FoodBrands America, Inc.
FoodBrands America, Inc.
Independent Subsidiary of IBP, inc.
Incorporated: 1964 as Doskocil Companies, Inc.
Sales: $835.1 million (1996)
SICs: 2013 Sausages & Other Prepared Meats; 2051 Bread, Cake & Related Products; 2011 Meat Packing Plants; 2038 Frozen Specialties, Not Elsewhere Classified
A market leader in the foodservice industry, FoodBrands America, Inc. produces and sells branded and processed perishable foods for foodservice, delicatessen, and retail customers. FoodBrands America formerly operated as Doskocil Companies, Inc., a company that reigned as the largest supplier of pizza toppings to national pizza chains before filing for bankruptcy in 1990. After reorganizing and then changing its name in 1995, the company emerged as FoodBrands America, with more than 1,600 products comprising its product line. During the late 1990s, the company maintained a presence in numerous niche markets through four operating divisions. Its foodservice division ranked as the largest supplier of pepperoni and pizza toppings in the United States. Its specialty brands division produced ethnic frozen food under the Rotanelli’s and Little Juan brand names. The company’s deli division marketed more than 100 products under brand names such as Fresh Cuts and American Favorite. The retail division marketed approximately 300 products under the Wilson Foods and Corn King labels. In 1997, FoodBrands America became a subsidiary of IBP, inc., a global meatpacking conglomerate based in Nebraska that ranked as the world’s largest producer of fresh beef and pork.
Early 1960s Origins
Larry Doskocil decided what he wanted to become in life while working at the meat department in a Safeway supermarket, earning money for his tuition at Bethany Nazarene College in Bethany, Oklahoma. He decided he wanted to become the sausage king of Kansas. While working behind the counter at Safeway’s meat department, Doskocil handled all types of meat and became familiar with a variety of leading brand names, but he was impressed most with Oklahoma’s greatest selling brand of sausage, J.C. Potter. During the 1950s, Oklahomans must have been voracious fans of J.C. Potter sausage because Doskocil viewed the product as if it were a pot of gold. “I decided that I was going to become the J.C. Potter of Kansas,” Doskocil later related, recalling the defining moment that sent him headlong into the sausage business. The fruits of his efforts, which were arduous and fortuitously exerted at a time of opportunity, led to the formation of Doskocil Companies, Incorporated, the predecessor to the nearly $1 billion FoodBrands America that was flourishing during the 1990s.
Having picked the direction his life would take, Doskocil moved toward his objective of becoming the sausage king of Kansas with an extraordinary display of determination. In 1961, he leased an abandoned chicken hatchery in Hutchinson, Kansas, and began his bid to develop a powerful brand name of sausage in the Kansas market. His efforts were tireless and his conviction was unwavering. Doskocil started his day with seven hours of sausage making, beginning at five a.m., and working until noon. After cleaning up, he climbed into his truck to sell the sausage he had made and drove around the outlying areas surrounding Wichita, Kansas until dark. Once night settled in, Doskocil returned to his modest headquarters and slaughtered hogs until midnight, ending his workday 19 hours after it had begun. Doskocil followed this schedule religiously. During the entire first year of his business, Doskocil slept on a cot in his makeshift plant.
When he started out, Doskocil figured it would take him at least 10 years to come close to achieving his objective. Building his brand, which he named “Country Cousin,” into the Kansas equivalent of the J.C. Potter brand in Oklahoma would be a lengthy process no matter how many hours a day he worked.
Doskocil’s realization of this fact made his early efforts that much more remarkable, but the fledgling entrepreneur did not have to struggle for a decade before success came his way. In 1963, a serendipitous visit to a start-up pizza chain proved to be Doskocil’s big break. One night in 1963, Doskocil stopped at a new restaurant in Wichita named Pizza Hut and ordered a pizza. At the time, Pizza Hut was a small Wichita chain just getting started. Doskocil watched the owner make toppings from fresh meat and listened to his complaints about the time it took to make meat toppings from scratch. The Pizza Hut owner remarked that the laborious efforts were keeping him off the softball field, so Doskocil posed a solution. He offered to cook a batch of sausage for the owner and the owner immediately agreed. Doskocil then called other pizza franchises and offered the same service. The response was overwhelming, and Doskocil, unexpectedly, had found his niche in the Kansas meat market.
Doskocil’s timing was perfect. He approached pizza chain operators just as their enterprises were beginning to develop into regional and national chains. As the chains expanded, so did Doskocil’s business, its growth driven by the prolific growth recorded by Pizza Hut, Godfather’s, Domino’s, and other operators during the 1960s and 1970s. More business meant hiring more workers, freeing Doskocil from having to do everything by himself, but a steadily increasing workforce did not mean Doskocil sat behind a desk while his employees labored. Doskocil directed his tireless efforts in another direction, and the result had as much to do with his company’s success as his chance entry into the pizza topping business.
One of the chief reasons Doskocil enjoyed enviable success during the 1960s and 1970s was his emphasis on vertical integration. His company, Doskocil Companies, Incorporated, did not expand because of exhaustive marketing efforts; the company, in fact, did not have a marketing department. Doskocil sold exclusively to just a few huge chains and never attempted to develop any business with smaller buyers and independent food service operators. Instead, Doskocil made every effort to make his operations as efficient as possible and as self-reliant as possible. The characteristics of his personality that displayed themselves during the early years of his career, when he performed every task himself during a 19-hour workday, were demonstrated in a different way once his company became successful. Doskocil looked at every aspect of his business and made his own changes, tailoring Doskocil Companies into a force in the pizza topping business that no competitor could rival.
Doskocil studied every detail of his business. He determined precast concrete walls would cost less in the long run, saving money on maintenance and cleaning costs at his production facility. Doskocil could not get precast concrete locally, so he manufactured his own walls. When he made a survey of the insulation material available on the market, Doskocil was unimpressed and decided he could make a better, more efficient kind on his own, so he did. When Doskocil purchased automated production equipment, he immediately began tinkering with his new purchase, making improvements that fit his needs. When no manufacturer offered what he needed in production automation, Doskocil manufactured his own equipment. For the fuel required to cook his meat, Doskocil did not turn to a supplier for his needs, he purchased his own natural gas wells and his own natural gas transmission company. Doskocil owned or made nearly everything his company needed, restricting his vertical integration efforts only in the business of raising hogs and cattle. The result was a low-cost producer that held sway in the pizza topping market. No other competitor could match the efficiency of the Doskocil-designed production processes. Said a spokesperson for Hormel, which briefly tried to challenge Doskocil Companies but failed: “They make an excellent product and they’re doing it a lot cheaper than we could.”
1980s: Preeminence and Failure
By the beginning of the 1980s, Doskocil could not only rightly refer to himself as the sausage king of Kansas but also as the budding pizza-topping king of the United States. His company made 70 percent of the precooked processed beef and pork used by national pizza restaurant chains, a dominating percentage that generated more than $110 million in annual sales by the mid-1980s. “We have a neat little niche here,” Doskocil remarked at the time to reporters. “We’re very happy.” The company took advantage of its success by taking on the role of an acquirer, purchasing Stoppenbauch Inc., a pepperoni, smoked meat, and cheese maker based in Wisconsin and a crab meat processor in South Carolina. With these added plumes to Doskocil Companies’ already thriving operations, the company stood poised as a formidable force, holding sway as the national leader in its business. By this point, Doskocil had far eclipsed his ambitious dreams of the early 1960s and had begun to search for a new chief executive for his company. “We’re past the entrepreneurial stage,” he remarked to reporters in 1984, understating the maturity of his enterprise. “And I don’t want to run a $1 billion company.” As it turned out, Doskocil may have regretted not finding a replacement in 1984 because his company began to stumble during the mid-1980s. By the end of the decade, Doskocil Companies was mired in profound financial problems and bankruptcy was imminent.
How do we retain our diverse customer base ? FoodBrands America exceeds expectations by providing products that are formulated, cooked, handled, flavored and delivered exactly as ordered, on schedule. That dedication pays off for everyone. It allows our customers to expand their market share and enables FoodBrands America to grow sales. FoodBrands America is not only recognized as one of the nation’s top foodservice providers, but we ’re earning a solid reputation for being a growth catalyst, too.
The sudden turn for the worse began to manifest itself during the mid-1980s when the telltale financial signs appeared. The root of the financial ills stretched back to a reverse merger Doskocil completed with the billionaire Bass brothers in 1983. The transaction enabled Doskocil to acquire Stoppenbauch Inc. and the South Carolina crabmeat processor, and it gave his company some of the corporate trappings it had previously lacked. After the reverse merger, Doskocil Companies had sophisticated financing capabilities, a new marketing organization, and a more ambitious long-term goal. Doskocil remarked that the financial deal with the Bass brothers “blossomed us out… it showed us what we can do, which is more than just make sausage,” but the sudden transformation also diverted attention away from one of the company’s primary strengths: its low-cost productivity methods. The company’s profit margins began to shrink and its net income began to slip in 1985, as competitors made up lost ground and began to approximate Doskocil Companies’ processing technology and productivity. In 1986, gross margins and net income slid downward again, causing company officials to grow anxious. “We’re no longer five years ahead,” Doskocil confided to reporters in reference to the wide lead the company had had over competitors in terms of cost advantage. “Not even three years,” he mused.
To mend the problems, Doskocil went back to where he started and returned to the production floor. Labor costs were subsequently trimmed by 12 percent and the company made strides toward recovery. Heading into the late 1980s, the company was generating roughly $225 million a years in annual sales and reigned as the greatest purveyor of pizza toppings to pizza chains in the United States. Although the company’s profitability problems were not completely eliminated, management felt confident enough about the company’s position to entertain an enormous acquisition in 1988. The acquisition candidate was Wilson Foods, a meatpacker whose annual sales towered at $1.3 billion, or five times the total collected by Doskocil Companies. The company went ahead with the purchase, paying $238 million for Wilson Foods line of retail pork products, which included hot dogs, ham, sausage, and sliced bacon.
For a while, the acquisition of Wilson Foods appeared to be a smart move, at least one that investors liked. The company’s stock value swelled to $14 in 1989, but a year later it plummeted to $1.37. The cause for the stock’s collapse was the collapse of Doskocil Companies itself. The purchase of Wilson Foods had left the company overextended, and when the credit market tightened as a national economic recession set in, Doskocil Companies had nowhere to turn except for the protective shelter of Chapter 11. Doskocil Companies filed for bankruptcy in 1990 after flourishing for nearly three decades. It was a dark period in the company’s history, marking the fall of the sausage king and the end of the type of Doskocil Companies that had been in operation for 26 years. Bankruptcy was not the end for the company, however. Instead, it gave the company time to rethink its strategy and emerge with an entirely different operating philosophy. The merits of this new approach were borne out during the 1990s.
Roughly a year after filing for Chapter 11, Doskocil Companies emerged from bankruptcy restructured and reorganized. Looking toward the future, management envisioned a company involved in a variety of specialty foods niche markets, ranging from sauces to meats and crusts. What emerged was a company without a core business, a company entirely unlike the old Doskocil Companies that relied heavily on the sales of pork and beef toppings to pizza chains. Instead of catering to one type of customer, the post-bankruptcy Doskocil Companies would market its products to a wide spectrum of customers, ranging from the company’s original customer, Pizza Hut, to numerous other customers, including grocery store delis, wholesale distributors, casual dining chains, hospitals, and schools. Further, the new version of the company would market hundreds and hundreds of specialty foods products instead of the handful that had sustained it prior to bankruptcy. Hewing to this new course of development, management began reshaping the company in earnest in 1994.
That year, the company acquired the Frozen Specialty Foods Division of International Multifoods Corp. for approximately $135 million. The acquisition gave Doskocil Companies roughly $185 million in annual sales to add to its revenue volume and a product line that included appetizers, entrees, portion meats, and ethnic specialties. Brands acquired with the purchase of the division included Fred’s, Rotanelli’s, Posada, and Little Juan’s. After its acquisition, Frozen Specialty was organized as Doskocil Specialty Brands Co. Next, the company moved in the opposite direction by divesting one of its businesses, but before the sale, the company changed its name from Doskocil Companies to FoodBrands America, Inc. After this name change, which reflected the increasingly variegated nature of the company’s product line, it sold a substantial facet of its business. In May 1995, the company sold the retail pork division it had acquired seven years earlier in the Wilson Foods deal. Although the division accounted for roughly $220 million of FoodBrands America’s revenue volume, the business was regarded as a low-profit-margin business and industry observers applauded its exit from the company’s fold. The division was sold to Thorn Apple Valley Inc. for $76 million.
Before the end of 1995, the company resumed its acquisitive activities, purchasing KPR Holdings Inc. in December. A manufacturer of sauces, soups, pizza toppings, and side dishes, KPR sold its product line to clients such as TGI Friday’s and Brinker International. Aside from diversifying FoodBrands America’ product line and adding $99 million in annual sales to its revenue volume, the acquisition of KPR provided FoodBrands America with access to international markets. Through a partnership with The Quelly Group of Ireland, KPR Holdings was involved in a joint venture to produce pizza toppings for food service operators in Europe, the Middle East, Africa, and the Pacific Rim. One week after the KPR deal was finalized, FoodBrands America completed another acquisition, purchasing TNT Crust, Inc., a producer of partially baked and frozen self-rising crusts for use by pizza chains, restaurants, and frozen pizza manufacturers.
With these deals behind it, FoodBrands America entered 1996 as a thoroughly reshaped company with a product line that included more than 1,600 products. The company’s strength was its diversity. With no core business, FoodBrands America was involved in numerous, profitable niche markets that generated $835 million in sales in 1996. The company ranked as the largest supplier of pepperoni and precooked pork and beef to the pizza industry and held the leading market share in partially baked and self-rising pizza crusts, deli ham, and food-service frozen burritos. As management plotted the company’s future course, more acquisitions were in the offing. The strategy of targeting the foodservice industry as a whole by penetrating into niche markets had revived the moribund Doskocil Companies and created a powerful company able to grow through acquisitions during the late 1990s and into the 21st century.
In 1997, FoodBrands America joined forces with meatpacking conglomerate IBP inc. In April, IBP acquired Food-Brands America for $640 million as part of its strategy to diversify beyond its core fresh-meats business. Following the completion of the transaction, FoodBrands America was organized as an independent subsidiary of IBP, retaining its senior management and remaining in Oklahoma City. From the deal, FoodBrands America gained IBP’s operating expertise, a financial supporter with the resources to finance future acquisitions, and greater access to foreign markets. On the heels of its alliance with IBP, FoodBrands America prepared for the new century ahead, intending to acquire companies with strong niche market positions and cash flow margins of at least ten percent.
Continental Deli Foods, Inc.; Doskocil Food Service Company, L.L.C.; Specialty Brands, Inc.; KPR Holdings, L.P.
Food Service Division; Specialty Brands Division; Deli Division; KPR Foods Division.
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—Jeffrey L. Covell