The Ice Man Cometh on Strong Once Again : Union Ice on Solid Footing After Near-Liquidation
Generations of Californians have watched the red, white and blue shield of Union Ice Co. roll by, emblazoned on the side of horse-drawn wagons and a succeeding line of trucks carrying the company’s frozen product.
But after surviving the twin indignities of the home refrigerator, which nearly wrecked the ice industry, and a price-fixing consent decree, which nearly wrecked Union Ice’s business, the state’s oldest ice maker almost melted away under new owners in the early 1980s.
Now, Union Ice is trying to come back in from the cold, armed with a new marketing focus and a string of acquisitions.
“Slowly but surely, we’re growing again,” said H. G. Richard Williams, Union Ice’s new president. “Our mission is to be the finest refrigeration services company in the state of California.”
In these days of automatic ice makers and mini-refrigerators, it is difficult to remember the time when the 105-year-old company loomed large in the state’s business community. Union Ice today is much different from the giant that once ruled the state’s ice industry.
For one thing, it has been based in Los Angeles for only two years. During most of its life, Union Ice called San Francisco home. An early headquarters building even burned down in the fire that followed the 1906 earthquake.
What’s more, Union Ice now is less than half its peak size. The company, which is privately held, expects to reach sales of about $20 million this year, nearly equally divided between its ice and cold storage divisions, Williams said.
In the 1940s, Union Ice was posting annual sales of between $40 million and $50 million, and “back in those days, $40 million to $50 million was tremendous,” Williams said.
“The Union Ice Co. was like a utility,” he said. “It was like turning on your electric lights. You needed ice to keep your food chilled.”
Nowadays, Union Ice sells the cold stuff--80,000 tons of it last year--to restaurants, bars, food processors, sports arenas and as bagged “party ice.” Some of it even ends up in concrete to slow the drying process on hot days.
The cold storage warehouse side of the business is “like a hotel for food products,” both fresh and frozen, Williams said. The company also quick-freezes a variety of products, from berries to burritos, in a “blast freezer,” where temperatures drop as low as 40 degrees below zero.
The history of Union Ice, as recounted in the company’s promotional literature, mirrors the history of California.
The firm can trace its earliest roots to 1868 when Boca Mill & Ice Co. began the first commercial ice production in California on a 30-acre pond in the Sierras. Its product, the company boasted, was “good mercantable ice, free from deleterious substances not less than 10 inches thick.”
Union Ice was founded in 1882 by Edward W. Hopkins, a nephew of pioneer businessman and railroad tycoon Mark Hopkins, after Boca and four competing ice companies decided to end a fierce price war by forming a single delivery firm.
Six years later, Union Ice bought Boca Ice to assure a supply in the face of still more competition. The company continued to grow, buying out many of its competitors and building ice manufacturing plants rather than relying on the harvesting of pond ice.
Union Ice played a major role in the growth of the state’s agricultural industry, pioneering techniques in food preservation, quick-freezing and cold storage.
Union Ice lays claim to the first refrigerated railroad cars, which were cooled through a combination of block and crushed ice, to ship produce to the East. Union Ice also developed a portable hydrocooler that removes “field heat” from produce immediately after harvesting, thereby checking the ripening process.
Decree Hurt Company
But Union Ice was probably best known to California households through legions of ice men who regularly delivered heavy blocks of ice to keep the icebox cold.
The business changed drastically when the household refrigerator began appearing in kitchens of the 1930s.
The household refrigerator “really put the industry down the drain until it almost phased out,” said John Yopp, editor of Refrigeration magazine, a trade publication for the ice and cold storage industry.
After World War II, Union Ice began expanding its cold storage division to make up for the shrinking ice division, which was also becoming more seasonal.
Then, in the mid-1940s, the ice giant was challenged. Accused of price-fixing by the government, Union Ice entered into a consent degree that lasted for 40 years and dramatically changed the way it did business, Williams said.
“It dealt such a devastating blow that the company virtually changed its operating practices and walked away from many opportunities,” he said.
For example, Union Ice responded by setting up a network of distributors that acted as a buffer between the company and customers, Williams said. Many of those distributors eventually went into business for themselves and became competitors.
But worst of all, in the view of current management, the attitude of executives and employees changed.
“They pulled in their horns,” Williams said. “They began managing the company from the inside out--don’t talk to anybody, don’t let them know we’re around.” The publicly held company stopped talking to the press and failed to put out any promotional materials after the 1950s, he said.
As a result, Union Ice missed opportunities to capture more business as the population of California swelled, Williams said.
To be sure, the company continued to make money, its net worth grew steadily and it had virtually no debt. Union Ice became extremely wealthy, with dozens of ice plants on valuable real estate.
Union Ice was proud to point out that it never failed to pay a dividend to its shareholders from 1902, when the first payment was authorized, until 1981. That was the year that Union Ice was purchased for $28 million by Forstmann Little & Co., a New York investment firm that specializes in leveraged buyouts using capital primarily from pension funds.
Forstmann Little is known for finding companies that will turn big profits for its investors. It usually sells assets of companies it buys, but often runs what remains.
Realized Huge Profit
Forstmann Little executives remember Union Ice as a “sleepy” company that they had no plans to operate, a spokesman said.
Through sales of assets and the eventual resale of the company in 1984, Forstmann Little made a 15-fold profit on its investment, he said. In the process, the company shrank to 10 ice and cold storage properties in 1984 from 32 properties three years before. (In 1943, Union Ice had 70 properties.)
The current owner, a limited partnership made up primarily of West German investors, is intent on rebuilding the business, Williams said. One of the investors is ex-banker Juergen Spaethe, who is chairman and chief executive of Union Ice.
The challenge for Union Ice, Williams said, is to implement a new marketing style under which the company is managed “from the outside in” rather than the “inside out” style he believes former managements followed.
“People have permission now to look beyond the property line,” Williams quipped. “Our goal is, quite simply, to focus on the customer. . . . We want to get our fair share of the growth” of California.
While the company has sold two plants, it has purchased two of its former distributorships and is looking for more acquisitions, Williams said. Union Ice is also building a $1.5-million addition to its cold storage facility in Wilmington.
The $20 million in sales that the company expects to reach this year will be a 33% increase from 1986, achieved through a combination of acquisitions and internal growth, he said. In 1980, Union Ice’s last full year as a publicly held company, the company posted net income of $1.99 million on sales of $36 million.
Market Shares Vary
Williams believes that Union Ice is still the state’s largest ice maker, although its market share varies widely across the state from 70% to 80% in San Diego County to 15% or 20% in Los Angeles County to about 15% in Northern California. In cold storage, Union Ice is one of the state’s largest companies, if not the leader, he said.
Statistics on the ice industry, which is composed primarily of very small operators, are hard to come by, but various estimates put industry sales in a wide range between $500 million to $1 billion. Southland Corp. contends that its Reddy Ice division, which was the company’s original business, is the world’s largest producer of “fragmentary,” or crushed ice.
“Ice is one of those things that you take for granted,” said Jordan Shapiro, a spokesman for the Packaged Ice Assn. A survey conducted for the trade group found that consumers are not loyal to any particular brand of ice and buy strictly for convenience when they need extra ice for a party or a picnic, for example, he said.
The industry has been concerned lately about sanitation standards, because only one out of every three bags sold comes from a member of the Packaged Ice Assn., Shapiro said.
“What they want to do is eliminate back-room ice manufacturers,” he said. “If that person would sell a bag of ice with a bug in it . . . it’s going to taint the image of packaged ice for those who are legitimately making ice.”
Union Ice no longer makes its product by the old method of spraying distilled water on vertical grids on half-inch pipes extending from floor to ceiling. After freezing for three weeks, the ice was cut into blocks.
Today, the popular ice cube with a hole in the center is made by freezing water into long tubes cooled by ammonia and then cut into Scotch-on-the-rocks-sized cubes by spinning blades. Fragmentary ice is made by pulverizing sheets of ice, resulting in rock ice, pea ice and snow.
The cubes are then bagged by machines manned by employees in insulated coveralls who work in slick-floored rooms that never get much warmer than 30 degrees Fahrenheit.
But the chilly job has its benefits. “I understand the blast freezer is great for hangovers,” one employee shouted over the roar of machinery.