Making a Big Business Out of Little Rice Cakes

With a hiss and a puff of fluffy crumbs, round cakes that resemble popcorn snap out of machines and start down a conveyor belt, on their way to becoming packages of Simply Snacks flavored rice cakes.

The crispy snacks have been tumbling off the assembly line at Foodland Industries MN Inc. for the past year and a half, entering a $400-million-a-year industry dominated by giant Quaker Oats.

Foodland’s general manager, Keith Bjella, sees room for growth in the rice cake market, and the company is expanding its product line with a Minnesota twist.

The newest offering, due out next month, will be cakes made partly of wild rice supplied by Gourmet House of Clearbrook in northern Minnesota.

“The wild rice is going to play a key role in what we do here,” Bjella said. The wild rice cakes will be sold under the Gourmet House name and will come in apple cinnamon, caramel, taco and sesame flavors.

One of the reasons for putting Foodland in Aitkin, about 100 miles north of Minneapolis, was the 10,000 or so acres of wild rice paddies in the area.

Foodland’s owner, Gary Schlesinger of New York City, also chose the area because of a financing package that included a $450,000 low-interest loan and a $72,000 employment-based incentive grant from the Iron Range Resources and Rehabilitation Board.

Currently, the company makes flavored cakes from brown rice, which are sold in various markets in the United States under the Simply Snacks label. They come in 4-inch rounds, in 2-inch “wheels” and in “minis” packaged in one-ounce snack packages. Flavors include strawberry, blueberry, caramel, almond, honey nut and apple cinnamon.

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Foodland can also make flavors to order for customers. A potato chip company recently asked Foodland to make a cappuccino-flavored rice cake under a private label.

About 80 percent of the people who eat rice cakes, sometimes compared to Styrofoam hockey pucks, are women and children, he said. That leaves men and older people as an untapped market.

“We see this as being a $5-million business out of Aitkin,” Bjella said. “We still have to double our production to do that.”

That might not be too easy. For one thing, financing has sometimes been a problem.

The wild rice cakes, for instance, didn’t develop as quickly as planned because there wasn’t money to market them, said Dave Hasskamp, executive director of Aitkin County Growth, an economic development agency.

Local banks aren’t big enough to provide the business loan the company needs, Hasskamp said, so the company is trying to work out a financing package with larger banks.

“One of the toughest deals for us is getting adequate finance,” he said.

John McMillin, an analyst for Prudential Securities in New York, said the rice cake industry had tremendous growth for a number of years, but it has slowed.

Quaker still has about 80% of the market, but competitors are trying new flavors.

“Whether this is a fad or a long-term trend, I think rice cakes have hit the crossroads,” McMillin said.

Besides filling stomachs, Foodland provides about 40 jobs to this central Minnesota community of about 1,700.

“Aitkin has always been one of the poorest counties in the state,” Hasskamp said. “Forty or 50 jobs in Aitkin is a big deal.”

Terra Overstad, 22, started working at the plant a year ago for $7.50 an hour plus benefits.

“It was the best job in town,” she said.

Aitkin County Growth, which helps businesses develop and get on their feet, is housed in an old Land O’Lakes turkey processing plant that closed in 1984. The agency remodeled the buildings and leases some of the space to Foodland.

“It’s hard to measure the total impact,” Hasskamp said, but he estimates that for each job at the plant, another three jobs follow in the area. “This really took the economy of our little town to the next level.”