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Regional Tastes Add Spice to Saturated Market

b y     L A U R I E     J O A N     A R O N

In the developed world, the food processing business operates in a saturated market. In the developing world, business risks like the lingering Asian flu are still putting a damper on facilities expansion activities even as huge new markets beckon. Companies are far more likely to move into new markets by merger and acquisition or joint venture than by constructing new plants. The bright spot, in contrast to the still-consolidating global players, is niche, regional food makers who are using geography as a marketing tool, strengthening their brand and growing where they were born.

Consolidation and restructuring are still the buzz words among many large packaged food companies. Battle Creek, Mich.-based Kellogg Co. and Nabisco Holding Corp. are two of the many companies still announcing job cuts and plant closures. "Food companies were active in developing new sites throughout the 1980s," says Fred Ward, a managing principle with engineering consultancy Lockwood Greene in Atlanta. "Now, they're experiencing over-capacity and closing down and consolidating operations."

According to Paul Kleijne, Chicago-based area director for the Netherlands Foreign Investment Agency, the huge European market for food products is growing only 1 percent to 3 percent annually. "Most food companies that want to enter the European or even the Asian market do so through acquisition," he says. "Greenfield projects are rarely justified. To do greenfield development, you have to have a new specialty product, such as Texas barbecue sauce."