The public display of antagonistic fireworks ended at Azteca Foods Inc. last month when the unionized workers of the Southwest Side tortilla-maker ended their seven-month strike and returned to the factory floor.
Now the real work will begin, in private, to restore workplace harmony at the bruised, family-owned company, which started as a dream of the Azteca Lions Club in Pilsen in 1970 and has grown into a Mexican-American regional powerhouse.
And wiping the smudge of labor strife from a corporate visage more accustomed to the caress of high praise is just one of the major tasks facing Arthur R. Velasquez and his wife, Joanne, who have led Azteca through most of its life.
Looking toward retirement, the couple also is laying the groundwork for turning over the reins to the next generation.
Navigating these treacherous shoals while running the nearly $45 million business will be no easy task.
Still, many observers say the family, which has built up huge reserves of local good will through its civil rights, philanthropic and corporate board work, can pull it off.
“I suspect this family will stick together and make it work,” said Craig Aronoff, director of the Cox Family Enterprise Center at Kennesaw State University in Kennesaw, Ga.
As an example of the family’s ability to pull through change together, Aronoff noted its decision to sell the company to Pillsbury Co. in 1984 to foster its growth, then to work within the Pillsbury organization for several years before raising the capital to buy it back in 1989.
“The family stuck together through all that,” he said.
Still, the challenges are significant if Azteca is to hold onto its comfortable niche position, primarily in refrigerated flour tortillas, and grab additional share of the fast-growing U.S. tortilla industry, which generated $5.2 billion in wholesale revenue last year, up 18 percent from 2001.
Once a highly fragmented mom-and-pop industry, the tortilla business is increasingly dominated by big players, notably Mission Foods, a fast-growing unit of Mexico-based Gruma, the world’s largest corn flour and tortilla producer.
“The tortilla in America will be just like fresh bread in the next 10 years,” said Allen Lydick, president of Mexigrocers.com, a consultancy based in Raleigh, N.C. “The tortilla is mainstream. It’s no longer a Mexican item.”
A challenge for Azteca will be to continue to ride this wave without being bogged down by protracted contract negotiations for its 90 unionized employees, including the 63 strikers who came back to work without a new contract. Bargaining is proceeding under the auspices of a federal mediator.
“Labor negotiations can certainly preoccupy leaders of a business,” Aronoff said.
The son of Mexican immigrants, Arthur Velasquez, a down-to-earth executive with a casual manner, expresses confidence that the company can get past its differences with its mostly Latino workforce without disruption to its business.
The strike did not damage the business, he said. The union employees who stayed on the job, along with the company’s 50 non-union employees and some temporary hires, worked to keep production going.
“We didn’t miss one delivery,” he said. And the only customer to cut ties was the Hyde Park Co-op supermarket.
And now, “I think the healing process is going quite well,” he said. “I expect it will take a few months. … Communications is the big thing now, listening and communicating.”
Some heavy-duty communicating will be required, it seems, because Velasquez and union leadership appear to be viewing the Azteca workplace through very different lenses.
Azteca workers opted for representation by Local 1159 of the United Electrical, Radio & Machine Workers of America last spring, after ousting their longtime rep, Distillery Workers Local 3.
They went on strike Sept. 30, 2002, based on complaints of unfair labor practices, alleging, among other things, that the company engaged in surveillance and intimidation of workers during a union rally to protest the company’s stance in contract talks.
The company was proposing that workers pay 10 percent of family health-insurance premiums, and workers said the increase would more than offset the proposed pay hike, resulting in a net reduction in take-home pay.
Union complaint settled
The workers ended the strike last month after Azteca agreed to settle one of three union complaints with the National Labor Relations Board. (The union had withdrawn the other two.)
With the unfair-labor complaint off the table, the remaining issues were economic, and, legally, companies can replace workers in economic strikes.
“So we decided to go in and continue the fight inside the plant,” said Leah Fried, field organizer for Local 1159.
Still, rancor lingers.
“There’s a real contradiction in the way the company presents itself,” said Fried.
“On the one hand, there’s this incredibly generous owner, who belongs to a lot of organizations, who gives away a lot of his money, who is active in the Catholic church and does all these things in the community,” she said.
“And then he turns around and is punishing to employees, allowing abusive supervisors and punishing employees when they step up for themselves.”
Velasquez denies allegations that the firm engaged in any unlawful or abusive behavior.
“If our employees had received abuse, why would they work here 25 to 30 years, and why would they bring their families to work here?” he said.
Union employees earn between $9 and $11 an hour and receive a full benefits package, including health insurance and a 401(k) savings plan, he said. Velasquez said that this is at the top end in the industry–a contention supported by industry insiders.
It irks him that the union took its case to many of the organizations in which he is active.
“They sent letters defiling me as a no-good guy,” Velasquez said. “But it didn’t work.”
The family-owned business donates more than 5 percent of its pretax profits to not-for-profit groups, supporting 82 organizations. As well, family members sit on 15 to 20 boards, and it appears the groups they have supported are standing behind them now.
Art Velasquez “is a great man, a great leader who serves on many philanthropic endeavors in Chicago,” said Rev. Michael Boland, administrator of Catholic Charities of the Archdiocese of Chicago.
“Anyone who knows Art and his family knows they are very good people,” said Carlos Tortolero, executive director of the Mexican Fine Arts Center Museum. The union “has tried to portray Art in a very nasty, unkind way … and a lot of people in the community are very upset about that.”
Lions Club members
Azteca Foods got its start in the Mexican-American community, when 10 members of the Azteca Lions Club in Pilsen, including Art Velasquez and his father, pooled their savings, coming up with $80,000 to start the business.
But the company’s strategy from the start was to steer clear of the low-margin fresh tortilla business serving Latinos in the inner city and to aim instead for the more profitable general grocery market, relying heavily on refrigerated wheat tortillas suited to Main Street taste buds.
Since then, it has branched into specialty products, such as refrigerated salad shells, and into food-service, selling nacho chips, for instance, at a variety of sports venues.
It is a formula that has proven profitable every year since the buyback from Pillsbury in 1989, Velasquez said.
Still, the company has grown at a slower pace than it predicted back in 1993, when it was shooting for $100 million in sales by 1996.
And it has grown at a slower pace than Mission Foods, which entered the U.S. tortilla market in 1977, and now claims a 50 percent market share of all tortilla sales, including corn and flour, fresh and refrigerated.
In the past few years, Mission has gained share in refrigerated tortillas, Azteca’s core business, while Azteca has seen some slippage, according to data from Information Resources Inc. (Azteca says one of its largest customers does not report to IRI, and that if it did, the market share trend for Azteca would show growth.)
As well, Azteca “missed the whole white corn tortilla business in the U.S.,” said Mexigrocer.com’s Lydick.
Velasquez stands by his company’s strategic decisions, which includes some corn products in the mix.
“Our goal was not for all-out growth,” he said. “It was to grow in a slow, deliberate but profitable manner.”
The formula has resulted in a solid company that could attract its share of suitors, observers say. But the family is aiming to stay independent.
Toward that end, Art Velasquez, 64, who is chairman, president and chief executive, and his wife Joanne, who is executive vice president, have been turning over more and more day-to-day responsibility to other family members.
A daughter, Renee Togher, is vice president of marketing and sales for retail; a son, Art, is vice president of food-service sales; and Joanne’s brother, Jim DeCoste, is vice president of operations.
“The legacy we want is as a family business,” said the elder Art Velasquez. Toward that end, the family has been working with the Loyola Family Business Center, sending Renee and the younger Art through an 18-month leadership program.
