Lancaster Colony sticks to what it knows best — and gets even better at it

 

When Dave Ciesinski considers his philosophy for business leadership, he thinks back to when he was a child, playing baseball.

He thinks about going into the field — smelling the grass, kicking the dirt — and when he looked right and left, his friends were with him. It was rewarding to work together. If the team was behind, they pulled harder. If they were winning, they had to maintain focus.

“I view business like a big version of that,” says Ciesinski, who is president and CEO of Lancaster Colony Corp. “My guess is 25 years from now, if I’m still around, I don’t know if I’m going to remember exactly what numbers we hit in the third quarter of our fiscal year ’19. But I’d like to think I’m going to remember the looks on people’s faces when that new product was shipped to the marketplace and it worked.”

Ciesinki’s childhood experiences in team sports aren’t his only inspiration for leadership. He learned a lot about people when he served in the Gulf War, too. But today he is a dyed-in-the-wool packaged goods and food operator.

He spent more than a decade at H.J. Heinz. After a brief stop helping a friend start a technology company, he moved his wife and six kids to Chicago for a job at Kraft. Eight months later, when Kraft merged with Heinz, he took a step back.

Then, he had dinner with Jay Gerlach, chairman and CEO of Lancaster Colony, and Bruce Rosa, president of T. Marzetti Co., a wholly owned subsidiary of Lancaster Colony. They hit it off immediately.

Gerlach and his father had already decided to focus on food — divesting the company’s holdings in automotive and housewares — because they felt it had better margins. Rosa had announced his pending retirement. Gerlach was preparing to move into the executive chairman role. The board was looking for a potential successor.

“We had a great dinner, but at that point in time, I had a noncompete agreement with Kraft. So, we just agreed to go our separate ways and stay in touch,” Ciesinski says.

As his noncompete expired, the conversation was resurrected. In April 2016, Ciesinski became president and COO of Lancaster Colony, taking his current title in July 2017.

Lancaster Colony has $1.2 billion in annual sales, a far cry from that of Kraft or Heinz. The smaller company had a fantastic reputation, zero debt and a warm culture.

“But the fun thing, the thing that really appealed to me about this job was that we live in a time today, in the food space, where bigger isn’t necessarily better,” he says. “Better is better. More agile is better. More innovative is better.”

Ciesinski had worked on generational brands like Heinz Tomato Ketchup, Ore-Ida potatoes, Kraft Mac & Cheese, but smaller brands are gaining market share — think Seventh Generation or Tom’s of Maine. Big brands don’t have the cachet they once had.

“There used to be a day where the bigger the brand, the more trusted it was by consumers,” Ciesinski says. “Now, that’s largely shifted, and consumers trust small brands more.”

Channels of innovation

Lancaster Colony knows its strengths — innovation and manufacturing capabilities in dressings, dips and baked items. It also supplies salad dressing, sauces and baked items to 18 of the top 25 food service establishments in the United States.

While the company has separate business units, the overlap between retail and food service is increasing. For example, its Olive Garden salad dressing generates more than $80 million in retail sales under a license agreement with Darden Restaurants; that business didn’t exist five or six years ago.

Innovation remains central to Lancaster Colony’s goals. A group of employees have been carved out and dedicated to longer-term innovation. One person leads both food service and research and development, as the teams integrate to help share ideas more rapidly across those two channels. The company is building an innovation center that should be complete in June.

“It’s basically allowing all of these folks to come together underneath one roof with some expanded R&D facilities, but also create a demonstration kitchen so we can bring our most important customers in and co-develop ideas with them,” Ciesinski says.

Innovation has come via acquisitions, too.

“We go out of our way to look for entrepreneurs that have developed a really unique product that’s in our space, where we feel like we’re uniquely suited to help them take their business to the next level,” he says.

Lancaster Colony has provided help to these entrepreneurs — even if it doesn’t buy them. This shows interest in them as people and some good might come out of it in the future, Ciesinski says. Plus, the company has another friend in the industry.

The entrepreneurs who sell typically become employees for four or five years. If they meet performance thresholds, they earn another big payout, which keeps interests aligned.

“Nobody can sell with passion and conviction like the founder of a company, and nobody understands their brand and their product like a founder of a company. So, we can help them. Let’s say they have a shelf-life problem. The shelf life is X days and they want to extend it. Well, we have the expertise to help them to figure out how to do that,” he says.

Lancaster Colony allows the smaller business to run autonomously.

“The food industry is littered with examples of companies that have bought brands and tried to integrate them, only to squish them,” Ciesinski says. “Somebody has said, ‘It’s a little bit like holding the bird. You don’t hold tight enough, the bird flies away. You hold too tight, you can squish it.’”

A playbook for the future

Over the past two years, Ciesinski has helped Lancaster Colony position itself for the future.

The senior management team and board started by answering big questions like, “How do you define winning?” Then, they looked both outside at where the industry was going, and inside at the company’s assets and capabilities to figure out where and how to build a strategy.

External benchmarking, for example, found that while Lancaster Colony’s topline growth was faster than its peers, its margins were in the lower quartile.

For the better part of the year that followed, the company implemented its new playbook. That meant accelerating the base business with organic growth through innovative products and then making sure those got onto the shelf. It meant simplifying the supply chain and improving margins. It meant considering add-on mergers and acquisitions to grow the base business — acquisitions like Angelic Bakehouse in 2016 or Bantam Bagels in 2018.

Lancaster Colony also implemented metrics to make sure these changes got traction, Ciesinski says. The management team used those to celebrate the wins and see where to coach because people were struggling.

The final piece, which started ithis year, was linking the incentive structures and bonus programs to Lancaster Colony’s strategy.

“For this thing to work, we needed to come together as a team,” Ciesinski says. “If we were going to make these investments, we were going to be pretty deliberate about setting priorities, and equally deliberate about agreeing on what we weren’t going to do.”

For example, on the M&A front, Lancaster Colony became more disciplined.

“We don’t know a lot about running dairies, or we don’t know a lot about, let’s say, protein operations and how to prepare meat and process it and ship it safely and everything else,” he says. “But we do know a lot about how to make dressings and dips.”

Digging in the right place

Guiding organizational change has to be done in good faith with everyone working collectively. Ciesinski compares it to mining.

“You go down into a mine shaft and you don’t find anything,” he says. “If you don’t, discretion is the better part of valor. Stop digging. Pull up and let’s go dig someplace else, right?”

Build a culture that enables employees to be comfortable saying: OK, it’s just not working out like we thought. We need to go look someplace else.

Create an atmosphere where people try their best, but are willing to accept failing — and even more importantly agree to fail fast.

“No organization is going to be perfect. So, if we fail, let’s just learn quickly. Let’s adapt and go back and try again,” Ciesinski says.

One of the more challenging strategies was starting a Lean Six Sigma program from the ground up. A vice president of operations worked with the Center of Operational Excellence at The Ohio State University on a training program. Then, volunteers were recruited and had to implement a cost savings project as part of their training.

“When we started, we literally had zero in savings and we had zero in the pipeline. We had aspirations, but we didn’t even have specific goals,” Ciesinski says. “By the time we finished last year, we were averaging pretty close to the mid seven figures, you’d call that $4 million to $6 million a quarter in savings, every single quarter.”

More than 50 people have trained in the program, which has since been insourced, and some of those will increase their expertise with additional training.

“We’ve had some projects that presented fabulous savings, hundreds of thousands of dollars. We’ve had some that didn’t end up amounting to much,” he says. “And at each step along the way, I think we’ve learned, and we’ve gotten smarter about how do we screen the projects and how do we determine what needs to be done.”

 

Takeaways:

  • Innovation doesn’t spring from one place.
  • Clarify priorities within your change.
  • Fail fast, adapt and try again.

 

The file:

Name: Dave Ciesinski
Title: President and CEO
Company: Lancaster Colony Corp.

Born: Long Beach, California
Education: Bachelor’s, United States Military Academy, West Point; MBA, Tepper School of Business, Carnegie Mellon University

What was your first job and what did you learn from it? I started mowing yards when I was about 9 years old. I cut the yard across the street, getting 50 cents a week. I talked it over with my mom and dad and I wanted to go ask for a pay raise. They offered me $1 to do it every other week. That grass doesn’t stop growing. It was twice as hard that second week.

I would say I learned the importance of margins. When they weren’t willing to move on price, I actually took my lawnmower and went and cut somebody else’s yard.

My business philosophy is … focusing on the best idea. I try to create a culture here that’s highly collaborative, that’s honest, that’s transparent and really is all about the best idea, not the person who has the most stripes on their sleeve.

How have you and your family settled into the community? Of our six children, two are now away at college, but my wife, Trish, and I have gotten involved with the kids’ activities. My wife volunteers with my daughters at the homeless shelter. We’ve also done church retreats and volunteered through St. Andrew Church.

One thing people might find surprising about me: I was a surfer and an ocean lifeguard growing up. In 1986, I left Orange County and I reported to West Point, where I promptly got a close haircut and wool uniform. It was a Mars and the moon cultural shift.