MINNEAPOLIS – Ever wonder how M&M’s get their crunchy shells? Or how Reese’s Peanut Butter Cups and Pop-Tarts get their decadent fillings? Or how that perfect dollop of creamy goodness sneaks into the middle of an Oreo?
With little hoopla, Graco has quietly built a business of Food and Drug Administration-approved pumps and spraying machines that are renowned within the food industry. The unit is still small but one of Graco’s fastest-growing segments, doubling since 2010.
It’s enough to make a junk food addict drool and an investor smile.
Food companies consider Graco’s technology sacred, although the Minneapolis company – which employs 3,600 global employees and has $1.3 billion in annual revenue – is more likely to talk about its much larger units that make industrial pumps and sprayers that paint vehicles, insulate homes or fireproof oil rigs.
“Every M&M in the world is made with our equipment, and we pump the stuffing for all Oreo cookies” in Asia and Canada, said Kevin Jagielski, sales and marketing manager of Graco’s Process Division. “Doritos uses our (oil) sprayers in their tumblers so the seasonings stick to each chip. We do the fruit for Pop-Tarts. It’s a part of Graco most people never think about. But (food processors) know that what Graco really specializes in is pumping the really difficult and thick fillings that have high viscosity. We are the market leader.”
Other customers include General Mills, Cadbury, Ben & Jerry’s, Samuel Adams beer and Tropicana. The Schwan Food Co., based in Marshall, Minn., uses Graco’s food-moving machines to make frozen pizza and sauces. Graco’s equipment also transports Coca-Cola’s syrups, Campbell’s soups, Skippy’s peanut butter, McDonald’s ketchup and Kemps’ milk through factories for bottling, canning, molding and bagging.
“It’s almost like Graco’s been keeping a secret,” said Angela Petersen, executive director of the Minnesota Precision Manufacturers Association. “They are sitting on one of the best-kept secrets in the manufacturing sector. More marketing . would grow excitement and create additional opportunities. It has endless possibilities.”
Graco started handling food in 1990, but officials didn’t get serious about growing the business until 2010 when the company launched the line of FDA-approved products. The machines, aimed at high-volume food factories, often range from $40,000 to $150,000 each.
In 2011 and 2012, Graco managers began hitting food trade shows, flying equipment distributors and food executives into Minneapolis for demonstrations and producing training videos for food clients worldwide.
“Before, we had a different pumping system, but the system was more difficult to use and required more attention and physical labor,” said spokesman Chuck Blomberg. “The tomato paste that we use comes in a large container that weighs approximately 2,800 pounds. So this (Graco) equipment makes it much easier to move our tomato paste, and it’s more convenient for our employees.”
In March, Hershey’s bought a massive $150,000 bin evacuation pump so it could better transport chocolate into candy filling stations. In February, one of McDonald’s ketchup vendors bought another $150,000 machine to move hundreds of gallons of ketchup into packets.
And four months ago, a large chocolate supplier flew three executives and 165 gallons of chocolate sauces to Graco’s Minneapolis headquarters for fluidity testing.
“They came in to buy two of our machines, but left with four. We were happy,” Jagielski said.
Surrounded by heaping bowls of M&M’s, peanut butter cups, Oreos and stuffed Hershey’s kisses, Jagielski said the new emphasis on food has increased Graco’s “Process Division” by 5 percent a year. In addition to food, the division makes sanitary and industrial pumps for cosmetic, pharmaceutical and oil firms and generates about $250 million in annual sales.
Graco’s overall profits rose 5 percent, but extra sales and new business lines can be important in years like this one when the strong dollar and international economic woes are expected to weigh on sales results for international companies such as Graco.
The stock price, driven by improved annual performance every year since the Great Recession of 2008-09, has risen from $17 per share in March 2009 to recent highs around $80.
The global market is worth $2.4 billion. Many within Graco want a bigger slice of that pie.
Mike Moe, the company’s technical training supervisor, is one of them. On a recent weekday, he was surrounded by equipment distributors he’d flown in from New York, Pennsylvania, Indiana and Michigan. In a lab that smelled more like an Italian kitchen, Moe fitted a seal over a 55-gallon drum of tomato paste. He turned a few dials and watched gleaming stainless-steel pipes bob, thump and pump thick red paste out of a drum, through a thick hose and into a different drum.
“We’ll pump 14 gallons a minute, so we’ll have this (55-gallon drum) empty in about four minutes or less,” Moe said.
He repeated the feat with other products.
“Now that’s tricky,” agreed Don Reiniger, a distributor from Eastern Industrial Automation in Connecticut.
“It’s a great use of the technology” normally applied to other industries, said Jonathan Brown, with Eastern Industrial Automation’s New York office.
Many of the distributors came to see the equipment they’d not yet seen used on food. Stew Byrd from PRP Inc. in Detroit sells Graco equipment to manufacturing firms specializing in sealants and adhesives.
“I have been to a lot of these product demonstrations, but I have never seen anything like this,” he said while gazing at the pumps and munching a Milano cookie.
To hammer home the idea that Graco can transfer, unload, spray and layer just about any substance, Moe shared a host of goodies: fudge truffles, Tostitos corn chips, General Mills cream cheese frosting, Campbell’s tomato soup, Pepperidge Farm cookies and Colgate toothpaste. The equipment used on these products is “100 percent made in Minnesota,” said Jagielski.
Byrd was no longer listening. He took another bite of his cookie and said: “This is just what I needed.”
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