Lundberg Family Farms

Source: Food and Drink Digital

Date :01/06/2007 13:03:06

Lundberg Family Farms adheres to its family heritage to promote sales and sustainable agriculture.

Written and produced by James Buchanan and Nick Ledue

In 1937, things looked bleak in the American Midwest where the ravages of the Dust Bowl had turned a once prospering landscape into a natural disaster. Faced with the prospect of continued deterioration Albert and Francis Lundberg moved their farm and family from Nebraska to Richvale, Cal., in the fertile Sacramento Valley.

Over the years they practice a brand of farming that put a premium on conservation and respect for the soil they tilled. Then, in the 1960s the Lundberg family realized they had a unique opportunity to sell their product – rice, farmed with a keen eye to maintaining soil quality and purity of the product – directly to the public. Rather than co-mingle their rice with conventionally grown rice they put themselves in a unique position to become one of the first family owned and operated organic rice farms in the U.S.

As environmentalism and a desire for organically farmed products have grown, Lundberg Family Farms has been a leader in this ever expanding market by providing a diversity of rise-based products that adhere to rigorous quality and agricultural standards.

The Business of Going Organic…

In one sense Lundberg Family Farms follows a rather traditional corporate structure with an eight person board of directors and a leadership team to handle the daily operations of the Farm. However, upon taking a closer look it becomes obvious that the Lundberg family continues to play the leading role in their company. For example, the CEO of the company is Grant Lundberg, the grandson of Albert and Francis. The board of directors is composed of Lundberg family or extended family.

Beyond the management team the company is delineated by divisions:

• Agriculture, which works with growers and handles bringing in and storing new materials and supplies

• Manufacturing, which handles producing such things as rice cakes and other prepared foods

• Sales, which entails four regional sales managers and one specialty industry sales manager

• Marketing

• Finance

• Administration, which handles quality control and assurance

Within this structure Lundberg employs 165 people; farms 14,500 acres, with 10,000 dedicated to organic farming and 4,500 to their own Eco-Farmed style of agriculture; and they own and operate facilities such as a dryer, mill, rice-cake and packaged entrée production, storage, and other related facilities.

In all, Lundberg Family Farms is able to produce, ship, and sell up to 1 million pounds of product per week. However, according to Grant Lundberg, the company’s growth must be sustainable, which requires a broad scale of measurements in four categories:

Employees…The first, and a very important component of this operation are the employees, says Lundberg. Safety and retention are big issues as well as maintaining a high focus on a corporate culture that is supportive of the people who work for them.

In fact, the phrase “corporate culture” is something the company does not bandy about lightly. They view their culture generally as being a producer of high quality rice products grown with deference to the soil and environment. Within that, their employees must demonstrate a consistent dedication to the above philosophy, for which they are rewarded by working for a company that takes their overall job satisfaction very seriously.

Therefore, recruitment and the hiring process are critical to their overall success. As enticements they offer competitive pay, profit sharing and an annual performance incentive program. But in order to take advantage of those benefits any potential employee must go through a fairly rigorous hiring process. Interviews are an important part of this, but could also include asking an aspirant to perform some kind of special work on a contract basis in order to evaluate how they handle responsibility and to get a good sense of their personality.

“Finding the people with the skill sets is a quantitative process,” says Lundberg. “Does their training and experiences match what the job responsibilities are? What is more difficult is assuring they fit into the culture, which requires some patience on both ends of the equation. But the process and its importance is a reflection of our company’s culture.”

The Customer…

The next measure they use to assess growth is customer satisfaction. The Farm sells its products to specialized distributors that sell to retailers and then to the consumer so there is some distance between the company and the people who ultimately purchase their products. According to Lundberg, this makes it difficult to continually assess customer satisfaction and the customer’s perception of the company as a brand.

Customer feedback is generally received directly from the consumer through phone, mail and email. “We just want to listen because for us even though we may be receiving a complaint,” says Lundberg, “we want to be mindful of what is happening with our products and whether our customers are satisfied, rather than us running blind.”

To further overcome the distance between the company and their customers the Farm routinely hires third-party auditors. One recent example is the American Institute of Baking, which conducts audits on their baked goods. Food processors that are considering buying from Lundberg also perform their own audits to assess and ensure for quality.

“Many times the indicators we receive are after the fact,” says Lundberg, “so we are always looking for leading indicators in order to anticipate and prevent issues to make sure we meet the customer’s needs.”

Lastly, they have worked to build their brand by doing their own advocacy and outreach in order to remain active within the organics industry. This includes serving on non-profit boards, lobbying for strict federal organic guidelines, and public relations work on organic and agricultural issues.

On this latter point, when the California Rice Commission issued a notification in August, 2006, that genetically modified organic (GMO) compounds were detected in long grain rice from some farms in the South, the Farm suspended production of products that used Southern-grown rice. They then submitted some of the Farm’s seed and rice for testing. When the results came back negative, the Farm took further steps to ensure that none of their products could be tainted in the future by GMO grown rice, which, according to a press release from the Farm, included implementing a comprehensive GMO testing program.

Farm and Function…

The third area they evaluate to assess the company’s growth is their internal operations. Are they running as efficiently as possible while maintaining their desire for sustainable growth in a manner that fits their corporate culture?

There are significant challenges in this area. The first is achieving sustainable growth, which they define as building their infrastructure in areas such as getting new materials and bringing more rice and growers into the fold. As the GMO story above demonstrates, adhering to strict principles of organic agriculture can act as a limiting factor.

The next is building up the capacity and capabilities of their managers as the company grows into new product areas and increased customer demand. “These people need to handle this growth and broadly understand the industry they are in,” says Lundberg. “Can they handle new responsibilities with new skill sets and can they function in a manner that fits within the culture of the company, which adds another emphasis to our ability to attract and retain good employees.”

There is also the challenge of internal and/or operational growth while maintaining and strengthening their brand. Operationally, they are values driven, which means they are not driven by a need to attain a certain size as much as they are to grow in a manner that reflects their corporate culture. This can be somewhat limiting, but it also is a critical component to helping strengthen their brand as a family owned farm practicing environmentally conscious agricultural techniques while producing quality products.

Originally, the Farm produced 100 percent of their needs, which offered a lot of control over how crops were grown and handled. With growth, though, they have had to bring in additional growers. To maintain brand consistency they seek out other organic family owned growers and suppliers to provide them with the raw materials they need. Both suppliers and growers must meet the criteria of having a strong commitment to sustainable farming practices, not just their bottom-line, says Lundberg.

The Farm’s distribution chain must also have a strong understanding of the organic and natural foods industry. Eighty percent of their business goes through natural foods-centered distributors and they have been with some of these businesses for 20 to 25 years, such as United Natural Foods, Tree of Life, and regional distributor Kehe.

As for retailers, “We’re just trying to reach the consumer,” says Lundberg. “It’s not an extremely regimented system as we are somewhat removed from the retail stores. In fact, we are sometimes surprised at the stores our products show up in.”

The retail part of the equation is particularly important as the point-of-purchase is where their products and corporate brand come in direct contact with the consumer. It is a challenge for them to always know who their retailers are so they can help the retailer sell their products. One strategy they have developed is to have regional brokers that operate in partnership with their regional sales offices go into the retail outlets to make sure the product is properly placed and priced.

The Financial Picture…

The last area of growth assessment is the more classic examination of return on assets. How much money are they making and how can they build cost effective infrastructure. To address the latter of these two points the Farm employs a variety of technological innovations.

The first is continual innovation on their traditional farming practices, which led to an agricultural strategy developed by them they call Eco-Farmed. Rather than use synthetic chemicals for fertilizer they use highly productive cover crops such as clovers, certain beans and vetches to provide nitrogen in the soil.

They also use more conventional forms of technology to promote the bottom line such as generating their own electricity with solar power. Recently the Farm installed a 196.85kW flat panel photovoltaic electric generating system, which will generate 350,000 kilowatts per year and is expected to pay for itself in eight years.