Natural Foods Merchandiser

Amy's Kitchen May Not Be the Last To Leave California

Despite the best efforts of Gov. Arnold Schwarzenegger to keep Amy's Kitchen in California, the natural frozen food manufacturer will build a new manufacturing plant in Medford, Ore., while keeping its headquarters and existing plant in Santa Rosa, Calif.

It was the second win for "Oregon Naturally," an ambitious effort to lure California naturals companies north, where operating costs are cheaper amid 17 million acres of farmland.

"You have a number of food manufacturers looking at setting up in surrounding states—Oregon, Nevada and Arizona," said Pat Turpin, managing director at USBX Advisory Services, an investment bank in Santa Monica, Calif.

Natural food producers want to stay near their California customer base. But real estate, taxes, worker's compensation, wages, energy and water all cost more in California than in surrounding states, Turpin said.

And as price competition mounts, lower operating costs become more compelling. "With all the spotlight on Amy's, if the economic issues had been even to the point that they were tied, my guess is they would have stayed," Turpin said.

Co-founder Andy Berliner said that's true. "We love it here, this is our home ? but the economics [in Oregon] were clearly advantageous."

Had the Berliners opted to move the whole company to Oregon, annual savings could have approached $4 million, Berliner said. But they chose to stay in Santa Rosa and expand in Oregon, saving about $1 million a year.

"It seems like an organic-friendly kind of place," Berliner said.

Schwarzenegger had lobbied hard to keep Amy's in California, pressuring the legislature to reduce worker's compensation rates about 10 percent and persuading Pacific Gas & Electric to offer Amy's lower energy costs.

But Turpin noted, "It took decades to get into this mess. It's not going to get fixed overnight."

Oregon's economic development department sent prospectuses this year to about 250 California natural and organic companies. The Mulberry Street Juice Co., a startup that makes powdered 100 percent fruit juices, took the bait and moved from Chico, Calif., to Central Point, Ore., where it began production this fall.

Berliner said he hopes to finalize purchase of a 50-acre site in southern Oregon this month and have a 200,000-square-foot plant up and running by late 2005.

With products ranging from toaster pastries to tomato salsa, and about $100 million in annual sales, Amy's has run out of room for new lines or new products in Santa Rosa, where it has more than 700 employees.

"We're not 100 percent sure" which production lines will move north, Berliner said. "I think the simpler ones."

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