Expansions and acquisitions are a growing characteristic of the maturing Australasian food industry. Major local companies and multinationals need to compete in the global economy, so they’re looking to grow organically, consolidate their operations, or expand through acquisition.
Each of these options brings the challenge of site selection: either modifying an existing site and facilities (brownfield) or buying new land (greenfield). Each option has its costs, risks, advantages and disadvantages and, without meticulous early planning and expert advice, the entire decision-making process can be a costly minefield.
What are greenfields?
A greenfield is a new block of land, which can offer maximum flexibility for the current and future design and operation of a new facility. It's a blank slate. It also requires less maintenance, offers a chance to enhance corporate image, and is suitable for either lease or own. But while it is a blank slate, it has to be the right slate to be of any real value.
Some new sites are not fully developed and so they bring additional development costs, such as headwork costs for sewer and water. As well as this, council approval timeframes may be longer for new sites, and because industrial land is a high demand real estate, the only available land parcels can have challenging aspects, such as slope or poor ground conditions.
What are brownfields?
These are existing sites, and they offer some positives. Because they can have environmental licences, council approvals, some infrastructure and services (such as electrical and drainage) already in place, there is potential to save on the total project cost and occupy the refurbished site sooner. Of course, this depends on the extent of the fit-out or modifications required and whether any existing structures and services need major upgrades.
Other factors that can put the brakes on a brownfield's appeal are:
- Its suitability for future growth (for example, if the site is in the inner city, it might not have capacity to handle future traffic congestion or noise constraints)
- The standard of the existing facility's design (if it's lightweight, it won't be structurally suitable for more advanced fit-out to current standards)
- Whether existing fire services will comply with regulations and building codes
- The greater risk of cost blow-outs because of unforeseen situations
- Older structures and services making renovations and your services difficult to manage
So how do you choose?
While people tend to believe that brownfield sites will be the cheapest option because of the savings afforded by a building and some services already on site, often the most effective and economical solution is to 'start from scratch'.
The cost of a fit-out with insulated panels, floor drainage and trade waste system installed, concrete floors redone with falls, upgrades to electrical systems, additional lighting, plumbing services and ventilation (and this is not the end of the list!) typically far outweigh the 'salvage value' of an existing building which has depreciated over its lifetime.
Do your research
But no-one can (or should) make this assessment without thorough research and meticulous planning from the outset of the project. And that's the starting point. Initial research, internal input and external expertise are critical at the feasibility stage.
You need to start where you want to finish, and that means having the best possible vision of the end result you're shooting for, and a well developed plan for how to get there. Quality master planning depends on a strong team representing all aspects of your operations — production, operations, engineering, financial, logistics, sales and property — plus expertise from an external specialist.
The idea here is get everyone thinking through the complex issues of your commercial goals, your operational needs, and the optimal way to achieve these with your new facility or processes. You'll be seeking to achieve better fire safety standards, environmental efficiencies, enhanced employee conditions, increased food hygiene and safety standards, and additional efficiency measures from your site selection decision.
Hire a specialist
With so many options, risks, costs, advantages and disadvantages, there is a lot to consider. That's why it can be important to meet with a specialist who can give you expert advice; this will give you clarity around important project criteria, agreement among all parties, and confidence there is no critical information missing from your planning phase.
When done thoroughly, your feasibility and master planning stage should have made the choice between brownfield and greenfield blatantly obvious. When quality data points the way, follow.