A conversation with George Smith, president and CEO of NORPAC Foods.
Salem-based NORPAC was founded in 1924. The company makes canned and frozen fruit and vegetable products for dozens of household restaurants and retailers: KFC, Applebees, Taco Bell, Kroger, Costco, WinCo Foods and more.
The food processor is structured as a farmer’s cooperative. It employs 1,500 full time workers and grossed around $400 million this year, down about 10% from a few years ago.
In a conference room at the NORPAC headquarters, the 64-year old Smith, affable and self-effacing, reflects on company highs and lows, global trends driving change in agriculture and why the Oregon strawberry may soon be little more than a Proustian memory. After 38 years with the company, ten as chief executive, Smith will retire on March 31.
OB: So — farewell to all that.
GS: It’s a difficult decision to make. At what point do you decide to leave? I wanted to retire at 62, but stayed with it. Some days I’m excited about it; sometimes I’m intimidated.
OB: What’s your succession plan?
GS: Shawn Campbell, a vice president for Darigold out of Seattle, has been here since last summer as COO. He’s working on the transition to CEO role.
OB: Reflect on a few of the high points.
GS: Working with all the creative, innovative people we have here at NORPAC, and our farmers. It’s also exciting to see our product development efforts.
OB: The lows?
GS: [laughs] Where do you want me to start? We could have been faster to react to the organic movement. There was a fair sentiment in the ag community that it was a fad, and some of that is because it was small, and it was expensive, and there are real barriers to expanding organic. I wish I had been faster to react. Maybe we lost some ground we wouldn’t have had to lose.
OB: How much of your product is organic?
GS: Under 10%. We created a program to incentivize farmers to convert land, and some are jumping on it. They are starting to pick up on that.
OB: During your tenure NORPAC expanded its reach.
GS: We were primarily a Willamette Valley-based cooperative. We still are, but we’ve expanded up in the Columbia River basin. We have a facility in Hermiston; a facility in Washington state at Quincy.
OB: You also partnered with Henningsen Cold Storage on a new state of the art distribution facility in 2014.
GS: Our existing system was at capacity, so our infrastructure needed to expand. While you’re doing it, you improve the technology and engineering. The Hermiston harvest season is very high volume: They freeze in bulk bins, bring them here, where we blend, mix and package and put them in the Henningsen building for distribution.
OB: The New York Times ran a story last month about a new cold storage facility in Tacoma to be staffed by robots.
GS: We don’t have the mass to make that make sense. Robots may happen if the economics work. Warehouses are very expensive.
OB: What about other innovations, in the executive ranks, for example? Chief innovation officers are all the rage in corporate America.
GS: We don’t have a chief innovation officer, but I do want to know what they do. [laughs] But actually, innovation is something NORPAC is going to spend more time on. Innovation involves things we can do to fruits and vegetables to add value. So innovation in our space was adding soups or fruit toppings for pancakes. It’s marketable idea creation. Then someone develops that idea in research and development.
OB: What’s next on NORPAC’s plate?
GS: We’re looking for the next big one. We can grow quinoa and we did. Here in the Willamette Valley, it grows well. We do have a quinoa/ kale product. Does that sound on trend or what?
OB: Kale is on the way out, I hear.
GS: The story of my life. Missed it again. [laughs]
OB: How has your export market evolved?
GS: Most of the Asian market opened in Japan back in the ‘80s and ’90s. It’s gotten a lot more competitive as other countries like Thailand developed their production resources. It’s tough; our exports have declined. The dollar is strong. That’s a barrier as it’s easier for countries to import into U.S. We also have problems with shipping out of the Port of Portland. It adds costs to truck to Tacoma. We’re not big exporters. Under 10% of our product is exported.
OB: The political environment is not favorable to free trade.
GS: We’re a supporter of the Trans-Pacific Partnership. That was a disappointment — that it got summarily dismissed. I’m not sure what will happen to NAFTA — what parts would be tweaked or changed.
OB: Revenue has declined.
GS: The height of the ethanol boom forced up price of grain, which forced up the price of wheat. So then farmers wanted to grow wheat, which forced up price of vegetables. Some of that was passed on to consumers, so that increased our sales at the time.
OB: But NORPAC is holding steady at 220 members.
GS: We admit new farms as farmers retire. We have a lot of legacy farms, a lot of second, third and fourth generation farms. NORPAC is the definition of sustainable farming. We’re nothing more than a group of growers that gather together. One of the tenets of our mission is reliable market access. Farmers pool resources; they borrow money and invest in plants and facilities and we go to market with their products. Everything we make is distributed back to members. We are a true cooperative.
OB: We hear a lot about succession challenges in farming.
GS: I call it a sine wave in agriculture. During the tech boom in the ’90s everyone moved away from farming. But they all came back. It’s something that is always going to be an issue. But the severity of it is going to ebb and flow. Right now, agriculture across the board is not doing very well. So that is causing a different cycle to kick off.
OB: A new farm bill is coming up in the next couple of years.
GS: That will change dynamics across the U.S. The farm bill doesn’t affect us so much here. It’s aimed at big commodities like grain and corn. But it tends to have a ripple effect through whole farm economy.
OB: How do you compensate for swings in commodity markets?
GS: Value added is a big part of our strategy. Some people say you put a vegetable in a bag, and that’s value added. We have a line of frozen soups; we call that value added. We take corn and make corn chowder. Cream of broccoli is a big one.
OB: How are federal immmigration restrictions impacting operations?
GS: NORPAC doesn’t deal with farm labor directly, but it impacts us for sure. There is a shortage of workers at farm level, and that’s been brewing for a number of years. It got more acute after 9/11. Whatever Trump does will only exacerbate existing policies. Oregon minimum wage criteria has also influenced the cost of labor. Now it’s becoming pretty competitive and costly.
OB: What steps are you taking to minimize the impacts?
GS: We’re not relocating a plant to the Midwest because their minimum wage is lower. We’re based in Oregon; we’re here. We have to face the world from here. That’s a blessing and a curse. You have to keep reinventing your strategies as you go on. We devise our strategy around the balls thrown at us.
OB: What strategies are in play?
GS: Crops that require varying degrees of hand labor are going to go away. That’s going to be a natural economic force; it’s too expensive. Strawberries — they are going away. We have 10% of the strawberry volume we had even 6-7 years ago because of lack of pickers and cost of pickers. There’s a niche for fresh, farmer’s market local strawberries. But as a big piece of business, it won’t be here.
OB: What other crops are on the endangered list?
GS: Broccoli, cauliflower, although there are efforts to automate on that. Zucchini; yellow squash. It’s harder and harder to source those crops. We hope our membership can grow it.
OB: Back in the day, you picked beans, I hear.
GS: I grew up in the area. I rode my bike out to the field every morning. My parents made me do it, but I got enough to buy a go cart or something. My kids — I put them to work out there much to their chagrin. They moaned and groaned about that. But those opportunities have gone away, just like my strawberry example. History just gone away.
OB: Do you eat a lot of vegetables?
GS: Yes. I heard today — someone came out with a study that said you really need ten servings of vegetables a day. That’s what I like to hear. [laughs] NORPAC grows 35 different kinds of vegetables. We do some interesting ones. I like a lot of color: carrots, green beans, red peppers, I like to saute them a little bit.
OB: Back to your retirement plans.
GS: I’m looking forward to the next 92 years. [laughs] We want to travel, to Europe. I may do some school board consulting. I’ve never not worked.