Litehouse CEO credits ESOP with company’s growth

John O'Connell//June 25, 2018

Litehouse CEO credits ESOP with company’s growth

John O'Connell//June 25, 2018

The Litehouse distribution facility in Sandpoint. The company’s president and CEO says he thinks employee retention has improved since Litehouse formed an employee stock ownership plan in 2006. Photo courtesy of Litehouse.

The president and CEO of a popular Idaho salad dressing manufacturer believes his company is thriving mostly due to its recent conversion to 100 percent employee ownership.

Jim Frank, head of Litehouse, Inc., said the Sandpoint-based company increased its net sales by 18 percent from the prior year in 2017 and enjoyed a roughly 15 percent increase in its share price.

Litehouse, which also has manufacturing facilities in Hurricane, Utah, and Lowell, Michigan, added 58,000 square feet of new manufacturing space in 2017, company officials reported. Litehouse formed an employee stock ownership plan in 2006, allowing workers to buy 30 percent of the company.

“Our owners picked an ESOP versus selling the company,” Frank said. “They wanted to reward and appreciate the employees.”

Litehouse sold the remainder of the company to its employees in December 2014. Under the ESOP structure, workers are awarded shares as the company grows, which they can sell back upon their retirement. The company is appraised annually to set the value of shares.

Frank believes his employees are more personally vested now in the company’s success, and Litehouse is now reaping the rewards of its positive workplace culture.

Jim Frank

“The culture that’s created from that is one of, ‘If I’ve got skin in the game, I’m going to be more energetic every day and do a better job,’ ” Frank said, “As we all would if it’s something we own.”

Frank believes employee turnover has also dropped since Litehouse became entirely employee-owned.

Litehouse originated in 1958, when founder Ed Hawkins Sr. bought a small restaurant in Hope, Idaho, located near Sandpoint. Hawkins began selling batches of the restaurant’s popular blue cheese dressing for supplemental income during slow winter seasons. Hawkins built the Sandpoint plant in 1974.

In 2017, Litehouse expanded the Sandpoint plant with a wastewater treatment facility and a new 28,000-square-foot cooler, freeing space in the old cooler for more production lines. Sandpoint is also home to the company’s headquarters and a blue cheese plant, supplied by Magic Valley milk. About three years ago, Frank said Litehouse employed
roughly 500 workers in Sandpoint. The local workforce has more than doubled since then.

Company officials said Litehouse also contributed to more than 100 charitable organizations in 2017.

“They are truly an institution in our area,”  said Kate McAlister, president and CEO of the Sandpoint Chamber of Commerce.

Litehouse acquired its Michigan facility through a 1997 merger and built its Utah plant in 2011. The company anticipates completing an expansion of its Utah facility in September, tripling the plant’s manufacturing space to 270,000 square feet.

Frank said preferences of younger consumers, who value convenience, have also fueled Litehouse’s growth, especially in the value-added and ready-to-eat food categories. For example, Litehouse supplies dressing for products such as party trays and pre-made salad bowls.

Frank said millennials also demand natural foods, spurring sales of Litehouse refrigerated dressings, which have no preservatives. Litehouse says it’s the No. 1 producer of refrigerated dressings in the U.S. and Canada. Finally, Frank believes his dressings have become versatile as millennials have identified new uses, especially for ranch dressing.

Michael Keeling, president of the ESOP Association in Washington, D.C., has toured nearly 600 ESOP businesses. He said he’s noticed workers tend to use the pronoun “we” to describe corporate decisions, and they understand “what everyone does impacts the overall result.”

Keeling said roughly 7,000 to 8,000 U.S. companies are ESOPs, mostly smaller, private companies. He said ESOPs commonly form because owners have no heirs and wish to maintain the workplace culture they’ve established, while still cashing out on their stock. He cited a recent survey of middle-income U.S. workers, conducted by the National
Opinion Research Center, finding the retention rate of employee-owned companies is anywhere from four to eight times better than conventional companies.

Keeling emphasized that leadership within ESOP companies must be certain to educate workers about the concept to avoid hard feelings in case the stock price drops. Many ESOP companies, including Litehouse, also offer 401K retirement plans to help employees diversify.

“I’ve had some ESOP leaders say, ‘If you could put it in a bottle and sell it, you’d have a wonderful thing in what goes on with the attitudes and enthusiasm in an ESOP company,” Keeling said.