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Baking no more: Spring Wheat Bakers closes its doors (Tuesday, Oct. 8 2002 -- CropChoice news) -- Mikkel Pates, Grand Forks Herald: HILLSBORO, N.D. - Spring Wheat Bakers is out of the baking business.
Mike Warner, a Hillsboro farm owner and chairman of the board of Fargo-based United Spring Wheat Processors, confirmed that the co-op's board has closed its plant in McDonough, Ga., and put it up for lease or sale. Letters started hitting mailboxes for the co-op's 2,600 shareholders Saturday.
The news comes on the heels of the recent failure of Walton Bean Growers Cooperative of Englevale, N.D.
USWP, doing business as Spring Wheat Bakers, has laid off all but the staff preparing the plant for sale or lease.
Main mission ends
USWP's only immediate role will be to revive its
“identity-preserved and variety-specific” marketing system. The
sale should not disturb a deal announced this summer in which
USWP would revive its IP system with Monsanto. IP system is a
possible way to assure market segregation if and when Monsanto
commercializes the genetically modified Roundup Ready wheat it is
developing.
Meanwhile, USWP's signature mission is gone. USWP was created
in 1996 and raised $23 million from farmers in North Dakota,
South Dakota, Minnesota and Montana. The big strategy was to
become a national, farmer-owned bakery system. The co-op
studied and chose the frozen dough and partial-baked
(“par-bake”) market.
In August 1999, the co-op completed installations in a $20 million
bread facility near Atlanta. Plagued with start-up glitches in its
factory, however, the co-op foundered.
Gary Lee, the company's president and chief executive officer,
resigned in July 2001. The co-op improved efficiencies later that
summer, but the co-op's banks were “reluctant to provide any
additional capital.”
Warner wrote that “nonbank risk financing and support in
existence in all four states” also was denied. Government-based
financing was “denied,” presumably because the plant and its
jobs were located in Georgia.
In fall 2001, the co-op had hired CoBank veteran Lee Estenson as
acting chief financial officer. Hopeful for a turnaround,
shareholders contributed another $2.9 million in equity capital in
late 2001. (Growers also agreed to “options” to contribute
another $4.4 million in two stages - this fall and next fall - but
those transfers never were made.)
In early 2002, the co-op lost a key co-packing customer. Warner
declines to name the customer or say what happened. At any
rate, the co-op took on new financial losses and lost support from
lenders.
The co-op scrapped its old business plan and changed directions.
It hired John Parr as a consultant and went to one shift, producing
a dozen products under its own Spring Wheat Bakers label. But
this process proved fatally slow.
“In today's highly sophisticated marketing systems, attracting
new customers and gaining vendor approval is a process which
takes from four to six months,” Warner writes in the letter.
“During the time from the beginning of our restart to the present,
our capital sources were reaching critical levels as we waited for
numerous customer product approvals. We believe this also
became known to our potential customers, and may have
adversely affected the completion of those sales, as well.”
No partners
Over the past year, the board has searched for a partner or
joint-venture partner. There were three “very close calls,” but the
potential partners “were unable to deliver the amount of capital
required to consummate the partnership,” Warner says.
Two weeks ago, the board voted via conference call to call it quits.
Warner declines to say how much money the co-op lost or discuss
its debt situation. Numbers were not included in the letter. The
co-op is required to have an annual meeting in or close to March.
“Other than this notification, people are more than welcome to
contact board members,” Warner says.
How much shareholders will get out of the deal depends on how
the lease or sale deal works out. In the letter, Warner prepares
the members for a range of scenarios.
“(W)e believe we have finally completed the shake-down of this
plant and it is ready for production,” Warner writes. “This plant is
still located in the right market and can make par-bake products,
which are still experiencing growth of over 10 percent per year.
“Indications are that there is still under-capacity in the par-bake
business and this plant can easily be expanded to increase its
production as much as 200 percent. The plant is very clean and
shows well.”
On the other hand, Warner writes that “unsuccessful bakeries
often bring poor pricing, and on some occasions, the equipment
goes for salvage value and real estate.”
Still potential
In an interview, Warner says he'll be “surprised,
personally, if this doesn't go forward as a substantial bakery” in
its own right. Warner says the co-op soon will list the plant with
professional broker-sellers. A long-term lease (similar to the
Cargill/ProGold corn fructose plant in Wahpeton, N.D.) would be “a
great way to capture the lion's share of the equity that might be
available to us and possibly would leave the door open for some
kind of business relationship with whoever does run it, that traces
back to the identity-preservation part of our business.”
Warner, who has been on the board of American Crystal Sugar
Co. and remains on the board of Dakota Growers Pasta Co., says
farmers “should not abandon” efforts to own value-added
businesses. USWP was conceived as an “army of small investors.”
Fifty-six percent of the original shareholders were in at the
minimum of $4,800 each, and 85 percent were invested at
$10,000 or less, he says.
“We are going to have our wins, and we are going to have our
disappointments, but we still need to persevere. The alternative
(marketing commodities) is not good enough. We'll be OK, doing
that, but it's not good enough.”
USWP was unusual in two ways - first, that grower-members
invested first, before they knew what they would be
manufacturing, and second, because the primary facility was
located in another region of the nation, which meant it didn't
create local manufacturing jobs. The long-term strategy was that
when the Georgia plant became profitable, the co-op would have
repeated its design in the Southwest and other high-growth
areas in the country. | |
