Dan Malovany: Survival Mapp
August 1, 2010
If the salted snack industry were a reality show, it would be “Survivor” and Mike-sell’s Potato Chip Co. would be one of the leading contestants. The Dayton, OH, salted snack producer is celebrating its 100th anniversary, and guess what? It’s only had three chief executive offi cers in the company’s entire history.
There was Daniel Mikesell, who founded the business; Leslie Mapp, his son-in-law who took over the helm in 1965, and David Ray, the c.e.o. since 2005.
That’s it. Nada. No mas. That’s just stinkin’ hard to believe.
“A lot of our success has been due to flat out luck,” Mr. Ray said.
Three years after the company started producing chips, the Great Miami River flooded and wiped out the business. Two years later, fire destroyed it. Ever the progressive businessman, “that crazy Mikesell,” as his fellow businessmen called him, became one of the first to use a Ford truck to deliver his company’s products because the flood wiped out most of the horses in the region. Playing on his name, he developed the Mike-sell’s logo in the 1920s that still exists today. During the Great Depression, the company survived and even thrived.
“Very few chip companies went out of business in the 1930s,” Mr. Ray noted. “It’s like now. When the economy is bad, people stay at home and eat more snacks. They’re comfort foods.”
Mr. Mapp began overseeing operations in the 1950s and moved the company to its current site on Leo Street. There, the company installed continuous fryers and other state-of-the-art equipment. No one handled chips from the time they were sliced until they were packaged. By the way, that process took 15 minutes, and volume was about 780 lb per hour.
The company expanded again in the 1980s, investing in a new facility in Indianapolis, IN. During the potato chip wars, when many snack producers expanded as Frito-Lay and other companies contended on a national basis, many overextended businesses got crushed by the cost of distribution, slotting fees and other expenses. Today, their brands may exist, but their businesses were either gobbled up by others during the era of consolidation, or they ended up bankrupt.
Mr. Mapp, however, ran Mike-sell’s conservatively and expanded only to nearby major markets. Although the company started producing cheese curls and other snacks in the 1990s, its logo and packaging didn’t change until the last decade because, well, it wasn’t broken.
Under Mr. Ray’s leadership, Mike-sell’s updated its packaging, added new products such as kettle-cooked chips and rolled out new flavors. The company’s core market is still within 300 miles of Dayton, and sales have grown to $52 million annually from $41 million in 2005.
“Part of our survival is that we kept our distribution geographically centered,” Mr. Ray said. “We didn’t go outside of our core markets. A lot of companies that expanded beyond their means have struggled or gone out of business. Our survival is due to the conservative leadership of Mr. Mapp.”
Today regional snack manufacturers need more than luck to survive. To support its routes and make them more profitable, Mike-sell’s adapted a “master distributorship” system where it carries other company’s snacks and even tortillas on several routes. It needs such a system because many national retailers tend to eliminate third and fourth brands under the guise of SKU rationalization. They don’t want all of these pesky, competitive, innovative snack companies cluttering up their stores.
“What we have tried to show them is that without companies like ours, every one of them is going to be the same,” Mr. Ray noted. “If they all have the same products, then it becomes a price war.”
Thirty years ago when Mr. Ray cut his teeth in the business, the snack aisle was one of the most profitable categories for retailers. Now, margins to the store have decreased over the years due to competition and using leading products as loss leaders.
“We’re continuing to focus on growth per store and to concentrate up and down the street business in some of our markets,” Mr. Ray said. “We’re strong in our core markets but not in our outlying areas in up and down the street business.”
To survive, regional snack producers can’t afford to roll the dice too often. In the end, Mr. Mapp’s conservative business style combined with innovative products and a savvy, brand-building marketing plan can help keep companies from ending up on a new reality show, which would be known as “The Last Regional Snack Company.”