Gerber's plan shows area's focus

December 22, 2008
| By Pete Daly |
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FREMONT — Part of the growth sector in the West Michigan economy — high-tech research and development — is rooted in a long legacy of growing products. The latest sign of the region's R&D potential was widely noted here last week.

Gerber Products, which grew from a viable idea for commercial production of baby food 80 years ago, is now the key R&D center in infant/toddler food products for Nestlé, one of the largest food-processing corporations in the world. This would be the third growing initiative in R&D related to agricultural products; others are under way in Battle Creek and in the Holland/Zeeland area.

Nestlé, which is based in Switzerland, announced that Gerber Products, which is now part of its Nestlé Nutrition division, will be the focus of $75 million in new investment over the next 10 years, entailing the creation of 200 jobs related to its infant/toddler food research center there.

"Western Michigan is probably the major driver behind the high performance of the state in agricultural products," said Jim Hettinger, president and CEO of Battle Creek Unlimited. Kellogg's, another food giant on the world economic stage, is now constructing a new R&D center in Battle Creek that will have enough space for 300 new employees.

"Michigan ranks in the top 10 states in production of 45 different fruits and vegetables — the second largest agricultural diversification behind the state of California."

"We are really well positioned to achieve further growth just because of these strategic assets," he said.

While the Michigan economy may be perceived simply as motor vehicles in some narrow views from outside the state, Hettinger noted that the historic agricultural base and the growing R&D capabilities provide a different perspective of the state's future.

"You've got a real quadrant of activity in western Michigan that's very different from what's going on elsewhere in the state," he said. "We may not drive cars but we still have to eat."

Two years ago the Newaygo County Economic Development office applied for an Agricultural Processing Renaissance Zone designation for Gerber, which is the county's largest employer. That was approved last week, and the resulting 15 years of future tax exemptions will be worth $43 million to Nestlé, allowing the company to retain the 1,100 existing jobs at Gerber as well as the addition of 200 new jobs over the next 10 years.

"Michigan's food and agriculture industry plays a key part in helping to grow and diversify our state's economy," said Gov. Jennifer M. Granholm. "Agricultural Processing Renaissance Zones are enhancing this important sector by attracting new investment and creating jobs in communities throughout the state."

Gerber Products Co. began in 1928 and today produces nearly 190 different food products that are labeled in 16 languages and distributed in 80 countries around the world. Gerber has maintained one of the world’s largest private research facilities dedicated exclusively to infant nutrition. In 2007, Gerber Products was purchased by Nestlé.

Agricultural Processing Renaissance Zones are geographical areas designated as tax free for eligible agricultural processing companies that plan to build a new facility or significantly improve an existing facility within the zone.

Gerber buys fruits and vegetables from more than 200 Michigan growers. The produce is valued at approximately $12 million, and Gerber also uses $36 million worth of packing and raw materials from 11 key Michigan-based suppliers.

“We are excited by this great example of private-public partnership,” said Kurt Schmidt, CEO, Nestlé Nutrition, North America. “This announcement reflects our commitment to Gerber’s historical birthplace, Fremont, Michigan.”

Jeff G. Kinzbach, senior vice president of research and development at Nestlé Nutrition, said Gerber is now the base for all Nestlé Nutrition R&D in infant/toddler foods worldwide. Nestlé has about two dozen such R&D centers around the world for its various types of food products.

Kinzbach said the Gerber R&D center already employs about 100 research professionals and more will be added in coming years.

To give a graphic idea of how busy that Gerber R&D center is, Kinzbach said, "We bring about 100 babies here every day" to help in the research.

"It’s this type of homegrown investment from the state's agri-business sector that will further diversify Michigan’s economy and create more jobs," said Michigan Department of Agriculture Director Don Koivisto. "The agri-food industry continues to grow in Michigan, and this expansion underscores what can be accomplished when government and private business work together."

Koivisto said agriculture is a $64 billion industry in Michigan.

Gerber officials also announced there will be a $9 million investment beginning in 2009 in a call center in Fremont, housing telemarketers in the Gerber juvenile life insurance division.

Newaygo Economic Development director Andy Lofgren said his office has an arrangement with The Right Place in Grand Rapids, which provides him with assistance in some cases, such as the Gerber APRZ application.

Birgit Klohs, president of The Right Place, said that organization has had a "strategic alliance" with Newaygo County for three years.

Klohs noted that Gerber isn't the first food R&D center in Western Michigan: "Kellogg's is huge," she said, referring to the new investment Kellogg's is making in an R&D facility in Battle Creek.

Biofuels is one emphasis of ag research being studied in the Holland/Zeeland area, where the economic development effort is spearheaded by Lakeshore Advantage.

Hettinger said the larger vision in Battle Creek "is to bring technology to bear on the growing safety problems associated with food supply chains," he said. The Chinese crisis with melamine in foods was one such example.

"Like everything else, food processing is globalized and we are seeing the introduction of ingredients into foods that American and other consumers know very little about."

In addition to the growing prevalence of food additives, and biological accidents such as salmonella contamination, Hettinger said there is also a growing risk of deliberate terrorist attacks on large food supply chains, which will require more sophisticated scientific testing capabilities in lab settings.

Klohs said "there is always competition" within a large corporation like Nestlé when it decides where to expand its investments in new facilities.

R&D jobs in particular, she said, "are high value," and food R&D is a good fit here because of the agriculture it supports.

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