Casa de Oro: Tortilla Town
May 1, 2010
by Steve Berne
Business sustainability and profitability are not easy tasks, especially in this era of food safety and competition for market share even in the burgeoning tortilla industry. Just ask Tim Cranor, president of Casa de Oro Foods, Omaha, NE. “ConAgra started the plant in 1992 with four flour tortilla production lines and one customer, a major QSR,” he said. During the next two years the company added two more marquee clients: a major retail baking company and a leading consumer packaged goods company. Through the 1990s, several tortilla lines were added to the cavernous 86,562-sq-ft facility, which began its history as a ham processing plant.
As the millennium approached, ConAgra purchased Mesa Foods in Louisville, KY, which brought corn and fried products to the portfolio.
“Louisville got a lot of attention with a new flour line, taco line and improved infrastructure, using considerable human resources from the Omaha plant, but in the end, it was never really a profitable asset for ConAgra,” recalled Mr. Cranor. “The corn business is difficult. There are more small owner/operators, more competition and more complex processes.”
In late 2003, ConAgra divested the operations and sold the business to private equity firm Plaza Belmont Management Group in early 2004. However, when ConAgra sold the company, Casa was left with very few resources: a good core group of plant employees and a small customer base, but no sales totally dedicated to the Omaha plant, no accounting or software system, and only limited mid-management and purchasing functions, although ConAgra helped where it could, Mr. Cranor acknowledged.
A NEW START.
In fall 2008, Plaza Belmont sold the Louisville plant to Casa’s longtime president Ted Longacre and other Casa managers with the idea of reinvesting in Omaha, which for several years was left alone while the company concentrated on Louisville.
“We started reinvesting in people and operations,” Mr. Cranor said. “We asked several key people to step it up a notch to help us succeed.” Rod Hardenbergh, director, maintenance and engineering, who had been plant manager at the Omaha plant, spent the majority of his time in Louisville in 2007 and 2008; Shawn Jones, QA manager, who was previously in production; and Mike Doeden, plant manager, who started as a mixer operator in 1992, had all spent time in Louisville but were able to focus specifically on Omaha after the sale.
Mr. Hardenbergh worked for ConAgra and helped commission the Omaha plant. “Greg Power is our vice-president of QA and R&D,” Mr. Cranor added. “He took over from John Stout who had been here a long time and decided to stay on at the Mesa operation when we sold it.” Other key Omaha personnel include Chris Flores, human resources, with 30 years military experience; Ken Hecht, maintenance; Mary VanSurksum, customer service/logistics/scheduling; Cameron Stuart, operations superintendent; Dave Hein, purchasing manager; and Greg Russell, assistant controller. Our sales team is built around David Foran, vice-president of sales and a longtime food executive with sales and supply chain experience, and Lewis Carlyn, vice-president, food service, with a long history in food service management and operations.
“We are extremely fortunate to have the longevity of both people and customers,” Mr. Cranor noted. “The core base of customers has been here since the plant started, and most of the people running the operations have also been here since the mid or late 1990s. That says something very positive about the business.”
As a private equity firm, Plaza Belmont Management Group, based in Shawnee Mission, KS, generally keeps a company five to seven years. “We are very happy with the progress of Casa. It has been a good investment for us,” Mr. Cranor said, who is also a Plaza Belmont partner and vice-president. “We sell based on earning power (EBITDA) of the investment. We get very involved in every company we acquire and in the end try to leave a company in much better shape than it was when it was purchased so that our investors will benefit. In this case, it is bit more complicated since we pulled out of one of the plants and sold back a licensing agreement with one major customer because it got into tortilla production itself. We generally look for a 20% ROI.”
A business’ success is based on many aspects. Reinvestment is critical whenever and wherever possible, and that includes equipment, systems and people, according to Mr. Cranor. Customer satisfaction is also a top priority, as is food safety. “Without any one of these legs, you jeopardize viability,” he said.
“Customer audits have made us so much better because each one has different priorities,” Mr. Doeden added. “We now do our own audits and incorporate all priorities. For us, food safety audits have evolved to where our customers don’t come in and actually do an audit. Instead they come in and make sure our audits meet their standards.”
The plant had been ISO certified, but with all the audits taking place, it took the certification as a base to build on and now has documented procedures for every function on the floor, and each surpasses ISO standards. “We have three people who are Six Sigma trained and directly involved in continuous improvement, and we have one customer who expects reports on exactly what we are doing and how it affects them and their products,” Mr. Doeden said. “We and our customers have very high expectations of the operation and ourselves.”
Casa is very proud of its pilot plant and is one of the few tortilla plants that has one, complete with a mini production line, a variety of mixers and ample room for experimentation. “We invite our suppliers in to help us with formulations, and we encourage our customers to make use of the line as well,” Mr. Power said. “It is a great tool for sales because we can quickly formulate and produce test runs for potential customers, and customers get to work with our staff to perfect a formula before we move it to the big lines.”
Because it is a pilot line, the Lawrence Equipment mini-Megaline makes ramp up quick and easy vs. a bench-top model that does not mimic full production. “It is also a way to solidify relationships with our customers who better appreciate the work it takes to perfect a finished product, and it showcases the expertise of Casa’s team approach to potential and current customers,” Mr. Cranor added.
The newest R&D trends are sodium reduction and overall health and wellness. “Gluten-free has had a lot of interest but not a lot of volume,” Mr. Power noted. “That really doesn’t meet our business model. We are set up for long runs: truckload shipments versus a pallet of this and a pallet of that.”
Within operations, the newest production line is about 15 years old, but many upgrades and improvements through the years have improved cycles per minute by 15%. And new counter/stackers reduce giveaway, according to Mr. Stuart.
The plant is currently implementing a Wonderware software program that will help capture and record data and tie together various processes. It will also help traceability, improve accuracy of the minor ingredient system and verify proper movement and delivery of minor ingredients using load cells.
“When considering capital projects like this, we look at three criteria,” said Steve Crawford, controller. “Together with Rod and Mike, we classify the project as profit enhancements, environmental improvements or as a food safety initiative.”
Another initiative getting attention is sustainability, driven in part by its customers, according to Dave Foran, vice-president, sales. “They have pressures and expectations, and we have made that part of our continuous improvement plans. Things like source reduction, use of recycled board — things they can claim on their packaging.” Internally, Casa conducts audits on energy such as lights and motors and looks for ways to minimize waste and landfill use.
Some of the points of differentiation, or PODs, at Casa are that its people have each worn several hats at the company, and therefore, have a good perspective of the challenges and capabilities of the operation, according to Mr. Doeden. “After Louisville was sold and we started focusing more on this plant, all our roles changed again. We set key process indicators (KPIs), goals and communication protocols and worked on four key areas: labor, efficiency, waste and downtime, implementing measurement tools for each of these.”
Charts, graphs and Casa culture signage are visible for all to see as visitors and employees approach production.
“We want our goals and results as transparent as possible,” Mr. Doeden said. From the graphs posted, it is obvious the plan is working. To date this year, waste and efficiency are at target.
“We also display our KPIs for throughput, downtime and other parameters,” he added. “We review and discuss improvements shift to shift, week to week, month to month and year to year, with quarterly bonuses based on results. Audit results are also posted as are our employee of the month and employee of the year.”
In mid-2009, the plant surveyed its employees on quality and culture to gauge its situation. “It was not pretty, but it was revealing,” Mr. Doeden recalled. “We have made numerous improvements since then, and this month we are sending out another questionnaire to see the progress.”
Other improvement programs included “Get WEL” in 2008 that targeted waste, efficiency (downtime) and labor. “Our success was double-digit reduction in waste, downtime, and improvement in labor (improved startups, especially third shift),” Mr. Doeden noted. “One of the first days into the program, we actually collected all the waste from one shift and dumped it in a pile in the break room. It was almost one ton of material. The visual impact this had on employees, and management, was unbelievable.” In 2009, Casa implemented “Get DOWN,” which further focused on downtime as well as the other core factors. This year, it has “Casa WINS,” which includes safety and company culture to the mix. WINS stands for waste, improved quality, new culture and safety and service.
Casa de Oro has some unique products and customers, Mr. Cranor noted. “We employ modified atmosphere packaging (MAP) for military and NASA products with shelf life of up to three years,” he said. “Other formulas are designed to provide extended shelf life of up to nine months, which is necessary for international customers and meal kits that we assemble here as well.”
For MAP products, the plant relies on special processes and formulations using specific preservatives that help. Water activity must be below 0.854 in the finished product. Flushing with a mixture of carbon dioxide and nitrogen leaves the finished product with an oxygen residual of less than 8%. The formulas are very difficult to produce, and the company has perfected the process. It is one of the unique things about Casa, according to Mr. Cranor.
When the plant started up, it was the only tortilla facility in the US with an automated minor ingredient handling system. “We still have volume capacity available,” Mr. Hardenbergh said. “If needed, we could take space from the warehouse or adjacent land.” The plant runs 24 hours for four or five days but is capable of running seven days per week though planned 8-hour shutdowns of individual lines for scheduled maintenance and sanitation.
All materials used in the plant, other than bulk ingredients, enter through two dock doors. Lot numbers are recorded for traceability and mock recalls, which are conducted as many as six times per year.
Three Peabody 5100 CF outdoor silos hold flour, accommodating three 50,000-lb deliveries of raw material per day. A Smith 12,000-gal-capacity adjacent insolated tank holds liquid shortening. Batching of minor ingredients relies on a Shick system housing 12 bins on a mezzanine above pneumatic transfer pipes. The recipe-driven system, operated from a central control room, calls for ingredients, and minors are weighed using three main scales then pneumatically sent to staging bins above the appropriate mixer. Flour moves through a Shick rotary sifter system then is stored in a holding bin and automatically pulled from there to each mixer.
The plant uses three Peerless 1,600-lb mixers and two Peerless 1,000-lb mixers. Of the 20 base formulations, each produces multiple SKUs. In addition to white wheat, the plant produces whole-wheat and whole-grain tortillas and flavored wraps and home meal kits. Flavored wraps are available in Spinach, Tomato Basil, Garlic Herb, Jalapeño and Chipotle with several more still in development.
Output runs approximately 30% retail, 10% club store, 58% food service and QSR and 2% international. Total employment reaches 250, with some seasonal peaks.
After mixing, dough exits the mixer at approximately 90°F and is dumped in small troughs, which are then sequenced for rest time and hoisted to the hoppers of the Werner & Pfleiderer TWS series dough dividers. Die-cut tortillas for salad bowls rely on a Moline system using two sheeting and cross-roller stations producing 3- to 12-in.-diameter tortillas.
The plant outputs between 2 million and 2.5 million tortillas a day. In addition to the die-cut line, the plant houses seven Lawrence Equipment processing lines, each with a dedicated cooling, stacking and packaging line. The hot-press lines produce 6- to 12-in.-diameter products. The newest press line (Line No. 0 because it was added adjacent to Line No. 1) uses a 10-ball head while the other lines use 9-ball heads.
Tortillas bake in 3-tier conveyorized ovens held at about 500°F, after which they go through a 3-minute cooling process on a multi-pass conveying system in a controlled temperature enclosure. Packaging lines use Arr-Tech counter/stackers and Doboy or Rose-Forgrove wrappers. The meal kit line relies on an Adco cartoner. MAP packaging flushes out oxygen with a 70% nitrogen and 30% carbon dioxide mix as the product feeds the wrapper.
Sheeted items are ultimately used by food service restaurants for frying into chips, Mexican pizzas or bowls. These tortillas are parbaked, which enhances the final product.
The pilot plant employs a Lawrence mini-mega tortilla line specifically built for Casa. A Hobart mixer or a Peerless 300-lb-capacity mixer prepares dough. A manually controlled rounder and rounder board is used after which the dough balls are placed on a small press line in single file, or an adjacent sheeting line can be used. “We can output between 30 and 50 tortillas per minute” Mr. Power said. “The amount of dough mixed and the process are in close proportion to a full production line so ramp up is easier than from a bench-top model and has a greater chance of success with minimal tweaking of parameters.
“We work very closely and partner with our suppliers,” he continued. On the day of Baking & Snack’s visit, two employees from a major vendor were working with Mr. Power on low-sodium applications.
Casa’s in-house quality lab performs pH, physical measurement, water activity and moisture tests. An O2 tester assures quality specifications for extended shelf life products, and all microbiological tests for Listeria, salmonella, yeast, mold, coliforms and total plate counts are sent out to a lab.
Mr. Power maintains the big picture on trends and handles the daily R&D functions while Mr. Jones handles the day-to-day quality functions. “I’ll meet with customers, often going out with our sales team to understand what their needs are, then take that back to the plant and meet with Shawn and the production team to see how we can get it done,” Mr. Power said. “The current big push is sodium reduction. The challenge is, as always, maintaining taste and flavor. Trans fat removal has been fully realized, and for tortillas, fiber is getting some attention, but it is further down the road. ‘Clean label’ is another area that may affect the entire baked foods category at some point in the next year.”
NOTCH IN THE NICHE.
“The tortilla business is a tough, competitive market, but we have several strong points of differentiation,” Mr. Cranor said. “Everyone has unique but similar products. Tortillas are tortillas. But our food safety record and processes are top-notch. Customer service and flexibility — we work with all facets of our customers’ business. We partner with our customers, and we are concerned about the finished product as well as the consumer experience. The auditing and the talent of our workforce give us a lot of credibility. Also, our pilot plant is unique. And our customer list includes the top echelon of companies, which also provides credibility to potential ones.”
Looking ahead for Casa, priorities include throughput increases. The company experienced a slight decrease in volume last year because of the recession. But its goals include organic growth with existing customers, new products and new markets. With some planned upgrades to equipment and the tracking/tracing software, Casa anticipates even more efficiencies than it has accomplished with other efforts. Mr. Cranor concluded, “Ultimately, we want to be recognized not necessarily as the largest tortilla producer in the US but rather as the best flour tortilla producer based on quality and customer satisfaction. That is more important to us than physical size or output.”