It's not meat and potatoes, but poultry and potatoes and some dairy foods at Michael Foods Group. The group operates through Michael Foods, Inc., one of the top US producers and distributors of value-added egg products (frozen, liquid, pre-cooked, and dried). Its Egg Products division, comprised of four subsidiaries, supplies egg products to food service, retail grocery, and food ingredient customers. The group's business includes Crystal Farms, a distributor of cheese, butter, and other dairy case items to US groceries, and Northern Star, a supplier of refrigerated potato products to North American food service operators and grocery stores. The company is owned by a pair of private equity firms.
Minnesota-based Michael Foods Group operates 26 facilities in Iowa, Minnesota, Nebraska, Nevada, New Jersey, Pennsylvania, and Wisconsin, and in Manitoba and Ontario, Canada.
Sales and Marketing
The egg and dairy product company's largest customers are food servive giants Sysco and U.S. Foods, representing 15% and 11% of its 2012 sales, respectively. Its Crystal Farms division counts SUPERVALU, Wal-Mart, and Target among its largest customers, each accounting for more than 10% of sales.
Michael Foods Group's sales increased 5% in 2012 compared with 2011, and its profit more than doubled over the same period. The company credited higher volumes of egg and refrigerated potato products, partially offset by slightly lower volumes of cheese and other diary items, for the increase in sales. The company is enjoying strong demand for potato products from food service operators, while retail, food ingredient, and food service customers are increasingly buying its value-added egg products.
Michael Foods is setting itself apart from the pack of egg producers by focusing on valued-added, processed food products that keep pace with food trends. Indeed, about two-thirds of the egg products division's sales come from value-added products. Its position provides some flexibility for passing through higher commodity costs and offsetting volume declines by tweaking its pricing. It may also help Michael Foods diversify its customer base. Michael Foods is vertically integrated with more than 25% of the egg division's needs satisfied by production from its own hens.
The company has a 50% share in a joint venture that operates Lang Fang MK Food Company, a Chinese egg products business. Michael Foods also looks to acquisitions to build its business.
Mergers and Acquisitions
In June 2013 Michael Foods acquired Primera Foods Corp., an egg products processing company operating in the Midwest, for $35.7 million. By adding Primera to its own egg products operation, Michael Foods expects to realized significant synergies and cost savings.
GS Capital Partners and Thomas H. Lee Partners own 74% and 21%, respectively, of Michael Foods. The group's ownership and direction is a result of a change in control in June 2010, which was intended to pave the way for Michael Foods to go public (it didn't) and return value to its stakeholders. To this end, THL and members of Michael's management sold most of their interest in the group to affiliates of GS Capital (part of investment banking giant Goldman Sachs) in a transaction estimated at $1.7 billion. THL and management, which had acquired Michael Foods in 2003 from the founding Michael family, kept the remainder.