Processor of the Year: HP Hood; New England's Leading Dairy Going Coast to Coast with ESL

Dairy Foods, Dec, 2001 by David Phillips

Under its third set of owners in more than 150 years, HP Hood has established a connection with the Boston Red Sox, the legendary American League rivals of the New York Yankees. Without putting regional rivalries aside, Hood recently joined the national league, not in baseball but in dairy products.

In August Hood became the exclusive processor and distributor of Lactaid [R] products nationwide.

For the past ten years, Hood has had the Lactaid contract for the East Coast. Until August, Suiza subsidiary Morningstar Foods held the license in the West. With the purchase of Pacific Coast Brands, a marketing and sales company that had worked with Morningstar, Hood reached an expanded licensing agreement with Lactaid owner McNeil Consumer Healthcare. With seven plants and its growing ESL capabilities, the Chelsea, Mass. processor can now handle all 50 states for McNeil, marketing what may be the nation's most successful milk brand with sales of about $150 million nationwide, as well as ice cream and cottage cheese.

What this means for Hood is that it is now demonstrating a production, distribution, and sales network that will be capable of marketing other national brands.

Not surprisingly, the company is tickled by all this.

"We are in fact, since August 1st, a national company, albeit with one set of products," said John Kaneb, Chairman of HP Hood, while discussing how 60-day shelf life has enabled Hood to grow. "Hood has really become two companies -- one that continues to market its own super-regional brand in the northeast and along the east coast, and one with the capabilities to market other licensed brands on a national basis."

Hood has been able to make good on the Lactaid deal by using its two ESL plants in Oneida N.Y. and Winchester Va., for milk, and its plants in Vernon, N.Y. and Suffield, Conn. for cottage cheese and ice cream. It has also combined its own considerable sales and distribution network with infrastructure acquired from Pacific Coast Brands.

"We are staffed and ready to provide superior service to our customers and our licensors nationally. Hood has a direct organization of well over 150 people in addition to a broker network," said Jim Walsh, v.p. of sales and licensed products marketing.

Walsh absolutely expects to garner more national licensing deals, and points out that current licensing agreements with Lactaid, Nestle and Land 0' Lakes account for more than 30% of the company's volume.

"Hood's sales model is unusual. In addition to supporting the strong regional Hood brand, we are also focused on licensed brands and the challenge is to link our manufacturing capabilities with companies interested in licensing with us nationally," Walsh added.

The Lactaid deal is just the latest in a number of developments that have kept the company top of mind in the industry. In 1999, Hood launched a new line of reduced fat milks called Simply Smart. The first of its kind in the United States. (See related story page 26.)

"We developed Simply Smart Milk to solve the watery taste problem of low fat milk," said Mary Ellen Spencer. v.p. of Hood brand marketing.

Simply Smart received a "Best of Show" award at the IDFA SmartMarketing conference in 2000.

In addition, Simply Smart Milk was launched through the Answer Mom, an advertising campaign designed to educate and create a dialogue with consumers about Hood products and nutrition. The campaign, with its link to the Hood's Website, reinforces the company's position as New England's dairy expert and consumer advocate and also won an IDFA award in 2000.

"It is Hood's commitment to innovation and high product quality standards that makes products such as Simply Smart Milk and Peak Treasures successful," says Peggy Poole, v.p. of research, development & quality control.

Perhaps the most spectacular story from Hood came in Oct. 2000 when the company unveiled its new $100 million plus facility in Winchester, Va. The all-ESL plant is designed to run 45 million gallons of milk a year, much of it devoted to licensed products like Lactaid, Nestle's NesQuik, and Land O'Lakes. The plant was designed to allow more lines to be added and that expansion is now underway.

An Integrated Approach

One of Hood's biggest success stories involves an integrated product makeover centered on a new package. In 1997 Hood was the first in the New England region to offer vitamin C enriched Hood milk in a unique opaque, plastic LightBlock Bottle [R], designed to keep harmful light energy out and protect the flavor and nutrients in the milk.

Because exposure to light diminishes vitamins and affects milk's flavor, Hood set out to develop a plastic container that would keep light out. The project began with a desire to provide consumers with the best tasting, most nutritious milk possible. Then Hood had to measure consumer interest in the LightBlock idea. After all, there was no point in fortifying milk only to have much of the nutrition dissipate after a day or two in store coolers.

"The thing we always try to keep paramount in our development efforts is the consumer," Spencer says. "Innovation for the sake of innovation is not a path you want to go down. We do a lot of testing of products prior to launch to make sure they meet a real consumer need," Spencer says.