Report finds strength in Modesto food industry

AUGUST 4, 2016

BY JOHN HOLLAND

The Modesto area rates high for a consultant who helps food and beverage companies decide where to set up shop.

The Boyd Company Inc., in a new study on operating costs for processing plants, said Modesto’s are the lowest among five locales it analyzed in California. It also praised the area’s job-training efforts and its ability to move products by road, rail, ship and air.

The area ranked just 15th out of the 24 studied in the United States and Canada, including places with lower labor, energy and tax costs. The report nonetheless points to continued growth for dairy goods, wine, nuts, fruit and other farm products from Stanislaus and nearby counties.

“The news is good for Modesto,” said John Boyd, founder and principal of the firm, based in Princeton, N.J. “This study documents Modesto as the lowest-cost location in California.”

He talked about the findings, which are not available in detail to the public, during a meeting with The Modesto Bee this week.

At last count, 23,617 people worked in food and beverage processing in the county, according to Opportunity Stanislaus, formerly known as the Stanislaus Business Alliance. The county ranks first statewide in production per capita, Chief Executive Officer David White said.

He noted the area’s relatively ample water supply, despite the drought, and its lower wages compared with the coast. He also cited the two major freight railroads, connected by a short line serving the vast Beard Industrial District. Food and beverages are a major part of the Port of Oakland’s business, and high-value products can be flown around the world.

The study estimates the cost of a hypothetical plant employing 500 people on a 300,000-square-foot site. This includes labor, real estate, energy and taxes.

The Modesto area comes in cheapest in California at $41.8 million a year. The San Francisco area is the priciest in the state and the two nations at $45.7 million. The eastern part of Ontario, Canada, is the lowest at $30.3 million.

Ontario benefits from a favorable exchange rate for Canadian currency and that nation’s openness to free-trade agreements, the report said. It also cites low land and sugar costs (Kellogg’s and Quaker Oats make cereal there) and savings on employee benefits due to national health care.

The other California locales in the study are Los Angeles, Fairfield and Salinas/Monterey.

The report praises the food processing program at Modesto Junior College for turning out people who can operate today’s high-tech processing lines.

“We’re finding that we need to train up the workforce because a lot of the processors are automated,” White said.

Job training is one of the key concerns of the Manufacturers Council of the Central Valley, which mainly represents food and drink companies in Stanislaus and Merced counties.

Executive Director Jennifer Carlson Shipman said these businesses will lose many skilled people to retirement over the next five years. The council is working with high schools to boost vocational programs that had been declining until recently, she said.

Modesto-area manufacturers also have to deal with California’s excessive regulation, Shipman added. But overall, she sees strength because of the proximity to farms, good transportation and water supplies, and affordable land and energy.

The study said some processors could have to replace old plants to comply with the Food Safety and Modernization Act of 2011, which aims to keep consumers from getting sick.

BY THE NUMBERS

$41.8 million: Estimated annual cost for food or beverage plant in Modesto area, according to study by the Boyd Company Inc.

$45.7 million: Cost in Bay Area, highest in study

$30.3 million: Cost in eastern Ontario, Canada, lowest in study

Read more here: http://www.modbee.com/news/business/article93803492.html#storylink=cpy