By Muhammed El-Hasan
DAILY BREEZE

Seemingly endless rows of burlap sacks filled with nearly 20 million pounds of green coffee beans dwarf those who enter the cavernous warehouse at Torrance-based Farmer Bros. Co.

The closely held public firm has about 100 smaller warehouses in 26 states. But it’s to the Torrance headquarters that the coffee beans are brought from Central and South America and Africa to be roasted, ground and packaged.

Farmer Bros. sells its coffee to restaurants, hotels, hospitals, convenience stores, fast-food outlets and other institutional customers.

The firm’s four giant roasters can process up to 30,000 pounds of coffee beans an hour at 480 degrees Fahrenheit.

“It’s an automated process. Grinding is done in silos,” said Guenter W. Berger, vice president of production.

The coffee is then packed into boxes to be loaded onto semi-trucks. The packed coffee seldom stays longer than two weeks at the main warehouse before heading to a nationwide network of distribution centers.

“We don’t want the coffee to lose its freshness,” said Berger. In addition to coffee, the company sells about 300 items, including coffee creamers, spices, pancake mixes and soup bases. Farmer Bros. makes some of the products and purchases others under its private label.

Despite having diversified over the years, the firm’s main staple remains coffee. The coffee business accounts for more than half of sales.

About 350 of the company’s 1,100 employees work at the Torrance headquarters.

Company started in 1912

Roy E. Farmer and his brother, Frank, started the company in 1912 in downtown Los Angeles. They incorporated 11 years later.

The company built a coffee processing plant in Torrance in 1950, focusing its downtown L.A. operations on administration and manufacturing brewing equipment, a business that continues.

The next year, Roy Farmer died. His son, current chairman Roy F. Farmer, took the company public that same year. Farmer Bros. moved its headquarters to Torrance in 1960.

“When they moved out here, it was all built out in Los Angeles,” chief financial officer John E. Simmons said. “We needed a facility and we needed to be near the port. This was all marsh. They used to herd cattle here. This whole South Bay, there was a lot of vacant space.”

In 2000, Farmer Bros. started an employee stock ownership plan, or ESOP, that gives employees an additional incentive to stay with the firm. Simmons said the ESOP has helped keep its annual employee turnover down to 2 percent, excluding retirements.

Retention is high even among managers, Simmons said. He cited Berger, who started working as a sheet metal mechanic at Farmer Bros. in 1960. It was his first job after moving to California from West Berlin as a 23-year-old.

Simmons also cited Hami Assadi, the Farmer Bros. tax manager, who joined the company as a data entry clerk in the production control department two decades ago.

Last year, the company began a $5-million upgrade of its 9-year-old computer system. The upgrade will take at least another year to complete, Simmons said. The cost will cover new computers, software and employee training.

“We have five different systems for what goes on here and the computers don’t talk together very well,” Simmons said. “We’re putting the five systems into one.”

The company’s competitors include Sara Lee Beverage, Sysco Corp. and U.S. Foodservice.

For the nine months ending March 31, Farmer Bros. sales slipped 1 percent to $153.8 million compared with the previous fiscal year. During the same period, profit dropped 25 percent to $17.8 million from $23.9 million the previous year.

Farmer Bros. blamed the drop in profit on declines in consumers’ discretionary spending at restaurants that use Farmer Bros. coffee, higher prices for green coffee beans and increased employee benefits costs, including the ESOP.

The price of green coffee started rising four to six months ago after a price slump lasting several years caused by a market glut, said Jay Molishever, spokesman of the National Coffee Association of USA. Green coffee prices usually rise before roasters and wholesalers such as Farmer Bros. raise their prices, Molishever said. That could lead to a temporary drop in profits.

Simmons and other company officials stressed that Farmer Bros. is run conservatively, with little waste. This frugality was evident at the company’s main boardroom, where Simmons spoke with a reporter.

A scuffed wooden table, surrounded by 10 brown vinyl-backed chairs, dominated the boardroom. Faded wood paneling covered the walls. An old green filing cabinet sat in the corner.

“They try to save money on things they don’t think will help the company,” said Assadi, the tax manager. “They don’t have extravagant lunches or fancy annual reports. That’s how they stay active and profitable.”