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Market Update: Plant Expansions

Fri, 04/30/2010 - 1:34pm

Plant Expansion Reasons Survey Pie GraphPlant expansion can be both an exciting and challenging undertaking for food companies. The need to expand typically indicates that business is good; 83 percent of surveyed food manufacturers reported that company growth was the main reason for their current or past plant expansion project. However, plant expansion projects are always a risk and require careful planning to insure everything runs on schedule and within budget.

Additional reasons cited for plant expansion projects include:

  • Company is expanding/diversifying its product line – 52 percent
  • To update an outdated facility – 30 percent
  • Company is partnering with/was purchased by another company – 6 percent

Today's food manufacturers are tasked with responding to evolving consumer tastes, which explains why many plants are expanding in order to grow or diversify their product lines.

Plant Expansion Spending Survey Bar GraphDowntime costs any business money, so while expansion projects need to be done correctly, they also need to be done quickly. 78 percent of respondents reported that the actual construction of their new or renovated plant was completed in one year or less. In addition, 89 percent of food manufacturers reported that they kept their plants operational during the expansion project.

Over 68 percent of respondents are anticipating plant expansion within the next few years, with 21 percent of those respondents anticipating expansion as soon as the next few months. With recent media attention and plant closings surrounding food product recalls, it is not surprising that 63 percent of plant expansion projects promise to yield a plant that is more focused on food safety and sanitation. A similar survey in 2008 reported that a more ergonomic design to speed workflow was the leading plant expansion priority. This year, only 44 percent reported an emphasis on ergonomic design issues.

A heightened awareness of manufacturing's carbon footprint has led many companies to seek energy-efficient, sustainable buildings. 61 percent of food manufacturers noted that their new plant design is (or will be) more energy efficient. Building facilities with the goal of achieving Leadership in Energy and Environmental Design (LEED) certification, established by the U.S. Green Building Council, is a growing trend in today's manufacturing environment. The council, a non-profit organization, aids companies in the design, construction and operation of green buildings. Certification has traditionally been challenging for the food industry, due to the large amount of waste products and energy use indicative of the food production process.

Many large food manufacturers in the U.S. have expanded their markets and simplified distribution by establishing international plants or divisions in addition to their U.S. locations. 44 percent report expanding internationally, while an additional 13 percent are still open to the possibility.

80 percent of respondents reported enlisting help from an outside design/build firm for a plant expansion project. Of these food manufacturers:

  • 36 percent of companies chose a specific design firm because they were the most affordable
  • 31 percent of companies chose a specific design firm because they were the most flexible in terms of specific needs
  • 19 percent of companies chose a specific design firm because other food manufacturers had success with them

Perhaps indicative of today's tightening budgets, in March 2008, only 18 percent of companies cited cost as a major determining factor when choosing a design firm, as opposed to a this year's 36 percent.

While it might seem unusual to talk of expansion during poor economic times, this survey revealed that numerous companies are not only staying afloat, but growing. Hopefully the food industry's willingness to invest in its companies continues to pay off and expansion projects continue to build the industry, putting food companies in an even stronger position when the economy heals. 

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