Posted: August 26, 2014, 10:10 a.m. EDT
By Clay Jackson
Hi-Tek Rations, a Dublin, Ga.-based pet food manufacturer, divested itself of its value brands of cat and dog foods it sells through ranch, farm and animal feed stores in a transaction with Sunshine Mills Inc., a pet food manufacturer in Red Bay, Ala.
As part of the deal, Sunshine Mills and Hi-Tek Rations formed a joint venture corporation called Sun-Tek Pet LLC, which will own and operate Hi-Tek Rations’ manufacturing and distribution center in Dublin.
"The recent joint venture between Hi-Tek Rations and Sunshine Mills to form Sun-Tek Pet LLC is a great move for both companies,” said Leonard Powell, founder and CEO of Hi-Tek Rations. "In this venture, Sun-Tek Pet LLC becomes a manufacturing arm for both Hi-Tek Rations and Sunshine Mills.
"Hi-Tek Rations … wishes to focus on [our] premium products, while Sunshine Mills needs the location and capacity to meet the demands of their growing business.”
Hi-Tek Rations distributes premium pet food throughout the U.S. and to 38 countries in the Middle East and Southeast Asia, and it hopes to expand into Europe soon.
The ranch, farm and feed store channel might seem to be part and parcel with independent pet stores and others that sell premium brands, but the channels are very different in terms of distribution and sales, said Ron Jackson, assistant to the president for Hi-Tek.
Hi-Tek distributes and sells its premium pet food and treat brands to independent pet stores throughout the U.S. and worldwide, while its value brands are distributed and sold through ranch, farm and feed stores at a regional level.
Hi-Tek could have continued to produce and sell value and premium brands or focused on its regional pet food business, but instead it has decided to concentrate on the burgeoning premium pet food business.
There has been little change in the percentage of pet owners since 2006 that feed their dogs premium pet food as a first choice—the number has been fairly consistent at 35 percent, according to theAmerican Pet Products Association (APPA) 2013-2014 National Pet Owners Survey.
But because of the addition of more than 10 million dog-owning households during the same period, according to the same APPA survey, there are 3.5 million more households buying premium pet food as their primary pet food than in 2006.
Hi-Tek’s premium brands, which it will now put all of its efforts into, include Leonard Powell Signature Series Dog Foods, Hi-Tek Naturals, Hi-Tek Naturals Grain Free, Perfectly Natural Dog and Life4K9.
"Divesting itself of these [value brands] allows Hi-Tek to focus on its premium products, devoting sales, marketing and distribution efforts to a single segment of the market,” Jackson said.
Because Hi-Tek and Sunshine are geographically situated in the south and have worked together in the past, the transaction made sense "as both parties saw benefits to their own enterprises.”
Sunshine Mills purchased Hi-Tek’s Intimidator, Intimidator Jr., Good Dog, Tomboy, Defender, TomKat, Tracker and Satisfied Kat brands, including all formulations, associated inventory and rights to the customer and retailer base for the brands.
The Hi-Tek plant will be nearly fully utilized with the manufacture of Hi-Tek premium and private label products and Sunshine Mills’ products and private label products, including the newly acquired brands from Hi-Tek.
The 68-acre manufacturing campus provides for significant expansion capability as the company continues to grow, Jackson noted.
Morale among Hi-Tek employees has been high since the transaction was announced.
Hi-Tek Rations and Sunshine Mills, friendly pet food rivals, will jointly manufacture pet food brands from this manufacturing facility in Dublin, Ga.
"The new arrangement allows for considerable growth in Hi-Tek’s premium and private label businesses,” Jackson said.
"The joint venture in Sun-Tek Pet will benefit Hi-Tek Rations and its customers in numerous ways, including improved purchasing power for raw ingredients, and a large expansion of the laboratory and quality assurance programs,” Powell said.
One of the biggest improvements will be having the Dublin manufacturing plant become a Safety Quality Foods Program (SQF) certified level 3 facility.
"The Sunshine people insisted on it and are paying for the SQF audit, which will allow Hi-Tek to market our brands in Europe, which requires SQF certification,” Jackson said.
"As a family, we are excited about this move, the partnership, and the freedom we now have to focus on helping our distributors and retailers grow their business,” Powell said.
Neither company disclosed financial terms of the deal.
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