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Smude’s Sunflower Oil is doubling down on big expansion in little Pierz, Minn.

August 20, 2018

Business is popping for Tom and Jenni Smude, the central Minnesota sunflower entrepreneurs.

Sales of Smudes Sunflower Oil, including increased demand for bulk oil from high-end pet-food manufacturers, and a separate year-old microwave popcorn product, should increase revenue this year by more than 50 percent to around $5 million, on the heels of 60 percent growth in 2017.

Weve had to turn down business, said Tom Smude. One company uses up to 5 million pounds of oil a year, and we just cant sell them any this year. They gave us a letter of interest for next year. Thats cool.

The Smudes, who live on a 160-acre farm, are working with lenders to expand their manufacturing facility in Pierz, Minn. The imminent purchase and overhaul of an adjacent building would triple their space to 75,000 square feet.

Its exciting but a little scary, said Jenni Smude. Were investing a lot in our future. The employees are ready to go.

The Smudes also are a rural proxy for a growing specialty-foods industry focused on local, healthy products that tend to command a premium price.

The Smudes, both 44, know something about risk and building a business.

They almost lost the farm in 2007-08 to drought that devastated their corn crop and forced them to buy expensive feed for their cattle. The Smudes, who also make grain-handling and storage systems, turned to sunflowers as an alternative crop to corn and beans, which requires more fertilizer and water.

They planted 60 acres in 2010 with plans to sell the oil to processors and the byproducts as animal feed.

Smude Oil has grown to 13 employees who this year will process sunflower seeds grown by contract growers covering about 5,000 acres in Minnesota and South Dakota. Area farmers have found it a soil-enriching alternative crop that rotates well with corn and soybeans.

Success also draws interest. The Smudes, who had mortgaged everything except their farmhouse, were contacted by prospective buyers in 2017 after the products gained traction in grocery stores such as Kowalskis, Lunds Byerlys and Coborns.

The offers werent too good, and we started getting more orders and we found new markets for our products, Tom Smude said.

Rolling the dice

Running out of production capacity, the couple decided to roll the dice on expansion.

Carol Anderson, executive director of Community Development of Morrison County, is working with bankers on the $3 million loan package, including about $2 million in private financing and about $750,000 from county and state development funds.

The Smudes never missed a payment on the $200,000-plus the county loaned several years ago to help them open the Pierz plant, she said.

I like this project, and Smude Oil has been terrific, Anderson added. Weve watched Tom and Jenni grow.

Theyve worked hard to get distribution. The oil side of the business is growing with pet food companies, and the popcorn side is growing. They cant fill all the orders. So were going to help them grow some more.

The parties hope to close on the building and have the financing approved by the Morrison County Board in September.

The Smudes already have beaten the odds facing new businesses with their heart-healthy, cold-press sunflower oil that uses no chemicals or heat.

It maintains the oils natural flavor nutrients, according to an article earlier this year in the publication of the Minnesota Agricultural Utilization Research Institute (AURI), which has worked with Smude and other small food processors to achieve greater value from Minnesota crops.

Adding popcorn

The Smudes took on a silent 50-50 partner to help launch their fast-growing popcorn line this year.

Our customers encouraged us to create a microwave popcorn with our oil, said Tom Smude. Through the ingenuity of our packaging technology partner, we succeeded in securing a patent for the first microwaveable bag and seal designed to contain oil, so preservatives or artificial ingredients are not required. Our bag is made of natural greaseproof paper. A year ago we sold 1,000 three-bag packages a month. Now were doing 10,000 a week.

The Smudes sell 55-gallon and 250-gallon plastic drums of their vitamin-rich oil to food processors, movie-theater chains and premium pet-food makers.

On the Smudes website, consumers can choose from a 16-ounce glass bottle of cooking oil for $9.95, a plastic gallon for $26, a three-pack box of microwaveable popcorn for $4.99 or even from a line of sunflower oil-based therapeutic massage lotions and more.

Rural poster child

Tom Smude, who works many 12-hour days, has become a rural-producer poster child at trade shows for Midwest Pantry, a Minneapolis-based incubator and promoter of local foods that opens the doors for small companies to wholesalers and distributors.

Jenni Smude, a college business major who oversees finances and works with the accountant and lawyer, never envisioned a career beyond raising her kids and working at an off-farm job. Tom, who splits time between sales, the plant and the grain-storage business, doesnt sweat a bigger future.

He just needs $3 million more in space and equipment to fill a growing order book for next year.

We have to do something, Tom Smude said. Weve ordered 10 million pounds of seed, about 5,000 acres worth from farmers for this fall.

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.

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