Awareness Breeds Success
November 1, 2006
Awareness Breeds Success
By Sam Gazdziak, Senior Editor
Photos by Vito Palmisano
Photos by Vito Palmisano
By keeping in tune with consumer trends and its customers’ needs, Lopez Foods continually introduces popular new items.
Lopez Foods is one of the most well-known names in the foodservice industry, with a variety of top-shelf customers and a long-term reputation for quality and food safety. A processor that has customers such as McDonald’s and Sonic would have quite a challenge just to keep up with those companies’ growth and expansion. Lopez, however, also has made an impact in the retail market, and is looking for further growth.
Part of the company’s success is its ability to keep in touch with the consumer market so well.
Eduardo “Ed” Sanchez, chief executive officer of the Oklahoma City-based processor, notes that the company invests in several market-research reports, as well as investigating the grocery shelves first-hand. “All you’ve got to do is look at a bunker or freezer, or look at a grocery cart, and you can see what’s moving and what’s not. At least for me, you learn more from that than anything else,” he says.
Jim English, chief operating officer and chief financial officer, adds, “We’re a big enough company that we can innovate, but we’re not so big that we’re spending a fortune buying market information to track consumer trends. We’re keeping our ear to the ground.”
That strategy has paid off for Lopez Foods, as it has a number of products in development that are designed for the key trends of the moment. “We see trends leaning toward convenience, simplicity in the kitchen and quickness of preparation,” Sanchez says. He states that the company can turn a product around as fast as a customer needs it, and that product development doesn’t get bogged down with excessive management and structure.
“That’s one of our strengths, adapting to change and speed to market,” says Steven Diaz, director of sales.
Lopez Foods is one of the top beef grinders in the country, and it has benefited from maintaining a strong relationship with McDonald’s that dates back decades. The company began as a spinoff of Wilson Foods; a company that had been producing hamburger patties for the chain since the 1960s and helped with the introduction of breakfast products in the 1970s. After the company was spun off in 1989, John C. Lopez, a McDonald’s owner-operator with four restaurants in Los Angeles, acquired the company in 1992 and renamed it Lopez Foods in 1995. At the time of the purchase, it was producing just five products, all for McDonald’s — two hamburger patties, a sausage patty, sliced Canadian-style bacon and the McRib.
Prior to becoming chief executive officer at Lopez Foods in 2004, Sanchez spent 27 years at McDonald’s, starting as a crew person and eventually being named president of Latin America and Canada, with more than 3,000 restaurants reporting to him.
McDonald’s still represents almost of half of Lopez Foods’ volume, but the company has since built up a “who’s who” list of customers in the foodservice and retail world. Sonic, Burger King and Applebee’s are among the company’s other foodservice clients, and it supplies Wal-Mart, Sam’s Club, Super-Valu and a number of other grocery chains with private label and its own products, as well as co-packing products for Tyson, Laura’s Lean and Nolan Ryan. Far from being just a supplier of ground beef, Lopez has focused on excelling at multiple proteins in various forms.
New product pipeline
Lopez Foods operates three plants. The 195,000-square-foot Oklahoma City facility produces frozen ground beef patties, frozen partially and fully cooked sausage patties, McDonald’s McRib and sliced Canadian-style bacon. That plant produces more than 135 million pounds of ground beef annually for McDonald’s.
The 106,000-square-foot Carneco Foods plant in Columbus, Neb., produces ground beef products in a variety of forms and packages. Annually, it produces about 45 million pounds of ground beef chubs, 70 million pounds of frozen hamburger patties and about 30 million pounds of tray-pack ground beef. Finally, the Campos Foods plant in Caryville, Tenn., is an 80,000-square-foot facility that produces all fully cooked frozen beef, pork and chicken products, including hamburger patties, sausage patties, meat loaf, Salisbury steak, rib patties and coated chicken breasts.
Lopez’s frozen hamburger patties are delivered to restaurants and retail groceries throughout the United States in virtually every market. The ground pork products go to restaurants in the Southeast, Southwest and West Coast as well as retail groceries nationwide. Lopez also exports pork sausage and ham products to Hong Kong, Central America and the Caribbean.
The Carneco Foods plant was originally purchased in a joint venture with IBP, which is now part of Tyson Foods. “It allowed us to partner with a much larger company with raw-material sources for our operations and much broader sales and marketing reach than we had,” Sanchez says. “We offered them expertise in the processing area and have run the operation there since the joint venture began. Similarly, the Campos plant is a joint venture with Advance Food Company. That company was able to pull some manufacturing into Oklahoma for distribution purposes, and Lopez was able to expand its fully cooked capacity. “The Tennessee facility … logistically gives us an opportunity to grow in the eastern half of the country,” Diaz adds.
With its versatility, Lopez has several new and recently released products that cover a wide range of food types, but they all keep in mind the importance of consumer convenience.
Lopez has a successful line of sausage products under the Country Cousin brand, and the latest addition to that line is a 30-percent-reduced-fat, all-natural fully cooked sausage patty. The patty, which will be released in the first quarter of 2007, will be made of pork trimmings, with no byproducts, no fillers and an all-natural spice blend.
A one-third-pound, fully cooked frozen hamburger is another new offering. The burger, which is produced in the Caryville plant, will be marketed under the new Quick ‘N Eat brand. “The difference in this burger from any other fully cooked burger is the flavor and juiciness that you get after just minutes in the microwave,” Sanchez says. “That’s done through a very specialized process that seals in the juices and also enhances the flavor of the Angus burger.”
Sanchez says that the company has run a few focus groups on the burger, with this being their first venture into fully cooked frozen hamburgers at the retail market. “We are excited because our product was competing against fresh hamburgers and was meeting or exceeding them in terms of flavor, juiciness and texture,” Sanchez says.
The company also is re-launching its Lopez Foods brand, which had not been used recently. “A number of years ago, we did a chorizo sausage patty under the brand through Wal-Mart,” English explains. “It did reasonably well in some areas of the country, but it just didn’t have a nationwide appeal. At that time, Wal-Mart was not as focused on regionality as they are now, where they target a product and put it into smaller markets based on demographics.”
The first products under the new Lopez Foods brand are four varieties of chili rellenos: beef, chicken, cheese, and spicy cheese. They can be eaten either as an appetizer or as part of an entrée. “We see a huge movement toward ethnic foods, so we decided to capitalize on our expertise in the Hispanic market and develop the Lopez Foods brand of frozen foods,” Diaz says. More products are currently under development for the brand.
The chili rellenos are available now at select Wal-Mart stores. “They designated about 500 stores as high Hispanic-penetrated markets, and they’re in those stores,” Diaz says, adding that other retailers are looking at the products as well.
All of Lopez’s new products share the characteristics of high quality and convenience, English points out. “That’s what we’re looking to do, provide tasty food that is easy for the consumer to prepare. We’ve seen our sausage do very well because it’s a high-quality, portion-controlled product without the mess of a raw sausage roll. You can microwave it or cook it in a skillet, have it ready quickly and serve your family a delicious hot meal.”
Lopez has big plans for its branded products. “There’s really only two large national players out there [in the sausage business], and we feel there is room for a third national player in the marketplace,” Diaz says. With the capabilities in its Caryville plant, the company will also be adding fully cooked chicken to the Country Cousin brand.
Quality comes first
Lopez Foods conducts more than 100 tests an hour on its products, whether it is on the production line, measuring the fat content, or testing after the product has been put in patty form and frozen. The company always has been at the forefront of food safety. In 2004, its Carneco Foods plant became the first beef grinding facility in the country to require that 100 percent of its raw-material suppliers utilize N-60 raw-material testing on all material shipped and utilized at Carneco.
The concern over BSE, or mad cow disease, has caused Lopez, like other beef processors, to incorporate stringent specified-risk materials (SRM) controls into its beef-purchasing specifications. The company also visits all of its beef suppliers on an ongoing basis to ensure that the appropriate SRM controls are in place, and that Lopez’s expectations are being met.
In the last year, Lopez has focused on new initiatives in its grinding department. The company has strengthened its Acceptable Quality Level (AQL) process with its incoming beef supply. Each month, Lopez randomly selects vendors, says Kevin Nanke, director of quality assurance. “We’ll go through a random sample of the beef or pork we’re buying and look for defects.” Lopez collects that information and then goes back to the vendor with a list of major and minor deviations from the purchasing specifications. “By giving the supplier feedback and working with them, we improve the quality of our raw materials to produce a higher quality finished product for our customer.”
Nanke says that the program is in the top tier of the industry. “I think it’s the folks that provide the information back to the raw materials supplier that help move the entire industry in a higher-quality direction,” he adds.
Lopez keeps up-to-date with the latest processing and food-safety breakthroughs, staying on the cutting edge of technology. “It’s a very capital intensive business, there’s no doubt about it,” Sanchez explains. “If you fall behind, you’re spending large sums of cash at one time. We like to take the approach of continually reinvesting in the business.”
The company’s high-tech operations are another attractive feature to current and prospective customers, giving it the reputation as a large, reliable processor that is still versatile enough to handle a variety of needs.
“We feel like we are a niche business that’s growing, and we’re going to do the best we can to meet our customers’ needs with the products we specialize in,” English says. “We know we’ll never be all things to all people, but we believe our attention to servicing our customers will allow us to grow our business.”