Innovation and sustainability are important when it comes to staying competitive in manufacturing, but these are especially crucial during economic downturns. Food Manufacturing spoke with Richard Kopelman of Habif, Arogeti & Wynne LLP about the 2010 Georgia Manufacturing Survey, which focused on how manufacturers have responded to the recession and its impacts.
Q: What did the survey show regarding how manufacturers responded to the recession?
A: The successful manufacturers responded by introducing innovations in their products, processes or both. In fact, manufacturers that compete based on innovation were 1.6 times more likely to add capacity or new business in the last two years in comparison to manufacturers that competed on price. Innovation impacts profitability, according to the results. While overall profits declined for Georgia manufacturers, profits declined significantly less for manufacturers that focused on innovation.
Q: The economy is recovering slower than expected. How is this impacting manufacturers?
A: It is certainly impacting profit margins. There is enormous price competition from both domestic and foreign manufacturers. Also, the uncertainty in the market and with government policies is negatively impacting hiring and investment. However, with capacity being removed from the market over the past three years margins are starting to firm up.
Q: What innovation has occurred in the food industry as a result of the recession?
A: Although green and organic continue to be a trend, it’s not recession driven innovation. However, the recession has not slowed down the progression or desire for these alternative ingredients, labeling and formulation. Less new products are getting introduced to the market because of lower R&D budgets and shifting habits of consumers.
Q: The survey results indicate that 75 percent of Georgia manufacturers have set goals to improve sustainability efforts. How can manufacturers benefit from sustainability?
A: Efforts to improve sustainability should have a direct impact on a company’s bottom line over time. In addition, both the federal and many state governments provide tax credits and other incentives that can help abate the cost of changes to improve sustainability. Finally, being able to show a company’s commitment to sustainability can be an important differentiator setting them apart from the competition.
Q: One of the survey results showed that only 12 percent of food manufacturers take advantage of the tax credits available to them. What can manufacturers do to ensure they are getting all of the credits possible?
A: They should be working with their CPA to identify all tax credit opportunities. However, many CPAs are not up to speed on all the available federal, state and local credits. HA&W has a dedicated State and Local Tax Incentive Team dedicated to working with manufacturers to obtain the maximum credit they are entitled.
Interview by Lindsey Coblentz, Associate Editor