When a company decides to change directions and offer new products, the result could be good or bad. To help ensure the change is a positive, it is important for the company to have a clear goal and a clear strategy for how it will reach the goal.

ACH Food Com panies Inc. provides an example of how a company can evolve successfully, explains Dan Antonelli, presi dent and CEO. “We tripled our business in the last nine years,” he says.

“In 1995, we had $550 million in sales and today we have $1.5 billion in sales.” ,The producer of ingredients, oils and grocery products was able to accomplish this, Antonelli explains, through strategic growth; in that time, the company completed approxi mately 15 acquisitions. “A number of our acquisitions were to help us expand our presence in the market of higher-value ingredients,” he says.

In the last four years, ACH Food acquired four brands in the grocery market. This included the branded food service and shortening business from Procter & Gamble, which gave ACH the leading position in the industry, Antonelli says; and the Mazola oil business from Unilever, which provided ACH with a strong position in the retail sector.

Prior to these purchases, Antonelli explains, the company focused on a number of smaller acquisitions to diversify its offering into a higher-value segment.

“From 2001 forward, our strategy was to move into the branded food segment,” he says. “This year, we acquired brands in Mexico that include the Mazola corn oil business -Capullo canola oil, a successful brand, and the Inca shortening brand -giving us a larger presence in shortening products. In the coming weeks, we will close on the acquisition of Tone Brothers spices and seasonings business, which is No. 2 in the United States.”

These acquisitions, he says, will allow ACH Food to continue to expand outside the oil business into adjacent categories. Its next move will be to move further into flavor enhancement.

“Our strategy has been successful,” Antonelli says. “Our profits have increased more than three-fold, which is great. Also, we were able to move away from the commodity business, where we were in 1995, to the branded food business, where we are now in 2004.”

Quality Experience
ACH Food has six plants in Illinois, Tennessee, Connecticut and Wisconsin; it will add another plant with its Tone acquisition. Antonelli notes because ACH Food has been in the oil business for 100 years -the company was founded in 1904 as Anderson Clayton Co. -it knows how to maintain its rigorous standards and quality guidelines. “We have a lot of experience throughout our organization,” he says.

Antonelli explains Anderson Clayton Co. operated in Dallas, with a focus on oils and shortening. In 1930, HumKo was founded in Memphis, Tenn., to manufacture lard substitutes and oils. In 1987, the two companies merged under Kraft Food Ingredients, combining their years of experience. In 1995, Associated British Foods plc acquired parts of Kraft Food Ingredients, naming it AC HUMKO, and renaming it ACH Food Companies in 2000.

“We have a long heritage in understanding how to develop and sell manufactured oils and similar goods to the retail and foodservice markets,” Antonelli says.

With its many acquisitions, however, the company has learned to balance custom products with high standards. ACH Food now has large product development staffs and a pilot plant in Tennessee. These capabilities, Antonelli explains, allow ACH Food to interact with large food companies, working to help with a variety of tasks, such as to modify textures and flavors and create custom formulas to meet specific needs such as removing trans-fatty acids. He notes ACH Food works hard to understand customers’ needs.

“We are very fortunate to sell into the three major channels: retail/grocery, foodservice and ingredients,” he says. “We work to understand the various trends, which helps us know which segments to sell to. For example, by buying the Capullo and Mazola brands in Mexico, we have brands that have a strong reputation in Mexico. This gives us an opportunity to learn how to sell to those customers in the United States.”

In the ingredients sector, he explains, ACH Food’s sales staff works with customers’ purchasing teams and its product development team works with customers’ R&D groups to understand the trends in the market. In the foodservice market, however, ACH Food must sell to distributors, so the challenge is to demonstrate the superiority of its products. “We have found that we can sell a higher-priced unit, because we offer higher quality,” Antonelli says. “Because they are getting better quality, we can provide them with a lower cost per day.”

Customized Options
Antonelli notes one of the biggest changes in the industry is mandated trans-fatty acid labeling, which he says will bring more attention to these fats. Although he explains these types of fats provide products with higher levels of stability and better performance characteristics, they have been found to be less healthy, so consumers are looking for alternatives.

The foodservice market has responded by updating the oils in which it fries foods. In other markets, many companies want to be able to manufacture their goods with low or no trans-fatty acids, so they are seeking alternatives. For example, Antonelli says Frito Lay has switched to using corn oil which is low in trans-fatty acids. ACH Food is helping other customers make similar decisions.

“We work with our customers to provide solutions to them,” Antonelli says. In the foodservice sector, ACH Food introduced its FryMax ZT product, which has zero trans-fatty acids, and the FryMax LT, which has lowered the levels of these fats.

“We want to provide options to our customers,” Antonelli says. “The New York Fries Co. in Canada, for example, switched to our FryMax ZT product because they wanted no association with trans-fatty acids . As a result, their sales boomed because they were able to make that claim. “At our core, we are an oil company,” he continues. “We have a long heritage of providing many oil products, but our strength is providing our customers with what they need.”

Improved Supply Chain
An important aspect of the company, Antonelli says, is how it provides customers with “customized solutions.” To do this, ACH Food is leveraging its oil heritage to expand into the markets of cooking ingredients, meal preparation and flavor enhancements. “We have strong sales, marketing and distribution capabilities in branded oils, so we have a low-cost supply chain,” Antonelli says. “Also, we can leverage our infrastructure when we bring new companies into our organization.” FAD