Jays Foods, Inc.

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Jays Foods, Inc.

825 East 99th Street
Chicago, Illinois 60628-1590
U.S.A.
Telephone: (773) 731-8400
Toll Free: (800) 621-6152
Fax: (773) 933-2100
Web site: http://www.jaysfoods.com

Private Company
Founded: 1927
Employees: 850
Sales: $100 million (2006 est.)
NAIC: 311919 Other Snack Food Manufacturing

Jays Foods, Inc., is a Chicago, Illinois-based full-line snack food company best known for its Jays Potato Chips. Other brands include O-KE-DOKE popcorn, Krunchers! Potato Chips, Sweet Baby Jays sweet potato chips, and Hot Stuff snacks. Jays also sells such snacks as caramel corn, corn puffs, pork skins, and shoestring potatoes. Jays products are sold throughout Illinois, Indiana, Wisconsin, and Michigan, and to a lesser extent in Iowa, Minnesota, and Missouri. The company is a subsidiary of Ubiquity Brands, formed by Chicago private investment firm Willis Stein & Partners in 1999 after acquiring Jays and another area company, Lincoln Snacks.

FOUNDER HOPS TRAIN TO CHICAGO: 1921

Jays was cofounded by its longtime owner and chief executive, Leonard Japp, Sr., originally born Leonard Jepp in Wells, Minnesota, in the early 1900s. His was very much a rags-to-riches story. The son of a railroad section hand father and a mother in poor health, Japp learned the necessity of hard work early, at the age of six helping the family by scavenging for coal along the railroad tracks and going door to door peddling holy pictures and bluing to wash clothes. When he was 12 he traveled far from home to follow the wheat harvest from Kansas to the Canadian border. After graduating from high school in 1921 at the age of 17 he hopped a milk train in Minnesota to move to Chicago. Fortunately a veteran of free rail travel advised the young man to jump out before the train reached the station, where the railroad "bulls" took pleasure in working over anyone they caught in the cars. Dirty and hungry, Japp stopped at a tavern run by a Lithuanian immigrant named Bachus, who not only allowed the young man to wash up, but also fed him, helped him find a job at Continental Can, and let him sleep in the bar until he received his first paycheck and could afford a room.

Japp was a hard worker, sometimes holding as many as four jobs simultaneously. A good athlete handy with his fists, Japp worked as a bouncer and a lifeguard at the Oak Street Beach, along with a fellow named Johnny Weismuller, who would go on to become an Olympic gold medal winning swimmer and be even better known as "Tarzan" in the popular movie series. Japp also did a little boxing, and on occasion his second would be an aspiring English-born vaudeville comedian who he failed to convince to drop show business and join him in a venture selling cemetery plots. The youth's name was Leslie Townes Hope, who fought under the name Packy East and later adopted the stage name of Bob Hope.

The 1920s was a time of Prohibition and the resulting illegal drinking establishments known as speakeasies. In Chicago many of them were run by gangsters, headed by the notorious Al Capone. In 1927 Japp and a friend, a dissatisfied bus driver, decided to go into business for themselves. "My partner, George Gavora, and I knew about the speaks," Japp recalled in a 1985 interview with the Chicago Tribune, "so we decided to buy an old broken down truck for $5 down to sell pretzels, nuts, cigarettes, what they needed for sandwiches. Pretty soon, they started asking for potato chips. I didn't know anything about potato chips." Thus, with an investment of $27.50, of which $22.50 was spent on an inventory of nuts and pretzels, Japp & Gavora Food Co. was formed. Supplying speakeasies proved to be a thriving enterprise, and soon the young partners were able to pay cash for brand new frying vats and a fleet of four trucks. It would all come to an end just as quickly, however. The stock market crash of October 1929 resulted in bank runs, one of which struck the Casper State Bank, which held the assets of Japp & Gavora, now ruined.

Japp and Gavora went their own ways as the country became mired in the Great Depression. Japp managed to scrape by, working as a truck driver and a window washer, and picking up some extra money by serving as a sparring partner for Buddy Baer, brother of the heavyweight boxing champion Max Baer. Japp finally got lucky when he borrowed $10 to bet on a horse, a 100 to one long shot that paid off. He bought another truck and returned to the snack business, distributing pretzels, taffy apples, and potato chips that he bought from Mrs. Fletcher's Potato Chip Co. In 1934 he began packaging the snacks under his own name. Japp took a new partner in 1938, a Kraft salesman named George Johnson. Together they formed Special Foods Co., supplying small Chicago grocery stores with a wide variety of goods, including spaghetti, noodles, jelly, salad dressing, and dog food, as well as candy, popcorn, and potato chips.

Japp was not pleased with the quality of Mrs. Fletcher's chips, and eagerly switched to a new lighter chip fried in corn oil that was made by a company in Madison, Wisconsin. Sales soared for Special Foods, but the Wisconsin company soon closed its doors. A new source for chips was found at the Rockford, Illinois, Blue Star Foods, Inc. It was during this time that Japp's wife Eugenia, who was an accomplished cook and had once run a chain of bakeries, came up with an idea that has since become standard in the food industry: placing recipes on the packaging to tell consumers how to use the product. Because of the Depression she was especially interested in helping housewives stretch their food budgets. One of the recipes she developed and her husband persuaded Blue Star to print on the packaging became an American classic: tuna fish casserole with crumbled potato chips on top.

NAME CHANGE: 1941

Special Foods expanded its fleet of delivery trucks and steadily dropped the items it carried in favor of potato chips. The company was Blue Star's largest customer but its demands were too great. As a result, the partners decided to make their own chips, and in 1940 they invested in an $18,000 automatic potato chip maker and leased space at 40th Street and Princeton Avenue in Chicago to begin making potato chips under the Mrs. Japp's label. However, what seemed like a safe and logical choice for a brand name soon proved otherwise. After the Japanese Navy attacked Pearl Harbor in December 1941, grocery stores began demanding that the potato chips be removed from their shelves since "Jap" had quickly become a derogatory term for the much-despised enemy. Forced to act quickly, Japp and Johnson sought a new name. In all, they came up with 30 possibilities. Their primary choice was Jax, but it had already been trademarked by a brewing company, and so they settled on the available "Jays," and Mrs. Jays Potato Chips and Jays Foods were born.

COMPANY PERSPECTIVES

Jays sells fun food products that people love. Our continued success is determined by how well we fulfill our promises—every day—to our customers and consumers. Our VISION is our commitment to fulfill the fun food desires of people, while providing WORLD-CLASS services.

Because of wartime restrictions on materials, Jays had to rely on used cartons, and Japp and his wife traveled widely in order to trade nylons for the stamps that were needed to acquire cooking oil for the vats and gas and oil to keep the delivery trucks on the road. Doing business in Chicago, along with another 15 or so potato chips companies, Jays managed to grow, with sales reaching $750,000 a year. Then, in 1944, Japp and Johnson decided to split up, agreeing that one of them would buy out the other. They chose to write down bids and agreed that the highest would be accepted by the other. Japp decided to offer $120,000 but his wife convinced him that if he really wanted to buy the business he should write down $150,000. As it turned out, Johnson bid $145,000, and Japp became the sole owner of Jays Foods.

In the postwar years, Japp continued to expand Jays, one of a number of secondary brands to the Chicago market leader, Mrs. Klein's, and by the start of the 1950s Jays had eclipsed Mrs. Klein's, becoming the city's top potato chip brand. Jays solidified its position and expanded beyond the city into other Midwest markets, aided in large part by advertising, becoming one of the first snack companies to launch full-scale campaigns. The company developed the slogan, "Can't stop eating 'em," drawn from the persistent comments received by people at food shows. Supposedly, Jays' slogan prompted Lays Potato Chips to create the long running "Bet you can't eat just one" campaign that began in 1963. In addition to expanding geographically, Jays added new products, including pretzels, popcorn, and tortilla chips. In 1955 the company moved to its current manufacturing plant in South Chicago.

BORDEN BUYS JAYS: 1986

It was during the early 1950s that Leonard Japp, Jr., began working at Jays when on leave from the Marines. Upon his discharge he joined the company on a full-time basis and eventually succeeded his father as president, leading the company through the 1970s and into the mid-1980s. Annual sales reached $50 million in 1981 and grew to about $64 million in 1985. Starting around 1977 Borden, Inc., began courting Jays, making periodic low-ball offers that the Japp family rejected. "Finally," according to the Chicago Sun-Times, Leonard, Jr., told them, "If you people are serious, quit trying to steal the company and buy it for a fair price." Borden came back with a higher number, probably between $20 million and $30 million, and in 1986 the Japp family agreed to sell.

The family members divided the proceeds and went their separate ways. Leonard, Jr., for example, bred horses in Tennessee. "I smelled the roses for a few years, but then I got bored," he admitted to the Sun-Times. "Every time I went to the store I'd go to the snack food rack and compare brands and prices." Borden, in the meantime, planned to introduce Jays as a national brand and bought more snack companies, but Borden did not fare well in the new venture. Increasing health concerns over high-fat snacks hurt business, as did the steep price discounting in the industry and high promotional spending. While Jays remained Chicago's top-selling potato chip, Jays Foods began losing money, $4 million in 1992, and a reported operating loss of $13.3 million a year later. Borden decided to exit the snack food business, and unable to sell the unit as a whole, put the assets on the block piecemeal.

It was at Leonard Japp, Sr.'s, 90th birthday party that the family decided to try to buy back the family business. Credit for the idea was a matter of dispute, however. Leonard, Sr., contended that he jokingly asked his son, "How would you feel about buying the company back?" The younger Japp, on the other hand, maintained that he broached the subject by asking his father, "Do you want to go back to work?" His reply was, "Yeah, why not?"

The Japp family took on a partner, Tom E. Howe, the former president of Butterball Turkey Co., and bought Jays Foods from Borden for about $12 million in 1994. Howe took over as president with Leonard, Jr., serving as chair and CEO and Leonard, Sr., holding the title of chairman emeritus. For Jays' employees the sale represented a happy homecoming, the return of Leonard Japp, Sr., and Jr., who had always maintained warm relationships with the workers. While Borden had made some investments in Jays plants, it had allowed the operation to deteriorate in many ways while transferring some operations to other Borden units. As a result, the new owners had to rebuild the accounting, human resources, and data processing operations, and upgrade an aging delivery fleet that not only needed some new trucks but also computerized inventory-tracking equipment.

KEY DATES

1927:: Leonard Japp, Sr., becomes involved in the snack business.
1929:: First company closes after stock market crash.
1940:: Japp and partner begin manufacturing potato chips under Mrs. Japps label.
1941:: Company name is changed to Jays Foods.
1955:: New plant opens in South Chicago.
1986:: Borden, Inc., acquires company.
1994:: Japp family reacquires Jays.
2000:: Leonard Japp, Sr., dies at 96.
2004:: Willis Stein & Partners acquires Jays.

The Japps played catch-up, struggling to rebuild the company's infrastructure and distribution reach while launching new lower-fat products to remain competitive in a changing marketplace. Jays quickly returned to profitability, and in 1995 sales improved to $95 million, a number that jumped to $120 million in 1996. The company's momentum would begin to stall, however, as industry giant Frito-Lay continued to flex its muscle. Jays' sales dipped to $113 million in 1999, leading to a management restructuring and renewed focus on quality in late 1999. At the same time the company and the Japp family suffered a string of tragedies. First, in October 1999 Leonard Japp, Jr., died suddenly, and then six months later his 40-year-old son, Leonard Japp III, died from an enlarged heart. Surviving them both was 96-year-old Leonard Japp, Sr., but he too succumbed in August 2000 following a lengthy illness.

Leonard Japp's son, Steven, took over as Jays chief executive officer. The changes initiated in 1999 began to pay off in the new century, resulting in an improvement in sales to around $130 million in 2002. Business soon fell off, however, and revenues dipped to $120 million in 2003 and continued to fall in the early months of 2004. The Japp family plan had been to evaluate the situation of the company after ten years and Steven Japp now followed through and conducted a strategic review. Since his father's death a number of companies had made offers to buy Jays Foods, and the family now decided to sell. Completed in conjunction with a filing for bankruptcy protection, Jays foods was sold to the private equity firm of Willis Stein & Partners for $26 million in May 2004.

The Chicago investment firm was making a push in the snack food category, having acquired Lincoln Snacks, known for its Fiddle Faddle caramel popcorn snack. Willis Stein formed Ubiquity Brands to house the two companies. With the backing of its new corporate parent, Jays introduced its first new product in several years, Sweet Baby Jays, a crisp made from sweet potatoes. Other items were added as well to fill out the company's snack offerings, packaging graphics were changed, and about $13 million was invested to upgrade the Jays Chicago plant and another $5 million to acquire and refurbish a warehouse across the street, which would become a key component in improving distribution. Whether Jays Foods would regain its former glory, or at least find a niche as a profitable regional company able to contend with Frito-Lay, remained to be seen.

Ed Dinger