Swanson Legacy Offers Lessons in Continuing Success

All good things come to an end, but tomorrow brings a new beginning. That summarizes the feelings of many long-time employees of The Swanson Corp., the Omaha, Neb.-based vending, foodservice and OCS provider that serves customers in seven states and enjoys an outstanding reputation for the quality of its service.

In March, Automatic Merchandiser reported that the company, founded in 1952 by the late husband/wife team of Merle and Joy Swanson, was sold to Treat America, based in Overland Park, Kan.

While many veteran Swanson employees believe that the company's best days ended several years ago, the recent acquisition formally marks the end of one of the vending/foodservice industry's greatest success stories.

The Swanson story embodies many of the elements that are characteristic of vending and foodservice. The company was launched by an entrepreneur in the Post World War II era who dedicated himself to excellent service, spared no expense in continually improving his service, and built a team of equally committed professionals.

A model in vending and foodservice leadership

The Swanson Corp. exemplified leadership in every aspect of refreshment services: operations, marketing, accountability, employee motivation, fresh food, and nutrition. In the process, Swanson Corp. grabbed the lion's share of the top accounts in Omaha, despite competition from all of the nationals, and in several other cities.

And like many leading-edge companies, the leadership began at the top. Merle Swanson was liked and respected by everyone around him, and he was able to motivate. His passing in 1995 marked a turning point from which several veterans claim the company never recovered.

Merle and Joy Swanson's legacy nevertheless still motivates many employees, including the new owner.

John Mitchell Jr., president of Treat America Inc., told Automatic Merchandiser he hopes to bring back the entrepreneurial spirit it had lost with the passing of the founders.

The Swanson Corp.'s sales fell from $48 million in 1998 to $35 million in 2005. Some months ago, management announced that it was in the company's best interest to sell the company. The employees had witnessed layoffs with declining sales, and they voted overwhelmingly to accept Treat America's purchase offer.

While some of the lost sales can be attributed to location downsizing, increased competition and an economic recession, company insiders say the leadership was the main cause of the company's decline.

Interviews with current and former Swanson executives offer some insight into what refreshment service companies need to do to maintain success over an extended time period.

In a nutshell, the management team that succeeded the founders failed to maintain the investment in sales and marketing that had driven the company's growth. Merle Swanson in particular believed in the importance of not only the highest quality service, but aggressive sales and marketing.

Excellence from the start

Gary Sands, a former Swanson executive who retired in 1993, was the company's fifth employee when he came on-board as a route driver in 1960. By that time, the company, which began as a Kwik Kafe franchise, was expanding beyond hot beverages, cold drinks and pastry to ice cream, cigarettes and candy.

One way the company distinguished itself at the outset was that all drivers wore ties. "We never took the tie off," Sands said.

Sands worked his way up through the ranks and eventually became president. In 1968, he opened the Sioux City, Ia., branch, which grew to seven routes, before returning to Omaha in 1970 as general manager. As general manager, he helped oversee construction of an expanded, 12,000-square-foot commissary, the largest in the state.

The new commissary was a pivotal tool to the company's growth, and Merle Swanson spared no expense in developing what some observers considered the most professional vending commissary in the country. He hired a foodservice manager with a college foodservice background and a full-time dietitian to oversee the recipes. "It (having a company dietitian) helped sell business and keep business," said Jeff Dale, a Swanson salesman for 17 years who is now retired.

A cornerstone: fresh food

From the commissary, the company segued into manual foodservice. To maintain culinary excellence, the Swansons established a culinary program in their name at Metropolitan Community College in Omaha, which produces chefs.

Walter Reed, the retired public relations director of the National Automatic Merchandising Association, remembers Swanson Corp. as one of the first independent vendors to provide college foodservice, a business that many believed was only possible for the big national companies.

The American Automatic Merchandiser April 1986 cover story reported Swanson's innovative foodservice concepts. The company's "Chef's Table" was a food court concept that included a variety of wellness, indulgence and ethnic themes. The concept extended to free-standing restaurants. The "Caterette Cart Service" delivered food from The Chef's Table to offices via mobile carts.

Another milestone came in 1980 when Sands oversaw the first successful bid on a civic auditorium concessions contract for the Omaha Civic Auditorium. Auditorium concessions was largely the domain of the nationals, but Swanson made its mark in this business as well, winning concessions contracts in 11 states.

The company built a party center and expanded into catering and senior center foodservice. The expansion into catering necessitated the name change from Kwik Kafe to Swanson Corp. "That (Kwik Kafe) didn't go over very well with brides," Sands recalled. "From that point on, everybody got to know us as Swanson."

Selecting the right name for the company was a challenge, Sands recalled. Management made sure they designed a logo that would clarify any confusion with other companies with similar sounding names. (Omaha, Neb., was also the home of the C.A. Swanson & Sons, which developed frozen TV dinners. In addition, there is another large regional vending/foodservice/OCS provider in Madison, Wis., with a similar name — CL Swanson Corp., which has no relation to The Swanson Corp.)

The company got into OCS in the late 1970s when it opted to divest a music and game business it had operated for a few years. "It (music and games) just wasn't our cup of tea," Sands said.

Loyalty born of leadership

Through it all, Merle Swanson led by example. "Merle instilled that in you and you wanted to do it," Sands said. "He would give his employees the shirt off his back if they needed it."

While Swanson was personable, he was also demanding. If he didn't like something, he let you know it, but in a gentlemanly manner. "He did not use profanity," Sands said. "He was not that kind of person."

"There was an awful lot of loyalty to him," agreed Al Kirkpatrick, who joined the company as a route driver 37 years ago and is now vending manager for Omaha, Neb., Lincoln, Neb., and Des Moines, Ia. "They (Merle and Joy) made you a part of it. You were an employee owner. They just felt like you were an integral part of the company."

Kirkpatrick echoed Sands and others in the enjoyment he felt being part of a successful team. They claim the company never lost employees to any of the competition.

Swanson believed strongly in the sales function. "You've got to service the customer and stay close to the customer," Sands said. "To do this, you have to have salespeople continually making calls."

The company had about $10 million in annual sales in 1976 when Swanson approached his investment banker, Jeff Dale, about joining his sales team. Dale was impressed with Swanson's approach to the business, and agreed to join. He became vice president of sales and customer relations.

Sales drove market expansion

Dale helped find business in new geographic markets. To support these expansion efforts, the company built commissaries in Lincoln, Neb., Sioux City, Ia., Columbia, Mo., and Springdale, Ark.

Roger Van Waart joined the company in the late 1980s as a sales rep and developed the Sioux City, Ia., Springfield and Columbia, Mo., branches. He credited much of his success to the excellent service the operations side delivered, plus the professional marketing literature that put the company on a par with the nationals.

"Merle Swanson, Gary Sands and Jeff Dale wanted to separate us from our competition," Van Waart said. "We presented an image that was second to none."

When the company decided to computerize its accounting, inventory control and other management functions in 1972, the software designer, Rick Loneman, was instructed to develop reports that would help the salespeople stay on top of clients and prospects. Swanson reviewed these reports constantly. Loneman, who eventually became chief financial officer, developed proprietary software for the company.

Marketing and public relations

Swanson didn't believe in doing anything quietly, however, and he made it a point to let the public know what his company was doing. As early as 1964, he utilized the services of a professional public relations agency, something that even today most big vending companies don't do.

The PR firms produced professional brochures and newsletters, and sent press releases to the local media about new clients and new services. When the company equipped its drivers with two-way radios, for example, it made the local news.

The company's pioneering efforts in promoting healthy eating also made news in many local and regional newspapers. The company's "Right Course" point-of-sale literature highlights both low-fat and low-carb items that have been popular with human resource managers.

The company produced its newsletter, "RSVP," in-house. The newsletter provided recipes, health tips, news about new customers and employees.

The newsletter also incorporated the customer survey to glean input on customer satisfaction. Merle Swanson insisted on surveying customers regularly.

Achieving employee buy-in

Employees were treated as family. When new drivers came on board in Omaha, Merle Swanson made it a point to spend five minutes with them the first day. There were at least two company parties per year.

The decision to form an employee stock owned plan (ESOP) was Swanson's. He wanted the employees who built the company to own it so they could control their own future in the event of his passing.

With so much going for it, what went wrong?

After Sands' retirement as president in 1993, Swanson replaced Sands with a vice president who was also the controller.

Swanson passed away in 1995. Joy Swanson remained active as secretary treasurer and oversaw the implementation of the ESOP. She passed away in 1998.

Veterans agree the management that followed the Swansons was more bottom-line than top-line focused. The sales staff was cut by two-thirds.

The executive who followed Sands as president had an accounting background. Sands said accountants by nature don't see the need for customer relations as much as people from other disciplines. Hence, there was less willingness to support customer relations and marketing.

Roger Van Waart was among four salespeople who were let go. A six-year veteran at the time, he had developed business in Sioux City, Ia., Springfield and Columbia, Mo. After he was laid off, he immediately received offers from competitors, but he did not wish to compete against his former colleagues. Van Waart has since found success selling in other industries.

"That's when they stopped growing," Van Waart said. "To grow is going to cost you money. It (cutting the sales staff) cost them customers."

A change in focus

"Merle put a lot more value on customer relations, public relations and sales than they did when Merle passed away," agreed Dale, the vice president of sales and customer relations whose position was also removed under the new leadership. "Merle was very involved in being out and seeing people. He understood you've got to spend money to make money."

Dale said there was a definite switch from a growth orientation to one of cost containment once the Swansons were gone.

Kirkpatrick agreed that the focus was off of growing the business. "You have to be driven," Kirkpatrick said. "You have to keep striving for improvement, for training. You need constant leadership."

Loneman, the former chief financial officer who has since left the company, said nobody was pushing managers to excel the way Merle Swanson did. Loneman also believes that a lack of emphasis on sales contributed to a loss of business.

A welcome change

Kirkpatrick said employee morale has improved since the acquisition. He recently visited Treat America's headquarters facility and was impressed. "The whole operation is really focused," he said. "You didn't see people sitting around shooting the breeze.

"To make a great company, you must have good people, and good leaders," continued Kirkpatrick. "With the purchase of our company by Treat America, I feel we are gaining that leadership, and they are gaining a group of people that are very dedicated, and want to make a change, and want to change the direction in which we have been headed the last few years."

The acquisition of The Swanson Corp. by an organization that is committed to operations and has a successful track record incorporating well established companies promises a positive future. But equally important is that Treat America has excellent role models to follow in the late Merle and Joy Swanson.