Archway Cookies, Inc.

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Archway Cookies, Inc.

5451 W. Dickman Road
Battle Creek, Michigan 49015
U.S.A.
(616) 962-4031
(888) 427-2492
Fax: (616) 962-8149
Web site: http://www.archwaycookies.com

Wholly Owned Subsidiary of Specialty Foods Corporation
Incorporated: 1936 as Swanson Home Style Cookies
Employees: 180
Sales: $160 million (1998 est.)
NAIC: 311821 Cookie & Cracker Manufacturing

Archway Cookies, Inc. is one of the top cookie makers in the United States. The company’s biggest sellers are variations on its original oatmeal cookie, which together account for more than 40 percent of sales. Archway’s line of over 60 varieties also includes fat-free, low-fat, and sugar-free types, as well as holiday cookies sold at the end of the year. The company makes soft-baked cookies, which have a shorter shelf life than the “hard” brands and are generally preferred by consumers over the age of 50. In the late 1940s the company began selling baking franchises in order to expand nationwide, but it bought most of them back in the 1960s. By the late 1990s only four franchise bakers were left, with two company-owned bakeries supplying the bulk of the country. In 1998 Archway was purchased by Specialty Foods Corporation, which also owned California-based Mother’s Cake & Cookie. The combined companies made Specialty Foods the number-three cookie maker in the country.

Early Years

Archway’s origins date to 1936, when the husband and wife team of Harold and Ruth Swanson began baking soft oatmeal cookies and doughnuts in their garage in Battle Creek, Michigan. In the company’s early days the cookies were distributed only locally, packaged from the start in clear wrappers that helped stimulate both appetites and sales. During World War II, with baking ingredients in short supply, the Swansons decided to concentrate exclusively on cookies. Swanson Home Style Cookies, as they were known, grew into a line of 15 different varieties by the late 1940s.

Seeking to expand outside of Michigan, the Swansons decided to license their cookie recipes and brand name to franchisees in neighboring states. The first franchise was sold in December 1949 to Ellison Bakery of Fort Wayne, Indiana, and a year later the family-owned Ellison company purchased a second Archway license for Wisconsin. Other franchise sales followed, and the company began to expand its reach throughout the country and into Canada. In 1954 the Swansons changed the brand and company names to Archway Cookies, as the name Swanson was already recognized nationally in association with a popular brand of frozen dinners. Growth continued throughout the 1950s. In addition to selling franchises, the company built plants of its own in Ashland, Ohio, and Boone, Iowa, with only the company headquarters remaining in Battle Creek. In 1962 the Swansons sold Archway to George Markham, a company vice-president. Over the next two years, under Markham’s leadership, Archway bought back the majority of its franchises, which then numbered 22, and gained control over most of its production. Franchises were still important to the company, however, providing a source of new cookie varieties that were popular in different regions of the country. The Ellison Bakery in Indiana, for example, developed the company’s Ruth’s Oatmeal and Rocky Road recipes, which it discovered through a series of baking contests that it sponsored at state fairs. Although most of Archway’s cookies were available in every market, some types were only offered regionally if the varieties were not popular outside of a particular area. This and other factors helped keep the company’s national profile relatively low, as it focused its energies on regional competitors, rather than national brands such as Keebler and Nabisco.

Key to the company’s success was the quality of its soft-baked cookies. These were much less common in the cookie market, but at the same time were perceived to be closer to homemade than other cookies. Soft-baked cookies had higher moisture content than ones that were dry and relatively hard, and thus had a much shorter shelf life. To compensate for this, the company developed a system of baking cookies only after orders for them were received, allowing it to keep store stocks fresh and minimize waste. Archway’s goal was for stores to sell half of the cookies on display each week, ensuring that the vast majority would be purchased well before the six-week “sell-by” date was reached.

Over time the company also came to offer a number of different holiday varieties, which were marketed primarily during the Christmas season. As many as 15 to 20 additional types of cookies were produced during this time of year, and the company took on extra employees to keep up with the demand. Archway’s primary market was consumers over the age of 50, and the company focused its marketing and advertising on this customer base, rather than children. During the late 1960s and into the 1970s, sales continued to grow as Archway distribution expanded. Stores were serviced by independent distributors, which the company felt could best reach the wide range of businesses that sold its products. These ranged from large supermarkets to small mom-and-pop stores.

New Ownership and “Healthier” Cookies in the 1980s

In 1983 George Markham sold Archway to senior executives Thomas Olin and Eugene McKay, Jr. Both had been with the company since the 1960s, Olin having managed the Ashland, Ohio, baking plant and later serving as national vice-president and general manager of the company’s eastern baking operations. The two new owners each took the titles of co-president and co-CEO.

During this time, what the industry referred to as “The Great Cookie War” began when the major food companies began to introduce their own lines of soft-baked cookies. With the large-scale advertising campaigns and national clout of Procter & Gamble, Frito-Lay, Nabisco, and Keebler targeting Archway’s market niche, the company was forced to fight back with a “buy one, get one free” offer and other marketing strategies. Although sales of the new soft cookie brands started out strong, they quickly crumbled as consumers found taste to be disappointing, and the companies discovered they were displacing sales of their original brands. Within several years the majors withdrew from the soft cookie business, leaving Archway holding its own.

In the late 1980s, as Americans grew increasingly health-conscious, Archway responded to concerns about saturated fat by removing the ingredient from all of the company’s products. Studies showing that oat bran was an especially beneficial dietary fiber were also published around this time, and sales of Archway’s oatmeal cookies grew as a result. In 1988 the company’s date-oatmeal cookies were lauded as the most healthful cookies on the market by a consumer watchdog organization, and four other Archway varieties finished near the top of the ranking of 250 cookie brands.

Over the next several years Archway also rolled out a line of fat-free cookies, as a wave of studies that exposed the harmful effects of fat in the diet were published. Annual sales, which were not disclosed by the privately held company, reached an estimated $68 million in 1993, and grew an astounding 138 percent the following year with the success of Archway’s fat-free cookies.

Controversy arose in 1994 when the company canceled the Illinois franchise of Oak State Products, Inc., after it discovered that Oak State had been making fat-free cookies for Nabisco. The 38-year franchisee Oak State sued to have the license reinstated, and a judge issued a temporary injunction against Archway. Archway argued that the agreement with its franchisees required them to get permission from the company before baking cookies for a competitor. Oak State had in fact informed Archway when Nabisco approached it in 1992 to help with an unspecified product, but Archway had not learned until August 1993 that Oak State was baking, and had helped develop, Nabisco’s new SnackWells fat-free cookie line. Not only was SnackWells an instant and major success, but it competed directly with existing Archway products. Ironically, Oak State had helped Archway develop its own fat-free line. The issue was settled before it went to court, when Oak State sold its franchise back to Archway. The two companies also agreed to coordinate the change in distribution for Illinois, which would now be supplied from Archway’s Boone, Iowa, plant.

1995 Alliance with Kellogg’s Boosts Sales

In 1995 Archway entered into an agreement with the Battle Creek-based Kellogg Company to use Kellogg’s All-Bran cereal in a line of low-fat cookies. This represented the first time Kellogg’s would allow another company to market a co-branded product. The new cookies were a success, and propelled Archway for the first time into the number three spot in U.S. cookie sales, though it slipped back to number four after a time.

Archway owners Thomas Olin and Eugene McKay, Jr., stepped down from day-to-day management of the company in 1996, letting their sons Thomas Olin, Jr., and Eugene McKay III take over their roles as co-president and co-CEO, while remaining joint chairmen of the company board. When Thomas Olin Sr. died a few months later, his widow, Gloria Olin, was given his co-chairman position.

Company Perspectives:

Commitment to traditional quality and guaranteed freshness is the foundation of Archway cookies and its more than 60 Home Style, Gourmet, Fat Free, Sugar Free, Bag, and Holiday cookie varieties. It has also led the Company to become the nation’s leading producer of oatmeal-based cookie varieties.

The year 1996 also saw Archway initiate a new television advertising campaign which featured an animated “spokes-cow” character and the tagline “Classic Cookie Jar Material.” Moreover, the company upgraded its packaging during this time, redesigning logos and adding product identification to package ends. Most Archway cookies were still packaged in clear wrappers as they had been since the 1930s, with the exception of larger-size bags and certain holiday varieties. In a national promotion launched in 1997, “The Big Cookie Tour,” the company gave away over one million free cookies in cities across the United States. A special “cookie mobile” showcased a costumed character named Archie the Baker who entertained and gave away cookies. The tour was produced in conjunction with a sweepstakes contest advertised on cookie packages that offered trips, luggage, and other travel-related prizes.

Early the next year the company introduced a new line of sugar-free cookies, including such varieties as Chocolate Chip, Oatmeal, Rocky Road, and Shortbread. These cookies used Sorbitol and Maltitol as sweeteners, and although they were not low in calories, they were popular among diabetics because they did not increase blood sugar levels. The packages displayed the logo of the American Diabetes Association, and Archway pledged five cents from each sale to that organization.

In October 1998 Archway was sold to Specialty Foods Corporation of Deerfield, Illinois, in a deal reportedly worth close to $100 million. Archway joined the Oakland, California-based Mother’s Cake & Cookie Co. in the Specialty Foods portfolio, making Specialty Foods the third largest cookie baker in the United States. Archway management remained the same, and the company did not announce any major changes in direction.

Reshuffling among leading cookie makers had been taking place for several years, with number two Keebler being purchased by Inflo Holdings, Inc. in 1996 and subsequently merging with number three Sunshine. Market leader Nabisco also announced a major restructuring in 1998. Cookie sales had been stagnant or dropping slightly for several years, and consumers had lost interest in the fat-free varieties that had initially been highly successful. Nabisco’s SnackWells, once the number two cookie brand, had seen sales drop by almost two-thirds, and the company had added fat back to most of the brand’s varieties, changing its advertising to emphasize flavor over fat content. Archway was also affected by these changes, with supermarket sales of its cookies slipping from $159 million in 1997 to $152 million in 1998.

Nevertheless, after more than 60 years Archway cookies were still an American favorite, and the company that produced them was solidly ensconced in the top ranks of cookie makers. Though it maintained many traditions such as its clear packaging and the emphasis on soft-baked oatmeal cookies, the company was frequently adding new varieties and using new marketing methods to keep up with the times. Despite the turbulence brought on by shifting marketplace trends and the changes taking place within many top cookie companies, Archway had maintained its position as the leading maker of oatmeal cookies and remained a major player in its field.