From the Ground Up - McCain Foods Limited

Mc 2
In 1967, McDonald’s raised its golden arches for the first
time outside the United States – in the Vancouver suburb of
Richmond. During one of his West Coast sales trips, Wallace
McCain dropped in to have a look.
He remembers it well because customers were lined up
waiting to get in. Nothing came of the visit, because all purchasing
decisions at the time were made at the Chicago headquarters,
and McDonald’s was relying on a U.S. company to
supply its french fries.
McCain’s next encounter with McDonald’s was even less
auspicious. Wallace and Harrison met in Toronto in the early
1970s with Cal Goldstein, a McDonald’s buyer, to see if McCain
Foods could get some of McDonald’s business. “We were cocky,”
says Wallace. “Harrison said, ‘Give us your specifications, and
we will make it. ’They wanted to have a tour of the Grand Falls
plant and come to see the lab. We said, ‘We know how to make
french fries, we don’t need you to tour our plant or lab.’ After
that, we did not get a call for ten years.”
Mac McCarthy made the first McCain sale to McDonald’s,
completing a deal in 1977 to supply the chain’s continental
European and British restaurants with McCain-made MacFries.
Howard Mann, who became CEO of McCain in 1995,
worked hard to make McDonald’s a core business. McCain and
McDonald’s have since cemented a strong global partnership.
McCain supplies McDonald’s restaurants in sixty-two countries
and is the largest producer of MacFries.
Ray Kroc, founder of the McDonald’s chain, believed in what
he called the “three-legged stool,” referring to McDonald’s, its
franchisees, and its suppliers working together as partners. “What
started with a handshake has grown into a global partnership
– a premier example of how a world-class supplier can enhance
the strength of the three-legged foundation of the McDonald’s
system,” said McDonald’s CEO Jim Skinner and Frank Muschetto,
senior vice-president and chief purchasing officer, in a joint statement
to mark McCain’s fiftieth anniversary.
Robert Cornella, an entrepreneur who built Good Stuff
into the second-largest privately held bakery company in the
United States, joined McCain in 2000 to take charge of the relationship
as global vice-president of the McDonald’s Worldwide
Business Unit. Previously, he says, the relationship had been
one of convenience: if both companies happened to be in the
same place, they did business. Cornella’s job is to build and
maintain a worldwide partnership between the two.
McCain and McDonald’s are a good fit because both are
obsessive about the quality of the potatoes used to make
french fries. “Identifying the right potato for the right conditions
is what separates McCain from many other companies,”
says McDonald’s agronomist Dell Thornley, who worked
for Simplot before joining McDonald’s in 1989. At the time,
McDonald’s was pushing to get Russet Burbank potatoes
grown in Europe, but the growers were not enthusiastic.
Thornley recalls that two McCain experts, Han van den
Hoek in the Netherlands and Tom Matthews in the United
Kingdom, were instrumental in getting Russet Burbank seed
production in Europe started,
although both were skeptical
that the variety could
be successfully grown
there. “Once they saw
that we were not going
to take no for an answer
and that the only way
to supply McDonald’s
was to grow the
Russets, the program
took off,” says Thornley.
toP LEFt: Bob Cornella
on his Harley-Davidson
in front of the Hinsdale,
Illinois, McDonald’s.
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McDonald’s business unit in 2000. In 2005, Van Schaayk took over as CEO of McCain
USA when Lessard retired. Van Schaayk says it’s tough to succeed in the world’s biggest
market unless you are big. That’s why the Ore-Ida deal was pivotal. “Scale matters
in the United States to a greater degree than anywhere else in the world,” he says. A
small player can survive if it has a unique product and is able to maintain that uniqueness
or if it has some other advantage. But if your product is french fries, which are
not unique, “you had better have scale so that you can hold your own against the bigger
buyers and somehow equalize the leverage that will be applied against you.”
The most common query after the purchase was, “Who was it that bought Ore-
Ida?” Those in the food service industry who asked this question were amazed to
learn that McCain Foods is the world’s largest processor of frozen potato products,
with factories all over the globe. Once they had digested that news, they would say,
“So what are you going to do for me in the United States?”
McCain had proven itself elsewhere and now it finally had the scale to show what
it could do in the United States. As Tom Albrecht, then vice-president of purchasing
for McDonald’s, commented, “You have now Americanized your business.”
But, given the difficulties involved in absorbing a business bigger than itself,
success was not going to come easily. At the time, McCain USA had annual sales
of U.S.$325 million; the Ore-Ida division it had acquired had sales of U.S.$550
million. “People knew it would be the biggest integration that McCain ever did,” says
Van Schaayk, “but I don’t think any of us really understood the challenge of an
integration of that magnitude.”
When the deal closed on July 1, 1997, McCain’s immediate task was to extricate the
Ore-Ida food service business from Heinz and into McCain’s systems. “There was
176 f rom the Ground up
south of the border 177
toP: Othello trim room, 1962.
bottoM: Frank van Schaayk,
2006.