Golden Enterprises, Inc.
Golden Enterprises, Inc.
Incorporated: 1923 as Magic City Food Products Company
Sales: $129.52 million (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: GLDC
SICs: 2096 Potato Chips & Similar Snacks; 2099 Food Preparations, Not Elsewhere Classified
A leading snack food producer in the southeastern United States, Golden Enterprises, Inc. makes and distributes potato chips, corn chips, fried pork skins, tortilla chips, onion rings, and popcorn. Golden Enterprises served as the holding company for Golden Flake Snack Foods, its lone subsidiary. During the late 1990s, the company marketed its products in 12 Southeastern and Midwestern states spreading outward from its headquarters in Alabama. Production was conducted in Birmingham, Alabama; Nashville, Tennessee; and in Ocala, Florida. Despite the presence of much larger competitors such as Frito-Lay in its operating territory, Golden Enterprises enjoyed convincing success throughout its history as a regional favorite, attracting a loyal customer base drawn to the company’s signature Golden Flake brand. Golden Enterprises also sold a line of cakes and cookies, dips, nuts, and dried meat products packaged by other manufacturers under the Golden Flake label. In 1998, former Chairman Sloan Bashinsky, whose family had managed the company since 1946, owned roughly 55 percent of Golden Enterprises.
Founded in the 1920s
Golden Enterprises began its business life in 1923, starting out in the basement of an old grocery store in Birmingham, Alabama. The company, then known as Magic City Food Products Company, was founded by Mose Lischkoff and Frank Mosher, who adopted the nickname for Birmingham as the name for their entrepreneurial creation. The pair made and sold peanuts, peanut butter cracker sandwiches, and horseradish, but the principal product was potato chips—Golden Flake Potato Chips—so named because of their appearance. The snacks were all made by hand and sold to Birmingham residents living nearby, with the company’s peanut butter cracker sandwiches proving to be the second most popular item after Golden Flake Potato Chips. At its start, the company was essentially hawking its homemade products to neighbors, but success came quick for Lischkoff and Mosher, despite the modest trappings of their business. Before the first year was over, the two owners were forced to hire two salesmen in order to keep pace with demand, as the business’ signature Golden Flake Potato Chips quickly found a place in the hearts of Birmingham residents. The forging of this special relationship—the tie between the Deep South and Golden Flake Potato Chips—was an important one, because in the decades ahead, when the U.S. snack industry evolved into a $20 billion-a-year industry, the deep-seated awareness of the Golden Flake name would allow Golden Enterprises not only to survive, but to thrive. Massive food conglomerates would eventually saturate the Deep South with their products and hold sway as market share leaders, yet Golden Enterprises withstood the pressure and held steadfast to the number two position throughout its territory. This achievement was primarily due to the affection for the Golden Flake brand that began in 1923.
As Magic City’s business burgeoned, more employees joined the payroll, including one employee who played a pivotal role within the company’s history. Helen Friedman, better known at the time as the “Golden Flake Girl,” joined Magic City not long after the company was started. Friedman did not remain an employee for long, however. With the help of her mother, Friedman bought out Lischkoff’s interest in Magic City and in 1928 cemented her position at the company further by marrying the other co-owner, Mosher. The marriage did not last, however, and in the wake of Friedman’s and Mosher’s personal differences, ownership of Magic City was decided by the courts. Friedman gained full control over the company in the property settlement that concluded the divorce, putting the Golden Flake Girl in charge of the popular Golden Flake Potato Chips.
During Friedman’s guardianship of the Golden Flake Brand, Magic City was transformed from a fledgling, basement-bound business into a flourishing, firmly established enterprise. Perhaps most impressive, Friedman fulfilled the difficult task of shaping Magic City into a genuine company during the most pernicious economic times of the 20th century, achieving meaningful strides during the decade-long Great Depression. Expanding while others businesses collapsed around her, Friedman built the foundation Magic City rested on during the 1930s, and by the time of her departure following the end of World War II, she left a substantially sized, profitable business, with annual sales hovering at approximately $750,000. Geographically, Friedman had extended the company outside of Birmingham and into other Alabama communities, establishing a network of 17 sales routes. Friedman’s departure cleared the way for the Bashinsky family, who acquired Magic City in 1946. For the next half-century, the Bashinskys, through two generations, controlled the fortunes of the Golden Flake brand and its numerous products, developing the business into a multimillion-dollar snack foods enterprise.
1946: Bashinsky Ownership Begins
The Bashinskys acquired Magic City four years before annual sales reached the milestone mark of $1 million. Under their stewardship, annual revenues would increase a hundredfold, with nearly all of the credit for that achievement going to Sloan Y. Bashinsky. Bashinsky started working at Magic City shortly after his family had acquired the company and became one of the charter members of the board of directors, but the young Bashinsky did not enjoy any other advantages. He started at the bottom of Magic City’s corporate ladder, working in production and traveling as a salesman before assuming greater responsibilities. His rise was quick, however, ending in 1956 when he bought the company from his father and uncle and assumed the duties of Magic City’s president. A year later, he changed the name of the company to Golden Flake, Inc., adopting the name of the brand that had propelled sales for the previous 25 years. Bashinsky’s next move was to relocate production to larger quarters. In 1958, the company began production at the Birmingham plant that would serve as a production site for the remainder of the century. Initially, before steady expansion of the plant would increase its production capacity exponentially, the Birmingham facility measured more than 45,000 square feet, resting on a five-acre plot.
Rapid Post-World War II Growth
Early during his tenure, Bashinsky demonstrated his desire to develop Golden Flake into a bigger company, a desire first evinced when he moved the company to a larger production facility shortly after assuming command. Five years after the move, he added to the company’s might in a far more substantial way, completing Golden Flake’s first major acquisition, which established the company’s first operations outside Alabama. In 1963, Bashinsky purchased a Nashville, Tennessee snack food producer and distributor named Don’s Foods, Inc. The acquisition gave the company its second production facility, a 40,000-square-foot plant located in Nashville. Don’s Foods was operated as a separate business until 1966, when Golden Flake was reincorporated as a Delaware corporation and the operations of the two companies were combined.
The acquisition of Don’s Foods ushered in an era of expansion for Golden Flake that would see the company take on the characteristics of a modern corporation. Bashinsky had his sights set on not only steering the company into new markets but also into new business areas, businesses that had nothing in common with producing and distributing snack foods. To obtain the capital for Golden Flake’s maturation into a more sophisticated corporation, Bashinsky took the company public in an initial offering of stock in 1968. At the time, there was a sweeping trend in corporate America toward diversification. Holding companies were being formed to serve as umbrella entities for entry into new business areas and to oversee the operation of a disparate collection of subsidiaries, as success in one area spawned forays into other areas far removed from a company’s original business. In the general march toward far-flung diversification, Bashinsky did not stand aside as a spectator. He diversified with fervor, completing a series of acquisitions in 1971 that greatly expanded the scope of Golden Flake’s operations, moving it well beyond snack foods. Bashinsky purchased Steel City Bolt & Screw, Inc., an advertising company named Nail & Associates, and diversified into real estate, insurance, and fastener production, developing a handful of subsidiaries to operate alongside Golden Flake. Although Bashinsky’s diversification later proved to be unsuccessful, the basic objective of his plan—to accelerate the growth of the Golden Flake enterprise—was fulfilled. In the wake of the diversification begun in 1971, Golden Flake recorded a decade of robust financial and physical growth, demonstrating sufficient financial strength to draw the attention of the national business press to the bustling activity in Birmingham.
Shortly after the company moved to its new production facility in Birmingham, its sales began to increase at an encouraging pace, rising to roughly $3 million a year by the end of the 1950s. From this point forward, sales increased exponentially, doubling every five years for a 25-year period. Amid this energetic growth, Bashinsky altered the structure of the company to better conform to its increasing stature and to the numerous operating subsidiaries it had acquired in 1971. In 1977, a holding company was formed named Golden Enterprises, Inc. Concurrently, Golden Flake, Inc. changed its name to Golden Flake Snack Foods, Inc. and was organized as a wholly owned subsidiary of Golden Enterprises. Steel City Bolt & Screw and Nail & Associates also were organized as subsidiaries of the newly created Golden Enterprises, but assets of the real estate and insurance subsidiary were sold, divested from the company in September 1977, nine months after the formation of Golden Enterprise.
Golden Flake: It’s Where You Find the Flavor!
Although the diversification into real estate and insurance had proven to be a misstep, there could be little doubt about the prudence of Bashinsky’s management of the company’s mainstay business, its Golden Flake Snack Foods subsidiary. Sales reached $50 million by the end of the 1970s, and better yet, the company was exhibiting a profitability level that put it near the top of all snack food producers in the nation. Flush with success, Bashinsky began plotting a push into new markets during the early 1980s, hoping to build on the company’s presence in Alabama, Mississippi, Tennessee, and Georgia and spread outward into Louisiana, Arkansas, Kentucky, and North and South Carolina. His biggest plans were for expansion into the lucrative markets in Florida, where he decided to build the company’s third snack food production facility. The new plant, slated to be erected in Ocala, Florida, was part of an $18 million expansion program that tripled Golden Enterprise’s corn procession capacity. At the time, the company derived 45 percent of its sales from potato chips, 30 percent from corn chips, and 15 percent from fried pork skins, but Bashinsky wanted to increase the percentage obtained from corn-based products because corn was less expensive and less vulnerable to weather than potatoes.
The new Ocala plant, measuring 100,000 square feet and resting on a 56-acre site, opened in 1984, serving as the hub for distribution throughout Florida. Sales by this point had reached the milestone mark of $100 million, a total collected from the company’s 12-state operating territory, which was serviced by 800 company-owned trucks traveling 666 sales routes. Bashinsky, in his mid-60s, was at his peak, hailed by Forbes magazine as a “junk-food king.” Although Frito-Lay, which collected a numbing 40 percent of all salted snack food sales in the United States, ranked as the leading brand in all of Golden Enterprise’s markets, the time-honored Golden Flake brand held steadfastly to the second position in all its markets except in recently explored Florida. In some ways, the company benefited from the presence of its much larger competition, carefully watching where the snack food giants succeeded and failed to determine the best path to pursue. When Frito-Lay introduced a new cheese chips brand dubbed O’Gradys in the mid-1980s, Bashinsky eyed the product introduction closely. “We’ve been watching O’Gradys cheese chips for a year,” he explained to a reporter. “This month [May 1985] we’ll introduce Au Gratin. Frito spent over $50 million researching O’Gradys. We didn’t spend anything.”
The 1990s and Beyond
With sales topping $100 million and his company performing admirably, Bashinsky began to think about retirement and the important issue of his successor. His two sons had been trained as lawyers and expressed no interest in running a snack food business, so Bashinsky turned to a long-time employee named John S. Stein, who had joined Golden Enterprises during the 1960s. Stein was put in charge of the company’s operating division, Golden Flake Snack Food, and from this vantagepoint he watched the company’s eye-catching brilliance fade. After recording annual earnings growth of 16 percent between 1975 and 1985, the company’s profits began to slip during the latter half of the 1980s. The costly push into Florida markets provoked a price war with Frito-Lay, owned by Pepsi-Cola Company, and Anheuser-Busch’s Eagle Snacks, thrusting Golden Enterprises into the enviable position of having to battle head-on with multibillion-dollar adversaries. Sales growth became anemic and profits began to slide as a result, causing Golden Enterprises’ earnings to fall from 73 cents a share in 1985 to 35 cents by 1991.
Despite having its 25-year period of remarkable growth shudder to a stop, Golden Enterprises operated during the 1990s as a solidly positioned and financially sound company. With Stein in charge as chief executive officer and chairman of the board, the company exuded many of the same strengths that had underpinned its success for decades. Golden Enterprises was debt-free and its Golden Flake brand benefited from the same awareness and loyalty that had enabled the company to thrive in the Deep South. The last remnants of the 1971 diversification were removed in 1995 when Golden Enterprises sold Steel City Bolt & Screw and Nall & Associates, leaving the company with only its Golden Flake Snack Foods subsidiary by the time it celebrated its 75th anniversary in 1998. Annual sales by this point hovered around $130 million after a decade of fluctuating results, while net income stood at a solid $3.7 million. As Golden Enterprises prepared for the 21st century, its past achievements provided a source of optimism for the future, fueled by the knowledge that its signature brand had earned the lasting affection of its Southern clientele.
Golden Flake Snack Foods, Inc.
Behar, Richard, “Copycat,” Forbes, May 20, 1985, p. 126.
“The History of Golden Flake Snack Foods,” http://www.goldenflake.com/gfhistory.html.
Willis, Clint, “Here Are Five Stocks Under $10 That Promise 40% Growth,” Money, May 1992, p. 77.
—Jeffrey L. Covell