Fast Facts

on Food Processing
Grant Thornton Food & Beverage Practice Part 6 of 6

Coloring the industry:

Is “green” right for your business?
Few social movements have impacted the business world – and the food and beverage Why go green?
industry in particular — as much as the green or environmental movement. Food and Food and beverage manufacturers’
beverage companies are focusing on the three Rs (reduce, reuse, recycle) as they green green efforts are driven by a variety of
their facilities, supply chains, products and packaging, in order to capitalize on the objectives, with the biggest motivating
growing consumer appetite for environmentally friendly products. factor being cost reduction. Three-quarters
It’s no secret that the green movement is affecting consumers’ purchasing (75%) indicate that they are pursuing
decisions. Increasingly, consumers are demanding green products and patronizing green practices in order to achieve cost
brands that have adopted green practices. They are becoming more concerned about reductions. More than half (57%) are
how and where products are produced, including energy use during production and adopting green practices “for the good
distribution and energy efficiency of retail sales operations. of the earth” and another 52% cite
As a result, trends such as organic and locally grown foods; sustainable agriculture; marketability as a key objective.*
fair trade practices; energy-efficient manufacturing equipment, transport and retail;
and eco-friendly packaging are taking the food and beverage industry by storm. More
and more food and beverage companies are realizing that going green extends beyond
fulfilling social responsibility; it’s also immensely profitable. Is it time for your
organization to go green?
Grant Thornton LLP, the audit, tax and business advisory firm, is collaborating Contact information
with Food Processing magazine on a series of six bimonthly surveys — Fast Facts on
Dexter Manning
Food Processing — to provide a pulse-check on business performance challenges and
Partner
opportunities in the food and beverage industry. This sixth and final survey — National Food and Beverage Industry Leader
Coloring the industry: Is green right for your business? — examines how food and T 404.475.0061
beverage manufacturers are responding to customer demands for green products and E Dexter.Manning@gt.com

packaging. It is based on responses from 168 companies (see participant profile at the www.GrantThornton.com/FoodandBeverage
end of this report), and was conducted in April and May 2009.

* Participants were able to select more than one answer

category.
 Many also see an opportunity to
improve their bottom lines. Four in
10 (40%) identify potential profits as an
important driver behind their efforts.
Nearly three in 10 (28%) point to a need
to keep up with competitors. Finally,
a smaller percentage cite market-entry
requirements (15%), and favorable tax
credits (15%) as motivators.*
Specific green efforts to improve
profitability also vary widely. One
respondent points to saving energy
and staff time through the elimination
of paper reports and the conversion to
energy-efficient batteries and battery-
charging systems for material handling
equipment. Other manufacturers improve
margins through more energy-efficient
lighting and motors, pallet recycling and
optimized delivery routes. Others are
adopting energy-efficient technologies;
for example, one company is testing a
new dryer technology intended to reduce
propane usage by more than half.
Green products, packaging and
practices
A large number of food and beverage
manufacturers are heeding customers’
calls for greener goods and greener ways
to produce them. As a result, food and
beverage executives report implementing
the following efforts to improve their
products’ green qualities:
• packaging initiatives (e.g., reductions
in amount of packaging, biodegradable
and/or compostable packaging, use of
non-bleached boxes, use of recycled
materials, soy ink on packaging);
• ingredient selection (e.g., naturally
derived antioxidants replacing
synthetic antioxidants, sourcing
organic produce, fair-trade
ingredients); and
• energy usage (e.g., more efficient
lighting, equipment and transportation
routes).
* Participants were able to select more than one
answer category.
2 Fast Facts on Food Processing - Part 6 of 6
More than one in 10 (12%)
report that 100 percent
of their products are
recyclable and/or reusable.
More than eight in 10 (82%) food and When asked about their “greenest”
beverage manufacturers indicate that they products and packaging, respondents cite
have made an effort to develop green/ a wide variety of examples, including:
sustainable products and packaging. Of • organic strawberry flavor,
this group, seven percent report that they • biodegradable packaging,
are a market leader in this area and 17 • snack chips and beverages made with
percent have made an “extensive effort.” solar-heated water and oil,
The recyclable/reusable materials • organic beef and elk, and
trend continues to gain traction across the • food containers made of corn starch.
industry. Nearly six in 10 respondents
(58%) report the majority of their Not surprisingly, as manufacturers
products and packaging (by sales volume) focus on removing waste from their
are recyclable and/or reusable. More than supply chain, nearly nine in 10 (89%) also
one in 10 (12%) report that 100 percent are developing green/sustainable business
of their products are recyclable and/or practices. Of this group, three percent
reusable. report being a market leader in this area,
while one-quarter (25%) report making
an extensive effort. Manufacturing (75%),
maintenance (57%), and front office/
administration (50%) are the areas where
companies most frequently apply green
practices.*
Which functions are adopting green practices?
(% of manufacturers)*
Manufacturing (e.g., use less energy, reduce waste) 75%
Maintenance (e.g., improve energy-efficiency of equipment) 57%
Front office/administration (e.g., strive for paperless office, reduce energy) 50%
Purchasing/procurement (e.g., buy from greener suppliers) 43%
R&D/product development (e.g., design greener products) 39%
Distribution/logistics (e.g., optimize delivery routes) 37%
Customer relations/services (e.g., explore green customer demands) 33%
Supplier relations/management (e.g., manage suppliers to be greener) 23%
Testing/compliance (e.g., test for green labeling/certifications) 14%
Other 8%
 Despite the widespread emphasis on
green practices, a majority of food and
beverage manufacturers do not have staff
dedicated to these efforts. Less than half
(39%) have staff on board dedicated to
green initiatives, and nearly one in 10 (9%)
are not aware if their companies have any
green-focused staff.
Two additional factors are motivating
some food and beverage manufacturers’
green strategies: tax credit provisions
in the economic stimulus package and
the current economic recession. More
than one-quarter (27%) of companies
cite energy tax credits in the economic
stimulus package as a reason for their
increased emphasis on green strategies.
Nearly one-quarter (23%) of food and
beverage manufacturers cite the economic
recession for their increased emphasis on
going green.
Measuring green results
While many food and beverage
manufacturers report specific successes
with green products, packaging and
practices, achieving substantial results
from green efforts can be difficult. One-
third of food and beverage manufacturers
(33%) report no change in the year-
to-year reduction in energy per unit of
product output. Five percent actually
report an increase in energy usage. Among
companies that report energy reduction,
half (50%) report a reduction of one to
10 percent. Only 12 percent report energy
reduction of more than 10 percent.
More than one-quarter
(27%) of companies cite
energy tax credits in the
economic stimulus package
as a reason for their
increased emphasis on green
strategies.
3 Fast Facts on Food Processing - Part 6 of 6
Taking advantage of green incentives and credits
By Mel Schwarz, Legislative Affairs partner, and Jim Wittmer, Tax partner
Federal legislation over the last several years has greatly expanded the universe
of energy tax incentives available to food and beverage businesses. These
provisions offer businesses added rewards for conservation and energy
efficiency efforts.
Some potential opportunities for food and beverage companies to save on
their bottom lines by going green include:
Energy-efficient commercial business deduction (Section 179D)
Businesses that make renovations to reduce their power use can do more than
save on their utility bills. They could also be entitled to a deduction of up to
$1.80 per square foot if new lighting, building envelop material, HVAC or hot
water systems reduce their building’s power use by 50 percent compared to
a reference building. Less drastic reductions in power use can still provide a
$0.60 per square foot deduction.
Business energy investment tax credit (Section 48)
Food and beverage companies that want to generate power for their own
use can take advantage of tax credits for alternative energy property. A 30
percent credit is available for investments in fuel cells, small wind turbines
or solar property used for heating and cooling. A lesser 10 percent credit is
available for geothermal property, small combustion turbines, combined heat
and power systems, ground or groundwater heating and cooling systems and
solar property used for lighting. The recently passed stimulus bill also allows
businesses to apply to the IRS to take these credits as a grant.
Alternative vehicle credits (Sections 30B and 30D)
Businesses that want to update their fleets with more fuel-efficient vehicles
can choose from more than one credit. Section 30B provides up to $2,400 for
fuel cell, hybrid, lean burn and alternative fuel vehicles. Section 30D offers
up to $7,500 for new plug-in hybrid vehicles or up to $4,000 for a plug-in
conversion.
Alternative refueling property credit (Section 30C)
Food and beverage businesses with their own refueling systems can receive
a 50 percent credit (30 percent for hydrogen) of up to $50,000 ($200,000 for
hydrogen) for installing refueling property for clean fuels that are at least 85
percent composed of ethanol, natural gas, compressed natural gas, liquefied
natural gas, liquefied petroleum gas or hydrogen – or any mixture of biodiesel
and diesel fuel containing at least 20 percent biodiesel.
Qualified reuse and recycling property (Section 168(m))
Businesses are entitled to accelerate depreciation deductions for qualified reuse
and recycling property. The accelerated deductions are equivalent to bonus
depreciation, which allows taxpayers to deduct half of the cost of property in
the year it is placed in service. Machinery or equipment used exclusively to
collect, distribute or recycle qualified reuse and recyclable materials is eligible
for the tax break.
 Similarly, reductions in the usage of
non-recycled material per unit of product
output have been difficult to achieve.
Three percent of food and beverage
manufacturers actually report an increase
in non-recycled material, while nearly
four in 10 (38%) report a reduction of one
to 10 percent in their use of non-recycled
materials. Fourteen percent report
reducing non-recycled materials by more
than 10 percent.
Measuring success is also made more
complicated because of the challenge in
identifying a universal benchmark for
what it means to be green. For some,
carbon footprint is the benchmark. But
carbon footprint formulas vary, and
companies in many industries have a
hard time compiling data for an accurate
and meaningful calculation. While nearly
one-quarter (23%) of food and beverage
manufacturers regularly calculate their
carbon footprint, nearly six in 10 (58%)
Food and beverage
companies that are able
to effectively implement
green practices and adopt a
green mindset will be well
positioned to cash in on this
lucrative market and take
advantage of generous tax
credits and other benefits.
Does going green bring in the green? Profile of participants
An array of food and beverage manufacturers
More and more food and beverage
is represented in the sixth Fast Facts on Food
manufacturers are embracing green ideas, Processing survey. A majority of participating
practices, products and packaging. At companies (63%) report revenues of $100 million or
less, and 37 percent report revenues of greater than
the same time, consumer demands for $100 million. Approximately 38 percent of companies
sustainable products continue to grow at produce processed foods, the largest food group
represented, followed by bakery products (24%);
an impressive rate, a trend that shows no miscellaneous/other (24%); and meat, poultry and
signs of abating in the near term. seafood (21%). *
Food and beverage companies that * Participants were able to select more than one answer
are able to effectively implement green category.

indicate they have never calculated a
carbon footprint. Another 14 percent
say they don’t know how to do so, and 5
percent do not even recognize the term.
practices and adopt a green mindset will
be well positioned to cash in on this
lucrative market and take advantage of
generous tax credits and other benefits.
Green products, once considered a small,
niche market may soon be standard
operating practice for the food and
beverage industry. Is it time for your firm
to consider going green?. •
About Grant Thornton LLP
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International Ltd provide personalized attention and the highest
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About Food Processing
Established in 1940, Food Processing is the premier
publication for the packaged foods industry. Food Processing
writes for the entire management team about the critical
issues in bringing a product successfully to market, exploring
the latest trends in new product development, marketing,
process optimization, packaging and workforce management.

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4 Fast Facts on Food Processing - Part 6 of 6