Cover Story – Créme de la Créme

Posted on Feb 1, 2015 :: Cover Story
Sean P. Johnson
Posted by , Insight on Business Staff Writer
“We serve some of biggest names in food and beverage in the U.S.,” says Tim Galloway, chairman of the board at Galloway Company. “We do it by embracing customer demands.”  Photo by Shane Van Boxtel, Image Studios

“We serve some of biggest names in food and beverage in the U.S.,” says Tim Galloway, chairman of the board at Galloway Company. “We do it by embracing customer demands.” Photo by Shane Van Boxtel, Image Studios

If there’s a company that’s “Got milk?” it’s Galloway Company.

They get it very well, in fact, taking in hundreds of thousands of gallons each day and transforming it into the dairy ingredients that make the pies, candies, beverages and ice cream treats consumed each day taste so delightful.

Yet, when walking through the company’s Neenah production facility, it’s a bit surprising how little milk can actually be seen.

“We don’t make dairy products here,” says Tim Galloway, chairman of the board and part of the third-generation family ownership group. He adds, tongue-in-cheek, “We make stainless steel.”

Sure enough, a look in almost any direction of the production facility reveals miles of stainless steel piping and valves that connect a network of ingredient vats, processing machines and finished product tanks.

It’s what’s flowing through those pipes, vats and tanks that distinguishes Galloway Company,  and has fueled its growth from a small Neenah dairy to a highly specialized ingredients company supplying a host of recognized brands, from regional powerhouses to international icons (all “top secret” to protect competing clients).

“We play on a high level for a small company,” Tim says. “We serve some of biggest names in food and beverage in the U.S. We do it by embracing customer demands.”

Behind the company name is the Galloway family, which in three generations has fostered that growth. Starting with a core product of sweetened condensed milk, the company has become a major supplier for frozen dairy mixes. The current generation of leadership — which includes Tim, his brothers Pat and Ted and a cousin Tod — has overseen the company’s growth into several new markets, such as beverages, and has invested significantly in the company’s Neenah production facility, including a $15 million renovation completed in 2014.

They have also taken steps to ensure Galloway thrives into the next generation and beyond, whether that leadership has Galloway as its last name or not. Realizing their own passions and strengths did not always align with the company’s leadership needs, they have successfully transitioned to non-family members holding key leadership posts.

“They are doing things right to make sure this company remains here for a long time,” says Doug Dieterich, Galloway president. “They are invested in the community and that is important to them.”

A small investment

Through the early 1960s, Galloway Company also operated a door-to-door dairy serving the Neenah area. That part of the business was eventually discontinued as the company focused on sweetened condensed milk and other ingredients.

Through the early 1960s, Galloway Company also operated a door-to-door dairy serving the Neenah area. That part of the business was eventually discontinued as the company focused on sweetened condensed milk and other ingredients.

Galloway Company traces its roots back to Edwin Pierce Galloway, the grandfather of the current generation, a principle in the Galloway-West Company in Fond du Lac, which later became a subsidiary of the Borden Company. Edwin Galloway was also a dairy farmer and recognized as a world-class breeder of Brown Swiss dairy cattle, which are considered one of the oldest breeds and are prized for producing large volumes of milk.

That family tradition has been preserved in the original family farmstead, which is part of the historic Galloway House Museum and Village in Fond du Lac.

In 1932, Edwin Galloway purchased an interest in Neenah Milk Products as an investment. He continued to work for Borden until retiring in 1944, then turned his attention to the company. As his sons Ned, John and Dick returned from their service in World War II, they opted to join him at the dairy and in 1955, they acquired 100 percent ownership. In 1956, the small dairy business was renamed Galloway Company.

“I can remember weekends in the station wagon making deliveries,” Tim says of his early exposure to the family business. “First with dad (John Galloway), then when we were old enough, he sent us out to do it on our own.”

While the door-to-door dairy delivery would continue for a few more decades, finally ceasing in the early 1960s, the company increased the focus on its specialization in concentrated dairy blends such as sweetened condensed milk.

Today, Galloway is the nation’s largest producer of sweetened condensed milk for food manufacturing, as well as a leader in the production of frozen dairy mixes — think ice cream, gelato or custard — and produces beverage bases used in consumer products, from New Age drinks to cream liqueurs.

“We’ve had great growth in the alcoholic beverages,” Tim says. “We have seen a lot of growth from the distillers, and our ability to mix product in-house is very helpful.”

Well known in the industry and around Northeast Wisconsin, most consumers have no idea what the company is or that its ingredients are in so many products.

“Although we like to fly under the radar,” Tim says, “our ingredients are in many of the snacks, desserts, foods and drinks that you enjoy daily.”

Let’s just say you are probably eating or drinking it.

Wisconsin is home to a surprising number of ingredient companies, particularly in the dairy industry because of the availability of diary ingredients and byproducts, that are suppliers to national and international brands, says John Umhoefer, executive director of the Wisconsin Cheese Makers Association. They are low key not only for competitive reasons, but at the request of the brands who use them. Galloway is one of the bigger players in that segment of the industry, he says. 

“They are the dominant player in the class 2 category, which is what we call those dairy products that are neither cheese nor milk,” says Umhoefer. “There are a few others in the state who work with similar products, but Galloway is by far the dominant player.”

Galloway posted sales in excess of $100 million in 2013, Tim says, a figure that can be deceiving. The company’s principle raw materials are milk and sugar. The price of the former is set by federal policy, while the latter is traded daily and well known. Margins are produced by effectively managing the production process.

“You learn to live by your process price,” Tim says. “That drives efficiency and innovation.”

As the company’s product mix has grown, so has its physical plant, which has been renovated several times the past several decades, including the most recent renovations, which dramatically changed both the external appearance of its Neenah location and expanded the company’s office space.

They are not done yet. As much as $20 million in additional renovations have been identified and will be completed as both need and budget allow. A $2 million project that will improve the company’s sugar deliveries is currently under way.

Galloway essentially invented the process of liquefying sugar directly from a railcar, and the new facility will improve the efficiency of that process. Once completed, railcars of sugar will be emptied directly into a machine affectionately known as “Lumpzilla,” which adds water, removes the lumps from the mixture and then pipes it to various storage tanks in the production plant.

Innovation  culture

The development of a better transfer process for “Lumpzilla” is just one small part of a company culture that includes the value “nimble.”

One of Galloway’s core products, sweetened condensed milk, is in production 365 days a year. Frozen dairy mixes are in production roughly five days a week and beverage and other custom solutions are produced as needed. In addition to the mixing process, the finished products need to be packaged and prepared for shipment.

Yet, the crew manning the plant on any given day seems small in comparison to the amount of products, in part because that stainless steel network of piping Tim joked about is part of a larger automated and efficient system the company has developed through the years.

“As the products evolved, so did the plant,” says Tod Galloway, vice president and the engineer behind the inner-workings of the plant.

Galloway owns several patents for innovations it has made over the years, part of the company’s ongoing efforts to increase efficiency. Some of those patents have spread beyond the production facility walls. A device allowing processors to extract samples from a storage tank without exposing the products inside to air and potential contaminants is now a standard feature in the dairy business as a whole.    

“You order a tank from just about anywhere, and that comes as a standard feature,” Tod says.

Tod has received U.S. patents for the “pig” system he developed for moving products from one part of the plant to another. (“Pigging” is an industrial process where a device – the pig, so called for the squealing sound it can make – is moved under pressure through a pipeline system.) He is in the process of applying for patents in Europe for the technology, which has applications outside of the dairy industry. 

But innovation is not just about technology. Another key element of the Galloway mission is to “provide meaningful employment,” and employee contribution and empowerment is encouraged from morning gatherings to the design of the new facilities.

At 9 a.m. each day, there is a standup meeting in the company lunchroom. Details of various orders and processes are posted on video screens around the room. First, there is recognition of celebrations — acknowledgements of those who have made contributions of time and talent outside of their normal duties or for milestones achieved. Next, everyone reviews the board and provides updates to the group, whether it’s the latest batch of a specialty beverage mix or a safety warning about the installation of wall panels for the new sugar transfer facility.

“We are invested in customer success,” Dieterich says. “We try to figure out ways to make things happen for them. Sometimes it makes it harder for us, but part of our mission is to do what others won’t do.”

The final step: a little group stretching — arms, trunk and legs — then everyone is off to work.

The latest renovation and expansion is employee-centric in its design, with the higher traffic areas such as production and logistics in the center for easy communication with those in the plant while administrative, sales and leadership functions are on the outside edges.

       

The change

The first two generations of Galloway Company include founder Edwin Galloway, seated, surrounded by his sons, from left to right, Dick, Ned and John.

The first two generations of Galloway Company include founder Edwin Galloway, seated, surrounded by his sons, from left to right, Dick, Ned and John.

Preserving a company culture that encourages innovation and meaningful employment was among the reasons that, in 2000, the family realized it was time to change the traditional leadership team by introducing non-family members.

Part of it was a personal decision by Tim, who was serving as company president as well as selling sweetened condensed milk and heading the new beverage division, one of the fastest growing segments of the Galloway product line. After 10 years, Tim realized he was at his best when working with customers, not when managing the day-to-day operations of the company.

“I had to make a change. I was best at selling. That’s when I’m at my best,” Tim says of his realization he needed to change his role. “Feed your passion, not your ego.”

With none of the current generation wanting the role, and uncertainty if and when a fourth generation would be ready for leadership, it became apparent it was time to go outside the family for leadership posts. While not an easy decision to make, family members agreed not only that it was best, but that they would not second-guess themselves.

“It was unfair what we were asking Tim to do (both jobs),” Ted Galloway says. Still, he says, there was some trepidation going in. Not that it wasn’t the right decision, but more that they wanted to make sure it was executed properly, he says. 

“Once you make the decision, you have to let that person do their job,” Ted says, noting the issue can be disastrous otherwise. “I still get calls from folks asking how we did it. We made the decision and we stuck with it.”

Making the decision to hire non-family executives is a difficult decision for family-owned businesses, and one that is best planned for well in advance, says Meridith Jaeger, executive director of the Wisconsin Family Business Forum at the University of Wisconsin-Oshkosh.

“If the family is still going to own the business, then it’s critical there is a succession plan in place and the family has time to articulate its values and find a candidate who is a good fit,” Jaeger says.

Handled poorly, these decisions not only hurt the company, but can hurt the community with a loss of local control and even lost jobs. By all accounts, Galloway’s process can serve as a model for other companies facing the challenge, she says.

For Galloway, it helped there was already a candidate in house when they made the initial transition to non-family leadership. Robert Kime, longtime chief financial officer, was asked to step into the role of president. Tim took the role of chairman of the board and CEO. Dieterich moved into the president’s role in 2003 after Kime retired.

Dieterich says the relationship has worked well in part because the family has developed very clear expectations for what the president’s role will be. It also helped that Kime’s tenure solidified the position and its relationship within the family leadership.

“I had the benefit of observing the initial transition and how clearly they handled it,” Dieterich says. “You learn through the years how to manage it effectively. There are four very strong personalities, but they are in agreement on how this works.”

While the family members have strong personalities, Dieterich says they are a great team to work with. Open and positive communication helps, of course. He makes sure his plans are clear, and once agreed upon, family members make sure to avoid contradiction.

The end result: The company benefits from a day-to-day leader not torn by other demands while family leadership can concentrate on the areas of the business they have the most passion for.

“They are very good with customers, and that’s what they want and need to do,” he says.

With that transition behind them, the company is now preparing for the next one: a time when a customer may not work directly with someone named Galloway.

“A Galloway has always been out with the customer,” Dieterich says. “We need to be ready for that.”

Just what does Galloway make?

Galloway’s line of dairy ingredients fall into three categories:

» Sweetened condensed milk, which is about 40 percent of the company’s sales, used to make food items such as pies, candy mixes, ice cream toppings or pourable syrups such as coffee flavorings.

» Dairy dessert mixes, sold through the company’s subsidiary Classic Mix Partners and making up another 40 percent of sales. These mixes include frozen custard, ice cream and soft serve, gelato and sorbet, as well as custom mixes for other frozen treats.

» Beverage bases are the newest, but perhaps fastest growing segment of the company’s sales. These are used in both alcoholic — anything from rum to wine — and nonalcoholic applications, which includes drinks from smoothies to energy drinks to juice-based products.

The Friday challenge

A special feature was recently built into Galloway’s renovated office space.

At the end of the main hallway (really only discernable if you know what to look for) is a perfect circle of carpet that pops out of the floor. Underneath is a regulation PGA putting cup, and if you look in the conference room behind the hole, you will notice the flag with a Galloway crest.

On Friday afternoons, the staff partakes in a little team bonding and competitive putting, a real challenge given the alternating carpet patterns you have to conquer in the 25 to 30 feet between the starting point and the cup. The breaks can be tough to negotiate.

“It’s a lot nicer than what we had in the other building,” Dieterich says. “Come to think if it, it’s been a while since I won, but I did have a streak of three or four in a row.”