Breaking Out From Basics Lakeside Foods Tries Self-Heating Drinks in Addition to Food Staples

By DORIS HAJEWSKI

Belgium — At the same time basic foods such as beans and corn are moving through Lakeside Foods processing plants by the ton, lines of mocha lattes are snaking their way through the company’s plant in northern Ozaukee County.

After the beverages are prepared, the liquid is poured into cans that are outfitted with a patented contraption that allows users to heat the drink by pushing a button, anytime, anywhere, without the use of a microwave or any other heating element.

The self-heating coffee products are a tiny but growing part of Lakeside’s business — just 1% of the company’s nearly $400 million in annual sales. But the innovative drinks are representative of the company’s efforts to try new things.

“We’re always looking at new products,” said Tom Reilly, vice president for human resources at Lakeside. “Our customers are challenging us to come up with new and different products.”

Lakeside’s business consists of processing foods that are sold under private-label brand names to grocers such as Roundy’s and many others. The company was founded by Albert Landreth in 1887 in Manitowoc, where it is still headquartered. The company was sold after Landreth’s death and now is owned by several families and governed by a board of directors.

Lakeside operates 10 processing plants and nine distribution centers in Wisconsin and Minnesota. The company employs about 1,000 people year-round. During harvest season, the work force swells to about 3,000.

Growth spurt

The company makes the self-heating beverages year-round. The drinks are enjoying a second growth spurt, after an ill-fated launch four years ago under the Wolfgang Puck brand name.

Lakeside began making products named for the famous chef in 2004, after signing a contract with Ontech, the San Diego technology company that developed the system for heating beverages in the can. The Ontech system combines old knowledge, using calcium oxide and water to generate heat, in a new container design that keeps the chemical away from the beverage while it heats.

The company stopped making the Wolfgang Puck beverages in 2006 after complaints of cans overheating, exploding or melting and a lawsuit in California state court between Ontech and the California- based company that had licensed the rights to market the Wolfgang Puck-branded product, according to reports in 2006 in The New York Times and Bevnet.com, an industry trade publication.

Ontech re-launched the self-heating drinks two years ago under the Hillside brand name, which Ontech owns.

Thaddeus Thorne, director of business development for Ontech, said he couldn’t comment on the allegations surrounding the earlier Wolfgang Puck-branded product.

“The containers are designed to be safe for consumer use,” Thorne said of the Hillside products. The calcium oxide is contained in an inner core inside the can. Heat is generated when the user presses on the bottom of the container, breaking a seal that releases water into the calcium oxide, also known as quicklime. When the core is heated, the beverage will stay warm for 30 minutes.

Targeted to travelers

The target customer for the self-heating coffees and hot chocolates is someone who is pursuing a cold-weather outdoor activity, or a traveler who doesn’t have time to stop and buy a hot beverage. Ontech also tried making soups and tea with the initial launch but found that consumers were less-interested in those products, Thorne said.

Now the Hillside line includes four flavors of latte and two hot chocolate varieties.

After launching in 2006 in a test in 400 Wal-Mart stores, Hillside self-heating drinks are now sold in Wal-Marts across the country and will be promoted more prominently in the fall, Thorne said. The drinks also are available in a growing list of outdoor retailers, including Dunham’s, Sportsman’s Warehouse and Gander Mountain.

Ontech also sells the drinks to the Army National Guard and is in negotiations for a contract to sell to the Army for troops in Iraq, Thorne said. If Ontech makes the sale, Lakeside will need to increase production from the pace of nearly 40,000 cans a day, he said.

While the self-heating beverages are the result of technology developed by Ontech, Lakeside also employs people who work on new product ideas, Reilly said. Over the years, the company has diversified its product mix from the peas, corn and beans to value- added items such as jellies and preserves, frozen and shelf-stable meals, canned meats, health beverage supplements, non-dairy frozen dessert toppings, salsa and other sauces.

Holds up well

The company is facing the same cost pressures as other businesses for fuel to run its equipment and trucks. Fuel costs also have pushed up the cost of raising crops, which translates to higher prices for commodities. But Lakeside has been able to pass increases to its customers,

“Passing it along in the past has been difficult,” Reilly said. “Now customers are aware.”

Jim Hertel, a partner at Willard Bishop Consulting in Chicago, said the food industry holds up well in a recession. But he said the private-label processing business is a competitive area, where companies compete for contracts based on product quality and delivery times.

Lakeside’s sales have grown steadily, and the company has added plants to meet demand, particularly for frozen vegetables, Reilly said. In 2003, the company acquired three processing plants and a distribution center that were formerly owned by Chiquita Processed Foods.

“We’re always looking for more acquisitions,” said Bruce Jacobson, director of operations for Lakeside.

WISCONSIN 75

Deloitte & Touche will honor the Wisconsin 75 and recognize five companies as Distinguished Performers on Oct. 2 at Pier Wisconsin. Timothy E. Hoeksema, chairman, president and CEO of Midwest Airlines, will be the keynote speaker. For information on the Wisconsin 75, visit www.deloitte.com/us/wisconsin75.

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