Imperial Sugar Company Business Information, Profile, and History
Post Office Box 9
Sugar Land, Texas 77487-0009
In 1999, we changed our name from Imperial Holly Corporation to Imperial Sugar Company. A name recognized and trusted in the food industry for over 150 years. Although our name says 'sugar' we are much more. Imperial Sugar Company maintains a portfolio of successful consumer sugar brands, has expanded its distribution and production facilities from coast to coast, and reaches further into the specialty products, foodservice and healthcare industries. Now with over 500 years of combined experience, Imperial Sugar is equipped and prepared to continue the reputation of dedication to quality.
History of Imperial Sugar Company
Imperial Sugar Company holds the number one position in refined sugar in the United States, with a market share of about 33 percent. The company refines raw cane sugar at four facilities in Texas, Georgia, Florida, and Louisiana, and processes beet sugar at 11 processing plants in California, Wyoming, Montana, and Michigan. Its line of sugar products includes several well-known regional brands: Imperial Sugar (Southwest), Dixie Crystals (Southeast), Pioneer Sugar (Great Lakes region), Holly Sugar (intermountain West), and Spreckels Sugar (California). The company also sells sugar under private labels and markets the Wholesome Foods brand, the national leader in organic sweeteners. In addition to its sugar operations, Imperial Sugar derives about one-quarter of its revenues from its foodservice business, which sells a variety of nonsugar products--from drink mixes to plastic cutlery&mdashø restaurants, healthcare institutions, schools, and other entities. Imperial Sugar traces its history back to 1843, when a sugar refinery was erected on a small sugar plantation in Sugar Land, Texas. The fledgling sugar enterprise grew as the nation grew, adopted the name Imperial Sugar Company during the early 20th century, then merged in 1988 with Holly Sugar Company--a beet sugar producer with roots stretching back to 1905&mdashø form Imperial Holly Corporation. Following the acquisitions of Spreckels Sugar Company in 1996, Savannah Foods & Industries, Inc. in 1997, and Wholesome Foods L.L.C. and Diamond Crystal Specialty Foods, Inc. in 1998, the company changed its name back to Imperial Sugar Company in 1999.
In 1820 a rush of Anglo-American settlers began colonizing the vast region that 25 years later would become the state of Texas. Through the recruiting efforts of Moses and Stephen Austin, who promised to carry out their father's plan to populate the territory, Texas' population swelled enormously in the years following 1820, jumping from 7,000 in 1821 to 50,000 by 1836--by far exceeding Stephen Austin's promise to bring at least 300 families into the area. Texas became an independent republic in 1835, and its citizens voted the following year in favor of annexation by the United States. Statehood would be another nine years away, however, delayed as lawmakers debated whether or not to extend slavery into the new region. Another 60 years would pass before oil, the chief engine that would drive the state's economy, first erupted from a well near Beaumont, Texas. During the six decades that separated Texas' admittance to the Union and the discovery of oil, other agricultural and manufacturing industries fueled the region's growth, including the cultivation and processing of sugarcane.
Although the first sugar refinery in the United States began operations in 1689, sugar production did not become a major U.S. industry until the 1830s. Early settlers into Texas took up the trade upon their arrival. One such colonist was Samuel May Williams, who owned a sugar crop on Oakland Plantation in southeast Texas in a community that later would be aptly named Sugar Land. Initially, the sugarcane was used to produce syrupy sweeteners, but by 1843--two years before Texas became a U.S. state--Williams and other neighboring farmers were harvesting sufficient sugarcane to warrant the construction of a commercial raw sugar mill. Completed that same year, the mill enabled the cooperative of sugar farmers to make granulated sugar. Imperial Sugar Company was spawned from this first mill, with the site Williams chose for Sugar Land's first sugar refinery serving as the site of Imperial Sugar/Holly's sugar production over the next 150 years.
Before long, Williams's Oakland Plantation and the mill were sold to W.J. Kyle and B.F. Terry, under whose stewardship the property became known as Sugar Land Plantation, one of several sugarcane farms in a region referred to as the 'sugar bowl.' Kyle and Terry profited from their investment, as Sugar Land Plantation flourished in the years leading up to the Civil War, but the outbreak of the war signaled more prosaic growth for many of the sugar bowl's farmers. Once the war ended, sugar production in the region declined considerably and the number of sugar mills dropped to slightly more than a handful.
After the deaths of Kyle and Terry, Sugar Land Plantation and a majority of the other plantations in the area that had withstood the effects of the depressed agricultural climate were purchased by Edward H. Cunningham. Cunningham spent a considerable amount of money modernizing Sugar Land Plantation, investing more than a million dollars in machinery and construction projects by 1890. Slightly more than a decade later, however, Cunningham's holdings devolved into receivership and were stripped away from him by disgruntled and unpaid creditors. Sugar Land Plantation, along with the other properties formerly belonging to Cunningham, was acquired in 1905 by I.H. Kempner, his mother, and siblings, as well as W.T. Eldridge.
Early 20th Century: Development of Imperial Sugar
In the nearly 60 years since the first sugar mill was erected in Sugar Land, the property had passed through three sets of hands, and now, with the arrival of the new century, Kempner and Eldridge had become its fourth owners. There it would stay, remaining in the Kempner family for the next 80 years. I.H. Kempner and his descendants steered the company through its development from a small collection of sugar production properties to one of the largest sugar producers in the United States.
Kempner and Eldridge, like Cunningham, poured capital into their newly acquired properties, renovating the sugar production facilities and the community of Sugar Land itself. Toward the end of the 19th century Sugar Land was ignominiously branded 'Hell Hole of the Brazos'--a swampy area populated by ex-convicts, drifters, professional gamblers, and deserters from ships sailing to and from the port of Galveston. Kempner and Eldridge sought to ameliorate this disreputable image of their town by draining the land and paving new gravel streets. In the process, Sugar Land became a company town, managed by the company, with company-owned stores--such as the Imperial Mercantile Company general store--catering to the residents. Later, churches, hospitals, and schools were constructed, additions that attracted more respectable Sugar Land denizens and gave Kempner and Eldridge a community upon which to build their sugar empire.
The sugar properties owned by Kempner and Eldridge were known as Sugarland Industries until 1924. At that time, Imperial Sugar Company was incorporated to take over the properties owned by Sugarland Industries, including Sugar Land Feed Company and Imperial Mercantile Company. The name 'Imperial' came from New York City's Hotel Imperial, one of the lavish hotels that graced the city's Herald Square in the 1890s. As a college student, Kempner had visited the hotel, been impressed by it, and decided to borrow its name as the name of his sugar company, co-opting the crown symbol from the hotel's stationery as well.
Imperial's sugar refinery by this point could produce 1.5 million pounds of sugar per day, a production capacity that required the importation of raw sugar from Cuba and the West Indies to keep the facility in operation throughout the year. Raw sugar was shipped to Galveston, unloaded in 300-pound burlap bags, then sent by rail to the refinery at Sugar Land, where granulated sugar was packaged in 25-, 50-, and 100-pound cloth bags bearing the Imperial brand name. By 1927, the company was producing slightly more than 300 million pounds of sugar per year and annual revenues had climbed to nearly $19 million. These results were encouraging, but the company would not eclipse these figures until the eve of World War II.
1930s Through Early 1980s: Fluctuating Fortunes
When the Great Depression descended on the country, stifling economic growth and forcing many businesses into bankruptcy, Imperial Sugar was not immune to its effects. The company's yearly sugar production and revenue totals both dropped substantially during the decade-long economic downturn. Revenues plunged from $18.8 million in 1927 to $6.3 million in 1932, and annual sugar production during the period fell from 219 million pounds to 165 million pounds--exceeding the magnitude of the recessive conditions following the Civil War. Moreover, the decline recorded between 1929 and 1932 did not represent the end of Imperial Sugar's financial woes. As the Depression dragged on into the mid-1930s, the company went into the red and was forced to cut its workforce from 500 to 373. Imperial Sugar lost money every year between 1932 and 1937, recording its greatest loss in 1932, when the company showed nearly $300,000 in negative net income, down from the $750,000 gain it had posted in 1928.
Despite the losses, Imperial Sugar--through a wholly owned subsidiary named Fort Bend Utilities Company--spent $300,000 on a power plant, which supplied the sugar producer's energy needs. When the power plant was completed in 1937, the company was beginning to emerge from the effects of the Depression, generating $15.9 million in revenues that year and $19.7 million the following year, at last eclipsing the total recorded in 1927. Annual sugar production increased as well, climbing to nearly 400 million pounds in 1938, offering persuasive proof that the hard times were over.
After the war, the Eldridges sold their stake in Imperial Sugar and the Kempners became majority owners of the company, which by the end of the 1940s was recording nearly $1 million a year in net income. The production capacity of the refinery at Sugar Land by this time had been increased to two million pounds per day, and by a decade later reached 2.25 million pounds per day, as the company expanded to meet rising demand during the postwar economic boom period. During the 1950s, Imperial Sugar's financial performance fluctuated wildly, in part due to President Eisenhower's embargo against Cuba, then the company's principal source of raw sugar. The company's annual net income wavered between $395,000 and $1.2 million during the decade, foreshadowing more difficult years to come.
Since the beginning of the century, the sugar industry had been subjected to federal regulation that, as time wore on, threatened to price sugar out of the U.S. market. During the 1960s and 1970s, as regulatory measures continued to inflate the price of domestic raw sugar, Imperial Sugar avoided much of the damage incurred by sugar producers located elsewhere. The migration of candy factories and bottlers into the Sun Belt during the period buoyed the company's business. By the end of the 1970s, however, the sugar industry had changed significantly and Imperial Sugar's position began to appear tenuous.
Sugar use experienced a precipitous decline during the 1970s, falling even as total sweetener consumption remained steady. From 1973 to 1983, Americans consumed 124 pounds of sweetener per person annually, yet sugar's share dropped from 107 pounds of the annual total to 71 pounds during the ten-year period. Corn sweeteners moved into the breach, increasing in usage by 130 percent. Exacerbating matters for sugarcane processors was the burgeoning popularity of artificial sweeteners such as saccharin and aspartame, as well as the rising price of domestic raw sugar. By the early 1980s, domestic raw sugar sold for 22 cents a pound, double the world market price. Imperial Sugar's management, now led by I.H. Kempner III, searched for a solution to the difficulties that lay ahead.
Late 1980s and Early 1990s: Merger with Holly Sugar
Imperial Sugar by this time was generating roughly $230 million a year in revenue, recording nearly $13 million a year in net income, and producing nearly a billion pounds of sugar annually. The totals were prodigious for a producer in the U.S. sugar industry, but they also reflected the uncertainties of a business derived exclusively from the refining of sugarcane. What the company lacked was a stake in those segments of the sugar market that were expanding, including companies that produced sugar from stock feed other than sugarcane. The realization of this need brought Imperial Sugar's management in contact with Holly Sugar Company, a producer that used sugarbeets instead of sugarcane to make sugar. The resulting association between the two companies would alter Imperial Sugar's future dramatically.
In 1905, the same year Kempner and Eldridge acquired Sugar Land Plantation, the first Holly Sugar factory was constructed in Holly, Colorado, just in time for the sugarbeet harvest that year. From the harvest the fledgling company produced 60,000 100-pound bags of sugar, enough to justify and help pay for the addition of a second factory in Swink, Colorado. Several years later, in 1911, expansion continued, this time across state borders into California, where Holly Sugar constructed a beet sugar factory in Huntington Beach. After the company's expansion into Wyoming in 1915, a wealthy Colorado businessman named A.E. Carlton acquired the company and spearheaded its subsequent vigorous growth. Either through acquisition or plant construction, Holly Sugar added ten factories to its growing list of facilities between 1916 and 1931. As the company expanded its sugarbeet operations, it also diversified into other business arenas, including livestock feeding operations and oil production and refining. By the mid-1980s, however, as Imperial Sugar was weighing its future moves in an increasingly volatile sugar market, Holly Sugar had been forced to close 12 beet sugar factories and divest its other business interests.
Imperial Sugar's management began actively courting Holly Sugar in 1987, convinced that the two companies would be more capable of competing in the sugar industry together than they would be apart. In October 1987, Imperial offered to pay Holly Sugar's stockholders $68 for each of Holly Sugar's 1.1 million outstanding shares, in addition to giving them one share in the combined company, which would cede a 23 percent stake in the merger to Holly Sugar's stockholders. Imperial Sugar's offer, however, was not the only one Holly Sugar's management had to consider.
Just prior to Imperial Sugar's attempt at effecting a merger between the two companies, a Melville, New York-based investment group named Plum Associates, led by Illinois businessman Peter R. Harvey, offered Holly Sugar a $94.3 million, two-stage takeover plan. Holly Sugar initially rebuffed Imperial Sugar's proposal, favoring instead Plum Associates' offer, but before two months had passed, Plum Associates cut its tender offer to $85 million. As a result, negotiations with Imperial Sugar resumed, leading to a definitive agreement between the two in December 1987 that stipulated Imperial Sugar would acquire Holly Sugar for $78.5 million plus cede a 25 percent stake in the merged company. The following April, Holly Sugar's shareholders approved the merger, joining together Holly Sugar's eight beet sugar processing facilities--four in California, two in Wyoming, and one each in Montana and Texas--and Imperial Sugar's Sugar Land refinery, which created a new $660 million sugar concern named Imperial Holly Corporation. Also as a result of the merger, Imperial Holly became a publicly traded firm for the first time, although the Kempner family retained a stake of about 38 percent. Initially traded on the NASDAQ, the stock moved to the American Stock Exchange in 1990.
After the merger, Imperial Holly's annual revenues initially rose to $717 million in 1990, but then the company recorded consecutive declines in 1991, 1992, and 1993. Entering the mid-1990s, Imperial Holly continued to suffer from external market forces that prevented the company from realizing the true benefits of the 1988 merger. The most damaging of these developments continued to be the depressed prices for refined sugar, which fell 11 percent between 1989 and 1994. More unexpected were losses resulting from adverse weather and disease in 1994, which froze beets in the Midwest and infected them in California, contributing to the $7.9 million loss the company recorded in 1994. Meanwhile, on the management front, James C. Kempner was named company president and CEO in 1993, with I.H. Kempner III, brother of James, continuing as chairman.
Late 1990s: Acquisitions Spree and the Return of Imperial Sugar
In the wake of the 1996 Farm Bill, which eliminated certain government controls on sugar allotments, the sugar industry entered a period of consolidation, with Imperial Holly being one of the most active consolidators. In April 1996 the company acquired California-based Spreckels Sugar Company, Inc. for about $28 million in cash. Spreckels was a beet sugar processor and marketed a leading West Coast sugar brand, Spreckels. Imperial Holly, which held approximately 16 percent of the national sugar market at this time, managed to post its first profit since 1990 for the 1996 fiscal year. In August 1996 Dublin-based Greencore Group PLC, the only processor of sugar in Ireland, spent about $50 million to take a 27 percent stake in Imperial Holly and gain two seats on the company board. Imperial Holly used the injection to pay down debt and accelerate its capital improvement program.
In December 1997 Imperial Holly completed a $567 million acquisition of Savannah Foods & Industries, Inc., which had fiscal 1996 revenues of about $1.2 billion. Based in Savannah, Georgia, Savannah Foods was best known for its Dixie Crystals sugar brand, which was marketing throughout the Southeast. Savannah Foods operated three cane sugar refineries in Georgia, Louisiana, and Florida, and four sugarbeet processing plants in Michigan, with the latter stemming from its 1984 acquisition of Michigan Sugar Company and 1985 purchase of Great Lakes Sugar Company. The combination of Imperial Holly and Savannah Foods created the leading sugar refiner and processor in the United States, with a market share of 33 percent. Imperial Holly now owned five leading regional consumer sugar brands: Imperial Sugar, Dixie Crystals, Pioneer, Holly, and Spreckels (the Pioneer brand came to the company through Savannah Foods' Michigan operations). Imperial Holly also became a national supplier of sugar and sweetener products to industrial food manufacturers. The acquisition also helped increase the company's revenues to $1.78 billion for the 1998 fiscal year, more than double the year-earlier figure of $766.1 million.
In the late 1990s Imperial Holly remained vulnerable to the fluctuations engendered by government intervention in the sugar industry and by the industry's cyclical nature. As it looked to the 21st century, the company sought to ameliorate these influences by diversifying its operations into higher margin, higher growth, noncommodity sectors of the food industry. It already had a start on this through Dixie Crystals Brands, Inc., which was acquired with Savannah Foods and was a leading supplier of packaged sugar, sugar substitutes, and related products to the foodservice industry. In November 1998 Imperial Holly acquired Wilmington, Massachusetts-based Diamond Crystal Specialty Foods, Inc. for $143 million in cash, stock, and assumed debt. Diamond Crystal produced nutritional dry mixes, sauces, seasonings, drink mixes, and desserts for distribution to the foodservice industry, including hotels, restaurants, hospitals, and schools. Imperial Crystal combined Dixie Crystal and Diamond Crystal into a new foodservice operation called Diamond Crystal Brands, Inc. In less than a year, foodservice revenue had grown to represent one-quarter of overall revenues. In another move that increased Imperial Crystal's involvement in higher margin sectors, the company spent $5.1 million to acquire Daytona Beach, Florida-based Wholesome Foods, L.L.C., the leading marketer of organic sweeteners in the nation as well as the marketer of Sucanat, the number one organic sweetener in the United States. In the aftermath of all of these acquisitions, Imperial Holly's leaders concluded that the company's name was no longer appropriate for a firm with a national presence and a number of brands. In early 1999, then, the company returned to its roots and readopted the name Imperial Sugar Company.
Principal Subsidiaries: Holly Sugar Corporation; Savannah Foods & Industries, Inc.; Savannah Foods Industrial, Inc.; Dixie Crystals Brands, Inc.; Michigan Sugar Company; Imperial Sugar LP; Savannah Sugar LP; Imperial Distributing, Inc.; Diamond Crystal Specialty Foods, Inc.
Principal Competitors: Alliant Foodservice Inc.; American Crystal Sugar Company; CSM nv; Corn Products International, Inc.; SYSCO Corporation; Tate & Lyle PLC; U.S. Foodservice.
- 1843: A commercial raw sugar mill is constructed in a southeast Texas community later named Sugar Land.
- 1905: The Sugar Land Plantation and sugar mill are acquired by I.H. Kempner and partner and are operated as Sugarland Industries; the first Holly Sugar factory is built in Holly, Colorado.
- 1924: Sugarland Industries is incorporated as Imperial Sugar Company.
- 1927: Company is producing more than 300 million pounds of sugar per year; annual revenues reach nearly $19 million.
- 1932: At height of Great Depression, company posts a $300,000 net loss.
- 1938: Production increases to nearly 400 million pounds of sugar.
- 1988: Imperial Sugar merges with Holly Sugar Company, a sugarbeet processor, to form Imperial Holly Corporation, a publicly traded firm.
- 1996: Imperial Holly acquires California-based Spreckels Sugar Company, Inc.; Dublin-based Greencore Group PLC acquires a 27 percent stake in Imperial Holly.
- 1997: Company acquires Savannah Foods & Industries, Inc. for $567 million.
- 1998: The acquisitions of Diamond Crystal Specialty Foods and Wholesome Foods, LLC are completed.
- 1999: Imperial Holly changes its name back to Imperial Sugar Company.
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