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Supply Chain Management of J & J Snack Foods Corporation
Supply Chain Management of J & J Snack Foods Corporation - January 11th, 2011
J & J Snack Foods Corporation is a manufacturer and exporter of snack foods, beverages, and frozen specialties. Headquartered in New Jersey, the company considers itself the largest maker of soft pretzels in the United States. The company's hallmark--the SuperPretzel--has changed over time, but remains the foundation of J & J Snack Foods.
In addition to its pretzels, J & J Snack Foods manufacturers a variety of snack foods and drinks, as well as sells frozen carbonated beverages in the United States, Canada, and Mexico. The snack food company markets to the food service industry, retail supermarket customers, and specialty snack food outlets.
The Pretzel Empire Begins in a Waterbed Store
The history of the current J & J Snack Foods begins with Gerald Shreiber, a college dropout whose motto was "Discover, salvage, and build." Shreiber left Rider College in 1960 for work as a machine shop apprentice. By 1967, he was a partner in a metalworking business housed in a garage beneath a pool hall in Philadelphia. Though the company was profitable, Shreiber wanted a product of his own instead of concentrating on the offspring of other companies. Shreiber and his partner sold the business in 1970, with Shreiber taking about a $60,000 share of the profits.
Oddly enough, within a year, Shreiber heard of a foundering pretzel business while shopping in a waterbed store. As the pretzel maker's largest secured creditor, the waterbed store owner--beleaguered by the company's bankrupt owners--complained of the situation to Shreiber. Immediately interested, Shreiber visited the pretzel business and just as quickly recognized its potential. He purchased the waterbed store owner's portion of the company for $30,000 plus a share of its early profits. Then Shreiber obtained the rest of J & J Snack Foods' assets by outbidding the other owners in bankruptcy court. In total, the acquisition cost a little more than $72,000.
By 1972, Shreiber had distributors in Philadelphia and Shrewbury, New Jersey. To expand the business, he looked to innovations. For example, Shreiber developed pre-baked and frozen soft pretzels in response to vendors who disliked baking the snacks. Shreiber also initiated compact pretzel ovens and display cases for the convenience of snack bars. His SuperPretzel business eventually expanded to cities across the United States--in schools, bowling alleys, and sports arenas. "The more business we did," Shreiber told Forbes, "the more I thought we could do more."
Growth Through Acquisitions During the 1980s
In 1986 Shreiber made frozen soft pretzels available to consumers through their local supermarkets. He enlisted Michael Karaban, the man who successfully marketed Lender's frozen bagels to the public, to direct the sale of soft pretzels through supermarkets when initial efforts fell short of expectations. Karaban repackaged the J & J Snack Foods' frozen pretzels and re-focused the company's marketing directly to consumers.
J & J Snack Foods acquired ICEE-USA, a semi-frozen carbonated beverage manufacturer, in 1987. A competitor of the Slurpee brand, the slushy ICEE was losing money in a $500 million market when Shreiber bought the company. As a division of J & J Snack Foods, however, ICEE increased its sales and operating income by more than 20 percent annually through the end of 1991. In July 1991, J & J Snack Foods issued a secondary stock offering to expand ICEE from a 15-state market in the western United States, plus Mexico and Canada, to a national brand. The stock offering earned $29 million, which J & J Snack Foods invested in dispensing machines for the frozen beverage. "Having built a successful pretzel business from scrap, can he repeat the trick in frozen drinks?" asked Christopher Palmeri in Forbes in 1991. "Chances are he can."
By 1989, J & J Snack Foods controlled 70 percent of the soft pretzel market and enjoyed a 24 percent increase in sales and earnings over the previous five years. The snack food manufacturer produced two million pretzels each day, and its marketing network expanded to include 145 food brokers and 875 independent distributors in all 50 states. Five competitors eventually sold their businesses to Shreiber.
Internal Growth and Strategic Acquisitions in the 1990s
As the market for soft pretzels in the food service industry flattened, Shreiber sought new markets and new products to add to the company's line. He sold soft pretzels to snack bars in warehouse clubs and tested soft pretzel sales at selected McDonald's in the early 1990s. Shreiber also launched a bite-sized soft pretzel--with melted cheese for dipping--for sale in movie theaters.
In 1994, J & J Snack Foods purchased the New Jersey-based Funnel Cake Factory, a supplier to the food service industry and to retail supermarkets. Schreiber explained the rationale for the acquisition to the Frozen Food Digest: "Funnel Cake represents another niche product for our distribution channels. We like the product. We like the potential."
J & J Snack Foods was eager to acquire the Funnel Cake Factory for its projected impact on revenue. Conversely, the company also was interested in divesting some of its holdings. So in 1995, J & J Snack Foods offered a subsidiary--Western Syrup Company--for sale. Dispensing with the subsidiary had no adverse effect on the operations or financial situation of J & J Snack Foods.
The following year, J & J Snack Foods expanded its SuperPretzel product line to include Cinnamon Raisin Minis. Made with Sun-Maid brand raisins, Cinnamon Raisin Minis were fully baked and frozen--with packaged squeeze-on icing--for reheating in microwave ovens. J & J Snack Foods also purchased Pretzel Gourmet Corporation, a retailer headquartered in Pennsylvania, in 1996. With outlets in New Jersey, Florida, Nevada, and Washington, D.C., as well as Pennsylvania, Pretzel Gourmet sold $1.5 million in snacks in 1995. "Pretzel Gourmet," Schreiber reported in Business Wire, "is known for its superior, freshly baked, hand-rolled soft pretzels and represents an excellent vehicle for us to enter this growing segment." Pretzel Gourmet retained its own identity within J & J Snack Foods after the acquisition. J & J Snack Foods also acquired a manufacturer and distributor of Italian ices and frozen desserts in 1996. Mazzone Enterprises of Cicero, Illinois, earned $4 million annually before its acquisition.
Later in 1996, the company acquired Bakers Best Snack Food Corporation, a Hatfield, Pennsylvania, company also doing $4 million in sales annually. A soft pretzel manufacturer serving supermarkets as well as the food service industry, Bakers Best fit nicely into J & J Snack Foods' product line.
Within one month, J & J Snack Foods purchased the controlling share of common stock in Pretzels Incorporated. Like Bakers Best, this company manufactured soft pretzels for the food service industry and for supermarkets. Pretzels Inc. annually sold $2 million of Texas Twist brand pretzels.
Marketing and Merchandising
By now, J & J Snack Foods established national marketing and merchandising programs for both its food service and supermarket customers. As part of this program, J & J Snack Foods provided food service customers with point-of-sale materials and merchandising equipment such as ovens, warmers, and frozen-beverage dispensers. Through the development of innovative merchandising systems, J & J Snack Foods facilitated adding its soft pretzel systems to existing food service operations or as stand-alone concessions. The SuperPretzel line, for example, gave its customers exclusive mobile merchandising units, display cases, and point-of-sales materials.
J & J Snack Foods' Pretzel Gourmet Express concept was a natural outgrowth of this program. Introduced at the CoreStates Arena in Philadelphia, Pennsylvania, in 1996, Pretzel Gourmet Express provided a complete package to food service customers as a turnkey operation. "Building on the success of SuperPretzel," the company's 1997 annual report revealed, "we ... launched an upscale branded concept to capitalize on America's growing taste for premium snacks and the evolving trends in the food service industry. It's called Pretzel Gourmet Express." The two Pretzel Gourmet Express concessions that opened at the Philadelphia arena, for example, featured butter-dipped, Parmesan cheese, cinnamon-sugar, and other freshly baked, flavored, and filled soft pretzels sold through a complete food service operation, including proprietary merchandising equipment and promotional programs. J & J Snack Foods developed the Pretzel Gourmet Express concept to solidify its leadership position in the soft pretzel market, as well as to broaden this business category. The concept also responded to identified needs in serving customers on college campuses and in the business dining market segment.
J & J Snack Foods widely promoted its products for retail supermarkets at this time. The company advertised in newspapers and occasionally on television. J & J Snack Foods also offered consumers coupons for its products and conducted in-store demonstrations at supermarkets. "Ask any food company," a J & J Snack Foods annual report revealed. "The world's toughest environment isn't the Amazon, the Sahara, or the North Pole. It's the retail supermarket and, more specifically, the highly competitive freezer case in the supermarket." Nevertheless, J & J Snack Foods' SuperPretzel brand established the company as the leader in retail supermarket soft pretzels.
In 1996, J & J Snack Foods contracted with The Food Group for its advertising and marketing plans for the company's food service division. The Food Group assumed branding development for SuperPretzel, ICEE, Arctic Blast, Luigi's Italian Ices, Shape-ups, Tio Pepe's Churros, and Funnel Cake products manufactured by J & J Snack Foods.
By the end of 1997, J & J Snack Foods expanded its marketing to the global marketplace, establishing distribution of its pretzel products through the United Kingdom, the Pacific Rim, and Israel.
More New Developments
In addition to gains in the soft pretzel market, J & J Snack Foods also made strides in cookies and frozen beverages in 1996. J & J Snack Foods began supplying raw cookie dough to a major national retailer, and the company became the exclusive distributor in both North and South America for frozen carbonated beverages by IMI Cornelius, a beverage equipment supplier.
J & J Snack Foods continued expanding through acquisitions as well. In January 1997, the company purchased Chicago-based Mama Tish's International Foods, a manufacturer and distributor of frozen juice products such as Italian ices and sorbets. Expecting more than $15 million in annual sales from Mama Tish's products, Shreiber noted in a Business Wire release that "the combination of increased sales and other synergies should have long-term continued benefits" for J & J Snack Foods.
By the end of the year, J & J Snack Foods acquired the controlling interest in National ICEE Corporation. Headquartered in Philadelphia, National ICEE annually sold $40 million in frozen carbonated beverages to consumers in the eastern United States. The acquisition of National ICEE, Shreiber remarked in Business Wire, "represents an excellent opportunity to further develop the frozen beverage category and the ICEE brand on a national basis." "We are embarked on an ambitious program to integrate the National ICEE system into our ICEE-USA subsidiary company," Shreiber explained further. Indeed, this latest acquisition secured J & J Snack Foods' right to sell ICEE frozen beverages throughout the continental United States&mdashø about 17,500 company-owned and customer-owned dispensers.
J & J Snack Foods' plans for the future at the end of 1997 included increased sales of all its product lines. For example, the company tested noncarbonated frozen beverages in an effort to appeal to more mature consumers. The company also changed the image and graphic design for ICEE products. According to an annual report, "this new image is one more example of how J & J Snack Foods is continually evolving to meet the needs of our ever-changing market."
Principal Subsidiaries: Bakers Best Snack Food Corporation; Bavarian Soft Pretzels Inc.; FCB America Corporation; ICEE-USA Corporation; J & J Snack Foods Corporation, Bakery Division (Vernon, California); Pretzels, Inc.
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