Hood unveiled: H.P. Hood Inc. readies plans for an ESOP, the final step in a multifaceted restructuring program - employee stock ownership plan

Dairy Foods, Oct, 1993 by Gail Rosenbaum Doeff

"You've got to convince |the employees~ that change has to take place, and that it can be done," Keller explains. "Because the minute you start |working toward change~ you'll find some people saying 'We can't do that!' and if you can't convince them that you can, you have to change the person. It's a painful process."

Necessary divestitures

Another difficult measure was ridding the company of operations that did not perform adequately. "Sometimes the best way to make money is to quit losing it," Keller notes. Hood sold its central New York fluid milk business to Upstate Milk Cooperatives Inc., Leroy, N.Y., in November 1992. Under the agreement, Hood now licenses the Dairylea brand name for fluid milk in Central New York to Upstate. This sale was followed by significant investment in the Oneida and Vernon, N.Y., plants. In May 1993, Hood sold its struggling Empire Cheese business, formerly known as Cuba Cheese, Cuba, N.Y., to Great Lakes Cheese Co., Newbury, Ohio. Previous divestitures included a foodservice juice processing facility in Florida and joint venture ice cream business in Alabama and Texas. In retrospect, Hood had overextended itself and was attempting to manage too many diverse operations.

"You can't be all things to all people," Keller says emphatically. "You've got to ask yourself, 'Will I ever make any money, can I ever make any money at |a particular business~?' If you draw me a scenario where the only way to make money is for my competitor to die, that's not a solution." Needless to say, the efforts to divest consumed time and energy.

"When you're trying to sell unprofitable operations, you spend all your damn time at it, and you're not generating any bucks," Keller says ruefully. Hood was profitable in fiscal 1993 (ended June 30, 1993) from continuing operations, but Keller plans even greater improvement in fiscal 1994.

Growth and expansion

The sluggish New England economy has caused the company to become creative in its expansion plans. Through demographics and no fault of its own, the outlook for Hood's fluid milk business in New England is flat. "Per capita consumption is flat, population is flat, so sales available to us are flat," Keaveny explains. "That's created a very competitive environment: It's not growing, there is excess capacity, and the downward pressure on pricing has been severe." Hood's strategy is to become even more efficient by pursuing further increases in productivity, to continue lowering its fixed costs, and "to remain as the viable competitor in the Northeast," Keaveny says. Hood also plans to spend approximately $37 million on advertising and promotion in fiscal 1994, up from $33 million in 1993, to support all its branded dairy products, which in addition to milk include cultured products, frozen desserts, eggnogs, creams and juices. The company's ice cream and other frozen desserts have shown steady growth trends, and its market shares reached all-time highs in the summer of 1993. Hood brands are ranked either No. 1 or No. 2 in 17 of the 22 categories in which they compete.