Peopperidge Farm, Incorporated

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Peopperidge Farm, Incorporated

595 Westport Avenue
Norwalk, Connecticut 06851-4413
U.S.A.
Telephone: (203) 846-7000
Toll Free: (888) 737-7374
Fax: (203) 846-7369
Web site: http://www.pepperidgefarm.com

Wholly Owned Subsidiary of Campbell Soup Company
Founded: 1937
Employees: 5,000
Sales: $1.1 billion (2005 est.)
NAIC: 311412 Frozen Specialty Food Manufacturing; 311812 Commercial Bakeries; 311813 Frozen Cakes, Pies, and Other Pastries Manufacturing; 311821 Cookie and Cracker Manufacturing

Pepperidge Farm, Incorporated, is a leading provider of premium fresh breads, cookies, crackers, and frozen foods. The Pepperidge Farm bakery line includes breakfast breads, English muffins, bagels, Farmhouse and Natural Whole Grain breads, and an assortment of rolls; more than 50 varieties of fresh baked breads are offered in total. The company also produces stuffing and croutons. The cookie lineup includes the Milano and Chocolate Chunk varieties, while the cracker portfolio is headlined by the Goldfish line, a favorite with kids. Pepperidge Farm's frozen food assortment encompasses garlic toast, French toast, pot pies, cakes, and puff pastries. Pepperidge Farm was founded in 1937 by Margaret Rudkin, a Connecticut homemaker and entrepreneur, and has been wholly owned by Campbell Soup Company since 1961. The company's products are produced at eight manufacturing facilities across the United States. They are distributed in more than 40 countries around the world.

BEGINNINGS IN MARGARET RUDKIN'S KITCHEN

Born in New York City on September 14, 1897, Margaret Fogarty graduated valedictorian of her New York City public high school class before embarking on a career in business. She spent four years at a local bank working first as a bookkeeper and then as a teller. In 1919 she took a position with the brokerage firm McClure, Jones & Co., where she met Henry Albert Rudkin, one of the company's partners. The two married in 1923 and by decade's end had three sons. In 1926 the couple bought 125 acres of land near Fairfield, Connecticut, part of which had once been a farm. A distinguishing feature of the property was a group of pepperidge trees, an ornamental variety known for its brilliant scarlet foliage in the fall (the tree is also called the black tupelo, black gum, and sour gum). The new owners thereby named the estate Pepperidge Farm.

Margaret Rudkin faced many challenges during the years of the Great Depression, including dealing with a serious polo accident that her husband suffered in 1932. She earned money during this period by selling apples from the farm's orchard and turkeys they raised. Her true turn to entrepreneurship arose, however, after her youngest son, Mark, was diagnosed in 1937 with severe allergies and asthma that were exacerbated by most commercially processed foods. An allergy specialist recommended a diet of fresh fruits and vegetables and minimally processed foods. Rudkin therefore at the age of 40 ventured to bake her first loaf of bread. She drew on her memories of childhood, when her Irish grandmother taught her to cook, conjuring up her grandmother's recipe for whole wheat bread based on old-fashioned ingredients, including stone-ground whole wheat flour, honey, molasses, natural-sugar syrup, whole milk, cream, and butter. Her first attempt was a miserable failure, something she looked back on humorously in one of the autobiographical sections of The Margaret Rudkin Pepperidge Farm Cookbook: "That first loaf should have been sent to the Smithsonian Institution as a sample of bread from the Stone Age, for it was hard as a rock and about one inch high." Through trial and error, Rudkin eventually mastered the use of yeast and the art of breadmaking, producing a loaf that her whole family enjoyed.

The bread also seemed to improve Mark's health, and his doctor was so impressed by a sample Rudkin gave him that he asked her to make bread for him and for his other patients. Armed with a letter of recommendation from this doctor, Rudkin successfully approached other doctors, who passed word of this healthful bread on to their patients. In this fashion, Rudkin developed a sizable mail-order business simply by word of mouth. As demand for the bread from friends and neighbors increased, she soon expanded into distributing loaves to local grocers. Although commercial bread then sold for ten cents a loaf, Rudkin insisted on selling her premium bread, which carried the "Pepperidge Farm" brand, to the grocers for 20 cents, with the bread then retailing for 25 cents. "I reasoned that if the public really wanted a loaf of good, old fashioned bread, they'd be willing to pay for the ingredients that went into it," she later recalled. Her plan worked.

As demand increased, Rudkin hired a young female assistant, Mary Ference, and moved production out of her kitchen—first to her garage and then to an unused outbuilding on the farm, which was converted into a model bakery. In its first three months of operation the business sold $2,500 worth of bread. Through the fall of 1937 Rudkin had continued to produce only whole wheat bread. Knowing that many people still preferred white bread, she began making an old-fashioned all-natural white bread that used only unbleached flour. Around this same time, the Pepperidge Farm business began to have difficulty filling the increasing mail orders from New York City. Rudkin's solution was to expand distribution to New York retailers. Rudkin persuaded Charles and Company, a prestigious specialty food store, to carry her bread, beginning with 24 loaves a day. At first her husband made the deliveries as part of his daily train commute to his Wall Street office, but the use of a trucking company was soon needed as the order reached 1,200 loaves a week. By the end of its first year of operation in September 1938, Margaret Rudkin's bakery was producing 4,000 loaves every week.

EXPANDING INTO A NATIONWIDE BRAND

The high quality and healthfulness of Pepperidge Farm bread, along with its "homemade" image, became known to an ever wider audience following the publication of several enthusiastic newspaper articles as well as a glowing tribute in the December 1939 issue of Reader's Digest magazine. This free publicity brought orders pouring in from throughout the United States as well as Canada and several other countries. Under pressure to expand, Rudkin in 1940 moved her operation into an empty service station in nearby Norwalk, Connecticut. During the first year in this rented building, production soared to 50,000 loaves per week, aided by a workforce that had grown to about 50. Annual revenues soon reached $500,000.

COMPANY PERSPECTIVES

From our beginning in Margaret Rudkin's kitchen in 1937 to today, Pepperidge Farm has changed a great deal, but one thing has never changed, our commitment to quality. It's a tradition that began with our entrepreneurial founder, and proudly continues to this day.

Rudkin had planned to stay in this building for only a year before shifting quarters into a newly built modern commercial bakery. However, rationing during World War II led to a cutback in production because Rudkin refused to compromise on quality by making substitutions for top-quality ingredients. Construction of the new plant had to be delayed until after the war's end. Finally, on July 4, 1947, Pepperidge Farm began production at a new $625,000 state-of-the-art plant in Norwalk that Rudkin had designed herself. Initial capacity was 4,000 loaves per hour. Although the company had moved into mass production, Rudkin remained steadfast in her commitment to quality. She continued to use only stone-ground wheat produced at water-powered mills in New England that she helped to restore. The dough was still mixed in small batches and kneaded by hand. She further decreed that loaves that were not sold after two days on a store's shelf be returned to the company. As had long been done in home kitchens, Rudkin turned this stale bread into a new product, poultry stuffing. The Pepperidge Farm brand soon extended to dinner rolls and additional varieties of bread as well.

Distribution spread from Maine to Florida and west to the Mississippi. The growing popularity of Pepperidge Farm products led to the opening of a second factory in Downingtown, Pennsylvania, near Philadelphia, in 1949 and a third in Downer's Grove, Illinois, near Chicago, in 1953. The former's capacity was 77,000 loaves per week, while the opening of the latter raised companywide capacity to one million loaves per week. Adjacent to the Downer's Grove plant the firm built a new mill to stone-grind wheat the old-fashioned way that Rudkin deemed essential to producing quality baked goods. By the end of the 1950s Pepperidge Farm reached nationwide distribution.

This expansion was backed by a move into television advertising. The first ads, which debuted in 1950, featured the founder herself as "Maggie" Rudkin and had a homespun appeal. In 1956 a new campaign was launched featuring a down-home Pepperidge Farm deliveryman named "Titus Moody." This character, who was eventually known simply as "the Old Timer," starred in one of the longest-running TV ad campaigns in history, one that lasted into the early 1990s.

A further broadening of the product line also occurred in the 1950s. On a trip to Belgium, Rudkin discovered a line of premium cookies being produced by Delacre Company. She reached an agreement with the Belgian company to produce and sell the delicate European-style cookies under the Pepperidge Farm banner. A wing was added to the Downingtown factory where a 46-meter-long cookie oven, imported from Belgium, was installed. Production of the Distinctive line of cookies, which initially featured such names as Bordeaux, Geneva, and Brussels, was launched in 1955. This line would later be headed by the popular Milano cookie. Pepperidge Farm also expanded into frozen foods in 1957 through the acquisition of Black Horse Pastry Company of Keene, New Hampshire, maker of frozen puff pastries. A decade later, frozen three-layer cakes were added to the lineup.

SALE TO CAMPBELL SOUP, END OF THE RUDKIN ERA

By 1960 Pepperidge Farm was producing 1.2 million loaves of bread per week and its workforce had reached 1,700. Its more than 50 products were sold through 500 distributors and some 50,000 stores across the country. For the fiscal year ending in April 1960 profits totaled about $1.3 million on revenues of $32 million. The Rudkin family maintained ownership of more than 80 percent of the stock, and Margaret Rudkin continued to handle the production and personnel end of the business, while her husband was responsible for the financial side, as well as marketing, sales, shipping, and other areas, and served as the company chairman. He had gradually retired from his Wall Street job to work fulltime at Pepperidge Farm.

KEY DATES

1937:: Margaret Rudkin begins making Pepperidge Farm bread, which is initially sold by mailorder and through local grocers.
1940:: Production moves to a rented building in Norwalk, Connecticut.
1947:: Company opens a new modern bakery in Norwalk.
1955:: Production of European-style cookies begins.
1961:: Campbell Soup Company acquires Pepperidge Farm.
1962:: Pepperidge Farm launches Goldfish crackers.
1966:: Margaret Rudkin retires.
1968:: Gordon McGovern begins 12-year stint as company president during which time he increases revenues to $300 million.
1984:: Richard Shea takes over as Pepperidge Farm president.
1986:: American Collection cookie line, later renamed Chocolate Chunk, debuts.
2001:: Revenues reach $1 billion.
2003:: The original Norwalk bakery is shut down and replaced with a new plant in Bloomfield, Connecticut.

In November 1960, however, the Rudkins agreed to sell Pepperidge Farm to Campbell Soup Company as a way of providing their firm with additional financial backing to support further expansion. Campbell bought Pepperidge Farm for about $28.2 million worth of Campbell Soup stock in a deal that closed in January 1961. Margaret Rudkin continued in charge of Pepperidge Farm, Incorporated, which became a wholly owned subsidiary of Campbell, and she also gained a seat on the soup company's board of directors—the first woman to do so. In 1962 her husband retired from the company, Margaret took over the chairmanship, and their son Bill was named president.

Rudkin made one final lasting contribution to the Pepperidge Farm product lineup through another European discovery, this one from Switzerland. There she discovered a unique fish-shaped cheese cracker that Pepperidge Farm launched in 1962 under the name Goldfish. Originally a cocktail cracker, Goldfish later became a favorite kid's snack. Margaret Rudkin retired in September 1966, shortly after her husband's death, having built Pepperidge Farm into a $50 million business. She died of breast cancer on June 1, 1967, at the age of 69.

UPS AND DOWNS

From March 1968 through August 1980, Pepperidge Farm was led by Gordon McGovern, an aggressive marketer who, in a little more than a dozen years, increased the firm's sales from $60 million to $300 million. Under his leadership, Pepperidge Farm pioneered the mass marketing of upscale food products. The company's marketers lured customers into paying premium prices for the company's products by having them placed high on store shelves and emphasizing the products' high quality and all-natural ingredients. New products flowed freely from a seat-of-the-pants approach to new product development. On the advertising side, a nostalgic campaign featuring the tagline "Pepperidge Farm Remembers" ran throughout the 1970s, while the first television advertising for Goldfish crackers debuted in 1977. Finally, distribution was aided and expanded through the opening of a string of new plants. In January 1974 production began at a cookie and frozen food plant in Richmond, Utah. In 1977 two more plants commenced operation: a bakery facility in Aiken, South Carolina, and a cookie facility in Willard, Ohio.

In a side note during this period, Pepperidge Farm in August 1971 was given responsibility for managing Godiva Chocolatier, Inc., which Campbell Soup had acquired in 1966. This arrangement ended in August 1987 when Godiva became an independent Campbell subsidiary.

The McGovern era ended when he was promoted to president and CEO of Campbell Soup. This ushered in a chaotic period in the early 1980s when the Pepperidge Farm presidency changed hands several times and the company suffered through a string of highprofile failed product launches. Three products introduced in the early 1980s all failed miserably in the marketplace: Deli's, a line of pastry-wrapped fruits, vegetables, and meats; Star Wars cookies; and Pepperidge Farm Apple Juice. All three of these products flew in the face of one of the company's founder's key principles: her emphasis on quality first and foremost. They simply were not up to the standards expected of the Pepperidge Farm brand.

Richard Shea, named president of Pepperidge Farm in June 1984, quickly got the company back on track. He purged hundreds of products from the lineup and improved production efficiency by closing several outdated plants, upgrading the remaining plants, and constructing two new high-tech plants. By the early 1990s Pepperidge Farm had spent $500 million on plant modernization and construction as well as installation of company-wide computerized delivery systems. In August 1987 an $80 million state-of-the-art bakery commenced production in Lakeland, Florida. This was followed by the October 1991 ribbon cutting at a $180 million, 611,000-square-foot facility in Denver, Pennsylvania, designed for both baked goods and cookie production. Through these initiatives, the time required for getting products from the plants to stores was cut in half, improving the freshness of the company's offerings and thereby revitalizing Pepperidge Farm's emphasis on basic quality. The company also scored its first hit new product in years in 1986 with the debut of the American Collection cookie line, which was later renamed Chocolate Chunk. By the time Shea retired from Pepperidge Farm in 1994, sales had reached $600 million.

INTO THE NEW CENTURY

From 1996 to 2002 Pepperidge Farm was led by David L. Albright. Under his watch, the Goldfish brand was successfully repositioned more as a kid's snack item. In 1997 the product was altered for the first time since its 1962 introduction with the addition of a stamped smile, a change backed by the tagline "the snack that smiles back." The product was then extended with the launches of Flavor Blasted Goldfish (1998), Giant Goldfish (2000), Baby Goldfish (2001), and Goldfish Colors (2002). By 2002 sales of the Goldfish brand had doubled to $280 million, and Goldfish had become the number two cracker brand in the United States. Other successful product introductions during this period included frozen pot pies, French toast, and Texas toast. Pepperidge Farm also launched a new umbrella ad campaign in late 1999 featuring the slogan "Never have an ordinary day." In 2001 revenues at Pepperidge Farm exceeded the $1 billion mark for the first time. By this time, bread production had reached 145 million loaves per year, while the company was also producing more than 75 billion Goldfish crackers and more than 500 million Milano cookies annually.

After Albright's departure, Mark A. Sarvary was named Pepperidge Farm president in August 2002. Sarvary, a onetime executive at Nestlé USA, had served as CEO of retailer J. Crew Group Inc. He oversaw the opening of another new plant in May 2003, a 265,000-square-foot, $72 million facility in Bloomfield, Connecticut, for the production of bread, rolls, stuffing, and croutons. In a historic move, this plant replaced the firm's facility in Norwalk, the one that Margaret Rudkin had designed herself and that had been in operation since 1947. The Norwalk plant closed in July 2003, but Pepperidge Farm kept its headquarters in the building adjacent to the plant. In another historic shift, the company in September 2003 introduced its first new spokesperson in nearly 50 years, an animated character known as "John Dough" who replaced "the Old Timer." In the meantime, Pepperidge Farm scored another hit on the new product front with the July 2003 introduction of five Mini cookie varieties, including Mini Milano, Mini Brussels, and Mini Sausalito.

When Sarvary was promoted to president of Campbell Soup North America in March 2004, Jay Gould succeeded him as president of Pepperidge Farm. Gould had joined the company in December 2002 as chief marketing officer, having previously worked at both General Mills, Inc., and the Coca-Cola Company. Over the next couple of years, Pepperidge Farm continued its tradition of focusing on healthful foods by eliminating trans fats from all of its product lines and by introducing a string of products featuring whole grains, including breads, English muffins, bagels, and Goldfish crackers—the latter clearly harkening back to the founder's original stone-ground whole-wheat-based product. Gould left the company suddenly in January 2006. He was replaced by Pat Callaghan, a Pepperidge Farm veteran who had joined the firm in 1979. Callaghan made an immediate promise to uphold the company's nearly 70-year tradition: "I am committed to maintaining the quality and innovative spirit of Pepperidge Farm's founder, Margaret Rudkin."

PRINCIPAL COMPETITORS

Kraft Foods, Inc.; Sara Lee Bakery Group; Kellogg Company; Interstate Bakeries Corporation; Ralcorp Holdings, Inc.; Frito Lay North America; George Weston Limited; Flowers Foods, Inc.