February 25, 2000

 By Ronna Abramson
 STAFF WRITER

 OAKLAND -- Granny Goose Foods Inc. is shutting down its sprawling plant in East Oakland and
 laying off about 170 employees after more than a half-century of churning out potato chips here.

 The snack company, founded in Oakland in 1946, plans to consolidate its operations at a Salt Lake
 City plant acquired about three years ago. But Granny Goose will keep its corporate headquarters
 in Oakland, Chief Executive Officer Larry Wheeler said.

 In a letter Tuesday, JoAnn McMahon, vice president of human resources, informed employees and
 Teamsters Local 98 of layoffs starting April 22. Management and Teamsters officials said they are
 planning to meet today to talk about the company's plans and severance packages for the 166 union
 employees who will lose their jobs.

 "We have made the decision to exit the Southern California market, which has not proven to be a
 profitable venture for our company," Wheeler explained in a telephone interview Thursday. "The
 Oakland plant was the one producer of product for Southern California and we have made the
 concurrent decision to close the Oakland production facility and combine all of our production in
 one plant, which is the one located in Salt Lake City."

 Wheeler said Granny Goose intends to continue selling goods in the Northern California market.
 About a dozen employees will remain in the company's corporate headquarters in Oakland.

 "We're not insensitive to Granny Goose being an Oakland company and an Oakland institution,"
 said Wheeler, a former Pillsbury executive brought in to help turn the company around. "We all live
 here and it's our largest market. We want to maintain a presence here in Northern California."

 Wheeler said the company will add a second shift to the Utah plant, a nonunion facility. "The Utah
 market distributes as far away as Denver and Albuquerque and even El Paso," he said. "It's really
 impossible to serve those markets out of the Oakland market and truck the product that far."

 Granny Goose will put its 194,000-square-foot facility and 8.6-acre property on 98th Avenue up
 for sale.

 "Obviously I'm tremendously disappointed," said City Council President Ignacio De La Fuente, who
 helped broker the deal to save Granny Goose in 1995. "I'll continue to work hard if there is anything
 I can do, but it doesn't sound like there is."

 Ron Paredes, business representative with Local 98, said he had been out of town and had just
 heard about the closure Wednesday.

 "We anticipated some problems for a year," Paredes said. "Granny Goose has been struggling in the
 market with Frito-Lay."

 But Paredes still called the notice a "little bit of a shock. I thought they had some chances."

 Last year, sales at Granny Goose plummeted to $90 million, a 10 percent drop from $100 million
 the year before. In March, the company averted a strike by agreeing to boost wages 8 percent.
 Union members took a 19 percent cut in 1995 to help keep the company open.

 The company was founded by Matthew Barr, who had hoped to call the brand "Mother Goose."
 But that name was considered to be in the public domain and could not be trademarked. Upon the
 suggestion of his 5-year-old daughter, Barr named the company "Granny Goose."

 The company, once owned by Del Monte, has changed hands several times. The past five years
 have been marked by numerous ups and downs.

 The company entered the Southern California market in 1996 with the purchase of routes and other
 assets from defunct Eagle Snacks. That same year, it bought Salt Lake City-based Country Club
 Foods out of bankruptcy for $17 million and repaid a $2.25 million loan to Oakland.

 That city loan, along with company employees who agreed to steep wage cuts, helped local bakery
 owner and real estate developer Keith Kim save Granny Goose from closing in 1995. Kim, still
 chairman of the board, has recently created an Internet business incubator and is not involved in
 Granny Goose's daily operations. He could not be reached for comment.

 Bernard Pacyniak, editor of Snack Food and Wholesale Bakery Magazine, speculated that
 distribution costs probably played a major role in hampering Granny Goose's ability to break into
 the Southern California market, where there are more tortilla chip companies competing than in
 Northern California.

 There wasn't much of a profit margin on potato chips, he said. "I'm sure they're trying to build their
 profit margin on corn products."
 

                         By Damon Darlin

                         WHERE THERE'S a government program, there are ways to exploit it. So
                         Keith Kim has learned. Back in 1985 Kim, just out of Stanford University
                         with an undergraduate economics degree, bought a run-down $59,000
                         house in Sacramento, Calif. for 3% cash down and a low-interest,
                         federally insured loan, fixed it up and rented it out. He sold it for $90,000
                         about a year later, bought another house and kept repeating the process.

                         Even after the residential real estate market collapsed in 1990, Kim kept
                         at it, buying and fixing up Oakland, Calif. apartments, occasionally with
                         some form of government aid. Kim accumulated some 600 apartment
                         units by 1994.

                         Owning apartments, some of them subsidized low-rent units in Oakland's
                         inner city, brought him into contact with city officials. To keep the permits
                         and zoning skids greased, Kim contributed regularly to campaign chests.

                         It paid off last year—big time. Oakland City Councilman Ignacio De La
                         Fuente approached Kim. G.F. Industries, a privately held real estate and
                         food company, planned to shutter its potato chip business, operating
                         under the Granny Goose label. The business was losing money—$14
                         million over the previous three years. At stake were 367 union jobs in the
                         economically beleaguered city that lies across the bay from San
                         Francisco. The Oakland unemployment rate of about 8% was far higher
                         than the national average. City officials considered the situation critical.

                           Would Kim like to buy the plant? "The last thing the politicians needed
                         was another institution to close," says Kim, now 34.

                         The 48-year-old Granny Goose brand image, a giant goose in a blue
                         bonnet and yellow tennis shoes, evokes fond memories among
                         Californians. Kim figured it could be salvaged—if costs could be cut.
                         Granny Goose had those 367 unionized workers—and another 110
                         pushing paper in the back office. Then there was the confused marketing.
                         The $75 million (1994 revenues) company had 1,200 different chip
                         products and bag sizes.

                         His councilman friend De La Fuente, a union organizer, helped Kim
                         convince the Teamsters union to roll back wages and benefits at Granny
                         Goose by 20%, to a starting pay of about $8 an hour. De La Fuente,
                         chairman of the city council's economic development and housing
                         committee, persuaded the city council to lend Kim the purchase price:
                         $2.25 million at 8 1/2% interest. No other prospective buyer was offered
                         the same deal. Within a few months Kim also convinced the state to give
                         him $750,000 from a worker retraining fund.

                         Using little money of his own, Kim became owner of Granny Goose.

                         Kim says he paid back the $2.25 million lent by the city within a year.
                         True, but he paid it back with proceeds from yet another government
                         loan, this time a $2.25 million federal Housing & Urban Development
                         (HUD) loan earmarked for Oakland improvements.

                         A son of modest Korean immigrants, Kim is well on the road to
                         riches—thanks to government handouts. Using little money of his own, he
                         owns Granny Goose.

                             Kim isn't the only entrepreneur in Oakland to benefit from taxpayer
                         money. Oakland has seen more than $100 million in city money go to
                         developers of an ice rink and a football stadium. It has little to show for
                         either handout. And it intends to ladle out several million more to save
                         another food processing plant. "This is strategic investment," argues Kofi
                         Bonner, the city's director of economic development. Of course it is
                         nothing of the kind. It is simply the kind of state interference that has
                         created such a mess in other countries and that this country has,
                         mercifully, been largely spared.

                         But why should Kim care? A son of modest Korean immigrants who came
                         to this country in the 1960s, he is well on the road to riches. After losing
                         $800,000 a month when he took over, Granny Goose now looks like it
                         could show a profit next year. Kim has cut the number of products by
                         75%, to only 300. That resulted in a 40% drop in revenues to $45 million in
                         1995, but the company is no longer hemorrhaging cash. Kim has bought a
                         fleet of used vans and trucks and strengthened the company's distribution
                         system. With revenues this year expected to hit about $100 million, he
                         has added shifts and is talking about taking Granny Goose public.

                         And he is expanding. In October he borrowed $7.5 million from a private
                         bank to help buy a Kaysville, Utah producer of potato chips, $90 million
                         (sales) Country Club Foods, now in bankruptcy court. He says he has
                         already raised the money needed to buy Country Club Foods—$10
                         million, cash—without government help.

                         Kim calculates that with Granny Goose he has 25% of the San Francisco
                         market, but little penetration elsewhere, and he dreams of carving out
                         20% of the potato chip market west of the Rockies, giving him a $500
                         million business. Frito-Lay has already vanquished competitors like
                         Anheuser-Busch's Eagle Brands, and Kim figures Frito-Lay will leave a
                         little guy like him alone.

                         When Congress bailed out Chrysler Corp. in a job-rescuing move in 1979,
                         the government at least shared in the gains by collecting $33 million in
                         fees from the automaker. If Mr. Kim makes it big, doesn't he owe us
                         taxpayers something other than contributions to campaign chests?
 
 
 

  BY STEVEN OBERBECK
  THE SALT LAKE TRIBUNE
      Granny Goose Foods Inc. of Oakland, Calif., has completed its acquisition of Clover Club Foods, the Kaysville-based potato-chip and snack-food maker that filed for Chapter 11 reorganization in 1995 under its Country Crisp name.
      The California company paid about $15 million for the assets of Clover Club, completing the company's reorganization under the supervision of the U.S. Bankruptcy Court for Utah and ensuring continuation of its operations.
      ``Most of the salaried employees and most of the hourly employees are expected to remain,'' said Danny C. Kelly, who represented Clover Club in its reorganization efforts.
    Clover Club employs 300 people in operations in several states.
      Kelly described the efforts to reorganize Clover Club, a company previously owned by the family of Lt. Gov. Olene Walker, as difficult. ``It was an up-and-down case, but it ended up being successful.''
      Petersen Ventures, the former owner that acquired the company from the Walkers shortly before the bankruptcy, offered to pay $15 million to company creditors to retain control of Clover Club's assets.
      Granny Goose entered the picture in late 1996, expressing its interest in buying the company assets.
      Its bid won, although its initial agreement last November to buy Clover Club's assets fell on hard times.
      ``We renegotiated and in the meantime, Granny Goose recapitalized its own operations,''
  Kelly said. Granny Goose on Feb. 28 struck a new deal to buy the company and on June 18 a plan of reorganization was confirmed by U.S. Bankruptcy Judge Judith Boulden.
      Granny Goose, which produces about 250 different products out of a plant in Oakland and bills itself as the dominant snack-food producer in Northern California, this week completed the deal for the Utah company.
      It wired to Utah the $15 million it had agreed to pay for the company for distribution to Clover Club creditors.
      Clover Club distributes its products in most of the Western states and is a major producer of private-label snack foods for supermarket chains throughout the region. 

                          Clifford Carlsen   Business Times Staff Writer

                           Oakland entrepreneur Keith Kim, who saved snack-maker Granny Goose when it was
                           almost cooked three years ago, has recruited a food industry turnaround specialist to boost
                           the company's profitability and prepare it for a sale.

                           New CEO Larry Wheeler has been given the charge of boosting profits to allow a public
                           offering or private sale within the next few years. Wheeler has already begun cutting costs, but
                           hopes to raise new equity or restructure debt within the next few months to allow investment
                           in new equipment to make the company more efficient.

                           "We accomplished a lot in terms of sales and the products," Kim said "But I brought him in to
                           take the company public or sell it."

                           Wheeler comes to the company most recently from Mrs. Baird's Bakeries, a $300 million
                           family-owned Texas company. He guided the baked-goods maker through Chapter 11
                           reorganization and quadrupled operating profit before selling last year to Grupo Bimbo,
                           Mexico's largest food company. Before that, Wheeler led turnarounds of Pillsbury's pizza
                           business, Green Giant's canned-vegetable business and Alpo, the dog food company.

                           Wheeler takes over Granny Goose after a dramatic turnaround of its sales and distribution
                           system, but while it is struggling to produce profits.

                           Since rescuing Granny Goose Foods from a pending bankruptcy and extinction, Kim rebuilt
                           sales from $30 million to over $100 million. Along the way it also boosted expenses through
                           acquisitions and geographical expansion, and it is facing pressure from investors to improve its
                           bottom line.

                           "I have done three turnarounds where a solid company needs to fix things on the earnings side
                           rather than sales," Wheeler said. "My plan here is to correct some profit issues then bring in
                           some minority investment until we get earnings up to a level where we can interest a buyer or
                           do an IPO."

                           Since buying the company, Kim already has sold about a third of Granny Goose to Taiwanese
                           food giant President Enterprises, brought in a $15 million equity investment from San
                           Francisco buyout firm Doyle & Boissier and taken $2 million from Hambrecht & Quist's
                           venture group. Wheeler said he did not expect to raise additional funds from those partners.

                           The company is marginally profitable now, but still carries a great deal of debt, he said. Its
                           strengths include a powerful brand identity, plus the fact that Kim already pared down
                           non-performing brands just prior to his recruitment. Now it is a matter of boosting the return
                           on the remaining Granny Goose, Padrinos and Kettle Chip brands that make up the
                           company's core stable of snack foods.

                           "There is certainly a lot of opportunity for upside from an earnings standpoint," Wheeler said.
                           "It was in really bad shape when Keith bought the company, and he did some very aggressive
                           things to rebuild sales, but the next step was to bring in somebody to improve operations."

                           Granny Goose competes in a market where Pepsico's Frito Lay division controls about 70
                           percent of the shelf space and sales nationwide.

                           Food industry analysts said retailers will always have a need for a secondary brand to
                           augment the shelf space Frito Lay occupies, and that Granny Goose is well established in that
                           position in California

Snack biz returns

                           The California company opens a  wholesale operation on Oahu and has plans for a factory

                                          By Russ Lynch
                                           Star-Bulletin
 
 

After an absence of more than a year in Hawaii, Granny Goose Foods Inc. is back and plans to use Honolulu as a base for
Pacific Rim expansion.

The Oakland, Calif.-based maker of potato chips and other snack foods also plans to eventually bring back something it hasn't
had here for about six years: a manufacturing plant.

California real estate investor Keith Kim rescued the company in July 1995, just before it was to close its Oakland factory and
go out of business. The company also pulled its wholesale operation out of Hawaii then.

Granny Goose now intends to be a major presence again in Hawaii, said Rich Dwinell, senior vice president for sales and
marketing.

Yesterday, the company had a formal blessing for its island warehouse, a Mapunapuna-area facility employing 20 people, and
product was to start rolling out of the building this morning.

"It's right around from where the Granny Goose plant used to be," Dwinell said.

The company expects sales of about $4.5 million in the first year of its reborn Hawaii operation, handling Oahu distribution itself
and selling on the neighbor islands through a network of local distributors, Dwinell said.

Granny Goose will be aided in the islands by the same factor that gave it a boost in California around the time Kim took it over:
the decision of Anheuser-Busch Co. to end its Eagle Snacks business.

Granny Goose was able to pick up 70 percent or more of Eagle's retail market space in Northern California and arranged to
acquire all of Eagle's routes in Southern California.

In Hawaii, with Eagle out of the picture and just a trickle of Granny Goose's product being brought in by some independent
wholesalers, there was no substantial competition for Frito Lay, the remaining big snack business. Now Granny Goose has
stepped into the market and expects to grow fast, Dwinell said.

Many of the employees in the new facility had been with Granny Goose before and are familiar with the products, the market
and, importantly, the computer ordering system the company uses, he said.

"We told them what our goal is: to build up enough business here to have our own plant," he said.

The island operation would have to be at a sales level of $6 million or $7 million a year before that could be justified, Dwinell
said.

He said he is well aware of the costs of doing business in Hawaii but sees a balance between local costs and the cost of
shipping in the product from the mainland.

"It's a trade-off," he said.

Meanwhile, Granny Goose will be working on export markets from the Hawaii base. "Hawaii has inherent advantages as far as
exports are concerned," Dwinell said. "Our owner (Kim) is Korean and he knows the export markets."

Kim is in Hawaii with Dwinell and other company officials to get the new wholesale facility open.

Dwinell said the company's first island marketing push will be to the major retail chains. After that, the company wants to get its
products into small stores, such as Waikiki convenience stores, and into the food service business, he said.
 

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