Address:
Avenida North Larch, 677
Elmhurst, Illinois 60126
UNITED STATES OF AMERICA.
Telephone:(630) 833-2900
Fax:(630) 530-8773
http://www.keebler.com
The statistics:
Public Subsidiary (55% owned by Flowers Industries, Inc.)
Built-in:1927 como United Biscuit Company of America
Employee:11.600
Sale:$2.66 billion (1999)
Exchange:New York
Action icon:KBL
NAIK:311821 Manufacture of biscuits and biscuits; 311919 Manufacture of other snack foods
Company outlook:
To succeed in the cracker and cookie impulse buy category, you must win customers day in and day out by having the right product in the right place at the right time. At Keebler, we do this by combining great branding and elven ingenuity with excellence in sales and distribution. In our industry, new products and innovative promotions are essential to capture this all-important impulse purchase. We combine our compelling products and promotions with an unparalleled convenience of service provided through our Direct Store Door Delivery (DSD) system. Through our own and operated DSD system we have 3,200 sales and distribution elves visiting 31,000 supermarkets and bulk retailers twice a week. The benefits of this close contact with our customers make the DSD system an invaluable asset for our company, not only in terms of delivery costs.
Important data:
1853:Godfrey Keebler opens a bakery in Philadelphia.
1927:The United Biscuit Company of America is founded.
1966:Keebler will be adopted as the corporate name and sole brand name for all of the company's products.
1974:UK-headquartered United Biscuit Company acquires Keebler.
1996:Keebler's Leveraged Acquisition of United Biscuit Completes; The Sunshine Biscuit Co. is subsequently acquired.
1997:Name change to Keebler Foods Company.
1998:Keebler Acquires President Baking Co.; Flowers Industries will become the majority shareholder of Keebler after the IPO.
2000:A Keebler acquires an Austin Quality Foods Inc.
Company history:
Keebler Foods Company, majority owned by Flowers Industries, Inc., is the second largest cookie and cracker manufacturer in the United States, selling its products in more than 75,000 retail locations nationwide and in select international markets. Keebler brands include Cheez-It, Famous Amos, Plantation, Murray, Ready Crust and the exclusive Keebler brand. In addition to producing its own branded biscuits and crackers, the company is recognized as a leading manufacturer of Scout biscuits, producing more than 60% of these biscuits by sales.
19th century origins
Keebler is named for Godfrey Keebler, who opened a small bakery in Philadelphia in 1853. Godfrey Bakery received the distinction of becoming the first member of a chain of local bakeries that would later be merged under the Keebler umbrella. The other constituent bakeries were opened in the following generations, neighborhood bakeries trading under the names of Streitmann, Hekman, Supreme and Bowman. The affiliated bakeries were controlled by a single corporate entity in 1927 with the formation of the United Biscuit Company of America in the car. A fleet of trucks enabled locally oriented bakeries to develop into regional bakeries and provided locomotion for a distribution system that expanded territory. By 1944, the affiliate network included 16 bakeries whose geographic reach included markets stretching from Salt Lake City, Utah to Godfrey Keebler's hometown of Philadelphia.
More than a century has passed since Godfrey Keebler's Bakery opened before the Keebler name was adopted as a unified corporate title for the entire organization. In the decades leading up to this momentous decision, the biscuits were marketed under their respective bakeries' brands, a wide variety of products and labels as varied as the number of bakeries that made up the United Biscuit ranks. Eventually, however, the bakery chain's leadership streamlined its organizational structure, emulating a corporate trend that was spreading from coast to coast. In the 1960s, numerous companies took advantage of the centralization of all corporate functions into a single entity. United Biscuit management followed suit and realized that greater business efficiency, quality control and marketing effectiveness could be achieved by operating under a corporate banner. In 1966, Keebler was adopted as the company name for the bakery chain and as a uniform brand name for all baked goods.
While the debut of the Keebler brand marked the launch of one of the country's most recognizable brands, the Elmhurst-based company's enviable marketing prowess wasn't enough to defeat its closest rival, Nabisco, Inc. Like Keebler, Nabisco was founded by a consortium of bakeries that began operations in 1898. By the latter half of the 20th century, the New Jersey-based cookie and cracker maker had become a formidable force, and its market share was the yardstick by which Keebler's progress was measured.
The 1974 acquisition of United Biscuit proved a failure
Keebler remained an independent company until 1974 when it was taken over by the United Biscuit Company, one of the UK's largest food manufacturers. Within United Biscuit's corporate structure, Keebler functioned as a unit of UB Investments US Inc., a subsidiary of the UK parent company, which would run Keebler's operations for the next two decades. Organized as such, Keebler continued his eternal struggle with Nabisco, but eventually the strategy underpinning the company's war plan proved self-defeating. At the behest of United Biscuit, Keebler focused on developing and marketing savory snack foods like Zesta Saltines, which critics say diverted the company's attention away from its core specialty of cookies and crackers. Additionally, Keebler has been criticized for attempting to compete directly with strong Nabisco brands such as Frito-Lay, rather than increasing its market share in product niches where Nabisco's strength was most vulnerable. Ultimately, United Biscuit's ownership time made Keebler an unprofitable business, a time he claimed.ADWEEK East Editionon October 11, 1999, when Keebler "got almost everything wrong." In 1995, the last year under United Biscuit's control, Keebler reported losses of $93 million. It is time to make deep changes.
1996: New management ensures rapid growth
Two people have been credited with Keebler's rebirth, Sam Reed, who would become the company's president and CEO, and David Vermylen, who would oversee the management of Keebler's brands. Vermylen worked for General Foods for 14 years, marketing brands such as Stove Top Stuffing, Bird's Eye and Post Cereals. In 1988 he and his wife entered the business and the two worked as marketing consultants for the next three years. In 1991, the Vermylens received a call from Sam Reed, who had worked with Vermylen's wife a decade earlier. A veteran of the snack and baking industry for over 20 years, Reed was on the verge of becoming the new CEO of Mother's Cookies and asked the Vermylens for help developing marketing strategies. David Vermylen and Sam Reed eventually worked side by side at Mother's Cookies, with Vermylen joining the company as vice president of marketing before being promoted to president.
Reed and Vermylen joined Keebler in January 1996. Concurrent with their arrival, a leveraged buyout (LBO) of the United Biscuit business was initiated, which will hopefully put Keebler back in a position to turn a profit. Thomasville, Georgia, Flowers Industries, a manufacturer of fresh and frozen baked goods, and Artal Luxembourg S.A. acquired Keebler through a joint venture agreement, installing Reed and Vermylen as the saviors they would soon prove to be. The company's vice president of research and development remarked in a November 1999 interview withFood processing:'The leveraged buyout was a catalyst for a major shift in our approach to strategic direction. Sam Reed set the tone and pattern and gave permission for the change. Reed radically changed Keebler's organizational structure, placing a greater emphasis on research and development, an aspect of the company's operations that benefited from the era of United Biscuit ownership. In 1996, Keebler opened an 83,000 square foot engineering center in Elmhurst for cookie and cracker development projects. Designed to emulate a functional bakery, including receiving docks, mixing room, ovens, and assembly lines, the engineering center allowed Keebler to test every possible scenario and allowed Reed to create products for niches where Nabisco's dominance was less resilient.
New product launches played a key role in the turnaround campaign that began in 1996. Reed instilled a new spirit of freedom and creativity in employees and reorganized the R&D chain of command. New products, over a dozen a year, were the result. Meanwhile, Vermylen developed a portfolio strategy that Keebler singled out as a trademark of the company. To that end, Reed resurrected Ernie Keebler, a cartoon character who served as the company's spokesman, and his helper elves. The use of Ernie Keebler and the Elves was discontinued under United Biscuit ownership, but the fictional characters played a prominent role in the company's advertising and marketing campaigns and as a symbolic centerpiece of the new corporate culture fostered by Reed and Vermylen.
The most visible aspect of Keebler's progress after the LBO was on the acquisition front. About six months after joining Keebler, Reed acquired Sunshine Biscuit Co., the third largest cracker and cracker manufacturer in the United States. Sunshine Biscuit was best known to consumers for its snack food brand Cheez-It, which had annual sales of $125 million at the time it acquired Keebler. Reed hoped to increase the brand's sales volume by distributing Cheez-It through new distribution channels and relying on its R&D department to create new varieties of Cheez-It snacks. Under Sunshine Biscuit ownership, Cheez-It snacks were sold in supermarkets and convenience stores, a distribution base Reed built by making the brand available in vending machines and mass retail stores. As consumer contact increased, Cheez-It sales began to soar, particularly after a spate of product line expansions. Keebler introduced Hot and Spicy Cheez-It, Nacho Cheez-It, Cheez-It Chip-Its, and Cheez-It Heads and Tales cookies for kids. The new product offerings and additional distribution channels through which Cheez-It snacks were sold significantly increased sales, doubling the brand's sales volume by the late 1990s.
The resounding success of the Sunshine Biscuit purchase convinced Reed of the profits to be had by pursuing growth through acquisitions. To fund further acquisitions, Reed celebrated his second anniversary at Keebler by taking the company public and conducting an initial public offering (IPO) of shares in January 1998. Nearly 12 million shares were sold at a price of $24 per share, giving Reed the financial resources to consider his next move on the acquisition front. In September 1998, he entered into an agreement to acquire a private company owned by Taiwan-based President Enterprises Corp., Taiwan's largest food company. Reed's target was President Baking Co., a nearly $500 million cookie maker that ranks as the fourth-largest company of its kind in the United States. Atlanta-based President Baking made famous Amos cookies, Plantation brownies, Murray and Murray sugar-free cookies and was ranked as the top supplier of Girl Scout cookies, accounting for 60% of total production.
Keebler's acquisition of President Baking was strategically important for a number of reasons. Keebler enjoyed tremendous national brand recognition, but if the company had a geographic weakness, it was in the southeastern United States, where President Baking's Murray brand of biscuits was strongest. In addition to providing a core customer base in the Southeast, the Murray brand has also pushed Keebler, which is considered a premium brand company, into the value brand category. Equally important, President Baking had a distribution system focused on supplying products to convenience stores, complementing Keebler's strength in distributing cookies and crackers to supermarkets.
In January 1999, Reed formed two new business units to integrate distribution of President Baking's brands into Keebler's existing distribution system. Mother's Cookie Co. was formed to oversee the Girl Scout Cookie business and other specialty businesses, and the Murray Biscuit Co. was organized to manage the direct store supply and channels of the direct selling group. President Baking Co. Inc. was formed as a wholly owned subsidiary of Keebler. As the arduous task of inducting President Baking into the growing Keebler organization progressed, the effect of Reed's influence on the company became clear. In less than three years, he had nearly $1 billion in sales while achieving a remarkable turnaround in profitability. Keebler's $93 million loss before he arrived turned into a $265 million profit in late 1998. Compared to Nabisco's 40% market share, the progress made under Reed's leadership has been remarkable. The announcement that the purchase of President Baking was the first of many upcoming acquisitions promised further progress in the near future.
As Keebler entered the 21st century, Reed demonstrated his commitment to new acquisitions by announcing an outstanding $250 million deal. In January 2000, he agreed to acquire Austin Quality Foods, a $200 million maker of crackers and crackers best known for its Zoo Animal Crackers brand. Shortly after the Austin Quality Foods deal, speculation arose about Keebler's relationship with its parent company. Flowers Industries was expected by at least some to sell Keebler or spin it off as a separate company sometime in 2000. As industry insiders offered their various theories about the impact of Flowers Industries' future decision on Keebler, one fact remained clear. Keebler made impressive strides under Reed's dynamic leadership, something the company should do going forward regardless of its relationship with Flowers Industries.
Main offices:BakeLine Products Inc.; Pequenos Brownie Baker; Denver Bakery Keebler Co.; Chicago Bakery Keebler Co.; Presidente Baking Co. Inc.; Sunshine Biscuit Co.
Main competitors:Nabisco Holdings Corp.; Campbell Soup Company; Lanze, Inc.
Additional reading:
Cohen, Deborah L., "Despite Elves' Efforts, Keebler's Stock Plunges: Wall Street Shakes the Hollow Tree",Crains Chicago Business,23. August 1999, p. 4.
------, “Keebler spin-off takes root for flowers; Owner's Dilemma: Free Keebler or Taking Risk,'Crains Chicago Business,April 24, 2000, p. one.
Dahn, Lori, 'Work Magic'food processing,November 1999, p. 37.
"Flowers increases Keebler's stake to 55%"nation restaurant news,23 February 1998, p. 92.
Gottesman, Alan, 'Tem Cookies?,'ADWEEK East Edition,9 February 1998, p. 16.
'Keebler Launches Two New Business Units'US Sales Newspaper,January 1999, p. 74.
Lo Bosco, Maryellen, 'Keebler Foods Agrees to Buy President Baking'supermarket news,21. September 1998, p. 43.
Lukas, Paul, "Oreos to Hydrox: Resistance is futile",Fortuna,March 15, 1999, p. 52
Rewick, C.J., "Keebler Seeks First Deal Since IPO"Crains Chicago Business,3. August 1998, p. 3.
Somasundaram, Meera, “Strong European Dynamics in US Grocery Market”Reuters,26. June 2000.
Those: International Directory of Business Stories, Bd. 36. St. James Press, 2001.