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JUNE 2016
FOOD MANUFACTURING UPDATE
GOOD EATS & MORE TREATSA FIVE PART SERIES
A Cushman & Wakefield Research Publication
Good Eats & More Treats - Food Manufacturing Update
PART 1
The economic impact and geographical diversity of food manufacturing is quite broad. According to the latest data from the Bureau of Labor Statistics, the industry made up more than 1.5 million wage-and-salary jobs in the United States in 2015, making it a significant employer. Construction of plants and expansion of facilities play a major role in providing markets with employment opportunities and has a direct effect on commercial real estate.
From 2011-2015, there have been 1,691 food processing project announcements, of which 1,033 were expansions and 658 were new projects. Since 2011, there has been a clear upward trend in both new and expansion projects, and growth is accelerating. In 2015, we enjoyed the greatest number of food manufacturing project announcements of the past five years with 249 expansion projects and 155 new projects. We expect this trend to continue and for the 2016 tally of food manufacturing projects to surpass the prior-year level.
Over the coming months, Cushman & Wakefield Industrial will be taking a critical look at several significant components of Food Manufacturing in the Americas.
Food safety is job #1 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 later this year, manufacturers are focused intently on it. The FSMA is a paradigm shift for the industry. With the FSMA, the FDA is moving from the old food safety approach that reacted to potential harm to a new, preventive framework that puts greater responsibility on the
food industry to identify potential risks to the safety of the food supply and counter the risks before harm occurs. The FSMA isn’t the only regulation the food industry is digesting. Regulations related to employee safety (ergonomics) and sustainability (reduced emissions and waste, recycling, and reduced consumption of water/power) confront the sector. The need for better food safety practices goes beyond the regulatory requirements. Regaining the trust of consumers due to the increase in food recalls is also a top priority.
Food Manufacturing & the Changing American Table
Food Safety & Regulations
Food and beverage manufacturers have witnessed profound change in the last decade. Stringent regulations and evolving food preferences have challenged food 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; and, perhaps most transformative of all, changing consumption patterns of the young and the old have altered the very nature of food manufacturing.
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. 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 (e.g.,
equipment and technology that automate the report documentation process for traceability requirements under FSMA). Equipment and production line operations are also becoming more complex as the consumer’s palate has become more discerning. One clear example is the increasing interest in organic and natural foods. From a manufacturing standpoint, the handling is different for these products, impacting how lines are set up and operated. For example, if a bakery is gluten free, the processing is different due to concerns over ingredient separation and cross contamination.
Cold storage ensures that the food we eat stays safe, from the point of harvest to our table, and demand for such storage is on the rise. Over the past five years, public refrigeration space increased 2% and private space increased 5.3%. Alongside the growth in cold storage is increased demand for transportation infrastructure capable of handling temperature-sensitive products. Energy consumption is the name of the game for cold storage providers considering it comprises a substantial portion of operating costs. Although the focus on energy consumption itself isn’t new, the tools and strategies to achieve it keep evolving. Another area that is generating interest is refrigeration compliance. Companies are taking an active role in developing a refrigeration strategy, driven in part by new OSHA mandates. Due to damage to the atmosphere, food manufacturers must phase out R-22 refrigerants and move toward natural options such as CO2 by the year 2020.
Given the highly competitive nature of food manufacturing, capturing the favor of Millennials – the fastest-growing consumer segment – may be the biggest challenge facing food executives. Given 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% and Millennials are a big reason why. This cohort likes fresh, less-processed food,
which has played out in their preference for fast casual restaurants that offer freshly prepared foods. 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.
Plant Efficiency
Cold Storage
The Young & the Old
Over the past five years, public
refrigeration space increased 2%
and private space increased 5.3%.
Construction of plants and expansion of facilities play a major role in providing markets with employment opportunities and have a direct effect on commercial real estate.
Chris B. CopenhaverDirector Logistics & Industrial Services
Co-Lead Food & Beverage Practice Tel: +1 404 853 5240 [email protected]
Ken Reiff, SIORManaging Director
Co-Lead Food & Beverage Practice Tel: +1 916 617 4241 [email protected]
Jason TolliverHead of Industrial Research
Tel: +1 317 639 0549 [email protected]
John MorrisHead of Logistics & Industrial Services
Tel: +1 847 720 1321 [email protected]
About Cushman & Wakefield
Cushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm’s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms in the world with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facilities services (branded C&W Services), global occupier services, investment management (branded DTZ Investors), tenant representation and valuations & advisory. To learn more, visit www.cushmanwakefield.com or follow @Cushwake on Twitter.
Copyright © 2015 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
