Shank's Extracts' products are strong, and so is the Lancaster County company
You might think you know Shank's Extracts Inc. — that yellow Shank's Vanilla bottle you see in grocery stores, right?
But you don’t. Not really.
“The business has grown fairly dramatically without people really knowing who we are or what we do,” said Vice President Leslie Slough.
These days, manufacturing extracts under its own brands for retail sale accounts for maybe 1 percent of Shank’s business. The rest is a result of changes that have occurred since Jeff Lehman, Shank’s owner and president, started at the business in 1978.
“Initially he grew the business by acquiring some other local companies that were essentially doing the same thing,” said Slough. There was no high-speed filling equipment; employees were “literally filling bottles with a rubber hose” until the mid ’80s, when Shank’s got the opportunity to do some private labeling for Winn-Dixie, a large supermarket chain, and invested in the equipment to get the job.
Private labeling was a pretty new concept back then, said Mark Freeman, Shank’s vice president of sales. But it took off quickly, and that part of Shank’s business increased accordingly. Shank’s kept making acquisitions, too, and formed relationships that got its natural and artificial vanilla included in spice racks at pharmacies — and convinced some companies to get out of the extracts business.
Spice manufacturers, for example, are used to dealing with dry products, Slough said, “and when you get into flavoring extracts, you’re dealing with alcohol and flammable liquids. Some of them were more than eager to get out of it if they had a competitive solution.”
In the ’90s, Shank’s ventured into another market, selling vanilla to commercial dairies, bakeries and flavor houses. The extraction process works for other products, too, and over time Shank’s range widened to include more flavors, food colors, syrups, emulsions and sauces. There’s a lab now, and Shank’s does compounds ranging from just a few ingredients to dozens.
All that added up to significant, relatively steady growth and diversification, Slough said. Shank’s has been at the same facility in an East Hempfield Township industrial park for a couple decades now, during which time there have been four additions to the building. It now totals about 110,000 square feet and 105 employees.
Vanilla still dominates its business, but interest in botanical extracts has been burgeoning lately as the food industry chases organic dollars. Freeman said Shank’s is well positioned to help meet that demand.
Leading the team
The reason for the success? A loyal, long-term workforce, Slough said, and considered opportunism. And, of course, Lehman.
“Jeff is a terrific entrepreneur; he’s got a great business mind and tons of integrity. I think those things, especially integrity, pay back over time,” said Slough. “We’ve been really blessed.”
On top of his business ventures, Lehman has logged many hours in community service. Some of that was on the board of Lancaster General Health, which he chaired for a time.
“I always tell people that the ideal business in Lancaster is Shank’s Extracts, because it brings in money from outside and exports a good that others value,” said Tom Beeman, president and CEO of LG Health. They don’t always make much noise, he said, but the county is fortunate to have “lots of entrepreneurs that run small to mid-size businesses that are the backbone of our success.”
Beeman described Lehman as humble, “exceptionally ethical” and an insightful provocateur when necessary. That he honored commitments even at a loss when the market abruptly inverted in the worldwide vanilla crisis that started in 2000 was emblematic, Beeman said.
“He not only was ethical in meeting his obligation, but he’s also the ultimate entrepreneur — someone who is not willing to bet the farm on somebody else’s money, but on their own,” Beeman said. “He’s the real deal.”
Dealing with volatility
Most of the world’s vanilla beans come from Madagascar, an island country in the Indian Ocean that accounts for 85 percent to 90 percent of global vanilla production. The orchid plants from which the pods grow take three years to reach maturity, and there is just one harvest a year, involving hand-pollination, hand-picking and a labor-intensive curing process.
All that set the stage for a vanilla crisis when a tropical storm hit Madagascar in April 2000.
“Prices essentially went from what was $20 a kilo before the crisis to $500 a kilo at its peak,” said Leslie Slough, vice president of Shank’s Extracts Inc.
It took five or six years for the market to regain stability after that storm, Slough said. And even without a crisis, navigating the vanilla market is complicated.
“The only published pricing we have is the import data that the government puts up,” he said. “There’s no trading board you can go to when you’re trying to figure out prices. You’re getting quotes from your suppliers and you’re trying to get market research from what your customers are hearing or running into with bids.”
Also, in answer to the universal question about vanilla, Slough said Mexico does, indeed, grow high-quality pods. Thanks to lax licensing standards, however, the super-cheap bottles of “pure vanilla extract” offered there are fake.