Central Valley, is not only one of the top counties in the nation in agricultural production, but it also hosts a wide variety of food processors, including Frito-Lay, which operates a large number of plants. "The nature of the finished products is that they don't travel well from a freshness, breakage or economic point of view," explains Jerry Matthews, Frito-Lay's senior operations director for Southern California. Kern County offers access to large markets, particularly Los Angeles and the Central Valley. It also provides a huge amount of the raw material that goes into the potato chips, tortilla chips and pretzels manufactured at the 13-year old plant, which recently doubled in size.

"A substantial portion of the potatoes we use are grown locally," says Matthews. In addition, Kern County rolled out the red carpet for Frito-Lay, fast tracking permitting to enable the plant to get into operation on a tight timeline to meet new product introduction deadlines. "The local government was responsive," says Matthews. "They helped us identify and screen job applicants and train new employees, and they defrayed our initial investment with a property tax rebate."

Not all locales court food processors. "Some places don't want canners, because they're noisy," says Henderson. "Some food businesses create water and air pollution and truck traffic." Also, the wage rates tend to be low. However, a critical advantage of food processing companies, consolidations aside, is that their business tends to be somewhat less cyclical than other industries, and so a more consistent boon to the local economy.