Hood's Dairy Nation
This is one busy company!
In October of 2000, the Dutch company Koninklijke Wessanen placed its North American holdings on the auction block.
This came in the waning hours of what had been an unprecedented period of consolidation in the dairy industry. Dean Foods and Suiza Foods had spent the better part of a decade gobbling up small, large and mid-sized processing operations from coast to coast. Few knew that within a couple months, Suiza would gobble up Dean Foods, too.
But another company had a keen interest in Wessanen's Marigold and Crowley operations, and that company was HP Hood, of Chelsea, Mass., one of the oldest, most venerable regional players in the industry. At the time Hood was well into a rebuilding under a new owner.
Marigold and Crowley, each doing about a half-billion dollars in business, were themselves products of several acquisitions. Crowley had amassed several plants in the Northeast, and Marigold several more in the Midwest.
Hood, under the guidance of the Kaneb family since 1995, hadn't really leapt into the acquisition game, and was instead focused on the start up of a new state-of-the-art plant in Winchester Va. that would help it expand its business in licensed specialty products. But the Crowley properties in particular were just too good of a fit to let pass.
Hood didn't win the bid, and for a brief while at least, the idea of acquiring Crowley seemed destined to become a footnote in Hood's 150-plus year history.
The company that did win the bid for the 17 plants and hundreds of distribution routes represented by Crowley and Kemps was none other than Suiza Foods Corp. of Dallas. But Suiza never bought the Wessanen holdings. A few months later, Suiza and Dean announced that the two largest dairy processors in the United States were to become one, under the Dean name. Soon after, a new Dallas-based company emerged from what had been Milk Products LP-National Dairy Holdings-and eventually acquired Crowley and Kemps. But the story doesn't end there.
A year later, in October of 2002, the idea of a merger of National Dairy and HP Hood was in the news. The company would be based in both Chelsea and Dallas, and the Missouri-based co-op-Dairy Farmers of America-would be a partner, as it was in National Dairy. But regulatory concerns about a producer-side monopoly on milk outlets killed that plan. Finally, earlier this year, Hood completed an outright acquisition of the Crowley and Kemps (Marigold's new brand-company name) from National Dairy Holdings. And it all started with the initial offering in November of 2000.
"Ultimately it did result in our acquisition of the two companies we would have liked to have acquired back in 2000," Kaneb says. "We just did it three and a half years later."
At the end of 2004, HP Hood LLC, the new company's name, is a $2.3 billion business with 25 plants in a dozen different states. In the past 18 months the company has introduced a line a low-carb products, completed the acquisition, installed a state-of-the-art aseptic-capable filling line at the Winchester facility, and entered into an organic milk partnership with Stonyfield Farm.
This is one busy company!
Team AmericaSo how exactly will the new Hood triumvirate operate? To some extent the three companies will continue to function as they have, and will each continue to manufacture a wide range of products. But each will become a bit more specialized in what they do best, Kaneb says.
Specifically, Kemps will manage the frozen dessert business for the entire company, while still offering a full line of dairy products. Crowley will become the cultured products and foodservice specialist of the group, and Hood will manage the bulk of the fluid operations, especially long-life fluid products.
In respect to plants, Hood and Crowley will work more closely together. Crowley's expertise in cultured products and foodservice will complement Hood's expertise in UHT.
Ice cream operations in the Northeast will be consolidated into one of two plants. Crowley will take over management of Hood's cultured products plant, and Hood will manage Crowley's UHT milk plant.
"We are hopeful that what we do will best utilize the strengths-both the people strengths and the production capability strengths-of the three companies," Kaneb says. "We've come up with a slogan, and although I'm not a big fan of slogans, I think this one fits, it's ‘Three Players, One Team.'"
Jim Walsh, ex. v.p. of sales, came to Hood five years ago from Dannon where he was a national sales manager. Before working with the nation's largest yogurt company, he was with Colgate Palmolive, which sells nearly $10 billion worth of toothpaste and laundry detergent in a given year.
Walsh is itching to take advantage of the new capabilities offered by the new, larger Hood.
"We are taking our core competencies and putting the folks that are truly the experts in charge of each," Walsh says. "For instance, at Crowley, Joe Cervantes and his team will maximize their foodservice capabilities, and we will move toward becoming a much bigger player in foodservice. Whichever plant can provide a product, that group will support it. We are trying to figure out what is most functional. The customer will be the common denominator. The customer will drive what products are designed. The person who walks into a Sysco, for example, will be able to talk intelligently about any product we can produce under the HP Hood LLC umbrella."
And what has the acquisition meant for those at Kemps and Crowley?
Jim Green, president of Kemps, says that having three different parent companies in four years has been a bit of a challenge, but one that Kemps people have met with a good attitude.
"They have had to adapt, to positively respond to significant changes, and they have always been ready to charge ahead," Green says. "I'm sure they will make the most of the opportunities that will develop with the joining of Hood and Kemps and Crowley.
Green sees opportunity, and why shouldn't he? The Hood organization is certainly making those opportunities available, Kemps ice cream products are now being included in Hood's product portfolio in the Northeast for example, and all three companies will have new added resources to work with.
"I'm very positive about this acquisition of Kemps by Hood," Green adds. "There appears to be a really good fit between the two companies. Hood's success has been based on innovation and creative brand development and that fits with Kemps' strategic intent."
Has the assimilation of Crowley and Kemps been seamless? No. A few weeks after the acquisition took place, long-time Crowley executive Marty Margherio resigned, to be replaced by Joe Cervantes, another Crowley vet. But Kaneb is optimistic that the road is getting smoother.
Green grew up in a family dairy company in Pennsylvania that was acquired by Crowley. Cervantes has been with Crowley for 19 years, but his experience in the food industry also goes back to his childhood when his father worked for Quaker Oats in Chicago.
"Each business has a different culture and tradition," Cervantes says. "Crowley has always been a family-type organization, and the Hood group is a family. John wants to maintain these cultures as we become part of one bigger family."
While he's optimistic about the acquisition, Cervantes acknowledges that any change of ownership can be challenging.
"We had competed more aggressively (than Kemps) against Hood. So we found ourselves in a different situation," Cervantes says. "Whenever there is a change in ownership there is a period where there are more questions than answers. Our customers were asking us about what was going to happen, and the message we gave them has been consistent-we are bringing together three organizations that are all very good organizations, so what we are doing is optimizing our facilities and optimizing our strengths."
More than 30% of Crowley's business is in foodservice, Cervantes says, so to be able to focus greater attention on foodservice customers will be a benefit.
HP Hood LLC FactsHeadquarters: Chelsea, Mass.
HP Hood LLC 2004 Sales: Approximately $2.3 billion
Total HP Hood LLC Employees: Approximately 5,000
Plants: 25 total
HP Hood LLC Officers: John A. Kaneb, chairman, pres./CEO
Gary R. Kaneb, CFO
Theresa M. Bresten, treasurer, asst. sec.
James A. Marcinelli, controller
Paul C. Nightingale, gen. counsel, v.p., and sec.
Paul F. Beatty, asst. gen. counsel, v.p.
James F. Walsh ex. v.p., sales
Bruce W. Bacon, v.p, human resources
H. Scott Blake, v.p, processing
Jeffrey J. Kaneb, v.p, order fulfillment and logistics
Margaret A. Poole, v.p, R&D and product quality
Michael J. Suever, v.p, milk procurement and processing
Rachael A. Kyllo, v.p
Francis V. Torgerson, v.p, operations services
Barry Boehme, v.p, marketing
Joe Cervantes, senior v.p
Jim Greene, v.p
Camille DiCocco, asst. sec.
Maria Williams, asst. sec.
Market Position: Hood is the number-one brand in 14 categories in which it competes and enjoys 97% brand recognition in New England.
Home Delivery: Available in New England
Crowley FactsFounded: 1944
Headquarters: Binghamton, N.Y.
Chief Executive: Joe Cervantes
Annual Sales: $500 million
Employees: Approximately 2,000
Kemps FactsFounded: 1914
Chief Executive: Jim Green
Plants: 7 (including a joint venture with AMPI)
Annual Sales: $650 million
Employees: Approximately 1,500
Licensed to sellOne area of great potential for Hood is organic milk. Hood has been involved in organic milk in the past through a licensing agreement with Organic Cow, a division of Horizon Organic. But as Horizon Organic has become the property of Dean Foods, Hood's activity with organic milk has gone dormant. But that's about to change.
Since November, Hood has been manufacturing, selling and distributing organic milk in a partnership with Stonyfield Farm.
"Stonyfield is the number-one organic brand in the United States, so this is a tremendous opportunity for us," Walsh says.
And it is one that's indicative of one of Hood's unique strengths-its ability and willingness to produce, sell and distribute licensed brand products. NesQuik®, Lactaid®, Coffee Mate®, and Southern Comfort Eggnog® are all produced by Hood and sold coast-to-coast.
"In looking at something like organic milk, most companies would immediately look at it and say let's do it ourselves," Walsh explains. "And we are continually looking at taking our own trademarks national. But we don't have a problem saying ‘you have more equity in this category than we do.'"
Walsh says the success of Lactaid and NesQuik have laid the groundwork for things like Southern Comfort, which in a little more than a year has become one of the top 2 brands of eggnog in the country. A long-term licensing deal with Arizona Iced Tea will introduce cold-filled tea in plastic bottles to the convenience store channel early next year.
The Stonyfield deal, too could be tremendous. When Dairy Foods broke the news of this marquee partnership in August, Stonyfield's CEO Gary Hirshberg said he had resisted past temptations to move the yogurt company's brand into milk. Hirshberg said several factors led him to believe that the "stars have lined up" in favor of a Stonyfield milk brand, not the least of which was his confidence in Hood's ability to get the job done.
Bottom line and beyondThe end of next year will mark the tenth anniversary of the Kaneb's acquisition of HP Hood and the beginning of the turnaround that has become somewhat of a legend in the North American dairy industry. A private company, Hood does not disclose its earnings, but its sales have grown from $550,000 to $2.3 billion since the Kanebs bought the company.
Hood became profitable in the first year after the acquisition, and the Kanebs never looked back-investing in the Winchester plant, and continuing to grow the company. A New England television station produced a segment in the late 1990s that recounted the turnaround and illustrated how a sense of pride had returned to the company.
Like most dairies, HP Hood has long been a very visible symbol in its community. Hood's community, however, is New England, and its home city is Boston. It's a densely populated market, and a place that takes its history, traditions, and symbols very, very seriously.
No surprise then that Hood's own symbols might be a bit more dramatic and more cherished than those of similar companies throughout the country. On any given day in the milder seasons, Bostonians and other New Englanders might look skyward and catch a glimpse of the Hood blimp, for instance. There's also a Hood Milk Bottle landmark near the site of the Boston Tea Party that appears on some tour maps.
The original Boston plant and headquarters is no far from the Bunker Hill Memorial, which still sports the landmark Hood smokestack. Today it is the home of a multi-use business complex that includes Hood's R&D facilities.
The blimp, grounded for a while after September 11, has this year been very active covering sports events including post-season Boston Red Sox baseball. It now promotes not only the Hood name, but the Carb Countdown brand as well.
Hood continues home delivery service in many New England markets.
"We get bus loads of people coming in, and they come from Florida and all around the country," says Lynne Bohan, Hood's director of public relations and government affairs.
Hood has throughout the years been involved in dairy industry associations and contributed extensively to charitable causes.
At the end of October, to honor the historic Red Sox World Series win, Hood announced that it would contribute a bonus to its Home Team Advantage™ program for this record-setting year, bringing its four-season total to $400,000. Since its launch, the program has donated extensively to children's hospitals throughout New England. This year, Hood donated $1,500 each time the home team won at Fenway Park, including post-season play. Kids across New England also did their part to support Home Team Advantage through "Red Sox Kid Nation Presented by Hood," the first-ever Red Sox fan club designed for children 14 and under.
"With 5% of club membership dues going to Home Team Advantage, this is a great way to have kids help kids," Bohan said.
Hood is truly a partner with the Red Sox, and Kaneb continues to own a share of the baseball franchise under the new ownership group established in 2002.
Around the bendSo much has happened at Hood in the last nine years that one is inclined to think that there will have to be a period of calm, wherein the company can catch its breath. Not likely.
Walsh says the licensed branded products that have full market penetration today offer a platform for more partnerships in the future. Once it is validated, the new line at Winchester (see related story p. 50) will produce aseptic products in plastic bottles, opening a world of possibilities. And Kaneb said there is thought being given to building another long-life plant west of the Rocky Mountains.
What about the future of Hood's leadership? Kaneb, who says he saw his first Red Sox game in 1945, has for the better part of the past nine years served as president, CEO and chairman of Hood. Two of his sons, Jeffrey and Gary are also involved in the company.
Jeffrey, currently vice president of order fulfillment and logistics, has been a full-time executive since the company was purchased. Gary, Hood's CFO, is involved with other family-owned companies, as well.
According to Jeffrey, who is married with two children, there's something special about helping run a company that he grew up with as a consumer.
"I have five brothers, so we drank a lot of milk. We had Hood milk delivered to the house twice a week, and my mother actually had a commercial type dispenser. Each week I think we'd go through four or five of those 2.5 gallon packages that fill it."
When asked about whether he sees himself in a chief executive role, the younger Kaneb seems almost surprised by the question, and says that has really not been considered yet.
John Kaneb says he has no golf game waiting for him, and he plans to continue working for a long time.
"But I do have something like 14 people reporting directly to me, and sometime, sooner rather than later, we will do something to reduce that number," he says. "It's really the best thing for the company."
Sidebar:Innovation and Quality: Common to Hood, Kemps and CrowleyHood's product development and quality control team has long been one of the most innovative in the industry. One of the first companies to introduce low -fat ice cream and frozen yogurt, Hood continues to innovate with low-carb and specialized products. Kemps and Crowley bring their own legacies of innovation and quality.
Lead by Margaret "Peggy" Poole, Hood's R&D group has, in the past few years developed products like Simply Smart milks, Peak Treasures ice cream and of course, the Carb Countdown line, which includes milk-based beverages, yogurt smoothies, cup yogurt and juice drinks.
Kemps, under its previous name, Marigold Foods, was also a pioneer in frozen yogurt in the early 1970s. Yo-J, rolled out by Marigold in 1992, is a blend of juice and yogurt that anticipated the yogurt smoothie trend that only blossomed in the past couple of years.
Crowley, a 100-year-old company from Binghamton, N.Y., (also the boyhood home of television visionary Rod Serling), has been a consistent producer of quality products, particularly in the cultured products segment. Earlier this year Crowley won five gold and five silver medals at the New York State Fair dairy product competition.
Both Kemps and Crowley grew by acquiring other dairies themselves, and one of the most notable operations in the Crowley stable is Heluva Good of Sodus, N.Y. A perennial winner of marketing awards, this company is also an outstanding manufacturer of innovative real sour cream dips and Cheddar and flavored cheeses. "You'll Love It. We Swear" is Heluva Good's trademarked slogan.
Five Other Innovations
- Yo-J 1992 (Kemps)
- LightBlock 1999 (Hood)
- Simply Smart 1999 (Hood)
- Carb Countdown 2003 (Hood)
- Dino Dip 2001 (Crowley)
Sidebar: A Rich and Creamy History of HP HoodWith its roots in America's seminal revolutionary city, it's no surprise that HP Hood LLC has a lengthy and proud history.
If you go back five, 10 or 20 years in the Dairy Foods archives, odds are you will find something about HP Hood in almost any issue. And that's just the recent chapters. The company was founded in 1846 when Harvey P. Hood bought a milk route in Charlestown, Mass., beginning Hood's tradition of home delivery of milk. Ten years later he started his own wholesale milk business and by the 1890s HP Hood and Sons was incorporated.
In 1894 Hood started its long record of product innovation by hiring its first food scientist to prepare modified milk for babies. In the same year, the company began to work on adapting pasteurization.
During World War II, Hood hired its first woman route driver. A couple years later it retired its last horse-drawn delivery vehicle and introduced the Hoodsie Cup, a 3-oz cup of ice cream.
Hood claims to have been the first company to introduce several product innovations that have become dairy industry standards, including frozen yogurt, low-fat milk and light ice cream.
In 1983 Hood Ice Cream became the top-brand in New England, 10 years later the company became the nation's leading producer of extended-shelflife dairy products.
In 1995 the Kaneb family purchased the company, and a year later Hood celebrated its sesquicentennial.
The Winchester plant opened in 2000, and in 2001 Hood was Dairy Food's Processor of the Year for the first time after becoming the sole national licensed producer of Lactaid.
In 2004, Hood acquired Kemps and Crowley, and its hometown baseball team, the Boston Red Sox, won the World Series.