Bakeries invest in construction with hesitant optimism
Sept. 1, 2015
During the past several years, the baking and snack food industries have bolstered themselves to an outlook of cautious optimism. Things have been moving along nicely since the recession years of the late 2000s, but it’s never a bad idea to take things one step at a time.
That theme can be seen in construction numbers across the industry. Look at the latest Economic Census, and find that while the number of employees across the board has gone down, the number of facilities in the industry is either holding steady or slightly increasing. At the same time, production and capital expenditures are both on the rise. As covered in the March issue of Baking & Snack, commercial bakeries are doing more with less.
That means companies are finding a way to be more efficient in their production, reach, and construction and expansion. Baking & Snack has told the stories of several plants and their recent projects this year. This report looks back at some of their challenges, goals and decision-making processes.
Flowers Foods, Thomasville, GA, has been a major player in the construction game during the past year, thanks mainly to some repurposing of existing facilities.
The major piece of the company’s conquests is a high-tech, high-volume line in Oxford, PA. Flowers had a gap in production coverage for its Northeast region, and the answer was spending $31 million to expand and equip an existing bakery an hour southwest of Philadelphia in Oxford. The facility already contained a sweet goods operation; Flowers took it over in an acquisition of Tasty Baking Co. in 2011 and began steadily building a regional presence of Nature’s Own, Flowers’ signature bread line.
The company first added 90,000 sq ft to the existing building to create a total of 262,000 sq ft on 42 acres. They later ran into trouble in the form of municipal requirements and environmental issues, including the preservation efforts for the bog turtle. Flowers decided to use an outside consultant to help navigate the overlap of state and local jurisdictions.
The process was then affected by the weather, something that comes into play more in some areas of the country than others. “It’s different than building in the Southeast or out West,” Robert Benton, senior vice-president and chief manufacturing officer for Flowers, told Baking & Snack during a plant visit earlier this year. “Complications brought on by the weather ‘window’ are very challenging and take additional planning. You have to factor in ground freeze, snow loads, larger ranges of ambient temperatures and numerous other engineering factors into design and actual building.”
Those are lessons that can be put to use during future projects — the same way Flowers was able to use knowledge gained from previous installations when working on the Oxford site. Four years before opening the plant, Flowers began development with AMF Bakery Systems on an automated divider that keeps pace with, and can actually exceed, the speed of competing technologies. When the time came to choose technologies for the Oxford plant, the company knew it already had part of its automation figured out.
On a somewhat smaller scale, Flowers opened a new operation in another renovated facility in Kansas. Flowers Baking Co. of Lenexa, LLC, reopened the bakery over the summer in Lenexa, KS. The 137,350-sq-ft facility was first built by Interstate Bakeries Corp. in 2002 to replace an outdated Kansas City plant. Flowers acquired the plant with its 2013 purchase of most of Hostess Brands, LLC’s bread baking assets.
Flowers embarked on an extensive modernization project that totaled an estimated $10 million. The bakery — which produces Nature’s Own, Wonder and Home Pride bread distributed throughout Kansas, eastern Oklahoma and Missouri — opened with one bread line and approximately 100 jobs.
Furthermore, the facility allows Flowers to increase its presence in the region. D. Keith Wheeler, president of Flowers Bakeries, said the company was supplying customers in Kansas City from a Batesville, AR, facility. As volume grew in Kansas City, MO, and St. Louis, the company had a need for a production facility in that area. Now, the company noted, the new facility will help in expanding to markets in Omaha, NE, and Iowa.
When Turano Baking, Berwyn, IL, decided to install a new bun and roll line at its plant in Orlando, FL, it did so with a proverbial truckload of ambition. In installing the line in its 82,000-sq-ft facility, the company made the decision to focus on flexibility and variety on a line that is considered a high-speed system. That means the line doesn’t produce to the full capacity per hour. It also means a lot of new questions arose.
To answer those, Turano worked closely with vendors to focus on the scope and detail of the project. The team looked to line operators and supervisors as well as leadership teams from the company’s three other facilities and visited other backing companies to observe new equipment or processes in action.
Turano also faced the issue of space inside the building. The original line took up 65% of the square footage in the facility. The management team again worked with contractor and equipment suppliers to advise in solving the space puzzle. To make the most of space available, Turano tore down its original production office.
That collaboration was key to the company’s culture and to completing a project of that magnitude.
“We’d walk through the plant and through the line — piece by piece — and everyone got to put their two cents in,” said Jeff Kozloski, chief engineer. “We debated the pluses and minuses of everyone’s ideas until we came up with a design we liked.”
When Highland Baking, North-brook, IL, started up its high-volume bakery in Spartanburg, SC, there was a definite emphasis on efficiency, value and growth.
“In our industry, value is important,” said Stu Rosen, president and CEO of Highland Baking. “You have to make smart investments and grow into them. Spartanburg represents a tremendous value for Highland Baking and our customers.”
The bakery opened its massive South Carolina facility — 230,000 sq ft on 12 ½ acres — as a streamlined version of its successful headquarters located in Northbrook. Highland Baking recently completed a second line that doubled bun capacity, and Mr. Rosen revealed to Baking & Snack earlier in the year that the company has plans to expand the freezer and add a third oven in the next couple years.
Quick expansion of the plant is possible because the plans utilize floor space that is already available and square footage waiting to be converted into usable space. A 30-ft-wide bay that runs the length of the building will allow the new lines that will help Highland Baking continue focusing on its fast-paced product development and service to its customers.
“So far, Spartanburg has answered what we’ve needed phenomenally,” Mr. Rosen said. “For us, it’s all about the customer. And the new bakery allows us to respond to customer needs … It is doing exactly what we want it to, and we’re hearing a desire from customers now to make more products here.”
Highland Baking decided on the Spartanburg location after first focusing on West Coast sites. After a year of searching, one site was nearly agreed upon, but it still didn’t quite offer everything the company needed. The bakery turned to research specialist CBRE Food Facilities Group, a real estate agency focused on the food industry, and asked for a recommendation of five sites nationwide.
Highland Baking’s managers looked at the community and the Spartanburg site, which was built in stages between the 1950s and 2000s. They found a business-friendly environment that came with state and federal incentives. Just 30 days after the first viewing, Highland Baking closed on the site.
Despite setting out on the expansion journey with eyes on the West Coast, Highland found a more efficient route on the East Coast. “The West Coast is still a continuing project for us,” Mr. Rosen said. “But we have to find the right property offering the best value to us.”
As most in the industry are well aware, new construction and expansion aren’t all roses and new money. Toronto-based Weston Foods has been in the process of rolling out capital investment in an effort to spur future growth. The largest of those projects is a $77 million cake facility near Indianapolis. The facility is part of Maplehurst Bakeries, LLC, a division of Weston Foods, and became operational in March. The 180,000-sq-ft facility in Lebanon, IN, houses the company’s warehouse, distribution and manufacturing operations for its cake and cupcake products.
Capital investments like the Lebanon facility continue to be, momentarily at least, a drag on earnings for Weston Foods. While sales increased 8% in the second quarter of 2015, operating income was down 16% and adjusted operating income fell 24%, illustrating the burden that can be experienced with new growth.
“We’re making investments in areas such as sales and marketing, innovation and capabilities to support the capital investment,” said Pavi Binning, president of George Weston Ltd., during a July conference call with analysts. “In the second quarter, the reduction of operating income was driven by plant start-up and related overhead of C$5 million [$3.7 million], investments in people to support innovation and growth of C$4 million [$3 million], and higher input cost inflation at pricing of C$3 million [$2.3 million].”
Mr. Binning said plans are in place to install two more new lines at its Lebanon facility, which will allow the company to close its cake plant in Carrollton, GA.
“At the moment, that doesn’t give us incremental capacity, but it will when the second two lines go in,” Mr. Binning said. “And it was for economic reasons that we actually decided to close that facility.”
Also in the plans for Maplehurst is a $102.8 million manufacturing facility in Lebanon, TN. The 173,000-sq-ft outfit is expected to be operational in the first quarter of 2016 and will house warehouse, distribution and manufacturing operations for Maplehurst’s donut production. Kevin McDonough, president of Weston Foods’ biscuit and frozen divisions, said the facility will allow Maplehurst to reach more customers throughout North America.
Growing for the future
At its foundation, construction is, obviously, about the future. Without the prospects of growth and stability, new buildings aren’t constructed, new lines aren’t installed and new life isn’t breathed into existing facilities.
Clif Bar, an Emeryville, CA-based maker of organic foods, is in the midst of constructing its first self-owned and operated bakery. The Clif Bar Baking Co. is a 275,000-sq-ft bakery in Twin Falls, ID, that will help the company meet growing demand for organic energy and nutrition bars. Construction began in April with plans to open in spring of 2016. The bakery, which is slated to produce Clif Bars and Clif Kid ZBars, will create 200 jobs.
The initial phase of the project will involve an estimated $90 million investment. The bakery is being designed to grow over time. A total capital investment could potentially reach $160 million.
Clif Bar’s new facility is a solid example of new construction that eyes not only the company’s future but also the environment’s. With more and more attention on sustainability, companies must factor in things like efficiency and environmental friendliness.
The new bakery will include state-of-the-art processes and packaging systems to maximize energy efficiency, including technology to capture heat waste and use it in the baking process. Its “cool roof” will reduce pollution and greenhouse gas emissions, and a smart lighting system will maximize natural light instead of electricity.
That can help governments from the state level to the city level welcome new construction with open arms, as Twin Falls Mayor Don Hall did. “We’re thrilled to welcome a new business like Clif Bar & Co. that aligns with our values,” he said. “We look forward to working with Clif Bar as a long-term partner to strengthen our economy and together act as good stewards to the environment.”
If that long-lasting relationship between Clif Bar and the Twin Falls community comes to fruition and remains strong years down the road, it will largely be due to steps that were taken in the past months and years. As can be seen in these bakeries and facilities covered, success comes from attention to many details. The right site, plan of attack and reaction to setbacks can point a new project down the road directly to achievement.