Acquisition creates efficiency, growth potential for midstate potato company
With the recent sale of a Halifax Township property, northern Dauphin County could play a much bigger role in the East Coast distribution of a staple crop.
In late June, Schuylkill County-based Sterman Masser Inc., one of the largest potato shippers east of the Mississippi River, acquired a 128-acre tract with an established warehouse along Armstrong Valley Road to address storage capacity issues at its Hubley Township headquarters.
But the former Harman Stove Co. property — which doubles SMI's local warehousing capacity — also has the potential to generate greater output for a company that already ships between 100 and 150 trailer loads per week.
Those loads include potatoes, onions and sweet potatoes that it grows in Schuylkill and Dauphin counties and purchases across the country. The company also is a primary partner in a Michigan facility, along with other national growers.
"Halifax does allow us to have the immediate need of overflow," said Dave Masser, SMI's president and COO.
In 1999, the company charted an East Coast distribution course with a major expansion of its production and storage capabilities. It went from being a regional player to one that now ships its full line of potatoes from Maine to Florida and all points in between.
The Halifax purchase helps alleviate short-term issues that come with increased demand, Masser said. Sales have doubled every five years from 1970 to 2010.
Over the next five years, the new real estate could lead to a separate potato packing facility and maybe become the company's main processing plant, he said.
Volume growth has been trending between 5 percent and 10 percent annually, Masser said.
"We are looking to expand our acres in Pennsylvania," he said, citing current access to about 5,000 acres.
Being within three hours of nearly one-third of the potato consuming population in this country, Masser said he is confident in sustainable growth moving forward. The company's proximity to Interstate 81 and the Susquehanna River routes makes it possible to do same-day and next-day delivery.
"It's still a reasonably priced source of nutrition," he said of potatoes.
But with available land diminishing while population and food production needed to feed everyone are on the rise, the products that companies like SMI grow are becoming more valuable.
They also are becoming more convenient.
In recent years, SMI has rolled out a line of microwave-ready steamer bags it calls Simply Spuds. It also has a foil-wrapped line called Grillables.
"There is a lot of opportunity in the convenience category," Masser said.
SMI has capitalized on several other opportunities over the last decade. Ten years ago, crop-destroying weather led to the creation of Keystone Potato Products LLC, a potato processing plant that takes off-grade potatoes and turns them into dehydrated potato flake and flour, as well as other fresh-cut potato products.
Some of that product is exported internationally.
To streamline farming operations in the Great Lakes region, SMI partnered with six other companies to launch Fresh Solution Farms LLC in Michigan. The creation of a national marketing company called Fresh Solutions Network LLC followed.
"It locks up supply. All members are growers," Masser said.
So, if one part of the country is hit with a weather event that disrupts crop production, customers — including grocery store chains — continue to have a dedicated supply coming in.
"It helps retail and food service partners sell more potatoes and increase their profits," Masser said of the network, which pools member funds.
Eighty percent of SMI's business is retail, including many private store labels. Demand for organic potato varieties also is driving sales, Masser said.
Last year, the company added distribution capacity with the creation of Masser Logistics Services LLC.
Masser said the company will continue to explore other opportunities — whether that's additional real estate or increased sales efforts in the Southeast, where potato production is more seasonal, or new product lines that complement the core business.
"Our focus is responsible growth," Masser said. "We want to grow customer sales and profits. We'll assess opportunity as it comes forward."
Schuylkill County-based Sterman Masser Inc. is a third-generation potato farming company that was founded in 1970 by Sterman and Gerri Masser.
The Masser family has been farming potatoes for eight generations. Much of that history includes door-to-door distribution in the coal mining towns around Schuylkill County.
Dave Masser, the company's president and COO, returned to the family business in 1999. He has children, ages 6 and 9, who could be the ninth generation.
Here are some facts about SMI and other business ventures it is associated with locally and across the country:
120: The number of acres the company was using in 1970 to farm potatoes at its Hubley Township headquarters. SMI distributed about 100 to 150 trailer loads annually within about 50 miles of Sacramento, Schuylkill County.
$14 million: In 1999, the company spent about $14 million to expand its production and storage capabilities in Schuylkill County. SMI also branched out into new varieties of potatoes. It sells more than 200 different potato and onion packs and labels.
2,000: By 1999, SMI was farming and distributing about 2,500 trailer loads with about 2,000 acres of available farmland. Today, about 5,000 acres are available to the company through ownership and land leases. It distributes 6,500 trailer loads of potatoes from Maine to Florida and west to the Mississippi River.
2003: After a massive crop loss in 2001, SMI starts Keystone Potato Products LLC in 2003. Located a few minutes from the company's headquarters, KPP is a potato processing plant that takes off-grade potatoes and turns them into dehydrated potato flake and flour, in addition to fresh-cut potato products. The plant utilizes waste methane gas to power the operation.
100 percent: SMI sells 80 percent of its potato products via retail. Another 12 percent of sales are tied to food service, while the remaining 8 percent includes processed products. The latter includes dehydrated products and fresh-cut varieties to supply companies that make potato salad and chip manufacturers.
2007 and 2008: The company had been shipping russet potatoes from farmlands in Michigan back to Pennsylvania. In 2007, it partnered with six other potato and onion companies across North America to start Fresh Solution Farms LLC in White Pigeon, Mich. The $20 million facility there stores and distributes products throughout the Midwest and east of the Mississippi. Those products are grown on about 3,000 acres in the Great Lakes region.
Fresh Solution Farms is one of the flagship operations in the Fresh Solutions Network LLC, a national marketing company. The network includes SMI and KPP, along with Michael Farms Inc., Basin Gold Cooperative Inc., Green Thumb Farms Inc., Red Isle Produce Co. Ltd., Nokota Packers Inc. and Sun-Glo of Idaho.
2013: The company started Masser Logistics Services LLC to bolster its internal distribution capacity.
$100 million: Masser expects to do about $100 million in sales this year between SMI and KPP. Much of the company's geographic growth is connected to its 1999 expansion. Masser said SMI is targeting the Southeast for future sales expansion.
Extra potato space
At the end of June, Sterman Masser Inc. purchased the vacant 128-acre Harman Stove property on Armstrong Valley Road in Halifax Township for $1.75 million.
The property has a warehouse sized at more than 113,000 square feet.
In the short term, the Dauphin County property will allow the potato growing, packing and shipping company to add storage capacity and manage overflow.
Long-term plans could include packing operations in Halifax to complement SMI's main facility in Schuylkill County, said Dave Masser, president and COO of the potato company.
It's also possible that primary operations could move to the new site in a few years. Final plans have not been made, he said.
A recent survey from the United Potato Growers of America found that 9 percent of all meals — at home and in restaurants — include potatoes.
Restaurants account for 35 percent of all potato meals, with french fries making up 61 percent of those eatings. Chips are second at 10 percent, according to the survey.
Fresh potatoes declined 7 percent per capita from 2011 to 2012 at home, while instant potatoes increased 13 percent. Frozen was level.
In retail, frozen potatoes dipped in volume and dollar in the fourth quarter of 2012 — the fifth straight quarterly decline, according to the survey. Meanwhile, dehydrated volume was up 0.6 percent after seven straight quarters of year-over-year declines.
By type, russets and red potatoes accounted for more than 80 percent of dollar share, as of April 27. By volume, they account for 86 percent of the market, according to the survey.