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For 110 years, jams and jellies have set them apart, now a rare business model of co-CEO brothers does it
By Betty Lin-Fisher
Beacon Journal business writer
Published on Sunday, Aug 12, 2007
It would be rare for a great-grandson to enter the family business.
It would be rarer still for two brothers to do it and lead the company as co-chief executive officers.
And industry researchers say it's even more unlikely to have five members of a family's fifth generation working their way up in the company to perhaps one day take over.
Research shows only about 3 percent of family-run companies will make it to the fourth generation and perhaps as few as 1 percent will reach the fifth.
But that's what makes Orrville-based J.M. Smucker Co. so unusual.
Consumers might not give it a thought when they buy a jar of strawberry jam, but the executives behind the product, brothers Tim and Richard Smucker, have worked full time for 38 and 35 years, respectively, and as leaders for the last 21 years.
And while the company still is perhaps best known for jam and jelly, it's not the same company that their great-grandfather founded 110 years ago though it still relies on the same values.
In fact, it's not even the same company the brothers helped run for a time with their late father, Paul.
Since 2001, Smucker has tripled in size, scooping up through acquisitions such iconic brands as Jif, Crisco, Pillsbury, Hungry Jack and this year, Eagle Brand condensed milk.
Its sales have exploded from $650 million in 2001 to a projected $2.1 billion this year. The company now has 15 manufacturing facilities in the United States and two in Canada. And as the Smucker brothers prepare to preside over the 2007 shareholders meeting Thursday in Wooster, the company's stock has increased by 160 percent from $24.45 in 2001 to a high of $63.66 on June 29.
Their father would be thrilled, but not surprised, by the company's growth and success, said Tim Smucker, 63, the elder of the two brothers by four years.
In fact, Paul Smucker conceived the ideas for the company's pattern of growth 25 years ago when he first tried to convince Procter & Gamble to pair peanut butter with jelly by selling its iconic Jif brand to Smucker.
''We're very patient,'' said Richard, 59, with a chuckle.
The Smucker family Tim, Richard, older sister Susi and their parents would talk about business at the dinner table when the children were growing up in Orrville.
Sometimes the discussion was about the company's future. Other times it was about product ideas some that were winners and some that appeared, at first blush, to be losers.
Richard: ''Dad would come home and say, 'We're a regional company that should be national.'''
Tim: ''His goal was always growth, he didn't like to look behind him.''
Richard: ''He once came home with a Pop Tart, but that wasn't the name at the time. (The chairman of the Kellogg cereal company) got Dad together with Mr. Keebler (of the cookie and cracker firm) and said, 'If you can put the jelly inside a cookie they didn't have a name for it at the time Kellogg would market it.'
''He brought home the cookie, put it in the toaster, snapped it, put it on the table and said, 'This will never sell, but we'll sell them the jam anyway.' And we did for 30 years.''
While the company continues to grow it has 3,300 employees nationwide, with about 1,100 at its Orrville headquarters and plant as one of Wayne County's largest employers the Smuckers said they rely on the same core values passed down through generations of doing business.
Five ''basic beliefs'' quality, people, ethics, growth and independence are published in a ''Corporate Strategy'' booklet given to employees.
''Those aren't just words on a piece of paper,'' said Tim, a graduate of the College of Wooster. ''We really live them on an everyday basis.
''Very simply, it's about treating people the way you want to be treated,'' he said.
Jenni Reusser, president of the Orrville Area Chamber of Commerce, who grew up in Orrville and went to school with Tim and Richard, said the image of the brothers and the company is the ''real deal.''
''There's no smoke and mirrors. There's no pretense about who they are trying to be or pretending to be. It's just very honest and real and sincere,'' she said of the brothers, who both are active in the community and the region.
Tim: ''We were like any kids. We played baseball and football in the backyard. We were a close family. We did things together. Since our sister was older, we'd be the little brothers . . . (''Brats,'' Richard interjects) . . . pestering the older girls (slightly older girls, since the brothers joke that they won't be the ones to divulge their sister's age).''
Although the Smuckers' roots were in a rural upbringing, Tim and Richard Smucker both are University of Pennsylvania's Wharton Business School graduates who know their way around business negotiations.
''You might think this is an old-fashioned, little company that wasn't sophisticated when it came to Wall Street or the arcane strategies of mergers and acquisitions. I've found just the opposite,'' said Lisa Long, a retired executive vice president of Time Inc., who has been on the Smucker board of directors for 10 years.
''These guys, they get it,'' Long said of Tim and Richard Smucker. ''They understand they're playing with the big boys and I think on the execution of these deals and the integration of these companies and brands, they get high marks.''
Correction, the company is one of the ''big boys,'' said Don Hall Jr., CEO and president of Hallmark Cards Inc., based in Kansas City, Mo.
''I think Smucker has really demonstrated itself as one of the most progressive consumer goods companies,'' said Hall, who is the grandson of Hallmark founder J.C. Hall. ''I think every brand company would look at Smucker and acknowledge the way that they have managed the company, stayed true to its values and built on its long-term brand equity. (They) really built a company that values its people and its community.''
Both Tim and Richard have been mentors to Hall and his brother, David, who is president of Hallmark's wholesale business. Tim Smucker has served on Hallmark's board since 2005.
Staying true to their roots has helped the company grow its heritage Smucker's brands as well as become a larger player in other branded and packaged foods, said Wall Street analyst Jon Andersen of William Blair & Co. in Chicago, who ranks Smucker stock as ''market perform.''
Andersen said he could sense the company's close-knit culture and working environment during his visit this year to the headquarters and plant in Orrville, which makes all of the retail jam and jelly for the United States as well as the little single-serving cups of jelly often found in restaurants. Andersen, like some other analysts, had traveled to Orrville to visit the Smuckers at their invitation.
Tim and Richard Smucker's earliest childhood memories are of eating jam.
''A lot,'' Richard said.
''For breakfast,'' Tim said.
Though it was natural to talk about jam and the business at home, their dad never told any of the children that he expected them to join the family business.
It was more by osmosis, Richard said.
''I think he had a goal that he hoped we'd both be active in the business. It worked out really well,'' Tim said.
But joining the family business made sense for the boys who grew up in a small town.
Did they consider other careers?
''It's funny, I'd say no,'' said Richard, a Miami University of Ohio graduate. ''We came from a small town and didn't know other things.''
While finishing their education and working directly for Smucker's fared well for Tim and Richard, they had a request of the next generation.
''Our goal was that we'd love to have them work in the business, but for their benefit, go do something else first,'' Tim explained. ''Richard and I didn't, but it was a lot smaller company then. This way, the next generation could learn more and bring more to the company.''
Five members of the fifth generation now work for the company two of Tim's sons, a nephew, niece and nephew-in-law. Tim and Richard each have daughters who live in New York and are unlikely to join the family business. One niece also does not work for the company and another niece passed away last year.
Having that time away from the company was extremely beneficial, said both Mark Smucker, the oldest of Tim's children, and Paul Smucker Wagstaff, the eldest son of Tim and Richard's sister.
''It gave me an overall feeling of a little more confidence that you can do it on your own without a family business sitting right there,'' said Wagstaff, who worked as a trader and analyst for a money manager for two years in California where his dad ran a Smucker manufacturing facility after receiving his MBA before joining the company in 1996. Wagstaff is now vice president of food service and beverage markets.
''It gave us a lot of perspective,'' said Mark Smucker, who was adamant growing up that he wouldn't join the family business. He taught eighth-grade earth science in Alabama, then worked for advertising businesses in South America for several years after earning his MBA. He finally joined the company in 1997 while he was still living in Argentina, working on the company's international expansion. He returned to Orrville in 2001 when the company made its Jif and Crisco acquisition, then moved to Canada when the company made an acquisition. He recently moved back to the Akron area.
''I think once I started to see the world, I realized there was a lot of opportunity out there and by having that external experience, you're bringing a lot back to Orrville, Ohio, and the company here,'' said Mark Smucker, who is now vice president of Smucker international operations.
Like Tim and Richard, the younger generation started as laborers in the factory, working jobs ranging from truck mechanic to janitor, during the summers beginning when they were 17.
''It wasn't easy work,'' Mark Smucker said. ''We had to be here at 5 a.m.''
Usually, members of the younger generation weren't assigned to the same departments especially after one summer when Mark and Paul were put together.
''We had a little too much fun and we've been separated ever since,'' jokes Wagstaff, who is now vice president of food service and beverage markets. ''We were working in the cook room it can get up to 100 degrees. We got to spraying a little water when we shouldn't have.
''We had a great time together, and still do,'' said Wagstaff, who knew he wanted to join the company since he was around 10.
Mark Smucker and Wagstaff, both 37 (Wagstaff is a month and a half older), are the two most senior members of the fifth generation working in the company. While Tim and Richard Smucker said the best decision will be made for the publicly traded company, they do have hopes that someday the next generation, perhaps Mark and Paul, could also ''co-lead'' the company. The family does not hold a majority of the stock, but a significant amount.
Having members of the fifth generation go out and do other things as well as working all types of jobs, including manual labor in the plant, is a smart thing, said Tom Ogburn Jr., director of the Family Business Center at Wake Forest University in Winston-Salem, N.C.
''It dampens this entitlement perspective that the next generation could have because it indicates that you really have to kind of earn the position,'' Og Please see Legacy, A11
Continued from Page A10 burn said.
The positions of ''co-CEO'' evolved and have worked well, said the brothers, though they acknowledge that their arrangement is atypical.
Among the advantages: having someone else to bounce ideas off and two people to do the job of one, including traveling.
But that also can be a disadvantage, about the only one the brothers could think of.
''We spend more time with each other than our respective wives,'' Tim said.
It's clear the brothers are on the same wavelength they sometimes even finish each other's sentences.
And even though Tim has the title of chairman (somebody had to have it, they said) and Richard is president, Tim said he doesn't use his birth order as an advantage.
''Ninety-eight percent of all decisions, we'd both make exactly the same way,'' Richard said.
''At exactly the same time,'' Tim added. ''I think it's just because we've worked together for so long.
''We have various departments that report to us. I don't want to get into decisions that I trust Richard to do,'' Tim said.
As they rose through the company, they had different specialties. Tim in sales and marketing and Richard in financial matters.
But if it's a major decision, such as an acquisition, the brothers seek each other out as well as members of their top management team, Richard said.
Mark Smucker said he often gets questions from people outside the company asking about his dad and uncle working as co-CEOs.
''How can you make that work? Doesn't there have to be one boss?'' he's often asked. ''It works really, really well.
''We all get along. That doesn't mean we don't disagree, but we're good about working out our differences and it doesn't enter into our personal lives,'' Mark Smucker said.
''There's always been a mentality within the family that we're going to do what's right first for the company before we do what's right for the family,'' he said.
A co-CEO setup, while rare, can work when there are clear rules about the structure and responsibilities and similarities in values, said Mike McGann, an adjunct professor who teaches family enterprise at Babson College in Babson Park, Mass.
''When families default to co-presidents or co-CEOs is usually because they do it for familial reasons, representing branch A and branch B,'' and that structure often doesn't work, McGann said.
Andersen, the Wall Street analyst, said Richard and Tim collaborate well.
''At the end of the day, they've proven that they've been able to make the co-CEO model work,'' Andersen said.
On a recent July morning, Frank McComas, 63, intended to retire from his nearly 43-year career in the Smucker factory by quietly leaving after his last shift. He didn't want any big to-do. But when Richard and Tim heard about McComas' last day, they surprised him with a visit as he sat in the lobby of the Orrville manufacturing plant, with his hair net on. After all, McComas had been one of their first supervisors when they were teens working in the factory unloading trucks.
Asked whether Richard and Tim Smucker were hard workers as teens, McComas said, ''No,'' to laughter. But McComas said he knew they would grow up to be good leaders.
One of the things the Smuckers say they're most proud of is their 10-year ranking as one of the top 100 businesses to work at by Fortune magazine an honor based on employee surveys.
The ''Little Boys'' advertising theme, which was broadcast from 1996 to 2000, and will begin again this week in a national television campaign, focuses on the Smucker heritage through Tim and Richard's eyes as 6- and 10-year-olds. The concept was developed after the brothers, who didn't want to star in any ads, told their marketing staff that if they could think of a way to incorporate them into ads without actually using them, they could do it.
''They're kind of real,'' Richard said.
''They're stories of us growing up,'' Tim said.
In one of the original ads, Richard asks Tim why no one in town wonders what his father does for a living. Tim answers: ''When your last name is Smucker and you live in Orrville, everybody knows what your dad does.''
In the ad, Richard asks: ''Everybody knows? Who told them?''
''There's one drawback to the ads, though,'' Tim quips. ''Since I'm the older brother, I get (to be) the straight man and he gets the punch lines,'' pointing to Richard.
What's in the future for the company?
The brothers said they want to continue growing sales, developing new products and making acquisitions. Some new products, such as Uncrustables, which were introduced in 2000 after the product was purchased from a North Dakota entrepreneur, continue to have strong markets and growth potential.
They also note that research shows as baby boomers retire, they are doing more baking at home, making Smucker's acquisition of Pillsbury products potentially more popular.
And half of the company's growth over the long-term will be through acquisitions, they said.
''Our vision is to grow (our presence) in the center of the grocery store and in North America,'' Tim said. The brothers said they and other Smucker executives go to the grocery store three times a week to see their products.
''We've identified a number of brands that we think would be very, very good fits with Smucker's,'' Richard said.
''It's like fishing,'' he said. ''We have a lot of lines in the water in terms of the fish we'd like to catch, but they only bite every so often.''
And what about a sixth generation of Smuckers?
They only range in age from about 2 to 12, so it's a bit early.
''We're going to try to encourage them to do what they like. We don't want to make them feel like they have to do it,'' Mark Smucker said.
Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@ thebeaconjournal.com.
It would be rare for a great-grandson to enter the family business.
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