From the Ground Up - McCain Foods Limited

McCain won a Supplier of
the Year award from U.S.
supermarket chain Kroger,
c.1990; (left to right) Bob
Hodge of Kroger, Michael
McCain, Dick Owens of
Kroger, and Richard Lan.
plant manager told him they were parts
of a system used to adulterate the juice
by adding artificial sugars, thereby substantially
reducing the production cost.
McCain found itself the new owner of a
business based on outright fraud.
McCain immediately halted the
adulteration, but now Bodine’s was no
longer profitable. The existing management
was fired, and Wallace’s son
Michael became the president of the
company, which was renamed McCain
Citrus Inc.
Wayne Hanscom, who had worked
for McCain in Australia, Europe, and Vancouver, had just settled in Toronto to start
a new assignment when he was asked to go to Chicago to manage the financial affairs
of the orange juice operation. What was supposed to be a one-year stay turned into a
stay that lasted the duration of his career: Hanscom worked for McCain in Chicago
until he retired in 2005.
Fixing the citrus business wasn’t easy, he says. “The previous owners had put a lot
of energy into being crooked. Once that had been stopped, the business’s profitability
didn’t look so good.”
“When we went to Chicago, it was immediately apparent that the entire place was
totally corrupt,” recalls Michael McCain. “They were adulterating the products in
very sophisticated ways. The FDA was on the hunt to indict the former owners. We
had to take them by the hand and show them how to accomplish this, including how
to piece together the financial trail. The result was that roughly a year after Wayne
and I arrived, the FDA went on air with what they described in their federal indictments
as the biggest consumer fraud in American history. I remember CBS News
arriving on our doorstep that day – it wasn’t fun.”
To help him turn around McCain Citrus, Michael relied on Hanscom and Richard
Lan, who joined as vice-president of sales after McCain acquired his family’s New
Jersey–based juice business, Dell Products, in 1988. “We had to build an organization
from scratch. It took us four years and lots of struggles to fix the business.”
McCain immediately switched to producing pure orange juice that actually was
pure. It bought some other juice businesses and added a line of Tetra Pak juice.
“In the tenacious McCain style, we battled on,” says Hanscom. Eventually, McCain
grew from being a small player to one of the biggest in the U.S. frozen private-label
juice business.
The new McCain Citrus was a model of integrity. Harold Durost, who worked in
senior positions for McCain USA for many years before retiring in 2005, attended a
dinner during the 1980s with representatives of the insurance company managing
the McCain pension. At the end of the dinner, someone from the insurance company
tried to pay the bill, but Wayne Hanscom refused to let him pay for the McCain
people who were present. “He was sending the message that his decision to buy services
would be based on the best deal we could get, not on relationships or on perks
like free meals,” says Durost. “I think this was driven home by the examples Wallace
and Harrison set and the code of conduct that they lived by and demanded their
employees uphold.”
“Our costs went way up because we were using real juice,” says Hanscom. “By buying
other companies and combining them, we got certain synergies. We kept working
it and working it. In the end, we were good operators because we employed the highvolume,
low-cost disciplines that had made the french fry businesses successful.”
By the end of the 1980s, McCain Citrus had spent $31 million buying and upgrading
plants, including building a new one in California. The company had won the acceptance
of retailers who had once shunned it because of Bodine’s tainted reputation.
Major marketing campaigns were launched to establish branded retail beverages, the
most successful of which were Boku and Junior Juice, in ready-to-drink Tetra Paks.
In 1991, McCain Citrus made a profit for the first time and was profitable for most of
the ensuing years.
The business had become “profitable and sustainable in a declining market,” according
to Richard Lan.
Until 1990, each of the three divisions of McCain USA – juice, pizza, and potatoes
– had been reporting to Wallace directly. Harrison and Wallace agreed that there
should be one head of the entire U.S. business, but Harrison did not support any of
the three division presidents for the top job. After more than a year of searching, they
had not found anyone from outside whom they trusted to both fit into the McCain
culture and run the business. Finally, Wallace decided in the fall of 1991 to appoint
Michael president and CEO of McCain USA. Richard Lan became president and CEO
of McCain Citrus.
170 f rom the Ground up
south of the border 171
Harold Durost, 2005.