WINNIPEG, MAN. — Transforming a large grain business is difficult, even harder when the company is 130 years old. Effecting such a remake while the industry itself is undergoing radical change adds another layer of complexity to the undertaking.
Still, dramatically remaking the core business of James Richardson & Sons, Ltd. is exactly what Curt R. Vossen proposed nearly 30 years ago when he discussed taking the helm of the grain business owned by the Richardson family and headed by Hartley T. Richardson, the fifth-generation president of the company who had assumed the role in 1993.
The sweeping changes at Richardson since Vossen joined the company mirror historic changes reshaping the grain and grain processing sectors across Canada, with seismic shifts precipitated by developments that included the dismantling of the Canadian Wheat Board, the emergence of recently developed oilseed canola as a major crop and major changes in transportation, most notably the industry’s growing reliance on ever larger unit train configurations.
How Richardson survived and even thrived in this environment was the topic of an interview of Vossen by Milling & Baking News conducted in January at Richardson’s Winnipeg headquarters, just days before his retirement. Describing the plan he shared with Hartley Richardson and its subsequent implementation when he joined Richardson as president of its grain operations, Vossen emphasized how a new direction was charted for the company while never abandoning Richardson’s roots in grain storage and its specific focus on crops cultivated and processed in Canada.
Vossen’s background
A native a Weyburn, a small city in southern Saskatchewan, Vossen graduated from the University of Saskatchewan, Saskatoon, with degrees in English literature and agricultural economics and was recruited by Cargill in 1976.
Curt R. Vossen
Source: Sosland Publishing Co.
“I started my career in commercial agriculture with Cargill in Western Canada,” he said. “I was in merchandising, country operations. I moved back to Winnipeg in 1986 in charge of their grain handling business and their crops input business. That included our international merchandising out of Canada for Cargill and our terminal elevators, both eastern and western Canada. I was in charge of their ag business in Canada until 1995.”
Looking for opportunities to advance in his career but committed to keeping his young family in Canada, Vossen was receptive in 1995 when he was approached by Hartley Richardson, president and chief executive officer of James Richardson & Sons, Ltd.
“He asked me to have a meeting with him and a visit, and we talked about his business and what I thought they needed to do, where the agricultural industry was going in Canada and on a global basis,” Vossen said. “Subsequent to that, he made me an offer to come over to Richardson as president of their Ag division, before it was spun off as a subsidiary (Richardson International) of the parent company.”
When Vossen joined Richardson in June 1995, the Canadian Wheat Board still retained a monopoly on the purchase of Canadian wheat and barley, a structure that greatly limited what grain companies could do.
The wheat board retained its monopoly on wheat and barley until 2012. It lost its monopoly on oats in 1989.
In 1995, when Vossen joined Richardson, the grain industry featured major regional cooperatives — Saskatchewan Wheat Pool, Alberta Wheat Pool, Manitoba Pool Elevators and United Grain Growers. Vossen estimated that the four combined accounted for about two thirds of the grain origination in western Canada.
Private grain companies and cooperatives in Canada operated essentially as agents of the wheat board. Richardson, Cargill and others were paid tariffs (fees) to handle wheat and document the work, including receiving and grading the grain, with dockage assessment, and storing it, paying the grower on behalf of the wheat board. When instructed, the grain companies would ship the grain, possibly to the company’s export terminal for loadout, again generating a fee at each step.
Export sales were generally handled by the CWB, though accredited exporters in certain instances were offered the opportunity to sell on a FOB (free on board) or FOB to CIF (cost, insurance and freight) basis, Vossen said.
Five-point plan
When initially meeting with Hartley Richardson, Vossen offered guidance around five parts of the Richardson business, beginning with grain storage and handling.
“I told him, No. 1, you need to recapitalize your grain handling business,” Vossen said.
At the time in the mid-1990s, grain facilities owned by Richardson, the cooperatives/pools, Cargill and nearly every other grain company in western Canada were antiquated, Vossen said.
“Everyone was in the same situation more or less,” he said. “We had all older, traditional wood crib elevators that you saw across not just Canada but across the western part of the United States. We had 174 of them when I joined the company. None of them could load 50 rail cars, and the push was on with the railways to get greater loading and shipping efficiency.. I said, being in the grain business is a good idea, but you’re going to have to move with the evolution of that business and recapitalize to compete and be involved in the loading of multiple rail cars, first 50, then eventually 100 and then more than 100 cars at a time.”
This recommendation meant Richardson needed to build new elevators to replace its existing facilities.
He continued, “Are you going to be able to have as many? No, you won’t want as many. And you won’t be able to afford to replace 174 with 174. You’re going to want to replace 174 with a much lower number of higher capacity, more efficient, more modern elevators.”
The move to replace old, wood facilities with more modern concrete elevators with higher capacity grain loading and cleaning capabilities was gaining momentum in the mid-1990s, following experimentation with the format in the late 1970s and the addition of more in the 1980s and early 1990s.
“Everybody was understanding that they were going to have to recapitalize their grain handling facilities,” Vossen said.
At the time, Richardson’s 174 elevators compared with figures closer to 500 for the Saskatchewan and Alberta wheat pools, and the cooperatives’ need to update their infrastructure led capital raising events that included stock offerings.
Next on Vossen’s “to-do” list for Richardson was an opportunity to expand Richardson’s role in the crop input business as a complement to its grain handling and merchandising operations at country locations.
“The idea is to help him produce his crop and then put yourself in a position to also be a candidate to buy the avails of his crop production,” Vossen said. “So, I said you’re going to have to professionalize that business. It needed, once again, investment, and it needed recruitment of people of the caliber who would be additive to the needs of the farmer to improve and optimize the farmers’ production capability. We were moving into new science, chemical molecules, new forms of agriculture. We needed to be part of that, and there was an opportunity.”
While the CWB’s monopoly limited Richardson’s ability to engage in many basic merchandising functions of grain companies, Vossen’s third priority was for the company to develop competency beyond FOB selling and begin seeking opportunities for cost and freight (C&F) and CIF selling. Without such capabilities, Richardson’s participation in non-CWB-controlled markets, including oats and canola at that point in time, was greatly diminished.
“Because of the wheat board, we had not spent a lot of time with developing direct relationships with consumers of Canadian agricultural commodities on a global basis — millers, crushers, maltsters and so forth,” Vossen said. “We were dealing through others to access those markets. For example on canola, which was at that time a non-board commodity, we were selling through a Japanese trading house, FOB our terminal in Vancouver. They were selling to the end use customers in Japan or elsewhere. My thought had been if we’re going to be effective, our competition in the future is going to be global companies, ABCDs (the major exporters, including ADM, Bunge, Cargill and Dreyfus) and others. And so, for us to be effective and competitive, we were going to need to develop that expertise on FOB to C&F selling.”
Number four on Vossen’s agenda was what he called a “balancing of Richardson’s configuration such that the amount of grain the company was handling in the country better matched up to its export facilities’ grain-handling capacity.”
“If you have a terminal in in Vancouver that can handle 3 million to 4 million tonnes of grain annual (at that time, it handles more today), we weren’t handling 3 million to 4 million tonnes out of our country operations, so we needed to figure out how to balance that,” he said. “We were well below in origination our capacity at tidewater position, at seaboard position. We had to balance our configuration, which means we had to figure out how to get more origination.”
Finally, the unpredictable and cyclical nature of many aspects of the grain business led Vossen to conclude Richardson should have a broader mix of business beyond its narrow focus on grain handling in western Canada.
“We needed to diversify our risk profile,” Vossen said. “By that I mean we were very much a one trick pony. Handling and merchandising grains and oilseeds from Western Canada is a good, fundamental business, but it’s also a business that has a certain risk element to it because it’s so narrowly focused. You’re in one geography. You’re subject to things over which you have no control, which includes the weather, trade patterns, government policy and at that point in time, obviously the involvement of a quasi-governmental agency like the Canadian Wheat Board.”
Asked whether such an ambitious “to-do” list scared Hartley Richardson, Vossen said it did while adding that the steps he was recommending were not out of line with how other legacy grain companies were already evolving. Several global companies were eyeing Canada. He credited Richardson with recognizing the way his family’s business had operated for an extremely long time needed to change.
“This is a company that at that point in time was 138 years old, and this was moving in directions where it hadn’t necessarily moved,” Vossen said. “Hartley was relatively new in his role as the new president of the parent company, and he intuitively had a feeling that they had to do something of a unique nature. Most of those models were the ones that I was familiar with, e.g., Cargill, ADM, ConAgra, Bunge, Dreyfus. They were generally the international trading companies that were casting eyes at Canada.”
Execution
Vossen described his subsequent career as shaped by that initial “to-do list.”
“It’s what we did over the last 29 years,” he said. “We closed all those elevators. We were closing 20 to 30 elevators a year, and we were building 2 or 3 elevators a year. We went from handling, back in 1995, 2 million to 2.5 million tonnes of grain per year to handling 13 million to 15 million tonnes of grains and oilseed. So that definitely balanced our configuration. We became a FOB to C&F seller. We became a relationship seller on an international basis. We grew our crop inputs business logarithmically from what it was at that time to what it is today — we’re second biggest player in Canada and top 10 in North America in inputs. We have gone up the value chain. We became a crusher and refiner of oilseeds in 1999. We followed that up with building a second plant at Yorkton, Sask., which we just expanded and is now the biggest crushing plant I think is certainly in North America and I think in the world; 7,200 tonnes a day of capacity; 2.5 million tonnes a year. We became an oat miller on a very large scale, an independent oat miller, with three mills in Canada, one in the US and one in the UK. We became a durum miller by buying Italgrani in Saint Louis. We expanded into packaging and branded products with the acquisition of Wesson Foods from ConAgra and the plant in Memphis, Tenn. I think on all of those fronts, we’ve followed that model, that blueprint over the course of the years.”
Expanding on what transpired at Richardson over the course of his tenure, Vossen said the antiquated wood crib elevators were gradually replaced with concrete elevators with high-speed loading capacity that were state-of-the-art at the time with the ability initially to load 50-car unit trains with the figure moving upward to 100 cars and higher over time.
“They were automated facilities, fewer of them, with greater capacity per location,” Vossen said.
As ownership of the cooperatives changed hands through recapitalization and global grain companies pursued growth in the Canadian market, Richardson found opportunity to accelerate its expansion by purchasing assets of other companies. The wheat pools covered the capital costs of building updated elevators generally through share sales.
“During that time, everything changed, between the early 1990s and 2005,” Vossen said. “It was cataclysmic in terms of the competitive landscape in Western Canada. And the wheat board was still there. Market shares weren’t radically changing from year to year in spite of the investment because all the players were still in position, and they were replacing old capacity with new capacity and not necessarily retiring old capacity in a proportional way. So you’ve got all this capacity, and companies began selling that capacity cheap.”
During this period of excess capacity, 2002 was a major turning point, Vossen said.
“We had a major drought in Western Canada in 2002, basically cutting normal production in western Canada in half,” he said. “And when you’re completely reliant on a tariff-based system to handle grain, and you’ve been investing a lot of money and accruing a lot of debt, you have no way to respond to that.”
In addition to putting cooperatives under severe strain, the 2002 drought gave certain companies expanding in Canada second thoughts about their strategies. When assets were offered for sale, Richardson was interested, Vossen said.
“I know Richardson couldn’t ‘build its way to glory,’” Vossen said, explaining its decision to acquire assets.
He said the investments in switching out old elevators for newly built ones would allow the company to “hold our position” in the marketplace, and used acquisitions to grow and achieve the desired balance between the company’s country elevator business and its export capacity.
“We also acquired some independent elevators where we’ve had gaps where they were locally owned,” Vossen said.
Other transactions followed. When the Saskatchewan Wheat Pool acquired Agricore United in 2007, Richardson was about to pre-buy 15 elevators that had been part of Agricore. Several years later, Richardson once again acquired assets when Glencore acquired Agricore United/Saskatchewan Wheat Pool, changing the name of the business to Viterra (now poised to be purchased by Bunge Ltd.)
While Richardson ranks 15th among North American grain companies, according to the Grain & Milling Annual, published by Sosland Publishing, Vossen said Canadian grain company positioning is measured more by “total turns” than by grain storage.
“In Canada, because of the wheat board, and because of the big storage that farmers had on the farm (farmers in Western Canada were pressured by the wheat board system to carry a lot of grain on farm), why when you have all the storage on the farm, why do I need it in the commercial system?” he asked. “What I want to do is I want to turn my space.”
Processing and grain trade
In terms of diversification, Richardson began processing canola in 1999 and expanded into oat milling in 2013. Its grain business orientation changed dramatically that year, too.
“Keep in mind, in 2013 it was a whole new world for us because the wheat board lost its monopoly the year before,” Vosen said. “It opened up all sorts of possibilities that dovetailed quite nicely with increased origination, because now you go to that FOB to C&F sellers routine, now we can go to markets that heretofore we were not allowed to participate in, durum wheat to Morocco, durum wheat to Italy, spring wheat to Indonesia. And so that had not been in our purview, the board handled that usually with agents or foreign trading companies and wouldn't let a company like Richardson participate. Now we presented our credentials and started to work directly with those buyers.”
With regard to the Italgrani mill, situated in the center of the United States, Vossen said Richardson already was handling durum through its grain business in Canada before acquiring the durum mill in 2021. In addition to the mill, Richardson acquired elevators in North Dakota, which are a major durum source for the facility.
“We have three different sources for durum,” he said. “We have our grain facilities in Canada, the elevators in North Dakota, and we also buy from third parties.”
In diversifying, perhaps the greatest departure from Richardson’s legacy business was its 2018 acquisition of Wesson from Conagra. The successful integration of Wesson was a particular source of pride for Vossen, who noted Conagra sustained supply chain management for the business for several months after the deal closed. He said taking that responsibility over going into COVID and maintaining fulfillment at a near 100% level was a major achievement.
While pleased with how the Wesson business has performed for Richardson, Vossen said the branded vegetable oil category has been and remains under pressure. He said consumers’ sensitivity to pricing was heightened during COVID and in its aftermath, a development that hit commodity-like products such as edible oils especially hard. As a result, the three leading brands have been competing for “a smaller slice of the pie,” he said, with private label taking a steadily larger share.
Satisfied enough with the business to invest nearly a quarter billion dollars updating its production facilities, Vossen said the Wesson investment likely doesn’t harken a major move by Richardson into consumer brands. While not ruling out additional acquisitions, he said he believes consumer products will not be a “major focus” going forward.
“We’ve become very competent at processing versus consumer products,” he said. “I don’t get the impression that's our sweet spot. I think we are going to play in that sector where it makes sense. But I think our expertise, our focus, our comfort level is in processing, volume, logistics, merchandising, price realization, risk management, those kinds of things that are before the branding.”
The mix of businesses Richardson has acquired has given the company diversification. The sectors which the company pursued may appear disparate, but they are anything but random, Vossen said.
Richardson’s three largest businesses — grain, oilseed processing and crop inputs — account for roughly 70% of the company’s sales, Vossen said. The fourth slice of the pie is a mix of grain processing and ingredients. Falling in this category are durum milling, oat milling (including granola production), malting and what Vossen dubs “food ingredients.”
“Just to stitch together all of these things, there is a logic behind our entry into different places in processing,” he said. “You take a look at North America production grains and oilseeds — what predominates in the US? Soybeans and corn, correct? Thirdly, wheat. What predominates in Canada and in the Northern Plains United States? Small seeded grains and oilseeds. Spring wheat, durum wheat, canola, oats and peas. To a lesser degree flax, barley and others. For example, if you take a look at oats, where is most of the acreage in North America? It’s in Western Canada (5.5 million acres, versus 2.5 million in the United States).
“Where’s all the canola? Well, it’s grown in Canada, in Western Canada in particular, you get about 21 million acres of canola in Western Canada, 2 million in the US. Where is most of the durum wheat grown? Same thing as oats, most of it in Western Canada. So we focused on processing where we could be relevant. We were never going to be, in our view, realistically, a major player or having materiality in critical mass in sectors like soybean and processing, when you have the largest players, they have 5, 10, 15 plants, and they’re originating in geographies that are producing significant amounts of that type of product.
“What could we be relevant in? Crops that we have significant presence in originating: canola, barley, durum wheat, spring wheat, oats. So that’s what we focused on..”
The value of discipline
Even as Richardson has found ways to enter numerous new business categories over the last quarter century, Vossen said the company has not gone on a wild shopping spree. Instead, the company has patiently awaited opportunities to arise and has passed on sectors it concluded did not make sense financially. As an example, many other companies have invested aggressively in pulses over the last several years, drawn by the seemingly limitless growth potential of plant-based proteins. Vossen said the category had appeal to Richardson because Canada is a leader in production of peas, lentils etcetera.
“We don’t process pulses,” he said. “We export pulses, we originate pulses, feed peas, lentils primarily.”
While the company took a hard look at building a processing plant, Richardson concluded the economics did not work, particularly relative to alternative uses for the same capital. Vossen estimated the cost of building a pulse processing plant with the capacity to process 125,000 tonnes per year at close to half a billion dollars. The same investment would build a canola processing plant eight times larger.
More generally, while the investment required to participate in the grain industry changes transpiring over the past generation in Canada imperiled the financial health of numerous players, including the wheat pools, Vossen said Richardson navigated the process smoothly. Investments were paced out and manageable in size.
“As they say in sporting terms, we stayed over our skis,” he said. “We didn’t buy Agricor United, we bought assets of Agricor United. We didn’t buy Viterra, we bought assets of Viterra. Each one of those was a step to growing. We didn’t buy the biggest crushing business. We bought a crushing plant in Lethbridge, Alta., learned the business, and that knowledge gave us the confidence to build a much larger crush plant/refinery at Yorton in 2010 that we later expanded and then expanded. We’ve stayed within our capacity to grow on our own account. It would be fair to say we keep a very conservative balance sheet.”
Still, the company has been busy in the 2020s with major initiatives either launched or completed that include:
- Expanding an oat mill and processing plant in South Sioux City, Neb., in a project that will double the facility’s granola packaging capacity.
- The acquisition of Ragleth Ltd., the parent company of Anglia Maltings (Holdings) Ltd., a leading European maltster and grain processor based in Norfolk, England.
- Investment of $220 million in Memphis, Tenn., to replace its Wesson oil plant with a state-of-the-art production and packaging facility.
- The purchase of Italgrani USA Inc., a St. Louis-based durum miller.
- The construction of a new high throughput grain elevator in Carmichael, Sask., with 46,000 tonnes of storage and a loop track capable of loading 175 high cube rail cars.
- The doubling of canola processing capacity at Yorkton, Sask., to 2.5 million tonnes per year.
Navigating an uncertain world
The value of diversification for Richardson has become abundantly evident in recent years as Canada has been ensnared in the middle of trade tensions beyond the company’s control.
When the chief financial officer of the Chinese company Huawei was arrested in Canada in 2018 on a US warrant, China responded by de-registering Richardson and Viterra as exporters, claiming the move was a “quality issue.”
“So, we were out of the Chinese market for about three years,” Vossen said.
Because of more recent tariffs placed by Canada on electric vehicles from China, Richardson faces threats once again, this time possibly on all canola from Canada.
“This goes back to the point I made in discussions with Hartley in 1995,” Vossen said. “You’ve got to have other places in the stream to dip the water out of because you can’t be reliant on things over which you have no control. Trade is one of them, and trade sanctions are one of them.”
Threats by President Donald Trump to impose tariffs on Canada because of immigration issues also are alarming to Richardson.
“It means everything to our business,” Vossen said. “There’s a significant cross-border trade in agricultural commodities between the United States and Canada on certain products like durum wheat for example..”
Richardson’s future will be charted by Vossen’s successors, including its new president and CEO Darwin G. Sobkow. Still, Vossen expressed the view Richardson has “abundant opportunity” to expand in the current lineup of business in which it operates.
“If you look at them as pillars, and you say grain handling and merchandising; crop inputs retailing, crushing and refining of oilseeds, specifically canola; milling of oats and durum; and food ingredients packaging for the consumer, all of those pillars and now malting,” he said. “Every one of those has the opportunity for growth both from a product line basis and from a geographic basis.”
He said the company is better positioned than in the past to capitalize on expansion opportunities that may arise, with the critical mass necessary to compete in the markets in which it is a player. Similarly, the company is poised to remain privately held, he said.
“The family is going into the sixth generation of Richardson leadership. At the board level, everybody is all in on staying private, doing it at a pace and to a magnitude that suits the profile of a private company, in other words, staying within their capabilities.”
