A taste of success Featured

8:00pm EDT March 26, 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