For Richmond region, product diversity is a source of strength

If a region can be defined by the products it makes, then folks could have a lively debate over how to define the Richmond area.

One could certainly call it a tobacco town, as the world's top cigarette brand — Marlboro — and numerous other cigarettes have called Richmond home for decades.

Yet there also is a strong argument that the Richmond region can be defined by the plethora of foods and beverages, packaging, chemicals, pharmaceuticals and machinery it produces at factories all over the area.

And increasingly over the past few decades, one might as well say the "products" the area makes have shifted more toward finance, technology, health and education — part of a much broader economic shift toward services.

The Richmond area "is like the American economy in a microcosm," said Paul A. Levengood, president and CEO of the Virginia Historical Society.

"At one point, Richmond was the manufacturing center of the South," Levengood said. "Richmond was home to a dizzying array of manufacturing companies."

Over the decades, local products have come and gone, risen and fallen. Others have come to take their place.

Few people today remember the Kline Kar, an automobile that was made in Richmond in the first two decades of the 20th century. Perhaps a few more remember Valentine's Meat Juice, a dietary supplement that was produced here for a large part of the 20th century and captured a global market.

In just the past few years, the region has suffered some serious blows to its lineup of home-grown products.

Chief among them, arguably, is the loss of Reynolds Wrap aluminum foil. Also going away are the products born from the former A.H. Robins Co. — now part of Pfizer — including the over-the-counter pharmaceutical brands Robitussin, Dimetapp, Preparation H and ChapStick.

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So, too, has the base of manufacturing employment diminished. Today, most of the biggest employers are in services. "It is government, health care, education and transportation," Levengood said.

Between the first quarter of 2000 and the third quarter of 2010, the number of people employed in manufacturing in the Richmond area dropped from almost 56,500 to 32,987, according to Bureau of Labor Statistics data.

During the same time, employment in service-based industries rose from 463,286 to 505,675. Service-based employment stood at 522,737 in early 2008, before the worst job losses of the recession hit, and it hasn't fully recovered yet.

All of the region's major manufacturing sectors have seen declines in employment since 2000. But that's a trend that has been a long time developing, and mostly the result of technological innovation that improved manufacturing productivity, more so than outsourcing of jobs.

One historical example illuminates the trend. In the second half of the 19th century, as much as half of the region's working population was employed in tobacco or tobacco-related jobs, and more than 90 factories were involved in the production, processing, or packaging of tobacco.

Then came the technological breakthrough of the cigarette rolling machine, which could do the work of 40 people, Levengood said.

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Today, the region remains home to an array of products, though many come from companies with a much smaller employment base than the vast industries of the past.

And the region has gained new products, with food processing becoming an even bigger part of the region's brand identity.

That includes hummus and other dips made by Sabra Dipping Co., at a factory it opened in Chesterfield County last year.

Smaller brands are rising in the area. For instance, many in Virginia and nearby states now recognize Legend as a popular microbrew brand.

New additions to the region's product mix include Rolls-Royce, which has built a factory in Prince George County that just started production making aircraft-engine components.

Local and state officials have hailed the Rolls-Royce investment, which could amount to $500 million and employ 500 people within a few years, as proof that not all manufacturing is destined to go offshore.

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Yet local and state officials and businesspeople say it also shows that what is most important to the region's vitality isn't so much the products it makes, but the people who live here, and how well they produce ideas and make products that are innovative.

"As we trend out into the future, maybe we are going to be known more as a creative location, still producing products, but ideas, too," said Gregory H. Wingfield, president and chief executive officer of the Greater Richmond Partnership, a regional economic development group.

"I think we are still going to have the manufacturing base here and products being made here," Wingfield said. "The key difference in the future is I think we are going to have a balancing of that with ideas. Creative activities are going to be a part of the mix."

Small businesses create most new jobs, but it is difficult today for small companies to make products in the United States competitively unless local production offers some advantage, said Patrick Galleher, partner and managing director at Boxwood Partners, a Richmond private-equity and mergers-and-acquisitions advisory firm.

Galleher said the Richmond region is a good place to start new brands and products, largely because of the intellectual capital here and the region's good colleges and universities.

Yet Galleher said the region suffers from a lack of middle-market private equity to help businesses grow. "I think that would really help the Richmond economy, if there was more growth capital available," he said.

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Local investment and access to a skilled workforce have been key to keeping some of the region's stalwart brands here.

That has long been the case at AMF Bakery Systems, which has been operating since 1953 from a timeworn yet sturdy factory on Laburnum Avenue.

AMF Bakery Systems makes equipment for bakeries that make soft breads and buns. At its factory recently, employees were making equipment destined for Brazil, Canada, Texas and Georgia.

The company employs about 140 people at its Richmond plant and offices, and about 300 overall at plants near Montreal, Canada; in China; and at sales offices in the United Kingdom and Asia.

Since 1986, a series of local investors and investment groups has backed the company. Most recently, Markel Corp. took a stake in the company, which Ken Newsome, the company's president, said has been transformational and enabled the company to invest in long-term growth.

AMF Bakery is serving a global market, with much of its growth potential in Asia, the Middle East and Africa.

"Richmond is a great place for us because we can attract talent from around the world to live here," he said. "We have sufficient local suppliers to help us build our products to ship around the world. The cost of manufacturing labor is not significant so there would be no advantage to chase cheaper labor."