This column is the fourth in a series looking at manufacturing companies in Edmonton that are unrelated to the oil patch.
The provincial environment minister herself has clearly suggested Alberta should be preparing for a fossil-fuel free future. Which is a tall order. As ATB Financial economist Rob Roach points out, the $80 billion a year oil-and-gas business in Alberta is the equivalent of the entire Ontario manufacturing sector – in a province four times our size.
Which also begs the question: Just how much manufacturing in Metro Edmonton now happens outside the oil/gas/petrochemical energy sector. What do those companies need to grow?
Today, Hicks on Biz looks at the food-processing sector, as represented by Heritage Frozen Foods – best known through its premiere brand, Cheemo Perogies.
When Walter Makowecki started making Cheemo perogies in 1972, nobody outside the Ukrainian-Canadian community knew what perogies – Ukrainian/Eastern European dumplings traditionally stuffed with cheese and/or potatoes – were.
Today, in a light industrial area in the city’s northwest, the family-owned company headed up by Walter’s son Joe Makowecki makes three MILLION perogies a day.
Frozen Cheemo perogies can be found in just about every grocery store in Western Canada, every other grocery store in the rest of Canada, and, increasingly, under house-brand names in the United States. Heritage is about to launch Cheemo perogies in Mexico, via a major Mexican grocery chain.
Every single Cheemo perogy is made in the Edmonton Heritage Foods plant.
The Makowecki family has steadily grown the Cheemo Perogies brand, from $1 million in sales 25 years ago to $30 million today.
Four years ago, Joe had reached a crossroads in the company’s growth. Heritage Foods either had to greatly expand the family company’s Edmonton plant, or open a second facility somewhere else in Canada.
Joe, for some years, was a banker. He remains acutely conscious of input costs, of the importance of a healthy bottom line. “Growth without profit,” he says flatly, “is absolutely useless!”
He toured Canada, especially Southern Ontario where many food-processing companies had closed down and put their plants up for sale. He discovered every line item (input costs, raw materials, labour, taxation and especially energy) was better in Edmonton. “We were much better off to expand here.”
For his business, Alberta agriculture is a huge advantage. Heritage is the single biggest customer for locally grown potatoes – buying 15% to 20% the crop or about 1.5 truckloads a day. “The Edmonton region grows great potatoes,” he says. “Buying locally saves us three cents a pound in transport costs. Likewise Alberta has excellent locally grown and locally processed wheat flour and canola oil. It’s a true advantage.”
On the other hand, production cost savings have to compensate for added transportation costs. “Thirty per cent of our inventory is always in transit (to distribution hubs throughout North America),” he says. “It’s a long ways to get paid.”
Heritage has grown and flourished due to innate, family-owned business values.
Specialization, for one: Heritage makes nothing but Cheemo perogies – albeit 16 different kinds, such as South Asian-style curry perogies and Pizzarogies.
“The food industry is full of big whales,” says Joe. “We don’t try to compete against them. We are experts in a niche product, in a niche market.”
Cost controls: Heritage is relentless, Makowecki says, in controlling costs. “Our biggest marketing asset is our price tag.”
Automation: Heritage Foods’ Edmonton plant is near state-of-the-art automated. Much of the equipment was custom-designed, built specifically for high-volume perogy production.
Most of the 100-plus full-time employees – down from 160 just a decade ago – are long-term, skilled technicians. There are very few line workers to be seen. The plant runs 24 hours a day, five days a week, with two days for cleaning and maintenance.
No debt: Heritage is debt-free. All reinvestment comes from retained earnings. “You have to ensure you have a 35% to 40% margin,” Joe says. “Otherwise there’s no money to reinvest. Everything we make has to make money.”
The future? Joe is willing to contemplate adding other kinds of ethnic dumplings to the product mix. “They are like perogies, an everyday inexpensive food. We’d just have to pick our spot.”
Will Heritage Foods always be headquartered in Edmonton, always make its products here? Never say never, says Makowecki. But, so far, the combination of being Edmonton based, embracing a “small is beautiful” philosophy, being fiscally conservative yet embracing technology, has served Heritage Foods well.