36th Annual Plant Construction Survey
The push for ROI
It’s been a rough-and-tumble five years since Food Engineering reported 613 food and beverage plant construction projects for calendar year 2007. From there, the number of reportable projects went downhill with the state of the economy. But it seems 2012 is the year processors freed up some money to upgrade their plants or build new facilities to keep up with an increased demand for product.
Reportable projects hit 600 in 2012, 32.5 percent higher than 2011’s total of 453 projects and just 2.1 percent lower than the 2007 high of 613 projects, according to Food Engineering’s 36th Annual Plant Construction Survey. Reportable projects are those that have been made public by the processor itself, a government entity (including local or state economic development groups) or the architectural and engineering/construction (A&E/C) firm responsible for the project.
Most A&E/C firms tend to agree on what’s driving the higher 2012 numbers—although the order changes depending on whom you ask. Curtis Manns, E.A. Bonelli + Associates senior designer, suggests improving food safety, increasing automation (to achieve higher plant efficiency) and decreasing energy usage are primary drivers. But when it comes to reducing energy, processors are not altruistic. Rather, according to Case, Lowe & Hart President Kevin J. Lewis, processors are moving to reduce operating costs through energy efficiency, but LEED certification (often associated with sustainable design) has not attracted processors lately due to the high cost and low return on investment.
Charles K. Dietz, Middough Inc. senior vice president and general manager, adds to the list food quality, improved asset utilization, nutritional improvements and margin improvement. In addition, there are more infrastructure and new product introduction projects.
“The Food Safety Modernization Act [FSMA] is stimulating renovation projects as companies grasp the seriousness of this regulation,” says Forrest McNabb, Big-D Construction Corp. senior vice president, food and beverage group. “The financial institutions are still restrictively conservative, and most projects we see breaking loose are self-funded.” Activity is expected to pick up the end of this year and into 2014.
“In protein [beef, poultry and pork], we’re seeing increased focus on sanitary equipment design,” says Brian Kappele, Stellar divisional vice president. Food processors are taking more of the responsibility—rather than relying on OEMs—to ensure food safety. They present their sanitary design requirements and challenge OEMs to meet them. Previously, processors focused more on operational concerns. Now they are proactively involved in the design phase with specific sanitary guidelines.
The accelerating pace of the changing demands of the food and beverage market and the arrival of new technologies and construction materials require processors to be much more agile, according to Michael J. Steur, Hixson Architecture & Engineering director, business development. Plants must be able to be modified and expanded quickly and cost effectively to produce new products and take advantage of new technologies and materials. Processors are also turning more to automation for a variety of reasons, including increased flexibility, elimination of hazardous and hard-to-fill job positions, improved product traceability and faster reaction time using real-time, point-of-sale (POS) data.
To upgrade or not to upgrade?
The question of whether to upgrade existing facilities or build new is becoming more complex as processors evaluate existing facilities and their ability to meet the new food safety regulations imposed by FSMA. Whether these facilities can be automated to improve production efficiency is another issue as space is critical, and older equipment may not lend itself to automation. In addition, applying automation technology piecemeal to old equipment doesn’t make much sense; what does make sense is purchasing an entire line or unit operation with modules that are linked together. Then, there are architectural issues that can affect both food safety and plant safety—and may not be easily fixed in an old facility— such as airflows, water flows and outdated drainage systems or ammonia piping. For example, OSHA recently fined a Massachusetts processor because there was insufficient space between the plant’s anhydrous ammonia piping and stored materials immediately below the piping, causing a potential for pipe damage and deadly leaks when pallets were moved. The plant also lacked effective lock-out/tag-out systems to protect workers during maintenance.
In 2012, 382 projects or 63.7 percent of total projects were for expansions or renovations, a 22.4 percent increase over 2011’s 312 expansion/renovation projects. The 2012 number also reflects a 6.1 percent gain over 2007’s number of 360 projects.
Many food processors are opting to renovate existing building space for their growing production demands versus new, ground-up construction with either plant expansion or greenfield facilities, says Tyler Cundiff, Gray manager business development – food and beverage market. Several factors may contribute to this trend, such as the availability of existing space, equipment technologies requiring a smaller footprint, capital budget constraints and the overall global pressure of raw material costs and consumer spending.
“Trends we have seen include adaptive reuse of light industrial buildings that have access to enhanced transportation infrastructure, such as inland ports for food processing and distribution,” says Robert Graham, The Austin Company vice president, food and consumer products. Building reuse often allows processors to begin production sooner rather than using a greenfield site, but it can also keep them from having the state-of-the-art complex they initially intended, due to limitations with the existing space. Graham also sees processors moving to states with favorable conditions related to labor, fewer regulatory restrictions and incentives.
In 2012, 218 new projects accounted for 36.3 percent of total projects (600), but in 2011, 141 new projects accounted for 31.1 percent of total projects (453). Warehouse/distribution centers (DCs)—whether new or expansions/renovations—accounted for 7.3 percent (44) of total projects in 2012 compared to a total of 9.1 percent (41) in 2011. In 2007, the percentage of new projects hit 41.3 percent (253) while expansions/renovations totaled 58.7 percent (360) of all projects. Of the 613 projects in 2007, 15.3 percent (94) included warehousing and/or DC capabilities. The warehouse/distribution center category did not track combined projects where both manufacturing and warehousing spaces were included. However, several plant expansions also included warehouse or DC space. As always, the survey did not count projects that were only R&D facilities or corporate offices—unless they also included manufacturing.
No throwing caution to the wind
While 2012 was a good year—or at least better than the previous four years—processors are not plowing money into projects that don’t promise returns. “We still see apprehension on releasing capital for projects,” says Lloyd Snyder, Woodard & Curran senior vice president. “Planning is being done, and selection of projects to execute is cautious. Following the 2012 election, the expected resurgence in spending is still muted. The stock market envisions the growth, and I can envision a major release of funding at the end of 2013 and [into] 2014.”
Ken Gruenhagen, SSOE Group division manager, agrees that capital plans are a little tight this year. “Many companies appear to have cash available, but approval levels are becoming more stringent.” Processors will spend money on food and personnel safety, and sustainability initiatives have momentum, including greener packaging and any type of efficiency improvement—whether it is related to energy or water conservation. Gruenhagen also sees some spending on improving supply chain efficiencies.
“Overall capital spending is up, but just as much, [so is] attention on an individual project’s financial justification,” says Darrin McCormies, Epstein vice president. “Projects focus on providing capacity to satisfy volume increases, and there is continued focus on cost reduction.”
Available capital has been tempered by product demands, the availability and costs of raw materials, and the utilization of “multiuse/multi-product” plants to reduce operating costs, according to Austin’s Graham. Ready funding has also been crimped by the costs of utilities such as water, electric and gas.
Drivers for spending will be projects that support rebuilding the infrastructure of an aging industrial base, says Snyder. Also, processors will invest in new products and processes in 2014 and 2015. “We see a major focus on wastewater treatment, water reuse and energy,” adds Snyder. “Companies and communities want to revive their factories with new technology, but still must fix their old problems first.”
“There is a growing focus on plant optimization and/or existing asset optimization, and it is this focus that is driving most construction-related projects we are seeing in the US,” says Darryl Wernimont, food and beverage specialist, POWER Engineers. Greenfield construction in the US is far and few between with most greenfield activity in select international markets. Optimization, according to Wernimont, is occurring in manufacturing processes, packaging, plant consolidation and rationalization, plant and line relocations, brownfield conversion, automation upgrades and in distribution and logistics.
Processors are placing their money where consumer spending is. Two areas that have taken hold are value-added convenience and health foods, and quick-serve, fast food and casual dining, according to Michael Golden, Food Tech LLC vice president, who reports the latter has been “driving the bus on the expansions we are doing for our foodservice clients.”
As might be expected, larger companies have the capital, but smaller and startup businesses are finding it more difficult to move ahead. “Capital seems to be freeing up for established businesses with strong balance sheets and equity positions,” says Jack Michler, ESI Group USA regional sales manager. “But startup enterprises seeking funding or SBA loans are almost non-existent. A recent prospective client sought out an SBA loan, and when it thought it was nearing approval, another ‘truckload of forms’ just showed up for it to complete.” Now the processor, according to Michler, is seeking private financing alternatives.
“We are seeing companies investing in larger capital projects—game changers for them,” says Hixson’s Steur. Some smaller projects that had been postponed are now moving forward to address infrastructure and utility needs, reduce costs and improve productivity and safety.
Chobani’s Twin Falls, ID one-million-sq.-ft. facility was certainly a game changer for the yogurt company. Equally impressive was its fast tracking from design to building completion. According to Mark P. Shambaugh, Shambaugh & Son CEO, the design-build approach to constructing this plant reduced the time to build the structure from an average 24 months to just 10 months. This translates to money well spent and a system online much sooner than the traditional bidding process allows. However, the design/build process does require a very close relationship between the processor and the A&E/C firm. (For more information, see “Plant of the Year: Chobani,” FE, April 2013.)
FSMA’s impact on plants—old and new
FDA released for public comment its proposed rule on preventive controls for human food to prevent foodborne illness. (For more details, see “FSMA Update: The devil’s in the details,” FE, March 2013.) Public comment has been extended until September 16, 2013. Under the new rules, processors would be required to have written plans that identify hazards, specify the steps that will be put in place to minimize or prevent those hazards, identify monitoring procedures, and record monitoring results and specify what actions will be taken to correct problems that arise. Since a food plant’s physical space is usually so tightly integrated with the process, there are concerns as to whether existing buildings will need a lot of work to meet FSMA requirements.
As HACCP teams review their programs and good manufacturing practices (GMPs), they are often faced with the reality that outdated facilities impose significant product contamination risks due to the existence of faulty facility design, inadequate construction materials and outdated mechanical systems, according to ESI Group’s Michler. Food safety improvements should include controlling unauthorized access of plant personnel to production/process areas; designing proper site, floor slab and roof drainage systems to eliminate water pooling and the harborage of pathogens; and isolating plant areas to separate raw, production, packaging and warehouse spaces.
“The concern is not necessarily the facility’s age, but more the use it was designed for,” says Bill Sokolowsky, Burns & McDonnell business development manager. Greater risk is likely in facilities designed for non-food processing applications that have been converted to food manufacturing centers. Overhead installations (primarily piping with joints), access for overhead cleaning, proximity to sanitary facilities (e.g., lavatories with access directly adjacent to production lines) and waste segregation are the most obvious shortfalls Sokolowski sees during visits to plants. The integration of wet and dry processing areas also makes the list, as do specific uses of construction methods and materials (e.g., open cavity walls, porous surfaces, etc. that harbor and promote infestation and bacteria growth).
More also needs to be done to fully isolate the exterior environment from the manufacturing area. HVAC upgrades, interior separations and dynamic pressure balancing will likely be issues in facilities not designed to meet today’s more stringent requirements. But workflow and dust control will be among the most difficult issues to overcome in other than optimal plant layouts that have workers, machines and materials negatively affecting the desired and required sanitary conditions of the plant.
Accessibility and visibility are some additional common issues in older facilities, according to Gray’s Cundiff, and planning existing building space to improve them often hinders production and could come at a high cost. However, design techniques such as drop-down, walkable ceilings used in new plant designs are also often considered for plant improvement projects.
In RTE production facilities, a high level of segregation of systems including water and air is necessary, but reconfiguring ventilation and sanitary systems in an existing facility poses many challenges. “During project planning walkthroughs and observing sanitary design issues, we have learned the processor may be in need of updated cGMPs or HACCPs as a broader, but necessary, solution,” adds Cundiff.
As if there weren’t already enough issues on the list, Epstein’s McCormies adds existing HVAC systems that are often inaccessible and difficult to clean, the uncontrolled movement of materials and personnel that allows for cross-contamination and older buildings with too many cracks, crevices or hidden areas that make sanitation difficult or impossible.
While the basics of sanitary construction haven’t changed all that much in the last 10 years, today’s new construction places more emphasis on airflow and ventilation design, says VCP&A Principal William Vaughn. Austin’s Graham adds that allergen separation is another issue being addressed by new construction. HACCP implementation is designed in at the outset. The handling of wastewater and creation of smooth interior surfaces are also addressed by new designs.
According to Hixson’s Steur, allergen control is not only an issue in the plant but the warehouse as well, since older facilities were not properly designed to segregate allergens. Airflow issues are caused by changes over time in product mix, equipment utility requirements, production volumes and unanticipated alterations. “Meat plants that have not been updated since AMI created the Sanitary Design Principles for Facilities in 2004 often must upgrade their HVAC systems to improve the control of moisture and temperature,” says Steur.
As noted earlier, processors are looking for paybacks when it comes to any alternative energy schemes or recouping wasted energy or recycling water. But, taking on alternate energy initiatives (wind, solar, waste-to-energy) is usually beyond the scope of most projects. “We have participated in conceptual efforts—and even design development phase—for a tri-generation energy plant with energy recovery systems for a new food plant; however, we have seen that for the specific application, the capital cost to operational payback ratio may not make sense,” says Gray’s Cundiff. But processors are exploring the possibilities. “Overall we have been asked by several manufacturers to evaluate similar waste-to-energy systems at least from a conceptual standpoint to gauge the various payback scenarios. In the larger industrial manufacturing sector (including food manufacturing), we have observed a consistent and growing trend in requests for similar systems.”
While SSOE has designed and installed waste-to-energy projects, they have not gone into the food industry, according to Gruenhagen, because the food industry generally is looking for simpler, more immediate and cost-effective energy-saving devices. “SSOE has installed a number of systems to recover waste heat from processes—flue gases and waste streams,” says Gruenhagen. Most of these systems are used for heating water or preheating ingredient streams. One application involved pulling excess heat from the production environment and using it for area heating in the rest of the building. While the firm has installed numerous systems to recover water, it is generally used for non-food contact applications, although Gruenhagen reports that in some applications, the recovered water is pure enough for use as an ingredient. But the public perception that the water wouldn’t be suitable caused the processors not to use it as an ingredient.
“The Austin Company’s focus has not been on the construction of [alternative energy] systems, but on working with clients to develop the most sustainable design possible, given the project’s scope,” says Graham. “With that said, we have recently completed or are working on food plant projects that focus on energy savings, reduced air emissions, water savings and more sustainable waste management system features and/or LEED certification.” Some of the more notable systems and features include site work for rain gardens and riparian buffers, highly efficient HVAC, Solatubes that maximize natural lighting and hot water return recirculation. “It should be noted that some LEED elements are a challenge to implement in food production facilities due to conflict with food hygiene requirements,” adds Graham.
Most processors have instituted green and/or sustainability initiatives with a focus on zero-waste systems. “Standalone projects are difficult to gain approval due primarily to internal ROI requirements, but when capital projects such as greenfield facilities are constructed, it is a vital component of the design to incorporate zero waste and/or uses systems,” says Stellar’s Kappele. Some projects Stellar has designed include those that were part of an overall LEED strategy or implemented at a later date:
1. A refrigeration system that uses the waste heat from screw compressors to pre-heat hot water.
2. Waste heat from the refrigeration compressors that is used to heat glycol and pumped under freezer floors to prevent frost and heave.
3. A reverse-osmosis (RO) wastewater treatment facility that returns treated water from the process steam waste system for use in the refrigeration system cooling towers.
4. A wastewater treatment facility, equipped with an anaerobic digester, that is capable of capturing methane gas generated by the process and returning the gas back to the plant’s boiler room, where dual-fuel boilers accept the methane and use it as a fuel source.
While Stellar has been involved with solar, wind, waste-to-energy and zero-net systems, which are typically larger and more aggressive investments, it has found most food processors tend not to pursue these technologies, especially because they require knowledgeable maintenance over the life of the equipment.
Click here for a link to the survey results.
The following companies assisted Food Engineering in compiling this survey:
A M King
The Austin Company
Big-D Construction Corp.
E.A. Bonelli + Associates, Inc.
Burns & McDonnell
Case, Lowe & Hart, Inc.
Kevin J. Lewis
The Dennis Group
ESI Group USA
Food Tech, LLC
Hixson Architecture & Engineering
Michael J. Steur
KBR Building Company
Jane Gray Boland
Charles K. Dietz
Shambaugh & Son, L.P.
Woodard & Curran