Top Tomato

REVIEW SUMMARY
Industry. Agriculture
Company. Lipman
Key. Agriculture companies that control both the farming and the packing can remain competitive.

Florida's biggest tomato producer is about to get bigger.

Lipman, the fourth-generation family business also known as Six L's, has hired its first outside CEO to grow the company. In September, the Immokalee-based agriculture company hired Kent Shoemaker, 49, who most recently was chief operating officer of FreshPoint, a division of food-distribution goliath Sysco.

“His mission is all encompassing,” says Larry Lipman, 63, who recently retired as CEO but remains the chairman of the company and is the grandson of founder Max Lipman. But foremost on Shoemaker's agenda is expanding the company's farming, packing, shipping and selling operations, particularly where it doesn't have a significant presence in the Midwest, West and internationally.

Privately held Lipman doesn't disclose revenues or other data. Shoemaker says the company employs “thousands” of people and farms “tens of thousands” of acres.

Lipman is already a huge player in the tomato business, billing itself as the largest tomato producer in Florida and controlling 12% of the $1.28 billion industry (amounting to more than $150 million in annual sales). Besides Florida, the company also operates in Pennsylvania, Maryland, North Carolina, South Carolina, California and has joint ventures with companies in Mexico.

Larry Lipman declines to cite specific sales-growth targets. “Making money is more important than just getting bigger in sales,” he cautions.

Fact is, business valuations are more attractive today because smaller competitors face increased costs of doing business, from rising commodities to greater government scrutiny. “We have seven deals in the pipeline and two in contract,” says Shoemaker.

Shoemaker is no stranger to deal making. He grew his father-in-law's produce company called Red's Market in Orlando after graduating from Florida State University in 1985 and sold it to a British firm. He later bought it back with the backing of New York venture firms and eventually resold it to Sysco, where he helped grow FreshPoint's operations to $1 billion in sales until he left in September to join Lipman.

Farming, packing and other agriculture businesses in Florida remain mostly in the hands of generations of well-established families. The name Six L's stands for the six children of Max Lipman. “This industry has not been rolled up,” Shoemaker says.

Going vertical
Shoemaker says Six L's thrives today because it controls every phase of the tomato's life until it reaches the supermarket. It grows seedlings, farms the tomatoes and packs them for distribution to large undisclosed retail and restaurant chains.

“We are fortunate because we're vertically integrated, and that's helped us a lot,” says Larry Lipman. That's because packing and distribution is less volatile than farming. “A guy who's just a farmer, he's got more of a problem.”

Indeed, some had predicted the demise of Florida agriculture during the real estate boom, when developers believed inland areas would be more valuable as residential communities and commercial hubs than vegetable farms, citrus groves or grazing land.

What's more, increased government regulations and rising labor and other costs have been rising compared with competitors in Mexico and other countries. Size matters for U.S. agriculture companies because small operations can't bear those costs, especially in a bad crop year.

Another reason for controlling the process from seed to market is that customers now demand to know where their produce comes from. “Customers want to get closer to the ground,” Shoemaker says.

For example, large restaurant chains want to be sure their produce is grown in a manner that ensures food safety. “They have brands to protect,” Shoemaker says.

The speed with which information is spreading has increased exponentially with the Internet. For example, when Six L's voluntarily recalled a single lot of grape tomatoes from a farm in Estero in April because of the potential for salmonella, the widespread news coverage was out of proportion to the problem. “It was less than half of 1% of what we pack each week,” says Shoemaker.

Fortunately, Six L's was able to trace the issue because of its control over the tomato growing and packing process to the satisfaction of its customers and the news faded. “Our sales didn't drop off,” Shoemaker notes. The point is that the problem of food contamination might not be as easily solved if different growers, packers and a host of middlemen had been involved.

Culture challenge
Growing the company while maintaining the Lipman family culture is another challenge that Shoemaker faces. For example, it wasn't until the mid-1990s that anyone at Six L's had corporate titles.

“You can't come in here and act like a corporate person,” says Shoemaker, whose work attire is casual.

Shoemaker was hired because there wasn't a Lipman family member ready to handle the task of managing such a large enterprise. “The company had grown too big to hire someone who doesn't have the drive to be able to run it,” says Larry Lipman. “It was not an easy decision.”

Although he was most recently with corporate giant Sysco, Shoemaker points out that he and three top executives form the management. “We have no vice presidents,” he says. The company's headquarters are an unassuming two-story brown building in Immokalee.

Instead, the company has general managers who are given wide autonomy to make decisions. This decision-making authority is one of the ways Six L's attracts talent, Shoemaker says. “You can come to work here and be significantly involved,” he says. “We'll hand you the ball quickly.”

Shoemaker is counting on this entrepreneurial spirit to grow the company so it can be seasonally and geographically diverse, especially in more far-flung areas of the Midwest and countries such as Mexico. What's more, he doesn't have the burdens of short-term earnings expectations like publicly held companies, and he has a board committed to Lipman's growth strategy. “We have an ownership group that likes to be in farming,” Shoemaker says.

Several family members have sold their shares to others in the Lipman clan over time, but Larry Lipman says those who are current shareholders are long-term holders. “Those who are in are in,” he says.

Fortunately, Larry Lipman says Six L's has been able to grow using internally generated funds. “My family has believed in not working with debt,” he says, though he acknowledges the possibility that bank debt might be an option if an acquisition were big enough.

Lipman says growth will be strategic, a reminder of how the business has survived four generations. “We need to do it for the right reasons,” he says.

From New York to Immokalee

Max Lipman didn't let his sixth-grade education hold him back. An immigrant from Poland in the early 1900s, Lipman started as a laborer in the New York City produce market. “His main concern was getting enough food on the table for his children,” says Larry Lipman, chairman of the company that bears his family's name, also known as Six L's after Max's six children.

Max and his children became brokers at the New York produce market, buying and selling vegetables and specializing in tomatoes. They visited the packing plants of Immokalee in eastern Collier County and got into the business around 1950. “They got into the packing business and a few years later they got out of the brokerage business,” Lipman says.

The Lipmans got into farming shortly after they bought packinghouses because farmers hit a few bad years. “To keep the volume up we got into farming ourselves,” says Larry Lipman, who became the CEO in 1990.

On May 19, Bill Lipman, the last of the six L's, died at age 88.