Ben E. Keith Company

views updated

Ben E. Keith Company

601 East 7th Street
Fort Worth, Texas 76102-5501
U.S.A.
Telephone: (817) 877-5700
Fax: (817)338-1701
Web site: http://www.benekeith.com

Private Company
Founded: 1906 as Harkrider-Morrison Company
Employees: 2,800
Sales: $1.5 billion (2004)
NAIC: 424410 General Line Grocery Merchant Wholesalers; 424810 Beer and Ale Merchant Wholesalers

Based in Fort Worth, Texas, Ben E. Keith Company is a distributor with two divisions: food and beer. Ben E. Keith Foods is a full-line foodservice distributor, serving more than 12,000 restaurants, hospitals, schools, and other institutional customers in Texas, Oklahoma, Arkansas, parts of New Mexico, the southern part of Kansas, and northern Louisiana through six distribution centers. Products include produce, frozen foods, meats, refrigerated foods, dry groceries, and paper goods, as well as equipment and other supplies. The unit is among the ten largest foodservice distributors in the United States. Ben E. Keith Beers is the largest independent Anheuser-Busch wholesaler in the United States and one of the largest distributors of Anheuser-Busch products in the world, selling 35 million cases a year through a network of eight distribution centers, serving 60 Texas counties. In addition, the division distributes Redhook and Kirin brewery brands. The private company is partially owned by brothers Robert and Howard Hallam, who serve as chairman and chief executive officer, and president and chief operating officer, respectively.

Early 1900s Origins

Ben E. Keith is named for Benjamin Ellington Keith, who was born in Fort Worth, Texas, in 1882. The company was founded in Fort Worth in 1906 as a produce house known as Harkrider-Morrison Company. Keith had been forced to leave school when he was just 14, driving a coal wagon at first to help out his family, but he would later attend business college and study accounting. In 1909 he became the first salesman of Harkrider-Morrison, which targeted small grocery stores. The company received shipments of fresh fruits and vegetables from the West Coast and South Texas. The train cars in which the items were transported were iced repeatedly along the way. The mix was simple: lettuce, onions, potatoes, apples, citrus, and other fresh staples. Harkrider-Morrison also carried dried fruit, very popular at a time when refrigeration was an almost unheard-of luxury. Each day the young Keith visited his customers to take their daily produce orders, returned to the warehouse, loaded a wagon, and made his deliveries. Other times he might load up the wagon with whatever he thought he could sell on the spot and make his rounds. During this period of horse- and mule-drawn wagons, deliveries outside of Fort Worth were problematic, however, due to unpaved roads that would become muddy quagmires during the rainy season. Deliveries to stores in outlying towns were delivered the next day using Railway Express company. To improve the service to these communities, the company began opening branch houses. The first, Wichita Fruit and Vegetable Company, opened in Wichita Falls, Texas, in 1910. Two years later Merchant's Fruit Company was establish in Forth Worth, close to the downtown farmer's market. West Texas would be served by the 1914 opening of a branch in Abilene, Texas, the Abilene Fruit and Vegetable Company.

Ben Keith quickly made himself an important part of the business, and his contribution was recognized in 1911 when the company changed its name to Harkrider-Keith-Cooke Company. Keith became vice-president and treasurer, and then in 1918, he bought a controlling interest when two of the owners dropped out. He now became president and general manager, but kept the name of the firm, which did not become known as Ben E. Keith Company until 1931. After taking charge he continued to open new branches, in Dallas in 1920 and in Lubbock, Texas, in 1925.

During the mid-1920s Keith became involved in the gift business when the publisher of the Fort Worth Star-Telegram, Amon G. Carter, asked him if he could package and ship some Texas grapefruit—the popular Texas Ruby Red—to some New York friends. The idea proved so popular that for the next couple of years Keith shipped more grapefruit gift packages on request. This led the company in 1929 to produce a crude gift catalog. It was just a mimeographed affair, but it served the purpose. Ruby Reds and other fruit were placed in baskets made in Mexico and shipped around the country. It was Carter who urged Keith to produce a professional catalog in the 1940s. Later in the decade the catalog added items such as smoked ham, turkey, and fruitcake. It grew by word of mouth and formed the basis of the Ben E. Keith Gift Division, which by 1990 had a mailing list of 100,000 names, specialized in gourmet specialty foods, and generated $2 million in annual sales. Nevertheless, the division was discontinued later in the 1990s.

Acquisition of Anheuser-Busch Distributorship in the 1920s

Another effort launched in the 1920s by Keith would prove to have a more lasting effect on the evolution of the company. At the time, the company experienced a lull in business during the summer months, since many people maintained their own gardens and supplied themselves with fruits and vegetables, and even sold some to the local stores. In 1928 Keith paid a personal visit to Adolphus Busch in St. Louis and secured the Texas distributorship for Anheuser-Busch products. Although the introduction of Prohibition several years earlier had put Busch out of the beer business temporarily, his company distributed other products, especially ice cream syrup, as well as soft drink flavorings and a near beer product with a negligible amount of alcohol. Anheuser-Busch also offered baker's yeast and malt syrup. Salesman made sure to warn about the danger of allowing the yeast to mix with the malt syrup and water: Customers would likely end up with the problem of disposal of a batch of beer. With the repeal of Prohibition in 1933, Anheuser-Busch returned to beer brewing, and Ben E. Keith was well positioned to take advantage of the situation. Not only did it have an Anheuser-Busch franchise, it had the refrigeration facility from its produce business that was needed to store unpasteurized draught beer, which had to be stored below 40 degrees Fahrenheit.

Ben E. Keith made advances on other fronts during the 1930s. It began using the advertising slogan, "Fresh from Keith's," which was painted on the side of its delivery trucks and featured on instore posters. The company also took some tentative steps in the foodservice area, but retail remained the key channel at a time when most people ate at home. During this period frozen food storage and delivery technology were becoming available, but with the advent of World War II, some equipment was commandeered for the war effort. When the war ended in 1945, however, Ben E. Keith was quick to invest in this new sector, becoming the first Birdseye distributor in Texas.

Ben Keith died in 1959, not only leaving behind a thriving business but also a legacy of personal accomplishments. He helped in the establishment of three Texas universities and was involved in the founding of three Fort-Worth area military bases during World War I and the Carswell Air Force Base during World War II. He helped to organize the first modern citrus plant in the Rio Grande Valley, and was a founder of the Fort Worth Chamber of Commerce and served as its president. He was also a pioneer in employee relations. In 1943 his became one of the first companies in America to offer a pension and profit-sharing plan to employees.

In the early 1960s Gaston Hallam acquired a large stake in the company and in 1962 became president and assumed the chairmanship five years later. Hallam was well familiar with the operation, having worked for the company for 40 years. He started out unloading boxcars, and after he learned bookkeeping he became bookkeeper in the Dallas office, then assistant manager of the Lubbock branch. After Prohibition ended he became involved in the beer side of the business and in 1939 took over as manager of the Dallas operation. When he took charge of the company, Ben E. Keith employed 400 and generated annual sales of $40 million. When Hallam retired in 1979, the company would have 1,200 employees and sales of $350 million. One of his major contributions was to expand Ben E. Keith both within and beyond the confines of Texas. In 1966 a Shreveport, Louisiana produce company was acquired, and two years later The Panhandle Fruit Co. of Amarillo was bought to form another branch office. Ben E. Keith moved into the Arkansas market in 1972 when it established a branch in Little Rock.

A new generation of management took over in 1979 when Hallam's sons, Robert and Howard, assumed the top positions. They grew up with the company, learning the business from the ground up during holidays and summer vacations when they loaded trucks and made sales calls, among other tasks. Unlike Ben Keith and their father, who scraped together an education, they both earned law degrees from the University of Texas. By the time they succeeded their father, they were seasoned executives. Robert Hallam launched a beer branch in 1967 and Howard opened a beer branch two years later in 1969.

Company Perspectives:

Our philosophy is to earn the loyalty of our customers by handling only products of the highest quality and value, and by providing excellent service and responsiveness to customers' needs.

Shift to Foodservice Emphasis in the 1980s

The Hallam brothers took control at a crossroads in the company's history. The food division produced about $80 million in 1979, of which $35 million came from foodservice. According to Institutional Distribution, "It had become apparent that the game was changing. A number of major supermarket chains that had been purchasing produce from Keith put up their own refrigerated warehouses and began to source their own produce and distribute it to their stores. Obviously, opportunity for future growth at retail was limited…. The die was cast in 1980 when Piggly Wiggly, Keith Foods' biggest customer, announced that it was going into self-distribution." Keith Foods now directed its focus toward foodservice and in 1981 announced that it would significantly broaden its offerings beyond produce, which accounted for 75 percent of volume, in order to become a full-line foodservice house. The company's reputation in produce helped to open doors, and the service inherent in the business—daily deliveries and the development of close relationships with customers—was added to a broad-line approach to create an effective combination in winning accounts. Although deliveries were not made six days a week as had been the case with produce, Ben E. Keith still made deliveries far more often than the competition.

The company was also deliberate about how it expanded into foodservice, initially targeting white tablecloth restaurants, many of which were already buying produce from the company and were the type of customers that appreciated the extra service. From there Ben E. Keith targeted hospitals, schools, and other institutions. It also increased its business through strategic acquisitions, including small foodservice distributors in Little Rock and Oklahoma City, thereby extending its reach into markets in northern Texas, Oklahoma, Louisiana, Arkansas, and eastern parts of New Mexico.

Three years after making the switch to full-line foodservice, Ben E. Keith had to contend with inventory problems with small quantity items, which often led to short supplies. To address this problem the company created a redistribution system out of Fort Worth, called Keith Central Distribution (KCD). In 1984 KCD set up operations in an 18,000-square-foot warehouse. Not only would it provide low-volume items to branches, it would also ship high-volume items to fill out loads if they could be delivered cheaper than regular shipments. The program proved effective, and a large number of items were added and the warehouse space expanded to meet increasing demand.

By the start of the 1990s Ben E. Keith Food's sales reached $211 million, more than double the total sales volume when the shift to full-line foodservice began a decade earlier. The business continued to grow in the 1990s and facilities were expanded to keep up. Ben E. Keith Beer also kept pace. In July 1993 it began expanding its Denton warehouse. By now sales had reached $50 million and the division was servicing 46 Texas counties. It ranked 37th on Beverage World's list of the Top 50 Beverage companies.

In the late 1990s Ben E. Keith Foods enjoyed a major growth spurt, as sales increased 50 percent over a five-year period. To keep apace with demand, the company in 2003 began to build a $20 million warehouse in Amarillo, expanding the current operation from 61,000 square feet to about 250,000 square feet. Moreover, the new site could later be expanded to 450,000 square feet. The company also began work on a 285,000-square-foot facility in Oklahoma City. Enough land was purchased to allow the operation to eventually house 800,000 square feet.

As Ben E. Keith approached its 100 anniversary, the beer division had spread to 60 Texas counties and the food division continued to expand its geographic reach. They combined to generate sales of $1.5 billion in 2004, a 12.4 percent increase over the previous year. The food unit, accounting for about $1 billion of that amount, had long since surpassed the beer business as the driving force behind the company. There was every reason to expect that Ben E. Keith would continue to enjoy strong growth for some time to come.

Principal Subsidiaries

Ben E. Keith Beer; Ben E. Keith Corporate; Ben E. Keith Food.

Principal Competitors

The Gambrinus Company; McLane Foodservice, Inc.; SYSCO Corporation; U.S. Foodservice, Inc.

Key Dates:

1906:: The company is founded as Harkrider-Morrison Company.
1909:: Ben E. Keith is named as the company's first salesman.
1918:: Keith acquires a controlling interest in the company.
1931:: The Ben E. Keith Company name is adopted.
1933:: A beer distribution business is launched.
1959:: Keith dies.
1962:: Gaston Hallam is named president.
1979:: Hallam retires and his sons, Robert and Howard, take charge.
1981:: The company begins to focus more fully on foodservice, broadening its offerings beyond produce.
1993:: The Denton beer distribution facility is expanded.
2003:: Major expansion on Amarillo and Oklahoma City foodservice facilities is begun.