Hensall Co-op tops $1 billion in sales for first time

Hensall Co-op has surpassed $1 billion in annual sales for the first time in its 85-year history. It also celebrated another milestone, marking the first full year of operation for its new chilled ready meals line. The achievements were announced at the co-op’s annual meeting Nov. 30.

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Why it matters: The farmer-owned co-op has more than 6,000 members, mainly in southern and mid-western Ontario but also in Manitoba and other western provinces, and provides employment at 25 locations across Ontario and 33 altogether.

“Last year, we thought we’d be close to hitting the billion,” said newly-named President Henry Vander Burgt in an interview following the virtual annual meeting. The co-op is projecting another strong fiscal year in gross sales, which runs Aug. 1 to July 31.

Vander Burgt says reaching the $1-billion threshold reflects, in part, a strategic financial plan. The board looked at what was happening in the world a year ago and erred on the conservative side. In the end, however, “COVID-19 didn’t quite take the toll on us like we thought it could. One of our biggest strengths is that we have multiple business divisions.”

Unlike some competitors, Hensall Co-op doesn’t solely rely on agri-chemicals or feed commodities or grain trading or fuel.

“Our freight forwarding division is very strong,” Vander Burgt said, and the edible beans division is well-known. Propane and fuel sales held their own in 2021-22, and the strength of those divisions allows Hensall Co-op to envision future possibilities such as the new Hensall Foods Inc. division. One of its initiatives the “Screaming Chef” line of prepared meals now available in two major grocery chains in Ontario.

CEO Brad Chandler said some of the commodities Hensall Co-op handles, including fuel but also dry beans and IP soybeans, saw significant price increases over 2021-22. This affected sales revenue.

Overall, the different businesses performed to their 2021-22 forecast in terms of financial top line, Chandler said. This was a pleasant surprise, particularly in the freight logistics division, which faced challenges from the shortage of sea containers and labour troubles at major ports.

Hensall Co-op’s goal is to ship 70 containers per day out of its locations, primarily dry beans and IP soybeans and primarily from Hensall, Mitchell, Exeter and Bloom, Man.

Over the past year such shipments decreased considerably.

That and other volatility and uncertainty led to a decision to lower Hensall Co-op’s patronage dividend compared to the previous year. This was announced at the annual meeting.

Outgoing president Terry VanderWal said the board “felt that, with volatility in the commodity and currency markets, the cost of labour and all core components required to operate the business to serve our members, it would be in Hensall Co-op’s best interest to direct a larger proportion of the profits towards retained earnings.

“This will result in the business becoming less dependent on borrowing and strengthen Hensall Co-op’s overall financial position.”

Vander Burgt said the co-op is “like anybody else. We don’t like paying the taxes any more than we have to,” and providing a patronage dividend typically lessens the tax burden for co-ops.

In discussions, the board decided to put more into retained earnings. There would have been enough money from operations in 2021-22 to pay out the same one per cent of total revenue as last year but it decided to cut that percentage in half.

“We say that with our own (farming) operations. You can’t live off borrowed money forever, especially with interest rates going up,” Vander Burgt said.

Chandler discussed the focus of retained earnings.

“We do see opportunities coming that we want to be able to respond to if we decide that’s the right way to go,” he said.

With costs for building materials and labour increasing significantly, “you can’t do that if you’re maxed out financially, but we also see volatility that’s not going away, at least not over the next couple of years, along with uncertainty in Ukraine and Russia.”

Vander Burgt elaborated further.

“I’m not saying that (decreasing the patronage dividend) for one year is going to get us away from borrowing, but it’s a step the board felt was prudent.”

Aside from diverse business, Chandler sees another strength in the Hensall Co-op approach, which includes the ability to make members feel a part of a larger team so they’re willing to consider ideas about how their own farming operations can help make the larger co-op successful.

“The farmers own this business,” Chandler said.

When demand surfaces for a particular variety of dry beans or any value-added contract, there are farmer members willing to work that program into their crop rotations. And they’re willing to do what needs to be done to supply the top-quality commodities and food products that Hensall Co-op is known for globally, he added.

“Being able to count on our farm members for that gives us the critical mass to be able to supply the strategic global end users that will continue to drive our cooperative business.”