It’s safe to assume that Harvey Perley Hood never envisioned doing business in California when he founded his Massachusetts creamery in 1846, three years before the Gold Rush drew the attention of the fledgling nation westward.
Now, 161 years later, HP Hood has put down stakes in the Golden State. True, the company has been a national player for some time, through co-packing arrangements and licensing agreements. But the May 2007 acquisition of Sacramento-based Crystal Cream & Butter was a great leap toward establishing a western manufacturing base, augmenting Hood’s purchase of New York-based Crowley Foods and Minnesota’s Kemps (formerly Marigold Foods) from National Dairy Holdings in 2004, a move that saw Hood grow exponentially.
“The world’s getting smaller, and the opportunities tend to be on a national scale,” says Jeff Kaneb, vice president of the $2.3 billion company operating out of new offices in the Boston suburb of Lynnfield. “The acquisitions helped broaden our footprint.”
In particular, Hood sees greater opportunities in the private label market, and the broader reach strengthens the company’s ability to deal with an increasingly consolidated retailer base, explains Jim Walsh, executive vice president for sales. “It provides a platform to partner more greatly than we were already with key retailers,” he says.
The company is already reaping benefits in this area. In 2007, Wal-Mart awarded Hood its Great Value-brand coffee creamer business; this product is made at Hood’s Winchester, Va., plant and distributed nationwide.
These acquisitions also allow Hood to better tap a consumer base that’s shifting westward. “You have a declining population base in some of our core markets [in the eastern U.S.],” Walsh says. “The West Coast provides us with a growing population base.”
Hood’s interest in Crystal, Sacramento’s hometown brand since 1901, was purely one of infrastructure. To that end, Hood in October sold Crystal’s conventional (non-ESL) business - retaining the plant in Sacramento - to Foster Farms Dairy, located 80 miles south in Modesto. The largest independent dairy processor in California, Foster Farms plans to continue distribution of conventional Crystal-branded products in Sacramento.
“We recognized we would not do the conventional DSD operation justice to run it from 3,000 miles away,” Kaneb says. So, with the historic brand in the hands of capable stewards, Hood is free to enhance extended-shelf-life product operations in Sacramento, where Crystal had been its co-packing partner for many years.
“Having ESL capacity on the West Coast is an important part of serving our customer base,” Kaneb says. “If you looked at our manufacturing platform six months ago, there was a clear void. We have a large business west of the Rockies. We viewed this as an opportunity to fill that manufacturing void.”
Putting it togetherMeanwhile, the integration of Crowley and Kemps is ongoing. “Those two acquisitions together are the largest we’ve ever made,” says Kaneb, whose father, company chairman John Kaneb, led the family’s acquisition of Hood in 1995. “It continues to be a large task.”
Crowley Foods - which includes the Crowley, Penn Maid, Rosenberger’s and Heluva Good brands - operates as a division of Hood, while Kemps exists as a subsidiary of the parent company.
Kemps operates “more or less as it had before,” Jeff Kaneb says, explaining that the subsidiary runs all the ice cream business for both Hood and Kemps brands, including sales and marketing. “One of Kemps’ core competencies is the ice cream business,” he says. “We looked to take advantage of their expertise.”
At the time of the acquisition, each company had its own R&D unit and it was kept that way at the outset, explains Mike Suever, senior vice president of R&D, engineering and milk procurement. “The only alteration is that we asked each to specialize,” he says.
So while Kemps took on ice cream, Crowley focused on cultured products and Hood handled beverages.
Then last September, the company closed Crowley R&D and moved its operation in with Hood’s facility in Boston, consolidating beverage and cultured development, with space expanded to accommodate new pilot plant equipment.
Product development efforts across the Hood family network are coordinated through a new “opportunity system,” Suever explains, in which the sales and marketing team provides profit and volume projections to the new products committee, which meets monthly to set launch priorities.
Coordinating this cross-country network is not without its challenges. “They are large companies, with lots of people and moving parts. Any time you try to integrate that, there are huge challenges,” Kaneb says. “Even though there have been lots of challenges, there’s an upside to having a platform with a broader reach … a sales force with a more diverse set of relationships.”
The key, Walsh says, is to enhance the best features of each company. “For example, we were keenly interested in how Crowley in particular approached private label as well as foodservice,” he says. “We felt we could learn a lot.”
The Hood brand continues to build identity beyond its historic northeastern marketing area. Four new seasonal eggnog flavors launched for the winter holidays were distributed across the country. “These will be in almost every state coast to coast this holiday season,” Chris Ross, director of marketing, said in a mid-November interview. A television ad campaign with the ABC Family Channel’s “25 Days of Christmas” gave Hood wider brand exposure.
But the Hood name is not necessarily a lynchpin to success. For example, Ross notes that the company has been expanding distribution on its Simply Smart line of low-fat and fat-free milk, formulated to taste like higher-fat products, with the Hood logo taking a step back to the line identity. “The Simply Smart brand is strong enough on its own with Hood as an endorser,” he says. “All these things will continue to get the Hood brand out there in a very strong way.”
Staying on trendMeanwhile, Hood has taken a step forward in dealing with a hot-button issue currently facing all businesses: environmental sustainability. “HP Hood shares in the responsibility to do things smarter and better, and we are committed to environmental sustainability because it is the right thing to do and the smart thing to do,” John Kaneb wrote in a recent issue of Hood’s Dairy Gazette employee newsletter. “We can do much more as a company and as individuals if we approach this opportunity intelligently and persistently.”
Kaneb heads up Hood’s new sustainability implementation committee, which also includes key managers from all areas of the company.
According to Suever, the new program basically formalizes an attitude that Hood has maintained for several years. “The Kaneb family has had a long-standing philosophy to be environmentally friendly,” he says. “That’s the way they want to conduct business.”
For example, capital appropriations include line items that identify and quantify environmental impact. “We look at the level of utilities involved, how energy-efficient a new piece of equipment is,” Suever says. “It’s changed the way we track things - the final aspect - but not how we do business. Our customers are looking for a scorecard. It has changed the accounting, not the culture.”
Of course, trends for new products are also guiding activities at Hood. Suever notes that better-for-you products seem to have come full-circle, from calorie counting, to low fat, to low carb and “back to calories again,” noting the trend toward portion-controlled packages. “Now we have this magic 100-calorie number,” he says. “What can be tweaked to meet this?”
School milk requirements also are guiding product development, as new proposed school nutritional standards keep aiming for increasingly lower calorie and sugar levels. “We’re definitely aiming for the low target,” Suever says. “We’ll be educating school milk accounts on DMI data and the successes in St. Louis.” Among the challenges is that many schools still base their milk bid specifications on outdated standards, he says.
Meanwhile, the growth in organics presents its own set of challenges, even though supply has managed to somewhat catch up with demand. “The organic market is still growing. We’re starting to eat into the surplus [from 80/20 producer conversions],” Suever says. “It might get depleted in ’08. There’s a backlog of producers that would like to transition.” And while Hood still sources milk from up to 11 states, “we’re bringing it from closer than ever,” he says, “not as far afield as we used to.”
On the manufacturing side, it’s a challenge to segregate the different types of raw materials, such as organic, conventional, rBST-free and non-dairy ingredients. “At Winchester, we’re segregating four different types of products,” Suever says, noting that this plant was designed for such segregation using separate lines and stainless-steel fixtures for easier cleaning. “It’s a more expensive design up front, but it’s paying off in spades for what we’re now faced with.”
Overall, the milk supply is “plentiful and growing,” he says. “It’s not difficult to obtain. More money has created more milk.”
Facing challengesBut even with greater availability and efforts to promote the natural goodness of milk, Hood managers contend the industry still needs to do more to get the point across to consumers.
“It’s the perfect food, but we sure like to give it away,” Walsh remarks. The issue is “much bigger than Hood. It’s our business, and it’s up to all the companies to figure out ways [to communicate that],” he says, adding that this challenge presents “the biggest potential and the greatest risk.”
Jeff Kaneb adds: “For so many years, it just wasn’t done - educating the consumer about how good dairy is.”
True, generic industry marketing campaigns have come a long way in recent years, Ross acknowledges. “The fundamental messages are great, but it doesn’t get to the heart of why consumers are consuming beverages,” he says.
Milk is even losing ground in dayparts once considered mainstays, Ross says, noting that Diet Coke has even been marketed for breakfast. “The industry is going to continue to struggle until we find a way to connect with consumers and reclaim occasions we’ve surrendered,” he says.
And industry infighting about rBST-free labeling just harms that effort, Kaneb argues. “The time we spend fighting against ourselves, that’s lost time,” he says. “Getting the consumers to really value the nutrition of milk, that’s the upside.”
In the meantime, Hood will continue to develop its growing nationwide platform from which it can strengthen its brands by developing and launching new products and firm up the company’s position as a national player in branded and private label products.
“We’ve created this platform and we want to do our best to take advantage of it, whether it’s our own brands, store brands or co-pack operations,” Kaneb says. “We have a talented team that’s brought us here and will take us where we need to be in the future.”
The Hood Family of ProductsHood
Under its own brand, Hood offers a vast array of fluid milk, cultured and frozen dessert products that carry the red oval logo familiar to consumers throughout New England and New York state. What has perhaps become its new flagship is Simply Smart, a line of fat-free and low-fat milk formulated to have the taste and mouthfeel of higher-fat products. Launched in 1999, Simply Smart has seen its marketing area grow as Hood finds an expanding audience for this product among folks who maybe stopped drinking milk because whole or 2% has too much fat but they didn’t care for traditional skim. Simply Smart milks have since been introduced to the Florida and Georgia markets. Among other fluid products, Hood has innovated with Calorie Countdown, a dairy beverage launched during the low-carb craze, and unique flavors of eggnog as seasonal offerings.
In the freezer case, Hood offers the New England Creamery line of ice cream. The 26 flavors offer a delicious tribute to New England icons, from quaint B&Bs and ski lodges to forest and lake retreats. Each flavor is crafted with authentic recipes from throughout New England. Hood also makes the official ice cream and frozen novelties of the Boston Red Sox, with flavors like Fenway Fudge and Green Monster Mint.
Hood’s Crowley Foods division - founded in upstate New York in 1904 - encompasses the Crowley, Heluva Good, Penn Maid, Rosenberger’s, Axelrod and Maggio brands. Products under the Crowley banner include fluid milk, cultured products and soft-serve ice cream. Heluva Good is known for its many unique flavors of real sour cream dips, cheeses and condiments. Penn Maid is Philadelphia’s hometown brand of cultured and cream products, while Rosenberger’s has marketed milk, juice and tea products in Pennsylvania’s Delaware Valley since 1925. Axelrod’s cultured products have been sold in the New York metropolitan area for well over a century, and Maggio’s ricotta, mozzarella, shredded cheeses, string cheese and grated cheeses can be found throughout Philadelphia and in parts of New Jersey, New York, central Pennsylvania and Baltimore.
Founded in 1914, Kemps offers a line of milk, ice cream and cultured products sold throughout the Upper Midwest. In charge of ice cream development for all of Hood, Kemps has developed many innovative products including Caribou Coffee ice cream, Life Savers sherbet and, most recently, Kemps IttiBitz. Kemps offers a full line of premium ice cream, frozen yogurt, sherbet and frozen novelties to both retail supermarket and foodservice customers.
Hood packages such nationally distributed products as Lactaid lactose-free milk, Stonyfield Farm’s line of organic milk, Wal-Mart’s store-brand coffee creamer, Southern Comfort eggnog and Arizona ice teas.