Independent ice manufacturers fight being frozen out

Jacob2In the ice business, mid-May typically marks the beginning of the busy season.

This year, the season opened with a bang. The Mother’s Day holiday and school graduation ceremonies coincided with ideal picnic weather during the May 13-14 weekend. It seemed like almost everyone needed ice.

The following Tuesday, the biggest freezer at Hilke’s Ice in Freeburg was still half empty.

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Laron Hilke

“It was full on Friday,” said Laron Hilke. “You can see how having this good of a weekend impacted my inventory.”

In an adjacent building, the company’s two ice machines were noisily working to restock the company’s supply.

Each minute, the machines send more than 150 pounds of ice into a 85-ton storage bin. From here, the ice is bagged by an automated bagger. At the end of the line is small team of production workers who stack finished bags of ice onto pallets and manage the company’s 600 tons of frozen inventory.

If that sounds fairly simple, it belies the true nature of the ice business — it’s heavily regulated and fiercely competitive. It’s also still settling after industry forces wiped out 90 percent of Missouri’s ice plants over the last 25 years.

Despite these challenges, Hilke’s Ice is strong and growing. The family-owned company opened a major factory expansion two years ago. This enabled the company to add 129 new ice sales locations last year, amounting to more than 25 percent growth.

But industry expert Tom Howat says Hilke’s Ice is an exception.

“There are fewer and fewer independent ice companies out there,” said Howat, secretary of the Missouri Valley Ice Manufacturer’s Association.

In the early 1990s, Howat said out-of-state companies began buying up small ice manufacturers in Missouri and across the Mid-West. Many local ice plants were shuttered in favor of centralized production and distribution.

Today, there only a handful of independent ice plants left in the entire state.

In addition to running the ice association, Howat travels the state selling ice-making equipment. Earlier in his 45-year career, it would take him a week and a half to visit all the ice plants in Missouri.

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Hilke’s Ice in Freeburg

“Any good sized town had an ice company at one point,” Howat said.

This began to change as larger corporations sought to enter Missouri’s ice market. At first, local ice companies were offered generous buyout packages, Howat said.

But as consolidation grew, the major ice corporations began winning contracts that covered entire chains of supermarkets, convenience stores and restaurants — places that were once cornerstone customers for small plants.

While this was happening, affordable ice-making technology was coming to market, giving small stores the option of freezing and bagging their own ice — cutting ice manufacturers completely out of the equation.

In addition, ice companies were facing new, complex regulation from the federal Food and Drug Administration. Small ice plants became subject to hundreds of pages of rules and random inspections.

These forces sent many of Missouri’s small ice plants into distress. For some, selling out became an attractive option, even at rock-bottom prices. From there, consolidation snowballed.

Part of what made Hilke’s Ice different is that instead of selling out during this time, the company became a buyer.

Over the years, Hilke’s expanded by purchasing 12 different ice companies. The biggest move came in 1995 when Hilke’s Ice bought Cuba Ice Company, giving Hilke’s Ice a second distribution point in a growing region.

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John and Laron Hilke

Today, the company has more than 700 ice sales locations — up from roughly 100 when Laron Hilke joined his parents in the family business full-time after graduating high school in 1988. These locations span across 60 counties in central Missouri.

The company’s niche is serving smaller communities and areas outside of the state’s major metropolitan areas.

“We circle all major markets, but don’t go into major markets,” Hilke said.

Hilke credits his wife, Penny, for helping the company thrive as regulation increased. He said she understood before many others in the industry how important food safety regulations would become. She pushed Hilke’s Ice to take proactive steps and become a leader.

Despite the pressures of recent decades, Hilke said he now sees encouraging trends in the industry.

Today’s ice season is stretching longer than it ever has. In years past, ice sales would cool after Labor Day. Today, sales drop off around the second week in August, as students return to school, but then pick back up from Labor Day all the way through October. After another pause, strong ice sales start up again for deer season and carry through Thanksgiving and the holidays.

“Our season is getting longer and more diversified,” Hilke said.

Ice manufacturers also see food safety regulations eventually ensnaring small shops that purchase small ice machines and bag their own ice. Both Hilke and Howat believe these small bagging operations are ill equipped to handle the full brunt of the FDA’s food safety regulations. This could push more small shops back to selling manufactured ice.

Perhaps the most positive sign Hilke sees is a renewed focus on service. During ice industry’s years of consolidation, price became the core point of competition. But today, Hilke said more and more customers are looking for service, reliability and relationships they can trust.

This bodes well for small ice manufacturers.

“The tide started changing 3-4 years ago,” Hilke said. “The independents are starting to push back and we have the edge when it comes to service. It doesn’t matter what you do, you’ve got to have service behind you.”

ice

 

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