Serendipity is a wonderful phenomenon. Flash back to 2004. The gluten-free diet trend was just hitting the U.S. market with sudden force. Over the next several years, gluten-free would grow at an annual rate approaching 30 percent, forever leaving its imprint on the food industry.
It was just a year later in 2005 when TH Foods, with its headquarters in Loves Park, IL, acquired and then relaunched the Crunchmaster brand of gluten-free rice crackers. TH Foods already had strong expertise in gluten-free rice cracker production, and the company quickly embarked on a path of innovation that would greatly expand its presence across the U.S. snack industry.
Today, TH Foods maintains four domestic production facilities and has garnered roughly 60 percent share of the U.S. rice crackers market. And the company continues to expand into new and advantageous directions in snacking.
In 1984, Sesmark Foods got its start. The company was later renamed Terra Harvest Foods after an acquisition in 1998, and then rebranded into its current iteration, TH Foods, Inc., in 2004. This year marks the 35th anniversary of the company’s origin.
At the start, the company’s initial product was wheat-based sesame sticks, and then wheat crackers—but an expanded focus emerged on the horizon. “In 1989, we were approached by Kameda Seika and Mitsubishi Corp.,” says Terry S. Jessen, president and CEO. “Kameda Seika, based in Japan, wanted to introduce rice crackers in the U.S. market.” TH Foods launched its first rice cracker line in 1991.
Capabilities for usuyaki rice crackers—very popular in Japan—were added in 1994. “We have a proprietary manufacturing process that helps us get that special crunch,” says Kim Holman, marketing director.
From around 1989 through the early 2000s, TH Foods was predominantly a contract manufacturer and bulk supplier, notes Jessen. “Then, in 2005, we purchased the Crunchmaster brand from a company in California. They were doing baked rice crackers for the club channel.”
A decade later, in 2014, TH Foods launched the Harvest Stone brand of crackers, featuring attributes like organic, along with strategic use of sprouted grains, culinary flavors like Taste of Za’atar and Peruvian Aji Amarillo, and even toasted sesame tahini for Spouted Hummus crackers.
Another milestone came more recently, in 2018, when TH Foods acquired the Terri Lynn business, which manufactures a variety of nuts, dried fruits and confections, including dried fruit coated in yogurt and chocolate, notes Jessen. “We saw a lot of potential synergies between Terri Lynn and our snack business.”
Today, TH Foods has a diversified business plan that includes branded product lines, contract manufacturing and private label customers. “At the core what we do is innovation,” says Matt Ptacek, managing director. “We are fast to market. We hold ourselves to a high standard. And while this company has grown significantly over the years, we haven’t lost our true entrepreneurial spirit. That allows us to really partner with our contract manufacturing partners and really understand what their needs are, innovate, and quickly get out on the market.”
Now TH Foods can offer roasted, panned, coated, extruded and other snacks, in addition to its signature crackers, across a span of on-trend product designations, including gluten-free, organic, non-GMO, kosher, vegan, vegetarian, Paleo friendly and more.
In 2004, at the time of the Crunchmaster acquisition, TH Foods implemented a cross-functional team process to guide growth. “It’s through that cross-functional team approach that we developed the Multi-Seed Crunchmaster product,” says Jessen.
Cross-functional teams are composed of individuals from across the company with distinct areas of expertise, coming together to accomplish a common goal.
The Multi-Seed products—and cross-functional approach—found great success, and the company expanded to accommodate growth, adding capacity in its Loves Park, IL and Henderson, NV facilities. The company also has a facility in Caledonia, IL and one in Elgin, IL that came with the Terri Lynn acquisition.
The Crunchmaster Multi-Seed products merged the best of Japanese rice cracker expertise with American tastes for flavor and ingredient diversity. Crunchmaster Multi-Seed remains one of the company’s best-selling product lines.
TH Foods has lately seen strong success for the brand. According to the July 2019 SF&WB “State of the Industry: Snacks” analysis, Crunchmaster was up 5.6 percent in dollar sales to $58.8 million in the “all other crackers” segment, per IRI, Chicago, for the 52 weeks ending May 19, 2019.
“We had a lot of issues with it initially,” says Jessen. “It was difficult to sheet, it was difficult to process. But through the cross-functional team, they were able to dissect and go through the entire process and make the necessary adjustments—not only to the recipe, but also to the equipment—to make it work. And they were able to turn it around in six months.” The cross-functional team approach has been in place ever since.
“During the past decade, we were growing at 20 percent annually,” says Jessen. “That type of growth can heavily strain an organization. But through the cross-functional teams, we were able to execute tasks at a much faster rate. Our ability to quickly develop and execute plans, with rapid speed to market, has been instrumental in our success.”
TH Foods has developed a strong strategic position in today’s snack industry. “We have a proprietary process,” says Jessen. “We develop the equipment that we’re currently utilizing today for the manufacture of sesame sticks. Likewise, for the rice crackers that we’re producing under our brand, one of our shareholders provides the technical expertise for us and also we purchase the equipment through them, and nobody else has that equipment here in the U.S. So that proprietary equipment helps us form a competitive advantage.”
The original Loves Park, IL facility features six production lines, with four lines in the newer Henderson, NV facility, says Micheal D. Hoffa, operations director. He notes that Loves Park accommodates more changeovers for specialized packaging, like single-serve. “We want Henderson to be high-volume, low-cost and more efficient.”
Through the years, Hoffa has worked to increase efficiency through addition of case packers at Loves Park and an automated palletizer at Caledonia, IL. Operations has also switched from using pre-made pouches to making their own. “We try to remain flexible in the operations group, meeting sales needs in a cost-effective manner,” he says.
The Henderson also has an integrated bulk rice flour system delivery. “I’m able to automate that process, which lessens the impact on employees and improves safety while boosting efficiency,” says Hoffa. “As our sales continue to grow, we’ll look to expand the Loves Park site to incorporate some of those capabilities.”
The operations group has worked to streamline efficiency across its locations through standardizing processes and procedures. “Over the past four years, we’ve seen our waste and downtime reduce by 40 percent,” says Hoffa. Part of this process involves ongoing analysis of KPIs like waste, downtime, total labor, cost per pound, waste pounds and more. “We’re getting better at gathering and utilizing data,” he says. A few individuals are now completely dedicated to continuous improvement.
“We found actual capacity by getting better at what we do,” says Hoffa. Now, with all of the new products introduced over the past few years, the challenge is to incorporate multiple changeovers without a drop in efficiency.
Seeing a distinct market opportunity surrounding gluten-free and high-protein, the company recently broke into new territory with its Crunchmaster Protein Snack Crackers and Brownie Thins lines, which fall squarely into the better-for-you snacking realm, with 5 or 8 grams of protein per serving.
The Protein Brownie Thins include rice flour, black beans, cassava flour and quinoa seeds in the mix and are sweetened with a hint of stevia. They’re a truly better-for-you snack option that has enough flavorful indulgence to satisfy cravings. “You get protein, a sweet flavor profile and great crunch all in one,” says Holman.
The Brownie Thins also help get the Crunchmaster brand into other parts of the store where sweet treats like cookies are the focus.
Hipolito Sanchez, R&D manager notes that product development starts with the consumer research from the marketing group, and then the R&D staff begins ideation. “Our scientists are combing the marketplace for what’s hot, what’s new and what’s the right technology we should be pursuing from an ingredient and processing standpoint.”
R&D recently moved into a brand-new state-of-the-art facility in January 2019. “It allows us to have a pilot process for everything that we can do in operations,” says Sanchez.
Product development has followed emerging trends in the marketplace. Holman notes that more consumers are following specific diets, including those that eschew grains. That gave birth to Crunchmaster Grain-Free crackers, made with cassava flour, which launched in 2019.
“The trend around gut health and digestive well-being in the U.S. will continue to grow, says Braden Bennie, senior marketing manager.
Jessen notes that an instrumental aspect of the current TH Foods strategy is marketing. “We’ve made a full commitment to bring on a strong marketing team and to make sure that we’ve funded them appropriately.”
Sampling will factor strongly into the marketing plan over the ensuing months. “We’re going to distribute upward of 2 million samples this year,” says Bennie. “Sampling is a great way of driving trial and awareness, and just getting consumers exposed to our product.” TH Foods is also working to get products to large events, like marathons.
The Crunchmaster line is often merchandised in the deli. “We know through basket data that we are sold with cheeses, dips, hummus and meats,” says Holman. “We want to make that purchase for the consumer really easy.”
But many Crunchmaster crackers—particularly the flavor-forward varieties—are also suited to out-of-the-bag snacking, notes Bennie.
“We’ve had a lot of success,” says Jessen. “But there’s still a lot of potential for the future.”
AT A GLANCE
TH Foods, Inc.