The age of transparency has arrived in food and beverage manufacturing, and the reverberations are being felt throughout the industry.

The operating environment for food and beverage companies is undergoing tremendous change. From the way organizations validate their food safety and plant security systems to the way they respond to key customers and the public, manufacturers are coming to grips with unprecedented levels of accountability. How well companies adapt to these changes will determine whether they thrive or saddle themselves with an unsustainable business model.

That was the unifying message at the 2012 Food Automation & Manufacturing Conference and Expo, the four-day annual event sponsored by Food Engineering that drew more than 200 industry professionals to Fort Myers, FL. They came to discuss those changes and get expert guidance on a host of issues, from coping with the Food Safety Modernization Act (FSMA) to improving workplace safety. Over the course of the program, participants heard from 33 speakers on key challenges and opportunities facing the industry.

While many companies have struggled with the meaning of manufacturing sustainability, speakers made it clear that sustainability goes well beyond energy conservation and environmental initiatives. It even extends beyond corporate social responsibility (CSR); this is the age of transparency. Keynote Speaker Michael J. McCloskey provided a perspective on what that means and the stunning fall from grace that can occur if a company fails to take the offensive in telling its own story.

McCloskey is the founder and CEO of Fair Oaks Farms, a 30,000-acre dairy operation in rural Indiana that includes the Fair Oaks Farms Adventure Center, “the Disneyland of dairy,” that each year hosts 500,000 visitors from the ranks of the 98 percent of Americans not involved in agriculture. A global player in international agribusiness, McCloskey started the adventure center in 2004 to serve as the transparent face and public education vehicle for an industrial dairy with 30,000 milking cows.

McCloskey was among California’s industrial-dairy pioneers in the 1980s, a time when groups critical of industrial practices were gaining traction and projecting a voice that now reverberates through social media and over the Internet. “Other people began telling our story,” he recalls, and many food companies “closed their doors” rather than engage the critics. At Fair Oaks, open doors have been the rule since 1997, and employees are trained to speak frankly and honestly to an urban audience. Some visitors may dislike GMO feed, but they leave the dairy with a clear understanding of its importance in reducing the need for pesticides and its role in producing enough milk to feed a growing global population. “You create trust and then back it up with science,” McCloskey says.

In contrast, McCloskey notes the calamitous effect of “pink slime” on the reputation and business of Beef Products Inc., the leading producer of lean, finely textured beef (LFTB). Aided by trade groups, the company has fought back against the slime label, but the war already may be lost because no engagement occurred earlier, he says. “If we don’t already have a script and are preaching it daily,” McCloskey warns, “this is how quickly things can get out of hand.”

Despite Fair Oak’s proactive message of environmental stewardship, animal welfare and wholesome products, “I’m still vulnerable to things like a pink-slime attack,” he allows. But studies indicate 98 percent of his visitors “leave with a fantastic attitude” about industrial farming.

Best practices in safety & security

McCloskey’s themes echoed through several other presentations that considered sustainable production and corporate social responsibility. Like McCloskey, Dave Haft, senior vice president, sustainability, productivity and quality at Frito-Lay, emphasizes the need for a clear business purpose in CSR. Projects that are more glamour than good practice are not worth pursuing, he suggests. The PepsiCo division carefully weighs the return on all sustainability initiatives, and “you better have a credible, tangible sustainability program when you’re talking to Wal-Mart,” Haft cautions.

Frito-Lay wavered from the ROI guidelines in implementing its near net zero project in Casa Grande, AZ (see “Sustainable Plant of the Year,” Food Engineering, November 2011). Three-quarters of incoming water is treated and returned for processing use, and the plant is almost off the electric grid and gas pipeline. “The returns on Casa Grande were not great,” Haft concedes. “On the water system, it was a learning experience.” A combination of membrane bioreactors, charcoal filtration and low-power reverse osmosis technology produces effluent that rivals bottled water in purity. But an organization must use technology before it can master it, and the purification systems in Arizona are being installed in four plants in Mexico where water availability threatens to close them. “What would it cost to move those plants?” he asks rhetorically. “$100 million?”

Transparency of production records and food safety defenses is the essence of FSMA, arguably the most significant regulatory change since the Food Purity Act of 1906 and the Food, Drug & Cosmetics Act of 1938, contends Kurt E. Deibel, vice president, quality & food safety for H.J. Heinz Co. Scientific validation of processes and responses is the heart of FSMA, and “it’s a lot more involved than people realize,” Deibel warns. The entire Heinz organization is preparing for FSMA by seeking “transparency and understanding of risks throughout the supply chain,” he says. Mock regulatory inspections have been staged, food safety training documents have been updated, and the efficacy of every safety protocol has been scrutinized. For example, a risk assessment of ketchup production was conducted, despite a dearth of food safety problems in a century of production.

About one-quarter of food companies’ capital budgets are devoted to food safety intervention, Deibel estimates, and organizations that do not have their production records in order may need to spend a larger share to comply with FSMA. The industry will need support from suppliers, possibly with some sort of certification or disclosure of potential contamination points in equipment. In the meantime, manufacturers need to “validate, validate, validate,” he says. “Records contain the information you need to provide the level [of food safety] that the FDA is looking for.”

FSMA also addresses plant security, and both manufacturers and regulators are feeling their way in terms of systems and expectations. “Food defense is brand new to the industry,” notes Bill Ramsey, corporate director of security at McCormick & Company Inc. Food security guidelines began to emerge from FDA a decade ago, soon after US military forces discovered documents in Afghanistan outlining various Al Quaeda food contamination plans. FSMA also requires companies to address economically motivated adulteration and to adopt work rules and procedures to address security threats.

Ramsey advises manufacturers to address basic needs such as perimeter security and worker vetting before considering the likelihood and seriousness of attacks on vulnerable activities, such as bulk ingredient receiving and storage and processes such as coating, grinding and rework. Patience also is a virtue when dealing with inspectors and customers who are unsure what they should expect from your organization, he says. Customers are sending McCormick security questionnaires, some detailed and others superficial. Recalling a questionnaire that asked if McCormick’s plants have moats for protection, Ramsey jokes, “We would have, but the alligators were too expensive.”

Sustainability best practices

Created by the Packaging Machinery Manufacturers Institute (PMMI) and the Grocery Manufacturers Association (GMA), the Alliance for Innovation & Operational Excellence is composed of processor and solutions supplier members who work to address key issues facing the industry. One of the alliance’s working groups is creating a resource manual for food professionals who are thrust into a leadership position in their firms’ sustainability initiative.

“Sustainability drives a sense of transparency,” suggests Jarod Cook, director-environmental services at Del Monte Foods and an alliance member who has helped identify best practices on initiatives under the sustainability umbrella. “You’re going to have to be prepared for the ugly as well as the good news” when establishing KPIs and performance measurements for waste reduction, greenhouse gases and other metrics. Staff involvement also is a challenge, and to address it, Del Monte recently established a sustainability recognition and rewards program.

Best practices in facility design are outlined in the Green Building Council’s LEED program, says Paul Halberstadt, senior director-energy and environment at ConAgra Foods’ Lamb Weston division. The company attained platinum LEED status for a frozen potato facility built in Delhi, LA, and while LEED may have added as much as $1 million to project costs, “it’s almost like a best management practices to consider,” Halberstadt suggests.

Helping offset the added cost are the $20 million in projected energy savings expected at the plant, according to Halberstadt. Harder to measure are the goodwill and additional business the project generates from customers, though the interest they express suggests there is a halo effect. “There were some step changes in the way things were done,” he says. “You have to have the guts to ask, ‘How can we do this better?’”

Whether food companies embrace transparency or are shoved toward it, they are operating in a business environment that demands accountability and new approaches to leadership. 

Continuous improvements’ hits and pitfalls
Between black belts, high-performance work teams, A3 reports and 5S methodology, there is no shortage of formalized programs for continuous improvement (CI). Execution dictates how successful any of them will be, and four continuous improvement experts from leading food companies shared their insights on how to get the most from those initiatives and some of the dangers to avoid.
A “grassroots approach” kicked off T. Marzetti Co.’s efforts in the 1990s, recounted Tom Deschler, vice president-continuous improvement, though “it really helps when it’s driven from the top down.” Marzetti’s president proclaimed CI a core competency last year, and that energized a host of initiatives. Staff commitment also is critical, and Deschler says buy-in was assured “when we said, ‘We can’t ask customers to pay for your pay hike.’” Raises are funded through efficiency savings.
Diageo North America’s CI focus also traces to the 1990s. A commitment to world-class performance “starts with the operator,” insists Sharri Hall, the spirits company’s director of manufacturing excellence. In recent years, daily performance meetings give operators an opportunity to review production issues on the preceding shift and to write reports identifying needed actions. “We want them [operators] to hold us accountable for solving problems,” she says, and that frontline input keyed a 21 percent OEE improvement in the last fiscal year.
Problem-solving and people skills are necessary. Supervisors must be receptive to give-and-take with subordinates. Before Glanbia USA began its lean journey, systems that “were built on command and control” were prevalent, and some supervisors were unable or unwilling to listen to workers, recalls John Mutchler, executive vice president. Those supervisors no longer are with Glanbia, and in the last 24 months, the company has realized $11 million in continuous-improvement savings at three Idaho plants.
The Boston Beer Co. is riding the crest of the craft-beer wave, and growth can obscure the need for continuous improvement, acknowledges Tom Lance, vice president of operations. “We don’t want to name it [continuous improvement], we just want to do it,” says Lance. The brewer avoids formal trappings and encourages staffers to set aggressive improvement goals in all areas. As a result, he estimates the firm has reduced supply chain costs by $50 million in the last six years.