La Choy Food Products Inc. - Company Profile, Information, Business Description, History, Background Information on La Choy Food Products Inc.

901 Stryker Street
P.O. Box 220
Archbold, Ohio 43502

History of La Choy Food Products Inc.

La Choy Food Products Inc. is the oldest and most successful American-based producer of Oriental food products for the grocery or supermarket shelf. The company has a strong hold on more than 40 percent of the shelf-stable Oriental food market in the United States, with its closest rival Chun King maintaining approximately a 20 percent share of the market. La Choy's food product line includes soy sauce, bean sprouts, chow mein noodles, pepper steak dinners, fancy mixed vegetables, chop suey vegetables, and a host of other items. The company has become famous for preparing its products with fresh ingredients: it ships shortening from Indiana; bamboo shoots, water chestnuts, and pineapple from Taiwan, Thailand, and China; mung bean seeds from Oklahoma; pepper and carrots from California and Idaho; and large amounts of chicken, beef, and pork from a number of Midwestern states. Yet, for all its emphasis on high-quality ingredients, the company has experienced difficulty increasing its sales volume during the 1980s and 1990s, because of the introduction of tastier frozen foods and the proliferation of quick-service, Chinese take-out restaurants.

Early History

La Choy Food Products Company was the brainchild of two friends, Wally Smith and Ilhan New. The two men met and developed a close friendship while students at the University of Michigan during the early years of the 20th century, and both had become successful businessmen. Smith, an American who owned his own grocery store in Detroit, Michigan, wanted to sell bean sprouts that were fresh grown to bring a more varied product line to his customers. He thought of his old friend New, a Korean by birth, and asked him whether he had any knowledge or expertise in the matter. New said he was well acquainted with how to grow bean sprouts, and the two men came up with the idea of canning bean sprouts in glass jars. This innovative idea was so successful that Smith and New decided to incorporate their own business, La Choy Food Products Company, in 1922, and to use metal to can a variety of Oriental vegetables in addition to bean sprouts. In just a few years the company was making a tidy sum of money.

Although New left the company for personal reasons in 1930 and Smith was killed by lightning in 1937, the company continued to flourish. By the late 1930s management at the firm had developed a comprehensive line of food products, including bean sprouts, La Choy soy sauce, sub-kum, kumquats, water chestnuts, bamboo shoots, brown sauce, and chow mein noodles. In addition, more than eight million copies of The Art and Secrets of Chinese Cooking had been distributed across the United States. Fortunately, the company had capitalized on the growing fascination Americans had with the Orient, including an entirely different type of cuisine. In 1937 the company built its first manufacturing facility in Detroit, Michigan, with 60,000 square feet of production space, and the most sophisticated and modern equipment for processing Oriental food products.

World War II

With America's entry into World War II on December 7, 1941, La Choy Food Products Company was dealt a severe blow by the federal government. The production of Chinese food was deemed as non-essential for the United States war effort and, as a result, the tin-plate that had been used by the company to can its products was no longer available. In addition to the difficulty in procuring container materials for its products, the firm was unable to import ingredients from the Orient because of the Japanese and American conflict spreading throughout the Pacific Ocean. To reduce overhead costs and maintain profitability during the war, management decided to relocate the company from its facility in Detroit, Michigan to new headquarters in Archbold, Ohio. Selling its Detroit plant to the federal government for the production of munitions, the proceeds from the sale enabled the company to start a new era in its history.

La Choy Food Products continued to produce its soy sauce and brown sauce, as well as to package bean sprouts, chow mein noodles, chop suey, and mixed vegetables in a wide variety of containers, including glass, tin, and metal. But the lack of vegetable imports from the Orient was proving hard to overcome. Previous to the war, the company's entire supply of mung beans, which eventually blossomed into bean sprouts, had been imported from different countries in Asia. The inability to import mung beans led the company to engage in its own agriculture project, namely, growing bean sprouts from mung beans. Having relocated from Detroit to Archbold, Ohio, and having addressed the problems surrounding the lack of imports from the Orient, La Choy Food Products began production at its new facility in August of 1942.

In addition to the cultivation of the mung bean, the company discovered that the soil around Archbold was conducive for growing tomatoes. Processing tomatoes at the plant started in 1943, and the company supplied one of the most needed vegetables to the American public during the rest of the war. Unfortunately, however, La Choy Food Products Company was not able to overcome the restrictions caused by the war, and sales began to decline precipitously. In November of 1943 the firm was acquired by Beatrice Food Company, located in Chicago, Illinois, and incorporated into its new parent as an operating division.

Prosperity and Growth During the Postwar Era

With the financial backing of Beatrice Food Company and the growing consumer demand for Chinese foods across the United States during the late 1940s and early 1950s, La Choy Food Products increased both its product line and its revenues. One of the most innovative package designs during the 1950s resulted when La Choy introduced the "family pack," a 34-ounce package of chop suey/chow mein for a family of four. Throughout the 1950s fresh ingredients were used in all of the company's products, requiring a large staff, for example, to debone approximately 14,000 pounds of fresh chicken every day. Locally raised and slaughtered, the amount of chicken used at the Archbold facility indicated the demand for La Choy products.

Another innovation resulted from the increased use of bean sprouts during the 1950s. In the 1940s, because of the war and the firm's inability to import mung beans, the company pioneered the development of a reliable mung bean crop in the United States. By the early 1950s La Choy management had granted significant sums of money to universities and colleges across the United States to conduct research into the development and cultivation of mung beans. The research conducted by academic teams revealed that mung beans grew best in Texas and Oklahoma, where the composition of the soil, the amount of rainfall, and the prevailing harvesting methods combined to produce healthy beans. Yet crop yields tended to vary according to climatic conditions, and company management wanted a more reliable source of bean sprouts for its product line. Consequently, with the knowledge it had gleaned from the academic research it had funded, La Choy established its own indoor hydroponic garden, where employees harvested bean sprouts from growing mung beans. Raised in an environment of exact temperature and moisture control and irrigated with purified water, the growing period for mung beans amounted to seven days. From that time forward, the company attained its objective for a reliable source of bean sprouts.

With the expansion of its product line and the ever-increasing public demand for Chinese food, the company implemented a three-year, multimillion dollar expansion plan in 1955. By September of 1958 the plan had been completed, and La Choy had double the production capacity of its Archbold facility. Nearly seven and a half acres of space had been added to the plant, with new techniques for producing food that had been developed and designed by company employees. The installation of highly sophisticated cookers and machinery for the quick-cooking process and packing of chow mein, an innovative chow mein noodle production workplace, and the doubling of space devoted to growing and packaging bean sprouts were just a few of the capital improvements that resulted from the expansion plan.

The decade of the 1960s included some of the best years for the company. Not only did La Choy expand its product line to encompass a wide variety of Chinese food, but the firm also expanded its production by purchasing the product lines of other companies. One of its most important acquisitions during this time was the Oriental Show-You product line of Chinese food. As sales for Show-You products continued to increase, La Choy management constructed a new, state-of-the-art soy sauce processing plant in 1963 for the recently acquired product label. By the mid-1960s the company was processing and packaging approximately 300 private-label products.

This increase in product line items necessitated more and more space at the Archbold facility. Large new warehouses were constructed to stock the ever-growing list of products made by the company, as well as bean growing bins that were needed to meet the increasing consumer demand for La Choy Chinese foods. One of the company's major capital investments during this time involved the establishment of a research and development department, formed in 1965. Technicians and scientists in the department began to develop new products, investigate and experiment with the wide range of ingredients used in La Choy foods, and evaluate the technological advances and various methods of processing food with the industry. Following up and augmenting its research and development department, the company also added a bacteriology laboratory in 1969. By combining its own criteria for assessing the quality of ingredients used in the production of its food items with the standards set by the United States government, La Choy assured its customers of a quality control process not often seen in the industry.

During the late 1960s La Choy Food Products Company ventured into the frozen foods business. Marketing research had indicated that frozen food sales would increase rapidly during the next decade, and management at the company decided to invest heavily in this segment of the industry. When construction for new buildings to house frozen food production was completed, La Choy immediately began making different flavors of egg rolls, fruit rolls, soups, dinner entrees, and the innovative boil-in-bag entrees. Not content with its line of frozen Chinese food products, the company made a strategic acquisition by purchasing the Lambrecht line of frozen food items, which included pizzas, pizza rolls, cheesecakes, and other desserts.

The 1970s and 1980s

By the beginning of the 1970s La Choy had become one of the prominent producers of frozen foods and management committed itself to build upon the company's promising entry into this burgeoning market. In 1974 management acquired Temple Frosted Foods, one of the more successful frozen food firms located in New York with an extensive product line that added different types of Chinese soups, egg rolls, and sauces to La Choy's already existing line of frozen food items. By the end of the decade more manufacturing space had been added to the company's frozen food facility in Archbold, along with new administrative offices, employee lockers, and bean growing bins. The decision by management to invest in the frozen foods market was justified clearly by the increasing sales figures for the company's frozen food items.

In 1984 Beatrice Food Company purchased all of the assets and operations of Hunt-Wesson, Inc., a large food products firm located in Fullerton, California. Part of the strategy behind this acquisition was to merge La Choy Food Products Company into Hunt-Wesson. Consequently, La Choy was fully integrated into Hunt-Wesson and the company's administrative operations and offices were relocated from Archbold, Ohio to Fullerton. This reorganization and relocation simultaneously included shifting the responsibility for the marketing and sale of La Choy products from the Archbold facility to Fullerton as well. With all of the La Choy administrative offices and responsibilities moved to Fullerton, the Archbold facility was used solely as a manufacturing plant.

The 1980s were, of course, the years of mergers, hostile acquisitions, and leveraged buyouts, and no company was better at this game than Kohlberg, Kravis, Roberts Company of New York City. In 1986 Kohlberg, Kravis, Roberts purchased Beatrice Food Company and, typical of their targeted acquisitions, sold the company piecemeal to the highest bidders. Along with many other of the food companies Beatrice had purchased over the years, in 1990 Hunt-Wesson, Inc. and La Choy Food Products Company were sold to ConAgra, Inc., a large agricultural and food products conglomerate located in Omaha, Nebraska. In 1991 ConAgra management decided to decentralize the administration of all Hunt-Wesson business activities, so the company was parceled into what was called "Independent Operating Companies," or IOCs. La Choy Food Products Company was combined with Rosarita Food Company to become La Choy/Rosarita Food Company, a division (or IOC) of Hunt-Wesson, Inc.

The 1990s and Beyond

Although La Choy had a strong hold on approximately 40 percent of the Oriental food products market, amounting to more than $50 million, sales dropped dramatically during the early and mid-1990s. When the frozen foods product line was moved from the Archbold facility to other ConAgra plants in 1994, La Choy lost one of its most stable sources of income. The Chun King label of Chinese foods was purchased by ConAgra during the late 1980s, and some of its product line was merged with La Choy at the Archbold facility. The entire line of Healthy Choice Soups, 19 altogether, was included in the production schedule at Archbold.

La Choy's future appears uncertain. Although the company makes the most complete line of Chinese food products in the United States, canned chop suey, chow mein, and pepper steak are not competing well with easily accessible Chinese takeout food and tastier frozen dinners. Parent company ConAgra has assumed the responsibility of developing new strategies that would enable La Choy to reposition itself within the industry. But the success of such a long-term plan remains to be seen.

Additional Details

Further Reference

"Beatrice Sheds Fat," Fortune, October 28, 1985, p. 10."Chinese-Style Foods," Consumer Reports, January 1981, p. 16.Henkoff, Ronald, "ConAgra--A Giant That Keeps Innovating," Fortune, December 16, 1991, p. 101.King, Paul, "Branding Out of Control: Who's Driving This Train, Anyway," Nation's Restaurant News, March 4, 1996, p. 18.Koeppel, Dan, "Choy Suey Taipans Ready for War," Adweek's Marketing Week, November 26, 1990, p. 14."The La Choy Story: A Brief History," La Choy 75th Anniversary, Archbold (Ohio) Buckeye, November 1, 1995, p. 3B."La Choy Hits Bar Code Target with Labels," Packaging Digest, April 1997, p. 42."'You Make The Difference' Makes a Difference in Productivity at La Choy," Quick Frozen Foods, October 1981, p. 26.

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