Greater Portland ranks high in a study of prime processor sites for its low labor costs and its port.

A study by a national site-selection firm identifies Greater Portland as one of the lowest-cost locations for food and beverage processors in the United States and Canada, primarily because of the area’s lower labor costs.

Only companies based in eastern Tennessee and eastern Ontario have lower overhead costs, according to the analysis from the New Jersey-based Boyd Co.

“Costs rule the day for many of these projects,” said John Boyd, a principal at the firm. “The idea that this report documents Portland as the third-lowest-cost area to operate in North America – that has tremendous value for the region.”

The study compared estimated annual operating costs for a 300,000-square-foot plant with 500 hourly workers in 24 regions across North America. Factors considered were labor, energy and certain taxes.

Besides its lower labor costs, Portland is also an attractive destination for food and beverage processors because of its proximity to water sources and a major port, Boyd said. He thinks Maine has opportunities to grow in the seafood, poultry and craft beer industries.

Local business leaders already see food and beverage processing as ripe for growth, and several agencies are working to strengthen startups in the sector.

Last month, the Greater Portland Council of Governments and the U.S. Department of Commerce announced the government has renewed a federal designation to help Portland’s food production industry.

“Since 2010, the (Greater Portland) region has gained 600 new manufacturing jobs, and food has been a big part of that,” said Caroline Paras, community and economic planner for the council of governments.

Roughly 50,000 Mainers currently work in the food and beverage industry, according to 2012 data analyzed by Harvard University. The university’s Maine Food Cluster Project issued a report last year that said Maine’s food and beverage industry has “clear growth potential,” but needs a coordinated plan of action.

In Maine, the Boyd Co.’s clients include Nestle Waters North America, which owns the iconic Poland Springs water company. Nationally, the firm has worked with PepsiCo and a wide range of corporate clients in other industries.

As food and beverage processors bring their operations into compliance with heightened regulations of the Food Safety and Modernization Act, Boyd predicted companies would be more likely to look for more cost-efficient locations to relocate or expand.

A hypothetical Maine operation would cost $37.2 million to run. The cheapest area, eastern Ontario, would cost $30.2 million, according to the study.

The highest-cost location in the study was the San Francisco Bay area, where a hypothetical food processor would incur $47.5 million in annual operating costs, followed closely by Brooklyn and Long Island in New York. Other expensive sites included the Monterey Bay region of California and upstate New York near Rochester.

Boyd noted that Chicago is a city with an active industry, especially since food giant ConAgra recently relocated there from Omaha, but the Midwest generally remained in the middle of the pack based on operating costs.

He considers eastern Ontario one of Portland’s greatest competitors because of Canada’s national health care plan, a favorable exchange rate and numerous open trade agreements.

CHEAPER LABOR, WORKER TRAINING

In Boyd Co.’s estimate, Maine’s primary advantage is labor costs.

The state’s weighted average wage in food and beverage processing – $24.73 an hour – was lower here than almost any other region in the survey. Weighted averages combine the wages of non-supervisory personnel, including quality control, lab and administration workers, with those of production employees. Eight of the 24 regions averaged $28 an hour or greater.

Boyd said prospective employers look to hire for a wide range of positions, from entry-level workers to high-level engineers. He praised the workforce training programs in Maine’s community colleges.

OFFSETTING COST OF ENERGY

Although Maine’s unemployment rate is relatively low, Boyd said he sees labor capacity for larger companies, especially as shifts occur in other industries.

He noted that the recent sale of Fairchild Semiconductor in South Portland, where about 650 people work for the microchip manufacturer, came in an industry experiencing significant consolidation and outsourcing. Their jobs could be at risk, but Boyd said that potential labor pool could attract outside employers.

He said if Fairchild closes, the labor market will be “enriched with several hundred highly skilled workers looking for a job.”

In Boyd’s model, the labor cost savings in Greater Portland offset the above-average spending on energy. Electric rates in Maine are typically higher than the national average for industrial users, but are lower than the rest of New England.

Boyd noted a recent change in Rhode Island, where the governor eliminated a sales tax for businesses paying for electricity, natural gas and heating fuels. He suggested Maine could adopt a similar program to make its electric costs friendlier to new developers.

“Portland can make a great case to companies that are in Illinois and California’s central valley,” he said.

Two years ago, the federal government designated Portland as a hub for food manufacturing and processing. That recognition means Greater Portland has priority for technical and financial assistance to grow that industry, and the priority was renewed in September for another two years.

ASSISTING EXISTING COMPANIES

At the Greater Portland Council of Governments, the agency that applied for that designation, Paras said one goal for the next two years is to find added value for companies already established in Maine. For example, she said lobster shells can be reused to manufacture plastics, and she wants to see Maine-based processors capturing revenue from selling that waste.

“I’m intrigued about what could happen,” she said. “Where are our competitive advantages?”

Shelley Doak, executive director of the Maine Grocers and Food Processors Association, said Maine already has a reputation for high-quality food products.

“I absolutely think there is continued opportunity for Maine food producers and processors,” Doak said.

The study identified Portland’s access to markets in Europe and Asia via its port as an asset, and Doak agreed that opportunities for export are critical.

“(Maine food processors) have a market in Maine, but to be successful they’re going to have to market their products outside of Maine,” she said.

CAPITALIZING ON MAINE BRAND

The Boyd Co. study’s findings also didn’t come as a surprise to Peter DelGreco, president and chief executive of the business recruitment firm Maine & Co.

He recalled attracting a potato distributor to South Portland in 2012 because the company was looking for a cheaper alternative to Boston, although that company no longer operates a plant in Maine. DelGreco also pointed to the growth of Luke’s Lobsters as a testament to the popularity of Maine products. Cape Elizabeth native Luke Holden began selling lobster rolls in New York City in 2009, and now a processing plant in Saco supplies the international chain’s 19 shacks across the world.

“That’s an example of someone who has taken the Maine brand and made it work for him,” DelGreco said.

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