Carnation Co. officially opened a huge new ice cream plant here on Wednesday designed to help the firm keep up with the nation’s growing appetite for frozen goodies.
The $80-million facility--touted as the world’s largest ice cream plant--will produce up to 35 million gallons a year when it is fully operational in the next few weeks, company officials said.
Sprawling over an area the size of five football fields, the plant is a key part of Los Angeles-based Carnation’s goal to become the nation’s top producer of ice cream.
The firm, which started making ice cream in 1926, already is the nation’s third-largest producer of packaged ice cream--behind Kraft and Dreyer’s--and the second-largest maker of fast growing novelty products, such as ice cream bars, behind Goldbond.
Carnation’s novelty products includes Heaven and Berry Swirl bars, and it also makes Eskimo Pies and Drum Stick bars for other firms under contract.
Novelty products have been the fastest growing category of the $9 billion worth of ice cream consumers buy annually. Carnation estimates that sales of novelty products have grown 50% during the past five years to $1.4 billion.
“That is where the action is,” said John Harrison, manager of product development at Oakland-based Dreyer’s. “It’s not just a children’s snack item--adults consume 70% of the novelty bars,” he said. “A lot of the children get the low-end bars.”
The new plant also represents Carnation’s ongoing shift away from commodity items, such as fresh milk, towards more profitable brand name foods such as ice cream.
Only three months ago, Carnation, a subsidiary of Nestle, announced that it was selling its Los Angeles dairy plant and ending production at a plant in Oakland, thus spelling the end of the once familiar milk brand in California.
May Expand Later
Fresh milk producers have seen profits shrink and lost shelf space to milk produced by supermarket-owned dairies, says Carnation President Tim Crull. In contrast, “ice cream is a growing item” he said. And consumers who prefer mid- and higher-priced ice cream “buy brand names” such as Carnation, he said.
On Wednesday, visitors walked through a jungle of shiny steel pipes and shivered in sub-freezing temperatures as they toured the new ice cream plant here. Carnation officials say the facility might be expanded in a few years if demands continues to rise.
Under Crull’s three-year tenure, Carnation has shed $1.6 billion worth of businesses, including an animal feeds division, a maker of industrial tools and a division that sold school yearbooks and jewelry. Instead, the company has focused its attention on foods.
Carnation, which reported 1987 sales of about $2.6 billion, also owns such well known branded goods as Carnation Evaporated Milk-it’s first product, Coffeemate Non-Dairy Creamer, Contadina sauces and Heaven ice cream bars. The firm is also a major maker of pet foods, including Friskies and Mighty Dog brands.
The food business “is not fast-growing as a total category,” Crull said. “But we try to target products to those fast growing segments.”
Two of those categories include chilled pasta products, sold under the Contadina label, and specialized infant formulas, sold under the Good Start and Good Nature brands.
With financial backing of Nestle, Carnation has invested $160 million in the last 18 months to build new food plants, including the ice cream plant here. The factories, which include a new pasta and tomato products plant, mark the first new such facilities to be built by Carnation in several years.
Plan Working Out
Crull, speaking underneath the huge white party tent temporarily planted in front of the new ice cream plant, also said Carnation is actively seeking to grow by purchasing existing firms. “We are always looking for an acquisition that fits our objectives,” he said. “We’ve been talking to companies in the past couple of months.”
Industry analysts have praised Carnation’s moves. “Their business seems to be growing according to plan,” said Edward deBoisgelin, an analyst with Smith Barney, Harris Upham & Co. “They have expanded since they were bought by Nestle. They basically are pushing out in nearly every single area.”
Although it has lost its independence, he said, Carnation has benefited by the emphasis on long-term results at Swiss-owned Nestle, one of the world’s top food companies, which bought Carnation in 1985.
“The parent company has a very long-term orientation,” said deBoisgelin, who pointed out that most American firms are much more fixated on how their investments will affect their quarterly financial reports to stockholders. “It’s a merger that has worked out pretty well for both parties.”
That long-term thinking was evident at the new ice cream plant, whose employees were decked out in bright-red overalls and white helmets.
Computers in the plant will help employees speed up the process and keep tabs on quality. Besides introducing new technology, Carnation will also use a new team-method to run the plant. Employees play a greater role in running the facility and, as a result, management hopes to boost productivity and quality. For example, in the loading area, employees can turn away shipments that do not meet preset standards without having to consult with top managers.
These new methods and the large capacity at the plant, which replaces two aging Carnation ice cream facilities in Los Angeles and Oakland, will allow the firm to produce about 32 million gallons of ice cream products annually at a lower cost, officials say. Still, competition is stiff, and ice cream makers are tripping over themselves to squeeze their products into supermarket freezers--about 160 new ice cream products were introduced last year, according to industry estimates.
“There will be some attrition,” said Crull, but “it will settle out. We’ve been in the business more than 50 years and we will stay in it. The Carnation name will be prevalent.”
COLD, HARD FACTS Annual production in gallons California...155.5 million Pennsylvania...111.9 million Texas...90.6 million New York...66.6 million Ohio...65.9 million Florida...59.4 million Illinois...54.3 million Minnesota...50.3 million Michigan...47.1 million Massachusetts...46.9 million Source: International Ice Cream Assn.
California is the leading producer of ice cream and related products.
The ice cream industry spent about $14 million a year on advertising in the early 1980s, most of it concentrated in the summer months. That grew to an estimated $120 million by the end of 1987.
Ice cream bars and fruit and juice bars have posted the largest gain in the past three years, but ice pops still represent the largest segment of the frozen-novelty market.
Source: International Ice Cream Assn.