07/13/2012 09:03 am ET Updated Aug 21, 2012

Starbucks Georgia Factory Jolts U.S. Manufacturing

A century ago, factories on Georgia's Savannah River spun cotton and channeled hydroelectric power for a new industrial South. Soon, a new plant will churn out a modern-day staple -- the Frappuccino.

Starbucks today begins construction of its first U.S. soluble products plant, a factory in Augusta, Ga., that it said will be up and running by 2014. The facility will produce powder-coffee bases for Starbucks' Via instant coffee, blended Frappuccinos and bottled energy and coffee drinks.

The plant will be Starbucks' fifth in the U.S. While most American manufacturers are now located overseas, Starbucks and a handful of companies are bucking the trend and rediscovering old industrial towns like Augusta, where they say skilled, high-tech labor is easier to find than it is in foreign countries.

"The U.S. is a lot more attractive than we give it credit for," said Peter Gibbons, executive vice president of global supply chain operations at Starbucks. The Georgia plant also will blend smoothly with Starbucks' carefully-fashioned image as a job creator, something CEO Howard Schultz has hardly ceased promoting over the past year in open letters, media interviews and editorials.

But the 140 new jobs at the Starbucks plant will help only a few of Augusta's 22,800 total unemployed. The unemployment rate in the city is 9 percent, compared with the national average of 8.2 percent.

Ethan Robert, 31, a professional welder who lives near Augusta, lost his job as a sheet metal worker three months ago because of complications from diabetes. Though he's feeling better now, 12 years of experience haven't helped him locate another position. His old job paid $25 per hour.

"I've noticed in the past year manufacturing is starting to pick up and there are a few more jobs," Robert said. "But a lot of times it's hard to get in the door. The economy is just crap." Robert believes he would be qualified for some of the jobs at the Starbucks factory and says he would consider applying to work there once it opens.

A decade ago, in 2002, the Augusta metropolitan area had 27,500 manufacturing jobs. Today, it has only 19,100, according to the Bureau of Labor Statistics. But the decline has been less sharp over the past two years. Among the other companies that have recently chosen Augusta are Electrolux, a Swedish appliance company in the process of building a support center, and Rockwood, a color pigment company that announced plans to build a new plant in December. Kellogg and Procter & Gamble also operate factories in Augusta.

Like many southern states, Georgia has managed to lure companies with its relatively low taxes, labor costs and union membership. It is also willing to sweeten the deal for interested parties -- Augusta will fund roughly a half-million dollars of infrastructure improvements to Starbucks' future industrial park, previously unoccupied for 10 years, according to Walter Sprouse, director of the Augusta Economic Development Authority. Starbucks is also benefiting from a state-funded program called Quick Start that creates manuals for industrial machinery that Starbucks will use to train employees.

The $170 million that Starbucks will spend on the plant is the largest investment the region has received in the past three years, Sprouse said. Friday's groundbreaking event at the future site of the factory was attended by Augusta Mayor Deke Copenhaver.

The 140 jobs -- 75 percent of which will be maintenance and engineering technicians -- will pay well and require advanced skills, according to Gibbons. Prior experience in manufacturing is the most important quality for hiring, though typically employees will have at least an associate degree, he said. The company declined to disclose the pay scale, but said Starbucks offers health benefits to both full-time and part-time employees.

"These isn't your grandfather's factory with thousands of people in it," said Gibbons. "It's not manual labor. People have to learn a lot about the processes."

The main process for Via instant coffee starts with green coffee beans, which are roasted, ground and then brewed in what Gibbons calls a "huge espresso machine." The team then evaporates the water from the giant batch of fresh coffee to make a fine powder. (The proprietary process took 20 years to streamline.) The coffee extract in Frappuccinos and other drinks is produced similarly, with a few extra steps. Currently, all this is done in one factory in Colombia and two in Switzerland. These three plants will remain open even after the Augusta factory is completed.

The costs of running the same factory in Central America or Asia would have been 15 percent to 20 percent less, Schultz has publicly stated. This difference is mostly due to the price of labor, says Starbucks spokesman Zack Hutson. But there are also long term benefits of locating in the U.S. Starbucks will save on transportation and will be able to more rapidly fulfill orders and monitor quality, according to Gibbons.

Starbucks also said that creating jobs in America is ethically important. In October, the company launched the fund "Create Jobs For USA" to provide loans to small businesses. In June, it began selling a line of mugs in its stores produced by a factory in East Liverpool, Ohio, an ailing pottery manufacturing hub.

For Robert, the talk about a resurgence of manufacturing has so far been largely symbolic. In late June, the father of four listed his tool chest for sale on Craigslist to pay for his medication. "Lost my job only thing I have really worth any thing," he wrote in the ad.

"I figured knowing a trade like welding was good because there would always be a secure job," Robert said. "It doesn't always work out like that."

CORRECTION: A previous version of this article stated that Starbucks' soluble products plants produce both syrup and powder bases for beverages. The plants produce only powder bases, which are converted to syrup upon arriving in stores in order to make Frappuccinos.
CORRECTION: A previous version of this article misspelled the name of the country Colombia.