Food Processing and Manufacturing – Trends Dictate Location Choices

Food Processing and Manufacturing – Trends Dictate Location Choices

by Leslie Wagner, Senior Principal

Site selectors look at a number of factors when analyzing and evaluating potential locations for clients and this includes clients in the food processing and manufacturing industry. One of those areas examined includes The Tax Foundation State Tax Climate Index.

The Tax Foundation State Tax Climate Index allows business leaders, government policymakers and taxpayers to gauge how their states’ tax systems compare nationally. The index is designed to show how well states structure their tax systems and provides a road map to improving tax structures. This resource is often a go-to indicator for site selectors when analyzing site location opportunities. According to the 2015 Business Tax Climate Index, the Top 10 best states this year are:

1.  Wyoming

2.  South Dakota

3.  Nevada

4.  Alaska

5. Florida

6.  Montana

7.  New Hampshire

8.  Indiana

9.  Utah

10. Texas

Interestingly, only one state, Texas, appears on multiple Top 10 lists as a top state for the number of food manufacturing facilities. However, because other states are ranked above Texas on different lists, it indicates there may be other, more prevailing and compelling selection criteria that drive the site location decisions of food manufacturing companies. A brief look at California reveals it not only is the most populated state; it is one of the country’s top agricultural-producing states, according to the United States Department of Agriculture (USDA). New York reveals a robust agribusiness component and represents strong agglomeration in which industry tends to locate near its raw material base and/or market and customer base. New York, in terms of its manufacturing jobs, ranks food manufacturing positions at fourth-highest in the number of positions held.

While all site selection teams begin with a standard set of evaluation criteria, each project has its own nuances and unique set of business drivers and food manufacturing sites are no different. Standard quantitative location inputs used in the evaluation of manufacturing sites may include:

  • Availability of real estate
  • Geographic clustering
  • Business/tax environment
  • Utility availability and cost
  • Labor skills, cost and availability
  • Transportation infrastructure
  • Administrative approval processes
  • Regulations
  • Economic development incentives
  • Educational assets


These quantitative data points are well supplemented with other data components such as current trending within the industry and forecasting of industry predictors. Over the past decade there have been some significant issues impacting the food manufacturing industry, including more recent trends such as GMO legislation. By example, in 2012, California food manufacturers were challenged by Proposition 37 which, if passed, would have required labeling of genetically modified organisms (GMOs) in food. At the time, other states tried to pass such legislation and failed. The difference was that California took the issue directly to the voters, who had largely been in favor of the labeling. Just a month before the vote, the YES on Prop 37 constituents were polling ahead of the opposition by as much as 65 percent according to polls conducted by Pepperdine University. However, that didn’t mean the favorable vote was a guarantee. A group of NO on 37 – The Coalition Against the Deceptive Food Labeling Scheme, launched an intensive campaign against the measure. The group’s major donors included Monsanto, DuPont and the Grocery Manufacturers Association (a trade group that represents the interest of companies such as PepsiCo, General Mills, Kellogg and others). In fact, most of the large U.S. chemical and food manufacturers contributed financially to defeat GMO labeling. According to the California Secretary of State website, the list of contributors was extensive and included well-known manufacturers such as Nestle, Post, Campbell, Hershey, The J.M. Smucker Company, Kraft, Cargill, ConAgra, Coca-Cola and many others.

In November of 2012, the Coalition Against the Deceptive Food Labeling Scheme prevailed as California voters rejected the proposition by a narrow majority, 51.4 percent. Fast-forward to June of 2013 when Connecticut and Maine became the first states to pass bills requiring labels on all foods made from GMOs.

There is great debate nationally regarding GMO labeling, which has a direct impact on food manufacturers, their existing real estate and future location decisions. Many say the real costs associated with GMO labeling will fall upon food manufacturers, which may have to remake their products.

For the past 20 years, Americans have been eating plants in which scientists have used modern tools to insert a gene here or tweak a gene there helping crops tolerate drought and resist herbicides. It is thought that around 70 percent of processed foods in the U.S. contain genetically modified ingredients. Many of those against GMO labeling believe that instead of the labeling providing useful information, the mandatory labeling may intensify people’s misconception that GMOs endanger people’s health. The American Association for the Advancement of Science, the World Health Organization and the European Union all agree that GMOs are as safe as any other food.

The U.S. Food and Drug Administration tests all GMOs on the market to determine whether they are toxic or allergenic and they have concluded they are not. However, people having concerns with consumption of GMOs can seek out other options, one of which may be 100 percent organic, another trend impacting the food manufacturing industry.

Organic food sales in 2013 were $32.3 billion per the Institute of Food Technologists, which indicates remarkable stability over the last decade. Produce and dairy are the top-two organic food categories. The meat, fish and poultry category, which is domina