Kar Nut Products Company

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Kar Nut Products Company

1200 East 14 Mile Road
Madison Heights, Michigan 48071
U.S.A.
Telephone: (248) 588-1903
Toll Free: (800) 527-6887
Fax: (248) 588-1902
Web site: http://www.karsnuts.com

Private Company
Incorporated: 1939
Employees: 165
Sales: $45 million (2005 est.)
NAIC: 311911 Roasted Nuts and Peanut Butter Manufacturing

Kar Nut Products Company produces nuts and snack mixes for retail sale. Its products are distributed to convenience and grocery stores in Michigan and surrounding states and are sold nationally in vending machines and at club stores. Kar’s products include roasted peanuts, cashews, sunflower seeds, pistachios, and almonds, as well as blends such as PB&J Mix and Yogurt, Apple, Nut Mix, which combine nuts with dried fruit, pretzels, candy, and other ingredients. The firm’s top seller is the trademarked Sweet ’n Salty Mix, which has been voted best salty snack in polls of vending machine operators.

EARLY YEARS

Kar Nut traces its origins to the Great Depression, when Sue and John Karpe moved from Ohio to Detroit, Michigan, to look for work. John soon found a job with an auto manufacturer, and Sue began working for a candy company, which enabled them to buy a house near Navin Field, the original home of the Detroit Tigers baseball team. To help make ends meet, in 1933 Sue Karpe began roasting peanuts at home to sell outside ball games.

This sideline soon grew into a significant source of income, and in 1939 the Karpes moved production out of their home, incorporated the business, and expanded distribution to bars and grocery stores. While making deliveries Sue Karpe became affectionately known as “Miss Kar,” and she combined this nickname with Detroit’s auto-centric image to come up with a logo that featured a woman driving a car shaped like a peanut, with the slogan “Nuts to You from Kar’s.”

In 1946 the firm bought a larger building in the northern Detroit suburb of Ferndale and relocated its operations there. Over time distribution expanded to include most of the state of Michigan, while the product line grew to several different types of nuts.

In 1967 Sue Karpe sold the business to Bud Nicolay, and several years later the company updated its packaging, retiring the peanut car and driver. In 1984 Nicolay’s son Nick began working for the family firm.

The company lost money in fiscal 1990, and an effort to institute wage and benefit cuts in the summer of 1991 led to a strike by union workers, supported by Teamster truck drivers. After using management and temporary workers to run the plant, the situation was resolved.

NATIONAL VENDING SALES BEGIN IN 1992

In 1992 Kar Nut expanded distribution beyond its home turf of Michigan by winning contracts with vending machine operators in different parts of the United States. To facilitate these sales, special packages were created that fit into candy slots.

The firm was also producing a mail-order catalog to sell holiday nut tins, and in 1992 this was reduced in size and reworked with more appetizing photographs. With the number of copies boosted by 50 percent to 300,000, mail-order sales more than doubled from a year earlier. For 1992, the company had sales of $12 million.

In 1994 Kar Nut introduced a pay incentive program called gain-sharing to help promote efficiency and increase productivity. Communication between management and the firm’s 65 employees was also improved through weekly meetings. During the year a new vice-president, Bill Elam, was hired to oversee the company’s ongoing expansion, and in 1995 E. L. “Nick” Nicolay bought Kar Nut from his father and took the titles of president and CEO.

In 1996 vending sales increased after the firm boosted the size of its peanut packages to two ounces, while keeping the price the same. Kar Nut had also developed a way to cut cashews that reduced breakage in vending, which helped them become the second-biggest seller in this category after peanuts.

In the late 1990s the company began selling its products to national “club store” chains such as Sam’s Club and Costco Business Centers. To ship them in the cases such stores required, a custom-designed robotic machine was purchased, and the firm also reconfigured its pallets to offer product visibility on three sides for merchandise display.

By 2000 annual sales had reached $25 million, with vending clients accounting for 30 percent of the total. Products in this area included two-ounce packages of Sweet ’N Salty Mix, Salted Peanuts, Sunflower Kernels, Honey Peanuts, and new Hot ’N Spicy Peanuts. During the year Kar Nut also broadened its direct-store delivery area to Ohio and Indiana, enhanced its Web site to include a consumer e-commerce feature, and expanded its Ferndale plant from 49,000 to 56,000 square feet.

The firm’s quality products and strong advertising presence in industry trade papers helped give it a high profile among vending operators, and in 2003 Sweet ’N Salty Mix was named Product of the Year in the salted snack category in Automatic Merchandiser’s annual reader’s poll, beating products from Kellogg, Kraft, and Frito-Lay. Vending operators found it sold well and was more profitable than candy, and reported that the combination of peanuts, sunflower seeds, raisins, and candy-coated chocolate drops tasted great. The product’s sales growth was also attributed to studies that found nuts to have health benefits, as well as their applicability to the low-carbohydrate diet craze. Vending machines in schools were coming under scrutiny as well, with bans on sugary snacks and sodas giving Kar Nut an opportunity to supply them with peanuts, raisins, and Sweet ’N Salty Mix.

The firm sourced raw nuts from growers in the United States and abroad, and in early 2004 it was one of many nut distributors forced to recall packages of almonds because supplier Paramount Farms had shipped some contaminated with salmonella. During the year the firm also introduced a series of four radio advertisements that touted the availability of its products at convenience stores, gas stations, and grocery stores in Michigan, Indiana, Ohio, and the Chicago area. It operated nearly 70 delivery routes to service these outlets with its products as well as snacks from other manufacturers including beef jerky.

COMPANY PERSPECTIVES

Kar’s Nuts offers a variety of tasteful and nutritious nuts and dried fruits, packaged primarily in single-serve sizes for sale in convenience stores, vending machines and club stores across the United States.

MOVE TO NEW PLANT IN 2004

As sales continued to grow because of its increased vending and club store business, Kar Nut’s food processing facility in Ferndale began straining at the seams. In addition to being cramped by the greater production and warehouse space required, the facility was too small for installation of more modern food processing equipment that could improve quality and efficiency. In April 2004 the company purchased an empty 131,000-square-foot steel fabrication plant in nearby Madison Heights for $4.8 million, receiving a ten-year tax abatement to help seal the deal. It would initially occupy about two-thirds of the space and lease the remainder until needed for future growth. The Ferndale plant and some of its equipment were later sold to Rocky Peanut Company of Detroit.

In December 2004 the firm moved into its new quarters after spending more than $10 million gutting and rebuilding the interior to food processing standards and installing new equipment. The latter included two massive roasters that together could process 14,000 pounds of nuts per hour, about four times the previous capacity. The new machines used a technique originally created to fry breaded fish, in which nuts passed through thin curtains of oil that was filtered twice before reuse, cutting consumption dramatically. New conveyance and mixing equipment also improved the consistency of mixed products to within .5 percent of target weights, versus a variance of up to 9 percent in the past. While most existing packaging equipment was retained, four additional case-packing machines were added.

The company celebrated the plant’s official opening in March 2005 with public tours and personal appearances by several Detroit Tigers legends. Large windows faced the processing area, and weekly tours were offered to school groups thereafter. Kar Nut produced 20 million pounds of nuts and snack mixes per year, distributing 100 million packages to vending machines and stores. The company had also shipped 26,000 packages of Sweet ’N Salty Mix to troops serving in Iraq.

In early 2005 Kar Nut won trademark protection for the popular Sweet ’N Salty Mix, which was being copied by a number of competitors. In the summer a new product aimed at children called PB&J Mix was introduced, which combined roasted peanuts with strawberry-flavored jelly drops.

In 2006 Sweet ’N Salty Mix was once again named top salty snack by Automatic Merchandiser readers, having slipped to second place behind Cheetos for a year, after winning in both 2003 and 2004. Kar’s PB&J Mix was also named best new product.

In the summer of 2006 the company unveiled a new logo and packaging design, which revived the Miss Kar peanut-shaped roadster automobile and driver. Detroit’s Vanguard Creative Group had spent nearly a year designing the packaging and an associated marketing campaign for the 100 product and/or size variations. The changes were touted in August at Detroit’s annual Dream Cruise car rally, with a sampling tent and a custom-painted roadster car driven by CEO Nick Nicolay.

Nearly 75 years after Sue Karpe began roasting peanuts for sale at Detroit Tigers games, Kar Nut Products Company had become a leading independent player in the nut industry, both in the upper Midwest and as a supplier to vending companies and club stores nationwide. The firm’s growth was continuing, aided by a new production facility and the popularity of its products among vendors and the public at large.

Frank Uhle

PRINCIPAL COMPETITORS

Kraft Foods, Inc.; The Procter & Gamble Company; Diamond Foods, Inc.; The Hershey Company; John B. Sanfilippo & Son Inc.; King Nut Company.

KEY DATES

1933:: Sue Karpe begins selling roasted peanuts outside Detroit Tigers games.
1939:: Company is incorporated and moves to larger quarters.
1946:: Operations are moved to the Detroit suburb of Ferndale.
1967:: Sue Karpe sells company to Bud Nicolay.
1992:: Kar Nut begins selling to national vending firms.
1995:: E. L. “Nick” Nicolay buys Kar Nut from his father and takes titles of president, CEO.
2004:: Firm moves to new, larger processing facility in Madison Heights, Michigan.
2006:: New logo and packaging designs are introduced.