Richard Sprague (right) and his son Keenan (left), from Sprague Foods.Dave Chan/The Globe and Mail
Over the past century, Sprague Foods – a fifth-generation, family-run cannery and soup manufacturer in Belleville, Ont. – has experienced nearly every growing pain common to a family business.
But amid the collapse of the canning industry and a series of unplanned successions, the business has thrived as a cornerstone of Canada’s canned food sector.
“You know in a movie where somebody’s running and the ground is falling, but they just keep running?” says Keenan Sprague, account manager at Sprague Foods and a fifth-generation member of the canning family. “We’ve been doing that for 99 years.”
Founded in 1925 by Keenan’s great-great-grandfather as a seasonal, private-label cannery, Sprague Foods has become one of Canada’s only canneries producing organic, vegetarian soups and beans. The company has 50 employees and its products are sold in all 10 provinces and 50 U.S. states, with distribution through Walmart, Loblaws and Sobeys.
Sprague Foods is part of Canada’s large pedigree of family-owned enterprises, which account for 63 per cent of Canadian private-sector companies and nearly half of the nation’s real GDP in the private sector, according to national organization Family Enterprise Canada. While running a family business comes with many opportunities, it also opens companies up to several challenges – especially when family dynamics collide with business growth and difficult financial decisions.
For the Spague family, growth has come at a cost throughout the years, overextending the family at times and blurring the lines between business and family. Today, around 60 per cent of the company’s production is devoted to the Sprague line of soups and beans, while the remaining capacity is reserved for private labels. A decade ago, the Sprague line accounted for just five per cent of production.
“It’s sometimes – at least for our family – difficult to separate the stresses of running a profitable business and keeping that separate from family life,” says Keenan’s father, Richard Sprague, who’s also president and a food scientist at Sprague Foods. “Maybe some families are able to do it, but it’s been a challenge for us for sure … I think the family’s done remarkably well just to stay as close as it has through the generations.”
Richard and Keenan Sprague of Sprague Foods pull a cart of cans to be processed at the company’s factory on Oct. 16, in Belleville, Ont.Dave Chan/The Globe and Mail
Over the years, Sprague has relied on loans from the Business Development Bank of Canada and various banks to finance the business. “We secured these loans against real estate and equipment and provided personal guarantees, going all-in on the business,” says Keenan. “We also received periodic private equity investments on three different occasions since 1968, and occasional grants from provincial and federal governments through programs meant to support small food manufacturers.”
There’s several reasons why businesses may seek loans, grants or private equity investments. Some may want access to capital for growth, expansion or operational improvements, while others may want liquidity to facilitate staff restructurings, transitions or new product developments. Keenan says the loans and cash injections Sprague Foods has received have been essential to keeping the business afloat, allowing the company to pivot to new products, customers and markets.
He also says the company has historically been “countercyclical,” with higher sales when the economy is down since shoppers prioritize more cost-effective items – like canned goods – instead of fresh produce or going out to restaurants. For example, sales doubled during the pandemic when shoppers stockpiled canned foods as restaurants were forced to close for dine-in service.
“Whenever the business slowed down, we have pivoted to new products, new customers and new markets to build new business,” Keenan says.
However, there have been plenty of tough lessons in the pursuit of innovation.
One of those lessons came from opening a state-of-the-art production facility in 1994. At the time, the new facility cost $5-million. Following trends in Europe, Richard felt confident the canned soup market was moving in a more culinary and nutrition-focused direction.
“In retrospect, we were probably a little too ahead of the market,” says Keenan. “We knew we had to innovate, but we got ahead of ourselves – we didn’t have a sophisticated go-to-market plan.”
The decision to invest in the new facility and sophisticated production capabilities strained the family business financially, forcing it to deemphasize the Sprague brand and re-focus its efforts on private-label products to keep the company afloat. It was an outsized risk that would take nearly 15 years to pay off, says Keenan.
Craig Machel, a portfolio manager and investment adviser at Richardson Wealth’s The Machel Group, works with multigenerational, business-owning families and says it’s not uncommon for family businesses to take these kinds of risks to pursue growth. However, he notes family-run enterprises “need a ballast in place with other assets that aren’t going to be affected by the same risks.”
In the case of Sprague Foods, the company was able to counterbalance its investment by ramping up private-label production. But Keenan admits it was a lesson in being “very judicious with capital allocation and realistic on the go-to-market strategy.”
Richard also acknowledges that succession planning has been a pain point over the years. “Almost every generation’s succession has happened in a moment of crisis,” he says
They’ve since put in place a formalized succession plan to assuage the next generational transition.
That communication between generations is key, says Machel. When it comes to succession planning, “gathering dollar size and numbers is pretty simple,” he says. “The heavy lifting comes from the intangibles which are more subjective, (like) what is your hope with (the business’s) legacy and how do you see it unfolding with the next generation.”
Richard Sprague of Sprague Foods inspects bins of beans to be processed at the company’s factory.Dave Chan/The Globe and Mail
Machel says it’s often helpful to draft up a family mission statement, a document outlining values, processes and other details important to a family and their business. “This would involve collaboration from the older generations of the Sprague family and any family of course, and which becomes a bound agreement designed to mitigate any future friction,” says Machel. “The family mission statement would require periodic updating collaboratively as well.”
Richard says the Sprague family has always emphasized values, and despite the number of crisis-induced successions, has managed to preserve the family’s values across generations. Big decisions require a consensus vote but communication is rarely an issue, he adds.
Reflecting on the success of the business and the ability to weather crisis while remaining an industry leader, Keenan says the latest generation of Sprague family members involved in the business – including Richard and his wife Jane, plus Keenan and his wife Catherine – consciously try to talk about the company as a team. “When you’re thinking of it as family, you’re not as business-oriented,” says Keenan.
Richard agrees, adding that respect for every generation’s unique role in the business has helped preserve the family legacy and wealth. And the implementation of new structures like a formalized succession plan will help usher in the next generation. “After four generations, we’ve figured it out,” says Richard.