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http://www.omaha.com/article/20110425/MONEY/704259973 A World of Popcorn
Inside Preferred Popcorn Owners: Nebraska farmers Norm Krug of Chapman (40 percent), Daryl Hunnicutt of Giltner and Greg Senkbile of Central City (10 percent each) and the Aurora Co-op (40 percent)
Year founded: 1998
Production: At least 4 million pounds annually
Available: In 51 countries
Number of employees: 35 between Nebraska and Indiana
Contracts: 90 growers with an estimated 15,000 total acres in six states, including about 50 growers in Nebraska, none in Iowa.
Annual revenue: Estimated $20 million in 2011.
CHAPMAN, Neb. — Norm Krug pops out from the grays and browns of the gravel parking lot and nearby grain bins to wave hello to a lone passerby.
If the driver of the red International tractor missed the greeting, Krug's yellow Preferred Popcorn shirt and yellow truck did the trick.
The driver returns the wave, turns left and rumbles into a field.
“That's my tractor,” Krug said. “And he's turning into my field.”
Preferred Popcorn was born 13 years ago in that field, which like the plant is just south of U.S. Highway 30 between Central City and Grand Island.
Krug raised popcorn most of his life in the shadows of the vacant processing plant where his father once worked. In 1998, Krug organized a group to purchase the plant, now renamed Preferred Popcorn.
The company — owned by a partnership made up of Krug, two local farmers and the Aurora Co-op — is one of the top popcorn suppliers in the United States, and most of the product is shipped far beyond Preferred's home base in Merrick County.
The business retains its down-home feel despite being one of only 19 companies nationwide to produce 4 million pounds of popcorn annually.
Krug is proud to have people rather than machines answer the phones. Every bag of popcorn is stamped with a number representing the grower who raised it, so Krug knows where every kernel was grown.
Each week, the company ships at least 20 containers, each holding 900 50-pound bags of popcorn, to customers in 51 countries. Overall, 18 million servings the size of a movie-theater popcorn tub leave Chapman on a weekly basis.
“It's fun to be part of a company that literally feeds the world,” said Central City farmer Mark McHargue, who is growing 230 acres of popcorn this season.
About 60 percent of the product is exported to countries as diverse as Austria and Yemen. That's far more than the other major U.S. popcorn companies, which export only about a third of their product, Krug said.
Preferred Popcorn looked outside the United States for markets years before other companies, he said. The business has a competitive edge in Japan because it started selling popcorn there as the island nation began to adopt American-style movie theaters.
“It would have been easier to call up a store in Grand Island to sell our product,” Krug said, “but we probably wouldn't be where we are today without that early struggle.”
Krug and farmer-owners Daryl Hunnicutt of Giltner and Greg Senkbile of Central City had grown popcorn for years. The three were knowledgeable about genetics, yields and other farming issues but knew little about marketing or business management.
To this day, they laugh about their first sales call — to the University of Nebraska-Lincoln, which they thought would be the largest seller of popcorn in the state.
That conversation ended when they learned that crowds at Husker football, basketball, volleyball, baseball and softball games would consume just one shipment per year.
“We'd be able to feed everyone in Nebraska pretty fast,” said Krug, now the secretary and treasurer of the National Popcorn Board.
The three realized they needed to think bigger and broader.
Krug and Hunnicutt attended a trade show in Mexico and recruiting their first customer from an unlikely country — Indonesia. The general consensus in the industry was that Asia would be slow to embrace popcorn.
Twelve years later, that same Indonesian remains a client.
“It feels like I have friends all around the world,” Krug said.
Whether in Grand Island or Greece, Hunnicutt said, customers worldwide want just one thing: integrity.
“There's a relationship between the salesperson and the customer that has to develop over time,” he said. “When you're the new kid on the block, you have to show you're reliable.”
Krug said the North American Free Trade Agreement has helped his company and the farmers who raise popcorn. Mexico is the top international destination for popcorn.
Although Preferred sells microwaveable popcorn, its primary product is bulk corn used in concession stands. International retail giant Target uses it in all its in-store concession stands.
It also is available in a few other Nebraska supermarkets and stores — all Super Savers, Allen's in Hastings, Hy-Vee in Grand Island, Mangelsen's in Omaha and Grow Nebraska stores in Grand Island, Kearney, Lincoln and Norfolk.
Krug said the company's goal is to add value to agriculture in Nebraska and now in Indiana, where it purchased Preston Farms of Palmyra, Ind., last year. The two states alternate as the No. 1 and No. 2 popcorn-producing states.
Preferred Popcorn has contracts with 90 growers in six states — about 50 in Nebraska but none in Iowa. Its producer network stretches nearly 900 miles from Ogallala, Neb., to Louisville, Ky.
Todd Gerdes, an executive with the Aurora Co-op and Preferred Popcorn, said farmers are looking for new options in their crop rotations.
“We have a huge grower base looking for different opportunities,” he said. “At the same time, the popcorn plant has the chance for them to not have to duplicate.”
McHargue, the Central City farmer, said popcorn per-acre yields are about half that of feed corn. But popcorn grows better on his low-lying, marginal land near the Platte River, he said.
“It pays as well or better than some of the very best corn ground. It allows us to diversify,” McHargue said.
McHargue, in his fourth year contracting with Preferred Popcorn, has been pleased with the arrangement.
The contract price is set at the Chicago Board of Trade's December rate but is renegotiated as many as four times per season, up or down, as prices change. Those who exceed their contract estimates receive bonuses from the company.
Even with recent spikes in grain prices, popcorn prices have remained relatively flat for consumers.
“Our business is more related to Hollywood than to grain prices,” said Krug, who is as likely to be found on his red tractor as in the office.
He regularly surveys the roughly 2,000 acres surrounding the Preferred Popcorn facility on which he grows about 5 percent of the company's popcorn. His butter-yellow truck takes him wherever else he needs to go.
Krug's bright vehicles exemplify the joy he feels when he talks about popcorn, which has been his livelihood for 32 years and part of his life for all of his 54 years.
He still remembers the smell of popcorn as his father cooked a batch on the stove.
“Something makes you feel good to sell popcorn, because it's associated with so many good memories of family time,” he said.