The robots are coming. Associated Wholesale Grocers announced last week the company plans to build a state of the art, automated distribution hub in Hernando.
“It’s the first of its kind in the United States and it’s going to be right here in DeSoto County,” said Lee Caldwell, District 4 Supervisor.
Associated Wholesale Grocers (AWG) is the largest cooperative food wholesaler in the country. It supplies over 3,000 stores owned by its more than 1,100 member companies across 28 states. AWG currently has distribution centers in Southaven and Memphis that will be consolidated into the new Hernando facility.
AWG plans to invest $300,000,000 in the project and the facility will initially have 590 total employees. This means the creation of 79 new jobs in MS, up from the Southaven facility’s 511. It is worth noting that this will mean a net loss of hundreds of jobs, as the Memphis facility currently employs a similar number of people.
Last week, David Smith, President, and CEO of AWG met with Darren Musselwhite, the Mayor of Southaven, to let him know AWG would be leaving the city. They discussed rehabilitating the Southaven facility to get a new business to take over the space. “He could not have been more gracious, just wishing us success,” Smith said.
The project’s announcement comes following a year-long site search across three states. Hernando was selected after the shortlist was narrowed down to it and two other sites in east Arkansas and west Tennessee. The new facility will be located off Highway 51 in Hernando and the company expects to break ground this summer. The facility is expected to be fully operational in 2023.
This is a major development for Hernando, which has lagged behind other cities in DeSoto County in attracting new businesses.
“The city of Hernando has not had the number of industries that have located in other areas of the county,” said Jim Flanagan, President, and CEO of the DeSoto County Economic Development Council. “And as an economic basis built on industry, it was important that the city of Hernando recognizes the need to continue to diversify the economy.”
Local leaders fought hard to get AWG in Hernando. In May, the DeSoto County Board of Supervisors unanimously approved a memorandum of understanding with AWG to offer a large package of tax incentives if the project went to Hernando.
“They bent over backward,” Smith said. “They just kept going back to the well. They worked with the governor, they worked with everybody. It was like they just didn't want to lose out on having this be there. Mississippi was in it to win. And most specifically, I think that Hernando wants to get on the map that is a place that that industry can build.”
Bending Over Backward
The three following incentives are included in the memorandum:
DeSoto County will pay $2,400,000 to upgrade Highway 51. This will have to be repaid by AWG if the company fails to create 79 new jobs, retain 511 jobs and invest $300,000,000 in the Hernando facility project.
Part of the appeal of the Hernando site was its proximity to I-55 and I-69. The county is paying for the improvements to Highway 51 because its current narrow, two-lane layout does not accommodate large shipping trucks. Traffic congestion caused by companies like UPS has already been a source of complaint from local residents.
“We were very, very concerned because we didn't want to upset the neighbors by causing traffic jams,” Smith said. “And so we wanted to have the road widened. And we wanted a traffic signal out there to where it could be safer and be able to have access into the site.”
A fee-in-lieu abatement of two-thirds of all AWG’s ad valorem taxes for 30 years, with an agreement that no individual piece of property will receive the abatement for more than ten years.
This is the maximum property tax cut and the longest period allowed for it to apply under state law. AWG’s planned capital investment of $300,000,000 is well above the $60,000,000 threshold for a business to qualify for any fee-in-lieu exemption.
A free port warehouse exemption, eliminating in perpetuity all ad valorem taxes for all inventory shipped out of Mississippi.
This exemption is meant to encourage warehousing in Mississippi instead of neighboring states without an inventory tax. This exemption also applies to warehousing the parts and raw materials used in their products.
The DeSoto County Economic Development Council hired Younger Associates, a market research firm in Jackson, Tennessee to estimate the tax revenue generated by AWG over its first 15 years of operations. Over that period, tax revenue is estimated to be $13,385,607 for local schools and $9,613,715 for the county.
Warehouse Jobs In The Automation Age
Instead of manual labor, the jobs at the new facility will center around keeping the automated machinery working. Other than general maintenance, they will keep things running logistically, optimizing internal workflow operations, and ensuring products reach the right vendors. Smith says this workload will be much more sustainable for employees than the traditional warehouse jobs found in their current facilities.
“Those are not jobs that people can have for a lifetime,” Smith said. “Manual labor is something that is just more than most people can endure for a long, long period of time. That's not going to be the case with this new facility… That's work that you can do for an entire career.”
Getting workers prepared to take on these new roles will require significant amounts of training. That training will likely begin between 18 months and two years from now, according to Smith. AWG hopes to bring in local community colleges to assist with some of the training. They will be seeking guidance from WITRON, the company that provides the automation technology on how to best prepare workers for that transition.
It is not yet known how many workers in the two facilities being consolidated will stay with the company, but Smith said he wants to retain as many as possible.
“It's our job to open the door, and to prepare the people that want to move with us,” Smith said. We prefer that the people that enjoy working with us and want to move and are excited about this like we are, that already understand the (AWG) culture.”
“Reality is though, if you are moving a mile, or if you're moving 12 miles, some people may just simply choose not to move with a SIM, that's a reality. And we don't control that. So we will have to obtain more people from the outside.”
Other than the advanced automation technology, the facility is also innovative in the range of products that will be handled there. Individual products will be packaged alongside case and pallet goods. There will also be multiple temperature zones, allowing for frozen goods and fresh produce to be sent to member stores in the region. Stores have had to obtain these products through third-party vendors, but now they’ll get everything from the same facility.
There's a lot of the distribution business that’s remained relatively unchanged for over 120 years,” Smith said. So this is what we needed.”