Cannery Manager-Turned-Owner Saw Ingredients for Success

About a year ago, Hank Knaust, then general manager of the Meridian Foods canning plant in Ventura, found out that the company’s owner, the California Bean Growers Assn., was filing for bankruptcy.

Like any victim of corporate closure, Knaust was faced with an uncertain future. But Knaust’s solution was not to go out and look for another job, but rather to buy the company.

The first year of business for the new H.K. Canning operation, which Knaust owns with his wife, Carol, will come to a close in January. Knaust is pleased with the early return on the couple’s approximately $2.4-million investment and is already planning the company’s market expansion.

“Our hopes were to maintain the employees we had, maintain the customers and establish credibility--that we’re not here today, gone tomorrow,� Knaust said. “We had a five-year plan and we matched the first year of that plan, and in some places exceeded it, which we knew we could do.�

H.K. Canning, located in a 50,000-square-foot plant on Garden Street, cans beans, mushrooms and vegetables purchased from growers. It also sells and helps develop canned soups from a variety of manufacturers.

The company distributes about 1.2 million cases, or 7.2 million canned items, to grocery stores and restaurants annually. Customers include El Pollo Loco, Trader Joe’s, Vons and Ralphs.

To move from general manager to business owner was not a particularly farfetched career move, given Knaust’s family tree. His grandfather owned a canning company in New York from 1920 to 1940, and his father operated one in Illinois from 1951 to 1974. Knaust said the decision to keep with the family tradition was a relatively easy one.

“The problem wasn’t really with the canner, the problem was with the California Bean Growers Assn.,� Knaust said, referring to the now-defunct Central California cooperative. “They had problems in futures trading of beans and also had some flooding in their warehouse in Northern California.� With financial assistance from Ventura County National Bank, the Knausts were able to purchase the company out of bankruptcy court.

“It was almost a no-brainer,� Knaust said. “Yes, it was a risk for my wife and me, financially, but it wasn’t a risk because we knew the company was profitable. We had an opportunity to get ahold of a plant that was sizable, sales revenue and a customer base that was loyal.�

Knaust said he was able to maintain all 50 jobs at the company and 75% to 80% of the customers. He said a continued commitment from longtime clients, including El Pollo Loco and Trader Joe’s, eased the transition.

“Their input that they would stay with us under the new ownership has meant a great deal to us,� he said.

The Knausts’ plan from the start was to build H.K. Canning on the foundation set by Meridian Foods and has swayed little from the original operation.

“We didn’t change a thing other than we brought morale up and got the people at ease that the plant wasn’t going to shut down,� Knaust said. “We also let our customer base know they could still rely on us for products.�

Knaust’s goals for 1997, he said, are to gain back the remaining previous customers and expand the operation financially and geographically. He wants to increase annual sales by 20%, in large part by targeting new markets.

H.K. Canning does the majority of its business with distributors in Los Angeles. Knaust said he plans to develop additional clients in the Phoenix and Las Vegas areas as well as build upon recent moves into Seattle and Oregon. Meridian Foods served all four areas before the bankruptcy filing.

“We had been in the Pacific Northwest previously, but not as strong as we have been in the last seven months,� Knaust said. “We’ve really seen business pick up there.�

He said the company hopes to spread into Texas, New Mexico and Colorado. It will be H.K. Canning’s willingness to cater to low-volume, often start-up growers and soup makers, Knaust said, that should facilitate that growth.

“We are really a niche business, small enough not to be affected by the big canneries,� he said.

“Mainly it is the soup people we work with, the specialty-type people that have a new product and want to develop it,� he said. “The large [canneries] like a 15-truckload minimum, and we only require a half-truckload. That’s a lot easier and more economical for first-time soup customers to try to see if their soup will take off.�

The business has grown, he said, by giving new soup makers a chance to test the market.

“We have a lady in Michigan who started with one variety of soup and now is up to 19,� he said. “In 1994 she put out 10,000 units a year, and now she’s up to 100,000.�