Mebane’s City Council approved Monday night an additional expansion to the factory that Lotus Bakeries, LLC is constructing in the North Carolina Commerce Park.
The proposed expansion will increase the size of Lotus’s factory from approximately 175,000 square feet to 225,000 square feet, and constitutes an additional $17.4 million investment from the Belgian confectioner.
The total project amount is now expected to cost approximately $72.7 million.
The expansion will now go before the Alamance County Commissioners, who are holding a public hearing on the subject on Monday, Sept. 17.
The proposed expansion brings Lotus’s real property investment in the North Carolina Commerce Park up to $32.1 million from its original projected investment of $19.2 million - an amended increase of $12.9 million. Lotus’s personal property investment is increasing from $36.1 million to $40.6 million - an increase of $4.5 million.
The new production facility in Mebane is Lotus’s first outside of its home region of Europe.
The company, known largely in America for its Biscoff airline cookies, has a strong brand presence in Belgium, France, the Netherlands, and Scandinavia, and is currently experiencing tremendous growth in the United States.
“It’s an excellent opportunity for growing the tax base in Mebane and Alamance County,” Alamance Chamber President Mac Williams said in introducing Lotus Technical Startup Manager Bart Vanterwyngen to Mebane’s elected leaders.
“The competition (for the U.S. facility back in 2016) was coming to Mebane or the Greensboro area, or Rock Hill, South Carolina,” Vanterwyngen said. “I think we definitely made the right choice then. And not only talking about incentives, but the people we’ve run into (in Mebane). The help we’re experiencing. The warmth we’re experiencing trying to build this factory, and trying to go to a clean startup.”
“Today, the competition (for the new expansion project) is different, because we’re building the factory. We’re going to start up next year. But sales are going so great in the US - we’re talking double-digit growth in retail in comparison to last year. And that’s for the third consecutive year that we’re realizing that. So what we’re starting up now will already be inadequate by the time we have it started up. Because sales are growing quicker than we can get the volumes out.”
“The competition (for the expansion) will be between our home plant (in Belgium), and our plant over here (in Mebane),” Vanterwyngen added. “I’m trying to get to as competitive a situation as I can to convince our Board of Directors to invest as much as possible into the growth in this plant, rather than growing additional (product) lines in Belgium.”
The City of Mebane gave Lotus an upfront grant of $356,250 when it initially approved the company’s construction of a facility in the Commerce Park back in the fall of 2016. For the next five years upon the completion of the facility, Mebane will give the company annual cash grants based on the facility’s taxable value, as assessed by the Alamance County Tax Collector’s office.
Mebane was originally anticipating to pay out projected cash grants to Lotus over a five-year period in the amount of $1.106 million (approximately $221,200 annually). With the new agreement, that amount was increased by $261,000, to $1.367 million ($273,400 annually).
Mebane’s total financial commitment to Lotus was increased under this agreement from $1,462,250 to $1,723,250.
Lotus has committed to 60 full-time jobs at its Mebane facility, although no additional jobs are promised with the new amendment. The company will have to employ a minimum of 40 employees, or the City of Mebane could enact clawback provisions to avoid having to pay the company its annual incentives.
Lotus has also agreed to approximately $2.2 million in payroll plus benefits for its Mebane staff, with average salaries coming in around $35,931 per year. The workforce in the Mebane Lotus facility will include a technical and safety manager, a production and quality manager, a materials manager, a plant controller, human relations technicians, dough makers, packaging operators, and warehouse workers, among other roles.
“We want to go through with this (expansion),” Vanterwyngen said. “Our CEO and our board are really convinced that this is a huge opportunity strategically. And it’s such an important strategic project that we have to do it. And why is it so important strategically? Because of that delicious high quality. They’re making high quality in Belgium as well. But we will be a lot closer to our customers. Which means shorter lead times. Which means when you get our cookies six weeks fresher. And that adds to the flavor. That adds to the crispiness. You will be able to taste that advantage.”
“We still feel responsible if we can have shorter transportation. We still feel a corporate responsibility to take that into account when considering new investments,” Vanterwyngen continued.
Mary McFarlane, the lone public speaker at Monday night’s session, expressed disapproval with the additional incentives along with those that were already offered to Lotus.
“I wanted to make my opinion known concerning more economic incentive agreements to Lotus Bakeries,” McFarlane said. “I personally think that they have incentives. They’re wanting to put in, from my understanding from the research I read, they’re wanting to put in better machinery that will produce more product. But it’s not going to increase the employment numbers at all. I’m just like, they’re here. They’re not gonna leave. Why do we have to cover their expense of doing business?”
It will take until approximately four to five years for Mebane to get fully paid back for its investment in Lotus. But if the company stays in the Commerce Park for the next 10 to 20 years or longer, it will prove to be a very handsome investment.
Lotus is projected to pay approximately $3.34 million in real and personal property taxes to Mebane over the next five years, while Mebane pays out the $1,723,250 in approved incentives. That will result in a net gain of approximately $1.62 million for the City between 2019 and 2023. That will put Mebane in position to get fully paid back for its investment around 2024 or 2025 at the latest.
“Our understanding, this expansion was competing with their other global locations,” Mebane City Manager David Cheek said. “Worst-case, payback would be in five years. It’ll take about four years, on the conservative side, once the taxable property is in place.”
Mebane will start really seeing the financial impact of this investment ten years down the road, long after they’ve paid their full incentive commitments to Lotus.
By that point, Mebane will have collected approximately $6.65 million in taxes from Lotus, while offering the company the $1,723,250 in incentives over five years. That will result in a net gain of approximately $4.9 million for Mebane over the next decade between 2019 and 2029.
The margins will continue to increase as more time passes, and Mebane collects additional tax revenue on Lotus’s facility and equipment. Even with the anticipated annual depreciation, Lotus could wind up adding well over $10 million in tax revenue to Mebane over the next quarter century.
The Mebane plant will produce the company’s well-known Lotus Biscoff cookies, along with Lotus Biscoff Spread, BEAR fruit snacks, and its Lotus Dinosaurus chocolate cookies.
The two lines produced in Mebane will be the Biscoff XL 2P line, as well as the retail lines of 1 kilogram, 125 grams, and 250 grams. The 1 kilogram boxes are typically seen in places like Costco, and are a significant part of Lotus’s double-digit U.S. growth in recent years.
The site plan has potential for future expansion of up to ten additional product lines.
“We’re looking there (at the Mebane facility) for opportunities, such as making our own shortening,” Vanterwyngen said.
Lotus is hopeful to finish construction in Mebane in May 2019. They seek to finish equipment installation at the Mebane Corporate Park facility by August of next year, and the first commercial production out of the facility would be between September and December of 2019.