S&D Coffee, Inc.

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S&D Coffee, Inc.

300 Concord Parkway South
Concord, North Carolina 28027
U.S.A.
Telephone: (704) 782-3121
Toll Free: (800) 933-2210
Fax: (800) 950-4378
Web site: http://www.sndcoffee.com

Private Company
Incorporated: 1927
Employees: 850
Sales: $250 million (2005 est.)
NAIC: 311920 Coffee and Tea Manufacturing

A provider of coffee, tea, and juice products, S&D Coffee, Inc., serves a wide variety of outlets, including restaurants, universities, hotels, banquet halls, coffee-shops, offices, foodservice operations, and convenience stores. S&D supplies, repairs, and refurbishes its own brewing equipment; trains customers in the preparation and presentation of its products; and maintains a 24-hour toll-free help line. The company does business through divisions that are responsible for single stores and smaller chains in their area, as well as through national teams that are responsible for larger chains. S&D has its own branded line of specialty coffees, called Buffalo and Spring, and roasts hyper-caffeinated coffees for New York-based Shock Coffee. It is also the largest provider of iced tea to the foodservice industry.

ORIGINS

In 1927, Roy Davis, Sr., and Lawrence Switzer borrowed $500 to start a coffee supply business, setting up headquarters in a residential basement on West 11th Street in Charlotte, North Carolina. They provided freshly roasted coffee to local and regional grocery stores. As the company (whose name came from the first letter of each founders' last name) grew, Switzer and Davis learned about buying raw beans and about different roasting processes. The following January in Charlotte, S&D formally organized as a partnership. Several months later, Davis bought out Switzer.

In May 1930, Davis moved S&D to Concord, North Carolina. That same year, Franklin Delano Roosevelt's Department of Agriculture requested that all roasters report on their coffee imports. S&D was one of the few companies to comply, a move that paid off a little more than a decade later and proved a turning point for the company. Thanks to its earlier cooperation with the Department of Agriculture, S&D received the right to import 5,000 bags of green coffee in 1942, helping the company finally achieve profitability.

At about this time, S&D also expanded its product line, introducing Matchless brand tea to its customers. Matchless tea marked the company's first introduction of outsourced private label tea. During the 1940s and 1950s, it also introduced grocery store brands of coffee, Goldbond and HyTop. During these early decades, S&D, like Maxwell House and Chase & Sanborne coffee roasters, distributed its products to its customers via route service. The company had its own fleet of trucks bearing the S&D logo.

AN EXPANDED CUSTOMER BASE LEADS TO GROWTH NATIONALLY

The 1960s were an important decade of growth and change at S&D. On New Year's Day in 1965, two big changes took place: J. Roy Davis, Jr., who had joined the company in 1958, became president of S&D. The company also bought Interstate Coffee Co., a Georgia warehouse grocers' supplier.

J. Roy Davis, Jr., led his crew of 12 employees through some major changes. In the late 1960s, Davis officially refocused S&D's market strategy away from small grocery stores to concentrate business on the commercial side of the coffee business: restaurants, hospitals, and convenience stores, and in 1968, the office coffee market. In white collar and industrial facilities, S&D brought what it referred to as the "S&D Coffee Break," which consisted of coffee brewing machines, coffee, and related products for employee use. The service proved a solid business move, and by 1970, S&D had reached $1.7 million in sales. When Maxwell House and Chase & Sanborne switched their business away from route service, S&D held fast and gained many new customers. The company was fast becoming a regional power, distributing coffee and related products in North Carolina, South Carolina, and parts of Virginia.

Around this time, S&D also decided to expand nationally; it joined the Dine-Mor association of roasters based in St. Louis, Missouri, and landed its first national account with Holiday Inn. In 1978, the company hired Buckley & Forester, purchasing agents of green coffee. The company also took steps to ensure the quality of its iced tea by beginning to package its own tea in its Concord facility in 1980. In 1984, it hired its first commodities buyer and roast master. The following year, S&D made another major acquisition, DeWitt Nash Coffee Company of Cleveland, Ohio. Back in Concord, the company opened a retail outlet in response to public demand in 1987.

INCREASED BREWING CAPACITY AND SPECIALTY COFFEES

As America began to pay more attention to what it brewed, Rhyne Davis, Roy Davis's son and part of S&D's management staff, focused his attention on the company's introduction of specialty coffees. S&D acquired two new high-tech roasters, the Probat R-2000 and the Burns System 90, and embarked on a major expansion of its manufacturing and distribution facilities. In 1992, S&D also expanded its offerings to include juice, teas, and popular specialty coffees.

With greater capacity and roasting flexibility, S&D turned its attention to the expanding convenience store market, introducing its first branded program, Coffee Zone. In 1996, it ended its relationship with Dine-Mor and expanded its headquarters facility, doubling its roasting capacity from 21 million to 47 million pounds annually. In May 1998, S&D introduced its web site.

In a strategic move to expand business in the Northeast, S&D purchased Victor Coffee Company of Boston, Massachusetts, in May 2000. Victor Coffee was the oldest coffee roaster in the country, having been founded in the 1790s. The acquisition of Victor more than doubled the number of McDonald's restaurants among S&D's customers from 4,000 to 8,000. In addition to S&D-serviced units in New England, the Great Lakes area, and the Midwest, there were units throughout the Southeast, Ohio, and Texas. The acquisition of Victor Coffee also made S&D the number two domestic foodservice coffee roaster behind Sara Lee.

In anticipation of future growth, S&D also realigned senior management in 2000. Davis formed a board of directors with his sons, Rhyne and Alan, and they chose Ron Hinson to become the next president and chief executive of the company. Hinson had joined the company in 1979 as a 21-year-old route sales representative in the Asheville, North Carolina, area.

The company's successes called for several more rounds of expansion. By 2001, S&D had installed a third high-tech roaster and had increased its roasting, holding, and warehousing areas significantly. The company's new manufacturing and distribution center, completed in 2001, increased its capacity to roast and pack coffee to 100 million pounds annually. In 2004, it expanded again, adding a new building to house a sophisticated green bean unloading, handling, and silo storage system. The new construction also included the installation of S&D's fourth commercial coffee roaster. The additional roaster and handling system increased the plant's roasted coffee output again by one-third.

COMPANY PERSPECTIVES

No matter how fine a roaster we are, it wouldn't mean much if our coffee didn't get to you fresh, on-time, and with the set-up that makes it easy to serve and sell. That's why S&D not only uses premium beans and processing, but also puts a premium on service.

Keeping pace with the nation's interest in specialty coffee, which grew by 42 percent in sales volume from 2000 through 2005, S&D introduced several new products from 2004 through 2006. In 2004, S&D began to sell freshly brewed iced coffee. In 2006, it added a gourmet coffee line aimed at high-end resorts, fine restaurants, and upscale markets. In early spring 2006, the company launched its Buffalo and Spring Coffees of Distinction, the company's first branded specialty coffee line, which included fair-trade-certified coffees. (The fair-trade label guarantees means that the beans used are grown based on principles of sustainable growth and that the growers receive a higher portion of the profits from the sale of beans.) Also in 2006, S&D became one of McDonald's suppliers of premium roast coffees, and the roaster and a distributor for Shock Coffee, a hyper-caffeinated coffee sold by a company of the same name based in New York. S&D also made improvements to its tea facility in 2006 that doubled its tea-blending capacity to 22 million pounds annually and allowed it to formulate custom tea blends.

The company's push to diversify also led S&D to increase its presence in convenience stores in 2006, its fastest growing division. According to Hinson in a 2005 NACS article, the company had "committed the resources to compete with our competition. They have been involved in the convenience store industry in a bigger way then we were, but I think we're going to make up for lost time. We're going to continue adding to this division, and it will become one of our largest divisions in the future. I don't think there's anyone in the industry that does coffee any better than we do it."

The company also committed itself, according to Hinson, to educating its customers both about using higher-grade coffee products and "about the plight of the small coffee growers. We all need to be more accountable in bringing awareness of these sustainable issues and help in creating financial solutions to eliminate the current impoverished conditions that they face." Proceeds from the sale of Buffalo and Spring coffees were used to benefit Coffee Kids, an international nonprofit organization established in 1988 to help coffee-farming families improve the quality of their lives.

By all accounts, the company seemed to be well-liked by its customers. In the early years of the new decade, it had received numerous vendor-of-the-year awards—from Capital Grill, Shoney's, Applebee's, and Olive Garden—in at least one instance after having only served as a vendor for a single year. The company's short-term goals included continuing its focus on service to customers and staying ahead of trends with new products, such as low-carbohydrate and dessert cappuccinos and flavored hot chocolates. Among its long-term goals was expanding its customer base, specifically the regional and national chain store part of its business.

KEY DATES

1928:: Switzer and Davis found S&D Coffee.
1930:: Davis moves S&D to Concord, North Carolina.
1958:: J. Roy Davis, Jr., joins the company.
1965:: Davis, Jr., becomes president of S&D; the company buys Interstate Coffee Company.
1985:: S&D acquires DeWitt Nash Coffee Company of Cleveland, Ohio.
1987:: The company opens a retail outlet in Concord.
1998:: S&D introduces its web site.
2000:: The company acquires Victor Coffee of Massachusetts; Ron Hinson becomes president and chief executive of the company.

By 2006, S&D typically roasted about 275,000 pounds of beans a day. Yet, ironically, industry growth posed challenges for this fast-growing company in the form of potential shortages in the supply of quality beans. As a result, S&D continued to cultivate relationships with small plantations as it began plans to buy another company or roasting facility.

Carrie Rothburd

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