Savannah Foods & Industries, Inc. Business Information, Profile, and History

History of Savannah Foods & Industries, Inc.

Savannah Foods & Industries, Inc. is one of the largest sugar producers in the United States. Under the brand names Dixie Crystals, Evercane, Colonial, and Pioneer, Savannah markets both cane and beet sugar throughout the eastern part of the country. Among the facilities owned and operated by Savannah are its sugar refineries in Savannah, Georgia; Clewiston, Florida; and Gramercy, Louisiana. Through wholly owned subsidiaries, the company also produces beet sugar at several midwestern locations. Savannah's Michigan Sugar Company, which was purchased in 1984, operates processing plants in four Michigan cities: Carrollton, Caro, Croswell, and Sebewaing. Great Lakes Sugar Company, a wholly owned subsidiary of Michigan Sugar Company, has two facilities in Ohio, at Fremont and Findlay. Savannah also produces raw sugar from sugar cane at the Raceland, Louisiana mill of its Raceland Sugars, Inc. subsidiary. Additional subsidiaries include Savannah Foodservice, Inc., which produces packaged sugar and condiments for institutional use, and Food Carrier, Inc., a truckload carrier operation.

The Savannah Sugar Refining Corporation was founded by Benjamin Oxnard in 1916. Oxnard came from a family of sugar refiners. With his father and three brothers, he had operated the Fulton Sugar Refinery in Brooklyn, New York, and later he and partner Richard Sprague ran a 7,500-acre plantation and refinery called Adeline in St. Mary's Parish, Louisiana. Between about 1910 and 1915, the Louisiana operation encountered a series of setbacks. The complex was severely damaged by a fire, and then, after the factory was rebuilt and modernized, the plant's supply of sugar cane was affected by consecutive seasons of floods, droughts, and frosts. These problems were compounded by the passage of laws allowing free entry of foreign-produced sugar into the United States. This string of developments led Oxnard to investigate moving the operation to a more profitable location. While Oxnard sought to relocate in Virginia, James Imbrie, one of the major backers of the project, made his financing conditional: he would provide the necessary funding if the company moved to Savannah, where his family had land they wanted developed industrially. After consulting with his family, Benjamin Sprague (Richard's brother and the operation's engineer), and manager William Pardoner, Oxnard accepted the offer, and a site for the new refinery was chosen on the south bank of the Savannah River. At Ben Sprague's urging, the largely Cajun labor force from the Louisiana operation was imported to run the new plant. This meant a 700-mile migration for the community of workers and their families, about 300 people in all, many of whom had never been outside St. Mary's Parish.

Choosing the name Dixie Crystals for the new company's product, Oxnard set the Savannah Sugar Refinery into production in the summer of 1917. At the refinery's start-up, 19 million pounds of raw sugar were in store, selling at five cents a pound. The timing of Savannah's appearance was excellent. The onset of World War I created a sugar shortage, and with demand so high, the U.S. government took control of production. When the war ended, however, the government controls were entirely withdrawn, and the price of raw sugar from Cuba began to climb rapidly. A period ensued known in the sugar industry as "The Dance of the Millions," so called because of the millions of dollars that were said to have danced into oblivion. Raw prices were escalating at an artificially fast rate, supported by the mistaken assumption on the part of refinery management that there was a worldwide shortage. As prices gradually adjusted themselves back down, many companies were caught with huge orders of overpriced raws. Savannah, for example, lost a million dollars on 10,000 tons of raws from Java intended to keep the refinery running for about three weeks. Oxnard was forced to sell it at a substantial loss before the ship carrying it had even reached North America.

In 1924, Oxnard died, and William Pardonner was named president of Savannah. Oxnard's two sons, Thomas and Benjamin Jr., joined the company around that time. Thomas became assistant secretary of the company in 1924. The following year, Richard Sprague's son William joined the company as well. The Oxnard and Sprague families would go on to dominate the company's leadership ranks throughout its history. In the late 1920s, Savannah became a member in the Sugar Institute, which was essentially an organization set up to orchestrate price-fixing in the sugar industry. The government successfully sued to destroy the Institute, and the member companies left the battle with huge legal fees, half a million dollars of which were owed by Savannah.

Savannah remained in business during the Great Depression. Although raw sugar prices dropped to 1.04 cents a pound in 1930, an increase in consumption to some extent countered the losses, and by 1936, the company appeared to have emerged from the period largely intact. That year, stockholders received a four-for-one split on their shares, and employees were given a bonus equivalent to ten percent of their yearly salaries. In 1938, Savannah began marketing its sugar in paper bags. Their bagged sugar, new to the industry, came in three sizes, two-, five-, and ten-pounds. Company lore tells of an ambitious Dixie Crystals salesman who demonstrated the merits of the paper packaging to store owners by urinating on the bags, proving that paper bags were superior to cloth bags in repelling moisture.

The Oxnard and Sprague families retained their hold on the company's leadership after the death of Ben Sprague in 1944. Thomas Oxnard became Savannah's president, and Bill Sprague became executive vice-president at an identical salary to Oxnard's. Company records were set that year for both processing and deliveries, even though World War II was creating serious labor shortages and holding production below its potential. Following the war, Savannah undertook a program to keep producing at plant capacity while at the same time cutting operating costs. To assist in this process, the company enlisted the aid of Frank Chapman, a sugar engineer from Tate and Lyle, a prominent British sugar company. Chapman had by necessity become an expert at fuel conservation during the war. In 1949, Savannah's sales fell by $400,000 from the previous year, largely due to a decline in the market for blackstrap molasses, the company's primary by-product. This decline was offset, however, by the new cost-cutting measures, and therefore Savannah's earnings did not suffer significantly.

During the 1950s, the public image problem that has to this day plagued the sugar industry began to set in. For the first time, sugar began to be associated with bad health, and with obesity in particular. Savannah fought back with its own advertising. The company's own 1954 annual report pointed to sugar's role as an appetite suppressant, describing the relationship between hunger and blood sugar level. One advertising campaign of the era similarly stated, "Sugar helps dieters to say no." Another emphasized sugar's ability to provide a quick burst of energy, asking the consumer, "Why do mountain climbers carry sugar?"

Lawton Calhoun became the company's president in 1961, the beginning of a turbulent decade for Savannah. In the early part of the 1960s, worldwide consumption of sugar began to increase substantially. At the same time, extremely low prices around the world led many sugar producers to stop production. Meanwhile, Cuban sugar production dropped significantly, and two straight years of bad weather had decimated Europe's beet crop. In the face of a potential global sugar shortage, prices began to climb. Between January and May of 1963, the price of a pound of sugar doubled, from 6.6 cents to 13.2 cents. Before the year was over, prices rose and fell several times, creating havoc among U.S. sugar companies that were accustomed to relatively stable prices kept in check by a variety of Sugar Acts. Somehow, Savannah emerged as the only refinery in the United States to turn a profit in 1963.

While the sugar industry as a whole was in chaos in 1963, Savannah did not sit still. In December of that year, work began on a new refinery in Clewiston, Florida, which was completed and operational less than a year later. The Everglades Sugar Refinery, Inc., as the plant was called, was about one-eighth as large as the main plant in Savannah and had a production capacity of 400,000 pounds of refined sugar a day. The sugar produced there was sold under the "Evercane" brand name. In the mid-1960s, Savannah found itself the target of several takeover attempts. One strategy Calhoun employed to ward off hostile attempts was to keep the company's cash till unattractively low. This is usually accomplished by purchasing other companies. Savannah followed this pattern with the 1968 purchase of Western Grain Company, a firm based in Birmingham, Alabama for just over $26 million. Western Grain produced a range of products that included grits, cornmeal, and livestock feeds, but its most attractive feature was its Jim Dandy line of dog food. The whole package was renamed the Jim Dandy Company, and its acquisition helped increase Savannah's total sales by 21 percent in 1968.

William Sprague, Jr., was named president at Savannah in 1972. The following year, the company's earnings were held back by a two-week-long strike at Jim Dandy, an early indication of a string of problems that would arise at that subsidiary. A price freeze on sugar prevented Savannah from passing its higher costs along to its customers. In 1975, Transales Corporation, Savannah's storage facility subsidiary--which was dissolved in May of 1992--was established. That year, Savannah was among twelve sugar companies in six states named in an antitrust suit that alleged conspiracy to fix sugar prices. Another similar suit was added two years later, charging fourteen companies with violating the Sherman Antitrust Act. Meanwhile, Savannah diversified further in 1976, with the launching of Food Carrier, Inc., its trucking subsidiary.

By the end of the 1970s, the Jim Dandy acquisition proved to have been a mistake. Although it was ranked second in the United States among brands of grits, Jim Dandy recorded an operating loss of $3 million in 1979, attributed by Savannah officials to poor management in Birmingham. Savannah finally managed to unload a good deal of Jim Dandy's assets in 1981, selling some to Martha White Foods Inc. of Nashville for around $5 million, and selling the company's dog food operation in Decatur, Alabama to an Atlanta company called Willmac Inc. for about $12 million.

In 1980, Savannah was named for the first time on Fortune magazine's list of America's 500 largest companies. In October of that year, Savannah acquired Sunaid Food Products for $750,000. Sunaid, based in Miami, manufactured single-serving packets of sugar, ketchup, and other condiments. This purchase paid off quickly, with profits exceeding the purchase price within two years.

Savannah was the second-largest sugar refining company in the United States by the early 1980s, trailing only Amstar Corporation. After good years in 1980 and 1981, the company was hurt by the imposition of import quotas in 1982. This led to artificially high sugar prices, which in turn gave a new competitive edge to high fructose corn syrup (HFCS) in the natural sweetener market. Within a week of one another Coca-Cola and Pepsi-Cola, both huge sugar users, announced a switch to HFCS, and by 1984 one sugar company and six refineries went out of business. Savannah, however, managed to thrive during this period by securing new territory in the Midwest to compensate for sugar's losses in the sweetener market. In 1983, the company shipped 900,000 tons of sugar, and its plants operated at 95 percent of capacity. In 1984, Savannah paid $66 million for the Michigan Sugar Co., a beet sugar producer with yearly sales of about $97 million.

In 1985, Savannah became more deeply involved in beet sugar with the purchase of the Ohio beet sugar operations of the Great Western Sugar Company for about $14.5 million. Great Western, a unit of Hunt International Resources Inc., had filed for Chapter 11 bankruptcy, and the purchase included a mill in Fremont, Ohio and a storage facility in Findlay, Ohio, along with a sizable amount of inventory. The following year, Savannah acquired Colonial Sugars, Inc., a cane sugar refiner with plants in Louisiana and Missouri. Savannah's sales for 1986 reached $634 million.

By the late 1980s, Savannah was the largest sugar producer in the United States, with sales of $1.1 billion in 1989. This company's share of the sugar market was 21 percent, about equal to the share held by the British company Tate & Lyle, which had in 1988 purchased Amstar, the former U.S. leader. Savannah was able to capture such a hefty portion of the market because of its ability to survive the 1980s while ten of the nation's 22 cane refineries did not. These companies were largely the victims of a 20 percent loss to HFCS in the market for natural sweeteners. Savannah's stability was also enhanced by its beet refinery acquisitions of the 1980s, although beets still provided only about 15 percent of company sales by the end of the decade.

Savannah set company records for both net income and sales in 1990. The company earned $48.6 million on sales of $1.2 billion that year. Both of these figures declined slightly in 1991. That year, Savannah Foodservice began operating on the west coast, opening a plant in Visalia, California. In October of 1991, Savannah purchased the 100-year-old South Coast Sugars, Inc. of Raceland, Louisiana. That company's name was changed to Raceland Sugars, Inc., and it was expected to generate about $25 million in annual sales. Savannah celebrated its 75th birthday in 1992, and as the 1990s continued, the company appeared to be on track to finish its first century as a frontrunner in the sugar industry.

Principal Subsidiaries: Everglades Sugar Refinery, Inc.; Savannah Sugar Refining Corporation; Colonial Sugars, Inc.; Michigan Sugar Company; Savannah Foodservice, Inc.; Food Carrier, Inc.; Great Lakes Sugar Company; Raceland Sugars, Inc.; Phoenix Packaging Corporation; Savannah Investment Company.