| Client
Profile:
Magnolia
Medley Foods
The company began as a cooperative group of sweet potato growers
called Mississippi Fruit and Vegetable Association AAL. Each group
has been successful growing and packing sweet potatoes for the "fresh"
market (i.e., whole cured sweet potatoes, like you would encounter
in the produce section of the grocery store).
Situation:
In 2003, Mississippi Fruit and Vegetable Association AAL realized
there was great potential in addressing other markets, including
"further processed" value-added products such as frozen
sweet potato patties, frozen french-cut sweet potatoes, etc. One
advantage of such products is the use of the lesser grades of potatoes
that are currently being discarded and left in the field because
they are not suitable for fresh market. The Mississippi Fruit and
Vegetable Association AAL also realized that the capital investment
and risk required for producing such products was prohibitive to
them individually, but by joining together they could make it happen.
Solution:
In late 2004, the group approached MEP.ms Center/MSU Industrial
Outreach Service and requested assistance with the next phase of
their project, which called for identifying qualified engineering
and construction companies to design and build a processing plant.
MEP.ms Center /MSU Industrial Outreach conducted a search, identified
a number of such companies, contacted the companies and collected
information from them, and identified a short list of qualified
companies that could take on the project (or any portion thereof).
From this list, the growers selected an even shorter list of candidates.
MEP.ms Center/MSU Industrial Outreach then invited the selected
companies to make presentations to the Mississippi Fruit and Vegetable
Association AAL over a 3-day period in early 2005 at Mississippi
State University.
Results:
The Mississippi Fruit and Vegetable Association AAL received exceptional
cooperation and service from several of the companies involved.
The President of the sweet potato growers group believes that this
competition resulted in a cost savings of $150,000. The competition
also helped them avoid unnecessary investment, including $2.5 million
that they had planned to spend on a fresh cut and french fry line
that later was determined wasn't really needed with help from the
engineering firm that helped them fine tune their business plan.
Although
the company (now called Magnolia Medley Foods) has not yet broken
ground on their own plant, the contacts they made through some of
the contractors led them to a "co-pack" arrangement with
a potato processor in Idaho that has allowed them to begin addressing
the market for value-added sweet potato products. This arrangement
allowed them to land a three-year contract with the Ryan's Steakhouse
chain for 3 million pounds per year over three years (9 million
pounds total) at a very attractive sales price of $.65 per pound.
This equates to $5.85 million in sales over a three-year period.
The company has already satisfied approximately 2/3 of the first
year of this one contract through this co-pack arrangement, which
will continue through 2007. Magnolia Medley Foods expects to fulfill
the remainder of the contract with their own plant, beginning late
this year. They will have plenty of additional capacity beyond that
contract, but it gives them the "core" volume they needed
to justify building their own plant.
Because
of the co-pack arrangement, the total employment for the company
is still very small, with just six (6) jobs added so far. They have
already placed orders for $4 million in processing equipment. Estimated
cost for the new facility itself is $5.9 million. The business plan
calls for another $700K in working capital investment, but if things
go well, this could go as high as $1 million. Planned employment
for the first year is 35 jobs. If things go well, they expect this
to grow to 50 by Year 2, and total employment could eventually go
as high as 75.
Testimonial:
It is important to note that Stephen Bailey believes that the process
that MEP.ms Center Industrial Outreach Service set in motion led
directly to the contract with Ryan's Steakhouse.
Client Contact: Stephen Bailey, President of the Sweet Potato
Growers Group
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