Toiletries : a manufacturing opportunity in Georgia

'
a 1nanujactur-ing opportunity in Geor-gia
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Project B-209
TOILETRIES A MANUFACTURING OPPORTUNITY IN GEORGIA
Prepared for The Georgia Department of Commerce
Jack Minter, Director 100 State Capitol Atlanta, Georgia
by
Wade McKoy
Industrial Development Division Engineering Experiment Station GEORGIA INSTITUTE OF TECHNOLOGY
January 1963

Table of Contents

Foreword

i

Sunnnary

ii

INTRODUCTION

1

THE MARKET FOR TOILETRIES

2

The National Market

2

Regional Market

3

LOCATION OF THE INDUSTRY AND ITS MARKETS

9

Production Centers

9

Regional Markets

9

ADVANTAGES OF A GEORGIA LOCATION

11

Lower Freight Costs

11

Availability of Containers in Georgia

12

Lower Production Labor Costs

14

Lower Property Taxes

16

Other Factors

16

Increase in Earnings

17

Conclusion

18

APPENDICES

1. Market Forecast Calculations

20

2. U. S. Retail Sales of 30 Toiletries

24

Tables

1. U. S. Retail Sales of Toilet Goods (1951-1961)

2

2. Retail Sales of Toiletries in Descending Order (1961)

5

3. Sales Performance of Toiletries with Largest Dollar

Increases in 1961

6

4. Motor Freight Class Rates for Toilet Preparations,

Medicines and Drugs from New York and from Atlanta

to Southern Cities

11

5. Manufacturers of Metal, Plastic and Glass Containers

in Georgia

13

6. Plants Manufacturing Paper, Fiber and Wood Containers

in Georgia

14

Figures

1. Correlation Between Personal Expenditures for Services

and Toilet Goods Sales

7

Maps

1. Georgia Freight Advantage Area

8

2. Production Concentration Shown by Value of Shipments

for Toilet Preparations (SIC 2844)

10

3. Regional Markets for Toiletries

10

Appendix Tables

1-A Calculations for Coefficient of Correlation between

Personal Expenditures for Services (X) and Toilet Goods

Sales (Y) and for the Correlation Line Fitted by Least

Squares

21

2-A U. S. Retail Sales of 30 Toiletries

24

Appendix Figure

1-A Trend and Forecast of Personal Expenditures for Services

23

Foreword The gross imbalance which exists between the volume of toilet goods consumed in the South and the amount produced there -- with only one ninth the total consumed being manufactured in the area -- points up one of the most obvious reasons for considering a central location in Georgia for the production of toilet goods. As in the case of many other products analyzed in the more than 40 special industry studies completed over the past five years, the present large and growing markets are only one of several important economic reasons for considering a Georgia location for the type of plant under consideration. This is the third in the current series of reports being prepared for the Georgia Department of Commerce. Questions or comments regarding the study will be welcomed. Where appropriate, further analyses can be prepared to meet the specific requirements of individual firms.
Kenneth C. Wagner, Chief Industrial Development Division GEORGIA INSTITUTE OF TECHNOLOGY
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Summary
Retail sales of toilet goods in 1961 were almost $2 billion and have been growing at an average annual rate of 7.8% since 1951. By 1967, sales of toiletries are expected to reach $3.2 billion -- a 65% increase over 1961 sales.
A manufacturer of toiletries in Georgia would have a freight advantage over present producers in Chicago and New York in serving an area represented by 11 southern states.l/ The retail market for toiletries in the South was more than $380 million in 1961. Sales in the area should exceed $630 million by 1967.
Whereas the markets for toiletries are spread widely over the United States, almost 83% of the production is concentrated in the northern manufacturing belt. The South's consumption of toiletries is more than nine times greater than its production.
A plant in Georgia, formulating and packaging toiletries for the southern market, could capitalize on the advantages of low freight costs, locally available sources of containers, low production labor costs, favorable property taxes, low construction costs, economical sources of natural gas and electricity, and satisfactory availability of supplies and raw materials.
Considering only those major savings that can be readily quantified, a company presently producing in the New York area could increase earnings 30% on sales in the South by serving the southern region from a plant in Georgia. A Georgia plant with annual sales of $20 million would save more than $700,000 annually, resulting from:
1. $263,000 reduction in freight costs, 2. $420,000 reduction in labor costs, and 3. $36,000 reduction in property tax.
ll Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina, Tennessee and Texas.
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INTRODUCTION
The toiletries discussed in this report are the types of products that are formulated and packaged. These include hair products, cosmetics, shaving products, products used in oral hygiene, hand products, and related types of toilet goods. The U. S. Department of Commerce's Standard Industrial Classification (SIC) is 2844.
This study is concerned with the feasibility of establishing manufacturing operations in Georgia to serve the southern market. The present and future markets are considered. In pointing out the characteristics of the industry, the concentrated production centers and the dispersed regional markets are contrasted. The need for a broad base of low cost labor, due to the relatively low pay received by the production workers in the toiletries industry, is pointed out. By formulating and packaging these products in close proximity to large consumer markets, it is possible to effect considerable freight savings in distributing the finished packaged products. Savings result from reducing the distances that containers must be shipped, Ingredients can be shipped from a central source to a regional market area more cheaply in bulk form than in packaged form or, in many cases, can be procured on a delivered price basis. Additional shipping cost savings result when the formulation contains a large amount of water, which can be added at the point of packaging.
In considering the advantages of having a toiletries plant in Georgia, this report concentrates on the labor advantages, freight advantages and lower property taxes the Georgia plant would have. Georgia's many other attractions are also analyzed: construction costs, natural gas rates, electric rates, property taxes, and the availability of containers and other packaging materials.
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THE MARKET FOR TOILETRIES
The National Market Retail sales of toilet goods in 1961 were barely under $2 billion and
have been growing at an average annual rate of 7.8% since 1951. (See Table 1.) This is a substantially higher rate than population growth, indicating a rapidly rising per capita consumption.

Year
1961 1960 1959 1958 1957 1956 1955 1954 1953 1952 1951

Table 1
u. s. RETAIL SALES OF TOILET GOODS
(1951-1961)
Sales
$1,933,500,000 1,784,000,000 1,622,000,000 1,523,000,000 1,430,000,000 1,321,000,000 1,192,000,000 1,086,000,000 1,020,000,000 1,004,000,000 912,000,000

Per Cent Increase Over Previous Year
8.4 10.0
6.5 6.5 8.3 10.8 9.8 6.5 1.6 10.1

Source: "Toilet Goods Association 27th Annual Meeting," Chemical Week, July 14, 1962, p. 41.

Sales of toiletries reported in Table 1 include perfumes, cosmetics and other toilet preparations but do not include toilet soap.
According to Drug Topics, 1961 sales of toiletries by product categories were as follows: hair products, 25%; cosmetics, 22%; oral hygiene, 17%; shaving products, 6%; hand products 5%; and other toiletries, 24%.

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The sales leader in 1961 was toilet soaps followed by tooth paste, shampoos, face creams and lipsticks. The 30 leading toilet goods items are listed in descending order of 1961 retail sales in Table 2. Historical sales records of these products are shown in Appendix 2.
The largest dollar increase in 1961 sales was made by lipsticks, with a gain of $21.3 million over 1960. Other products with more than $10 million sales increases in 1961 were aerosol colognes, mouth washes and gargles, and spray hair fixatives. Products that have excelled in their annual sales growth are given in Table 3 along with measurements of their growth.
Retail sales of toiletries are expected to reach $3.2 billion in 1967, a 65% increase over 1961 sales. This forecast is based on the extremely close correlation (0.997) between sales of toilet goods and the U. S. Department of Commerce figures on "Personal Expenditures for Services" (PES) for the years 1951 through 1961. Using the U. S. Department of Commerce statistics, the McGraw-Hill Department of Economics has made forecasts of PES. The PES forecast provided the base for forecasting toilet goods sales. (See Figure 1 and Appendix 1 for details.)
Regional Market
The market for a Georgia manufacturer of toiletries is considered to be that area to which it is cheaper to ship from Georgia than from Chicago or New York.
The Georgia freight advantage area is shown on Map 1. Atlanta was used to fix the shipping point in Georgia, and Chicago and New York were chosen as representative centers for the present producers.
Retail sales volume of toiletries in the Georgia freight advantage area was approximately $387 million in 1961. The freight advantage area contained 41.68 million people in 1960, or 23% of the U. S. population.
This area is estimated to have 20.0% of the national market for toiletries. Several sources of data are available with which to measure the area's
Share of the mark et. S .~nee . f ~n ormat~on ~s g~ven b y state, 11 states1-I were
ll Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina, Tennessee and Texas.
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chosen as representative of the freight advantage area, and adjustments were made based on population.

In 1958 the 11 states accounted for 19.6% of the U. S. wholesale sales of drugs, drug proprietaries, druggists' sundries, and toiletries (SIC 5022).1/ In retail drug store sales (SIC 591), the 11 states accounted for 20.4% of the U. S. sales. Retail grocery store sales (SIC 541) for the 11 states amounted to 21% of the U. S. sales. Topics Publishing Company reports that 1960 retail sales of non-prescription items in drug stores for the 11 states accounted for 20.2% of the U. S. sales.

In summary:

11-State Percentage of U. S. Sales

1958 Wholesale drug sales 1958 Retail drug store sales 1958 Retail grocery store sales 1958 Retail drug store sales of
non-prescription items Average for 11-state area

19.6 20.4 21.0
20.2 20.3

It is estimated that retail sales in the 11-state freight advantage area will reach $636 million by 1967. Methods used in the forecast are given in Appendix 2. Sales in the freight advantage area are expected to remain 20% of national sales through 1967, since a population forecast indicates that the area's percentage of the national population will change little in the immediate future.

1/ United States Census of Business: 1958, U. S. Department of Commerce, Burea~ of the Census.
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Table 2
RETAIL SALES OF TOILETRIES IN DESCENDING ORDER ( 1961)

Product
Toilet Soaps Tooth Paste Shampoos Face Creams Lipsticks
Spray Hair Fixatives Mouth Washes and Gargles Hair Coloring Preparations Men's Hair Tonics Face Cleansing Creams
Home Permanent Kits and Refills Aerosol Cologne Aerosol Shaving Cream After-Shave Lotion Pressed Cake Face Powder
Nail Polish and Enamel Roll-On Deodorants Hand Lotions Perfumes Cream Deodorants
Colognes, Toilet Waters (non-aerosol) Talcum and Body Powders Liquid Facial Cleaners Women's Hair Dressings and Conditioners Loose Face Powder
Face Lotions and Astringents Make-Up Lotion False Teeth Adhesives Face Lubricating Creams Squeeze Container Sprays (External Personal Deodorants)

Sales
$266,740,000 243,730,000 172,740,000 127,600,000 121,680,000
91,490,000 87,570,000 74,440,000 74,360,000 71,190,000
70,210,000 65,420,000 54,790,000 49,440,000 41,790,000
38,370,000 38,070,000 37,860,000 37,440,000 35,380,000
35' 310,000 34,450,000 29,640,000 25,770,000 24,680,000
24,630,000 23,790,000 20,540,000 19,580,000 15,020,000

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Table 3 SALES PERFORMANCE OF TOILETRIES WITH LARGEST DOLLAR INCREASES IN 1961

Product

Dollar Volume
1961

Dollar Increase 1961 over
1960

Per Cent Increase 1961 over
1960

Average Annual Per Cent Increase

Number of Years
Covered

Lipsticks

$121,680,000

$21,290,000

21.2

10.3

12

Aerosol Cologne

65,420,000

12,280,000

23.1

21.0

4

Mouth Washes and Gargles

87,570,000

ll,750,000

15.5

11.1

12

Spray Hair Fixatives

91,490,000

10,240,000

12.6

17.3

7

Tooth Paste

243,730,000

8,920,000

3.8

8.3

12

Toilet Soaps

266,740,000

8,890,000

3.4

5.3

12

Hair Coloring Preparations

74,440,000

6,830,000

10.1

16.2

12

Shampoos

172,740,000

6,160,000

3.7

7.4

12

I
"I '

Roll-On Deodorants Pressed Cake Face Powder

38,070,000 41,790,000

6,100,000 5,950,000

19.1 16.6

40.0 10.0

5 6

Home Permanent Kits and

Refills

70,210,000

5,560,000

8.6

-4.0

5

Face Creams (all)

127,600,000

5,430,000

4.4

3.3

12

Nail Polish and Enamel

38,370,000

5,380,000

16.3

8.0

12

Men's Hair Tonics

74,360,000

4,440,000

6.4

6.4

12

Aerosol Shaving Cream

54,790,000

3,680,000

7.2

12.3

6

Make-Up Lotion

23,790,000

3,140,000

15.2

10.1

6

Cream Deodorants

35,380,000

2,340,000

7.1

3.8

9

Colognes, Toilet Waters

(non-aerosol)

35,310,000

2,190,000

6.6

After-Shave Lotion

49,440,000

2,170,000

4.6

6.9

12

Face Cleansing Creams

71,190,000

2,140,000

3.1

2.6

12

Source: Topics Publishing Company, New York, N. Y.

FIGURE 1
CORRELATION BETWEEN PERSONAL EXPENDITURES FOR SERVICES AND TOILET GOODS SALES

3.2

/'(!

3.0

//FORECAST

2.8

v /

FOR 1967 !

2.6
V)
et:
<{ _J

/v

_J
0

2.4

Cl

/v

ll..

0 2.2

zV)

I "'-.1

Q

_J _J

2.0

/v

I aJ

1961c:V

V)-

UJ _J

1.8

<{

/
,1-11960

19v V)

/

V)
Cl
0

1.6 ~--~----~--~----~--~----~--~--~~~~199~599

0

THE CORRELATION LINE FITTED

BY LEAST SQUARES

--~--~----~--~

The Coefficient of Correlation for

0

19570"'

1951 to 1961 is 0.997

1UJ
_J
0 1-

Yr 1.4
1.2 ~--~----~--~----~---b~~11955~---+----+----+----+----+----~---+----~--~----~--~----~--4

~9.'i4

1.0

1?52~~953~+----+----+----+----+----+----+----+----+----+----+----+----+----+----;

1951v

0.8

v /

Industrial Development Division

0.6 / ____ ~--~~---L----~--~~--~----~----L---~-----L----~----L---~

Engineering Experiment Station

GEORGIA INSTITUTE OF TECHNOLOGY

_ L_ _ _ _~_ _ _ _L __ __ i_ _ _ _ i._

l

40 50

60 70 80

90 100 110 120 130 140 150 160 170 180 190 200 210 220 230

SOURCE: U.S. Department of Commerce PERSONAL EXPENDITURES FOR SERVICES, BILLIONS OF DOLLARS McGraw-Hi II Department of Economics Topics Publishing Company

MAP 1
GEORGIA FREIGHT ADVANTAGE AREA (Area Where Freight Costs Wi II Be Less From Atlanta Than
From Chicago Or New York)

I
00
I
SCALE IN MILES 0 100 200 300

Oklahoma City e
Industrial Development Division
Engineering Experiment Station
GEORGIA INSTITUTE OF TECHNOLOGY

Motor freight rates are lower from Atlanta to points in U. S. south of line than from Chicago or New York

LOCATION OF THE INDUSTRY AND ITS MARKETS

Production Centers

Almost 83% of the production of toiletries in the United States is concentrated in the northern manufacturing belt (six New England states, three Middle Atlantic states, and five East North Central states). New Jersey and New York account for 49% of U. S. production. New Jersey ranks first with $330 million or 31%, and New York is second with $190 million or 18%. The concentration of production centers is shown on Map 2.

Regional Markets

In contrast, the markets for toiletries are spread widely though un-

evenly over the entire country. Drug store sales provide a reliable indica-

tion of the market for toiletries, since over 30% of all toilet goods sales

are made through drug stores. Regional markets, based on 1960 retail drug

store sales, are shown below and on Map 3. Arproximate Region

Per Cent of U. S. Retail Sales

Upper Atlantic (11 states) East North Central (5 states) Southern (12 states) Pacific (5 states) West North Central (7 states) Southwestern (3 states) North Western Mountain (5 states)

27.2 22.6 18.6 12.3
8.5 7.9 2.6

When Map 2 and Map 3 are compared, the significant variation between production centers and regional markets is evident. The South's consumption of toiletries is more than nine times greater than its production. It is feasible, therefore, to consider Georgia as a production center for the southern market.

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MAP 2 PRODUCTION CONCENTRATION SHOWN BY VALUE OF SHIPMENTS
FOR TOILET PREPARATIONS (SIC 2844)
SOURCE, U. S. Census
MAP 3 REGIONAL MARKETS FOR TOILETRIES
(Shown by 1960 Retail Drug Store Sales)

SOURCE: Top ics Publish ing Company
T he Circle Areas in Both Mops 2 and 3 ore Based on the Some Scale and The refore Con be Compared.

Industr ia l Oev lopme nt Div i s i on En'ilinee tl n'il E.pe rim e n l Stat ion GEORGIA INST ITUTE OF TECH NOLOGY

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ADVANTAGES OF A GEORGIA LOCATION
Lower Freight Costs A plant in Georgia, formulating and packaging toiletries for the
southern market, would enjoy a considerable freight advantage over a similar plant in the Northeast. Table 4 demonstrates possible freight savings. It shows a comparison of motor freight rates from New York and from Atlanta to major markets in the South.

Table 4
MOTOR FREIGHT CLASS RATES FOR TOILET PREPARATIONS, MEDICINES AND DRUGS FROM
NEW YORK AND FROM ATLANTA TO SOUTHERN CITIES (Truckload Shipment of 30,000 Pounds)

Savings

From New York City Area

From Atlanta

~'c

(Estimated New Rates)

Atlanta vs. New York City Area

To

($/ cwt.)

($/cwt.)

($/cwt.)

New Orleans Dallas Memphis Jacksonville Charlotte

2.66 2.64 l. 75 1.59 1.30

0.80 1.24 0.73 0.66 0.60

1.86 1.40 1.02 0.93 0.70

* The estimated new rates are 27% of the Class 100 rates applicable to truck-
load shipments. They are on the same relative basis as the present rate of $1.20 on 30,000 pounds from New York to Atlanta. Present rates from Atlanta are: $1.18 on 22,000 pounds to New Orleans; $1.61 on 30,000 pounds to Dallas; $1.08 on 22,000 pounds to Memphis; $0.98 on 22,000 pounds to Jacksonville, and $0.89 on 22,000 pounds to Charlotte.

A hypothetical case study for a New York area company with annual U. S. sales of $100 million in toiletries and related items illustrates that an Atlanta regional plant would save the company $263,000 annually in freight

-ll-

costs.l/ This would provide an increased profit on southern regional sales of more than 10%.

The case study company was assumed to be located in the New Yorknortheastern New Jersey area and to distribute products nationally from this location. Other pertinent facts concerning the company:

Annual sales Earnings before taxes2- /
Annual freight bill

$100,000,000 $12,000,000 $2,314,600

It was assumed that 20% --or $20 million-- of the company's output would be sold in the Atlanta freight advantage area. If a manufacturer were serving this regional market from Atlanta, the following freight savings would result:

Freight cost from New York plant Freight cost from an Atlanta plant Estimated annual freight savings

$462,941 199,832
$263,109

Profit on southern regional sales from the New York plant would be $2,400,000. This would be increased by $263,109, or 10.9%, if the market were served by a plant located in Georgia.

Availability of Containers in Georgia

Container and box manufacturers in the area are a primary advantage to a toiletries manufacturer. Located in Georgia are plants manufacturing metal, plastic and glass containers. These plants are listed in Table 5.

l l McKoy, Wade, Packaging Opportunities in Atlanta, Industrial Develop-
ment Division, Engineering Experiment Station, Georgia Institute of Technology, September, 1962, p. 24.
~/ Average earnings before taxes for the Chemicals and Allied Products industry averaged 12% of sales in 1961, according to Quarterly Financial !!Port for Manufacturing Corporations, Federal Trade Commission.
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Table 5 MANUFACTURERS OF METAL, PLASTIC AND GLASS CONTAINERS IN GEORGIA

Plant American Can Company

Location
Atlanta (Forest Park)

American Can Company
Crown Cork & Seal Company

Savannah Atlanta

Knox Glass Company
Owens-Illinois Glass Company, Glass Container Division Plastic Products Division

Atlanta (Forest Park)
Atlanta Atlanta

Polyco, Inc.

Atlanta (Smyrna)

Products
Oblong cans, beer cans, carbonated beverage cans, paper tubes with metal ends, lithographing facilities. Coffee cans and other cans. General open top cans, aerosol cans, aluminum cans, beer cans, bottle crowns, oblong cans, lithographing facilities. Glass containers.
Glass containers. High density polyethylene bottles. High and low density polyethylene bottles.

In addition there are many manufacturers of paper, fiber and wood containers located in Georgia. The number of plants are listed by Standard Industrial Classification (SIC) in Table 6.

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Table 6
PLANTS MANUFACTURING PAPER, FIBER AND WOOD CONTAINERS IN GEORGIA

Number of

SIC

Plants

Products

2651 2652 2653
2654 2655
2441
2442 2443

6

Folding paperboard boxes

7

Set-up paperboard boxes

14

Corrugated and solid fiber

boxes

10

Sanitary food containers

8

Fiber cans, tubes, drums,

and similar products

14

Nailed and lock corner

wooden boxes and shook

20

Wirebound boxes and crates

6

Veneer and plywood containers,

except boxes and crates

Nearby sources of containers are critical to a manufacturer of toilet goods since packaging materials are a major part of the shipping weight of some toiletries. Examples are:

Aerosol Shaving Cream

30 to 70% of shipping weight

Cream Deodorants

85% of shipping weight

Hair Shampoo

50 to 70% of shipping weight

Hair Spray Fixatives

35% of shipping weight

Tooth Paste

15 to 60% of shipping weight

Lower Production Labor Costs

In the toilet preparations industry production workers receive relative-
ly low pay. Nationally the production wage in 1958 averaged $1.85 per hour.l/
Production workers comprised 63% of all the employees and received 50% of the Wages paid. Production wages amounted to 6.3% of the value of shipments.

1/ United States Census of Manufactures: 1958, U. S. Department of Comme;ce, Bureau of the Census.

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Location of a plant in a low wage area, therefore, would provide a significant competitive advantage.

Not only are labor costs per man hour lower in Georgia than in the northern manufacturing belt, but production per man hour is often higher.l/

The following tabulation from the U. S. Bureau of the Census compares

incomes of operatives in Georgia with incomes of similar workers in other

locations in the country: Region of State

Median Incomes of Male Operatives and Kindred Workers

Georgia South North East New York North Central West Illinois California

$2,771 3,196 4,414 4,450 4,759 4,839 4,970 5,062

The occupation group, male operatives and kindred workers, was selected from the census groups as being the most representative of the production employees in the toiletries industry. The median income of male operatives in Georgia is less than two-thirds of the median income outside the South. Based on these figures, profits can show an increase of approximately 17% due to a 34% saving in production wages for a plant located in Georgia rather than in the New York area. The illustration is worked out below:

New York plant production wages

Georgia plant production wages

(6.3 X Georgia plant Profit of New

0.66 savin York

= 4.2) gpslainnt3-y

a

ges2-/

Profit of Georgia plant due to benefit

of lower wages

=

Georgia plant profit greater by

6.3% of sales
4.2% of sales 2.1% of sales 12.0% of sales
14.1% of sales 17.5% due to labor
savings

1/ Sewell, Charles, A Formula for Labor Productivity in Georgia, Industrial Development Division, Engineering Experiment Station, Georgia Institute of Technology, July, 1961.
/ This amounts to $420,000 for the hypothetical example on page 11.
ll See footnote 2, page 12.

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Lower Property Taxes

The following comparison shows a saving of $35,938 for a Georgia plant

over a New York area plant due to lower property taxes. The specific areas

being compared are Clayton County on the fringe of Atlanta and Caldwell Town-

ship in Essex County, New Jersey. Caldwell Township has the lowest tax rate

in Essex County. The property tax in Newark, also located in Essex County,

is about 2.5 times greater than in Caldwell Township.l/ Property taxes in the City of Atlanta are lower than the lowest Essex County rate.2- / A description

of the property follows, with a tabulation of comparable tax charges in the

two locations. Property

I n v e s t m e n t3- /

Tax Geo

rigr:la4-1

NewTYaxo r ki nA r e a5- /

Land and building Equipment Inventory Total

$1,900,000 2,350,000 750 2000
$5,000,000

$24,344 30' 109 9 2 609
$64,062

$38,000 47,000 15 2 000 $100,000

Based on these data, a plant located in Georgia would save $35,938 in property taxes over a similar plant in the New York area. Assuming a profit of $2,400,000 on sales in the southern region (see illustration on page 12), the property tax advantage in Georgia would represent a savings of 1.5% of profits.

Other Factors

The cost advantages of a Georgia plant over a plant in the Northeast are increased by the following factors:

1. Lower capital investment is required for a given production capacity in Georgia than in the Northeast. This lowers the amount spent on property

1/ Property tax in Newark on a $5 million investment would be $245,100.
If Newark were used in the illustration, the tax savings of a Georgia plant Would be more than $181,000 --or 7.5% of profits.
II Property tax in Atlanta, Georgia, on a $5 million investment would
be $92,235.
3/ It is estimated that a capital investment of $5 million would be required for $20 million in annual sales (see illustration on page 14).
4/ Tax is for Clayton County, Georgia, unincorporated area. Source:
~x G~ide 2 Atlanta Metropolitan Area, Atlanta Chamber of Commerce.
5/ Tax is for Caldwell Township, Essex County, New Jersey. Source:
~60-l961 New Jersey Industrial Directory.
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taxes even more and increases the per cent return on the investment as well as increasing the actual earnings.
Construction costs are proven to be low in Georgia. Leading contractors are building plants in the Atlanta area at costs that are 15 to 40% less than construction costs in many other areas. A specific example is two buildings built for the same company and to the same plans. The bid in Atlanta was $60,000, and on a site in New Jersey the bid was $95,000. Another comparison under the same conditions found Atlanta costs 20% lower than costs in a central Illinois town.
Contractors say the main reasons that construction costs are lower in Georgia are climate and worker productivity. There are more working days under favorable conditions. The attitudes of the workers both union and non-union -- are superior and permit effective use of new labor-saving tools.
2. Natural gas rates in Georgia are 30 to 50% of the rates in the New York area. Additional savings are realized because of the milder and shorter winters in Georgia.
3. Electric rates in Georgia are 60 to 80% of the rates in the New York area.
4. In general the availability of supplies and raw materials are as satisfactory in Georgia as in the present manufacturing locations. For many products water is an ingredient that forms a major part of the net weight. The use of concentrates and the increasing number of suppliers have created a competitive situation where freight is now either equalized or allowed on many raw materials and supplies. This reduces the freight cost factor for the formulator's raw materials. ~crease in Earnings
Earnings of a Georgia plant that formulates and packages toiletries for the southern market are estimated to be 30% greater than those of a similar Plant in the New York area. As illustrated earlier, the earnings of a hypothetical New York plant on sales to the Georgia freight advantage area are assumed to be $2.4 million. The increase in earnings of a Georgia plant over a Plant in the New York area are:
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From freight savings From labor savings From property taxes Increase in earnings
Calculation: $ 719,047 $2,400,000

$263,109 420,000
35,938 $719,047
X 100 = 30.0% increase in earnings.

Conclusion
In serving the southern market, greater earnings are possible from a Georgia plant than from a northern plant. However, the actual increase in earnings that a company would realize can only be determined from a case study for that company. As mentioned in the Foreword, studies can be made for interested companies.

-18-

APPENDICES -19-

Appendix 1 MARKET FORECAST CALCULATIONS

The toilet goods sales forecast was made by relating toilet goods sales to personal expenditures for services (PES)l/ and then using an authoritative forecast for PES. Toilet goods sales versus personal expenditures for services for the years 1951 through 1961 are shown in graphic form in Figure 1 of the text.

The coefficient of correlation for the data is 0.997, and the calculations are shown in Appendix Table 1-A.

Personal expenditures for services are graphed in Appendix Figure 1-A on semilogarithmic paper with expenditures on the log scale. McGraw-Hill's Department of Economics figures and forecasts for personal expenditures for services are:

Year 1950 1960 1965 1970 1975

PES in 1960 Dollars 85.4
131.8 168 209 260

Interpolating for 1967 and changing from 1960 to 1967 dollars puts the PES estimate at $227 billion for 1967. Toilet goods sales for 1967 are calculated to be $3.18 billion by correlating to PES, using the least squares equation.

Using national sales estimates and a regional market share of 20.0%, the following regional sales forecasts for 1967 were derived:

1967 U. S. Sales

Atlanta Regional Market (20.0% of U. S. Sales)

Toilet Goods

$3,180,000,000

$636,000,000

Regional forecasts are rounded off to the nearest $10 million in the text.

l l Survey of Current Business, July issue, U. S. Department of Commerce,

-20-

Appendix Table 1-A
CALCULATIONS FOR COEFFICIENT OF CORRELATION BETWEEN PERSONAL EXPENDITURES FOR SERVICES (X) AND TOILET GOODS SALES (Y)
AND FOR THE CORRELATION LINE FITTED BY LEAST SQUARES

Year 1961 1960 1959 1958 1957 1956 1955 1954 1953 1952 1951 Sum (S)

Toilet Goods Sales
(Billions of Dollars)
y
1. 934 1.784 1.622 1.523 1.430 1.321 1.192 1.086 1.020
1.004
0.912 14.828

Services (Billions of Dollars)
X 139.1 131.9 122.8 114.3 107.1 100.0 92.5 86.3 81.8 75.6
70.2
1' 121. 6

Functions Used in the Calculations

y -X-
+.586 +37.1 +.436 +29.9 +.274 +20.8 +.175 +12.3 +.082 + 5.1 -.027 - 2.0 -.156 - 9.5 -.262 -15.7 -.328 -20.2 -.344 -26.4 -.436 -31.8
.000 - 0.4

xy

y 2

21.740 .343

13.036 .190

5.699 .075

2.153 .031

0.418 .007

0.054 .001

1.482 .024

4.113 .067

6.626 .108

9.082 .ll8

13.865 .190

78.268 1.154

2
X
1,376.4 894.0 432.6 151.3 26.0 4.0 90.3 246.5 408.0 697.0
1.011.2 5,337.3

Mean

1.348

102.0

N ll

Gy ~lf+- ~~ll

.32389

~~~~ G

X

N

ll

= 22.0273

Coefficient: r = Sxy

NG y

G
X

78.268 (11)(.32389)(22.0273)

0.9973

-21-

Appendix Table 1-A (Cont'd)

The correlation line fitted by least squares: General Equation Yc =a+ bx

b = SSxxy2 =

78.268 5,337.3

0.01466

a

Y- b X = 1.348- (.01466)(102)

-0.147

Formula for Correlation Line: Yc

0.01466X- 0.147

Points on the Correlation Line

Yc 1 2 3
3.18

X 78.2 146.4 214.7 227

Percent increase from 1961 to 1967: 3.18 1.93

1.65 or 65%

-22-

APPENDIX FIGURE 1-A TREND AND FORECAST OF PERSONAL EXPENDITURES FOR SERVICES

BILLIONS OF DOLLARS 600
300
200
100 90 80 70
/ 60
50 /.
40

I

I I I
I

v

I
I
I

#

~~~ ' /

/

/" I I I I

/

I
I
I

/

[

L

I
:

/ v/

I I
I

I

I

I
I
I
I
0 McGraw-Hill Department of Economics, Figures and Forecast, 1960 Dollars

30

Curve A: Current Dollars Trend Line by the Method of Least Squares Using

-

1950-1960 Date. Data Source is U. S. Department of Commerce

Curve B: Current Dollars Forecast Converting McGraw-Hill Forecast in 1960 Dollars

I

20

I

I

I

I

I

Industrial Development Division Engineering Experiment Station

I GEORGIA INSTITUTE OF TECHNOLOCY

10 I I I I

I I I I

I I I I

I I I I

I

I
I

I

I

I

I

I

J

I

J

I

I

I

I

1945

1950

1955

1960

1965

1970

1975

1980

-23-

Appendix 2 Appendix Table 2-A
u. s. RETAIL SALES OF 30 TOILETRIES

Year

Toilet Soa12s
Millions of
Dollars % Change

Tooth Paste Millions
of Dollars % Chan&!:_

ShamJ200S Millions
of Dollars % Change

Face Creams Millions
of Dollars % Change

Li)2sticks Millions
of Dollars % Change

Spray Hair Fixatives Millions of Dollars % Change

1961

266.74

3.4

243.73

3.8

172.74

3.7

127.60

4.4

121.68

21.2

91.49

12.6

1960

257.85

4.4

234.81

3.1

166.58

4.5

122.17

4.6

100.39

9.2

81.25

6.7

I

1959

246.95

5.8

227.65

2.3

159.44

2.3

ll6.79

4.7

91.93

11.6

76. 15

-6.6

N

+=-

1958

233.39

6.6

222.59

10.0

155.9

6.3

lll.52

4.4

82.36

7.6

81.50

-1.3

I

1957

218.96

15.5

202.34

13.5

146.68

10.3

106.8

2.7

76.54

7.3

82.54

10.0

1956

189.58

6.6

178.27

13.4

133.00

8.4

103.96

4.1

71.33

10.1

75.05

51.6

1955

177.82

6.1

157.25

4.4

122.65

4.9

99.84

2.7

64.77

13.7

49.49

65.4

1954

167.58

7.1

150.62

0.6

ll6.92

1.0

97.23

1.3

56.94

5.4

29.92

41.8

1953

156.51

3.3

149.72

6.7

llS. 74

7.7

96.00

2.7

54.02

13.2

21.10

201.3

1952

151.5 7

-1.2

140.32

24.8

107.45

13.2

93.52

0.1

47.72

9.5

7.0

170.0

1951

153.5

8.0

ll2.44

9.5

94.92

17.7

93.41

2.6

42.58

5.9

2.6

1950

142.09

-0.7

102.68

9.6

80.68

9.4

91.01

5.1

41. 15

9.6

1949

143.12

93.69

73.77

86.59

37.55

Year

Mouth Washes and
Gargles Millions
of Dollars % Change

Hair Coloring
PreEarations Millions
of Dollars % Change

Men's Hair Tonics Millions
of Dollars % Change

Face Cleansing
Creams Millions
of Dollars % Change

Home Permanent Kits and Refils
Millions of
Dollars % Change

Aerosol Cologne Millions
of Dollars % Change

1961

87.57

15.5

74.44

10 .l

74.36

6.4

71.19

3.1

70.21

8.6

65.42

23.1

1960

75.82

9.8

67.61

46.9

69.92

0.1

69.05

3.1

64.65

-4.8

53.14

15.4

1959

69.05

8.0

46.01

23.4

69.85

5.0

66.98

3.7

67. 9l

-8.6

46.05

22.4

1958

63.94

17.0

37.30

15.2

66.52

2.7

64.62

3.9

74.27

-6.7

37.62

22.9

I

1957

54.65

39.0

32.37

14.9

64.74

7.9

62.18

2.5

79.64

-7.9

30.62

24.3

N Vl

1956

39.32

14.0

28.17

15.0

60.00

11.6

60.65

2.6

85.51

7.8

24.63

41.3

I

1955

34.49

4.5

24.50

9.7

53.75

9.6

59.12

-0.6

80.29

9.1

17.43

1954

33.00

4.4

22.33

6.7

49.06

3.8

59.49

0.8

73.61

6.3

1953

31.62

11.5

20.93

10 .l

47.27

10.6

59.00

2.7

69.23

6.3

1952

28.36

4.6

19.01

7.5

42.74

4.5

57.45

0.8

65.12

17.7

1951

27.10

5.0

17.68

17.5

40.91

13.6

57.01

3.3

55.32

4.3

1950

25.82

4.2

15.05

23.2

36.02

1.6

55.18

5.0

53.06

7.6

1949

24.78

12.22

35.46

52.57

49.32

Year

Aerosol Shaving Cream
Mill ions of
Dollars % Change

After-Shave Lotion
Millions of
Dollars % Change

Pressed Cake Powder
Millions of
Dollars % Change

Nail Polish and Enamel
Millions of
Dollars % Change

Roll-On Deodorants Millions
of Dollars % Change

Hand Lotions Millions
of Dollars % Change

1961

54.79

7.2

49.44

4.6

41.79

16.6

38.37

16.3

38.07

19 .l

37.86

4.6

1960

51.11

14.8

47.27

5.8

35.84

6.1

32.99

6.0

31.97

22.1

36.20

3.8

1959

44.52

12.6

44.68

7.2

33.78

10.3

31.12

9.7

26.18

28.2

34.87

3.7

I N

1958

39.54

9.8

41.68

7.3

30.63

11.8

28.36

-2.7

20.42

48.8

33.63

3.3

0\ I

1957

36.00

16.9

38.84

11.0

27.41

7.4

29.16

11.4

13.73

93.4

32.54

4.8

1956

30.80

12.6

35.00

7.6

25.53

13.2

26.17

6.1

7.10

31.04

5.3

1955

27.35

31.7

32.52

7.2

22.56

24.66

8.7

29.48

6.3

1954

20.76

39.3

30.32

5.9

22.69

11.6

27.74

2.0

1953

14.90

245.2

28.64

4.3

20.32

7.4

27.19

4.2

1952

4.32

332.0

27.47

4.6

18.92

8.5

26.10

5.3

1951

1.00

26.26

8.4

17.44

6.3

24.79

5.3

1950

24.22

9.2

16.41

3.7

23.55

15.4

1949

22.18

15.82

20.40

Year

Perfumes

Millions

of Dollars
----

% Change

Cream Deodorants Millions
of
])ollars % Change

Colognes, Toilet Waters ~other2 Millions
of Dollars % Change

Talcum and Body Powders
Millions
of
Dollars % <:;hang_!

Liquid Facial Cleaners
Millions of
Dollars % Change

Women 1 s Hair Dressings and Conditioners Millions of Dollars % Change

1961

37.44

1.4

35.38

7.1

35.31

6.6

34.45

2.8

29.64

2.1

25.77

4.5

1960

36.92

4.1

33.04

8.2

33.12

8.0

33.51

0.9

29.03

7.9

24.66

14.4

1959

35.47

7.2

30.53

-0.7

30.67

6.4

33.21

3.5

26.90

1.1

21.56

2.4

1958

33.07

5.6

30.75

-3.6

28.82

6.9

32.09

5.7

26.61

1.9

21.06

9.3

I

N
-...)

1957

31.33

5.6

31.91

1.6

26.96

4.0

30.38

3.8

26.12

4.2

19.27

l3 .3

I

1956

29.68

6.6

31.39

9.5

25.92

-6.7

29.26

9.3

25.06

15.8

17.01

7.5

1955

27.85

6.0

28.67

5.6

27.78

26.76

6.8

21.64 154.6

15.82

8.5

1954

26.26

3.4

27.14

1.2

25.07

6.0

8.5

77.1

14.59

12.4

1953

25.40

1.2

26.81

6.3

23.64

3.3

4.8

12.98

1952

25.10

1.7

25.22

22.89

2.8

1951

24.69

3.3

22.28

2.6

1950

23.89

-3.0

21.72

5.2

1949

24.62

20.64

Year

Loose Face Powder Millions
of Dollars % Change

Face Lotions and Astringents
Millions of
Dollars /, Change

Make-UE Lotion Millions
of Dollars /, Change

False Teeth Adhesives Millions of Dollars % Change

Face Lubricating Creams
Millions of
Dollars /, Change

Squeeze Container SEray Deodorant
Millions of
Dollars 7, Change

1961 1960 1959 1958

24.68

-1.1

24.63

0.9

23.79

15.2

20.54

8.9

19.58

3.9

15.02

3.7

24.96

-2.1

24.41

4.1

20.65

9.7

18.86

6.1

18.85

4.4

14.48

-2.5

25.49

1.8

23.45

5.1

18.82

5.4

17.78

10.0

18.05

6.3

14.85

-3.5

25.03

-0.4

22.31

4.8

17.87

13.4

16.16

10.0

16.98

4.9

15.39

-7.8

I

1957

25.13

-0.7

21.3

4.0

15.75

5.6

14.69

8.3

16.19

1.5

16.70

0.3

N

00
I

1956

25.31

1.8

20.49

4.8

14.91

11.9

13.56

10.1

15.95

6.5

16.65

9.3

1955

24.86

1.9

19.56

2.0

13.33

12.32

11.5

14.97

4.0

15.24

4.4

1954

24.39

-1.7

19.17

2.9

11.05

2.5

14.40

1.4

14.59

0.2

1953

24.82

-1.0

18.62

3.4

10.78

4.9

14.20

3.4

14.56

22.5

1952

25.06

-0.5

18.02

2.5

10.28

6.1

13.74

-2.1

11.89

1951

25.19

0.7

17.58

4.8

9.69

2.9

14.04

0.1

1950

25.03

0.5

16.78

5.3

9.42

9.4

14.02

7.5

1949

24.90

15.93

8.61

13.05