Sweet smell of success

Oklahoma wheat producers use USDA financing to launch frozen-dough bakery

By Sally Vielma,
USDA Rural Development,

raveling in northwestern Oklahoma, it is evident that the waves of wheat are a major contributor to the economic base of the region. As the state song, “Oklahoma,” says, when the wind comes sweeping down the plain, the waving wheat can sure smell sweet. “Sweet” not only describes the smell at the Value Added Products Inc. cooperative’s frozen dough processing plant, but also the aroma of several other aspects of the cooperative’s bakery operations.

Adding value to hard-red wheat
A core group of wheat producers in the Woods County area of northwestern Oklahoma held initial meetings to discuss value-added processing alternatives for their hard-red winter wheat. This variety is the region’s major crop, preferred by producers as a consistent source of clean, high-quality wheat that has above-average test weights and protein levels. Wheat producers, cooperative groups, economic development partners and agricultural business leaders all shared the vision and desire to add more value to the crop in the region where it is grown.

After careful study of information and research from the Oklahoma Department of Agriculture, Oklahoma State University and a professional consulting firm, the value-added group opted to pursue production of frozen, self-rising dough products plant.

Co-op launched
The group initially organized as a Limited Liability Company (LLC) as it planned for the processing of area producers’ hard-red winter wheat into value-added food products. The organization, called Value Added Partners LLC, assessed the feasibility of a frozen-dough processing plant. Several associations with international expertise in the field of bakery facilities, equipment and supplies greatly assisted the producer group as it examined value-added alternatives.

Value Added Partners evolved into a closed cooperative, and the name changed to Value Added Partners Inc. (VAP) in 1999. The co-op, as originally designed, was to provide wheat producers the opportunity to expand their customer base through vertically integrated processing. It also would allow producers to capture a larger share of the profit margins through the further processing of their wheat.

The project “just felt right to all of us from the beginning,” says Mike Dunker, plant manager. Producer response to the initial equity drive in 1999 was "fantastic,” board members say. Project backers held 34 producer meetings across Oklahoma, which resulted in more than 900 separate producer/investors joining.

About $7.5 million in member equity was raised in just three months. A second equity drive in 2000 brought in an additional $2 million in one month. The great response to the second equity drive was accomplished by mailing a single letter to producer/investors. The response was indicative of the strong level of commitment and belief the producers had in the VAP co-op.

VAP also used a 70-percent Business and Industry Guaranteed Loan, for $7.5 million, from USDA Rural Development for some of the capital expense for the project.

Perfect site located
With organization structure and management services in place, VAP selected a site it felt was perfect for the dough processing facility: a 48,000- square-foot building with eight acres of grounds in Alva, Okla. The facility had previously housed a Wal-Mart store and had several features that fit the needs of VAP. These included climate control, open span sanitary design, loading docks and adequate utilities and services.

The property around the facility would allow for plant, warehouse and freezer expansion. The state-of-the-art, “high speed” baking equipment purchased for the plant is very specialized and incorporates the latest European bakery technology for frozen, self-rising dough. It is used in manufacturing flat and artisan bread products, which includes frozen, self-rising pizza crust currently VAP’s main product.

The decision to focus on pizza crust production has proven to be a good choice for the co-op. VAP is currently selling pizza crust to some of the nation’s largest retailers of frozen pizza. In 2001, the co-op was awarded a $500,000 Value-Added Producer Grant from USDA Rural Development. This grant was a working-capital grant that assisted them in branching out with other dough products and in processing and marketing some additional dough and bread products.

Expanding product line
VAP has produced and sold several different types of bread and dough products since that time. These include four varieties of baguettes, three flavors of Danish rolls and the dough for a puffed pastry. Two sizes of “crazy bread” (a bread that is used for dipping) are being produced and sold.

VAP’s dough and bread product markets continue to grow, and it has the capability to produce almost any imaginable type of bread product. The newest addition to VAP’s product line is a unique frozen cinnamon roll that can be microwaved. “Good” does not even come close to describing the product. It is incredible, and sweet! The plant has its main line running at full capacity with pizza crust, while a pilot line (for orders of less than 1,000 pounds) is running full time for cinnamon rolls. They use this smaller production line also to develop new products. The main line has the capability to process 10,000 pounds of dough per hour.

VAP has 80 full-time employees, about 15 percent of whom are also producers in the cooperative. The amount of freight transportation has grown so much that a trucking company was launched to handle it. It owns 12 trucks and 20 trailers and employs 15 fulltime drivers. All this activity supports the vision of the cooperative in creating job opportunities in the area and supporting the small farmer.

Adapting to various situations in the marketplace has provided valuable experience for VAP. The co-op has successfully made necessary adjustments in labor, products and marketing efforts. The co-op is effectively managed and will continue to benefit producers while having a positive impact on the entire area.

The producers who launched the co-op say they made a very good initial choice in seeking out experts in the kind of food processing they wanted to do. Dunker, who served as a consultant to the project in the very early stages of the project, and his brother Harry, the co-op’s operations manager, together have 60 years of experience in the baking industry and plant set up.

With accomplishments and strides achieved so far by the co-op, who knows what could happen next? Some co-op members say a pizza-topping plant and toppings-producer venture would be sweet! Stay tuned.

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