April 7, 2007

Company Helps Develop State’s Onion Industry

KIDCO Farms may be the new kid on the block when it comes to fresh-cut onions, but the company already is expanding its operations and making a mark on North Dakota’s agriculture.

The major onion-growing region of the country is about two time zones west of where KIDCO Farms’ Dawson, N.D., plant is, but those running the company are fast discovering that North Dakota’s soil is well suited to producing onions. And those long-day onions are great for KIDCO’s foodservice business.

“The three gentlemen (who own the company), in conjunction with some of the organizations in the state of North Dakota, had come up with the idea to build an onion-processing plant – giving the farmers of North Dakota a viable alternative for another crop that would hopefully return a greater return on investment over the traditional beans, sunflowers and wheat,” said Bruce Lau, executive vice president of KIDCO Farms. “The soil conditions in the western part of North Dakota are ideal for growing onions and very much mirror what the conditions are in the Northwest.”

Those owners are Van Amundson, chairman of the board; Monte Benz, vice chairman; and Steve Knorr. All are actively involved in farming. Amundson serves on the board for the National Beef Council, and Benz serves on the board for potato processors in North Dakota. Terry Smith serves as CEO, and Lau oversees marketing and sales for the company.

Lau and Smith both come from a foodservice background, but working with produce is a new experience.

“Like any new business, there is a learning curve involved, and our experience with KIDCO is no different,” Lau said. “It has been challenging, but that has been part of the excitement.”

Although they had much to learn when they started with KIDCO, Lau and Smith have helped the company branch into a new sector: foodservice.

“It started out as a peeling operation, and since then we’ve moved up the value-added chain and have dicing and slicing capability,” Lau said.

A majority of the company’s customers are fresh-cut processors, which is where the whole, peeled onions go. With the slicing and dicing side of the business, KIDCO Farms is working with several restaurant chains and others in the foodservice arena.

“Our approach has been to take our capabilities and overlay them against the needs of the foodservice operators,” Lau said. “The foodservice industry is a rapidly expanding business. That fact, coupled with our knowledge of foodservice market, offers a broader marketing opportunity for the company.”

Supply

One of the ways KIDCO Farms looks to become a top player in the industry is by building solid relationships with its suppliers.

“In addition to our logistical advantage, we also felt that it was strategically important for KIDCO that the grower element be closely tied to the company,” Lau said.

And so, with the help of the owners, the company forged strong relationships with the growers in western North Dakota. Lau said that as a grower/processor, KIDCO has much better control over the incoming raw material.

Knorr graduated from North Dakota State University, where he was involved in onion research in progress while he was in school. Since then, Knorr has used that knowledge to work with local growers.

“KIDCO believes another important aspect to our business is to provide the type of information to the growers that helps them become efficient in their businesses,” Lau said. “You can take your experience and apply that to the real world of farming, and that’s what Steve’s been able to do.”

In addition to the relationships with local growers for long-day onions, KIDCO Farms has contracts with growers in the West for short-day product.

“You can say you’re vertically integrated, and that’s great, but you’d better be able to know what you’re doing,” Lau said.

Quality Assurance

As one of the “small guys” in the onion-processing world, KIDCO Farms has have all its ducks in a row when it comes to putting out a quality product. And with the company’s quality assurance plan, Lau said that’s a given.

There is what Lau called a “well-documented” inspection process for all incoming raw onions, as well as HACCP plans and other food safety and quality measures set up throughout the processing line. In addition, KIDCO Farms has an online quality control center to be sure it’s producing product to the specifications of each of its customers.

“We realize because of our years of experience in food that the quality of the end product is crucial,” Lau said. “And because we are a relative newcomer to the industry, we strive to reach a level of excellence on a consistent basis. It is important that KIDCO has a strategic point of difference from our competitor. ‘Just as good’ sometimes just doesn’t get it.”

But, with a smaller company come advantages.

“When you’re smaller, you can move quicker and respond to the needs of the customer faster than if you’re much larger,” Lau said.

Distribution

To make a place on the onion-production map for North Dakota is no easy battle. Idaho, eastern Oregon, Washington and California are the top players in the nation’s onion business, according to the National Onion Association. Those states grow 45 percent of the onions in the United States. But, if KIDCO Farms has its way, North Dakota won’t be too far behind.

“The state has been actively engaged in providing the kind of assistance that will help us achieve our primary objective of becoming a major supplier of onions to the produce industry,” Lau said. “Logistically, that works in our favor big time.”

While the West may have the advantage with quantity and availability, Lau said KIDCO Farms is positioned to be a major player simply because of the company’s location in the Midwest.

They are closer to the majority of the country’s population. And, with perishable foods, location and transportation can be important.

“Because of where we’re at, our access to our markets is a lot easier than if we were coming off the West Coast,” Lau said.

But, like other processors, trucking is turning out to be an issue – especially with the rising cost of fuel. KIDCO Farms is working with a handful of trucking companies that have been able to satisfy KIDCO’s requirements for the company’s product, Lau said.

Growing Pains

Although Lau would not comment on actual production volume, he said the company is expanding quickly and is running two shifts around the clock. There’s already talk of expanding the year-and-a-half-old processing plant.

“We’re growing rapidly, and thus we realize we must move quickly to expand our capability in order to be in the position to take full advantage of the market opportunities,” Lau said.