Speed to market is a business priority for most food companies. At Pinnacle Foods Inc., it’s also a manufacturing priority. The production challenge is organizing products around Pinnacle’s supply chain structure and the core competencies of the factories.
Converting an existing food-grade facility to branded products can be more cost-effective than undertaking a greenfield project. A more compelling argument in Pinnacle’s case is the faster commissioning of those plants. Meeting purchase orders with in-house capacity drives capital project decisions for both fast-growing health and wellness products and legacy brands.
The acquisitions of Birds Eye, Wish-Bone, Gardein and Boulder Brands have driven network optimization decisions that included purchasing two new plants and making significant investments in others.
Pinnacle acquired Birds Eye Foods in 2009 and has used innovation to help sales take off, requiring the firm to add capacity. Help is coming this month in Beaver Dam, Wis. Pinnacle will take ownership of a $37.5 million, 327,000-sq.-ft. cold storage facility that was being used for private label vegetable packaging.
After purchasing Wish-Bone and Western salad dressings from Unilever in 2013, the company invested $50 million on its existing liquid processing facility in St. Elmo, Ill., to bring Wish-Bone production in-house.
A onetime ice cream plant in Hagerstown, Md. had the dimensions, room for growth and freezer infrastructure needed to produce Gardein, an emerging plant-based meat-replacement star. Pinnacle paid $8.2 million for the shuttered facility two years ago, then invested another $24.5 million in new equipment and advanced technology to produce the Gardein line.
Last year’s Boulder Brands acquisition came with a four production facilities, including one of the largest gluten-free manufacturing facilities in North America. One of the plants in Colorado has since closed after Pinnacle set up a new line in its Fayetteville, Ark., frozen food hub to meet demand for Evol frozen foods, which were growing at a 30 percent annual clip. Evol is one of seven health & wellness brands added in the past four years, which collectively have boosted the company’s health and wellness sales to 55 percent of total sales.
“Adding facilities like Hagerstown, exploring consolidation ideas similar to closing our Evol Colorado facility and moving production to our frozen meal hub in Fayetteville or simply improving facilities will add value and capabilities,” said CEO Mark Clouse at a September presentation at the Barclay’s Global Consumer Conference.
Optimizing the network
Additions and subtractions to the production network have been necessary throughout the company’s history. Pinnacle was formed through the purchase of assets from Vlasic International, including two pickle plants. After making significant investments to increase efficiency and capacity in Vlasic’s Imlay City, Mich., facility, Pinnacle was down to one pickle facility. Network optimization is a continuous endeavor as the company puts manufacturing capital where it will have the fastest and greatest impact.
To enhance optimal performance, Pinnacle uses a common "playbook" based on lean (manufacturing) and Six Sigma methodologies that it applies in all facilities. Standardized key performance indicators are measured across the network and best practices are shared among the plants.
The company is also making investments to optimize customer service. A new end-to-end planning system analyzes all aspects of the supply chain enabling it to improve performance in the midst of constantly changing requirements. Automated reports quickly identify materials at risk of being late for critical production runs, allowing mitigation plans to be implemented.
Pinnacle maintains an almost maniacal focus on cost reduction, which is not limited to only the manufacturing or supply chain team. All employees company-wide are focused on activities that drive out waste and unnecessary costs. Pinnacle calls its continuous cost improvement program MVP (Maximizing Value through Productivity), which covers all cost reduction initiatives in support of gross margin improvement.
Clouse says Pinnacle is strengthening facilities by using better designs and layouts and making selective asset upgrades and process improvements. As an example, he cited vegetable segregation. By keeping the vegetable cleaning area separate from the flash-freeze packaging lines, Pinnacle is able to maintain some aspects of production while scheduled maintenance and sanitation routines are performed.
That is the design that will be used at the company’s new Beaver Dam plant, which offers many network benefits. “Beaver Dam provides a large amount of additional warehousing space, which will allow us to consolidate warehousing footprint and simplify our inventory management processes,” says Clouse.
Safety and sustainability programs
Food safety enhancements are built in with all facility upgrades and improvements. Pinnacle uses an ISO- and SQF-based Food Safety and Quality Management System. Compliance with expectations and continuous improvement are regularly assessed through a layered auditing process, including facility self-assessments, corporate food safety and quality audits and third-party inspections. Suppliers and co-packers undergo a stringent approval process, and ongoing performance is monitored through a formal supplier management program.
Employees are trained on personal safety procedures and standards. Worker injuries are trending down. Near-miss reporting, safety observations and internal audits are credited with the positive trend. When injuries do occur, a root cause analysis is conducted and remedies such as equipment modifications, process adjustments or employee training are implemented.
Energy conservation and water-use reduction became higher priorities in 2010. Since then, greenhouse gas emissions have been reduced 12 percent, water usage is down 19 percent and waste-to-landfill has been cut 33 percent. Cuts of 35-40 percent in those metrics per production ton are being sought by 2020 from a 2012 baseline.
One of the most successful sustainability projects to date was at the Fort Madison, Iowa, canned meat plant. A new retort system with advanced controls resulted in a 27 percent reduction in energy use.
Pinnacle’s manufacturing network, processes and priorities are all aligned to support the unprecedented changes in consumer preferences. Flexibility is a necessity to meet the expectations of shoppers.
“Companies that are nimble, that focus on execution, can still create opportunities,” Clouse says. Exploiting those opportunities requires quick action, another argument for quickly converting food-grade brownfield sites into facilities that meet rising safety standards, a tactic that Pinnacle has proven to be adept at executing.