KANSAS CITY (B)--Farm cooperative Farmland Industries, in the wake of a fiscal year that saw it lose $30 million, is charting a course for financial rebound through brand growth and a focus on profitability over expansion, its chief executive said Dec. 6.
After reporting its first fiscal year loss since the 1980s, Farmland will make earnings the priority, CEO Bob Honse told reporters in a preview of remarks he will make to Farmland members attending the cooperative's annual meeting here.
Additionally, he said the nation's largest farmer-owned cooperative would look to ramp up its brand recognition with plans to double advertising spending in fiscal 2001 to more than $10 million. If those efforts are successful, tentative plans call for doubling that spending again in fiscal 2002.
Farmland's future "could very well be in the expansion of the Farmland brand," Honse said.
He said the advertising efforts would focus largely on areas of the East Coast and some regions of the western U.S. as Farmland looks to take its largely regional brand national.
The move comes after a European firm valued the brand's worth at $250 million, Honse said.
"You have a very big asset there and you're not taking advantage of it," he said.
As far as specific food products, the CEO said the cooperative currently is test marketing bread lines and its case-ready meat products currently are being sold through Wal-Mart locations.
Wednesday's presentation marks Honse's first remarks to cooperative members since assuming the helm of Kansas City-based Farmland from retiring long-time CEO Harry Cleberg.
Under Cleberg's decade-long leadership, Farmland focused primarily on growth, laying claim to the title as the nation's largest cooperative while its sales grew from about $3 billion to $12 billion in fiscal 2000.
That growth was necessary, Honse said, to allow Farmland to compete with the major players in the farm sector.
However, amid a slumping U.S. agricultural economy and difficult conditions in the fertilizer industry, Cleberg's final year ended with the first fiscal year loss in his tenure as CEO.
Amid last year's difficulties, Farmland's bond rating was downgraded by the financial community and Honse said he will now work toward the cooperative regaining its investment grade status, a process he said likely will take three or four years.
The CEO said the fiscal first quarter of 2001, which ended in November, is expected to produce a $40 million gain in the bottom line, suggesting profits of about $13.5 million compared with a loss of $26.5 million in last year's fiscal first quarter.
Also, he confirmed reports the cooperative is selling a south Kansas refinery. Unable to provide the details due to confidentiality agreements, Honse said the deal is expected to be finalized within the next 60 to 90 days.
However, he noted that the sale does not mean Farmland is looking to exit the petroleum business, but is only exiting the refining side of the industry.
Regarding other possible moves, Honse said only that Farmland is "reviewing the whole portfolio."
Also under consideration by the cooperative include shifting Farmland's pork business to what is known as a "closed cooperative" which would operate similarly to its beef operations, Honse said.