Atlantic Beverage puts beef in pipeline Distributor expands with meat companies

August 06, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

Atlantic Beverage Co. Inc. isn't too much of a beverage company anymore. And it has more business outside the Atlantic region than in it. "Texas Meat Co." might be more like it. Or "Hot Sausages R Us."

The Baltimore-based outfit still distributes Royal Mistic and other drinks in the Baltimore-Washington area. But this year it has layered on enough new capital, businesses and revenue sources so as to be only partially recognizable as the former Maryland Beverage Co.

The latest change came yesterday, when the publicly traded company announced another acquisition: Richard's Cajun Country Food Processors Inc. in Churchpoint, La. Richard's (pronounced Ri-CHARD's) makes spicy sausage and other meat products that Atlantic executives hope to start selling through a distribution network they've been assembling in Texas, the state next door.

"We like the company because we think it fits in nicely, based on geography and the strategy of where we're headed," said Rick Elfman, Atlantic's vice chairman.

Where Atlantic is headed is several points on the compass and a couple of grocery-store aisles away from its previous destination.

After selling public stock three years ago, company managers planned to assemble a broad drink-distribution web by acquiring wholesalers and adding them to their Baltimore-Washington base. But would-be sellers generally "wanted too much money" and "had an unusual dependence on a particular brand," Elfman said.

Instead, some of Atlantic's large shareholders realized that "you could pick up processed food and meat companies at good prices," he added.

Accordingly, in March, Atlantic bought Prefco Inc., of Houston, and Carlton Foods Inc., of New Braunfels, Texas. Together the privately held companies sold $117 million worth of bacon, sausages and lunchmeats last year in eastern Texas.

It also added new talent, hiring as chief executive officer Alan Sussna, a former management consultant with Bain & Co. who had experience in the food industry. President William O'Leary still runs Atlantic's beverage business in Baltimore.

Atlantic's assembly of the three meat companies typifies what's going on in the processed meat industry, said Chuck White, editor of Meat Business Magazine in St. Louis.

"Basically, the larger companies are starting to eat up the smaller, regional brands," he said. "They're buying up the brands, but they're keeping the brand names," which often enjoy substantial recognition and sales, he said.

Another buyer of regional meat brands in recent years has been Medford Foods, owner of Hatfield Quality Meats in Philadelphia, he said.

Atlantic's purchases have swelled its revenue but not its profit, so far. The company yesterday reported earnings of just $151,000 for the quarter ended June 30, up from an even smaller profit of $942 in the same period last year. Sales, however, have zoomed from $5.9 million in the second quarter of 1995 to $37.0 million in the most recent period.

Management expects that better profits -- and more acquisitions -- will follow.

"It was announced prior to this that we had several deals in the works, and that's still the case," Elfman said.

"We hope that with the strategy of putting all these regional products together that we can achieve a good mix and get some operating synergies We're getting to where we want to be."

Richard's Cajun Country is a relatively small, with just $3.5 million in annual sales. Elfman declined to say what Atlantic paid.

But the Prefco and Carlton purchases, adding $117 million in annual sales, were substantial. Less than 20 percent of Atlantic's revenue comes from beverages now. To help finance the meat deals, the company executed a private, $2.8 million sale of stock mainly to the company's officers and directors; insiders now own about 30 percent of the company's 5.8 million shares, Elfman said.

It also borrowed money and now has about $10 million in debt and booked $497,000 in interest expense in the first half of 1996.

Elfman and Sussna are based in Chicago, as principals in Sterling Capital, an investment firm that purchased Maryland Beverage in 1991.

But Atlantic Beverage's headquarters and its 100 local employees will stay in Baltimore, Elfman said.

Atlantic's shares closed yesterday at $3.38, down 13 cents from Friday's close.

Pub Date: 8/06/96

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