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Dreamers Build Great Companies

March 1, 2007
Mel Coleman Jr. of Coleman Natural Meats, Fred Ruiz of Ruiz Foods and Gerald Shreiber of J&J Snack Foods all made their dreams into $500 million companies.

One's a cowboy, another the son of a Mexican immigrant. One brings his dog to work every day.

We weren't looking for People magazine fodder when we started researching this feature; we simply wanted three diverse companies that were rising stars in their niches. But in finding the companies, we also found the strong personalities that made those food processors what they are today. We found leaders, often founders, whose personal beliefs, ethics and even style are inextricably woven into the fabric of these companies.

Natural is a word that just as aptly describes Mel Coleman Jr. as his company, Coleman Natural Meats. Fred Ruiz is an Horatio Alger story; he and his Mexican immigrant father started Ruiz Foods by cooking up Mama's recipes with kitchen appliances. And while he admits to being a little more hands-on than some are comfortable with, Gerald Shreiber plucked J&J Snack Foods out of bankruptcy court and has steered it through a series of acquisitions that leave it nicely poised to take advantage of healthy snacking trends.

These three companies are no small potatoes, either. Each has surpassed the $500 million mark in annual sales and arguably is the leader in a niche that each has done much to define.

Although the leaders of these companies have different backgrounds, they have the qualities that make America great -- entrepreneurial, visionary, enthusiastic, willing to take risks and dedicated to making the best foods possible. We salute them.

Home on the range … naturally

Mel Coleman Jr. - Coleman Natural Meats

Mel Coleman Jr., equally comfortable wearing a suit or jeans and a Stetson hat, tells us his family was ranching in Colorado a year before it became a state. "In 1875, my great-great-grandfather settled in Saguache and started Coleman Ranches," he says proudly. The rest is "natural" history.

His father, Mel Coleman Sr., who advocated and practiced sustainable ranching and animal welfare, raised cattle without the use of antibiotics or added hormones. Mel Sr. never cottoned to the use of antibiotics or hormones because of his love for animals, and he was a conservationist visionary. He founded Golden, Colo.-based Coleman Natural Meats, introducing the market to "natural" meats in 1979.

It took many years for consumers, retailers and regulators to catch up to his philosophy. Mel Sr. was the driving force in convincing the USDA to create the "natural" classifications for beef and, a decade later, to create the organic classification for meats and poultry. The company was the first USDA-certified natural beef producer.

Background Information

BC Natural Foods (an alliance of Coleman Natural Meats, Petaluma Poultry, Gerhard's Sausage, B3R, Penn Valley Farms and Pennfield Farms) merged in August 2006 with KDSB Holdings LLC, Gainesville, Ga., a producer and supplier of cooked and deli poultry, to create Coleman Natural Foods LLC, the leading U.S. processor, marketer and distributor of fresh and further prepared natural and organic animal proteins. Mel Coleman Jr. serves as chairman. With the merger, Coleman Natural Foods is one of the top natural meat processors in the country, with revenues in excess of $600 million a year.

From rancher to processor

"My family ran a commercial cattle ranch, raising livestock for the purpose of food," says Coleman. "At the highest point including deeded and leased land, we ranched some 250,000 acres, running about 3,000 cows."

During the mid- and late-1970s, the commodity cattle markets were not conducive to economic sustainability on the ranch. "One evening at dinner, my sister-in-law, a student at the University of Colorado, mentioned that many of her friends wanted to buy meat that came from livestock raised without antibiotics and growth hormones," he recalls. "We never used hormones on the ranch. If an animal got sick, we treated it and segregated it from the herd. So the idea clicked in my dad's mind. He decided he would no longer sell nine-month-old calves, but raise them to maturity (18 to 22 months) and get into the meat business to sell natural beef branded as Coleman."

Since all the animals were raised naturally, Mel Sr. stamped the carcasses "natural," which raised a red flag at the USDA. "An inspector said we couldn't do that," says Coleman. "He said natural meat has to have a definition, but he didn't have one in his book. So dad drove to the regional office in Boulder, figuring he would get that taken care of in a couple of days. That was 1979. It took until 1981 for the USDA to establish a definition for natural, as it pertains to how livestock is raised."

In 1982, the definition was changed by USDA to be pertinent only to the end product, not how the cattle are raised. The definition now reads: "During processing, nothing synthetic is ever added to the meat, including preservatives, and the product is only minimally processed."

Mel Jr., who graduated from Western State College in Gunnison with a major in business and education, went to work in agricultural irrigation engineering and manufacturing because he feared the family ranch couldn't support another person. "All that time, I felt guilty about not being on the ranch," he says. "I came home in 1984, and when the meat processing business began, everything I had learned in the irrigation business dovetailed with what we were trying to do at Coleman."

On the red meat side of the business in Colorado, Coleman has 350 employees. But after the merger, there are nearly 2,300 employees at 17 locations in six states (Colorado, Illinois, Pennsylvania, New Jersey, Georgia and California). Brands include: Coleman Natural, Coleman Organic, Coleman All Natural Deli, Rocky the Range Chicken, Rocky Jr., Rosie the Organic Chicken, Hans' All Natural, Hans' Organic, Kings Delight, Clux Delux, Lake Lanier Farms, Anchor Bar, Executive Chef and Snowball.

"There are so many facets when you evolve from a conception to consumption business," says Coleman. "It's vertically integrated, with people involved with livestock raising and production, processing in the plant and marketing. It requires a variety of talents. If we make a mistake in any one of those areas, it affects us all.

"Leadership is vision. You delegate both responsibility and authority to those on the team," says Coleman about his management style. "Once you define where you are going, have a mission statement and goals and objectives in place, you hire people with the skills and experience to effectively do what the job entails. You then build a synergy that creates an atmosphere where people can have fun and also be creative."

Coleman looks at corporate responsibility as a combination of economic, environmental and social goals. "Our mission statement says, 'By understanding our customers, we will define and lead in the profitable marketing of superior quality certified natural and organic meats, raised and produced using ecologically focused principles.' The motto that has facilitated our internal growth is 'When the winds of change blow, build a windmill, not a shelter.' Over the past 25 years, we learned that any kind of growth brings change."

The best advice Coleman received from his dad was to always work toward passing on to the next generation an inheritance that's in better condition than when you received it. "As ranchers, the stewardship of natural resources, the care and welfare of animals and how we treat people and interact with our neighbors are key components of that philosophy.

"Once we got into the meat and poultry business, passing an inheritance to future generations took on a more global context, because we were working with over 900 family farms and ranches. Also, after interacting with consumers at retail, we saw a disconnect -- many consumers really don't know how and where their food is produced."

To help remedy the disconnect, to provide consumers with a vehicle to actively participate in conservation, and to support its founding principles, the company launched the Coleman Eco-Project 2015 in 2005. The Eco-Project is a decade-long conservation program designed to raise awareness about the link between conservation, healthy land, healthy food and healthy people, and to connect consumers with where and how their food is raised and produced. So far, the company has released a warmly received guide (the "Rocky Mountain Agricultural Landowners Guide to Conservation and Sustainability"), is hard at work on a consumer brochure and web site about the 2007 Farm Bill and has planted nearly half a million trees in eight states in the past two years.

Coleman's core consumers typically shop in natural and organic channels, as well as at mainstream retailers. They are highly educated, home owners, aged 25-54, and have children of all ages in their households. "We've noticed our consumers are starting to track younger and incomes are moving slightly lower, but they continue to be well-educated and home owners -- which reflects a broader acceptance and understanding of natural and organic products," says Coleman.

"Mainstream consumers might not be as familiar with the natural and organic categories but are being converted as they learn about it. We've also started to see an up-tick over the past few years in Asian and Hispanic consumers."

Coleman asks customers why they buy natural or organic. The top reason is the product is grown without pesticides and added hormones, followed closely by no antibiotics. The natural claim tracks very high, as do no artificial preservatives, made without genetically engineered ingredients and sustainably farmed.
"There's been a significant jump for our core consumers (tracked from 2002 to 2005) to no pesticides (+6 percent), no hormones (+6 percent), without GM ingredients (+7 percent), and organics (+9 percent)," says Coleman. Core consumers constitute about 70 percent of the market for natural and organic products and newcomers make up 30 percent -- which means they drive one-third of the market and are the reason natural and organic is growing by double digits.

Health and convenience reign

On the new product front, Coleman recently rolled out Coleman Natural Hampshire Pork. Hampshire is a heritage breed, known for its well-distributed internal marbling, unique flavor profile and consistent taste. Only 19 family farmers, who adhere to Coleman's standards for the natural category -- no antibiotics, added hormones, preservatives or artificial ingredients -- raise the animals in a low-stress environment. They are fed 100 percent vegetarian feed.

Other 2006 introductions include 100 percent beef hot dogs, frozen beefsteaks, pork chops and deli-meats. "And our all-natural deli meats contain no nitrates, nitrites, binders or fillers, and our bacon has no nitrites or nitrates and no trans fat," says Coleman.

Coleman's strategy for growth is to offer natural and organic products to a broader audience. "We have a strong retail base, but are reaching out to institutional and foodservice groups," he says. "We're breaking new ground in terms of the breadth of proteins we offer, the new product introductions, and the capabilities we have in the natural and organic sector are unmatched.

"Life events -- serious health issues and having a child -- drive awareness for products like ours," he says. "This year, we launch a new kids line including chicken patties, nuggets and tenders. Parents want to buy the best products possible for their kids.

"Chemicals made food production more efficient, and the driving factor to make it more efficient was that consumers were looking for cheap food. The whole concept of reducing the use of chemicals in agriculture and food production starts with producers who make that product available. But it also depends on consumers, who must vote at the cash register for natural/organic production models. If they don't, it won't work.

"The biggest enemy of the natural and organic category, for producers and consumers alike, will be a commodity mentality," says Coleman. "A commodity mentality lacks the commitment to do something for the next generation."

Only in America

Fred Ruiz -- Ruiz Foods

It's an "Only in America" story. Immigrant family with strong family values works hard, sees opportunities where others don't and succeeds. Then they give back to the community by funding programs focusing on children and education. That's the legacy of Dinuba, Calif.-based Ruiz Foods, a family-owned manufacturer of authentic Mexican frozen foods.

Situated on 43 acres in the heart of the San Joaquin Valley is Ruiz Foods' headquarters and main manufacturing facility. Plants in Tulare, Calif., and Denison, Texas, help Ruiz Foods manufacture more than 200 products under the El Monterey brand, all with an authentic Mexican touch and many based on the recipes of family matriarch Rose.

"Our family has been in the U.S. for about 85 years," says Fred Ruiz, co-founder, chairman and CEO. "In the early 1960s, my dad, who has always been an entrepreneur, and his brothers founded a tortilla company, so we moved from Los Angeles to the central valley. It was the largest tortilla company in the country, but the brothers didn't get along. One day, my dad walked away from it. I was angry for a while, because I thought it was going to be my future. But when I finished college, he told me he had an idea to start a frozen Mexican food company."

Background Information

Father and son began making cheese enchiladas and selling them locally. They started with the family's two-door twin chest freezer and Kitchen Aid mixer, found an old stove in a junkyard and set up the kitchen. "I was in charge of manufacturing and dad was in charge of sales," says Ruiz. He confides he made some "really bad stuff," but quickly learned that in the food business quality and consistency are really important.

"A few years later, we moved to an existing poultry plant so we could start making meat enchiladas and burritos," says Ruiz. "Through it all, the most important ingredient was the recipes my mom prepared for us when we were growing up. That's what makes America great; it's a revitalization of enthusiasm and people, who can see opportunity where others don't."

Under state inspection at the time, their business grew. But when the USDA began inspecting, "They said we were producing too much product in our plant," says Ruiz. "They gave us three options: expand the existing building, build a larger facility or cut back on production -- which I thought was unAmerican."

The Ruizes borrowed money from the Small Business Administration and built a larger facility, going from 2,500 to 11,000 sq. ft. In 1990, Ruiz moved its corporate headquarters to Dinuba where the company built a new manufacturing facility and distribution warehouse (now 250,000 sq. ft.). Then came a 20,000-sq.-ft. manufacturing facility in Tulare in 2003 and last year a 260,000-sq.-ft. manufacturing facility and distribution warehouse in Denison, Texas.

"Our business has always experienced double-digit growth," says Ruiz. "We've been riding this wave of Mexican food popularity via the growth of the U.S. Latino population. Today, it's much more competitive with many more players.

Ruiz emphasizes that he and his father had a lot of help. "Our team members have been a great competitive advantage for us. I learned a long time ago when the accountants and lawyers say you can't do things, but you bring people together and focus on the task at hand, it's amazing what you can do. There is a lot of power in people when you channel that effort. We have 2,500 team members, and many have been with us for many, many years."

In his niche of the food business, authenticity is as important as consistency. "Being Mexican, I know what authentic food tastes like, and we've always flavored our products the way my mom prepared enchiladas, tacos, burritos and tamales at home. We started on this path, and we're very fortunate that consumers have grown with us."

While he credits the mass popularity of Mexican food to restaurants like Taco Bell and El Pollo Loco, "Our food is not Americanized, and that's a competitive advantage. When major food companies conduct focus groups for a Mexican product, they ask if the food tastes good and if the consumer would buy it. One thing they don't ask is, does it taste Mexican?"

As Mexican consumers have acclimatized to the U.S., they have changed their cooking and eating habits, according to Ruiz. Second-generation Latinos, who are now Americans, work hard and don't have as much time to prepare food, so they are looking for convenient ways to feed their families. "They know what good Mexican food tastes like, so they are very much a consumer of ours. In fact, we get letters from them all the time thanking us for picking up the slack."

Ruiz has great expertise on trends in the Mexican/Hispanic community. "The issue of spiciness and authenticity is an important trend," he says. "Not only is the Latino migration impacting the Anglo population, but the Anglo population is more global. They travel to different parts of the world and are exposed to many ethnic foods. People are not afraid to try spicier foods, so I see ethnic foods in general continuing to grow."

"R&D is really important to us, in fact, we have a mandate: I ask that 20-25 percent of our sales every year come from new products," says Ruiz. A new product takes time from introduction until it achieves success, up to four years, according to his expectations. "But if a product does not earn its right to the table, we discontinue it," he says.

"Innovation is what retailers are looking for, so we try to build that into our whole business. We build teams around our key customers, with their own sales, marketing, logistic and R&D support. That's really important. There are so many changes at the retail level, so it's not uncommon for us to have a new buyer with limited experience. It becomes our responsibility to educate them about our products so they can be successful. We want our customers to look at us as part of the solution, not a problem."

Some 20 cents of every dollar spent on Mexican frozen food is spent on El Monterey products, according to Information Resources Inc. Despite this success, the company also strives to be an efficient, low-cost manufacturer.

Ruiz's strategy for growth might include an acquisition, and that's more likely to happen under the next generation of family leadership -- which started 2005 when his elder daughter, Kim Ruiz Beck, was named vice chairman. That transition continued last year with the promotion of his son Bryce to president and COO.

"We have many ideas for new products and have hired a new marketing person to strengthen that side of our business," he says. "The Go Go Taquito, a product developed specifically for 7-Eleven, and the El Monterey Tornado are the result of our new product innovation initiative and serve the consumer's increasing desire for quality products that are hot-to-go." A rolled tortilla dipped in a seasoned batter and stuffed with savory meats and real cheeses, Tornados have given new life to roller grill in c-stores, movie theatres and other gran-and-go outlets.

Ruiz serves on Governor Arnold Schwarzenegger's Healthy California Food Initiative Committee. Early in 2006, Ruiz announced the removal of trans fats from all its El Monterey brand products. "It's the responsibility of food companies to make our products healthier, and we are taking that very seriously," he says. "Can we take additives out? We're working with vendors to see if they are necessary. There's a new consumer awareness that all processors have to be sensitive to, and we need to respond to these issues.

"I think the most important thing is doing the right thing for our family, customers, and business," Ruiz says about his philosophy of life. "Hard work, honesty, sharing, fairness and communication are keys.

"It's sometimes a little painful to be a Latino because of immigration issues. Most of our employees are Latino; they work very hard, add a lot of value and contribute to the U.S. economy. Border issues are the responsibility of government. I try to be a role model, give them opportunities, improve their education by helping them get their GEDs and college scholarships, improve their quality of life and provide good healthcare programs."

Ruiz Foods has a legacy of community involvement, and Fred Ruiz is involved with the University of California Board of Regents, Institute for Family Business, California Chamber of Commerce, Ruiz 4 Kids, and others. "There are great needs out there, and making a difference in people's lives is important," he says. "Saying no is really hard."

Piecing together a $515 million company

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?"

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