2015 Processor of the Year, AdvancePierre Foods: Transformed, rolled out
AdvancePierre Foods has used its new, culture-defining continuous-improvement program to drive bottom-line growth, fire on all cylinders and make targeted acquisitions as a uniquely positioned sandwich manufacturer and protein processor.
CORPORATE PHOTOS BY ROSS VAN PELT; PLANT PHOTOS BY ANDY HANACEK
When John Simons began his stint as president and CEO of AdvancePierre Foods on Sept. 30, 2013, he saw the potential of the company he’d just been tapped to lead, as well as the challenges that lay ahead of the management team he began to assemble.
“Advance, Pierre and Barber were brought together in 2010 and 2011 to create the ideal value-added protein and sandwich-assembly platform, and most of what’s occurred in the last two years has been to connect five different family legacy businesses as one,” he says. Since 2013, Simons and his management team have been on a whirlwind ride, during which AdvancePierre has transformed itself into a cohesive, highly analytical and extremely successful sandwich- and protein-processing company looking to add more business opportunity to its already-strong 15-20 percent annual revenue growth in 2014 and 2015.
This transformation, the roll out of The APF Way continuous-improvement program and the bottom-line success borne from the changes earns AdvancePierre Foods The National Provisioner’s 2015 Processor of the Year award.
When The National Provisioner profiled the company just prior to the Barber Foods acquisition in spring 2011, the task of knitting together those legacy companies (Advance Brands/Food Co., Pierre Foods and Barber Foods) was a monumental phase-in project that had just begun. Even two years after the Barber acquisition, as Simons assembled his management team, work still remained to get the different divisions driving toward similar goals.
“It took a lot of time to build what we call the connective tissue, behaviorally, to get those legacy businesses to all behave as one,” Simons explains. “We’ve done it around three concepts: One is our customers and customer centricity. Two, we focused around our food — we needed to create innovative solutions. Three, we needed to take care of our team members and people in a way that exalted them and, as such, we’ve really come together as one team the past two years.”
The now-united AdvancePierre team has been bound since the start of 2014 by the company’s new continuous-improvement program: The APF Way. In a very short time, AdvancePierre’s management team has developed, instituted and received full-scale buy-in from employees on down the line — and the results have been nothing short of stellar.
“We’ve come together as one team to go to market in one way, for our customers,” Simons says. “As a result, we grew 15 percent in the second half of 2014, and a little bit more than that in the first quarter of 2015 — that’s equal parts volume and price, so we’re in a very fortunate, unique position to be growing meaningfully.”
It certainly took several months of waiting and hoping that the adoption of The APF Way would hit the company’s bottom line as management expected. And near the halfway point of 2014, savings began to show up in real, meaningful ways. Today, the breadth of success brought about by The APF Way cannot be overlooked, says Jim Clough, president, Foodservice.
“We have five channels growing north of double digits, led by our K-12 business, our retail mass business, our retail grocery, our convenience channel and our foodservice street business,” he says. “The C-store business is on fire, and consumer trends [support that]. Our sandwich protein initiatives in our burger and Philly sliced steak categories, and our fully prepared sandwich business are really driving this growth.”
Nor can the impact of The APF Way be understated. Many companies have continuous-improvement programs in place that have saved them hundreds of thousands of dollars, but as George Chappelle, senior vice president, Supply Chain, notes, there are a few aspects of The APF Way that make it different from your run-of-the-mill continuous-improvement programs. First, he says, it’s not all about cost reduction in the weekly meetings.
“We focus on every area of the P&L, so if you’re in a typical APF Way meeting, there will be some commercial opportunities, customer-driven ones, opportunities around increasing the margin of a product in a commercial sense, not necessarily by reducing any venture cost. There will be some new product activity, in terms of what we’re launching, what we’re changing or why we’re changing a particular product. And then there will be some more typical manufacturing/logistics opportunities as well.
“It’s always wholly inclusive, and we always do it that way — every week there’s an agenda that touches every business unit and almost every function,” Chappelle says. Another differentiation point: The APF Way meetings are CEO-led every single week, and they remain as intense and important today as they were at the start of 2014. Chappelle explains that, although he has seen many CEOs drive continuous improvement in their companies, not all of them retain the intensity and interest level more than a year into the program.
“If you think about yourself as a functional manager responsible for an activity in our APF Way program, you immediately know the visibility will be high, the timeframe will be very tight, and you’re expected to be prepared and give your two- to three-minute report on what happened last week and what you expect to achieve this week,” Chappelle says.
When the program started in 2014, AdvancePierre calculated it could reach $100 million in savings through this program, and Chappelle has confirmed that goal has been reached. As a clarification, he adds that The APF Way focuses strictly on net savings, and all numbers are audited by the company’s financial group. He also cites proof that savings are significantly impacting every area of AdvancePierre’s business — as opposed simple cutting of manufacturing costs.
“About 43 percent of that [$100 million] savings was in manufacturing, but 20 percent was procurement, 17 percent in logistics, and 20 percent commercial,” Chappelle states. “We’re on track to generate another $20 million this year of incremental benefits, and right now it looks like that’s very achievable.”
Simons believes The APF Way’s transparency to employees has helped build the unified culture as well, since every employee is welcome to log on and sit in on the meeting every week if they so choose. Additionally, he says, AdvancePierre has re-invested these savings, rather than simply pocket them, where opportunities have arisen.
“At a time when quite a bit of the food world is focused on taking costs out, we’ve gone the other way, quite frankly, to enable our food and our solutions, which customers have been extremely desirous of across the three main channels in which we operate,” he adds. Bernie Panchot, senior vice president, Research & Development, and a six-year veteran of the company, explains that re-investment has been impactful and very visible to all employees.
“We saw, very quickly, John [Simons] encourage investment back into the business in a way that we hadn’t before,” she explains. “I’ve added 12 new scientists in R&D in the last 18 months, and that’s very big growth. We have 10 new marketers, and we’ve invested in packaging and engineering. Those are the fundamental things it takes to get the work done, and when those things start turning, results start happening very quickly.”
Yet, re-investment in the business is only one piece of the success story in the last year. AdvancePierre’s recent acquisition streak is another piece of the puzzle that has transformed the company beyond perceptions.
While internal transformations were ongoing at AdvancePierre Foods through the last two years, its management team has kept its eyes on the acquisition market to help the company extend and bolster its strengths. To understand what AdvancePierre was fishing for, one has to understand what the company is, as opposed to what it formerly was. Panchot, in describing AdvancePierre’s strengths, hints at the company’s lean toward its sandwich-processing opportunities.
“Being vertically integrated in processing the meats, baking the breads and putting the sandwiches together, we really do have an advantage over anybody that’s competing on this scale right now, and I think we’re taking advantage of what we have in all three of our business units,” she says. Chappelle builds on that statement, admitting that perception of the company’s main thrust might be a bit off reality.
“The average person in the industry who knows the history of AdvancePierre would probably assume the company is 90 percent protein, just pumping out burgers — but that couldn’t be further from the truth at this point,” he says. “A lot of people don’t know that slightly more than a billion dollars of our sales is either a protein we make that ends up in a sandwich somebody else creates, or a sandwich we make. We’re 65 percent sandwich company and 35 percent meat/protein company.”
With that in mind, AdvancePierre’s recent acquisitions look even better on paper. Particularly given that the sandwich segment is where Simons admits AdvancePierre sees a lot of potential.
“In terms of future aspirations, that’s the direction we’d really like to continue to grow in: sandwiches and/or proteins that enable a customer to add further value to their products,” he says.
At the start of On Jan. 30, 2015, AdvancePierre officially closed on a deal to purchase sandwich processor Landshire Inc., headquartered in Caseyville, Ill., a few miles east of St. Louis, Mo. The deal offered AdvancePierre several significant benefits, particularly around the processing plant, which featured an underutilized, integrated bakery and nine sandwich assembly lines that were only being used at 50 percent capacity. Landshire’s slicing capabilities shore up one of AdvancePierre’s inherent weaknesses in the sandwich arena, as well.
Additionally, Chappelle notes that many of AdvancePierre’s facilities are geographically limited in terms of their ability to be expanded. The Caseyville plant sits on several acres of field now owned by AdvancePierre, and the opportunities for expansion of the facility have the team noticeably excited.
“It meets our targeted quote category growth; it increases our infrastructure capability on the bakery and sandwich assembly side and most notably on the sliced meat capability; it gives us some expansion opportunity physically; and it hits the channels that we sell with a lot more scale than they ever could,” Chappelle explains. “And even just a month-and-a-half into it [in March], it’s already going well.”
AdvancePierre wasted little time filling up the additional sandwich production capacity at the Caseyville plant, closing on a deal at the end of April to acquire the manufacturing assets of premium sandwich manufacturer, Better Bakery LLC, in Valencia, Calif. All Better Bakery production will move to Caseyville, improving the return on the Landshire investment and helping AdvancePierre fill another void in its sandwich offerings explains Clough.
“The Better Bakery brand gets us into a better-for-you, clean-label brand, so it is very valuable to us due to its clean-label, better-for-you position,” he says. “We have brands and quality tiers that go from premium to value, and they fit every eating occasion that is out there, but we like to call it ‘quality fit for purpose.’ So if the consumer is getting something out of a vending machine, it’s a great eating occasion out of a vending machine — and we’re very proud of that quality.”
On the prowl
Moving forward, expectations at the Caseyville facility will not waver from the rest of AdvancePierre’s model trajectory — Simons explains that The APF Way will continue to drive growth, and all the successes the company has experienced in the past year-plus will be the model from which that plant will operate.
“The main challenges on a go-forward basis are to expand, deploying our capital expenditures to not only optimize capacity utilization of the bakery but also get ready for the Better Bakery capability. We will then need to hire several hundred people, which is a good opportunity,” Simons says. “Finally, in terms of further processing, we’d love to add more than just sandwiches there at some point in the future.”
Clough adds that, company-wide, the trends favoring sandwich production have the company positioned to build off the surge in success over the last year-plus.
“We happen to be in the enviable position of being the sandwich leader, [and we want customers to] think of us as the sandwich leader in both fully prepared sandwiches and as an ingredient to a sandwich — and we’re riding this wave of growth because of that,” Clough concludes. “Also, [our growth goes] back to The APF Way of reorganizing our people, getting the portfolio right, and calling on the right customers with the right products and the right frequency. We’re generating growth as a result of that strategy.”
With the primary transformation of the company completed, AdvancePierre Foods can simply tweak to its current model and add acquisitions and facility expansions as opportunities arise and make sense against the analyses of The APF Way.