Food & Beverage
A taste of success
How J&J Snack Foods’ Gerald Shreiber turned a soft pretzel into a $569 million business
By Erik Cassano
Smart Business Philadelphia | April 2008
In the early 1970s, Gerald Shreiber built his fledgling snack food
manufacturing company on one cornerstone product: soft pretzels.
Shreiber, founder, president and CEO of J&J Snack Foods
Corp., says that back then, soft pretzels basically had no variety.
They were some shade of brown, had a chewy texture and were
probably covered in large, white salt granules.
Scores of companies made them and sold them pretty much
the same way. If you didn’t have a loyal customer base or some
way to differentiate your product from the many others on the
market, you probably had a hard time taking a bite out of the
soft-pretzel market. It was the definition of a commodity.
In order to grow the company, Shreiber needed to either come
up with new products, new takes on established products or purchase companies who made products compatible with his company.
Shreiber’s answer? All three.
“We’ve done some of our growth organically, some of it by acquisitions, and more and more, we’re gearing ourselves toward innovation,” he says. “We’ve started to move toward innovation through
product extensions of what we’re in, new ideas coming from the
product lines we’re growing in.”
Along the way, Shreiber has discovered that a pretzel isn’t just a
pretzel when combined with innovation and a forward-thinking
leadership philosophy.
“Today, we are making (soft pretzels) in different sizes, shapes and
forms, to the point that one SKU has become 35 to 40 different SKUs
in our soft-pretzel category alone,” he says. “On top of that, we’ve had
maybe a half-dozen attempts to further grow that category that
weren’t ultimately successful.”
From humble soft-pretzel beginnings, J&J Snack Foods has grown
and diversified to the point that the company now offers a wide
array of snack foods, frozen foods and beverages. Shreiber says that
while every company has different needs and different goals, the
need to grow creatively is universal and speaks to the visionary
mentality that every CEO should cultivate.
Encourage innovation
Innovation can be an imperfect process. Shreiber found that
out firsthand a little more than a decade ago when J&J Snack
Foods — which garnered nearly $569 million in sales in fiscal
2007 — rolled out a line of oat-bran pretzels.
Oat bran was the “it” health food at the time, so J&J’s leaders figured they could get the company in on the ground floor of an emerging consumer trend.
But forces beyond the company’s control had other plans.
“We came out with the oat-bran pretzel maybe about 12 years ago,”
Shreiber says. “It tasted good, it looked good, we formulated it well,
put it in an attractive box, then we got it into the marketplace just in
time for it to be negatively impacted by the New England Journal of
Medicine, which said oat bran was overrated and didn’t deliver on
all the health claims attributed to it.”
J&J followed that up with a low-carbohydrate pretzel line introduced during the Atkins Diet craze of several years ago. Like the
oat-bran pretzel, the low-carb pretzels didn’t pan out the way
Shreiber had envisioned.
“We developed some pretzels with less wheat flour and other types
of formulation,” he says. “It looked good and was attractively priced
but just didn’t deliver on the critical element of taste.”
The moral of the story: Even a company that has had 144 straight
quarters of growth, as J&J Snack Foods has had during its nearly 36 years of existence, is still susceptible to missteps. But it’s
a necessary risk to take if you want to innovate as a company.
“We don’t encourage failure, but we do allow for the fact that,
now and then, every ball you hit isn’t going to go screaming
through the infield,” he says. “What we do is we discourage too
many excuses for why something didn’t work. We discourage
being stupid, and we discourage not working as a team.”
At J&J, ideas are allowed to well up from within the company. The
main conduit is a teleconference call every Friday morning that
includes members of the company’s management and the research
and development department.
Shreiber says the goal of the teleconferences is to move ideas
along as quickly as possible. New innovations do a company no
good if they are allowed to sit and gather dust in the company channels.
“We don’t want to sit and allow fresh ideas to become stale,” he
says. “We want to get them to an R&D center and get some samples
made by hand, in a lab, and have some product meetings.
“Oftentimes, there will be six, eight or 10 new products submitted
at a time, depending on the potential of the product and whether the
customer involvement is or isn’t there. We are working on ideas that
are three months out, and some [are] six and nine months out. But
all of our ideas have to pass certain rigid criteria in order to get
through our lab and idea-concentrated thinking.”
That criteria covers more than the marketability and customer
appeal of the product. Shreiber says that with any innovation
that might spawn a new product or service, you must first take a
long, honest look at your company’s capability to produce the
new item.
The first place Shreiber looks is at the financials. For an innovation
to make sense overall, it must first make sense financially.
“You go through the investment analysis, what kind of special
equipment it takes to do that,” he says. “From an introduction standpoint, you have to find out if you will be able to adequately produce
the product.”
If the idea makes sense from a production standpoint, you must
then find out if there is a demand for it. Shreiber says that requires
constant communication with vendors and customers as you take
the pulse of the market.
“Look, listen and communicate, and keep doing it until you’re
doing it almost 24 hours a day, seven days a week,” he says. “It’s
something we’re pretty good at, but we could always be better at it.”
At J&J, ideas that end up being presented at the Friday teleconferences usually have their genesis at the customer-interface level.
As J&J representatives speak with vendors, schools and other
places to which they sell the company’s products, the information
is fed upward in the organization — first to the regional level and
then to the national level. Along the way, ideas that lose steam or
otherwise run into roadblocks are usually filtered out. The ideas
that are acted upon are then fed back down through the organization for testing and feedback from end users.
Shreiber says innovation from a leadership standpoint is a balance
between sticking to your guns and remaining open to change. You
cannot stray too far from what your company does best, but you
can’t become so rigid that you choke off the creativity of your people.
“The great football coach Don Shula once said, ‘Always have a
game plan, but be prepared to change it at a moment’s notice,’”
Shreiber says. “You can’t be so structurally oriented that you appear
stiff-collared and buttoned-down. Some products are ready for your
aim, and as long as you have your sights set on that, you can move
on that. But you also have to stay on target.”
Look outside
Shreiber says a growth-by-acquisition strategy can grow up alongside an innovation-centered organic growth strategy. But, in order to
splice the two strategies into a single growth philosophy, you need
to define the goals of your company.
At J&J Snack Foods, a good acquisition is defined as a company
that produces products that complement J&J’s array of offerings.
Throughout the years, J&J has made several acquisitions, including
a rival soft-pretzel manufacturer, which helped solidify the company’s
standing in the soft-pretzel market, and a frozen beverage and snack
manufacturer, which allowed J&J to broach a new market while staying in the snack-food arena.
“A good acquisition should bring together different products,”
Shreiber says. “It should also complement and supplement different
goings-on in your company. For us, that means it should complement
what is going on in our research centers, put us in different categories, such as frozen novelties, apart from traditional snack foods
and beverages.”
But acquisitions aren’t just about the products you want to add.
Once you’ve made the decision to buy another company, you must
consider the people and culture you are acquiring along with the
company’s name and product line.
Shreiber says each acquisition is unique, bringing with it its own
set of challenges as you attempt to stitch together two cultures and
combine two sets of employees.
“Acquisitions are like your children,” he says. “Each one is unique.
They each bring different people with them, all talented, but each
with their own special set of skills. That’s why you have to mesh the
cultures very quickly, because you can’t let things just lay dormant
and sit there. That would only fan the forest fire because if you have
people who are not communicating and not working together, that
doesn’t work for anybody.”
J&J Snack Foods tries to complete an acquisition and integration
process in the span of several months. Anything quicker is likely not
realistic, and anything slower will likely create stagnation.
“You need to resolve any issues that come up and do it quickly,” Shreiber says. “That’s why we’ll bring these new people in,
integrate them with our people, listen to their ideas, give them
our views and make sure they mesh.”
Plan for growth
Shreiber has a favorite saying when it comes to growth: “You
have to reinvent yourself before someone else does.”
Either you are going to be proactive in leading the evolution of
your business or you are going to be reactive in trying to keep up
with the businesses that evolved first.
That’s why any growth needs well-defined, measurable goals
in place that your company can work toward. With defined
goals also comes the responsibility of consistently reviewing
them, something Shreiber has his management team do monthly.
“You need to establish your goals, measure your goals and
make sure the goals are reviewed,” he says. “First, there is
always the financial part of it. If you measure it monthly as we
do, it becomes a report card, just as you received in school. It’s
a summary of your time-frame goals.
“As a public company, we are measured on sales history, historical
growth, future growth and past performance, and to that end, I’m
most proud of the fact that my team has led us to 36 years, meaning
144 straight quarters, of profitability and increased sales growth for
each year.”
Shreiber says the key to maintaining a growth-oriented mentality, regardless of the manner in which you want to grow, is
to never become content. No matter how much growth and
success you have under your belt, always believe that you can
— and should — do more.
That is a mentality that needs to start with you and your senior leadership. If your company’s leaders are all on the same
page and communicating the same values to every employee in
your company, you will be able to achieve widespread buy-in
and get the full resources and manpower of your company
channeled toward the direction in which you want to point the
company.
“You can be satisfied and proud of what you’ve accomplished, but you need to have other managers share in the culture and vision,” Shreiber says. “In that respect, I feel very
lucky because my company is very fortunate to have leaders
who have been a part of our growth and existence. That’s a
must for any growth-minded company.”
HOW TO REACH: J&J Snack Foods Corp., www.jjsnack.com
