One Processor At A Time
The Pinnacle Center in Hudsonville, just outside one of Michigan’s urban core communities, Grand Rapids, Michigan was filled with agricultural entrepreneurs in May 2012. Men and women, some clad in business attire, but most not. Some scribbling notes on white sheets of lined paper, others using iPads to keep track of not only what was going on where they, but also where they were not.
They were all gathered for MiFOOD 2012, a celebration of the scale of the agriculture and food processing industries as one of the largest company and employment clusters in West Michigan.
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Food processing in Michigan accounted for more than $24.5 billion in economic activity according to the latest Census Bureau figures available, that were published as part of the “Economic Impact of Michigan’s Food and Agriculture System” Strategic Marketing Institute Working Paper released April 11, 2012 by the Michigan State University Product Center. Breakfast cereal manufacturing alone accounted for better than $2 billion in economic activity.
As impressive as those figures are at first blush, it is important to realize that they represent just one segment of the agriculture and food processing industry in Michigan. The MSU Food Product Center reports pins a $91.4 billion economic impact value on the industry.
“The impact of Michigan’s farms and the commodities they produce is 12 percent of the overall total and their economic contribution has nearly doubled from less than $7 billion to more than $13 billion,” said MSU Product Center Director Carl Peterson. “You would be hard pressed to find another business sector that has pulled through the recession with those kinds of numbers in just six years.”
The Right Place Inc. Vice President of Business Development, Rick Chapla, said the economic development agency would like to get a much bigger slice of that action for West Michigan.
“First and foremost we want to work with our existing companies. That will provide an element of growth,” Chapla explained. “But there are also reasons we believe that others will be attracted to relocate their business to West Michigan beginning with the availability, quality and affordability of good water.”
He added that the size of the agriculture community suggests there is “an available trained workforce that is very typical of the workers in West Michigan. It is not only the business culture; it is also the productivity of our people.”
Expanding the food processing sector that is already very much a part of the West Michigan economic landscape while at the same time bringing new players to that arena was an underlying theme of MiFOOD 2012, the Michigan Food Processing and Agribusiness Summit scheduled for May 23, 2012 at The Pinnacle Center in Hudsonville.
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Dan Lennon, the president of one of the larger food processing entities in metro Grand Rapids, Michigan Turkey Producers Cooperative, gave the opening keynote speech of the Summit. His company is evidence of the potential being realized in this very attractive sector. MTPC was launching a $10.6 million expansion project in 2012 at its main campus in Wyoming, Michigan location coupled with $2.3 million worth of growth at its Hall Street location in Grand Rapids.
Wyoming Deputy City Manager Barb VanDuren said her community’s City Council was only too happy to help with the expansion by approving a P.A. 198 Industrial Facilities Tax Exemption. This is a tax break that is granted to manufacturing businesses in Michigan.
“Michigan Turkey Producers have been here for 12 years and have been growing steadily,” she explained. “They offer jobs to our residents. They are an easy company to work with. I believe they are loyal to Wyoming and we are loyal to them.”
One of West Michigan’s largest employers increased its footprint in the region’s food processing scene in late March when Meijer acquired the plant operations of Bareman’s Dairy. That move included plans for an $8 million investment to expand the facility in Holland.
The food processing industry is not an easy business to be a part of for any entrepreneur. The MiFood 2012 Summit included discussions of supply chain food safety strategies, a buyer’s relationship with the supply chain, employee development and training opportunities and a groundwater discharge permit update.
GreenStone Farm Credit Services and the MEDC joined together for a presentation about financing alternatives for growth, a subject that is obviously crucial to growers and producers who are studying expansion opportunities.
Greenstone’s Cindy Birchmeier told me before the event that there are “creative options” available for growth and expansion for all of Michigan’s business sectors, not just agriculture. However, growers and producers are able to take advantage of a pool of Michigan Department of Agriculture and Rural Development money.
“This money is for start-up and expansion,” Birchmeier explained. “The guarantee allows us to provide financing that would ordinarily be outside our lending scope from an owner equity or collateral standpoint.”
She also believes the West Michigan food processing industry, fruit and vegetable along with protein, has an opportunity to grow and expand. “The agriculture industry is in good shape overall,” Birchmeier said. “We expect that to continue through the foreseeable future.”
Michigan Department of Agriculture and Rural Development Director Keith Creagh, also pointed to the potential for growth in the Michigan food growing and processing industries, along with highlighting the strength of the sector.
“As a $91.4 billion industry, it would rank 47th on the list of Fortune 500 companies,” he said. “The (MSU Product Center) study further highlights that food and agriculture will be centric to Michigan’s economic reinvention and lay the foundation for regional economies.”
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Michigan farmers had to be tenacious in 2012. The year began with some of the worst weather the state’s agriculture had seen in recent memory.
Michigan Agriculture and Rural Development Department Director Keith Creagh all but guaranteed federal and state assistance for fruit growers whose crops were destroyed by terrible spring weather as he opened the MiFood 2012 Michigan Food Processing & Agribusiness Summit May 23 in Hudsonville, Michigan between Grand Rapids and Holland.
He expects Congress to approve a low-interest loan program for fruit growers whose operations were wiped out by an April frost-freeze following unseasonably warm March weather that had forced trees to bud early. Growers lost millions of dollars in crops.
“Fruit is a tough spot to be in this year,” Creagh explained. “We lost 90 percent of the apples, 90 percent of the tart cherries, and 95 percent of the peaches.” He also said juice grape crops were hurt by the weather, although “wine grapes, blueberries and asparagus appear to be okay.”
Overall the Michigan agriculture industry in the early innings of the annual spring growing season is in good shape, according to Creagh. He said that field crops and vegetables are alright, “so with our diversity we are doing fine.”
But he also admitted that fruit growers are going to suffer “some short-term pain” so he is reaching out to the Michigan congressional delegation for short-term help in the form of a low-interest loan program.
Creagh pointed out that Gov. Rick Snyder has promised state assistance for both growers and food processers that have been impacted by the historically severe spring weather. Just what form that assistance from Lansing will take is yet to be determined. However, Creagh did give his audience a hint inside Hudsonville’s Pinnacle Center when he explained, “we will dust off the 2002 program and figure out how that works.”
The 2002 state assistance program included zero-interest loans. “Money is a little bit cheaper now a days, so it might be better to lock in the low-interest rates for five years, let us get out of the way and let the banks qualify the loans so that people get back to work.”
Creagh also pointed out that because “it’s all politics, I have to leave a little early today” to go back to Lansing to talk about the loan program
While the spring weather and the loss of $300 million worth of fruit crops is more than a blip on the Michigan agricultural radar screen, Creagh concentrated on the big picture, 50-thousand-foot-high view of the industry.
He said Gov. Snyder wants to take the food and agriculture industry from $71 billion to $100 billion. “How are we going to do that?” Creagh asked rhetorically. “We are going to do that with you?” Where is the value-added in this? Not at the farmers’ gates according to Creagh. It is in the $25 billion food processing industry with its 40-thousand direct jobs.
This all relates to the all-important topic of rural development. Creagh explained that MDOT, MEDC and MDARD are all “sitting at the table” for discussions on topics like exports and transportation, infrastructure improvements, and broadband development. “As he also pointed out to his audience of food processors, “this is all anchored around food processing. There are some really good opportunities for you as you begin to grow.”
Creagh also pointed out that his “friends in food processing, all 1500 of them,” could play a major role in putting people back to work in Michigan. If each food processor, for instance, hired 10 people that would mean 15,000 people had new jobs.
Regional food systems would be another important topic discussed between MiFood 2012 and MiFood 2013, according to Creagh. What that comes down to is the effort to convince more retailers to stock more Michigan-produced food on their shelves. “And I will need your help with that.”
He is not only concerned with the grocery stores of Michigan. This is more than just a private-sector battle. Creagh explained there is also a real disconnect between Michigan agriculture and some institutions in the state’s public sector.
As a case in point, he told the story of getting a request from Detroit Public Schools officials for help putting more asparagus in the 50-thousand school lunches that are served in their cafeterias every year. Of course, he was only too happy to help, linking the DPS up with three Michigan asparagus growers. What could possible go wrong with this?
“Guess what? Guess where they got that processed? Fort Wayne, Indiana,” said Creagh. “Guess where Detroit is going for food processing for its senior meals? It is even more egregious. They are doing it in Jackson, Mississippi.”
Even though institutions like the DPS are getting their food processed out-of-state, “we have iconic food processors in this state. You will find companies like Gerber and Kellogg all over the world,” he pointed out. “So we have to do a little better job of getting that story out.”
Here’s the plan. Creagh said his department and processors have to start reaching out to public and private institutions within a 70-mile radius of their facilities to find out who isn’t buying from them, why they are buying food or getting it processed outside that circle, and then use the information to forge alliances that result in regional food systems.
Creagh also said that one of Gov. Snyder’s key initiatives, the drive to cut down on the obesity rate in Michigan includes Gerber as a key partner on the Pure Michigan Fit program that will be rolled out June 13.
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If you want to shake up an audience of food processing people simply ask the question, “How many of you are worried about product recalls?” Marsh Risk Consulting Inc. Managing Director Katherine Cahill rattled the crowd with that question at May’s MiFood 2012 food processing summit in Hudsonville.
I told you that it wasn’t easy to be a farm to fork entrepreneur.
They hardly had a chance to start breathing normally again when Cahill warned them the Food Safety Modernization Act could be 300-pages of trouble for their operations. It has changed the playing field. It has also made the U.S. the policing agent for the world. However Cahill ramped up the fear factor when she said, “This allows the FDA to come into your facility and mandate a product recall.”
“One recall could close us down,” responded an audience member. Cahill, who has helped her clients navigate their way through 6,000 recalls, said she understands “that product recalls can scare you to death. But, they don’t have to close you down if you have procedures in place.”
Those procedures should include cross-training and mock recall drills with the food processors’ customers. Cahill, along with her fellow panelists NSF Supply Chain Food Safety Director Robert Prevendar and Michigan State University Eli Broad College of Business Director of Executive Development Programs David Frayer Ph. D. explained that all of the players in the food chain need to be trained to handle recalls. And processors bear a special responsibility when it comes to food safety, something that is becoming much more complex as the food supply chain goes global.
Their audience was as concerned with getting shelf space at major retailers like Costco and Meijer as it was with dealing with product recalls. Cahill explained those goals were not mutually exclusive because getting into major retailers involves more than good marketing and a good product. “You also have to be ready to show them how you keep food safe and how you do product recalls.” The Costco’s and Meijer’s of the world want processors to be able to show them product recall procedures that are already in place.
“(Product recall) cross-training with your customers also helps build trust and understanding,” she said.
Frayer warned the audience that massive global urbanization means that fewer communities will be able to survive on food grown locally. That means the food supply chain is going to get more global and is it does, increasingly complicated. As a result, keeping food safe is going to become more of a challenge.
“The global food platform includes a lot of big dilemmas that won’t be solved the way we have operated in the past with a single discipline focus,” said Frayer.
It is not just the size, scope and scale of the supply chain that presents the possibility of problems. There are also different cultures and beliefs that could be troublesome. For instance, food safety is seen as the government’s responsibility in China. It is not seen as a problem that needs to be faced by growers, farmers or processors.
“There will be a tremendous opportunity for food safety mistakes to happen throughout the supply chain,” he explained. “We have to be more aware of that and have a better understanding of how to trace those mistakes back to the source of the problem.”
There is some hope of better worldwide food safety coordination that could make life a little bit simpler for West Michigan food processors according to Robert Prevendar. He said the Global Food Safety Initiative that was launched ten years ago by big European retailers and Walmart is going global. It is reducing the number of required safety audits while it is also raising food safety standards.
“We are not down to one audit yet,” Prevendar said. “But we are getting there.”
The simple truth is, whether they like it or not, West Michigan food processors are going to have to get in line with the GFSI if they want to do any business with the world’s big retail players. More and more, it is compliance with the GFSI that will get food processors into the doors of businesses like Whole Food, Costco and Meijer.
The bad news is that like any industry certification compliance with the Global Food Safety Initiative is not easy. “It takes months to prepare,” warned Prevendar. “This is a process. But the good news is, once you do this you are really raising the bar. Companies in compliance are saying this is reducing their error rate and saving them money.”
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The life of an agricultural entrepreneur has never been easy. However, it is a life with a purpose.
“This is really a great time to be in food and agriculture,” Creagh stressed. “You guys can put Michigan back to work, you can build regional economies, and you can help us be successful. If you are looking to make a difference, now is the time.”
(c) 2012 Lyons Circle Publishing Inc. All Rights Reserved
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