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by jacquelyn horkan, editor
Reaping New Harvests
Maybe the first 10 years are the hardest. If not, the future can't get
much more turbulent than the past has been for Nelson Fairbanks.
The 62-year old president and CEO of U.S. Sugar Corp. joined the
company in 1978, and took its helm nine years later. He's faced armies of critics and
disarmed them. He's had to axe some struggling operations, taking on the burden of putting
good, honest people out of work. And all this at a time when prices of the company's stock
commodity flatlined.
But, then again, Fairbanks has led U.S. Sugar to a position of strength
and stability. He's overseen the creation of one of the nation's premier orange juice
processing operations. And in a few months, U.S. Sugar will complete construction of a
brand new refinery, making it one of the first U.S. cane sugar companies to take its
product from field to table.
All in all, you could say life is sweet for the soft-spoken Louisiana
native and the company he leads.
Building On What's Already There
It's the second day of the 1997-98 sugar harvest and Murray Brinson is
not pleased. Sure, he just got a report that says the mill set a first-day production
record, but that's no reason to relax.
"Each crop is like a campaign," he growls. "It's like
going to war."
If Brinson, U.S. Sugar's senior vice president for sugar processing, is
a little on edge he's got good reasons. The first couple of weeks of a harvest are the
time to discover and fix all the problems with the mill machinery that laid hidden during
the five months it spent in hibernation.
This year, matters are also complicated by the new processes being
implemented in the mill. And then there's that hulking steel structure sitting a few
hundred yards from Brinson's office. When completed, that structure will house U.S.
Sugar's 200,000 square foot refinery.
Both the mill and the refinery fall under Brinson's purview. He speaks
with a slow, quiet intensity, and his manner leaves a new acquaintance wondering if he
knows how funny he is. Like when you ask him whether he's worried about industrial
espionage at the new refinery and he answers, "No. We'll just shoot them."
Nelson Fairbanks calls the refinery and the citrus processing plant his
proudest accomplishments, for now anyway. A few years ago, that distinction fell to the
creation of the company's employee stock ownership plan, formed when U.S. Sugar bought
back about 44 percent of its outstanding shares. The company's employees are now its
largest shareholder group.
With the buy-back, the publicly held company went private, which,
according to Fairbanks, was one of the intended consequences.
"We didn't need to be public," he explains, "since we
weren't accessing equity markets for capital."
In other words, U.S. Sugar was enjoying all of the encumbrances of Wall
Street but none of the benefits. The shedding of one of those encumbrances, the filing of
financial reports, means that the profitability of the company is a closely held secret.
If capital expenditures are any indication of financial health,
however, it seems that U.S. Sugar is doing just fine, thank you. In 1992, it spent $38
million on the construction of the Southern Gardens Citrus orange juice processing plant.
Since that time, the plant has been expanded twice. A third expansion project is underway,
scheduled for completion at about the same time the refinery opens.
When completed, U.S. Sugar will own the nation's first new refinery
built in more than 25 years. A comparable span of time had passed between construction of
orange juice processing plants when the Southern Gardens facility opened in 1994.
The age gaps give advantages to both of U.S. Sugar's new operations and
the company is pushing the possibilities as far as it can.
Strategic Forces
U.S. Sugar is implementing a series of innovations in its mill and
refinery that will increase the profitability of its product. The new method of milling
produces a purer form of raw sugar called feed stock. The production of feed stock adds
cost to the milling process, but the savings it engenders in the refinery will more than
make up for the increased front-end expenditure.
Murray Brinson and the rest of his crew at U.S. Sugar are close-mouthed
about the new methods they've developed. Some are technological, others are
process-oriented, and still others are simply refinements to the craft of milling cane.
The last of these can't be patented, thus Brinson's comment about shooting spies sent by
his competitors.
After the refinery is completed, it will undergo six to eight weeks of
testing before it begins producing sugar for sale to consumers and food industry
customers. During its first year, the refinery will produce 500,000 tons of sugar per
year, with plenty of room to expand.
Planning ahead for efficient expansion is one of the advantages U.S.
Sugar holds over older refineries and juice processing plants. At Southern Gardens,
production capacity has increased from seven million boxes of oranges in the first year to
16 million boxes in 1997. When the current expansion project is completed, the plant will
just be at half its planned capacity. Future expansions will be made without disrupting
the carefully conceived layout of the plant.
Southern Gardens produces orange juice concentrate. The company is also
the world's largest bulk supplier of the increasingly popular not-for-concentrate (NFC)
orange juice. The company is banking on NFC as the future of the orange juice business;
the product makes up about 40 percent of its current yield.
The plant incorporates the newest technology, allowing high processing
yields with about half the traditional labor force. That technology also includes a
sophisticated computer system that tracks every shipment of oranges from the time they are
received until the juice is extracted. The data stored on the computer allows the precise
blending of juice to a customer's specifications.
"With the technology out at our citrus plant," says
Fairbanks, "we can give a consumer a very consistent-tasting juice all year round
that would sell under a brand."
Right now, Southern Gardens is selling its product to wholesale juice
packagers and has no plans in the immediate future to begin marketing its own brand.
"If we're compensated adequately at the wholesale level,"
says Fairbanks, "we'll stay there longer. But, in the long run, we won't rule out
putting out our own brand, or partnering with other brands."
Instead, U.S. Sugar is using its mainstay crop as the vehicle to make
its first foray into the world of retail marketing. In July of 1997, the company joined
United Sugars Corporation, the marketing arm of a Midwestern sugarbeet growers
cooperative. The alliance between the two will make United Sugars the first nationwide
distributor of refined sugar. The product will be sold under the Pillsbury Best brand.
So the heat's back on Murray Brinson to get that refinery up and
running. Is he nervous? Not really. After all, he's spent five or six years planning for
this. It's just the waiting that gets to you.
"There are good surprises and bad surprises," says Brinson.
"I wouldn't take either if I could have my choice."
That's one of his company's strengths: planning for surprises and
controlling their effects. For farmers, one of the major source of surprises is, of
course, Mother Nature.
Aggressive Innovation
David Hall is a platoon leader in the insect world, pitting his army of
good bugs against the bad bugs. A U.S. Sugar entomologist, he is the sugar cane borer's
worst nightmare.
The sugar cane borer is one of the crop's deadliest enemies, with the
potential to wreck a harvest. But there's good news in the bad news. Borers have their own
enemies, a gnat-sized wasp with a rather nasty, but helpful, habit of laying its eggs
inside a borer. Once the eggs hatch, the baby wasps eat their way out, killing the borer
and saving the cane. Unfortunately, the wasps are not masters of good timing, often making
their appearance too late to save the crop. That's where Hall and his team come in.
They were given the challenge to breed sufficient quantities of the
wasp for release when the borers first appeared. The breakthrough came a few years ago
when the wasp breeding program reached a point where it cost less than the spraying of
chemical pesticides.
Since then it has been an unqualified success. Over the last four
years, about three million wasps have been released in the cane fields, reducing the
company's dependence on chemical pesticides. Since 1994, an average of 73 percent of U.S.
Sugar's established cane fields have been pesticide-free.
This integrated pest management program is just one of the innovations
to come out of U.S. Sugar's research lab. The lab was established in the 1930s to breed
new, improved varieties of sugar cane. That process continues today.
The lab has one purpose: making the work of growing crops cheaper and
better. Some innovations are developed exclusively in the lab, others are improvements on
discoveries made elsewhere.
One of the latter is the global positioning system (GPS) software that
enable the company to fertilize its fields with precision, applying just what is needed in
each spot in a field. The software plots the origin of soil samples taken from each field,
then draws a map for the fertilizer truck based on analyses of the samples done in the
lab.
"Before, we would take all the samples and put them together to
decide how much fertilizer the field needed," explains Michael Gould, vice president
of research. "There was so much variation among the samples that no one part of the
field got the right amount."
Another technique implemented by the company is the use of
laser-leveling to cut down on soil erosion. Before planting, a tractor planes the field,
guided by a laser eye that signals the tractor when to raise or lower the level.
Area soils have naturally high concentrations of phosphorus, one of the
chemicals blamed for Everglades degradation. Reducing soil erosion, however, is not just
an environmental boon; it's an agricultural necessity.
"Soil and the fertilizer we buy are assets for our company,"
says Gould. "We have no interest in shipping it down to the Everglades. It doesn't do
us any good down there."
Try telling that to the swarming hordes of self-proclaimed
environmentalists who seem to believe that sugar farmers pollute the Everglades, not just
deliberately, but gleefully.
Peacemakers
Fairbanks and U.S. Sugar have faced down a troika of enemies over the
last decade. In one case, the company met with its foes to resolve problems amicably. The
other two situations, unfortunately were not so amenable to friendly resolution.
All three evolved almost simultaneously. The first controversy involved
ongoing disputes with labor activists over the working conditions of foreign cane cutters.
The second began when acting U.S. attorney Dexter Lehtinen filed his lawsuit charging the
state with the failure to enforce water quality standards in the Everglades.
The third arose from Lehtinen's lawsuit. In 1989, he raided one of U.S.
Sugar's mills, sending in FBI agents in flak jackets bearing drawn weapons and EPA
officials in protective clothing, as helicopters buzzed overhead.
Before the raid occurred, Fairbanks had decided his company needed a
strategy to cope with its critics. This was the time of the great Alar scare, when a band
of radical environmentalists launched a public relations campaign to convince Americans
that apple growers were poisoning their fruit with a deadly ripening agent. The claims
were completely bogus, but the ensuing panic bankrupted many Washington growers.
Fairbanks turned to a Washington, D.C., consultant named Clark Judge to
help him resolve the challenges before the company. Judge is the managing director of the
White House Writers Group, a collection of former presidential wordsmiths, who provide a
service he describes as strategic thinking.
Fairbanks and Judge decided to tackle the labor issue first. The
company was facing lawsuits and reams of bad press over the allegations made by the labor
advocates, but Judge felt it was the easiest to resolve.
"If you're facing questions like that, you can't debate
them," says Judge. "The only way to combat it is to transcend it."
The two men agreed that Florida's sugar business was perceived as
secretive. They would transcend the perception with Open Harvest. In October of 1991,
Fairbanks announced that every inch of U.S. Sugar property, every facet of its operations,
and every one of its employees would be completely accessible to anyone who wanted to
visit.
"With Open Harvest, I was looking for a chance for them to take a
risk," says Judge. "If you're willing to be vulnerable it shows that you have
confidence in what you're doing."
Fairbanks embraced the challenge as an opportunity.
"I won't say I didn't have anxious moments," he explains,
"but I believe if you do what you think is right and you're honest with yourself and
with others, you shouldn't have to worry."
Open Harvest was a resounding success. It bolstered the public's
perception of U.S. Sugar and helped build trust with the labor advocates. In September of
1992, they signed a labor peace treaty, resolving all of their differences.
Open Harvest also laid the groundwork for dealing with the aftershocks
of Lehtinen's 1989 raid. Despite all the drama surrounding the event, Lehtinen and his
forces came away empty-handed. He then subpoenaed more than 60,000 pages of documents from
the company. A review of the documents gave him the ammunition he needed.
U.S. Sugar was charged with eight counts of improper handling of
hazardous waste. The charges essentially involved paperwork violations and resulted in no
harm to the environment. While the errors were minor, the penalties facing the company
were enormous. Rather than embroiling the company and its employees in a lawsuit, U.S.
Sugar pleaded guilty and agreed to pay a fine of $3.75 million.
Fairbanks accepted the humiliation with grace, telling reporters,
""When the U.S. attorney began his investigations, I would have bet my home and
everything my wife and I own that U.S. Sugar was in total compliance with all
environmental laws and regulations. I was wrong."
He promised to fix the problems by implementing a strict corporate
regime of environmental oversight. Since then, environmental regulators have twice
inspected the company but have found no hazardous waste violations.
The Everglades issue still lingers over the company, but the threat it
embodies has diminished. In 1996, U.S. Sugar ran a successful campaign to defeat a
constitutional amendment levying a penny-per-pound tax on Florida sugar.
While fighting off those dedicated to the eradication of sugar farms in
the areas adjacent to the Everglades, those same sugar farmers are scoring the early
successes in the effort to restore the great marsh. U.S. Sugar alone has already spent $3
million on new farming and drainage practices to reduce phosphorus runoff. According to
the South Florida Water Management District, the amount of phosphorus draining from the
farms into the Everglades has dropped 51 percent over the last three years.
Those expenditures are in addition to the special privilege tax farmers
are paying to continue their operations in the Everglades Agricultural Area. The tax is
expected to net up to $322 billion over the next 20 years. The money will be used to pay
for construction of special filtration marshes that will clean stormwater runoff from the
farms and from developed areas.
While Everglades restoration is a complex issue, progress has been
made, and that progress was made possible, in part, by Open Harvest and the resolution of
the Lehtinen raid on the company's mill.
Clark Judge believes that confronting these problems was also crucial
to the company's future.
"Getting these issues behind them has made them less vulnerable so
they could pay more attention to business," he says. "They're facing a new world
out there. Not everybody will be able to make transition to free market."
As for Fairbanks, the risks and rewards of playing the peacemaker just
confirm the wisdom that comes from a higher source.
"One of the things I've learned by reading the scriptures,"
he explains, "is that God is in charge of everything. We're just little servants
here, like little ants here on earth. But if you believe and you do the right thing,
whatever happens you've got to figure it's going to turn out all right. And even if we had
been broadsided, I wouldn't have second-guessed our doing all these things."
Persistent Vision
Once upon a time, there lived a great Indian rajah who ordered his
magician to create a heavenly paradise on earth. The magician worked his spells and
created a place of wonder and beauty for his master.
As the rajah's days grew short, he ordered his servants to destroy the
garden upon his death _ with one exception. They were to leave standing the one creation
of the magician that had brought the greatest joy.
And that, according to legend, is where sugar cane comes from.
But legends can't survive in the rough and ready world of
agri-business, where hard work and preparation have to take the place of mythical rajahs
and their court magicians.
The 1996 farm bill has made the domestic sugar business as close to a
free market system as you can get while import tariffs and quotas remain. No longer will
sugar farmers be able to default on government loans by forfeiting their sugar if the
price for their commodity drops below the guaranteed price. The bill also eliminated
marketing allotments, which were essentially supply controls, freeing production capacity
for sugar farmers.
Thus, with added uncertainty comes increased opportunity. U.S. Sugar is
strong enough to take advantage of those opportunities. Of course, doing so is a necessary
hedge against the uncertainties.
If anything, the problems, changes, and challenges he has faced have
motivated Fairbanks. "The competitive spirit," he believes, "always says go
do more."
Fairbanks is a master at executing the decrees of his competitive
spirit. After all, this is a man who once turned down his dream, a chance to play for the
Boston Red Sox, so that he could finish his college studies.
Who can argue with that kind of determination?
Jan/Feb 1998 -- Florida Business Insight, PO Box 784, Tallahassee, Fla. 32302
(850)224-7173, insight@aif.com |
