William G. Gisel Jr. remembers walking into a Niagara Street building in the late 1980s that Rich Products was considering buying.
The property was in financial distress, and still had tenants including an auto parts store, a rust-proofing operation, and a metal fabricator. But the food products company saw potential for more space for its research and development work, said Gisel, now the chief executive officer of Rich. The company bought and transformed the building, adding space to its headquarters complex and creating a gathering spot commonly called the Atrium.
Rich has evolved over the past quarter century. The family-owned business no longer manufactures products in Buffalo, but has bulked up its corporate operations here. The company has a presence in 112 countries, operates nine R&D centers around the world, and records annual sales of $3.3 billion. To reflect its growth, the company has modernized the Atrium and created a new “customer innovation center,” an $18.5 million investment that is substantially complete.
Gisel joined Rich in 1982 and was named CEO in 2006. He reflected on the changes and how its international growth flows back home.
Matt Glynn: What does the investment in your property mean for Niagara Street?
William Gisel: We’re very pleased with the mayor’s and the city’s focus on Niagara Street, on this corridor, and the realization that it’s a high opportunity area for the future of the city. When you think about a space that overlooks the river and faces Canada, there’s just so much to like about this. And one of our goals was to make enough of a commitment to this space that would draw others to believe that this is a good place to be for the long term. And so we’ve seen Resurgence Brewing next door. That’s a great development that hopefully is the beginning of several more. There’s nothing that we would like more than to see a real upsurge in interest in Niagara Street as a home for new businesses.
MG: Which markets are performing the best for Rich Products right now?
WG: Our U.S. business is doing very well. The growth rates in the U.S. are fairly low, as they are in many industries. The food industry is not growing quickly right now, along with the rest of the economy. We’re doing much better than the industry growth, so that’s a positive sign. We have a new business that we acquired a little over a year ago, the F’real milkshake business, and that’s growing very, very well. We’re on track to sell somewhere near 50 million milkshakes in 2014. We’re gradually rising in the ranks of the top sellers of milkshakes in the country.
Our business in Asia continues to be very strong, more than double-digit growth rates across the region, led by excellent growth in China. We continue to expand into tier-three and tier-four cities in China. There’s close to 300 cities in China with more than a million people, so there’s an enormous market that’s still coming into its own, and we are very much on the forefront of that market.
MG: Are there other countries you would still like to expand into?
WG: There definitely are. We’re in the Middle East, but we’re not in all the Middle Eastern countries. You have to be realistic about some of the constraints that exist in these places. We started off our international business in the late ’80s, and our major criteria at that time were a simple model of access and appeal. What markets can we have reasonable access to, based on duty restrictions or food laws or other things, or infrastructure? And appeal, as to what markets would have an appetite for some of the things that we’re able to offer. And just by using those two simple criteria, we’ve been able to consistently evaluate opportunities in different places around the world.
MG: How does your international growth flow back to Buffalo?
WG: Well, you’re seeing it. This place here is a headquarters that is geared to support a global corporation. If we were not a global company, we wouldn’t need the kinds of capabilities that we have constructed here. So what this really represents is a commitment by the Rich family to Western New York for a longer-term presence in this area. We could put these things anywhere in the world; we have nine R&D centers. But making the decision to do it here is really the family’s very strong commitment to Western New York as the headquarters of the company for the future.
MG: How has the economy treated Rich Products over the past couple of years?
WG: Since the financial crisis in 2008, the recession, that affected all companies everywhere, it really affected consumption. So everyone had to adapt to that. We in the food industry at the same time were very affected by high commodity prices. Raw material costs went up considerably during that period of time. We weathered that in very good shape and we’ve continued to add momentum ever since. So we have been performing very well for the last several years.
Part of the reason we were so effective in weathering it is we have had a greater presence in emerging markets than most of the other food companies in the U.S. Earlier than most, we made commitments in Asia, in Latin America, in Africa, and therefore have this strong base of business, strong foundation in emerging markets, when they were growing much faster than the U.S. Over the last couple of years, those economies have softened quite a bit, many of the emerging markets. And the U.S. has started to pick up a little bit. So what we’re starting to see now is a much more balanced but less growth-driven business climate.
MG: The company had an issue last year with a national E. coli outbreak linked to a Rich plant in Waycross, Ga. What was the outcome?
WG: Those types of issues happen from time to time in the food industry, and as an industry, the attention to food safety has never been higher. And it is higher in the U.S. than in any country in the world. Rich’s reflects those values. Food safety and the safety of our associates are the two most important things that we dwell on with all of our people. So when something like this happens, you know it’s a possibility because we’re dealing with raw materials that are coming from so many different places.
The most important thing is, how do you react to it? What we did is we got out in front of the issue. We worked very closely with the health authorities at the state and federal levels. We instituted recalls voluntarily early on to make sure we eliminated any possible risk. The reason we did that is because identifying the specific source of something like this is really like finding that proverbial needle in a haystack. And we did not want to wait to see if we would find that needle before taking action to assure that there would be no ongoing issues.
In the end, there were no specific sources that could be identified, and that was not a huge surprise because of the way we process food, and the ingredients that come through, and it’s harder to go back and do research into the past of what happened in a circumstance like this.
We ended up deciding to close the plant, not because of safety issues, but because of a change in the decision on the way we would produce these products and a change in a bit of the portfolio. And from an economic standpoint, it became a facility that was not viable going forward. So that facility has been closed for some time now, but the overall product line continues to be very much in our portfolio and doing very well.