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Sunday, 29 September 2013 22:00

Flour Power: Grand Rapids area gains reputation as snack food center

Written by  Matthew Gryczan, Special from Crain's Michigan Business
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Hearthside Food Solutions has five plants in metro Grand Rapids. Two production lines alone in Grand Rapids produce more than 2.5 billion food bars a year. Hearthside Food Solutions has five plants in metro Grand Rapids. Two production lines alone in Grand Rapids produce more than 2.5 billion food bars a year. COURTESY PHOTO

Although it recently won an honorary title as Beer City U.S.A. from an online straw poll, metro Grand Rapids should be known by another nickname: Snack City U.S.A.

The Grand Rapids area churns out billions of cereal and snack food bars a year, along with products such as Cracker Jack, Bear Naked granola, Pop-Tarts, Rice Krispies Treats, Multi Grain Cheerios Peanut Butter cereal, Kashi brand granola and nut bars, Ralston snack mixes and confections under The Hershey Co. brand, such as Zagnut, Reese’s Crispy Crunchy, Mr. Goodbar and Cookies ‘n’ Crème.

Given the size and number of local contract manufacturers that pump out products for General Mills Inc., Kellogg Co., Quaker Oats Co., Frito-Lay North America and others, the region has enough credibility to claim that it is a national center for the production of snack foods and cereal bars.

Hearthside Food Solutions Inc., Roskam Baking Co. and Kerry Inc. aren’t household names to snack food junkies, and the companies like it that way. They are loath to name the products they manufacture on behalf of the world’s largest food companies for both contractual and competitive reasons. Food companies themselves are tight-lipped about where products are made. Snack wrappers often bear “Distributed by” names only and rarely show locations of manufacture.

But it’s hard to miss the drumbeat of snack food processing in metro Grand Rapids, as one-ton totes of cereal and trainloads of flour arrive and convoys of trucks depart regularly with packaged foods to distribution centers across the Midwest and Northeast. Behind a lot of the growth is a rising demand for food bars, which have become a daily part of the American diet.

The market research company Packaged Facts estimates that the combined market for cereal/granola bars and energy/nutrition bars will be $6.8 billion this year, up nearly 9 percent over last year.

It’s only fitting that Hearthside Food Solutions, the nation’s largest independent baker and largest contract food manufacturer, would have five plants in metro Grand Rapids and would mark the area as its point of origin. The Downers Grove, Ill.-based company was launched in 2009 with the purchase of four plants from Cascade Township-based Roskam Baking.

Hearthside continued to grow through further acquisitions to the point that it now employs nearly 10,000 people at 20 factories with expected sales of more than $1 billion this year.

Roskam Baking itself is a heavyweight in contract food manufacturing even after its divestiture. With estimated manufacturing and storage capacity of more than 1.2 million square feet, Roskam is Grand Rapids’ largest contract bakery in terms of owned facilities, and the company is in the midst of a $62 million renovation of plants and equipment.

[RELATED: You don't know Cracker Jack about Roskam]

Through its Keebler Co. subsidiary, Battle Creek-based Kellogg’s operates three plants in Grand Rapids that produce Pop-Tarts, Special K Crisps and other snack products. In 2010, officials announced that the company would spend $18 million to relocate a baked-bar production line from Indiana to Grand Rapids.

In that same year, Omaha, Neb.-based ConAgra Foods Inc. announced its purchase of Elan Nutrition, a cereal and nutrition bar manufacturer founded by George and Rick Manus, two brothers from the Rockford area near Grand Rapids. ConAgra said it intends to spend $73 million on new equipment, to relocate an R&D lab and to improve efficiencies on production lines that manufacture nutrition and cereal bars.

Kerry, an Irish provider of flavorings and food ingredients, operates a 115,000-square-foot plant in Grand Rapids that is based on a cereal agglomerates business it bought from Roskam Baking in 2002. In addition, Kerry recently opened a warehousing operation nearby.

Flour to power bars

There’s no doubt that Grand Rapids’ easy access to grain, flour and other bulk food commodities from America’s breadbasket has helped the industry flourish there. Gleaming white Bulkmatic rail cars often line the Hughart Yard in downtown Grand Rapids, bearing flour that will be transferred pneumatically into trucks that shuttle the loads to the on-site silos of commercial bakeries and snack food plants throughout Grand Rapids. The flour is brought north from Indiana on the 150-mile-long Grand Elk Railroad, formed in 2009 to transport agricultural products, aggregates and other heavy commodities to West Michigan.

Nearly all of the major snack food processors in metro Grand Rapids get at least some of their flour by truck from one of the last six flour mills in the state — King Milling Co. in Lowell, now undergoing an $11 million expansion to expand capacity to well over 1 million pounds of flour a day.

Probably no other company represents the transportation and storage expertise for snack foods better than Grand Rapids-based Columbian Logistics Network, which carries the distinction of processing every cigarette sold in Michigan through its Hall Street plant.

Although it deals with commodities that range from chewing gum to car parts, Columbian Logistics particularly shines when the talk turns to batter mixes, one-ton totes of Cheerios and pungent spices used for baked food snacks.

During the past decade, Columbian Logistics has built up a network of five warehouses in the southeast quadrant of metro Grand Rapids that buzz daily with the activity of contract food manufacturing. Racks two stories high store doughnut batter, sugar, salt, cereals, spices and other dried commodities. But they also store individually packaged foods for Roskam, Hearthside and other snack food processors.

Columbian Logistics, which was established in 1892, formed its Sprinter Services Inc. business unit to supply everything from long-term contract warehousing, where customers transport bulk goods to their own factories, to arrangements where Columbian employees move items between docks on the customer’s premises.

Not only does Columbian Logistics need to keep hourly inventory of all these items, but commodities such as sugar stored for one customer can’t be used by another.

“That’s a huge no-no in our business,” said Blair Thomas, Columbian’s director of customer care.

With about 260 full-time employees, Columbian Logistics expects to post about $35 million in revenue this year, up from $29 million in 2010.

“We’ve absolutely grown because of the increase in food processing in metro Grand Rapids,” Thomas said.

And cars to bars

Just why Grand Rapids has become a snack food capital appears to be the confluence of both good and bad fortune, depending on how you view the half-glass of water.

Rich Scalise knows how the glass can look both ways. The CEO of Hearthside Food Solutions traveled from suburban Chicago and stayed in the city during the week for nearly 18 months while working on the acquisition of plants from Roskam.

“We have invested well over $20 million after the acquisitions, and we have some of our most advanced facilities there,” Scalise said.

One reason that the area was attractive is that “candidly, the automotive business took a downturn,” he said. “We really did benefit in terms of getting quality managers and quality hourly associates who understood what needs to be done to become competitive.”

Many employees are steeped in lean manufacturing techniques. The company has customized those as its Hearthside Performance System, which emphasizes how those manufacturing theories apply to food processing.

Scalise said Hearthside Food Solutions has a “great working relationship” with Local 70 of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents workers in four plants, “because they get what we do. We have to be competitive or we won’t have a business.” Local 70 also represents workers at Keebler and Kerry.

Scalise’s strategy doesn’t hinge on being the low-cost producer of snack foods by paying the lowest wages.

“We’ve measured our wages and health care plans against some of the bigger companies,” he said, “and we usually come out about on top.”

Rather, his strategy centers on leveraging the area’s skilled workforce, using its favorable locations for bulk commodities and distribution points to the Midwest and Northeast markets and melding its decades-old experience in cereal processing with snack food applications to be “fast, flexible and value-adding.”

The Hearthside plants are a marvel in modern manufacturing: Two production lines alone in Grand Rapids produce more than 2.5 billion food bars. Its factories are collections of K-Tron transfer bins to hold dry cereal, Bepex slab formers to make bars, Woody Stringers for icings and a whole host of sifters, mixers, ovens, cutters, wrapping and packaging equipment, often tied together with computers.

The company has research and development labs for new food items and even makes its own specialized equipment.

Yet Hearthside uses probably half the amount of automation that its customers use, Scalise said, and that is key to its flexibility.

Supporting all of this production is Grand Rapids’ fortunate location for distribution.

“That whole area around Grand Rapids is really sort of a distribution mecca for food production,” Scalise said. “A lot of products will flow between Michigan and Indiana and Ohio for disbursement throughout the Midwest and the Northeast.”

Thomas at Columbian Logistics concurs.

Metro Grand Rapids appears to have achieved the critical mass of attracting and retaining people experienced in snack food manufacturing, quality and safety. And their skills are now harnessed by smaller startups — similar to the way that three of the world’s largest office furniture manufacturers in the area spawned a host of startups.

Equipment operators and managers who once worked for the large snack food makers now can be found at smaller companies such as Festida Foods Inc., which opened a 155,000-square-foot plant in Grand Rapids last year that manufactures On The Border and MexAmerica tortilla chips, among other snack foods.

That intangible — a pool of people with deep experience in a particular industry — bodes well for Snack City U.S.A.

“In the end for us, we have no brands,” Scalise said. “Our business is really focused on our people, and if they can do well and our customers see that, then we enjoy more business.”

This article appeared in the September edition of Crain’s Michigan Business. More state and Southeast Michigan business news can be found at www.crainsdetroit.com/crainsmichiganbusiness.

Read 6152 times Last modified on Monday, 30 September 2013 14:42

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