Retail Merchandiser

This snack food manufacturer looks to grow both its own brands and private label products by bringing first-class, inexpensive products to the market.

Get one foot in the door of a convenience store or supermarket, and it is easy to see just how massive the snack food market is in America. Axium Foods is looking to grow its stake in the market because the company believes today’s consumers are willing to put down the national brands in favor of snacks of equal or superior quality at a much better price.

Based in South Beloit, Ill., Axium Foods is a division of McCleary Inc., which was founded in 1960. It is still a family-held company and has been making snack foods primarily in the private label and co-pack business since it was founded.

Providing choice

The Axium division focuses entirely on corn-based snack foods. Private label business has accounted for the majority of Axium’s operations over the years. About 80% of its business today consists of private labeling. However, the company has ventured into the market with its own branded products at times as well.

Successfully pushing out its own brands into the market would provide the security of diversification for the company while simultaneously giving consumers a reasonably priced, quality snack option. One Axium brand, Pajeda’s, offers tortilla chips and Cheetos-type snacks, but that isn’t the end of the line for Axium when it comes to its own branded products.

“We’ve recently done a significant amount of consumer research, and we are on the cusp of releasing our new brand, Fiesta Crunch,” said Jerry Stokely, president. “We’d like to see our branded products eventually become closer to 50% of our overall business.”

For now, however, private labeling remains Axium’s bread and butter.
The responsibility for establishing and maintaining relationships with private label partners lies with Axium’s sales force. Stokely said his sales team has been successful with private labeling because of its emphasis on constant contact and responsiveness to customer needs.

“In private labeling, our target customers are relatively well known and in a relatively small niche,” he said. “They are primarily the retail chains, some of which are represented by brokers and others by organizations like Topco Associates or Federated Group.”

Often, working with retailers represented by an entity like Topco, which provides services like procurement, quality assurance, and packaging to retailers, wholesalers, and foodservice companies, allows Axium to end up working with several different constituents. For example, the company has a relationship with Hy-Vee, which is based out of Des Moines, Iowa, and has more than 225 retail stores located in seven Midwestern states. Topco represents Hy-Vee, and, as a result, Axium has a primary relationship with Hy-Vee, a secondary relationship with Topco, and a tertiary relationship with Damon, a private label food broker. By successfully serving all of the parties in relationships such as these, Axium secures the future of the relationship while enhancing its reputation in the industry overall.

Whether the company is producing private label or branded products, the goal is to compete with the mega-brands by offering a comparable product at a better price. To do this, the products have to simulate the leading brand’s quality and produce a comparable, if not better, product than the leading brand offers. To stay on top of the market, Axium monitors the products and flavor varieties the leading brands are creating. Stokely said there aren’t many new corn-based snack offerings coming out from the category leaders, other than new flavors. Axium works with flavor houses to ensure it can match with new flavors. Stokely said Kerry Ingredients has been an important partner for Axium in that area.

“When it comes to our R&D on new products, that is really more for our own branded products because private labelers really just want to emulate the national brands,” said Stokely. “With our own brands, we can push the envelope and experiment.”

Internal improvement

Axium Foods has recently been investing in several areas to make the business more efficient and sustainable. It rebuilt and relaunched its purchasing group to link all of its purchasing activities. Previously, the company had disparate purchasing occurring. Its maintenance and engineering group was buying parts for machinery; materials related to food production were purchased by a separate group; HR was working with different vendors to fill employee needs like uniforms and health and safety equipment; and accounting was buying office supplies on its own. The company recognized the need to pull all of those activities into one central purchasing and integrate it into its ERP system. Stokely said Axium now has better control over all of its purchasing operations as a result.

The company is also in the middle of choosing a vendor for a new ERP system. The food business is a little different than other business, so what Axium is looking for from an ERP
system is compatibility with existing systems that run more or less on a Windows-based platform. Also, the methodology by which Axium’s ERP system must oversee production is founded in the continuous operation methodology instead of the batch methodology.

In addition, the company is in the process of doubling its tortilla chip capacity, which should be up and running right around Thanksgiving. It is also installing new crunchy extruders from American Extrusion. They are computer controlled and automated, which should have a positive impact on both quality and efficiency.

As for sustainability, Axium has several areas where it is concentrating not only on going green, but also on doing business the right way. The company has a full wastewater treatment plant that includes an anaerobic digester. That process creates methane gas, and while the company currently flares that gas, it is exploring ways to recapture it and/or generate electricity with it. Either way, the culmination of that effort should lower operational. Lastly, any dry waste from producing its corn-based snacks is sold as cattle feed to a local farmer, which is
not only a benefit to the farmer, it also keeps that dry waste out of landfills.

As the company continues on its path of maintaining the private label side of the business while growing its own brands, Stokely said expansion through acquisition, or perhaps the construction of additional facilities, is possible. But the key to that strategy for Axium is making sure it isn’t overextending itself.

“We have to make sure we have good prospects for our products before we expand, and we have to understand what our customers want and will most likely be successful,” said Stokely. “Market research and product development will help us understand what the customers want. After that it is all about executing everyday to produce quality products.”