Different is good

Gerald Shreiber - J&J Snack Foods

Gerald Shreiber sold his machine parts business and went to bankruptcy court in 1971 looking for a new opportunity. “I found this little soft pretzel company in the throes of bankruptcy proceedings,” he recalls. “It had old, tired equipment, eight employees and $400,000 in sales, but more heart than you could measure.”

For $72,100 he got J&J Soft Pretzel Co.  Thirty-five years later, J&J Snack Foods Corp., Pennsauken, N.J., is a $515 million processor and marketer of soft pretzels, frozen juice bars and frozen beverages in both retail and foodservice. The company has enjoyed 35 straight years of growth in both sales and profitability, has a listing on NASDAQ’s over-the-counter stock exchange and was named one of the 200 Best Small Companies in America by Forbes magazine for the fourth year in a row (and six times overall).

“The [bankruptcy] judge wanted to know what I would name the company,” Shreiber says. “I told him National Snack Foods, but after I wrote out ‘NSF,’ I realized that’s what was stamped on bounced checks for ‘not sufficient funds.’ That was not a good way to start, so I kept J&J, figuring I would change it later. But later never came.”

A self-described “street kid,” Shreiber now lives on a farm with his family, six dogs, eight horses and some goats. “I don’t have a country club membership, but one of the privileges I have as CEO, founder and controller of the company is I can bring my dog Scout to work,” he says.  “Some call me eccentric, and one critic told me I treat dogs like people and people like dogs. Naturally, I disagree with that assessment. I wear my feelings on my sleeve, and it’s not hard to tell where I come from and what I stand for.”

Shreiber, the eldest of four children, used to get up at 4:30 in the morning to work in his father’s produce store before school. “My father was a hard worker and taught us a good work ethic and values,” says Shreiber. “He taught us that pride and discipline comes from hard work, and to not be afraid to do whatever is necessary to succeed.”

From a single product category — soft pretzels sold in the Philadelphia and south New Jersey areas —  J&J Snack Foods today covers the whole country and beyond with many products. Soft pretzels remain at the forefront, including a variety under the Superpretzel brand, PretzelFils (stuffed soft pretzel sticks), Texas Twist, Baker’s Best, Gourmet Twists, topped soft pretzels and CinnaBon (a trademark of CinnaBon Inc.) CinnaPretzels.

“It seems like only a few years ago, we were doing less than $1 million in soft pretzels, and naysayers were saying growth was impossible,” says Shreiber. “Now soft pretzels represent 30 percent of our sales, almost $140 million a year.”

Frozen beverages include Icee, Slush Puppie and Arctic Blast. Frozen juice treats and desserts are marketed under the Luigi’s, Icee, California Natural, Minute Maid Soft Frozen Lemonade and 90 percent Juice Bars, Barq’s, Shape Ups, Chill and Mama Tish’s brands. “I think Icee has tremendous potential and equity, as do the Minute Maid products, particularly in foodservice, and sales are growing sharply each year,” confides Shreiber.

Bakery brands include Mrs. Goodcookie, Camden Creek Bakery, Readi-Bake and Country Home. Other unique niche products are sold under The Funnel Cake Factory and Tio Pepe’s Churros (pastry stix) brands.

“We have a major presence in Mexico with our frozen beverage company Icee,” says Shreiber. “We have a presence in Canada, Japan, Singapore, Korea and we’re looking at other opportunities in Central America and Europe. Right now, 98 percent of our business is in the U.S., [but] with the rest of the world to develop and expand our business, we are very bullish about the future.”

Discussing his management style, Shreiber says, “I’ve been fortunate to gather people who share our vision and goals and fit in to the team.” He admits to being hands-on, although he’s mellowed over the past few years. “I like to create opportunities for our 2,600 employees. I can fly over things at 20,000 feet, but sometimes I’ll get down to the floor. It’s a paradox of close connection and ‘let them do their job.’ ”

It’s important for J&J Snack Foods to have good communication because products are manufactured and marketed across the country in 10 plants New Jersey to California and ranging in size from 200,000 to 300,000 sq. ft. “Certain challenges — how to grow and expand sales — keep me up at night,” says Shreiber. “Other major challenges are the rising cost of commodities like corn, flour, shortening, sugar, eggs and chocolate and packaging.”

A timely product mix

“We want our products to be ubiquitous, and don’t want anyone to make what we make better than we do,” Shreiber continues. “Over the years, we established objective criteria including: create a quality niche product, be a good low-cost producer and maintain marketing and distribution channels.
“Our strategy emphasizes the development of new and innovative products that can expand not only into our existing market channels but to new ones. Our products are in schools, sports team venues, chain stores, fast food restaurants and retail venues.”

2006 was another good year for J&J. Sales jumped by 13 percent, with double-digit increases in all key business segments plus two acquisitions: Slush Puppie and Icee of Hawaii. Sales broke $550 million, up from $457 million the year before. In fact, earnings per share have tripled in the past six years.

“We have customers coast-to-coast, including Target, Wal-Mart, Sam’s, Aramark, Sodexho, Sysco and U.S. Foodservice.” And J&J Snack Foods’ products are in some 30,000 supermarkets across the country.

There is a difference in product development timetables in foodservice versus retail, according to Shreiber. “Product creation isn’t that different. But in foodservice, bringing a product from concept to testing is pretty quick – three to five months,” he says. In retail, it can take significantly longer. “The product must have nutritional, packaging and marketing support. And in frozen retail, you have to get out there, obtain a slot and pay a slotting fee.”

J&J Snack Foods’ consumer ranges in age from 4-84, and they are brand loyal, he claims. Because products are naturally wholesome, the company has had great success in school foodservice and vending.

Shreiber expects the trend toward healthy products to continue. “We have reformulated products ahead of the curve, because we don’t want to get there when the wave breaks,” he says. “By and large, we’ve successfully met the trans fat challenges for taste, and added products made of whole wheat and other grains with R&D initiatives in six of our plants.

“We still look to grow our business faster than the normal industry rate,” says Shreiber, and that probably requires acquisitions. “We’ve been pretty good at finding these neat, little strategic companies under the radar screen, buying and making them fit.”

Asked whether J&J Snack Foods would ever welcome a buyout offer, Shreiber admitted, “From time to time, there have been inquiries made by terrific companies and people. But we are all having so much fun and some success at what we are doing now, so it’s not at the top of my to-do list. After all, how could I get an agreement to let my dog come to the office every day?”