Strategic alliances are the asphalt paving the road from startup to stardom. That’s how John Omstead, founder and president of Family Traditions Foods Inc., describes the evolution of his company. He believes it’s imperative to develop a strategic network of partners in a firm’s early years, as his did, “Or you’ll never get far out of the starting gate,” he says.
Omstead, who was recently selected by the Windsor Chamber of Commerce as its Entrepreneur of the Year, created his Wheatley, Ont.-based frozen food company in 1989. In 1994, when processing giant Pillsbury put its Tecumseh, Ont. Green Giant processing plant on the selling block, an undercapitalized Omstead convinced Pillsbury to support him in a leveraged takeover. “They had unused capacity, and I had the need to buy a plant,” he says. Today, in addition to making frozen peas, asparagus and green beans for Green Giant, Family Traditions Foods supplies product to niche food manufacturers around the world.
According to Omstead, access to capital is the No. 1 issue for today’s small and medium-sized businesses. “No startup today has the resources to go it alone for long,” he says. “We all need partnerships to move forward.”
In Omstead’s book, there are three golden rules for determining a strategic fit.
- There must be a mutual need. Omstead recognized that Green Giant preferred to purchase product from someone else rather than process it itself, and he wanted to be that supplier.
- Good partners must share the decision-making. “There’s no alliance if one partner is making all the major decisions,” he cautions, adding that shared decisions and open dialogue can eliminate waste in a company’s operations. Family Traditions Foods works with its clients on everything from ordering the correct seed to planting to packaging.
- Risks must be shared. “No partnership can survive if only one [partner] is taking all the risks,” Omstead declares. That rule has been crucial to his firm’s success. “When crops are bad, the negative costs cascade from field to frozen and canned retail sales, and most of this burden is usually shouldered disproportionately by the processor,” he says. “But in our agreement with Green Giant, we’ve arranged to share the risk / benefit proportionately,” he says. “Without such a strategic alliance, we wouldn’t be able to operate profitably.”
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© 2003 Jack Kohane