Food manufacturers and Manufacturing & Technology

Indiana's Red Gold has become a tomato-industry big boy

August 28, 2006

Twenty years ago, the only thing coming out of Red Gold Inc.'s small Orestes plant was diced tomatoes, tomato sauce and tomato puree.

With 17 full-time employees, the company, nestled amid corn and bean fields on the east side of this tiny town 40 miles north of Indianapolis, was little more than a seasonal operation. It had little to no reputation beyond Indiana.

"In the mid 1980s, Red Gold was only a blip in the tomato industry," said Karen Klonsky, economist and agricultural extension agent at the University of California at Davis. "And it was barely a blip."

What's happened over the last 20 years is one of the most unlikely tales in the agriculture industry, tomato experts said.

While Midwestern tomato growers and processing plants were dying on the vine, Red Gold was more than quadrupling the size of its Indiana manufacturing and distribution facilities and growing its revenue at least fivefold.

Red Gold now makes products that sell in all 50 states and 16 countries under its brand or private labels. Red Gold--including its private-label business--is the nation's No. 2 ketchup maker. Its own brands hold down one of the top two spots in tomato-product sales in 26 key markets, including Chicago and New York.

The company now has 1,150 full-time and 40 part-time employees. Another 500 seasonal workers descend on its three plants in Orestes, Elwood and Geneva for more than two months starting each August.

Owned and operated by the same family that founded the company in 1942, Red Gold doesn't release revenue figures, but industry experts estimate annual sales at more than $230 million. Company officials suggest the figure might be even higher.

"We're a lot bigger than people think," said Tim Ingle, Red Gold human resources director. "It's hard to find anything reflective of how big we really are."

Because Red Gold produces a wide variety of products under various names, it's difficult to gauge its true market share. Most market share is tabulated by product.

Its diversity of tomato products--from whole tomatoes to ketchup, sauces and salsas--is unparalleled, said agricultural experts, who estimate it could hold 10 percent of the market for all tomato products sold in the United States.

Pittsburgh-based H.J. Heinz Co., the nation's No. 1 ketchup maker, for instance, focuses its tomato efforts primarily on ketchup. Nebraska-based Hunt's, New Jersey-based Campbell's, San Francisco-based Del Monte and other processing giants likewise produce a more narrow line of tomato goods than does Red Gold.

"If it's red and has tomatoes in it, we probably produce it," Ingle said.

The company's tomato obsession has served Red Gold well, said Corinne Alexander, assistant professor in agricultural economics at Purdue University.

"Looking back, it would have taken an almost perfect plan for this company to survive and grow to the level that it has," Alexander said.

Master planner

Those familiar with the company say that perfect plan was crafted by Brian Reichart, Red Gold's third-generation owner and operator.

Reichart, 56, has worked at Red Gold every summer since he was a schoolboy growing up near Elwood. He watched his father, Ernie, toil at what was then a small, slow-growing operation. He saw the company's infrastructure grow outdated and neighboring tomato production and canning facilities either collapse or move West, where most tomatoes are grown.

When Reichart graduated from Purdue University with a management degree, he agreed to take over the company on one condition. He wanted free rein to expand.

"You can see why we needed to invest in our facilities," Reichart said, pointing to an old black-and-white photo of the Orestes plant. "We needed something that wasn't going to fall on our heads."

Though he had no technical or engineering training, a lifetime on the farm taught Reichart not only how to work with his hands but also to be hands-on. He was personally involved in plotting the expansion and began to design equipment that helped Red Gold produce tomato pastes, ketchup, sauces and juices.

"If we were going to grow, we had to become a year-round operation," Reichart said. "I knew there was a stable demand for products beyond canned tomatoes and we had to take advantage of those markets."

The company grew its core offerings from three products in 1986 to 40 today.

Reichart also realized that many Midwestern tomato-processing plants were being killed by California's longer growing season. California, with its ideal temperature and irrigated fields, is by far the leading tomato-growing state, with 94 percent of the harvest. Indiana is a distant second, with 2 percent.

Indiana's harvest runs from late August to October, but California's is more than twice that long, with yields per acre about 15 percent higher.

Instead of taking on industry behemoths head-on, Reichart focused on chiseling out a niche.

"We couldn't match their production capacity initially, so we focused on quality," Reichart said. "We didn't set out to be the biggest tomato processor, just the best. And the Indiana farmer has helped us achieve that."

Hoosier farm aid

Red Gold's plants run three shifts five days a week most of the year, becoming a 24-hour, seven-day operation during the nearly three-month harvest. The company processes 9,000 to 11,000 tons of tomatoes daily at its three Indiana operations.

Keeping the plants supplied with tomatoes is one of Red Gold's biggest challenges.

Red Gold has expanded its network of Hoosier growers and, agricultural experts said, has almost single-handedly kept Indiana's tomato industry alive.

The only risk, UC Davis' Klonsky said, is if Hoosier farmers are unable to keep up with Red Gold's demand.

"Tomatoes are not any easy crop to grow," she said. "They are susceptible to mold with too much rain and are prone to a variety of diseases, all of which can drastically affect yield and quality."

Sixty percent of the tomatoes running through Red Gold's facilities come from Indiana farmers, 20 percent come from Ohio, and 20 percent from Michigan.

Red Gold already consumes 95 percent of Indiana's tomato crop and 80 percent of all Midwestern tomatoes.

Arcane federal legislation prohibits farmers from simply planting more tomatoes in lieu of corn and beans. Red Gold has enlisted the help of Sen. Richard Lugar and Rep. Mike Pence to introduce "Farm Flexibility" legislation that would give growers freedom to choose which crops they plant.

One of Red Gold's primary strengths is its proximity to key Midwest and East Coast markets, but that advantage will evaporate, Klonsky said, if the company is forced far from Indiana to get its life-blood harvest.

"Transportation is one of the biggest costs in many of these products, so if Red Gold's Midwest supply of tomatoes dried up, they'd be in serious trouble," Purdue's Alexander said.

Staying on the cutting-edge

A labyrinth of conveyors, sorters and monitors--electronic and human--take the tomatoes from a farmer's truck to the inside of a can, bottle or jar ready for a grocery store shelf in about an hour.

Slicing, peeling and dicing machines--along with sauce-making contraptions, stirring devices and juicers--pour an endless stream of red around the vast production facilities, transforming the pole-barn-like structures into a red version of Willie Wonka's chocolate factory.

About seven years ago, Reichart started incorporating more computerized machines, including an electronic eye system that can sort tomatoes by color. Humans, however, have the last say on which tomatoes make the grade for Red Gold.

"Everything that's been done here has helped us improve our efficiency and our quality," Reichart said. "And quality is critical, because that's what we've branded ourselves on."

Besides the Red Gold name, the company's products sell under the Redpack, Tuttorosso and Sacramento brands. Red Gold is the nation's No. 1 provider of private-label tomato products. It makes ketchups, sauces and pastes for Kroger, Pecante, Sure Fine, myriad restaurants and others, cornering about 90 percent of that market. The equipment engineered by Reichart and his staff can tweak each recipe to give private labels their unique flavor.

Growing reputation

Red Gold, industry experts said, is the largest tomato processor outside California and the largest privately owned player in the industry.

At a time its Madison County neighbor General Motors Corp. was folding operations, Red Gold was growing like never before. It had major expansions in 1993, 1995, 1997 and 2000, before sinking another $20 million into the operation this year. In total, Red Gold has invested $168 million in expansions in the last decade, watching its employment more than double from 500 full-time in 1995.

The company looks almost bulletproof, economists said.

"This company rides economic ups and downs very well," Ingle said. "Tomatoes are a staple in many meals, from chili to meatloaf."

The demise of other area manufacturers and the dot.com implosion allowed Red Gold to attract top-flight engineers and technicians needed for growth, Reichart said.

"We were seen as low-tech compared to other manufacturers," Ingle said. "But we've proven to be a very good company to work for."

Tomato consumption has inched up among Americans over the last 20 years--from about 65 pounds to 72 pounds per person annually.

While consumption increases have slowed to below 5 percent each of the last 10 years, Red Gold has continued to see double-digit percentage growth increases.

"That would tell me that Red Gold must be taking market share from somebody," said Purdue's Alexander. "And they've done it without a massive marketing push. It's really a great grass-roots story."

If industry experts and competitors think Red Gold has peaked, Reichart said, they are mistaken.

This summer, Reichart cut the ribbon on a 339,000-square-foot production, warehouse and distribution facility, with an indoor rail spur that can handle 13 rail cars. Reichart dedicated the Orestes facility to his father, who died earlier this summer.

Red Gold now has more than 3 million square feet under roof in Indiana, 15 warehouses throughout the United States, and a fleet of 140 trucks, Reichart said.

"We want to grow into a larger national brand," he said. "But we know we have to be careful because we don't have the resources of companies like Heinz and Hunt's. We have to grow by being smarter, more efficient and providing higher quality, and by not putting all our tomatoes in one basket."

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