McCain Foods Ltd. expects to be producing French fries in China within two years as part of a strategy to dramatically raise its presence in big undeveloped markets, says new chief executive officer Dale Morrison.
New Brunswick-based McCain is also targeting Russia and India for future plants, although plans are not as advanced as in China, Mr. Morrison said in his first interview since joining the giant French fry producer two weeks ago.
"In 24 months, we would hope to have a larger stake in China," said Mr. Morrison, 55, a 30-year veteran of the U.S. food industry who spent almost three years as chief executive officer of Campbell Soup Co.
Mr. Morrison, who succeeds the retiring Howard Mann, said he was hired to take family-owned McCain Foods to "the next level" as an independent food company that can stand on its own in a consolidating industry.
He joins McCain at a critical moment, as it confronts challenges to its core potato business from a dietary trend away from carbohydrates and trans fats, particularly in North America.
His appointment also continues the McCain family's withdrawal from operating leadership. It follows the recent death of "founding chairman" Harrison McCain, who created the company with his brother Wallace 47 years ago and helped drive it into international markets, including Europe, United States and Australia.
A key part of McCain's current growth strategy is to pick up the pace in developing regions and reduce dependence on more mature markets. China presents a clear attraction, with 1.3 billion people and an economy that has grown by more than half since 1997.
McCain, which produces a third of the world's fries, in addition to frozen pizzas, appetizers and cakes, is used to market development, Mr. Morrison said.
In China, Russia and India, it is replicating its standard approach to foreign ventures, first establishing a sales presence with imports, then building enough volumes to justify on-site plant and equipment.
He said the company has been preparing the ground by studying potato growing in China for more than five years, and it has been training Chinese nationals in "the McCain way."
The Chinese French fry market is being driven by the spread of "quick-service retailers," including KFC and McDonald's, which have made extensive inroads in the Asian country.
McCain, whose sales for the year ended June 30 are expected to exceed last year's $6.4-billion, is the world's largest French fry supplier to McDonald's Corp., dominating the market outside the United States.
While McCain pursues sales in areas where the Atkins diet is still a foreign concept, Mr. Morrison also wants the company to be a product innovator in potatoes.
Mr. Morrison said the company's potato business must put a priority on meeting health and wellness concerns.
"We need to provide a choice to consumers," he said, noting that the company in North America has quit using hydrogenated oils, thus eliminating trans fats from its internal processes.
The new president plans to name an advisory council of outside professionals to help guide it in the health and wellness area.
"The world is changing and we need to market to that changing world," Mr. Morrison said. "The change has happened pretty quickly, and I think all companies need to move with the speed of a cheetah on this."
Mr. Morrison also sees the possibility of exporting McCain's appetizer business, such as frozen onion rings and other potato products, which has been a successful diversification focus in Canada and the United States. The initial target will be Europe.
In addition, the company will continue to do "smart acquisitions" of the kind that have bolstered its appetizers business. The interest is strongest in targets that play to consumer trends, such as snacking, ethnic foods, and, again, healthy foods.
But Mr. Morrison said the company must be careful not to ignore its core potato business, which generates more than half of annual revenue.
At present, it is aggressively marketing in the U.S. retail sector, where McCain's presence is relatively underdeveloped.
Mr. Morrison is the product of a North Dakota farm about 30 kilometres from the Manitoba border. He figures he was probably the only candidate for the McCain CEO and president job who had actually harvested potatoes in his youth.
Armed with a university business degree, he joined General Foods Corp. after graduation and after 10 years moved to PepsiCo Inc. At one point, he headed PepsiCo's Hostess Frito-Lay snack operations in Canada, which landed him in Toronto for three years.
One factor in taking the McCain CEO job was that it is based in Toronto, a city he enjoys.
After seven moves in 14 years with PepsiCo, he resisted the offer of yet another transfer, preferring to keep his family in Princeton, N.J.
So he joined Campbell, turning around its Pepperidge Farm unit before taking the CEO's job in 1997.
But Mr. Morrison resigned in March, 2000, under criticism for failing to meet financial targets. After a sojourn in dot-com investment, he joined New York-based Fenway Partners, a private equity group focusing on the consumer-branded sector.
He was content in that role -- until the McCain Foods headhunter called about four months ago.
He was intrigued, particularly by the opportunity to meet Wallace McCain, Harrison's brother, who left the company in the mid-1990s over a succession dispute but who still owns about a third of McCain Foods.
Mr. Morrison said he welcomed the move to a private company that can take a long-term view without being buffeted by quarterly results. He also found he liked the McCain family.
He said he has spent a lot of time with company chairman Allison McCain, Wallace's and Harrison's nephew, developing a working relationship.
But Mr. Morrison does intend to bring culture change to McCain. He feels it needs to exploit its size and breadth of operations worldwide, but without losing its decentralized, entrepreneurial flavour.
He wants to introduce "smart standardization," using its scale to wring savings out of areas such as purchasing and developing a formal, company-wide approach to employee development. Until now, for example, McCain has not had a corporate head of human resources.
"In muscle-building the organization, and developing the talent as we go into China, Russia and India, our capabilities are going to be tested. We need to be sure that we are keeping ahead of that curve."