From the Ground Up - McCain Foods Limited

toP: McCain bought
a vegetable factory in
Smithton, Tasmania, in 1984.
bottoM: Basil Hargrove,
1978.
However, it got harder again in the mid-1980s
when Wallace McCain made one of his regular
visits to Australia and announced that he wanted
Australia’s potato growers to supply McCain with
Russet Burbank potatoes, the variety favoured by the
fast food chains, instead of the Kennebec and Sebago
varieties the Australian growers were producing.
“This was a thunderbolt out of the blue to me,”
says Rodda. “We had previously imported some
Russets and done token trials with them without any
knowledge of the correct agronomy. The result was a
total failure – and a strong belief that with Australian
conditions, the variety would never succeed.”
As it turned out, the Australian farmers converted to Russet Burbanks successfully
over a few years. Rodda collected all the information he could on how to grow them,
and Australian growers visited U.S. potato farms. In the mid-1990s, an American
expert spent two seasons in Australia training Rodda’s field crew and growers in the
art of raising Russet Burbank potatoes.
Australia, in particular Tasmania, now produces one of the best Russet Burbank
crops in the world, supplying most of McCain’s needs in Australia. For an early season
potato, the Australians use the Canadian Shepody variety. Because of the threat
of water shortages in the region, McCain is gradually converting to varieties that are
less susceptible to heat and water stress.
Although Australia was under Wallace’s supervision, Harrison made the occasional visit
there, just as Wallace visited Harrison’s European domain from time to time. During
the 1980s, Harrison and Basil Hargrove, a native of New Brunswick who had gone to
Australia in 1979 as finance director of the Australian company, met with potato growers.
The farmers were complaining about how tough it was for them to make a living
because the price they were getting for their potatoes was too low. McCain, a big, prosperous
company, should recognize that, they said, and offer more generous contracts.
Harrison replied, “Do you know how many french fry processors there have been
in the business worldwide?”
“Maybe ten or twenty,” said the farmers.
“No,” said Harrison. “There have been ninety-five.”
Hargrove told Harrison later that the number sounded
high to him.
“I’ll send you a list,” said Harrison, which he did.
Ninety-five companies, all but a handful no longer in existence,
were on the list.
Harrison’s point was that it’s a tough business, and if a
company can’t keep a tight lid on its costs, it won’t survive.
As the potato-processing business consolidated, high-cost
producers were being absorbed by more efficient ones.
McCain was a consolidator. One of the reasons it was able
to expand so successfully, in Australia as elsewhere, was
because it bought up competitors and integrated them
into the McCain empire. This isn’t an easy task. It’s hard
work, first to analyze the prospective purchase and decide
whether it is worth buying, and then to negotiate a price
that is fair to both buyer and seller.
McCain’s first purchase in Australia was a potatoflake
plant in Ballarat, which it bought from Unilever.
Subsequently, McCain supplied Unilever with potato
flakes from its own Ballarat plant, where they could be
produced more cheaply as a by-product of french fries. It then converted the former
Unilever facility into a pizza factory.
Wallace McCain always enjoyed the hunt for new acquisitions. In 1984, he was
involved in the purchase of a frozen vegetable plant in the southernmost part of the
country, the island state of Tasmania. Clements and Hargrove had done the preliminary
due diligence, deciding what the business was worth and what McCain could afford
to pay. Now it was up to Wallace to close the deal. The problem was that Wallace
had set a maximum price he was prepared to pay, and the owner, McCain’s major
Australian competitor, Edgell, wouldn’t budge from its own higher price.
On the last day of Wallace’s stay in Australia, he met again with Edgell’s negotiator.
It was a Friday afternoon, and Wallace’s return flight to Canada was that evening.
John and Wallace’s son Scott, who had accompanied his father to Australia, were with
him at the meeting, which was spent bickering over the price, neither side prepared
to make the compromise necessary to close the deal.
Wallace recalls: “He wasn’t giving in. He was a stubborn bastard like me. I said,
112 From the Ground up
down under 113
Premier Robin Gray turns the
first sod for the McCain chipprocessing
plant in Tasmania,
1987. Looking on are local
official Ken O’Halloran (far
left) and McCain managing
director John Clements.