Double-digit growth is a great thing for a dairy processor. But perhaps even more interesting is when more than two-thirds of your business is for customers other than your owners.
“In the last three years, we’ve had double-digit percentage growth outside the partnership,” says Jay Simon, president and CEO of Stockton, Calif.-based Super Store Industries. “That drives down costs for the partners and gives us a significant bump.”
SSI is the product of a partnership between three major competing grocery chains in northern California – Save Mart, Raley’s and Bel Air – and has two manufacturing sites for dairy, an 800,000-square-foot distribution center for frozen foods and dry grocery, and an ice plant that produces more than 200 tons of various retail pack ice on a daily basis. Simon says SSI’s sales are “well in excess of a billion dollars a year” overall, including dairy, grocery and frozen foods (DFR estimates dairy sales account for about half of the total).
SSI manufactures fluid milk, ice cream, cultured products, juices and drinks under private labels including Sunnyside Farms (considered the premier label of its retail partners), Bay View Farms, Cowabunga and Denali – more than 500 SKUs in all for partner stores as well as regional and national customers. About 30 percent of production is for the Sunnyside Farms brand, with the rest for a growing but selective roster of contract manufacturing clients.
Such a brisk co-packing business comes from the reputation for quality enjoyed by SSI’s house brands. “We get requests from different people for Sunnyside Farms – retailers and distributors that would like to have that label,” Simon says, noting the brand is exclusive and only available to SSI partners. “When we have a situation like that, we’ll propose doing something under their label.”
That has resulted in SSI manufacturing ice cream for California’s Stater Bros. grocery chain and Producers Dairy, along with yogurt for Foster Farms and cultured products for Unified Western Grocers, among others.
And while dairy products are a majority of SSI’s output, about 40 percent is juice products, with production dominated by the company’s contract to package Minute Maid beverages for West Coast markets. That business grew recently with the addition of a line of enhanced juices with claims such as antioxidants to help the immune system, plant sterols to reduce cholesterol and omega-3/DHA to benefit brain function.
Ron Harris, vice president of dairy operations, says juice sales have really taken off in the last six months after an extended flat period. “Consumers are looking for more and more enhanced juice,” Harris says.
Sweet nectarJuices and other non-dairy beverages have become a reliable money-maker for SSI’s Dairy Division. In February, it inaugurated production on its 59-ounce line of Minute Maid enhanced juices, bringing the total to 46 Minute Maid SKUs packaged by SSI.
“We think it’s really going to grow,” Jeff Woodsmall, operations manager of the Turlock Dairy Division, says of this addition to the brand owned by Coca-Cola. “They’re promoting it on a regular basis.”
Harris adds: “People are going to higher-end orange juice. Coke has done a great job with Simply Orange. I think the premium orange juices are growing rapidly.”
Sharing the lines with Minute Maid are products like Pom Wonderful, the pomegranate juice beverage that SSI has manufactured for several years. SSI bottles some 10,000 cases of Pom weekly for distribution in the United States as well as the United Kingdom. More recently, SSI began manufacturing for Florida-based Juice Works, which markets the Sun Shower line of nectarine-based beverages. With distribution on the West Coast, Florida and some Midwestern markets, Juice Works is looking to take the product national through a major club store chain, Woodsmall says.
Meanwhile, SSI has enhanced its partners’ private labels with a pomegranate lemonade, a cherry limeade and three fruit nectars. “They compete very well at retail, at a lower price,” Simon says. Further, SSI packages orange juice for Trader Joe’s stores on the West Coast.
But with all the juice business, don’t think SSI is ready to give up on dairy; cultured and frozen activities abound at its plants. But as long as fluid milk remains stagnant, juice will continue to be a lucrative profit center. “Dairy is flat but it’s always going to be here. MilkPEP has done a good job not letting it decline,” Harris says. “But we’re going to grow our juice.”
Milking the profitsIn fact, SSI lists dairy foods among its most successful products: cottage cheese, yogurt, sour cream, ice cream and smoothies produced on its small bottle line. Plus, within the past year, the company launched a churn-style ice cream and the Probiotic Plus line of yogurt. SSI manufactures about 18.5 million gallons of ice cream annually among all its brands. And Woodsmall notes that last year SSI ranked first in cultured products and ice cream among members of Quality Chekd Dairies Inc.
One of SSI’s frozen customers is Herd of Laughter, an Oregon-based ice cream brand for whose product SSI has the exclusive West Coast manufacturing rights. The product is shipped to the Pacific Rim as well as U.S. customers.
SSI worked with Herd of Laughter to develop flavors and formulas for the line, Simon explains. “We were in the hunt to develop a premium pint ice cream program – high butterfat, multiple inclusions in a fun package,” he says. “We wanted the ability to take it outside the partnership.”
Also new to the SSI lineup is Lovin’ Spoonful, a reduced-fat ice cream made in collaboration with the organizers of the Special Olympics, which receives 25% of the profits. “We expect it to take off this ice cream season,” Harris says of the product, which can be found in 800 stores in California and the Pacific Northwest.
Beyond the successes of its frozen products, SSI sees significant growth coming with cultured products. In fact, the company is gearing up to accept the manufacturing business for a new customer whose identity Simon was not prepared to divulge at press time. “We’ll be investing $2-3 million in a plant expansion here for this international foodservice customer,” he says of improvements that will include a new filling room. Annual output for the new customer is expected to start at about 17 million pounds, with a potential to grow to as much as 90 million pounds.
Further investment has been made toward technology and the environment. SSI is able to deliver products to hundreds of partner stores, often within one day, by using a hands-free, paperless order selection system that allows order selectors to talk back and forth in plain English with the host computer system over a spread-spectrum radio frequency network. A warehouse management system tracks and manages, in real time, more than 84,000 rack positions and $50 million of daily inventory, and a radio frequency scanning system on all forklifts allows the host computer to order resupply of rack positions in real time.
Meanwhile, SSI has installed a state-of-the-art truck wash/water reclamation facility at its Lathrop distribution center. A dissolved-air flotation waste treatment facility at its Fairfield dairy uses remaining solids to create methane gas for electricity.
Such innovations have allowed SSI to streamline its operations over the last three years and concentrate more time on creating new and better products for consumers.
“There will be more probiotics, natural and organic,” Harris says, noting that while the Turlock plant is certified organic, the company is just starting to develop some organic lines. “Dairy is changing and we have to change with it. We haven’t been slow; we’ve been strategic, as Jay would say, and we’re doing better. The consumer is moving more and more toward organic and natural products and is willing to pay the price. I don’t see it going away.”
SSI has been a longtime manufacturing partner of Mexican dairy giant Lala Foods, which continues to make inroads into the U.S. market. Lala recently acquired its own manufacturing facilities in the States, including a cultured plant in the Midwest from Wells’ Dairy. How this will affect SSI’s smoothie, sour cream and yogurt business for Lala has yet to be seen. “We anticipate it will have an impact on us at some point,” Simon says.
Meanwhile, SSI continues to take on new cultured and smoothie customers, including Ricera, a rice-based cultured product.
Safety is paramount“The big opportunity has been and always will be food safety,” Harris says, reflecting on the headline-grabbing food recalls of the past year. “There will be more restrictions put on the processor and that’s a good thing. Nobody can afford to make a mistake.”
Although dairy historically has been diligent, there is no excuse for the industry to let its guard down, Harris stresses. “Complacency can set in. The attitude always has to be for safety,” he says. “With all these brands and different kinds of products, you have to be extremely careful.”
The same goes for product security and worker safety. In fact, one of the biggest challenges SSI folks say they have from a human resource standpoint is finding new and creative ways to recognize and reward its employees for the quality products they produce and safe manner in which they do it. SSI reports its employee injury rates are routinely below national injury averages due to a strong commitment by and interaction from all levels of management. Safety programs emphasize employee involvement throughout all phases, including identification of hazards, program creation, implementation, evaluation and recognition.
The company is keen on recognition. For example, in January SSI’s Lathrop facility reached 150 days without on-the-job injuries, so management invited all employees and their families to a crab feast, a full catered sit-down dinner for more than 400 people. “For about two weeks after, that’s all people could talk about,” Simon says. “The whole idea is to focus on safety.”
Management reinforces successes in other areas with various recognition programs, making employees more prideful of their workplace and more willing to go the extra mile. “At a lot of places, people resist change,” Harris says. “People here know change is going to happen and they embrace it.”
Woodsmall described a situation in which employees had to remain well beyond their shift to solve a problem in the plant. “They do what it takes to get the job done,” he says. “They weren’t complaining. They’re dedicated.”
Simon adds: “Celebrating our successes breeds that kind of loyalty. We make a good product. We have a dedicated staff. We focus on safety. Customers see us having a level of quality and safety that’s difficult to achieve if you’re not focusing on it.”
Part of the communityThe company also offers generous benefits, including a 401(k) plan, as safeguards against turnover. SSI employee and company values emphasize the creation of a positive work environment, and the importance of being a good neighbor in the community.
To increase employee and family awareness of the power of proactive health care, SSI conducts annual health fairs at each of its facilities. The company provides annual onsite health screenings by third-party organizations, at no cost to employees, including confidential information on health benchmarks like cholesterol levels, body fat percentage and blood sugar level. Newsletters, brochures and free programs are available on health topics such as weight management, smoking cessation, psychological counseling, hypertension management and alcohol dependency.
It’s all part of an employer-employee relationship that makes folks want to stick around. “Fifty percent of our people have 10 years or more experience. It makes a huge difference,” Woodsmall says. “We have managers here 18 years, supervisors here 15 years. People running the equipment here 18 years. It’s a team atmosphere. We have a lot of people we can move from one department to another.”
And there’s little if any top-down red tape. Simon describes the corporate staff as “very lean,” consisting of just four others beyond himself.
SSI provides frequent worker training, both hands-on and online. “Most employees know at least three jobs, some as many as five or six,” Harris says. “If you’re light in one area, you can move them.”
Further, the company recognizes it has a relationship with more people than just the employee who comes to work each day. To support this relationship, SSI encourages family interaction in a variety of ways, including annual company picnics for all family members, monthly catered luncheons and formal Christmas dinners with dancing and entertainment.
Overall, SSI is approaching 900 employees, including multiple family members; it’s common for spouses, parents and children to work together in the same facilities, Simon says. “We have a lot of employees with kids who want to work in this industry. We have training programs to help develop career paths for them,” he says. “We’re fortunate we’re a growing organization, otherwise we wouldn’t be able to do that.”
HistorySuper Store Industries was founded in 1980, when Northern California supermarket chains Raley’s, Save Mart and Bel Air created Mid-Valley Dairy in a joint venture. In 1990, the partners opened an executive office in Stockton to oversee the day-to-day operations of the distribution center and dairy manufacturing.
The philosophy behind the alliance is to produce or purchase products at the lowest possible cost without sacrificing quality. The partners then can pass these savings on to their consumers and still maintain a competitive edge in the marketplace.
“There’s probably not another partnership of this kind,” says Jay Simon, SSI president. “These retailers are competitors, but partners in their distribution and manufacturing. That in itself is a milestone. We are a standalone company even though we are a partnership. Each partner runs their supermarket chain, and they pretty much leave us to operate the distribution and manufacturing.”
SSI serves more than 250 supermarkets out of its Lathrop dry grocery and frozen food facility in Lathrop, and more than 400 stores out of its dairy plants in Turlock and Fairfield.
While the company’s core business is serving its partners’ stores, its contract manufacturing operations have a global scope, shipping nationally as well as to the United Kingdom and the Pacific Rim.
“Even though the retail partners are competitors,” Simon says, “this hasn’t hindered the partners from the standpoint of utilizing the facilities or the volume to continuously drive down the cost of goods.”
The SSI Family of ProductsSunnyside Farms
This is SSI’s premier brand for its retail partners, encompassing a full line of fluid milk, cultured products, ice cream, juices and drinks. Recent additions to the line include churn-style reduced-fat ice cream and frozen yogurt, Probiotic Plus yogurt, pomegranate lemonade, cherry limeade and fruit nectars. Mainstays include the Cowabunga line of single-serve flavors milks, cottage cheese and sour cream.
Seventy percent of SSI’s business involves making products for customers outside of the partnership. The company co-packs cultured products, frozen desserts and juices for a host of regional and national processors, including Foster Farms, Lala USA, Pom Wonderful, Juice Works, Producers Dairy, Stater Bros., Trader Joe’s and Minute Maid.