Should I Stay or Should I Go? Illinois Manufacturer Weighs Move to Wisconsin
November 29, 2016
(Episode 6 of “The Project: Inside Corporate Location Decisions”)
Vonco Products, a manufacturer of flexible packaging products with 80+ employees, recently announced plans to move its operations across state lines from Lake Villa, Illinois to Salem, Wisconsin. If you’re up on your Midwestern geography, you know that move was just 20 miles to the North. But the deal at the center of this episode was nearly two years in the making.
We talk to Keith Smith, President at Vonco Products, and Todd Battle, President of the Kenosha Area Business Alliance, to get the full story.
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Andy Levine (DCI): Today we bring you the story of Vonco products, a manufacturer of flexible packaging for the medical, industrial and food industries. Now admittedly folks, this is not the sexiest product offering in the world, but this is a really well-run company. It’s a company of 80 employees, they made the recent decision to move across state lines from Lake Villa Illinois to Salem Wisconsin.
Patience Fairbrother (DCI): Now if you’re paying attention and you’re up on your Midwestern geography, you know that move was only about 20 miles down the road. But the deal we’re about to tell you about was nearly two years in the making.
Andy: So welcome to episode 6 of The Project: Inside Corporate Location Decisions. I’m Andy Levine of Development Counsellors International.
Patience: And I’m Patience Fairbrother also with DCI and Andy’s co-host of the project. Every two weeks, as you know, we bring you a new story of a recent corporate location decision. We share an inside look from company executives, economic developers, and site selection consultants.
Andy: We’re going to hear from two key players in today’s podcast. Keith Smith is president of Vonco products and Todd Battle is president of the Kenosha Area Business Alliance. Patience, I think this is the first time we’ve had two presidents on the show. So let’s start out with Keith and let’s get a sense of Vonco and its expansion needs.
Keith Smith (Vonco): Vonco has been around for over 60 years making flexible packaging and products for the medical and food and retail industries. Our claim to fame is really shaped in liquid tight packaging. In fact, we launched LiquaLoc this last week, anew division focused specifically on liquid packaging.
Patience: So Keith acquired the company in 2012 with the idea to continue its expansion in Lake Villa, Illinois where it’s been based since the 1960s. So when the company saw a need to expand to about 80,000 square feet, their first thought was to acquire the land either to the north or the east of the current parcel. But upon further investigation, Vonco found that the eastern parcel was largely wetlands. And that land to the north would require significant investment.
Andy: So Vonco was faced with a dilemma, should I stay or should I go. And, by the way, that is a great song from The Clash, a band that my young co-host Patience has probably never heard of. Is that correct?
Patience: That’s not true.
Andy: Okay, you know it. You know your classic rock and roll. But let’s get back to Vonco. They want to stay in Illinois. They want to retain their current workforce, but it’s going to be expensive. So the company does begin to look at other options. Let’s hear from Keith again.
Keith: We run a pretty technical product and value everybody that makes or touches our product here from an employee and associate base and so the goal was to stay in a radius that would give us the best chance to retain our associates. So, it limited us from that standpoint. We’re on the northern side of Lake County here, so we limited our search to Lake County, McHenry County and then Kenosha County.
Andy: So the short list was limited to three counties. Two were in Illinois, one is in Wisconsin. The one in Wisconsin is Kenosha County. We asked Keith about his first meetings with Todd Battle at the Kenosha Area Business Alliance. Now, right off the bat, it wasn’t looking terribly favorable, it wasn’t looking like a good fit for the company.
Keith: In Kenosha, initially, Todd and the team didn’t really have any viable options that getting out of the gate. And it was maybe a second or third meeting where they had a group of people in and they just started bringing up, “Well you know, we’ve been talking about this or that or the other thing over in western Kenosha County.” And I said, “Well, that might be worth talking about.”
Patience: So when Keith talks about this, that, or the other thing, the thing that made him really rethink Kenosha, he’s actually taking about an industrial park feasibility study that KABA just happened to be wrapping up around the time of those first discussions. The key point is that the park is much closer to Vonco’s location. Here’s Todd Battle on the moment he felt a shift in the right direction for the Vonco project.
Todd Battle (KABA): And so kinda not as an afterthought, but kind of as part of the discussion, we said, “Well, we’re wrapping up a feasibility study on an industrial park project and we’re very likely to proceed with a development of industrial park in Salem.”
Which is western Kenosha County, in close proximity to Vonco’s prior location and probably one of those frontier markets where the cost structure in the development of the park was gonna be a little bit more reasonable. And it just kind of fit. We kind of peaked their interest with the Salem Business Park and that started the discussion of, “Could this work?” And I guess at the time, it was really more for us a concept and hearing from Vonco that there was potentially interest there kind of legitimized our effort to pursue this business park development.
Andy: So, Todd and his team at KABA were encouraged to pursue this business park development. But in December of 2015 after months and months of discussions with Vonco’s decision makers, Kenosha got the sense the deal wasn’t headed in a positive direction.
Todd: As an economic developer sometimes you feel this way. We felt like the deal was trending away from us. We felt like maybe the decision was gonna be to stay where they were and expand. Maybe they were leaning towards a lower cost, it kind of less disruptive alternative. We just didn’t feel like there was much traction for the Wisconsin option.
Patience: Todd was right. At this very same time, developers in Lake Villa Illinois were starting to understand Vonco’s issues with the land and were going to pull out all the stops to help them stay. That’s when Todd and his team decided to do something a little non-traditional and frankly pretty risky. They decided to cut out the developer from the equation and take on the role themselves to develop the Salem Business Park. They basically said, “We’ll construct a building for you and we’ll do it at cost.”
Andy: If you were playing poker, it sounds like you basically said, “We’re going all in on this.”
Todd: Yeah, it’s probably not far off from how we presented this. Even talking to our board, we had a pretty significant investment into the land and the development agreement with the town of Salem to build out infrastructure for this 80 plus acre industrial park that we were in the process of building. And we kind of said, “We’re gonna double down.
We’ve got the land, we built the infrastructure, we need tenants to get the TIF district increment rolling.” This is gonna require a little more investment, a little more risk on our part, but it’s a good long-term bet. So we essentially went all in or kind of doubled down to kick start the park.
Andy: The strategy paid off for Todd and the Kenosha Area Business Alliance. They secured the interest of the company and they got a handshake that they would be the first tenant in the new Salem Business Park. But, of course, a handshake has some risk with it. As the developer, they needed to keep the project moving forward and they decided to do so on the handshake alone.
Todd: From that point in late June until early October, we didn’t have a signed lease purchase agreement. But in order to keep the project moving, we had to commission the architect, we had to get the plans going, we had to submit the permits, we had to submit site and operational plans. There’s a part of you that gets a little uncomfortable with that and you’d certainly rather have something inked. But there was also, I mean always a fair degree of confidence that we were dealing with some really forthright and fair people.
Patience: Ultimately, the risk paid off. And in October, Vonco officially announced plans to move into the Salem Business Park. A \$4 million investment that will create more than 80 jobs for Wisconsin. Construction is currently underway and will be completed in the spring of 2017.
So we’re up to the takeaways part of the episode. Andy, why don’t you take it away?
Andy: So, I want to talk about the competition between Illinois and Wisconsin. This didn’t really come through in the remarks that we used in the podcast from Keith but it was very clear to us when we interviewed him, that he really did not want to leave Illinois. He did not want to relocate Vonco Products. He was born in Illinois, he lived his whole life in Illinois, it was hard to make this move even though it was just 20 miles away. So there was a lot of emotion involved in this for him.
But in the end, he just couldn’t ignore the logic. He was going to get a brand new facility, he’d be able to keep pretty much all of his staff and there were clear ways that the business environment in Wisconsin was just better than it was in Illinois. So there was a bit of a battle between head and heart going on here. In the end, the deal presented by KABA and Todd’s team was just a better deal.
Patience: That takes me to my part of the takeaway actually, I think there’s really something to be said for going all in when the deck is stacked against you and that’s what Todd and his team did. They made this really strong statement with their final offer and they presented really what was a creative solution by putting the company’s needs first.
So by taking on the role of the developer, they eliminated quite a bit of the risk for the company and they made it their job to deliver the facility on time and on budget.
Andy: I just wanna reiterate what you said about putting the company’s needs first. I think KABA, Todd, they looked at this very carefully and they said, “What can we do to make this work for Vonco?” And that’s what they presented in the end that won the day.
So that is a wrap on episode number six of The Project: Inside Corporate Location Decisions. Patience, I can’t believe we’ve done six of these.
Patience: It’s pretty crazy. We’d like to give a special thank you to Keith Smith at Vonco Products and Todd Battle at the Kenosha Area Business Alliance. Thank you both for taking the time to tell us your stories.
Andy: The Project’s theme song that you’re listening to right now is brought to you by my son Evan Levine and his jazz trio. The Project is sponsored by DCI. We’re the leader in marketing of places and have served over 450 different cities, states, regions, and countries.
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