The timing couldn’t have been worse when Mustard Capital Inc. opened for business in April 2007.
As the new mustard processing plant in Gravelbourg, Sask., got down to business in its inaugural year, it encountered a variety of unexpected challenges.
Mustard production in Western Canada had declined and European buyers were looking to snap up available supplies. As well, the Canadian dollar was increasing in value and mustard prices were on the rise.
Instead of paying 25 cents a pound for its raw product, the company suddenly had to pay 50 to 60 cents.
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“You couldn’t have picked worse conditions to start up,” says chief executive officer Tom Halpenny.
“There were challenging conditions in the marketplace that couldn’t have been predicted, but we got through it.”
The fledgling company survived its baptism by fire and while Halpenny wouldn’t disclose specific financial results for 2007-08, he described it as a successful year, given start-up costs and the difficult circumstances in which it operated.
“We were quite pleased with the result,” he said in an interview after speaking recently to the annual meeting of the Saskatchewan Mustard Development Committee in Saskatoon.
The company expects to turn a profit in 2008-09, although again Halpenny declined to offer specific numbers.
MCI is the brainchild of local groups and individuals who in 2002 decided the Gravelbourg area had a significant competitive advantage for buying, processing and selling mustard.
Four municipalities got involved, which Halpenny says was crucial to getting the company up and running.
MCI has a typical corporate structure, with 80 shareholders. All are local and about half are farmers. There are no special delivery privileges for shareholders.
The plant obtains its mustard through a variety of contracts as well as direct spot purchases from producers, eliminating third party margins.
The 6,500 sq. foot facility has a milling capacity of 4,000 to 5,000 tonnes per year. The company plans to expand that to 20,000 tonnes a year by 2010.
The plant uses all three types of mustard – yellow, brown and oriental – to produce a variety of mustard products, including unique ones such as deheated and deoiled yellow mustard.
It exports to 10 countries, providing services such as custom labelling, specialized packaging and just-in-time delivery.
Halpenny said one of the keys to the company’s success has been the team of experienced people that came together to run the operation.
“If we hadn’t been able to get the qualified and experienced people we were able to attract to our company, I’m not sure I’d be reporting this success today,” he said.
Looking to the future, Halpenny said the company has a “grow as we go” strategy, exercising caution when it comes to capital outlays and being sensitive to the market.
“It’s a matter of matching growth to the markets,” he said.
MCI is also focused on providing outstanding customer service in traceability, food safety, quality and consistency, reliability and innovation, and serving a variety of niche markets, including biofuel, nutraceuticals and industrial uses such as biopesticides.
Halpenny said there are three lessons from MCI’s experience for other local groups looking to get involved in similar ventures:
- The support and direct involvement from local municipalities was an important catalyst.
- Having a strong, local group or individual to champion the project is important. In the case of MCI, that was farmer Gaetan Piche, now chair of the board.
- It’s important to work closely with other interests to identify the right project in terms of competitive advantages for a particular area.
Mustard is grown in every crop district in Saskatchewan, and Halpenny said he expects to see a steady increase in acreage in coming years.
“I am continually amazed at the functionality of mustard as a product and some of the untapped potential in the food and industrial markets, and I remain passionate and optimistic about the opportunities associated with mustard,” he said.
Mustard acreage and production have traditionally been volatile and unpredictable, responding quickly to changes in prices and markets.
Halpenny thinks that could begin to smooth out.
“We are never going to match canola, but we’re definitely going to see expansion.”
