McCain Foods Limited

107 Main Street
Florenceville, New Brunswick E7L 1B2
Canada
Telephone: (506) 392-5541
Fax: (506) 392-6062
Web site: http://www.mccain.com

Private Company
Incorporated: 1956
Employees: 20,000
Sales: $4.62 billion (2005)
NAIC: 424420 Packaged Frozen Food Merchant Wholesalers; 311412 Frozen Specialty Food Manufacturing; 311411 Frozen Fruit, Juice and Vegetable Manufacturing; 311423 Dried and Dehydrated Food Manufacturing

McCain Foods Limited is the largest processor of frozen potatoes in the world. McCain has a business presence in 110 countries on six continents and has been expanding its empire steadily over the past 50 years. In addition to its French fry production, McCain has diversified its product lines to include frozen pizzas, juice, and an array of gourmet/ethnic frozen appetizers and entrees.

1956–69: THE BEGINNING OF A FRENCH FRY EMPIRE

Frozen foods were a relatively new concept in 1956 when Allison and Wallace McCain introduced their new business in their native Florenceville, New Brunswick, Canada. The two set up shop on some old pasture land but it was only a short time before their frozen potatoes and other products were found in many freezers throughout the world.

The company's beginnings were modest. McCain Foods employed 30 locals to process, freeze, distribute, and sell its goods. The 1950s saw a surge of growth in partially processed convenience foods. Space-aged technology influenced the modern household. Frozen vegetables, canned soups, instant breakfast drinks, and ready-made meal options with their efficiency and modern panache held wide consumer appeal.

In a few short years steady growth led to expanded market options and the Canadian company looked to its British allies overseas to buy its products. McCain's "chips" gained a foothold in the United Kingdom in 1965. The British campaign was accompanied by a quirky advertising plan that made McCain fries a household name.

By 1968 the company was ready to expand to another English-speaking member of the commonwealth and McCain Foods set its sites down under on Australia. McCain also created subsidiary McCain Great Britain Ltd. in 1968. The following year, McCain opened its first British French fry production facility in Scarborough, England.

McCain Foods forged its way south in 1971 when it entered the U.S. market. The 1970s brought about significant changes in the American workplace and record numbers of women went to work outside the home for the first time. Convenience foods were not only sought after for their modern appeal but for their time-saving functions as well. McCain was well poised and capitalized on this newly emerging market.

Continuing to grow in the southern hemisphere in 1971 McCain Foods acquired an existing French fry processing plant in Doylesfood, Australia. The newly acquired plant allowed the company to produce and sell its product without overseas shipping. The same year McCain built a new plant on site at Florenceville and added an additional plant in Grand Falls, New Brunswick.

Demand in Britain led the company to double the capacity of its operation in Scarborough and growth in its European sector brought company leaders to the Netherlands soon after. Belgium, France, and the Netherlands had long established themselves as countries where "Frites" were traditional foods. Fried potato stands were a common sight throughout Belgian city streets where tourists and locals could purchase paper cones full of crisp fries smothered in mayonnaise. Within two years, from 1972 to 1973, McCain Foods added to its holdings and purchased plants in Werkendam and Lewedorp, the Netherlands.

Expansion and acquisition trends continued throughout the decade. In 1975 McCain bought a Washburn, Maine potato processing plant; a year later it purchased another U.S. plant, in Easton, Maine.

In 1976, McCain turned back to Europe, buying a French fry production facility in Whittlesey, England. A third Dutch facility would follow in 1978, this time in the town of Hooffddorys.

McCain took a gamble on a newer frozen food in 1976 when the company built a frozen pizza production facility at its Grand Falls, New Brunswick location. The company made frozen pizzas one of its top priorities in the last part of the 1970s. McCain built pizza production businesses in Doylesfood and Ballarat, Australia; Scarborough, England; and Manitoba.

1980–2000: EXPANSION, ACQUISITION AND A FAMILY FEUD

McCain bought Sunny Orange Juice Limited based in Toronto, Ontario, and entered the frozen beverage business in 1980. In subsequent years the company would increase its frozen juice holdings. In 1983 McCain bought a new juice processing plant in Grand Falls, and in 1987 the company went on to purchase another Canadian juice operation in Calgary.

In addition to the company's new interest in juices, McCain diversified its Australian frozen vegetable business by buying a processing plant for vegetables other than frozen potatoes. McCain further diversified by investing in a frozen fish processing plant in England under the Tater Meal label.

McCain opened a French fry potato processing plant in Haines, France, in 1981 and by 1987 the company added another French plant in Betheune. The decade's additional plant openings included the purchase of a Belgian frozen food company, Frima Viking, in April 1986. Frima Viking, the frozen foods subsidiary of Tractionel, operated plants in Ostend and Grobbendank, Belgium. McCain also developed its operations in South Africa and the United States. McCain bought an existing potato processor's facilities in Othello, Washington, and Clark, South Dakota, in 1988.

To keep up with increasing European demand McCain spent $33 million doubling the production capability of its processing business in Haines, France. The following year capital improvements were made to its Othello, Washington, plant at a cost of $35 million.

If the decade of the 1980s was known for acquisition, the 1990s was highlighted by a series of plant retoolings and expansions. The McCain plant in Prince Edward Island, known for its specialty potato products, was given $36 million in improvements.

The company bought New Zealand-based Alpine Foods Limited in 1990, renaming it McCain Foods New Zealand Ltd.

A fire in 1990 near the company headquarters in Florenceville meant an additional outlay of $25 million in rebuilding costs but resulted in a state-of-the-art facility at the headquarters site. In addition to the production site at Florenceville, McCain added a new $2.4 million data facility.

COMPANY PERSPECTIVES

Today McCain Foods is a global leader among food processors. It makes nearly one-third of the French fried potatoes produced internationally and is known for appetizers, pizza, vegetables, desserts, entrees, oven meals, and other quality frozen foods on six continents. The remarkable success of McCain Foods is built on cutting edge agronomy, superior technology and a global workforce sharing a unique culture and vision.

A significant rift between joint CEOs and brothers Harrison and Wallace McCain developed in the early 1990s. The brothers had worked out a plan to smooth the transition when the two retired at age 75, or in the event that one or both of the two died. The plan failed when Wallace unilaterally appointed his son to lead the company's U.S. subsidiary. This action led to a meeting of the directors and the firing of Wallace as co-CEO and president. A court battle ensued and the fight over the future of the privately held business turned ugly. In an article in the Financial Times, Bernard Simon wrote, "Harrison and Wallace thought they were moving the succession process along by giving their sons and nephews an increasingly active role. But it is hard to escape the conclusion that the participation of so many McCain family members in the business hampered rather than helped the process. Harrison says in an affidavit, 'an atmosphere of distrust, intrigue, and maneuvering has existed.'"

The future direction of the company leadership was left up to the courts. A decision in February 1995 upheld the decision of Harrison McCain and the directors to remove Wallace McCain from his position as co-chief executive. Wallace still held a one-third stake in the company and argued for a public offering of McCain stock. The brothers could not reach an equitable agreement regarding a buyout of shares. Wallace McCain went on to take a position with Toronto-based Maple Leaf Foods.

McCain Foods began its South American debut in Argentina. In 1994 the company presented plans to build a potato processing facility in Balarce, Argentina. The plant opened its doors two years later.

The company acquired Everest Foods PLC of Womourne, England, and Growers Foods Limited of Hasting, New Zealand, in 1996. The following year McCain Foods Holland B.V. spent $41 million on a French fry line expansion project at its Lelystad plant.

One of McCain's largest acquisitions also occurred in 1997 when the company bought the Ore-Ida Food Service frozen French fry and appetizer business for approximately $500 million from the H.J. Heinz Company. The buyout included a major production facility at Burley, Idaho, and four other U.S. plants. Several foodservice brands were part of the transaction, including Ore-Ida and Tator Tots brand potatoes, Rosetto frozen stuffed pasta, and Bagel Bites frozen bagel snacks.

The company introduced a new line of six varieties of snack strips in American Tex Mex and Cajun cuisine flavors. The products were designed to be deep fried and served with dips or as a side dish.

The McCain network expanded into central Europe in 1998 with the construction of a $78.6 million French fry production plant in Wroclaw, Poland. In addition, a host of expansions characterized the year. Besides the company's entry into Central Europe, a third fry plant was built in Matougues, France. The renovated fry line in the Netherlands opened and a $70.8 million expansion was slated for the Easton, Maine business. Further growth was added in a $93.9 million facility in southern Alberta.

Towards the end of the decade McCain had become one of the largest producers of frozen potato products worldwide. The company spent 1999 acquiring assets of Farscheure d'Europe in Vic-sur-Aisne, France, and expanding production with a $68.4 million addition to its Argentinean plant.

McCain Foods made a decision to refuse to buy genetically modified potatoes in November 1999. Harrison McCain commented on the so called "Franken foods," saying, "We think genetically modified material is very good science but at the moment, very bad public relations." He added, "we've got too many people worried about eating the product and we're in the business of giving our customers what they want, not what we think they should have."

KEY DATES

1956:

McCain Foods is incorporated.

1965:

McCain enters the British market.

1968:

Company begins marketing in Australia.

1969:

Company opens U.K. facility in Scarborough.

1971:

Company enters U.S. market.

1976:

McCain begins producing frozen pizzas.

1997:

McCain purchases Ore-Ida Food Service business.

2000:

McCain Foods builds $7.2 million potato processing technology center.

2002:

Wong Wing Foods is acquired by McCain.

2005:

McCain builds $18 million processing plant in India.

McCain embraced the new century with entry into South Africa. The company acquired a French fry plant east of Johannesburg and two frozen vegetable plants nearby. McCain Foods Canada purchased Aloro Foods Inc. of Mississauga, Ontario, in order to increase its frozen pizza product division. The year 2000 also brought plant openings at the newly renovated Easton, Maine expansion and the state-of-the-art French fry plant in Coaldale, Alberta. Capping the year, the company built a $7.2 million potato processing technology center. This research facility illustrated the company's commitment to research agrarian methods and practices devoted to the potato. The facility grew out of the company's interest in developing ongoing research to grow better potatoes with more efficient and economically affordable farming.

In 2001 McCain Foods worked another deal with the H.J. Heinz Company and acquired its frozen foods company in South Africa. The company also bought Heinz Watties Australia for $33 million.

The company broadened its inventory of frozen entrees and appetizers in 2002 when it acquired ethnic Chinese frozen food company Goodman, Fielder International Taiwan from Goodman Fielder Ltd. of Australia. The company also bought Wong Wing Foods of Montreal in 2002, adding Chinese entrees, egg rolls, and dim sum to its Canadian operations.

Business and industry began flooding into China and India in the early part of the 2000s. McCain broke into the Far East in 2004 when it announced plans to open a $43.3 million French fry processing facility in Harbin, Heilongjiang Province, in northeast China.

The following year the company began the process of opening an $18 million plant north of Ahmedagad, Guijarat Province, in India.

McCain Foods Limited stood out as the premier producer of frozen French fries and a growing competitor of ConAgra and other food giants. Its diversified product lines and global presence as well as solid business agreements with McDonald's and various foodservice vendors made it one of the most profitable privately held businesses to date.

PRINCIPAL SUBSIDIARIES

McCain Foods US, Inc.; McCain Great Britain Ltd.

PRINCIPAL DIVISIONS

McCain Foods Canada; McCain Foods Food Service Products Division.

PRINCIPAL COMPETITORS

ConAgra, Inc.; J.R. Simplot Company; Kraft Foods Inc.

FURTHER READING

Burghardt, John, "Viewpoint; Will Maple Leaf Foods Go the Way of McCain," Strategy, May 29, 1995, p. 19.

Chavda, Dharmendrasinh, "Specially for French Fries," Economic Times of India, December 3, 2001.

Cheeseright, Paul, "Tractionel Sells Frozen Foods Unit to McCain," Financial Times, April 24, 1986, p. 36.

"Giant McCain Poised to Ban Genetically Altered Potatoes," Toronto Star, November 29, 1999.

"Heinz Agrees to Sell Its Frozen Foodservice Business to McCain," Canada Newswire, March 14, 1997.

Hemstasilpa, Sujintana, "McCain Aims to Lead Thai Market," Bangkok Post, September 14, 2005.

"McCain Aims for Strip of Snacks," Food Manufacture, January 1997, p. 33.

Simon, Bernard, "Aged Enfants Terribles-The McCain Brothers Seemed to Have the Ideal Succession Plan but They Have Paralysed the Company by Falling Out," Financial Times, September 20, 1993, p. 14.

――――――, "Divided Family Set to Vote on McCain's Future," Financial Times, September 13, 1994, p. 30.

――――――, "Fresh Move in Frozen Foods Feud," Financial Times, February 13, 1995, p. 21.

Stern, Avi, "Fifty Jobs Cut at Food Products Firm in Appleton, Wisconsin Area," Post-Crescent, November 9, 2001.

Van Alphen, Tony, "Farm Groups Split Over Free Trade with U.S.," Toronto Star, September 28, 1988, p. F1.