Episode 40 – The COVID-19 Impact on the Food and Beverage Processing Industry
Rick Weddle (Site Selectors Guild): Welcome to “Site Selection Matters,” where we take a closer look at the art and science of site selection decision-making. I’m your host, Rick Weddle, president of the Site Selectors Guild. In each episode, we introduce you to leaders in the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners, and corporate decision-makers to provide you with deep insight into the best and next practices in our profession. In this episode, we have as our guest, Jay Garner, president and founder of Garner Economics and chairman of the Site Selectors Guild. Today Jay will talk with us about the impact COVID-19 has had on food and beverage processing. Jay will also share his unique perspective and insight on the role the Site Selectors Guild has played in professionalizing the location advisory business. Join me as we welcome Jay Garner to “Site Selection Matters.”
Rick: Jay, I read with interest your recent article on the impact COVID-19 has had on the food and beverage processing industry. You suggest the impact has been both positive and negative. Take a minute, if you will, and tell our listeners how you see this industry in a post-COVID world.
Jay (Garner Economics): Hey, Rick, thanks very much for having me. And I love talking about the food and beverage sector, it’s our wheelhouse, and so we are engaged in that sector extensively. Boy, let me tell you something, this pandemic really has impacted all of us, many of us negatively, especially economically, health-wise. But some of us, some corporations, have made profits like no other. And the food and beverage sector and all of the downstream companies associated with it, like grocery stores, have done the best they have ever done in the history of their business.
So, let me tell you a little bit reason why. Well, obviously, there is no such thing as a recession-proof industry sector, but the food and beverage sector is the closest thing to it because everyone still needs to eat. So, what happens is, because of consumer preference, you have an evolution and always evolving demand of what these products should be. In the case of food and beverage, a number of things were happening before the pandemic, they got exasperated during the pandemic. And what we’re seeing, coming out of it, is profound. Protein plants, for example, during the month of May. You know, between 40% and 60% of all protein plants, those are meat-processing facilities went offline. So, not only did you have a shortage in the grocery store and a lot of meat products, but, obviously, you had an escalation in prices as a result of that. And then we all know about paper products associated, in your grocery stores. Those don’t typically classify in the food and beverage sector, but you kind of get the idea, get the drift, you know.
At the same time, you have sectors like those that have alcohol-infusion that have really grown exponentially. Alcohol sales were on the decline, in the U.S., pre-pandemic. And then during the pandemic, alcohol sales grew significantly because of lockdowns, job losses. You know, there’s some inherent psychological challenges that people have faced and continue to face during the pandemic. So, anything…alcohol is classified as food and beverage. And you have alcohol-infusion waters, like these hard seltzer waters, that’s the rage now, everyone wants to buy these hard seltzer waters.
So, you know, in South Carolina, last month, you had one of these seltzer companies, that’s associated with White Claw, doing over a $600 million project. So, there it gives you an example of how we’ve seen some of the transition, during the pandemic, and what we may see as we come out of it, in 2021, because we will, that influences food and beverage.
Rick: You know, Jay, that’s interesting. I mean demand is everything in business, and, obviously, you’ve mentioned a number of areas where demand stayed strong or went up. Is it also true that, you know, the issue of some of the merchants were just better at responding to the issues and converting to delivery or curbside and those things, which kept their own demand up? I guess the question is how well they responded?
Jay: Well, that’s very true. And of course, e-commerce then of course played a significant role in that. Many of the large big-box grocery retailers had either directly or through a third-party grocery delivery. I used them, you used them, a significant number of folks have used them. Those have been on the decline recently because of more people having a comfort level going back into the grocery store, as long as they are masked up. But those that did make that pivot. And all of us had to do if we were going to succeed in this business, including my business, the Site Selectors Guild, any of us. We all had to do a business-plan pivot to thrive in this new normal.
Rick: Looking at the industry overall, Jay, what do you see are some of the major trends that are driving it?
Jay: Well, health and wellness foods continue to significantly grow because more and more people, especially aging baby boomers…and I’m kind of whispering this when I say you and me fall into that category. But as baby boomers, you know, we are mostly engaged, of course, in health and wellness foods. Now, that is a direct contradiction, the liquor being back, as a result of the pandemic, but it is what it is. And plant-based meat alternatives continue to grow in popularity, especially since the taste of plant-based meat alternatives are pretty comparable to the real thing, you know. And then, milk alternatives, you know, such as oat, almond, soy, chickpea, all of those are strong. My daughter, for example, has milk intolerance and so she drinks all of these milk alternatives. And seeing how that has grown, on the grocery store shelves, is indicative of that. Yogurt producers are now doing an entire line of milk and alternative products.
And then, you have cannabis, weed, hemp. Prior to the November elections, you had 33 states that had some form of legalized either recreational or medical marijuana. Now you have 38 states after the election. The House of Representatives, last week, just approved the decriminalization of marijuana. Now, that’s not going to get passed in the Senate, unless the Senate changes, and then it will get passed. But eventually, the decriminalization of cannabis will happen. What does that have to do with food and beverage? Well, a lot of food and beverage companies are buying into hemp and cannabis companies because, once you remove THC from hemp, then it’s going to become more of a food additive. And so, that’s a significant play. That’s why you see all that CBD stuff out there, on a lot of the street corners, because of the medicinal purposes of that.
Lastly, cold-storage facilities are hot-hot-hot. Because of the growth in the food and beverage sector and the distribution of it, you more of these cold-storage facilities. So, typically, those are loved by electric companies. They’re usually about an 80-million-dollar facility that would employ about 50 people. So, they don’t have a great footprint that would cause any harm, but they are a great taxpayer and a great utility partner.
Rick: What’s interesting, Jay, listening to you talk through these major trends, and you think of the average consumer that goes into the grocery store to buy a product, whether it’s a milk alternative or whatever. But what they may not realize is, behind each of those product lines is a whole supply chain of development, production, research. So, the whole industry behind each one of those that’s now being changed and shifted, as these trends shift. That’s very interesting.
Jay: That’s a great point, that is a really great point. And typically, in the food and beverage sector, you see a multiplier of 1.6 to 2.0. So, what we mean by that is, for every job that’s created in the food and beverage sector, 1.6 additional jobs are created by that downstream supply chain.
Rick: Yeah, that’s good. So, it means economic development, economic growth. That’s interesting. From a community perspective, let’s kind of bring this home and look at it, not from industry but from a community perspective, what do you think it takes to be a good or a competitive location for a food and beverage industry facility?
Jay: Well, the top two, and we’re limited on time, but the top two that you have to have, number one is you have to have the availability of water. And with that, even if a food and beverage company is not using water as part of their production process, they’re using it for sanitation. So, you have to have a significant abundance of water capacity that will allow that to occur. And then, obviously, with that, the availability of wastewater. Even if there’s going to be holding ponds or private distribution of wastewater, you still have to have the wastewater.
And then, secondly, one of my sayings that we’ve trademarked, and we’ve used for years is, “No product, no project.” What we mean by that is if you don’t have the product, meaning if you don’t have the sites or the buildings that will allow for these food and beverage companies to enter the marketplace quickly because of speed to market, then you’re going to get overlooked. Obviously, infrastructure like water and wastewater is part of that product. So, remember, no product, no project.
Rick: I like that. I like that. No product, no project. Pretty simple. If you can’t get that, you can’t get hardly anything. Let’s switch gears, if we can, and talk a little bit about the Site Selectors Guild. Jay, you’ve been involved with the Guild from the very beginning. Take a minute, if you will, and give us your perspective on the Guild, from its origin, a decade ago, to the present and what impact it’s had on the business.
Jay: Well, as you know, Rick, I am very passionate about the Guild. I love the Guild, I think it has had a significant impact with our global economic development community. I’m one of the founders, there were 15 of us. We were founded in…we started talking about the formation of the Guild in the third and fourth quarter of 2009. We actually became incorporated in July of 2010, so, we are 10 years old this year, 2020. We had our first conference in Orlando. You were there, in 2011. We’re going back to Orlando in 2021, 10 years later, for our next annual conference. And I have the utmost privilege and opportunity and love in serving as the chairperson of the Guild for this governance year.
So, today we have 51 members of the Guild. And pretty soon we’re going to have, I think, 56 or 57, based on an upcoming membership vote that will be forthcoming before your audience hears this podcast.
So, the whole premise behind the Guild, Bob Ady who was the quintessential really founder of the site location profession…he started, I think, with [inaudible 00:14:31], and then that transitioned into a number of different owners to where it’s Deloitte today. And then he ended up with his own company. And he is the person who kind of had this vision and dream of creating a consortium of location advisors who we all compete with but where we would have a collegial discussion and share knowledge with economic development organizations from throughout the world.
And he pulled it off. He brought all of us together, I was one of the founders with him, I was one of the early officers with him and with that first cadre of 15 Guild members and founders. And so, we have multiple conferences and knowledge sessions a year now, either in person or virtually, sharing that knowledge. And it appears, from our economic development partners, that they absolutely love and appreciate the fact that we’re able to learn from them and offer guidance from our perspective too. It has been probably one of the most fascinating and enjoyable facets of my 40-year history in economic development. And I was thrilled when we were able to engage you, hire you as our first president and CEO, just a little over 2 years ago. And that has been a tremendous impact and enhancement to our organization, as we evolved from basically a volunteer-driven organization to a staff-driven organization. And I say thank you, Rick, for all you’ve done to help us elevate and raise the bar of the Guild.
Rick: Well, thank you, Jay, you’re very kind indeed. And it’s been a very very interesting ride, the last couple of years. I think we’ve accomplished a lot and there’s a lot more to be accomplished. Listening to you talk about the Guild, from its formation to its present time, you know, the name Guild, going back to the old trade Guilds in Europe, really is relevant to the collegiality and the collection of these professional location advisors that kind of choose to hang their hat together.
Jay: Very much so. And I’m thrilled, I mean we have a lot of international representation. We have members outside of the United States, they’re all over North America, they’re all over Europe and Asia. And so, we have that collective participation. And frankly, we have made it fashionable to be a member of the Guild. And I’m very proud of the fact that we’ve elevated the brand, over this last year, and that we seem to have a tremendous amount of external participation from our economic development friends and partners from throughout the world.
Rick: Exciting work, despite being in a very challenging and interesting time. Thanks for sharing that unique perspective. If we can, in the time remaining, looking forward into 2021, for both the Guild and for the site location industry, what do you see in your crystal ball?
Jay: I honestly believe there is going to be, over the next couple of years, a somewhat return to what we considered normalcy. You know, a lot of folks are saying, “The genie has been let out of the bottle, it will never be back to where it was.” Well, no, I mean, no matter where we are, there’s always an evolution. We never want to step back, we always want to step forward. But once there is the widespread deployment of the vaccination and we have heard immunity, which will occur in 2021, probably the fourth quarter of 2021, but we will get to that point, you will start to see a significant return of what people used to do pre-pandemic. There will be full football stadiums again, there will be full concert venues again, you’ll have weddings again. I’m a musician, my band will be able to rehearse again. We haven’t been able to do that because there’s 18 of us and we can’t get 18 in a room that we can physically distance effectively. And so, we’re going to start seeing that. But we will also see the application of a lot of things that we’ve picked up, especially in this Zoom environment, that we will continue.
I’ll just say one last thing. A lot of people are saying, “Well, we won’t necessarily do all of the work in person like we did before because of these virtual applications.” We will continue to use virtual applications because it is a time and money-saving experience now, and we’re getting very proficient at it. But doing a lot of things that we did in person will not be eliminated. In the case of site searches, we still have to kick the dirt. And so, you still have to be on site, at some point, to do it effectively. So, it’s going to be a great hybrid, as we move into 2021 and then 2022.
Rick: Yeah, we’ve learned a lot of things through this process, had to. Necessity is always the mother of invention, we’ve learned those things. But I think that you’re exactly right, those things will be additives or augmentations of the way we used to do it, not replacing it completely. I think that’s great. You know, Jay, you’ve given us a lot to think about. What an extraordinary conversation. But that’s really all the time we have today. So, let me say thanks to Jay Garner of Garner Economics for talking with us today on this episode of Site Selection Matters.
Jay: Thank you, Rick. I appreciate being here.
Thanks for listening to this episode of “Site Selection Matters” and a special thanks today to Jay Garner of Garner Economics for helping us get inside and better understand how COVID-19 has impacted the food and beverage industry. What an informative discussion and one that leaves us with a lot to think about. Again, I’m Rick Weddle, president of the Site Selectors Guild. This podcast represents my views and the views of my guest and they do not necessarily represent the views or opinions of the Site Selectors Guild or its membership. We hope you’ll subscribe to the “Site Selection Matters” podcast on Apple Podcasts, on Stitcher, on Spotify, or wherever you listen to your podcast. We look forward to bringing you some great discussions in the year ahead. Until next time, good day.