Finding opportunity at the intersection of food production and distribution
With more than 30 years of experience leading economic development efforts across Missouri, Steve Johnson, CEO of Missouri Partnership, works with agtech companies evaluating Missouri for investment and agtech leaders across the state working to attract those companies, giving him a unique perspective on the agtech industry.
Look inside the refrigerator, and there’s a good chance the ground beef, sliced cheese or bacon was packed on a machine made by Multivac.
A subsidiary of the Wolfertschwenden, Germany-based Multivac Group, Multivac Inc. has its headquarters in Kansas City, Missouri, in the heart of America’s agricultural center where it benefits from a centralized location in the U.S. and proximity to a large network of stockyards. The company’s growth over the years offers a blueprint for food manufacturing executives everywhere.
As Multivac demonstrates, opportunity for food manufacturing companies lies at the intersection of food production and distribution. The company has fast access to both, and that gives it a tremendous strategic advantage.
Clayton Agri-Marketing, run by Tony Clayton and based in Jefferson City, Missouri, is another leading example of the power behind production and distribution in the same region. It is considered one of the leading livestock and agricultural exporters in the U.S., supplying agricultural products via air, water and road to 46 countries.
Time is the enemy
For any food manufacturer, profit is essential. All companies must constantly look for ways to improve efficiency, optimize processes and cut costs to generate profit, hire employees, and keep the lights on.
Food manufacturers also have to ensure the products they deliver are tasty, fresh and of the highest quality when they hit store shelves. Each hour counts as products move from farm to processing facility to marketplace.
Every company has reasons to back up its logistics and distribution model, and they often depend on transportation costs. But certain locations offer nexuses of raw materials and distribution outlets. These areas present food manufacturers with the opportunity to maximize profits, and prudent executives will search hard for them before settling on a location for a new processing facility.
When the journey from farm to fork is shorter, everyone benefits. Consumers get food that has spent less time in transit, and manufacturers can keep costs down while preserving or improving product quality. Ensuring key parts of the supply chain are geographically convenient gives companies more control over process and product quality.
There are many benefits for every aspect of the food manufacturing process occurring in a single location. Funds can be efficiently invested into new production and manufacturing facilities, ensuring those investments are maximized.
Ask critical questions
When evaluating whether a location in the U.S. makes strategic and financial sense, executives must ask themselves a number of critical questions.
- Does the cost and regulatory environment exist in order for all elements of the supply chain to be profitable in a particular area? Can the crops be grown, food products manufactured, and items distributed to customers nationally or globally in a manner that is more cost-effective than having various facilities in different locations?
- If the company represents portion of a larger supply chain, is there access to the partners and infrastructure needed to ensure profitability while still delivering a high-quality product?
- Executives must consider inputs such as water and conduct a long-range analysis of the stability of the source. The same goes for outputs. Does the location have the capacity to handle expected output, or does work need to be done to add capacity?
- Likewise, infrastructure must be carefully evaluated. Is there farmland to produce crops? Are sufficient amounts of labor, land and capital available to sustain production?
These are just some of the questions executives must consider when evaluating a possible location, but answering them will get that analysis off to a strong start.
Finding a perfect fit
Need a new manufacturing location but unsure where to begin searching? These three U.S. states present myriad opportunities for manufacturers:
Agriculture is massive in Missouri. The industry totals $88 billion in sales each year, and the diversity of crops and animals in the state offers a cost-effective supply of the raw materials needed for most food products.
The state’s relatively low cost of doing business and abundance of available talent allows for the cost-effective processing of raw material into food products. Direct access to every Class 1 railroad, highways in every direction, and the Gulf of Mexico via the Mississippi River make Missouri an ideal distribution hub for food products across the country. Plus, the regulatory and tax environment is optimal for businesses in agriculture, manufacturing and distribution.
Thanks to its climate and the presence of global distribution outlets on both coasts, Florida’s orange industry is a global enterprise. Companies can grow the product, process it into orange juice, and ship it around the world without having to leave the state.
When it comes to vegetables, fruits and nuts, California is king. The climate and land are ideal for those products, and access to ports on the Pacific Ocean allows for worldwide distribution.
In particular, the enormous Central Valley region, which encompasses roughly 20,000 square miles in the heart of California, provides fertile land for the cultivation of more than 250 different crops, including hay, grapes, cereal grains and cotton. The area produces 40% of the nation’s supply of nuts, fruits and other table foods.
Choosing a location for a processing facility is arguably one of the most important decisions a food manufacturing executive will make. If you can identify a spot at the intersection of production and distribution, the company will reap the benefits. As Multivac has shown, opening up shop in an area that has everything needed to run the business can position a company for maximum growth over the long term.