NORTHEASTERN PA — Food processing companies spend less to operate in the Scranton/Wilkes-Barre/Hazleton metro area than any other northeast market, according to a national study by a Princeton, New Jersey site selection guru, John Boyd Jr. from Boyd Co. Inc., which completed the study this month.
The study, which examined 24 of the top food processing regions, comes as the nation grapples with Canada to entice manufacturers. Canada, particularly eastern Ontario, looks especially sweet with a solid labor force and free-trade agreements with twice as many countries as the United States.
With a socialist health care system, Canadian businesses’ labor costs for insurance are about half that of the U.S., John Boyd said. Boyd picked its study markets based on clients’ inquiries. Boyd helps producing giants such as PepsiCo, Gerber Products and Nestle find suitable locations to build.
Considering operating costs such as payroll, utilities, debt repayment and taxes, it would cost the survey’s baseline plant — 300,000 s/f with 500 employees — about $38.5 million annually to do business in the Northeast PA region. By comparison, it costs about $45.7 million in San Francisco but only about $30.3 million in Ontario.
The other two Pennsylvania metro areas in the study trailed Northeast PA with the Lehigh Valley 13th at $40.2 million and the Harrisburg area 14th at $40.3 million. Cost is a factor, local experts say, however a strong labor force and proximity to major East Coast markets heap tremendous appeal to food processors.
“They’re specifically looking at time to market. We often use the statistic that 80 percent of the nation’s buying power is in a 500-mile radius of Northeast Pennsylvania,” said John Augustine III, executive director of the regional economic development agency Penn’s Northeast. “Meaning that in one day’s drive, they can hit a tremendous amount of the population.”
Lackawanna and Luzerne counties already are home to 76 food manufacturing firms, according to Teri Ooms, executive director at The Institute for Public Policy and Economic Development. Those firms employ about 4,200 people with employees on average earning $54,000 a year.
Food processing business has expanded 11.5% in the last six years, “demonstrating the type of strength this type of manufacturing has in the region,” said Terri Ooms.
Large processed food manufacturers are facing tough decisions with what some describe as draconian rule making from the Food and Drug Administration. The FDA this year rolled out the final pieces of the Food Safety and Modernization Act, and food and beverage makers claim the stiffer regulations will render doing business untenable. Faced with the reality of spending millions to retrofit plants, many are asking “does it make more sense to relocate to a low-cost market?” Boyd said.
Add to that, a record drought in California is forcing the myriad water-dependent industry players there to consider uprooting. And they’re eyeing places like Northeast Pennsylvania where the workforce is trainable and dependable and the water supply abounds, Boyd said.The second-generation consultant was in Scranton on Tuesday and Wednesday to meet with “two or three clients” who already have a presence in the area but are considering expansion, he said. He would not identify those clients or offer details about their plans.
However, he praised the region’s network of colleges with market-minded training programs to keep the job force local and ready. He also tipped his hat to the Greater Scranton Chamber of Commerce, which he said is known nationally for its large-scale business development efforts.
“Food processing joins other employers like plastics and advanced manufacturing among the high-priority business economic developers are fishing for.” Augustine said. “We’ve certainly seen regionally an uptick in the amount of inquiries when it comes to food manufacturing and processing, to the point that we’ve listed it as one of the top clusters to try to proactively attract to Northeast PA.”
Penn’s Northeast currently is courting two new food processing firms to build in the region, said Augustine.