Change is a constant, and AdvancePierre Foods Inc. is an organization that is constantly changing, in its approach to the food business, to production and to product development.
Created in 2010 by the merger of three entities, AdvancePierre's roots were planted either 67 or 40 years ago, depending on whose family tree is being traced. A more meaningful milestone would be the year 2008, when the venerable Pierre Foods emerged from bankruptcy reorganization with a new management team headed by William Toler. That set in motion a transformation marked by mergers, acquisitions and the creation of a food giant that thrives on new products distributed through multiple channels.
Retail sales are a growing part of AdvancePierre's $1.6 billion portfolio, but foodservice in multiple channels is the Cincinnati-based organization's bedrock. School cafeterias, convenience stores and vending machines are some of the places you will find the company's many branded and private label creations. The company counts more than 3,000 SKUs in a lineup to which products are constantly added and subtracted.
More than 160 new products rolled out of its test kitchens last year, and 2012 wasn't an anomaly, assures Bernie Panchot, vice president of R&D. Her customers and her customers' customers are not interested in the same-old same old, and it's the job of the 40-person R&D staff to respond with new and interesting alternatives.
Panchot joined Pierre Foods in December 2008 when Toler was building his senior management team. She reported directly to the CEO and served on the executive committee until 2010, when the company merged with Advance Food Co., Enid, Okla. The deal also included Advance Brands LLC, a joint venture between Advance and Cargill Inc. At that point, R&D was folded into the marketing organization, signaling a shift from a conventional foodservice go-to-market approach to a hybrid strategy that is tuned to changing market demands.
The New Year ushered in another realignment that assigns R&D professionals to three business units: branded products, foodservice and strategic activities. Members of the R&D team can be found on the premises of all of the company's 10 manufacturing sites, including five in Enid, two in Ohio, and one each in North Carolina, South Carolina and Portland, Maine, the home of Barber Foods, which was acquired two years ago.
The Barber brand probably enjoys a higher retail profile than AdvancePierre's other labels, and the new owners clearly want to nurture the name. Although AdvancePierre shifted production of Barber's fully cooked foods to an Enid plant and shut down Portland's oven, laying of 232 workers in the process, it also signaled it would invest $10 million over two years in plant renovations and equipment upgrades. The facility now accounts for more than 300 of the company's 4,000 head count.
While AdvancePierre's sales volume puts it in the neighborhood of brands such as McCormick spices and Dannon yogurt, its foodservice skew keeps it below the public radar and, to some extent, the industry's radar. Nonetheless, it is a major player in the channels it plays in and the handheld protein foods it creates. The organization ranks among the Top 10 processors of lamb & veal, beef, turkey and chicken; it also holds down the No. 10 spot in refrigerated & frozen foods, according to Gale Research.
As the Cargill joint venture suggests, the organization collaborates with its suppliers; in fact, "one of the requirements in key supplier contracts is that they help us stay ahead of key trends," Panchot explains. But the bedrock of collaboration is spelled C-U-S-T-O-M-E-R-S. Those are the relationships that drive product innovation.
Belly up to the bar
A recent example is the Fast Fixin' Sandwich Bar, a concept developed to help AdvancePierre's convenience-store clients. People in search of a hot meal increasingly were gravitating to the C-stores' hot dog roller grills, negatively affecting the handheld foods that AdvancePierre supplies.
At the prodding of a field-sales colleague, the R&D team started work on a self-contained system that approximates the footprint of a roller grill and allows people to build their own sandwich, choosing from three protein options and topping off the sandwich with fresh ingredients of the store owner's choosing. Local and regional favorites help customize the sandwich after the proteins are heated in a microwaveable bun R&D had formulated for other channels.
"That was a case where we found a (retail) partner who was willing to collaborate with us on the development of the bar and an equipment manufacturer who developed a warming tray for the buns and then made multiple adjustments as we went through tests," Panchot says. "By the time we launched the system commercially, we had a proven model. It changes the paradigm of the hot C-store sandwich."
Market research also drives innovation. Custom field research buttressed AdvancePierre's march to the top of the C-store sandwich pyramid and helps shape line extensions to Big AZ, a brand created for the caloric-unconscious and sold in C-stores and vending machines. While the name suggests a Southwestern flair, it's actually "a heartier serving in one of our leading categories," she explains.
In April, the company rolled out the Big AZ BaconAddict Cheeseburger, an oversized, flame-broiled patty sandwiched between two layers of bacon-infused American cheese and topped with -- what else? -- more bacon. "It was a way to create some excitement and enable our C-store customers to better compete with fast food," says Panchot. Not incidentally, it helps AdvancePierre maintain its big-dog status in the $4 billion-plus C-store sandwich category.
"Market research has shown that bacon is one of the most popular sandwich proteins and that many consumers prefer sandwiches with bacon," notes Tony Schroder, the firm's president of convenience channels in a prepared statement. He cites a Technomic research report that found over a third of consumers named bacon as their protein of choice for both lunch and dinner sandwiches. More tellingly, 87 percent are prepared to pay a premium of at least 50 cents when bacon is added to a sandwich.
AdvancePierre's consumer insights team kick-started the BaconAddict project, assembling secondary research and augmenting it with primary research that defined the ability of such a sandwich to "move the needle" in C-store sales, according to Panchot. "We had seen the same potential over and over again in other channels."
"A lot of innovation starts in white tablecloth restaurants and gradually filters down to home consumption, but because we participate in so many channels, we're able to shorten the cycle and drive innovation into the slower-adoption channels," she adds. "That's a real strength of the company, and an advantage most companies we compete with don't have."
Time to market varies considerably, but line extensions like the BaconAddict Cheeseburger can move from concept to commercialization in as little as 18 weeks, according to Toller. The super-sized cheeeseburger debuted to favorable trade reviews at the vending industry's NAMA OneShow in April.
Child nutrition programs have kick-started reformulation efforts at thousands of food companies in recent years. Pierre Foods was a major supplier to school commissaries long before the Healthy Hunger-Free Kids Act of 2010 was enacted, and the successor organization has kept AdvancePierre in the vanguard with the same combination of market research and R&D that is applied to other channels.
"One of the things we continued after the merger was our directors council of school foodservice operators," Panchot says. "That provides an opportunity to ask, 'What are parents talking to you about?' Anybody that is in this segment has to be listening to the changing demands of parents and school administrators, or they'll be selected out of the cycle." Her R&D team includes two school-nutrition specialists.
Final rules for the 2010 Kids Act, which caps school lunch caloric content at 850, only came into effect in recent months, but R&D anticipated most of the regulations. Three years ago, the firm introduced the Smart Picks line at the School Nutrition Assn.'s annual conference. The five dozen school-cafeteria menu items have one or more of the following attributes: reduced sodium, reduced fat, zero trans fat, no hydrogenated oils, whole grains or a good source of protein.
AdvancePierre also was one of the original seven food processors in 2011 to join the Alliance for a Healthier Generation, a coalition founded by the William J. Clinton Foundation and the American Heart Assn. that set science-based standards for school foods, including lean protein products, low-fat entrees, reduced sodium levels and whole-grain products. "When you find a successful formulation for sodium reduction, for example, you cascade those results through the rest of the business," points out Panchot. Synergies with the C-store initiative are an example.
Regardless of which distribution channel is targeted, new products are battle tested and come with a realistic profitability expectation. "We have a full bore test going with one of the major retail chains" right now, she says by way of example. "We launched 22 items with that customer originally as a market test." The line was winnowed to 11 SKUs and now is ready for wider distribution. "We test in real market conditions and get real results" before a full-blown roll-out, she adds.
Minimum thresholds for revenue and profitability must be crossed if a new product is to be commercialized. "We are constantly changing, constantly looking at ways to optimize our resources and get every pound out of our production plants," summarizes Panchot. To help make the call on what items are dropped from the production schedule, R&D professionals embedded in the plant management teams are on hand, ensuring the need for innovation is a metric in optimized production scheduling.