2009 KPMG Executive Roundtable: Positioning for Growth in Uncertain Times

Brent Cator: Our business is strong. It’s imperative that we build on our core strengths and work at it every single day. Having the base principles in place in the first place is, I believe, the key to success during tough economic times. Our industry is not one that’s afforded high margins, so it’s about being very good at the basics all the time. I think the companies that have stayed true to delivering value to their customers, have had solid best practices in place, and work really hard at keeping it tight all the way along, are the ones that are going to do very well right now.

Kruh: Over the last two years we’ve seen the Canadian dollar go on an incredible roller-coaster ride. How are you handling that?

Henry Demone: That’s a major issue for us. We buy our raw materials around the world in U.S. dollars. We sell roughly half of them in the U.S. so there’s no currency risk on that part of our business. But in the Canadian market, of course, those revenues are in Canadian dollars. So we’d like a strong Canadian dollar. How we’ve managed that is that we have a hedging program. We hedge probably 60 to 80 per cent for the coming quarter, then 40 to 60 per cent, two to three quarters out and then 10 to 20 per cent four quarters out. So what the hedging tends to do is dampen the extremities of these very volatile currency movements and give us time to react.

Paul Higgins: Our raw materials are also in U.S. dollars. About half of our business is in the U.S. and about half here in Canada so we have two different strategies. One here in Canada is that when we need to gain cost because the dollar is going against us, then we have to be aggressive and nimble in getting price increases. And in the U.S. the benefit we get if the dollar’s in the right position is you gain on your costs other than the raw material. So being able to try and work those two at the same time are two different strategies, but there’s opportunity in that. And we always like to say a volatile market offers our best opportunities.

Steve Smith: What best practices can you point to that have helped you to continue to be successful during these times?

Kliger: We’ve been, if you will, compulsive about exploiting any opportunity that’s been out there. Historically we started out as a foodservice manufacturing company. We went from being essentially a kettle-cook large batch processor, to getting into portion pouching or portion dipping cups or even shelf-stable bottles, all of which leverage our core strength, which is making large quantities of great quality. So now that that’s established, in these challenging times what do you do? We can’t jump at all the opportunities we would have years ago. We’ve got to sit back and say, “Okay. The infrastructure is there, how are we going to make money at this project. And can we really bring value to the customer? Can we bring value to the company, long term?” Because if we can’t do that, we’re not doing ourselves any service and we’re certainly not doing the industry any service either if we’re compromising our financial strength. We’re also finding that in these times the industry seems to be working a lot closer together. We do a tremendous amount of manufacturing for other manufacturers, very low-key, behind the scenes and off the radar.