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Diversification pays for co-op

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Waggoner: Some divisions thrive as others struggle



By MITCH LIES



Capital Press



PENDLETON, Ore. -- Allen Waggoner, for five years chief financial officer for Wildhorse Resort and Casino in Pendleton, changed jobs and industries three years back when he took over as president and chief executive officer of Pendleton Grain Growers. Founded in 1930, the cooperative now has 2,410 stockholders and 205 employees.



"I love agriculture," he said, "and the opportunity to bring my business skills and management skills into an agricultural environment was attractive to me."



Capital Press sat down with Waggoner recently to ask how PGG is doing in the midst of today's economic recession and whether changes are in store for the cooperative.



Q: How is the co-op surviving the recession?



A: We're doing really well. We came off 2009 with one of our best years, and 2010 is off to a great start.



Retail has struggled, as most would probably guess with the economic conditions that are out there. But overall, as a company, I'm very pleased with where we're at right now.



Q: Is that because you are well positioned with your mix of products and services?



A: One of the greatest strengths of Pendleton Grain Growers is our diversification. So while one business unit might struggle, other business units are able to maybe gain some ground and expand on opportunities.



Also, in the last couple of years we have begun to focus on optimization, which is putting together efficiency and effectiveness.



That has allowed us to improve performance even though it is a tough time.



Q: Does that mean you've cut back on some services?



A: No, not really. I don't look at it in the context of cutting. I look at it in the context of how do we drive revenue, optimize the delivery of that service. I look at it more as realignment of labor and realignment of cost, for example, making sure that every dollar we spend is generating the return that it should.



Some positions have been reduced or eliminated, but it hasn't been through an effort of cost-cutting. It's been more an opportunity to realign and restructure and move toward efficiency.



Q: Are you complacent with your current mix of products and services?



A: We value our core businesses and we are working to strengthen them and sustain them over the long term. But we are always looking to find ways to add value, and we are continuing to explore different things that come across my desk.



Companies nowadays have to be looking ahead and into the future and be willing to adapt and maneuver to what the market gives you to be successful long term.



Q: Are you looking at expanding?



A: There are three ways to look at expansion. One is market reach, and we believe there are opportunities for us to branch out with some of our businesses to serve a larger footprint.



Second is market share and expanding market share in your current market territory. If you're doing a great job of delivering customer service, you're going to attract new business in your market area.



The third is new business development opportunities. And one of the things we've looked in this area is container shipments of grain, which gets into identity preservation.



We have begun to experiment with that with companies on an extremely small scale to see if there are opportunities there.



Ultimately, the economic elements of that have to be there for that to work.



I think, down the road, there is potential there.



Q: Are any changes in store for your retail business?



A: We're focusing that more on farm supply and feed supply as we look to the future, which is more in line with our core business.



Q: Were you impacted by Measure 67 (an Oregon ballot measure that increased business taxes)?



A: Measure 67 had a definite impact on Pendleton Grain Growers, because we exceeded the cap. We have over $100 million in sales.



But the dynamic of that is we're buying grain from the producer, we turn around and sell it to the exporter, and we take a very small amount off of that. So with the gross receipts tax, we were hit with the maximum amount. But our net profit from that activity is substantially less.



For example, if we buy a bushel of wheat, we may have a $5 or $4 sale to an exporter. But on that bushel of wheat we may only net 3 or 4 cents.



Q: What can you tell me about your canola-crushing facility? How is that going?



A: We've been crushing oil and selling canola oil. We also looked at the biodiesel industry and manufacturing biodiesel, but when the economy went south on that, it just didn't prove economically viable. We backed away from that component at the moment.



But we are producing canola oil and moving that into the biofuel market and continuing to explore the edible oil development in food grade. We have been working on that and that is an area we will look to more as we go to the future.



Q. Do you feel well positioned for the future?



A. I feel really good about where Pendleton Grain Growers is. We have a great board of directors and they are working hard to set a strategic plan for the company. When I came on board in the fall of 2007, we went through a three-year strategic planning process. We implemented the plan and overall I feel very good about the progress we made in executing that plan.



This year we will again take a look at the next three years and the board will go through another strategic planning process. We'll take a look at our strengths, weakness, our opportunities, threats for the company. We'll try to take the crystal ball and guess what the future is going to be and set a new three-year strategic plan.



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