Inventure Foods Does It Differently

by Dan Malovany
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Some companies lead. Others follow. Then some businesses like Inventure Foods just march to the beat of a different drummer.

A little more than a decade ago, when the company was known as Poore Brothers, the snack producer partnered with T.G.I. Friday’s, licensing the casual-dining brand to create snacks for the retail grocery channel. Using its proprietary dual-sheeting technology, the Phoenix, AZ-based company began producing snacks based on one of the restaurant chain’s most popular items: potato skins. Working with executive chefs at T.G.I. Friday’s, the snack manufacturer developed and rolled out Cheddar & Bacon, Sour Cream & Onion and, most recently, Jalapeño Cheese potato skins. Suddenly, the different beat resounded quite well with consumers.

Likewise, in 2008, the snack manufacturer partnered with Burger King to create snacks for the retail channel. According to Terry McDaniel, president and CEO of the $134 million company, the trick to successful licensing involves matching the appropriate product with the brand. That’s why extruded onion ring snacks became the top-selling product for the Burger King line, he said. Consumers “get it” because onion rings are one of the fast-food chain’s signature items. “We came out with some products like pizza snacks under the T.G.I. Friday’s [brand] a few years ago,” Mr. McDaniel recalled. “Well, T.G.I. Friday’s doesn’t have pizza on its menu. It was a great product that did not work.”

Earlier this year, Inventure Foods announced it partnered with Nathan’s Famous — as in, yes, hot dogs. Although the company hasn’t said what snacks it plans to produce under the Nathan’s Famous brand, all consumers and retailers have to do is look at the chain’s menu to explore the possibilities, Mr. McDaniel suggested. “This is what we know about licensed brands: You instantly have a brand,” he said. “For a company our size, going out and spending advertising on brand awareness and all that’s required to build a brand is an expensive proposition. While we have focused on growing some of our core brands such as Boulder Canyon through investing in both trade and consumer [research], the investment required for licensed brands is less.”

To complement what Mr. McDaniel called the indulgent specialty snacks sold under its licensed brands, Inventure Foods established a parallel strategy to broaden its healthy/natural snack portfolio. Initially, it did so through its Boulder Canyon Natural Foods brand and later by purchasing Rader Farms, a fruit company based in Lynden, WA. In addition, it made the extra effort to formulate its Boulder kettle-cooked chips with natural seasonings. Then, Inventure Foods expanded the brand’s healthy/natural offerings by tapping into proprietary dual-sheeting technology at its Bluffton, IN, plant to produce Rice & Adzuki Bean snack chips and Hummus & Sesame tortilla chips. Most recently, it rolled out Garden Select vegetable crisps.

“There are a lot of vegetable chips made using pellets, and they have done very well,” Mr. McDaniel noted. “Ours, however, is a sheeted dough product with a distinct taste and texture. [It is] high in fiber, low in sodium and has 12 vegetables in it.”

Five years ago, healthy/natural products accounted for only 4% of the company’s revenue. Last year, they made up 53% of its sales. Moreover, in 2010, the company’s healthy/natural segment grew 27% while sales of indulgent specialty items rose 7%, according to Mr. McDaniel. “What I like about the healthy/natural category is that it isn’t mainstream and dominated by a few players,” he said. “It is wide-open, and to be honest, healthy and natural have higher margins.”

INVESTING IN TECHNOLOGY.

The company is adding new technology to broaden its product innovation and produce some existing products such as its Burger King Onion Rings flavored snacks. Previously, these items were made by a co-packer. Specifically, Inventure Foods installed a Clextral twin-screw extruder at its 140,000-sq-ft plant in Bluffton. Besides bringing copacked production in house, the twin-screw system provides additional product development versatility, noted Brian Foster, senior vice-president of operations. “We are able to do many more innovative products using the twin-screw than we could with a single-screw, and we’re looking now to bring many of those products to market in the near future,” he said.

Inventure Foods plans to spend $8.4 million over two years to almost completely overhaul its 60,000-sq-ft plant in Goodyear, AZ, where it produces kettle-cooked chips. The Goodyear investment — the largest in company history — is designed to drive efficiency and add much-needed capacity. Last year, the Goodyear plant operated at 90% capacity and was tested even more as Boulder Canyon brand sales grew 62% because several supermarket chains rolled out the line nationally. The Bluffton operation, where capacity was around 40% last year, experienced a 40% increase in poundage during the first quarter of the 2011 fiscal year, according to Mr. McDaniel. Most of that growth is coming from new product rollouts under the T.G.I. Friday’s, Boulder, Burger King and, soon, the Nathan’s Famous brands.

Moreover, Inventure Foods needs greater capacity as soon as possible at its Goodyear facility because the snack producer has ramped up its premium private label offerings by partnering with national retailers ranging from mass merchandisers, grocery stores and club stores to natural food stores, dollar stores and even home improvement outlets.

At the same time, business at convenience stores and in the vending arena — the company’s No. 1 and No. 2 top-selling channels for its licensed snack brands, respectively — remained steady as of late, despite high unemployment and a slow economy, and sales in these channels have picked up during the first quarter of this fiscal year. These brands also have increased sales in big box stores. Channel diversity, new product innovation and geographic expansion remain the primary drivers for capital investment, Mr. McDaniel noted.

“We need to invest in three areas: efficiencies, capacities and new product capabilities,” he said. “If we’re going to be an innovator, we can’t do it with the same old equipment. That’s where we’ve invested our capital and where we continue to put in a lot of effort and energy.”

GOODYEAR GETS BETTER.

During the past few years, capacity at the Goodyear facility got out of balance as the company evolved from a regional snack producer with the Poore Brothers brand to a national distribution under the Boulder Canyon label. Specifically, the volume produced by the plant’s continuous chip frying operation and battery of various-sized kettle cookers exceeded its packaging capabilities.

To better align packaging with production, the company is adding four new Heat and Control
Atlas vertical form/fill/seal baggers equipped with Ishida scales. That change will nearly double the capacity of the existing packaging systems already purchased from Heat and Control, TNA and other vendors over the years, according to Mr. Foster. The packaging area also features new Masipack collating conveyors.

To ensure better product consistency, the facility is adding Heat and Control Fastback Revolution seasoning tumblers, which will replace cascading waterfall seasoning systems.

“Consumers are used to seeing a chip that is evenly seasoned, and we’re not able to attain that look with our current waterfall seasoners, so we’re looking to tumble drum seasoners that provide more even coverage for our chips,” Mr. Foster said. “Along with that, we’re doing away with a 1% pre-salting of our chips because we found we are able to achieve a much more consistent salt level in the tumbling drums.”

Overall, the Goodyear plant is getting nearly a full makeover, right down to new flooring. “You are actually here at a great time because you are seeing the transition from an old plant to a new one,” Steve Sklar, senior vice-president of marketing, told Baking & Snack during the mid-June visit.

The Goodyear plant allocates 16,000 sq ft to processing, 18,000 sq ft to packaging, 23,000 sq ft to warehousing and 3,000 sq ft to offices and other areas. Five years ago, when Mr. McDaniel took over the helm at Inventure Foods, the facility was running only three days a week. Currently, it operates 24 hours, six days a week. Every production day, several trucks each deliver 40,000-lb loads of potatoes. Annually, the facility can produce 2.5 million cases, or about 13.5 million lb of product.

During Baking & Snack’s visit this summer, the potatoes came from nearby Maricopa County and were the size of softballs because it was near the end of their growing cycle in Arizona. According to Mr. Sklar, the plant sources its potatoes from California, New Mexico and Idaho as well, depending on the time of year.

Quality assurance personnel tests the moisture and specific gravity of the potatoes to determine yield. Typically, Mr. Sklar said, it takes 3.5 lb of potatoes to produce 1 lb of chips. Yield — and ingredient costs — can fluctuate dramatically depending on the density of the potatoes.

After a Vanmark system washes and peels them, the potatoes travel up a bucket conveyor and are directed to either the continuous frying system or the bank of kettle fryers. On the single continuous chip fryer, two potatoes at a time are sliced using one of 12 styles of cutters that can create everything from flat chips to large wavy varieties.

To meet the area’s strict emission requirements, Inventure Foods is installing a new 2,100-lb heat exchanger that relies on an afterburner unit to remove emissions from the stack gases before they go into the atmosphere. Over the years, Mr. Foster noted, the fryer’s heat exchanger lost efficiency as it aged, and as a result, the volume produced on the continuous chip line has declined. The new heat exchanger will restore the line’s capacity to its original volume.

The plant’s oil tank farm supplies fryers with sunflower, safflower, canola or even olive oil. The oil handling system uses an independently controlled distribution system to manage transfer of oils to the kettles, and it filters and cools the oil used in processing while facilitating quality testing.

Currently, the chip operation can only use one type of oil at a time, but the company is splitting the kettles into two separate banks — each with dedicated conveyors — to simultaneously produce kettle-cooked chips using two types of oil.

“From my perspective, it provides more versatility,” Mr. Sklar said. “I can run a test batch without affecting the volume of the whole plant.”

NEW KETTLE COLLECTION.

The original kettle fryers — some of which are around 25 years old — each produce 180 lb of chips an hour. All of these kettles eventually will be replaced with eight new JD Manufacturing kettles that can output 300 lb an hour and one Heat and Control system that cranks out 360 lb per hour. The new kettles and other investments will increase the plant’s capacity by around 50%, according to the company.

Besides providing needed capacity, Mr. Foster noted, the JD Manufacturing kettles gently heat the oil using immersion tubes. Instead of heating up the kettle’s metal base with direct-fire burners to then heat the oil, the immersion tubes pass through the oil and heat it directly. “It’s a nice, even heat with no creation of hot spots,” Mr. Foster said. “And the stirring paddles are very gentle on the oil, yet they still break apart the raw potato slices as they enter, preventing them from fusing together.”

The new kettles will substantially improve energy efficiency. Although the total amount of energy used will be higher with the two banks of larger kettles, the pounds produced per Btu will be greater. Moreover, an improved paddle design circulates oil more effectively, which will improve the product’s shelf life and enhance its quality with fewer burnt chips, according to Mr. Foster.

To produce kettle-cooked chips, whole peeled potatoes pass through an Urschel Laboratories slicer that’s designed to move back and forth to feed two adjacent kettle fryers. After feeding one kettle with a batch of sliced potatoes, the slicer then supplies the second kettle as the chips fry in the first system. On the older lines, each kettle cooker had its own dedicated slicer.

Frying requires careful control of oil temperature. When the potatoes first enter the kettle, the oil temperature drops significantly. After the oil temperature rises again to a set point during the process, the rotating paddles along a moving carriage scoop up the cooked chips and load them to a conveyor.

After passing through the two Key Technology Optyx vision scanning systems that monitor product quality, the kettle-cooked chips move along a Key Technology Iso-Flo vibratory conveyor. The chips then travel up a bucket conveyor to reach an Allen vibratory conveyor on a mezzanine level. The conveyor feeds a bank of eight scales atop form/fill/seal baggers that the company purchased over the years. After seasoning, scaling and bagging, the packages of chips are manually loaded into cartons or travel through a new BluePrint Automation case loader and packing system. The plant also has two M.J. Maillis shrink wrappers for palletizing.

For local distribution, packaged product is shipped to a separate warehouse in Phoenix, where 45 independent distributors operate. However, 90% of the snacks travel via common carrier through warehouse distribution to their destinations across the US and in parts of Canada. Additionally, the company exchanges Bluffton’s dual-sheeted and co-extruded snacks with Goodyear’s kettle-cooked chips to streamline distribution. Order-taking, for the most part, occurs at the Bluffton facility.


ROI AND VALUE EQUATION.

Along with its investment in the Goodyear operation, the company recently replaced older baggers with high-speed systems at its Bluffton operation and installed a new packaging system and yogurt line in its Rader Farms fruit processing facility. The versatile Bluffton packaging operation specializes in producing single-serve-size packages for c-store and vending channels, according to Mr. Foster.

When determining what packaging systems to purchase, Inventure Foods first evaluated the projected return on investment (ROI), or what Mr. Foster called the “value equations,” on a variety of equipment. If the ROIs were comparable on a project, then the company considered other factors such as delivery timeline, its experience with the vendor, the cost of replacement parts and ease of maintenance. When it came to purchasing packaging systems for the Goodyear facility, for instance, speed of delivery had become a critical factor because the operation needed to ramp up capacity as soon as possible, according to Mr. Foster.

To monitor the payback on its investments, Inventure Foods developed a “key project list” that the finance team uses on a monthly basis to document savings through improved efficiencies as it adds capacity, Mr. McDaniel said. The company also is installing an Oracle enterprise Manufacturing Resource Planning (MRP) module to assist with the increasingly complex scheduling of all facilities.

During the past few years, the company also started several lean manufacturing initiatives, and it rewarded non-managerial employees with a monthly cash award as a part of the internal program. “These have not only driven cost savings but also created a culture that starts disliking waste,” Mr. McDaniel said.

A company of Inventure Foods’ size must develop a culture focused on accountability and high expectations, he added. Many members of the veteran management team had worked at global consumer packaged goods companies, and blending the best features of a large and entrepreneurial business in a small, publicly traded company was one of Mr. McDaniel’s biggest challenges.

“At the snack food companies I was with before, the hardest part was getting the culture right where they saw the vision and how we were dedicated to a certain path,” he said. “Here, we don’t have a ‘strategy of the month.’

“Instead, we have had the same strategy for the past five years,” he continued. “We tweak it every year. People get behind it, and they become part of it. Our employees benefit because we have a bonus program that goes deep into the organization, and many of them have stock options and will gain through the growth of our stock. We are proud of the fact that during these difficult times while many companies are laying off and cutting benefits in salary, we have been able to continue to add employees, provide annual raises and keep employee medical costs in line. We also have worked hard to support the communities in which we operate.”

For Mr. McDaniel, it’s not only about the Inventure “difference.” It’s about making a difference with innovative products for its consumers and its customers. “At the previous companies I worked at, they had to take advantage of category growth or steal share to grow their businesses,” he said. “In our case, we have so many opportunities because we have brands like Boulder Canyon Natural Foods that are growing through new geography, new channels, new product category, while growing share and taking advantage of the strong categories we participate. Many opportunities remain to expand the Boulder Canyon brand into new categories.”
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