Thread: PA: U.S. Candymakers ponder cheaper factories in Mexico

http://articles.lancasteronline.com/local/4/222300

Assessing a candy plant location: Lancaster comes out in middle
Ranked 22nd out of 43, at $30.4 million, was Lancaster/Lititz, slightly cheaper than Hershey’s $30.5 million. Lancaster New Era
Published: May 30, 2008
11:25 EST
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By TIM MEKEEL, StaffLancaster has a mouth-watering history as a candymaking location.

But there's nothing unusually tasty about the costs of running a candy factory here, a new study shows.

Operating costs in the Lancaster and Lititz areas are average among U.S. locales and way above the costs in Mexico.

So says a report released Thursday by The Boyd Co. Inc. at a meeting of 30 corporate facility location planners in the Greenfield Corporate Center's Courtyard by Marriott.

Annual operating costs for a hypothetical candymaking factory here — where Milton Hershey opened his first factory — would be about a sixth less than the most expensive U.S. location studied, said Boyd.
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The cost of running a Lancaster/Lititz area factory, though, would be nearly twice as high as the cost of running one in Mexico, the Princeton-based firm concluded.

In its 67-page report, the latest of its "BizCosts" report series, Boyd looked at the annual operating costs in 43 North American cities for such a factory.

Boyd's hypothetical plant measured 150,000 square feet and had 300 hourly employees. It shipped its candy by truck.

Variables, selected because they vary by geography, included expenses for labor (wages and benefits), sugar, energy, property tax, sales tax, amortization and shipping. Relocation and start-up expenses were not considered.
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San Francisco was the costliest location, at $35.8 million per year. Ranked 22nd out of 43, at $30.4 million, was Lancaster/Lititz, slightly cheaper than Hershey's $30.5 million.

Lancaster/Lititz had many advantages over San Francisco.

Compared to San Francisco's expenses, the hourly wage in Lancaster/Lititz of $19.30 was 33 cents cheaper. The Garden Spot also offered lower energy costs, taxes, shipping and amortization (due to much lower construction and land costs here).

The cheapest American site studied was Salt Lake City, at $26.6 million.

But both Mexican locations studied were far cheaper than any of the American sites, a notable point in the wake of The Hershey Co.'s decision to move some candymaking to a new plant in Monterrey, Mexico.

The lower cost among the two Mexican plants was found in Maquiladora, at $18.2 million, a tad below Monterrey's $18.5 million.

As one would expect, labor was far cheaper in Maquiladora, at $2.86 per hour. The wage contributed to a total annual labor cost there of $3.5 million, versus $15.2 million here.

But another key advantage came in the cost of sugar — $2.4 million for the Maquiladora plant, versus $4.2 million for the Lancaster/Lititz plant, the study determined.

Boyd explained that the differential was due to wholesale sugar costing only 11 cents a pound in Mexico, compared to 21 cents in the U.S., due to government price supports in this country.

Southcentral Pennsylvania in general and Lancaster County in particular are major candymaking areas.

The Hershey Co. has its headquarters in the region and has a Twizzlers plant in Lancaster. M&M/Mars (Elizabethtown) and Wilbur Chocolate (Lititz) have major plants here too.

Boyd is a specialist in business cost analysis and comparison, serving U.S. and foreign corporations since 1975. The planners at Thursday's session were from mid-Atlantic confectionery and snack food industries.


Staff writer Tim Mekeel can be reached at tmekeel@LNPnews.com or 481-6030.


I quit buying Hershey's when they moved to Mexico and am informing all the other chocolate-loving nurses that Hershey's is now made in Mexico... who knows what's in it anymore. Besides, that move by Hershey's was just plain un-American. If they don't care for Americans, we certainly don't care for them.

I've found lots of other chocolates I like more. Ever try Harry and David's? Their chocolate is so good it's sinful. And made in the USA.

Sorry, I double-posted some way.