“We’re a society that is looking for convenience,” says Margaret Standing, a senior communications director for Bob Evans Farms, headquartered in New Albany, Ohio. Nowhere is that more true for Americans than with food. That quest for a quick meal is helping drive Bob Evans’ strategy and investments.
Part of that investment was on display on a press tour at Bob Evans' Kettle Creations facility in Lima, Ohio, about an hour’s drive south of Toledo. Bob Evans purchased the plant, which had been a co-packer for the company, for $50 million in August 2012. The plant produces refrigerated side dishes, primarily mashed potatoes and macaroni and cheese, which busy consumers can heat up to accompany a main meal. Company officials said the acquisition fit a strategy of vertical integration designed to support long-term growth.
Last October, the company added 50,000 square feet to the Lima facility and opened a third production line. It expects to add 70 jobs at the facility. Bob Evans also has plans to open a fourth production line at the facility this year.
The Lima plant can process approximately 500,000 pounds of potatoes per day. The potatoes are washed, steamed and then peeled and diced. They are run by an optical scanner to weed out imperfect potatoes, then pumped in water to large steam cookers. The cooked mashed potatoes are poured into containers at 160 degrees F, the containers are sealed and then cooled in a huge spiral water chiller to less than 40 degrees F to help ensure longer shelf life. The production lines provide the flexibility to produce three to four different items in a 24-hour period. For example, the plant also can make seasonal dishes such as broccoli and cheese, green bean casserole and glazed apples.
Bob Evans is undergoing a “transformation” as it shift increasingly to manufacturing prepared foods for time-conscious consumers and away from fresh sausage products, says Standing. There’s little indication Americans want to spend more time in the kitchen. A study by research firm NPD Group found that millennials are not willing to spend more than 15 minutes preparing dinner main dishes.
“We’re seeing a difference over the last 60 years in the way that Americans eat sausage,” said Margaret Standing. “It used to be a main course. Now it’s an ingredient in a recipe or a breakfast food, a side for your eggs.
Founder Bob Evans began business as a farmer and regional sausage producer, supplying the sausage for a small diner he owned in Gallipolis, Ohio.
Today, the company has annual sales of $1.4 billion and 33,000 employees. The business is divided into a chain of 561 restaurants in 19 states, primarily in the Midwest and the Southeast, and a food manufacturing and distribution operation, BEF Foods Inc., which sells its food products in all 50 states, as well as Canada and Mexico.
Course Changes to Service Busy Customers
In its fiscal 2014 second quarter results, reported December 3, Bob Evans’ restaurants had sales of $240.5 million, down 2.4% from the corresponding quarter for the previous year. BEF Foods’ net sales were $92.1 million, an increase 10.6% compared to the previous year.
Those results reflected a year in which cost-conscious consumers continued to provide little support for growth in the restaurant industry. NPD Group noted the “ongoing struggle of full service restaurants, casual dining and midscale/family dining, which, despite aggressive dealing, haven’t realized annual visit gains in several years.”
Addressing this societal shift, Bob Evans closed a plant in Richardson, Texas, that produced fresh sausage but invested in capacity at its ready-to-eat production facility in Sulphur Springs, Texas. The expansion there added two 57,000-square-foot production lines and provided room for a third line.
The company is experimenting with new business models. Last August, it entered into a partnership with AVI Foodsystems to launch Bob Evans Express, which will offer the company’s food in non-traditional venues such as workplace cafes, universities and hospitals. The first Bob Evans Express opened at BMW’s Spartanburg, S.C., manufacturing facility.
Bob Evans is also updating its restaurants, modernizing their décor, installing a Taste of the Farm Bakery and setting up a dedicated carry-out area where customers can quickly pick up a meal.
Not everyone has been pleased with the pace and particulars of Bob Evans’ transformation. In September, Thomas Sandell, CEO of Sandell Asset Management, told Bloomberg that Bob Evans management had “underperformed its peer group by 150% over the past five years.” He said there were “no synergies whatsoever” between the company’s restaurants and BEF Foods. He called for Bob Evans to sell off BEF Foods and to do a sale and leaseback of its restaurant properties, which he said would unlock about $800 million in real estate value.
But Bob Evans management says it has considered Sandell’s ideas before and rejected them. The sale and leaseback of its property, it said, would be “one of the most expensive forms of financing we could take on relative to other forms of debt” and would reduce its flexibility in remodeling restaurants and closing underperforming sites.
As for BEF Foods, Bob Evans said the best course was to continue growing the business.
“After recently investing more than $100 million in an acquisition and plant expansions, … the business is on track to deliver 250 basis points of margin expansion during fiscal year 2015, and on a clear path to achieving our targeted 300-350 basis point improvement by fiscal year 2018,” Bob Evans officials stated.