“When we take a step back and look at the past four years, it’s hard not to say, ‘Holy cow. No wonder I’m tired,’ ” said Brian McNamara, vice-president of sales and marketing, Hearthside Food Solutions, Downers Grove, IL.
In 2009, Hearthside Food Solutions began a series of acquisitions that has made it one of the nation’s largest comanufacturers of snacks and baked goods. With the backing of Wind Point Partners, a Chicago-based private equity investment firm, the then newly created company acquired a substantial portion of the assets from Roskam Baking Co., based in Grand Rapids, MI.
Then in May 2010, in a swift, bold move, Hearthside purchased Consolidated Biscuit Co., based in McComb, OH, as well as the cereal division of Golden Temple, Eugene, OR. In 2011, it acquired another Roskam Baking facility in Grand Rapids that produced granola.
Hearthside’s latest milestone — one that propelled its annual sales north of $1 billion — came this spring with the merger of Ryt-way Industries, a Lakeville, MN, provider of contract manufacturing services and packaging equipment; it was also a part of Wind Point Partners’ portfolio of companies. Hearthside also sold off its Golden Temple division to Post Holdings for $158 million and used the profit to fund the Hearthside/Ryt-way merger.
To Rich Scalise, Hearthside’s chairman and CEO, the merger of the complementary businesses makes perfect sense. Hearthside produces an array of snacks, cereal and baked goods, including cookies, crackers, croutons, stuffing, pretzels, rye bagel chips, popcorn, snack mixes, bread sticks, toaster pastries, muffins and more, and in a big way. The company, for instance, cranks out more than 3 billion cold-pressed and baked bars on an annual basis.
Ryt-way specializes primarily in co-packaging of dry foods. It also produces packaging equipment under the Cloud Equipment brand. Its expertise on the back end of the production line can open new opportunities for both businesses. Together, the combined company has 20 manufacturing facilities and 7,500 employees in seven states.
“As we look at our customer base and growth, packaging is playing a bigger and bigger role on the consumer side,” explained Mr. Scalise, a 35-year veteran of the food industry. “Day-part snacking is huge. There’s snacking at breakfast, lunch and dinner. All of a sudden, you’re seeing a proliferation of new products, packaging sizes and different shapes.”
While the increase of 100-Cal packs has softened, the demand continues to multiply for even smaller airline-pack snacks, individually wrapped bars and sandwich crackers in cups as well as to variety packs, club store bags and family-sized boxes of cookies. “Customized packaging is one of our solutions,” Mr. McNamara said. “With Ryt-way, we’re able to do it in a much more powerful way.”
In the co-manufacturing world, the ability to survive — and even thrive — relies on how a company adjusts to constantly shifting trends while maintaining the ability to be fast and flexible yet drive value, according to Mr. Scalise.
“In order to win, we have to be faster at what we do,” he observed. “We have to be flexible, and we have to add additional value. And value is not just about price. It’s about the whole equation of quality, service and employee engagement.”
Redefining speed to market: Combining Hearthside and Ryt-way isn’t an idea that came out of the blue. Throughout the past few years as a part of Wind Point’s portfolio, the two companies’ management teams exchanged information about the challenges and opportunities they faced in their respective industries, and there was a growing realization that it might be a good idea to combine their businesses someday.
In several cases, they served the same customers, which make up a “who’s who” of multinational corporations that market many of the top-selling household brands in the snack, baking, food and retail industries. In other cases, the combined customer base provides potential new business for both Hearthside and Ryt-way.
“When we looked at our customers and how we do business, it just made sense,” Mr. Scalise said. “This is a perfect complement not only for the baking and snacking sides of our business, but there is also a bigger opportunity to serve our customer base. And there’s a whole other set of customers who are packaging products who we can service with other products that we can do.”
Moreover, Hearthside and its customers are redefining the role of the traditional contract manufacturer, according to Mr. Scalise. “When we started, we were great commercialization experts,” he said. “Our customers came to us with their base formulas, and we helped commercialize them through our production and packaging capabilities. Today, we are starting to evolve, and our customers are evolving, too.”
Instead of being considered part of the procurement process, Hearthside now strives to be acknowledged as part of a customer’s supply chain. It didn’t happen overnight. “It’s been very gradual, but it’s been a dramatic change from just four years ago,” Mr. Scalise said. “The great branded companies are going to market more quickly, but they need our help, so they’re going outside of their organization and reaching out to us.”
From BakingBusiness.com October 10-2013
Hearthside Tightens Focus on Contract Manufacturing
Hearthside Food Solutions sold Golden Temple in May because the Eugene, OR-based granola and cereal business no longer fit into its co-manufacturing business model, according to Rich Scalise, Hearthside’s chairman and CEO.
Downers Grove, IL-based Hearthside purchased Golden Temple in 2010 thinking that the cereal company would enhance its co-manufacturing capabilities and reduce shipping costs to the Northwest and West Coast. All of Hearthside’s other snack plants are located in the central US.
Not a brand company: During the past three years, Golden Temple’s branded and private label business expanded, and it became apparent to Mr. Scalise that it might be a better fit for another company. “We’re not in the branding business,” he noted. The proceeds from the $158 million sale to Post Holdings is helping fund the merger between Hearthside and Ryt-way Industries, Lakeville, MN.
Hearthside defines contract manufacturing: But how does Mr. Scalise define co-manufacturing? Co-manufacturing means Hearthside doesn’t sell directly to retailers or foodservice operators, and it doesn’t have any direct communication with consumers. Rather, it produces snacks and baked goods for customers that ultimately sell their branded products to retailers. Private-label products are typically sold under supermarket or store brands and sold directly to consumers.
From BakingBusiness.com October 10-2013
Rich Scalise on American Bakers Association: For Hearthside Food Solutions, the American Bakers Association (ABA) provides not only a voice in Washington but also an opportunity to network with some of the Downers Grove, IL-based company’s biggest customers.
The value of the ABA: “ABA gives me access to all of the folks who have great brands,” noted Rich Scalise, Hearthside’s chairman and CEO as well as second vice-chairman on the association’s board. “ABA is one of the best organizations around in being close to legislation and regulations that can affect your business. It excels in having the ear and the access so we can explain the issues to legislators. I think it does it better than any other organization.
“It’s not about twisting someone’s arm,” he added. “It’s about the ability to have open dialogue with congressmen and senators about those things that really affect us and our ability to grow.”
August 26, 2013 — Downers Grove IL — Hearthside has been ranked as one of the fastest growing companies in the US in the The 2013 Inc. 500 / 5000 List of fastest growing companies. Ranked at #1284 overall, Hearthside is also the largest and fastest growing contract manufacturer in the food industry, and a fastest growing food company, based on the data in the Inc 500 / 5000 tables.
The Inc 500 / 5000 List, published by Inc. Magazine, has ranked America’s fastest growing private companies since 1982. Inc Magazine has been continuously published since 1979 and is focused on fast growing companies in all sectors and industries.
2013 is the first year Hearthside was eligible for the Inc 500 / 5000 list which requires three years of annual sales to qualify. Hearthside also ranks as a fastest growing food company overall and one of the largest food companies on the list for 2013.
FOR IMMEDIATE REEASE
Wind Point Partners to Merge Two Portfolio Companies: Hearthside Food Solutions and Ryt-way Industries
Chicago, IL, May 15, 2013 — Wind Point Partners, a Chicago-based private equity firm, today announced plans to merge two of its portfolio companies – Hearthside Food Solutions and Ryt-way Industries. The merger, which will take effect in late May, will create the leading contract food manufacturer in North America, with over $1 billion in sales and 19 manufacturing facilities across seven states.
Wind Point acquired Hearthside in April 2009 and Ryt-way in August 2008. Both companies provide contract manufacturing services to leading food and consumer packaged goods companies in North America. During Wind Point’s ownership, Hearthside and Ryt-way each completed three acquisitions that further diversified each company’s customer base and product portfolio.
Rich Scalise, CEO of Hearthside Food Solutions, will assume the role of CEO for the combined business.
Rich is a 35-year veteran of the food industry who most recently served as President of Ralcorp Frozen Bakery Products, a division of Ralcorp Holdings, Inc. (NYSE:RAH). Rich previously spent 18 years with ConAgra Foods (NYSE:CAG) in a number of roles including his last position as President and COO of ConAgra’s $3 billion Refrigerated Foods Division.
“Hearthside and Ryt-way have a complementary customer base and supply chain capabilities. The combined company will be not only significantly larger but also able to deliver a wider array of services,” said Rich.
David Finch, CEO of Ryt-way, added, “This is a great opportunity for our customers. By offering a broader suite of capabilities, Hearthside and Ryt-way will become a one-stop shop for contract manufacturing.”
“Rich and David have done an excellent job driving strong revenue growth, commercializing new products and completing accretive acquisitions at Hearthside and Ryt-way,” said Mark Burgett, a managing director at Wind Point. “By combining two industry leaders, we are able to create significant growth opportunities for the business in addition to value for our investors. Given the similarities between the businesses, we expect to start realizing benefits immediately.”
About Wind Point Partners
Wind Point Partners is a private equity investment firm that manages commitments of approximately $2.5 billion. Wind Point focuses on partnering with top caliber CEOs to acquire middle market businesses where we can establish a clear path to value creation. Additional information about Wind Point is available at www.windpointpartners.com.
About Hearthside Food Solutions
Hearthside Food Solutions, headquartered in Downers Grove, Ill., is the nation’s largest independent bakery and a full service contract manufacturer of high quality grain-based food and snack products for some of the world’s leading premier brands. Hearthside operates 12 food manufacturing facilities in five states. For more information on Hearthside Food Solutions, visit www.hearthsidefoods.com.
About Ryt-way Industries
Ryt-way, headquartered in Lakeville, Minn., is a leading provider of contract manufacturing and high performance packaging equipment solutions to North America’s leading food and consumer products companies. Ryt-way is known for its flexibility, scale and commercialization expertise in dry foods. Ryt-way operates seven production facilities across four states. Additional information about Ryt-way is available at www.rytway.com.