New plant construction, facility expansions/ renovations are being fueled by growing demand for further value-added meat and poultry products, as well as more sanitary facilities.

Even though the meat and poultry industries continue consolidating, insiders say that new plant construction and plant expansion/renovation projects continue percolating! This activity is due, in large part, to increasing demand for further value-added meat and poultry products. This increasing demand, in turn, results in the need for new plants, facility expansions, and plant renovations.

Such projects generate excitement for all processors involved.

“We’re excited about proceeding with [building a major new case-ready meat plant in Sherman, TX, scheduled to open in early 2006], which represents another monumental step in the evolution of our case-ready business,” said John Tyson, chairman and chief executive officer, earlier this year.

“Our strategic market shift over the past several years to focus our production and processing on higher-margin products has served us well,” said Joe F. Sanderson Jr., chairman and chief executive officer of Sanderson Farms Inc., Laurel, MS, in May 2005. “We have timed this conversion at Collins, MS [expansion of the hatchery, retrofitting certain equipment, and constructing a new feed mill] to coordinate with the opening of the company’s new Moultrie, GA, processing facility. Initial operations at the new complex are set to begin during the company’s fourth fiscal quarter of 2005.”

Processors aren’t the only ones excited about this trend.

“We have continued to see growth within the [meat and poultry] sector, and we have seen the activity continue to pick up,” says Darryl Wernimont, director, The Haskell Co., Jacksonville, FL. “Growth continues as beef, pork, and poultry product offerings [breadth of products] continues to expand. Pre-cooked, ready-to-eat [RTE], and case-ready products continue to provide consumers with not only convenience — but with a quality alternative to restaurant and cook-from-scratch meals.”

The Haskell Co. ranks among the foremost design-build organizations in the United States. It provides complete architectural, engineering, construction, supply chain analysis, and real estate services on a single-responsibility basis. It also provides the meat and poultry industry with design and construction services for processing plants, distribution centers, warehouses, and low-temperature structures, which includes new construction, renovations, and facility expansions.

Current new plant construction and expansion/renovation trends will continue. Although formal notifications from clients prohibit construction firms from discussing new plant and plant expansion or renovation projects in detail, Wernimont offers his opinions on what’s driving this investment.

“Modernization, food safety, and speed of production seem to be the largest factors driving investment [in both new plant construction and plant expansion and renovation],” Wernimont says. “Facility expenditures continue to support the growing trend in case-ready and RTE products. In addition, regulatory agencies in conjunction with industry continue to drive plant improvement programs to better support safety of both products and facilities. GMPs [Good Manufacturing practices], HACCP [Hazard Analysis & Critical Control Point programs], and facility security continue to drive the next generation of facilities.”

Wernimont says he has seen no trends in terms of new or expanded facility sizes.

“Facility size is driven by a specific need or application,” he adds. “However, there are major efforts being made in design relative to sanitation, food safety, and facility security.

“There is an increased emphasis on the facility-planning process involving ‘what ifs’ — thus making sure that flexibility is taken into consideration so that the facility can accommodate product line extensions, new packaging technologies, and the next generation of new products,” he continues. “In general, for the past two years we have continued to see growth in cold-chain distribution. Not necessarily meat or poultry specific, but across the board.”

More than half of the work FoodTech Structures, Hanover, MA, a full architectural/engineering/planning/design/build firm, does is in the meat and poultry industries.

“Most of our work has been on the renovation side,” says Jeff Jendryk, director of business development. “We have been getting a lot of calls from people who have been looking at studies. They realize interest rates are climbing, and they want to get these projects underway.”

Jendryk, too, couldn’t get into project specifics, but did say: “We work with Fortune 50 companies, as well as a lot of privately-held companies. We are working with new technology with some clients as well as simple renovations plus improving refrigeration systems, process utility work, and energy savings projects. People are basically trying to improve their overall operations.”

Most of the FoodTech Structures’ projects are challenging.

“Projects include fitting something between two facilities or adding on to existing plants — and you have to do this while the plant is running. We’re doing a lot of renovations,” Jendryk says,

Another firm confirms that industry plant construction and renovation remains steady.

“Meat companies that value our investment in staff professionals and seek the security and control that our single-source ‘Guaranteed Maximum Price’ approach provides seek our services year after year — no matter what the industry’s capital construction temperature is at,” says Tony Pitrone, senior vice president, The Facility Group (TFG), Atlanta, GA. TFG has been designing and building meat plants since 1986. It typically provides services in a turnkey, open-book accounting approach. Clients range from farmer-owned cooperative start-ups to established industry giants like Tyson Foods, ConAgra, Hatfield Quality Meats, and Sara Lee Foods.

“We are a single-source provider that has on-staff meat scientists, equipment specialists, packaging and conveyance specialists, meat processing industrial engineers, as well as a full complement of architects, civil, electrical, plumbing, mechanical, fire protection, refrigeration, material handling, and utility system engineering disciplines,” Pitrone says. “It does seem that every protein has its year. Last year it was beef, and the year before pork had a majority of our assignments.

“Over the last five years, many of our projects were driven by trends such as value-added, food safety, and organic or natural protein markets,” he adds. “I wouldn’t call any of those trends anymore; they have become permanent revenue streams and necessary capital expenditures for just about any company in the meat industry.”

Clients typically engage TFG early on for planning, feasibility, and grant preparation.

“For Tyson Foods, we are constantly engaged in dozens of plant-level engineering for refrigeration or related compliance-type assignments, as well as larger expansion and renovation designs,” he says. “Sara Lee Foods is another great organization whose project management group granted us key supplier designation for multiple assignments over the past couple of years to expand their Haltom City-State Fair corn dog production.”

The activity The Facility Group is now witnessing is new and interesting to company executives.

“A good deal of work is coming from small to mid-size companies that don’t just want ‘new products,’ but they want complete and total diversification across protein lines — just like the Big Boys,” Pitrone says. “The owners of these companies are leveraging their hard-won business relationships to sell their expanded protein lines to existing customers instead of trying to sell more of their traditional products by competing at the commodity level and having to win customers.”

Over the past decade, the only year that was truly flat was 2002, Pitrone says.

“There’s no question that 2003 and 2004 were truly explosive for large new slaughter and processing plants,” he adds. “This year [2005] is more of the same, with about one-half dozen very large projects out there. I predict that meat industry capital spending will continue to rise this year based on all of the planning we are doing for several smaller [less than 500 head] per day slaughter plants, as well as plants that will further process less than one-hundred thousand pounds of raw material a week.”

There has been quite a bit of construction activity since 2004 in the meat and poultry industries, agrees Harlan VandeZandschulp, president of Sioux City, IA-based Gleeson Constructors L.L.C., an industry leader in the design and construction of food processing facilities and distribution centers.

“Industry consolidation and reformulation has led to plant closings and expansions,” he says. “Larger corporations are streamlining operations and consolidating locations to improve cash flow and the bottom line. Consolidation has also led to the rise of start-up companies that are growing to fill the voids left behind due to consolidation.

“Consumer purchasing and the demand for more ready-to-eat options is also driving the construction of new facilities, and/or the renovation of existing facilities,” he adds. “Consumers are now looking for more flavors in different packaging, and more options. The consumer is ultimately driving the change in the construction marketplace for food-processing facilities.”

Plant construction has been on the steady increase since early 2004, and has seemed to ramp up and increase since January 2005, VandeZandschulp points out.

“We currently are seeing a sustained interest in projects, and depending on corporate approvals we could see sustained construction activity,” he adds.

Gleeson Constructors predicts a 10 to 15 percent overall gain in new and remodeled square footage over the next few years.

“The industry changes coupled with increased sanitation concerns and the emergence of the ready-to-eat market segment are the driving forces behind the increased construction,” VandeZandschulp says. The New Principles of Sanitation Design incorporate aspects of clean rooms and ventilation requirements, which are hard to achieve in aging facilities. These issues, coupled with the increased capacity and size of processing equipment, are leading to larger rooms with fewer columns and increased ceiling heights.

“The clean-room concept of enclosing the mechanical and electrical structural systems and minimizing the horizontal pipe runs in the room also leads to higher roof heights,” he adds. “Also, the change from evaporative coils to refrigerated make-up air units increase the roof loads and often exceeds the original plant designs. All of these factors, plus the increase in niche-market contributors, will lead to the increase in plant expansion and new construction.”

Last year was rather flat for new facility design in the meat and poultry industry, says Mark Redmond, president, Hendon & Redmond Inc., Cincinnati, OH. H&R is an engineering/architectural firm specializing in the design of food plants. It provides complete architectural, engineering, and construction management services for both new and existing facilities. But things are looking up so far this year, he adds.

“Activity has begun to pick up,” Redmond says. “Hendon & Redmond Inc. has seen an increase in new facility and renovation planning efforts. We think we’ll see an increase in new plant construction based primarily on the planning we’ve witnessed. Most firms that put such an effort into planning usually end up going through with the project.”

The following are several of the company’s 2004-2005 new plant projects:

• Saag’s Specialty Meats, San Leandro, CA. Luncheon meats; new/renovation, 25,000 square feet

• Ohio Department of Corrections, Cincinnati, OH; meat plant; new Greenfield, 45,000 square feet

• Milton Abeles Inc., N. Hamstead, NY; railed/boxed beef; new construction, 27,000 square feet

“Active expansion and renovations have been more active than new construction,” Redmond says.

Several recent plant expansion/renovation projects his firm undertook are:

• Gold Star Chili, Cincinnati, OH. Chili plant expansion, 10,000 square feet

• Ralph & Paul Adams Inc., Bridgeville, DE. Sausage plant expansion/renovation

Redmond sees a trend toward more specialized plants.

“These plants tend to produce for a new market or a niche market, or for a limited product line,” he adds. “The size is really a function of the market for the product. Thus, we’re seeing a variety of [new plant] sizes.”

Packers and processors involved in new plant construction, expansion, or renovation are looking more closely at their facility design, says Don Graham, president of Graham Security Design Consulting LDT, Chesterfield, MO.

“They’re not the ‘deep, dark dungeons’ like you used to read about,” Graham says of newer plants. “They’re bright and shiny and doing all the right things for sanitation.”

There is a lot of activity going on in plant expansion and renovation, Graham says.

“There are plants going strictly into case ready, and they’re highly sanitary,” he adds. “They’re building a room out of sanitary panels within a room. Plants not slaughtering, but doing the final cut-up, packaging, wrapping, pricing and shipping, are particularly concerned with sanitation because there isn’t a kill step until you get the product home and cook it. These plants are looking at high filtration in their HVAC systems and cleanable equipment, among other things.”

New plants are getting larger, he observes.

“If differs from customer to customer, but the plants are not getting any smaller,” Graham says. “The footprint is getting bigger. Cramped quarters aren’t good for safety records, and they are much harder to clean.”

Plant size is on the increase, given the competitive nature of the industry, VandeZandschulp says.

“The smaller facilities with a tendency for more inefficiencies are being pushed out by the larger, more efficient facilities,” he adds.

Suitt Construction, Greenville, SC, a specialty contractor that is very knowledgeable in sanitary facility design principles and installations, sees much activity in new meat and poultry plant construction.

“What’s driving this is new markets such as ready-to-eat products, new technologies, or just the need to improve or update existing facilities,” says Sid Adkins, director of business development. “We anticipate an increase [in such construction] more on the ready-to-eat and further-processing side of the business.

“We see more activity on the expansion side,” he adds. “This is being driven by untangling processes [the need to streamline or straighten out some processes and product flows in existing meat and poultry plants], improving employee welfare, or just improving the sanitary design of a building.”

Since January 2004, the industry has been primarily into a merger and acquisition mode making necessary revisions to acquired plants to update them to the level of their full potential and quality requirements of the parent company, says Ron Vallort, president of Ron Vallort and Associates, an Oak Brook, IL-based engineering, building, refrigeration, and processing consulting firm. The exception to this has been the design and construction of new specialty plants for niche markets.

Since there has been a pent-up demand for more capacity in the meat and poultry industry in recent years, the building owners have expanded and renovated their existing facilities to produce as much capacity as practical, Vallort says.

Traditionally, the food industry has focused on food safety — the right ingredients, sanitary design, time/temperature progressions, and container integrity. However, the steps that facilities must take to address food safety are very different from the steps they must take to address food security.

“Food safety puts in place preventative steps to eliminate unintentional contamination while food security puts in place steps to prevent deliberate acts of contamination,” Wernimont says. “In the past two years, The Haskell Co. has been involved in more than twenty facility security programs within the food industry. We typically provide facility integration, design of the exterior security layout, coordination and management of the design and procurement with security integrators, and all associated construction management to perform the required scope of work.”

Given the increased pressures on production, profitability, and food safety, Gleeson Constructors is noticing an increased size and scope of renovations and construction.

“Increased plant security is one of the lasting effects of new terror warnings, leading to plant layout changes, employee restrictions, and more,” VandeZandschulp says. “New facilities tend to be of larger square footages allowing more current and future flexibility in equipment and process flows. New facilities and additions are now incorporating more of the American Meat Institute’s Sanitary Design Principles, including the clean-room concept, air-handling units, and the minimization of standing water often found in older facilities.”

Environmental stewardship by many food companies is garnering more attention, he adds. Green Engineering, for example, is defined as environmentally conscious attitudes, values, and principles combined with science, technology, and engineering practice — all directed toward improving local and global environmental quality.

“Green Engineering encompasses the key engineering and design disciplines in conjunction with materials of construction to minimize the overall environmental impact throughout the entire life cycle of the facility,” Wernimont says.

The LEED (Leadership in Energy and Environmental Design) Green Building Rating System is a voluntary, consensus-based national standard for developing high-performance, sustainable buildings, he adds. Members of the U.S. Green Building Council representing all segments of the building industry developed LEED and continue to contribute to its evolution.

“The Haskell Co. has been one of the first design-build firms to provide the food and beverage industries with Green Facility design and construction,” Wernimont says.

Gleeson Constructors sees a moderate interest and activity in new distribution centers.

“The trend seems to be locating the distribution with the majority of production for a particular manufacturer,” VandeZandschulp says. “We are seeing more distribution centers on food processing campuses, but owned and managed by outside entities specializing in the distribution side of the business.”

Another trend that is developing is the shift to more strategic locations. The shift in population centers, as well as changes in transportation and trucking regulations, have shaped the size and location of the distribution centers and the system at large, VandeZandschulp says.

“Also, the changes in the retail industry and demands put on the processors for delivery has changed the layout and overall efficiency of the distribution center as we know it,” he adds.

The Facility Group’s Pitrone sees an increase in new meat and poultry plant construction in the future.

“The meat industry is a place where a hard-working person with a unique business plan will always attract investors,” he adds. “I don’t think new construction will ever stop as there will always be a handful of companies that achieve explosive growth and run out of capacity. Companies that fail have their assets available for others to purchase and renovate.

“And then there is always the producer who becomes ready to take that giant step into slaughter and maybe processing,” he adds. The market speaks both ways, though, because it seems every year just as many companies exit a part of the business — leaving co-packing and construction opportunities to those meat companies that can do it faster, cheaper, or have mastered yields and consistency.

“These companies exist to take on the new business, and a new facility or expansion for them is not a luxury but an urgent necessity,” Pitrone says.

FoodTech Structures anticipates accelerated activity in renovation and expansion of meat and poultry plants.

“A lot of smaller plants are going by the wayside,” Jendryk says. “They’re either being bought by larger companies or they’re entrepreneurs going into single-serve portions of multi-pack, vacuum packaging. I do see the market improving. A lot of companies are expanding renovations. People are feeling good again. Although red meat has been down poultry has picked up. Still, a lot of companies are also upgrading their red-meat facilities.” NP

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