Jul 2, 2015Shoreline Fruit vertically integrates to thrive
An agricultural operation with multiple business arms operates best when all facets are on the same page – or at least functioning from a shared playbook.
John Sommavilla, CEO of Shoreline Fruit LLC in Traverse City, Michigan, was brought into the picture two years ago to spearhead the business, which is in its fifth decade of existence. Shoreline Fruit grows, processes and markets cherries, concentrates, nutraceuticals and other dried products.
“The whole concept is to get everybody on the same page relative to the stakeholders in the business, whether they be in the farms, the processors in the middle or Shoreline, the direct marketer,” Sommavilla said during the MIFood 2015 Michigan Food Processing & Agribusiness Summit in Grand Rapids, Michigan.
Sommavilla defined the strategies for enhancing the value of a vertically integrated agriculture business. He said having a documented plan is critical to achieving success with a vertically integrated organization.
“The biggest thing is once you do your focus groups, and really understand within the group where the alignment is, then you build a strategy. It’s much easier to execute a vertical integrated strategy once you have the buy in and support from all the different entities.”
So what’s the biggest challenge in putting it all together?
“The big thing is it’s really hard to develop a strategy for a marketing company the size of Shoreline if you don’ t have alignment down on the board in the fruit and processing supply chain,” he said. “You know we’re going in one direction – whether it be the choice of sugars or how we pit or a lot of the different differentiations we make in a product – we have to have alignment in the vertical stream. So that’s a really important concept, that if you don’t have that alignment, you’re going one direction, you’re going right, they’re going left, and there’ a big gap in the middle where a big profit opportunity could be lost.”
When the company first embarked on a strategic planning effort called Vision 2015, there had to be recognition of diversity of thought going forward.
“You had four independent thinking gentlemen, respecting each other and working, listening and collaborating together,” he said of the company founders.
The plan also needed to involve “shared learning, collaboration, profitability at all levels and a recognition of the need for industry support.
“Farms have to make money; processors have to make money,” Sommavilla said. “Shoreline never shuts down. Farmers get the first bite, processors get the second bite and the LLC (sales and marketing arm) gets the scraps from selling to the customer at a very competitive price. Before, they never had cost centers – they had profitability centers all across the supply chain.”
Sommavilla, who previously led Coles Quality Foods of Muskegon and was in supply chain management for Spartan Stores, wasn’t accustomed to “interaction with the competition,” and said the cooperative nature displayed by agriculture endeavors is extraordinary.
“Don Gregory, our chairman, says you’re only as strong as the industry you are in. One thing about cherries, and agriculture roots, you have people working together. Our founders have been engaged in building the cherry industry from the day they stepped into the business. Now we all work pretty efficiently together.”
Shoreline Fruit LLC, the marketing arm of the company, presented an opportunity to tighten the operational model.
“Everyone was doing well in their own little silo,” he said. “The biggest thing I found in 2012, when I was the first one outside of the organization to join the board of directors of the company, there was not an overriding strategy for the entire company. It had grown so fast as a young company. Business kept ramping up. No one was developing an overlapping strategy. That takes time.”
Sommavilla recognized that in order to develop a strategic planning guide to build a vertically integrated management plan, there needed to be a blend of the stakeholders from each entity.
“There were a whole lot of people who needed to be engaged in the strategic planning process and enhancing vertical integration. I’ve learned over time and experience if you get people’s input and get their ideas, it’s a lot easier to sell the program.”
He said growers, processors and marketers were involved in focus groups to answer “some uncomfortable, tough questions.”
“We got some good direction to develop Shoreline Fruit growth objectives,” he said. “It was important to make it accountable and make people accountable throughout the organization.”
The “very traditional” approach yielded a three-year strategic plan.
“By developing common strategy templates, we spent a lot of time ensuring we had smart objectives and good strategies,” he said.
It has led to improved cross-functional communications and a greater understanding of how each business unit contributes to the overall effort.
It’s a constant cycle to assess, plan, execute and review the strategy’s effectiveness, he said.
“It’s a very painful exercise, but we go through it every quarter. Now it’s on to Vision 2017. Some strategies go further than others. It’s a nice way to do it but it takes discipline.”