By Dick Hagen
It’s not every corporate annual meeting where shareholders walk into the meeting room to find the wonderful smell of omelets being prepared by a chef, and egg product samples placed on the tables.
“We wanted our shareholders to both see and taste the fact that the Golden Oval today is moving into the consumer world,” said Dana Persson, chief executive officer of the Minnesota-based egg processing company. “That’s a tough, challenging arena. Competitors don’t give up their shelf space without a fight. But with the new products and new talents within our company, we’re now staking out our claim.”
Golden Oval appears to be up to the challenge. The number of employees has tripled in size in a short time — from 250 folks on payroll two years ago to 750 today — while it grew from a $65-million company to $200 million.
“The new Golden Oval is now consumer driven,” Board Chairman Chris Edgington told the audience at their recent annual meeting. “We went from three basic liquid egg products to several dozen products. Differentiation in the marketplace is what now sets us apart from other egg suppliers. ... We have moved from a basic commodity supplier of liquid eggs into the value-added consumer products world.”
Shareholders went home that night with two of those new consumer products. One is the snack item “Eggs Anytime.” Soon to be available at fast food stops across the Midwest, it’s basically a couple of peeled, hard-cooked eggs seasoned with salt and pepper. The other item is a pasteurized liquid egg product in an easy-pour container for making quick and tasty scrambled eggs. And important for catching the consumer’s critical eye, the container sports the well-known Land O’Lakes label.
Production and waste
Golden Oval has two major egg production facilities: Two million birds at its Renville headquarters, and 5.5 million birds at its Thompson, Iowa, site. Each of the two-story barns at these locations houses 127,200 birds. Cages are five tiers high with outside air drawn through the eaves and circulated downward over the birds through the same floor slots through which the manure passes. A turbo ventilation system dries manure to 12 to 18 percent moisture, which reduces odor.
At the Renville plant, six in-line breakers have the capacity to break 36,000 eggs per hour each, for a total of 1.75 million eggs during an eight-hour shift. The plant’s two million birds average 70 percent daily production (including the molt period) or about 1.4 million eggs per day.
This facility also produces 13 tons of shells per day, which are heat treated according to Food and Drug Administration regulations and fed back to the chickens as a calcium source. The birds consume 225 tons of feed daily. On an annual basis that’s two million bushels of corn and the equivalent of 800,000 bushels of soybeans.
The 22,000 tons of litter produced annually is contracted to area farmers. The company claims environmental issues had been virtually non-existent at their two large production centers until this past winter. The state of Iowa filed action against Golden Oval’s Thompson plant because effluent from its waste water treatment plant was exceeding allowable limits, a problem they said tends to surface when ice melts and turns over in the waste water treatment ponds.
Fiscal gains
Since 1995, Golden Oval egg product sales have increased from approximately 7 million liquid pounds to approximately 258 million liquid pounds.
With the acquisition of MoArk LLC last June 30, Golden Oval now has five additional facilities producing various liquid, hard-cooked, dried, refrigerated and frozen egg products. The purchases include egg-processing facilities in Ohio, Alabama, Missouri and two in California.
Revenues from egg product sales were $93.6 million for fiscal year 2006, $63.2 million for 2005 and $83.5 million for 2004. Total assets of Golden Oval as of Aug. 31, were listed at $158 million with a member’s equity of $37.5 million and long-term debts of $94.2 million.
Tom Howell, interim chief financial officer, told shareholders that liquid egg prices the past two years have been steady to lower, while feed costs are higher, especially since last October. This resulted in operating income as a percent of sales being squeezed down, 4.3 percent for fiscal year 2006, for example, versus 5.4 percent for fiscal year ’05.
Howell said that since the acquisitions started kicking into the total sales picture, “net sales for fiscal year ’07 at the halfway point matched total net sales for fiscal year ’06, however net profit is currently at a negative 8.4 percent of sales reflecting the increased debt load that came with the acquisitions.”
The retail sector
Persson said the industrial, food service and retail markets in the United States currently utilize about 2.5 billion pounds of liquid egg products annually, which represents $180 million of potential profitability for the entire egg industry.
The industrial market of food manufacturers and bakers is by far the largest market, of more than 1.4 million pounds. Profit potential in this big market sits at about 3.5 cents per pound. In the food service market you have a 10-cent-per-pound opportunity. Move into the retail sector, especially into convenience quick-stop stores, and margins jump to 40 cents per pound.
“Obviously it’s harder to get into the retail and food service sector, but that is now a major new goal of Golden Oval,” Persson said. “Our goal isn’t to be the biggest, but it is our goal to be the best. That obviously means a business plan that provides profitability to our shareholders as well.”
“Because of health and obesity issues, the retail sector is where the action is in food products these days,” said Rob Harrington, chief operating officer and vice president of marketing. “And here egg products are taking on new prominence. Today 50 cents of every American dollar spent for food is spent outside the home.”
Golden Oval is conducting a test market program with Land O’Lakes egg products in 10 New England states, Harrington said. They are also moving egg products into Wal-Mart’s vast distribution system under the retailer’s brand name of Country Creek egg products. So far they are in about 1,000 of Wal-Mart’s 3,000 grocery stores (out of 5,500 nationwide). Their next goal is Costco and the 2,000 Speedway convenience stores.
“Our intention is to become a fully integrated food company from the farm to the plate. We want to get closer to our customer, be they retail, industrial, food service, or the housewife buying her groceries,” Harrington said.
