Custom Food Processing Equipment and Systems


GEM Equipment of Oregon, Inc. was established in 1968 by Ed McKenney and George Everts. GEM Equipment has manufactured large belt blanchers for the french fry potato industry since 1975, fryers since 1985 and batter application systems since 1990.

GEM Equipment's second year saw solid growth, some capital investment and an entry into the saw mill industry. A salesmen for a transmission supply house had observed the large vibrating conveyors being built for Ore-Ida and asked if this company could supply a heavy duty unit for a saw mill. GEM Equipment's first saw mill conveyor had a 1/4 inch thick, 2000 pound pan, and fed scrap wood to a chipper. This unit had to withstand the impact from an eight-foot long twelve by twelve dropping eight-feet on to the shaker. For the next four years, heavy duty saw mill vibrating conveyors were an important part of the company's product line. Even though the last large order was shipped in 1974, orders were still beingl received each year for spare parts for these durable machines through the mid 1990s. . By the end of the second year the company had progressed to the point that better facilities could be considered. Unfortunately, in 1970, unoccupied industrial buildings were practically non existent in the Willamette Valley.

Planning for a new facility began late in 1970. Since the company did not have a lot of money, it would be necessary to lease the new building. To make sure it would not be substandard, design was started before a site was located. Thanks to a heads up insurance agent, who took Preliminary plans to the insurance rating bureau, the final design specified tilt up concrete rather than the "more economical" steel construction, still widely used for most small metal working plants. With fire insurance premiums factored in, concrete was no more expensive.

Construction was started on a 60 by 200 foot shop building with an attached 30 by 60 foot office, located in Woodburn's new industrial park late in the summer of 1971. The lease included an option to purchase with all principle payments applying to the purchase price for the first ten years. (Needless to say this option has been exercised.) A contact made while planning for the building led to considerable seafood equipment business for 1972 through 1975.

Early in 1972, Gem moved into the new facility. The tradition of slow business on start-ups followed the company into the new building. The first half of 1972 was a dog. Fortunately business picked up in the second half of the year enabling the company to finish its first year in the new building with a profit. Seafood equipment, saw mill equipment and Lamb Weston were a great help in making that profit. The year finished on a strong enough note to make it possible to order a shear and brake (Financed by US Bank). Addition of shearing and forming would eliminate the majority of the work still farmed out.

The shear and brake arrived early in 1973, a golden year for Gem Equipment. Business was very good, George, who had done most of the selling in the earlier years, had an effective salesman working for him and the company was highly respected by its customers. The growth of the business coupled with the addition of the shear and brake accomplished what appeared impossible less than two years earlier; the company had outgrown the new building. Planning for the second bay and an office addition started in the fall of 1973.

Construction of the new bay and office addition was completed in summer of 1974, just in time for Gem to finally feel the recession triggered by the Arab oil embargo. The year started out like there was no tomorrow. In the words of one metal working manufacturer, "Give the customer a proposal, and he buys it, regardless of price." It was too good to last. Not only did business tank, George was seriously injured from a mugging at Portland Airport; then his assistant quit. As a result, the company entered a very bad economy with a new building and no sales force.

Fiscal 1975 started out with, what was for that time, a mammoth first quarter loss. Fortunately by the middle of the second quarter, business picked up and soon there was adequate volume for the enlarged facility. Lamb Weston's potato and seafood equipment needs stimulated four major projects and fueled the turn around. One of these projects, a twelve foot wide 50 foot long, tri-mode, belt blancher established Gem as a very large blancher manufacturer, a position the company holds to this day. The year ended up with a profit and set conditions for a very prosperous 1976. This prosperity was driven by a large amount of conveyor work for a new General Foods cereal mill in Modesto California, more work for Lamb Weston's potato plants and a large yeast producing system for Boise Cascade.

After 1976, it was down hill for several years. George retired from active sales at the end of 1977, leaving a void that would not be filled for many years. His good-bye present was a large vegetable project, located in Santa Maria, California. This project generated over one million dollars worth of business for Gem in 1977 and 1978. Also in 1978, a large belt blancher was manufactured for Carnation's potato division. The two large blanchers replaced auger blanchers leading to the hope that others in the french fry potato industry would replace auger blanchers, leading to considerable business for this company. Early reports from the industry dashed this hope. The belt blancher's advantages did not justify its much higher price.

Business wise 1979 was a fairly good year, helped by a large block of seafood equipment. By any other measurement 1979 was the pits. It started out with a $25,000 product liability judgement against this company and went down hill from that point. Shortly after the product Liability trial, a representative from the millwrights union showed up with signed pledge cards. The union won the election and negotiations commenced. After weeks of negotiation a contract was signed. Except for the expiration date, July 1, 1980, the contract did not contain any provisions detrimental to Gem. The year 1979 also saw about $175,000 of receivables move into the uncollectible category. To put this blow into perspective, this total is larger than the combined write-offs, for all of the rest of years the company has been in business, to this date.

A three year run of poor business started with 1980. While nothing could be done about the lost receivables, the other major problem left over from the previous year, the labor union, was resolved. At this time the company was still doing considerable work for Pacific Northwest fruit and vegetable processors. The July first contract date was very detrimental to this business. The Union shop steward stated that they would take a three year strike before the contract date would be changed one week. Gem's management decided to meet the contract date issue head on and accepted the shop steward's offer. After a two week cooling off period the company exercised its legal right and hired strike replacements. Four months later the union gave up, triggering a provision in Federal labor law that placed the strikers on a preferred hiring list. Approximately 40% of the strikers ultimately returned.

Early in 1981, the two potato processors that had the large belt blanchers were again asked if these units had any future. As before, the answer was no. Carnation was designing a new fry line, for the plant jointly owned with Simplot, and planning on using auger blanchers. Those plans were about to change. McDonald, a very large buyer of french fries had evaluated and preferred large belt blanchers over auger blanchers. In early fall, two large insulated lift top belt blanchers were ordered for the Carberry, Manitoba plant. The option to purchase the Woodburn plant had to be exercised no later than August of 1981, a time when Gem's cash flow and supply were both at a very low ebb. Fortunately, thanks to the cooperation of Woodburn Development Corporation, the option was exercised. Gem was able to scrape together $15,000 to pay off the land contract. The other two loans stayed in place and monthly building payments were reduced by a very small percentage. This option could not have been exercised without US Bank's cooperation, nor could Gem have survived without the bank's support. The early 80's was very tough on this company. By comparison, the early 90's were a cake walk, even without the Bank's support.

The two Carberry blanchers were a totally new design. By early 1982, it was obvious that the complexity had been underestimated and the margins on these units was going to be much lower than had been projected, extending the company's longest period of losses. Even with the low margin these blanchers had a very positive effect on Gem's future. Late in 1981 Lamb Weston started designing, in house, the first high volume deluge blancher. After getting five bids Lamb's project manager inspected the Carberry blanchers, then entered into a design contract with Gem Equipment to complete structural and mechanical design utilizing Lamb Weston's processing design. This work included design of a new style platform belt, utilizing panels that were segments of a circle, forming a round drum when they went around six tooth sprockets. Because of the panel cross section it was designated, "Hump belt." Lamb Weston specified Alloy steel side chains, a miscalculation that had far reaching positive results for Gem. 1982 would have been profitable if the company had not bitten the bullet and finally written-off the last $150,000 of 1979's bad receivables.

By the beginning of 1983, the company had slimmed down and was able to finish the year with the second highest profit in its history on only slightly over two million in sales. Happy days were finally here again. That year also saw Gem's relationship with Lamb Weston progress from a respected manufacturer to a partner in technology. The blancher ordered in 1982 went into operation early in 1983. After three months it was discovered that clean up chemicals had attacked the side chains, resulting in one sixteenth inch combined pin and bushing wear. This Company contracted with a consultant engineer, who specialized in failure analysis, to devise a solution. The solution was to utilize K500 nickel alloy to replace the chain pins and for an insert in the bushing. This fix, coupled with a change in clean up procedure, extended the chain's life for several years.

Two things happened in 1984 that were destined to shape Gem's future as a major supplier to the potato industry and in the process make this company overly dependent on that segment of food processing. J. R. Simplot ordered two large tri-mode blanchers and Lamb Weston's engineering manager asked if this company would consider building fryers. The answer, "Yes if you have technology you wish to protect or your present supplier is overcharging." His reply, "Both." Lamb shipped in a surplus fryer to be rebuilt to familiarize this company with fryer construction. Engineering was started on a new fryer. This unit included a deluge option in the first section. Outside of that it was a copy of a Heat and Control fryer with a few refinements. 1984 had a good profit and cured the cash flow shortage. Lamb also ordered two deluge blanchers for delivery in 1985 utilizing the 1982 design. One of them was 90 feet long, dwarfing all previous units.

The new blanchers utilized the first side chains manufactured by Gem. This chain had K500 pins and bushings and stainless steel side bars. The Fryer designed in 1984 was manufactured and put into operation. This fryer proved the deluge concept and positioned this company to manufacture three deluge fryers for Lamb in 1986. Even though it was a risky course of action Gem made a conscious decision to take advantage of the Lamb Weston strategic alliance to build this company's financial position, and not try for diversification outside french fry potatoes until adequate cash reserves had been earned. The company's first two computer aided design (CAD) stations were purchased for the engineering department late in 1985. By the middle of 1985, it had become time to think about growth. In 1986, Lamb Weston furnished all the growth. Three of this company's 3.8 million dollar volume came from Lamb.

The Lamb Weston bubble burst in 1987. That company was sold and their capital investment policy drastically changed. Gem struggled through 1987 with a loss. It was not all bad news. Nestle's Carnation division purchased six small blanchers for their pasta operations. Simplot purchased a small blancher (Three years earlier it would have been considered medium size.) that was the first outside of Lamb to use the hump belt. It was also the first to use side chains with stellite pins and bushings. This material, which still does not show any wear, is a hard strong bearing material, with inherent corrosion resistance, a characteristic found in gold and few other materials. At that time stellite bar stock was the same price as silver. Since then, stellite price has increased and silver's has decreased.

The sale of Lamb Weston was not all bad for this company. In evaluating Lamb, several companies had gotten their first really good look at equipment manufactured by Gem. One of these, McCain would order three large blanchers complete with hump belt panels and stellite chain. Two of these units went into operation in 1988 and one in 1989. 1988 had a good profit and 1989 was a poor year. That year did however have its good points. Lamb Weston purchased this company's first batter applicator and a conventional fryer that Gem could use for a sales reference. Simplot's Director of Engineering asked if this company would supply fryers. Also an opportunity surfaced to purchase all the equipment in an operating machine shop. While most of the equipment was old, it did offer an economical entry into the world of machine tools. Until this equipment was purchased, all machine work had been farmed out. Engineering's conversion to CAD was completed in 1989.
1990 saw the first Gem fryer, not purchased by Lamb Weston, commence operation; and the second and the third. J. R. Simplot ordered one late in 1989 for start up in early 1990. The second went to McCain and the third to Northern Star. Batter systems were furnished for McCain and Cavendish Farms, both located on Prince Edward Island. Business came on very

Strong. Without more manufacturing space, two million dollars worth of business would have been turned down; psychologically impossible for a management that had survived too many years of inadequate sales. Company stockholders purchased a 63,000 square foot tilt up concrete building in Mount Angel to be leased to Gem. !990 produced 7.6 million in sales and record profits. The year also sowed seeds for a tough downturn.

Five large french fry lines commenced operation between August 1990 and June 1991. French fry production surpassed demand. Thanks to six large vertical preheaters ordered by Lamb Gem did not notice any slow down until orders dropped off a precipice in July. The period between August 1991 and July 1993 had few redeeming features. US Bank declined to renew the company's receivable line of credit at the end of 1992. By pledging a building owned by one of the stockholders the company was able to secure a line of credit adequate for the low level of business achieved in 1993. Good fortune returned during the last half of 1993 with a million dollar blancher order from Nestle-Simplot Carberry plant. The company also sold the back forty percent of the Woodburn property for enough money to make 1993 profitable and pay off the loan on that property. The early 90's did see the addition of more modern machine tools.

By the start of 1994, the potato industry had started buying equipment. Two, 120 foot long deluge blanchers, assured prosperity. This also gave the company the opportunity to start building a sales force. Record profits on 6.2 million sales funded upgrading of the company's CAD stations. Those profits also greatly reduced dependence on receivables financing. The last receivables loan was paid off in August of 1994 and none was used in 1995. The machine shop was moved to Mount Angel in 1994.

1995 provided record sales and profits. It was also the year of the fryer. Five new fryers manufactured and five rebuilt by this company commenced operation. The company's ability to handle large non potato projects was proven with a $600,000 specialty product project. Entry to the world of computer operated machine tools was achieved with a CNC vertical machining center. A computer program for fluid flow analysis was purchased. This program is a big help in designing fryers and a bigger help in selling them. Outside consultants helped upgrade quality, the hiring process, and provided information to upgrade the company's vibrating conveyors. Two steps were taken to ultimately reduce the company's over dependence on french fry potatoes. Preliminary design was completed for a potato chip fryer. At this writing the design is being reviewed by a very large snack food manufacturer. Two salesmen were added giving the company sales offices in western Oregon, covering the west coast; eastern Oregon, covering the Columbia Basin; central Minnesota, covering the Midwest potato industry; and Hanover, Pennsylvania, covering the east coast.

Again in 1996, record volume and profits were produced. Major projects for J. R. Simplot, Aviko, Lamb Weston and McCain contributed. A second CNC vertical machining center was added. A computer was set up in the machine shop, to take data in CAD format, and with information entered on the tooling to be used, feed the output to the machine tool's computers, to automatically program the machine tool operation. This computer, which is located in the machine shop and operated by the machinists, also makes it possible to download a manual set up onto a disk. This disk becomes a permanent record, that can be used to automatically set up one of the machining centers. The company paid the 1996 lease payments in advance and borrowed $165,000 to loan to the company stockholders so the Mount Angel building contract could be paid off. This loan was paid off. Other capital investment included a ten ton bridge crane for Woodburn and an upgrade for the computerized fluid flow profiling. A significant first step was taken toward management succession; Steve Ross was appointed Chief Operating Officer. Initially, Engineering, Personnel, Production and Purchasing are to report to Steve. He will gradually pick up responsibility for other departments. Unfortunately the primary sales objective to produce other business to offset dips in french fry potato volume was not met.

To date every year ending in 6 has been a record, followed by a year ending in 7 that is much more difficult. 1997 is following this pattern. While sales volume is down moderately and profits will be disappointing, there will be a significant addition to working capital. The expected dip in french fry potato business forced a hard look at sales. The Midwest and East Coast sales offices were closed. Terry Hersel moved from Engineering Manager to Sales strengthening Gem's sales effort. Terry was responsible for the year's most significant order, a batter and fryer system for a McCain plant in Europe. A small amount of business has been received from chicken and snack food processors. Even though low profits have held down capital investment, Engineering department software has been upgraded to AutoCad level 14 and two well used gear shapers have been obtained. The latter enabled the company to manufacture splined couplings, for a new frier jack drive, in house.