Former USDA official turned consultant Peter Buzzanell told delegates at the International Sweetener Symposium last week that the export of manufacturing facilities to foreign countries is a trend that “has run its course.”
At the American Sugar Alliance (ASA) sponsored event, Buzzanell presented a study indicating that US candy firms were returning home because of the good health of US candy manufacturing. When companies can enjoy strong profits while operating in the US, he said there is less of an incentive to shift production elsewhere.
But Jim Corcoran, spokesperson for the National Confectioners Association (NCA), said it is not aware of any confectionery firms returning to the US.
Corcoran agreed that confectionery exports from the US have increased in recent years but said the weakness of the dollar explained the improvement.
He told Confectionery News that there are still great financial advantages to relocation outside the US. Buzzanell also claimed to have uncovered data illustrating powerful financial reasons to relocate, but his view put weight on different reasons.
Wages or prices?
“We found huge disparities in wage rates to be the major economic factor,” concluded Buzzanell.
In Pennsylvania, he listed wages at $18.78 an hour and yearly healthcare costs at $7,680 a worker, while in Mexico wages plummet to 50 cents an hour and annual healthcare spending to $258 per head. Rent costs and other overheads are also much lower south of the border.
The price of sugar could also be a motivating factor but he said sugar prices are actually slightly higher in Mexico averaging 31 cents a pound from 2007 to 2008, while American manufacturers paid 28 cents.
Jim Corcoran took issue with this claim, saying that the price comparison is highly misleading and that sugar prices in the US are exceptionally high.
He said lower commodity costs abroad continue to be a major incentive for firms manufacture outside the US.
A US government report in 2006 underlined the importance of sugar prices in relocation decisions.
“For the confectionery industry in particular, evidence suggests that sugar costs are a major factor in relocation decisions because high U.S. sugar prices represent a larger share of total production costs than labor,” said the report entitled Employment Changes in U.S. Food Manufacturing: The Impact of Sugar Prices.