David McDonald: From Iowa Farm to a Global Leadership Position

Since the turn of the millennium, OSI Group has been riding a spectacular arc of growth. David McDonald has not just been along for the ride. Over his three-decade career at OSI he has risen from his first job out of college as a project manager to his current position as the company’s president and chief operating officer (COO).

OSI Group is a global leader in the food industry. It began as a neighborhood butcher shop run by a German immigrant in early 20th-century Chicago. Fatefully, mid-century it became one of the primary regional meat suppliers for the then-novel McDonald’s restaurant chain before a quarter-century later becoming one of that corporation’s primary global suppliers. And over the last quarter century, it has branched out aggressively into new ventures, both in the United States and internationally.

The Background of OSI Group’s David McDonald

McDonald comes to modern food processing from the starting point of the supply chain. He grew up on a farm in northeast Iowa and is a graduate of Iowa State University (ISU). He earned a bachelor’s degree in animal science and was awarded the Wallace E. Barron Outstanding Senior Award, which recognizes “outstanding seniors who display high character, outstanding achievement in academics and university/community activities, and promise for continuing these exemplary qualities as alumni.”

Today McDonald is president and COO of one of the nation’s most successful privately held companies. He is still committed to the Iowa State community, playing an active role in the university’s Agricultural Entrepreneurship Initiative. He is a generous financial supporter of the Alpha Gamma Rho scholarship fund and has also played a lead role in establishing internship opportunities for ISU students at OSI Group. In 2004 he won the ISU Alumni Association’s Young Alumni Award for his activism with the alumni association. In 2014 he won the Iowa State University Foundation’s Emerging Philanthropist Award.

McDonald is married to his wife Malinda and they have six children. Their two eldest children attend ISU.

A Brief OSI Group Primer: Behind the Scenes with a Midwest Icon

Today OSI Group is a global enterprise, with widely diversified operations around the world. This includes over 20,000 employees at more than 65 facilities in 17 countries. In the 2016 Forbes list of largest private U.S. companies, it was estimated to have a net worth of $6.1 billion – ranking it number 58.

In recent years McDonald has played a leading role in OSI’s significant expansion in China. He also played a key role in OSI’s acquisition of Baho Foods (a Dutch food company producing deli meats and snacks for the European food service and retail sectors) and Flagship Europe (now Creative Foods Europe, a supplier of high-quality bespoke products). McDonald is an expert in food production logistics, with vast experience working with governmental agencies, local suppliers, and retailers across many an international border. All of those locations are a long way from the fields of northern Iowa.

His childhood as an Iowa farm boy would not seem to be the kind of background that would result in leading such a diverse conglomerate. But spending his formative years at the start-point of the food-product distribution chain may have had an influence on his managerial style later in life.

“Our partners [know] the culture or business network in their respective geography,” McDonald is quoted as saying in an interview with CEOCFO Magazine in 2017. “We fundamentally believe the best management decisions are made closest to our customers in the regions or product categories in which we operate […] we still fundamentally believe it is best for our management teams to make the day-to-day decisions closest to their customers and markets.”

Like McDonald, OSI Group’s past is rooted in the iconography of the American Midwest. But in the company’s case, the backdrop is not the vision of rolling farmland dotted with cattle and awash in corn, but is instead that of one of the most famous commercial enterprises the region has ever produced – and now one of the best-known logos in the world.

The first McDonald’s Golden Arches were raised in 1955 in Des Plaines, Illinois, not far from OSI’s current corporate headquarters. At the time OSI was called Otto & Sons, a successful Chicago-area meat processor that had grown from the butcher shop opened by Otto Kolschowsky in 1909.

But crucial to OSI’s history is the strong working relationship developed between Ray Kroc – to whom Richard and Maurice McDonald of San Bernardino, California, had entrusted the franchising of their iconic hamburger stand – and the sons of Otto Kolschowsky. From that fateful business partnership, Otto & Sons was destined to grow almost as explosively as McDonald’s, though its expansion happened away from the public eye.

By the early 1970s, Otto & Sons had invested heavily in then cutting-edge cryogenic freezing technology and had become one of McDonald’s four primary U.S. suppliers of beef products. Previously McDonald’s had depended on a network of over 100 suppliers.

As McDonald’s continued to grow internationally in the 1970s and 80s, Otto & Sons grew with it and transformed itself into OSI Industries in 1975. Under the leadership of Sheldon Lavin – who is still OSI’s chairman and CEO – the company went from being a sophisticated yet one-dimensional supplier to the sprawling international conglomerate it is today.

OSI Goes Global – And Local

It was during the initial phase of explosive international growth that David McDonald – fresh out Iowa State – was hired by OSI as an intern to Sheldon Lavin. In the late 1980s and early 1990s, OSI expanded with a series of joint ventures with companies in the Pacific Rim, South and Central America, and Europe. The same year McDonald was hired, the joint venture with K&K Foods of Taiwan marked the establishment of the OSI Asia-Pacific division.

McDonald began his career in a company in which growth and innovation permeated operations. He not only adapted to this corporate culture but embraced it. And he has never left it.

“When I joined the company 30 years ago, OSI Group had a tremendous aspiration of growth. That appetite for growth remains today,” McDonald recounted in his CEOCFO Magazine interview. “The constant desire to grow and improve is a cornerstone to the culture itself. And the vision at that time was to be truly global and to be a valued partner to our customers.”

McDonald grew with OSI, developing in-depth knowledge of both the technical issues inherent in operating close partnerships with companies in other localities and being steeped in the corporate culture of OSI. He came to understand intuitively the vision of the OSI leadership, its commitment to not only growth but also to creating a stable workforce with long-term retention rates.

“Our vision has not really changed much, but our relentless push to improve and deliver more to our customers drives our growth,” explained McDonald. “It is important to note that, within OSI, we value family. Our people and our customers are viewed as family. The products that we make should be good enough to serve to our respective families proudly.”

By the time China entered the World Trade Organization (WTO) in 2001, McDonald was firmly entrenched within the leadership of OSI. As with Otto & Sons concurrent growth with McDonald’s restaurants, OSI had already built its business foundation in China prior to China’s entrance. The Chinese economy was poised for a period of rapid growth and OSI was ready to grow with it.

The growth was due to come because of a number of Wholly Foreign-Owned Enterprises (WFOEs) and joint-venture entities that OSI had set up in China. David McDonald was a key player in learning the ins and outs of the Chinese bureaucratic labyrinth. The emphasis of OSI’s leadership on true partnerships with local businesses and its own corporate structure made this possible.

“Because we are private and not publicly owned, we can be more nimble and flexible with our solutions. It gives us the ability to think long-term, and it allows us to be more patient when building a business or relationship,” explained McDonald to CEOCFO Magazine. “Ultimately, it requires flexibility, patience, and trust established over time that rewards both partners mutually.”

OSI’s growth was not only focused on the first wave expansion of China’s economy. New ventures were also undertaken in the United States and Europe as well.

In 1994, a partnership with Nation Pizza and Foods signaled a diversification of OSI’s domestic market into areas other than its traditional meat products. Also expanded was the line of meat products under OSI’s banner, with the 1996 purchase of a facility in Oakland, Iowa, which produced bacon, sausage, and hot dogs.

In Europe, the UK poultry processing company Moy Park was acquired in 1996. This began a series of partnerships and acquisitions in Europe that were also significant expansions of the OSI portfolio. David McDonald was in the thick of this growth phase as well.

OSI continues to move out of its traditional meat-protein market and expand into other product lines. In 2012 a new facility in Geneva, Illinois, opened to specialize in frozen entrée items, and in 2014 a joint venture with Canadian Select Ready Foods resulted in the OSI Select Ready Foods brand. Also in 2014, a Riverside, California, plant went online to process salsa, beans, and tofu products – another product expansion by OSI – one that was mirrored when a frozen vegetable processing facility opened in Madanapalle, India.

The purchase of Baho Foods and Flagship Europe were other key moments which look to fulfill OSI’s long-term growth strategy. These purchases helped build a global network of food producers who were given a wide latitude to operate within local parameters while being backed up with the purchasing power and know-how of a skilled leadership team.

One example of this was the 2013 creation of MPO (Meat, Poultry & Other) Global Trade, GmbH, in Germany. It is a global trading platform that integrates OSI’s production operations with end-user markets in around the world.

“We provide these managers [of local entities] with the resources that our scale allows and the global network to truly leverage our global presence, especially as it relates to global sourcing,” explained McDonald. “We aspire to become better, become more valuable to our customers through innovative solutions to their business challenges, and that should allow us to continue to grow and expand.”

With McDonald’s rise to his current position of president and COO, this drive for growth and innovation has not wavered.

In the last decade, OSI has continued to expand its China operations and has opened new processing facilities in Japan, India, Poland, and the United States. In 2016, a regional office was opened in Gersthofen, Germany.

As part of this growth, McDonald has incorporated a strong element of research and sustainability into the core corporate philosophy of OSI.

“To be in denial about change is futile. Adapting to change ensures our future. Quickly adapting to change gives us a competitive advantage over those who do not,” said McDonald. “Consumers change. Their needs become different; they value different things at different times in different cultures. We not only must adapt, but, in some cases, create new unique solutions to deliver on these consumer preferences.”

Two Culinary Innovation Centers – one in Aurora, Illinois, and one in Shanghai, China – have been created by OSI in the past few years. In addition, an R&D Center opened its doors in Aurora in 2014. These facilities operate in order to take the concerns of customers and insights of local producers and input them into the development of best practices that can then be distributed throughout the OSI network of companies.

“That gives us creative license to use our consumer insights, our innovative food development resources and products, and our global sourcing for unique and cost-effective solutions,” McDonald explains. “The collaborative engagement with them leads to additional improvements and refinements that creates a custom, innovative solution unique to them.”

One aspect of this innovation is focused on sustainability at every step of the processing ladder.

A number of OSI processing facilities have been Leadership in Energy and Environmental Design (LEED) certified, including one in Henan, China, and another in Ostróda, Poland. The office in Gersthofen, Germany was also LEED certified.

OSI’s Riverside, California, plant was awarded the California Green Business certification in 2016. The production facility features a number of high-efficiency systems, a state-of-the-art wastewater management process, and “zero waste-to-landfill” designation.

Other environmental efforts by OSI under McDonald’s leadership have been recognized as well.

In the United Kingdom, the British Safety Council has presented OSI with its Globe of Honour Award three times in the last five years. The award is based on environmental audits. Only 18 companies won the award in 2016.

The North American Meat Institute (NAMI) bestowed environmental awards to OSI plants in 2018, recognizing the environmental management systems that have been put in place at the Geneva, Illinois, and Fort Atkinson, Wisconsin, facilities. This follows previous awards for other OSI North American facilities.

And in 2017, Nicole Johnson-Hoffman, senior vice president at OSI, was named to the newly created position of Chief Sustainability Officer for the corporation. This represents a commitment by OSI to integrate environmental concerns into its core decision-making process at the highest levels of corporate governance.

David McDonald’s Vision of OSI’s Future

Under McDonald’s leadership, OSI has continued its steady march of growth. Along with the 2016 purchases of Baho Food and Flagship Europe, OSI also acquired a facility in Chicago formerly owned by Tyson Foods, and repurposed the existing facility and workforce into the assets of OSI. In 2018 OSI International Foods merged with Turi Foods, an Australian poultry processor, to create Turosi Pty Ltd.

These moves show the breadth of OSI’s operations, the steady innovation at its core, and its fundamental commitment to continued growth.

“Our foundational values do not change but our solutions, our products, our challenges, and our successes are constantly changing,” stated McDonald. “I take great pride in our team’s ability to deliver. There is tremendous reward in watching a team succeed.”

Being at the pinnacle of a global conglomerate that is one of the most successful businesses in the United States is a long way from the farm fields of Iowa. But there are aspects of McDonald’s style of corporate leadership – its steadiness and humbleness – that would not seem out of place back on the farm.

“We are not a group that brags or trumpets our success. We enjoy supporting our customers’ success and maintaining a relatively low profile,” McDonald said when explaining OSI unpretentious media footprint. “Perhaps, we are overly modest and it sometimes prohibits us from being more widely recognized; however, we are, fortunately, getting more awareness due to word of mouth from our customers, and we appreciate the confidence they have put in us.”