Recent Trends in Food Related and Light Manufacturing Location Decisions; Why “ Flexibility ” is Critical

1. Recent Trends in Food Related and Light Manufacturing Location Decisions; Why “Flexibility” is Critical Scott Kupperman Owner

2. 1 • Context & Goals for Discussion; • Recognize that changes in economic conditions and consumer tastes have had major impact on food processing and other light manufacturing based industries • Share observations on how the concept of “Flexibility” has risen in importance • Define what Flexibility means relative to a location solution • Provide you with a potential way to • differentiate your regions value • proposition Wake Everyone Up !!

3. The Food Industry in 2012 and beyond ….. • What’s Going On ?????? • - Changing Tastes & Expectations !! • - Baby Boomers (ages 48 – 66) want healthy choices and preventative products to feed expectations of longer lifespan. • -Millennial’ s (ages 16 – 30) want health & wellness products, convenience, increasingly use technology to learn where and how it’s produced, care about environmental responsibility and are highly brand “dis-loyal”.

4. The Food Industry in 2012 and beyond ….. • What’s Going On ?????? (Pt. 2) • Highly volatile costs of production …. • Commodity prices increased 8.5% in 2010 and 16% in 2011 • Worldwide economic instability continues • Energy prices continue to remain high and un-predictable

5. The Food Industry in 2012 and beyond ….. • What’s Going On ?????? (Pt. 3) • Food Safety will continue to increase in importance; • 2011 Food Safety Modernization Act (FSMA) shifts focus from contamination response to contamination prevention. • FSMA requires plans to be implemented by mid 2012; increased FDA inspections already reported and increase in re-calls expected.

6. The Food Industry in 2012 and beyond ….. • What’s Going On ?????? (Pt. 4) • In spite of all this, growth is forecast for the industry… • Recent survey indicated that 90% of F&B manufacturers expect sales to increase for 2012. • 75% of respondents expect to increase production or at least maintain 2011 levels. • M&A activity in the US increased in 2011 for third straight year.

7. How this is changing the Focus • Of Food (& others in light manufacturing) industry; • Continual product innovation a necessity !! • Increased focus on safety, tracking, ingredient sourcing • Sustainable production practices, focus on energy management are critical • Branding which defines a consumer experience and use of social media to connect directly with consumers are vital to success, especially in light of increased private label competition • Specialty and middle market stores gaining in popularity; taking market share from supermarkets

8. How are food processors (and their site consultants) addressing these changes in their decision making ?

9. Focusing on comprehensive solutions which offer maximum flexibility relative to; • Real Estate • Labor • Permitting & Entitlements • Taxation & Incentives • Local Resources & Professional Support • Branding & Cultural image • - How is “Flexibility” being defined in decision making ? - Which of these does your location have to offer ?

10. “Flexible” Property Solutions; • Include well defined expansion and/or exit strategies • Maintain a significant buffer from residential, retail, office uses • Don’t mix incompatible uses within, or adjacent to facility • Offer clear heights of 25’ + • Have robust & up-gradable utility infrastructure (electric, gas, water, sewer, waste water capacity) • Include a minimum 150 parking spaces, plus expansion area • - Feature large column grids, minimal existing partitions • - Offer significant structural capacity of roof/wall systems, floors • - Are not overly burdened by private use restrictions (CCR’s)

11. Key Labor factors which promote Flexibility; • Right to Work states and/or lack of union presence • Vocational training programs in tune with recent trends • in automation, food safety compliance, process • engineering, equipment maintenance, energy efficiency • 4 year colleges in region with strong programs in food science, packaging, product development, marketing (including use of social media !) or similar programs in regional industry of focus • Nearby military facilities with recurring veteran population entering workforce • Evidence of similar companies who can voice success in hiring and maintaining capable workforce • Recent layoffs in similar industries, resulting in under-employment

12. Entitlements and Permitting; • most overlooked aspect of • Flexibility; • How reliable and predictable are your processes ? • Are permitting entities contracted out or are they municipal or state employees ? • Are key permitting individuals aligned with ED goals ? Will they “show well” in an introductory meeting ? • Do you know of key permits which require long lead times ? Are you able to offer expertise to help mitigate ? • What would other local firms say about their experience with your jurisdiction ?

13. Taxation and Incentives; Flexibility concerns….. • How flexible are incentives; what if we go beyond our original commitments ? • Is there a means of mitigating property taxes on equipment and machinery ? • If we cannot use tax credits offered against state corporate taxes since we don’t generate a significant liability, what other assistance will you provide ? • What help can you provide for current and • future infrastructure needs and will you be able • to deliver ? • - How difficult will compliance process be for HR, • accounting/finance staff ?

14. Local Resources and Professional Support; • Do they exist and how “plugged in” are you to the following; • Design, engineering, construction firms • Attorneys who specialize in RE transactional work, entitlements & zoning, incentive documentation, environmental law, tax and municipal finance • Specialty consulting firms focusing on air emissions, energy efficiency/sustainable design, traffic consultants, waste-water specialists • Temporary staffing agencies who focus on industrial sector • Search firms that focus on senior technical specialists and facility leadership positions within key industries • Knowing there are quality choices in resources above is critical “Flexibility” differentiator

15. Branding and Culture; Promotes Innovation • Can you provide examples of other companies within industry that have been able to grow strong brand identity ? • Will local population embrace product and be proud it’s made in their community ???? • Are there local resources, landmarks, institutions which can be used by a company to help differentiate products thru marketing efforts ? • Does local workforce have evident history of loyalty and buying into team oriented environment and embracing “it’s not just about me” concept ? • Do you have property solutions for companies that want location to be a reflection of their brand ?

16. Closing Thoughts; • * Food processors and many light manufacturing based companies are facing dramatically shifting conditions, it’s never been more difficult to build and sustain success than it is today • * In order to be successful, they must be able to react, innovate and execute on a faster pace than ever before • * Location solutions must recognize and contribute to operating and financial flexibility • * Consider and be able to effectively convey what your region has to offer and recognize that for many companies, these factors can be a major differentiator

17. Questions…………… Contact Information; Scott Kupperman - Owner Kupperman Location Solutions W (224)-544-5540 C (224)-224-2559 Escott@kuppermanls.com www.kuppermanls.com Credits: Grant Thornton Study, FoodProcessing.com