Laird closing up shop in Sisters

In a formal statement October 12, Laird Superfoods (LSF-NYSE), announced that it would be closing its operations in Sisters, and outsourcing the production of its plant-based products to a co-packer, a business that manufactures and/or packages food products for clients. In some cases, the co-packer can be a competitor categorically, but not at the same price point or package size.

The Nugget spoke at length with Laird CEO, Jason Veith, who was not yet able to name the co-packer or their location other than “more central” to the company’s customers. The problem, Veith elaborated, is the location of Sisters is not competitive for shipping.

“It’s too far from the interstates,” he said.

Veith, who arrived on the scene about eight months ago, has been steadily streamlining operations trying to bring production in line with sales and inventory; the latter had ballooned to unsustainable levels in 2021. In the quarter ending June 30, Laird saw its first ever sales decline. Third quarter results will be released November 10.

There was anguish in Veith’s voice as he described having to tell 45 Sisters employees that their last day would be no later than December 31.

“That was a terrible day,” Veith said. “These are such good people, such a great team.”

He assumes that they will all find work given the labor market shortage, especially for skilled workers.

The maker of powdered creamers, coffee, snacks and other nutrition based products had 147 employees on January 1st, 83 on October 1. The 38 employees who will remain, Veith among them, are scattered around the U.S., mostly in the West, and work remotely. They are in sales, marketing and finance/accounting roles, and unaffected by the decision.

Apart from the elimination of 45 jobs in Sisters, the question on most people’s minds was about the real estate on Lundgren Mill Road where Laird’s campus comprises two class A buildings — the offices and the production facility, both new in the last few years, and built to Laird’s specific requirements.

The 27,000 square foot production building has highly sophisticated mega-refrigeration with a commensurate amount of electrical heft to power it. It is not typical warehouse or light manufacturing space.

Laird occupies the building under the terms of a long-term lease valued on its books at some $5 million. Paul Schneider of Sisters is the landlord and a partner with former Laird CEO Paul Hodge in the Woodlands, a 200-unit-plus housing development under construction along Barclay Drive and Pine Street. The Woodlands was originally imagined largely as affordable housing for what was projected to meet the needs of a rapidly growing Laird workforce.

Given market conditions, The Woodlands no longer meets the original definition with even the smallest units in the range of 900 square feet being priced at around $500,000.

When we asked about Laird’s remaining obligation under the lease or what their sublet rights were, Veith replied, “We have a long and good relationship with Paul and we are working out a solution satisfactory to both parties.”

Veith hopes that a tenant can be found that can make use of the substantial leasehold improvements and infrastructure in the buildings. Sisters is in the midst of a mini building boom with ground broken on several mid-to-large size commercial projects, five within 200 yards of Laird. One is 41,000 square feet in six units of 6,850 square feet, two of which will be used by the owner. Over 125,000 square feet of commercial space is currently under construction inside the city limits.

Veith, who never left his home in Colorado to take up residence in Sisters, explained how he tried to do the reverse of what Laird is doing.

“We looked for opportunities to pack for other similar manufacturers, but the same issue of location to affordable transportation made us uncompetitive,” he said.

In its published statement, Laird said: “This strategic pivot to an outsourced manufacturing model will significantly improve our financial profile by reducing fixed overhead and simplifying our business, enabling us to focus on maximizing our commercial growth potential. Increasing Gross Margin is a strategic imperative for Laird Superfood and this is an important step towards our committed long-term target of 35 percent. The shift to third-party manufacturing is an essential move in order to be more responsive to our customer demand while fully aligning our cost structure with the current state of the business.

“We are grateful for the support of the Sisters, Oregon, community, and our dedicated employees who have helped to build the Laird Superfood brand. We are deeply committed to supporting our employees during this transition and will provide all affected team members with severance and outplacement services.”

With respect to the unsolicited August 17 offer by New York investment bank E.F. Hutton to acquire all of Laird’s stock for $3 per share, Veith told us that Hutton filed an SEC Form 13D October 12 rescinding their offer.

Picky Bars in Bend, which Laird acquired in May of 2021 for $12 million in cash, is not affected by the decision to cease operations in Sisters. The facility on Lundgren Mill was not equipped to do baking nor make granola. Picky Bars has always been made by outside sources, including one in Canada.

Veith is focusing now on a major rebranding for the first quarter of 2023 and a total packaging revamping.

“We will expand the appeal of our products beyond the legendary following of our original surfing-based customers,” Veith said.

On May 30, 2017, the Company entered into a forgivable loan agreement with the City of Sisters in the amount of $51,000. The loan was issued to help the Company expand its business operations in the city through eligible jobs.

Laird met the terms of the loan, but questions are arising if the City made a good investment, or if the City should even be engaged in such development efforts in the first place.