Westrock Coffee Company CEO talks acquiring S&D Coffee & Tea and making meaningful change

Few could have predicted the storm that was COVID-19. It came with barely any warning, did its damage, and impacted millions in its wake. But unlike a violent storm that eventually pushes out to sea, this one hasn’t finished yet.

What was already a challenging time for businesses throughout the world was made even harder for Westrock Coffee Company CEO Scott Ford, who just two weeks prior to COVID-19 hitting the United States, had agreed to buy S&D Coffee & Tea from Cott Corporation in a US$405 million transaction.

“I was having lunch with S&D CFO Jack Robinson when he told me what the revenue was going to be, what the gross profit was going to be, and how little it was going to cover the fixed costs. For the first time in my life, I thought I was going to throw up, then I thought, ‘I’m going to do what has to be done to survive this,’” Ford tells Global Coffee Report.

“This was a category five hurricane. The numbers were clear from early on, so we battened all the hatches, rode out the worst of it, and waited for the storm to pass.”

Ford says it was clear to him within the first 10 seconds what needed to be done. He needed to let staff go, and for some, it would be career-ending.

“I took a risk. I knew if we acted really aggressively, really quickly, to put ourselves in a strong position, we could save the business. Then, if we get lucky and COVID-19 abates to some degree, we could bring people back, and that’s what we’ve done,” Ford says. “We have the majority of people back at this point, we’re running at 80 per cent of our prior to COVID-19 levels, and we have more money in the bank at the end of the day compared to what we had pre-COVID.”

Thankfully, Ford’s risk has paid off. Westrock supplies hundreds of clients with branded and mostly private label coffee to hotel chains, casinos, quick-service restaurants, and global retailers, including the two biggest in the United States – Walmart and its subsidiary Sam’s Club.

Ford says it’s thanks to its biggest customers – retailers, drive-through outlets, and convenience stores – that the business has bounced back quicker than others.

“Our retail business went up 30 to 40 per cent, year on year, with everybody staying at home. The seated restaurant business went down 80 per cent and drive-throughs only by 20 per cent. It’s that balance we had in drive-through outlets that pulled us through,” Ford says.

“Our hotel customers and our café customers have gone basically dark, and either have the financial resources to sit out for a year, or they don’t, and that’s a horrible reality.”

From little things, big things grow
Ford grew up drinking Folgers coffee. His father worked in business and politics, and his grandfather was the state school superintendent who desegregated Arkansas schools between 1957 to 1983. On Sunday afternoons, they would enjoy a big family lunch with black coffee and talk about the week’s politics. “That’s when I realised, ‘this drink goes with serious conversation,’ even as a kid,” Ford says.

Ford’s first career was in investment banking, followed by the wireless telephone and data industry. It wasn’t until he visited Rwanda that he made a connection with coffee on a deeper level.

“I saw people were paying about half what the crop was worth to women who were living in mud brick homes with children on their back. I knew we could do better than that. We could make a profit and pay twice that amount. I didn’t get into the coffee business to make a bunch of money or to build a traceability system. I did it because I was so enraged,” Ford says.

“So, I decided to build a coffee mill right there and offer market value for this crop, and I knew my grandparents would be honoured by that.”

With no non-government organisation or bank willing to finance the build, Ford funded what was only the third dry mill in Rwanda since the genocide.

“We had to finance the purchase of the cherries, mill it, ship it, beg people to buy from us, and take whatever we could for it and start over. We made a commitment to do all that, and only then did I look at my first employee, Matt Smith, and say: ‘So, you plant it like soybeans or what?’ And he said, ‘I’m pretty sure, but not positive, that it grows on a tree.’ And that’s where we started, April 2009,” Ford says.

“I didn’t care what it was or how you grew it, I just knew the economic impact we could have by just being a good commercial actor.”

Rise of technology
What Ford quickly learned in this process, was that agronomy training was key to transforming farmer income. He realised that by opening another mill in Rwanda – Westrock has since expanded its trading platform to 20 other countries – and establishing a competitive milling process, he could help the farmers raise their coffee prices and achieve a higher income.

“The farmers had no agronomy training stations, county extension agent, or number to call for support. For many of the younger producers, they had lost the generation ahead of them in the genocide, and others just needed the tools to enable their skills to shine,” Ford says.

“When we invested in agronomy training, production doubled, quality went up, and the farmers quadrupled their differential. They tripled their net cash take home even in a period of time when the C price went down 25 cents – and that’s all from the same number of trees.”

The next step was to provide traceable and transparent coffee. For six years, the Westrock team built an IT infrastructure and database to track and keep record each time beans changed hands along the supply chain. It also disclosed the price paid for the coffee every step of the way, from the farmer to the roaster, to its key customers.

Now known as Farmer Direct Verified (FDV), the model is a symbol of Westrock’s promise to its farmer partners and consumers to provide digital traceability, economic transparency, and ethical business practices. Using a QR code, Westrock’s retail customers can scan their bag of coffee to identify its quality, quantity, and the farmer who produced it. The price paid is often available to its end clients as well. When used at volume, without factoring in a premium, it allows Westrock to reinvest back into farmer training. This, Ford says, is the answer to long-term sustainable farming.

“I know it is widely viewed by many that it’s impossible to measure the impact of the supply chain and trace every single bean. A few years ago, it was a laughable proposition. Some people even said we were crazy, but it is doable. It cost us millions to build the system, but to our customers, the incremental cost is zero,” Ford says.

“No one bought anything from us for six years. We wrote check after check, knocked on doors, and prayed someone someday would say ‘yes’. Many said, ‘no thanks’, but eventually, a small handful of people said: ‘That’s what I’ve been looking for, I’m interested.’ Fortunately, they were some of the largest companies in the country.”

While certifications are great initiatives, Ford says it’s only now that coffee businesses are availing themselves of the opportunities of technology to measure the impact at origin.

“In the next five years I estimate that it will almost be ubiquitous that every large buyer of coffee – hotel, chain, retailer, casino, restaurant – will require this type of system to trace their purchase through the entire supply chain.”

When dreams become reality
Ford’s vision for more meaningful change at origin has gained even more momentum since the acquisition of S&D Coffee & Tea, which will now give Westrock additional volume to build an integrated supply chain.

“Because we come from an export background, we understand the value large customer volumes can have on the farmers that are trying to feed their children. When I saw the nature of their business – with its link to large international restaurants – I saw a great counterbalance to the big international retailers we serve, and I saw the volume when we put them together. That’s when I thought ‘fantastic, everybody in the supply chain will win’.”

Acquiring S&D was only ever “a dream” to Ford. From early on, he recognised the company as the number one US business in custom coffee roasting, serving the convenience store and restaurant markets.

“When we identified the sort of company we would like to be when we grew up, S&D was at the back of my mind. When it sold to Cott Corporation, about three to four years ago, I thought ‘that’s too bad’,” he says.

But a phone call in late-2019 was to change all that. Ford was told Cott was making a large acquisition in the water industry and was selling S&D.

“I was asked if we would like to buy it, and I instantly said ‘yes’,” Ford says. “I never thought they would trade, but I knew we had to jump in early and be aggressive.”

Ford travelled to North Carolina to meet the S&D leadership team. When he did, he saw that they were people of the “same heart and mind” with a passion to build a business and make sure that the impact of that business was felt through the entire supply chain.

After closing the purchase, what followed was six straight weeks of intense integration between S&D’s staff and Westrock’s executive teams, whom temporarily moved from Little Rock in Arkansas to North Carolina to iron out a magnitude of issues.

COVID-19 was an unexpected and unwelcome introduction to Westrock’s acquisition. A number of times, Ford called his wife of 36 years to warn her they could lose everything. Thankfully, on 10 April, he called her to say they were in the clear.

“This [acquisition] almost cost us everything, but in that moment, I knew we were going to make it,” he says. “We were thrilled, then we were panic stricken, now we’re thrilled again, and it’s better than I ever imagined.”

Despite the early hardships, Ford is excited about S&D’s growth opportunities, which he says were “buried treasure” he only discovered in the integration phase.

“We found out that S&D had passed on a number of national expansion and overseas opportunities even though it was asked to by several leading customers,” he says. “So, we are opening nationwide distribution, nationwide service, and international offices in Asia, the Middle East and Europe, and we are unbelievably excited.”

Over the next few years, Westrock also plans on investing millions of dollars into a new facility focused on research and development. But for now, Ford is committed to finalising the last of S&D’s integration and praying the brunt of the hurricane is behind him.

“We are thrilled to be part of the coffee industry, and we’re just trying to just be a good member of it,” he says. “It’s really a reflection of where we came from and why we do what we do. The fact that it’s resonated with customers who stuck with us when times were really hard, is perhaps the greatest reward of it all.”

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