Stouffer Corp.

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Stouffer Corp.

29800 Bainbridge Road
Cleveland, Ohio 44139
U.S.A.
(216) 248-3600
Fax: (216) 498-1420

Wholly Owned Subsidiary of Nestlé USA, Inc.
Incorporated: 1924
Employees: 4,000
Sales: $1.21 billion
SICs: 2038 Frozen Specialties Nec; 2037 Frozen Fruits, Frozen Fruit Juices, and Vegetables.

Stouffer Corp., a subsidiary of Nestlé USA, Inc., is the United States’ leading manufacturer and marketer of more than 150 varieties of premium quality frozen prepared foods. Stouffer introduced frozen foods in the 1950s and calorie-controlled products in the 1980s. The company’s products include frozen entrees, side dishes, the Lean Cuisine line, and popular French bread pizzas.

The company was founded in 1922, when Abraham and Mahala Stouffer left their creamery business in Medina, Ohio, to open a dairy stand in downtown Cleveland’s Arcade Building. The couple offered wholesome buttermilk and free crackers, and soon enjoyed a healthy lunch business. The Stouffers later added fresh-brewed coffee and Mrs. Stouffer’s homemade deep-dish Dutch apple pies to the limited menu.

Abraham and Mahala’s son Vernon graduated from the Wharton School of Finance at the University of Pennsylvania in 1923 and returned home to help with his parents’ growing business. His leadership would propel the family business to unanticipated prominence. The family established its first real restaurant with an investment of just $15,000. Stouffer Lunch opened in 1924 on the corner of East 9th Street and Euclid Avenue in the Cleveland Citizens Building. The restaurant’s menu featured four sandwiches priced from 20 to 25 cents.

The family extended its dining concept to Detroit and Pittsburgh by 1929, when a younger son, Gordon, joined the business. Gordon realized that, to attain chain status, the Stouffer restaurants’ menus, decor, and ambiance should coordinate. He therefore promoted standard uniforms for waitresses—or “Stouffer Girls” as he called them—and launched the slogan, “Everybody is somebody at Stouffers.” The family endeavor was such a success that even the Great Depression did not impede expansion: by 1935, the chain opened its sixth location, and in 1937, it launched its first restaurant in New York City.

The burgeoning company’s progress was curtailed by World War II, but growth recommenced in 1946, when Stouffer’s opened its first suburban restaurant in Cleveland’s Shaker Square neighborhood. Postwar suburbanization spawned Stouffer’s first diversification in the company’s 23-year history: customers at the Shaker Square restaurant began to ask manager Wally Blankinship to freeze popular menu items for reheating at home.

Blankinship soon realized the potential of frozen food, and began to sell the items in a separate business called the 227 Club. The evolution of Stouffer’s frozen foods from a restaurant atmosphere strongly influenced their development. Packaging, for example, focused on entrees, rather than entire meals. And without the concept of mass production driving the business, Stouffer’s dishes differed from normal frozen fare in their high quality and abundance of meat and vegetables. The products introduced a premium segment to the frozen food market. Stouffer’s volume of frozen food business grew so quickly that, in 1954, the company built a pilot processing plant in downtown Cleveland. That year, the company was officially named Stouffer Foods Corporation.

In 1960, Stouffer made its first venture into the hotel business with the purchase of Fort Lauderdale, Florida’s Anacapri Inn. The move gave the company three divisions: Stouffer Hotel Co., Stouffer Foods Corp., and Stouffer Restaurant Co. The restaurant group launched its “top” restaurants in the 1960s. These eateries were located atop skyscrapers in major cities, combining fine dining with a view of the city. By 1973, there were six such restaurants around America.

As more and more women entered the work force after World War II, homemakers had less time to prepare elaborate meals, and demand for convenience foods rose. To meet the increased production requirements, Stouffer constructed a highly automated and modernized frozen food plant in 1968 on a 42-acre site in Solon, Ohio, just south of Cleveland.

In the late 1960s, Stouffer’s consumer research showed that families with two or more children constituted a considerable segment of sales volume. Assuming a market for multi-serving packages, Stouffer developed a “Family Casserole” line serving four or more people. But Stouffer’s research didn’t take trends toward split meals and split menus into account. Split meals are eaten by families with conflicting activities that are unable to eat together. Split menu diners eat at the same time, but not all of the family members eat the same thing. The larger families that purchased Stouffer’s products were not necessarily eating multiple packages of a single product, but utilizing the single-serving packages for split meals and menus. Although the Family Casserole line was basically a failure, it did launch frozen lasagna, which became an instant success in single- and double-serving sizes.

The frozen foods division earned the United States National Aeronautics and Space Administration’s endorsement when Stouffer’s products were chosen to feed Apollo 11, 12, and 14 astronauts while in quarantine after their history-making space voyages. Advertising at the time exploited Stouffer’s support of the space program with the tag line, “Everybody who’s been to the moon is eating Stouffer’s.”

Swiss food colossus Nestlé S.A. acquired Stouffer’s three divisions in 1973, when Stouffer became a subsidiary of Nestlé’s American division, Nestlé Enterprises Inc. Once Stouffer became a member of the Nestlé “family,” its sales and earnings figures were no longer figured separately.

The Nestlé investment helped bring about the 1976 acquisition of Borel Restaurant Corp., owner of the upscale Rusty Scupper seafood chain. Under Nestlé, Stouffer also increased its holdings of restaurants with unique dining atmospheres by purchasing Parkers’ Lighthouse restaurants, which offered waterfront views.

By the 1980s, the Stouffer Hotel Company had grown into a loose chain of 19 Midwest hotels with $80 million in annual revenues. But unlike Stouffer’s other two divisions, the hotel group’s image had deteriorated. In 1981, former hotel busboy and ex-Marine William Hulett was appointed to the presidency of the hotel group. Hulett embarked on a revitalization of the hotel chain by terminating its franchising program and liquidating seven struggling franchised holdings. He then began a decade-long acquisitions spree that brought several prestigious hotels into the Stouffer group, including: Washington, D.C.’s Mayflower in 1981, the Waiohai Beach Resort in 1983, the Stanford Court in 1989, and Tampa Bay’s historic Vinoy Park Hotel in 1990.

Stouffer Foods had become America’s leading manufacturer of premium quality frozen foods by the early 1980s. To meet growing consumer demand, the company increased its production capacity in 1980, building a frozen foods plant in Gaffney, South Carolina.

Noting growing sales of diet foods and drinks in the 1970s, Stouffer Foods began research and development for a product that revolutionized the frozen food industry. Almost a decade of consumer and demographic research directed the brand extension. Focus groups indicated the things that dieters didn’t like about low-calorie food: inferior taste, unappealing appearance, meager portions, and lack of variety. Demographic figures indicated smaller, two-income, and single person households, which also influenced the development of the new product.

Stouffer used its findings to develop single-serving frozen entrees with lots of vegetables and extra herbs for flavor. The 300-calorie dishes in ten varieties fit in well with the American Dietetic Association’s 1200-calorie-per-day recommendations for women. And since dieters shunned the word “diet,” product developers chose the name Lean Cuisine over four other ideas. A white package design conveyed lightness and differentiated the new product from Stouffer’s standard “red box” line.

After about a year of test marketing, Stouffer launched Lean Cuisine in 1982 with the company’s first public relations efforts: a 24-page booklet entitled “On the Way to Being Lean,” and a national tour by nutritionists supporting the product. Consumers ordered more than 300,000 copies of the booklet, and, more importantly, purchased $125 million in Lean Cuisine during its first year of national distribution.

Lean Cuisine sales tripled Stouffer’s projections, and the company’s share of the $500 million frozen food market jumped from an already-impressive 33 percent to 46 percent. The product benefitted the industry as a whole, too; the single-dish entree category enjoyed its first growth in two years. The only problem generated by Lean Cuisine’s phenomenal success was that Stouffer had a difficult time keeping up with demand for the product. In 1982 the company expanded its Gaffney plant by 47 percent, and workers put in six-day weeks there and in Solon to keep stores stocked.

Lean Cuisine quickly overtook predecessor Weight Watchers’ frozen entrees, outselling the competitor three-to-one by 1984 and capturing almost half of the American frozen entree market. But not long after that coup, two other rival food companies introduced strong competing products. Kraft General Foods, Inc.’s Budget Gourmet cut into Stouffer’s share first with its cost-conscious entrees. ConAgra Inc.’s Healthy Choice did more damage with its line of low-sodium, low-fat frozen entrees. At the same time, H. J. Heinz’s Weight Watchers began attaching its name to dozens of products.

By 1987, Weight Watchers, Healthy Choice, and the other competitors had taken their portions of the single-dish frozen dinner market, leaving Lean Cuisine with just 13 percent. The rivalry remained fierce through the late 1980s, when Stouffer’s introduced a product that it hoped would regain some of the company’s market share. Right Course’s low-fat, low-cholesterol formulation seemed to fit in well with the ever-expanding health movement. And, like Lean Cuisine, the product was supported with extensive consumer research. But just 17 months after its introduction, the product was pulled from national distribution. After the overwhelming success of Lean Cuisine, Stouffer’s Right Course flopped, earning a meager 1 percent of the frozen entree market. Observers inside and outside the company blamed a variety of factors for the product’s failure: high pricing, poor shelf placement, overly exotic dishes, and perhaps most significantly, an inauspicious name. By the end of the decade, ConAgra’s Healthy Choice had taken the lead in frozen dinners and entrees, beating Stouffer’s basic entrees by just one share point.

Despite an industry-wide surplus of hotel rooms, Stouffer’s Hotel division continued to grow under Hulett’s direction. By the end of the 1980s, the chain bought the seven-unit Presidente Hotel chain in Mexico, adding to its assembly of resorts in the Caribbean and Hawaii. The hotel group had expanded to number 41 award-winning properties by 1990, with revenues of almost $600 million.

That year, Nestlé acknowledged the close relationship between Stouffer’s hotel and restaurant divisions. The June merger of those two companies to form the Stouffer Hospitality Group elevated William Hulett to the presidency of the reorganized division. But just one month later, Nestlé revealed its plans to sell Stouffer’s restaurants separately from the hotel chain. Nestlé spokespeople noted that, although most of the restaurants were profitable, they contributed less than 1 percent to the world’s largest food concern’s 1989 sales of $30.5 billion. The sale was only the beginning of a consolidation effort that returned Stouffer’s to the single-business emphasis it had established almost 70 years earlier.

In the early 1990s, Hulett continued to develop Stouffer’s hotel group, expanding its holdings in Mexico, the Virgin Islands, and the United States. And when other hotel chains announced rate cuts in the early 1990s, Hulett released nationwide advertisements touting the higher quality and value of Stouffer’s accommodations. By 1993, the group’s hotels and resorts had, in Hulett’s words, “won virtually every major award the travel industry has to offer.” For Hulett, premium offers like butler service, exclusive amenities, and exceptional dining justified Stouffer’s higher prices.

The chain’s success, combined with Nestlé’s desire to consolidate in the 1990s, attracted the attention of another large hotel chain, Hong-Kong based New World Development Co. Directed by billionaire Cheng Yu-Tung, New World operated both the Renaissance and Ramada International chains, and arranged to purchase the Stouffer group in 1993 for a reported $1.5 billion.

The reorganization left Stouffer Corp. with frozen foods as its sole business, and its business had become more complicated in the 1990s. Intense competition consumed Stouffer management, and in 1991, a reorganization of the parent company drew attention away from the grueling frozen foods rivalry. That year, Nestlé’s 15 food and beverage companies in America were reorganized into six business groups according to products or services. The new U.S. subsidiary was renamed Nestlé USA, Inc. Stouffer Foods corporation became part of the Nestlé Frozen/Refrigerated Food Company, yet maintained a separate identity.

Product introductions were a hallmark of the early years of the decade, when Stouffer’s fought aggressively to regain its number one spot from ConAgra’s Healthy Choice. HomeStyle Entrees sought a niche at the opposite end of the product line from Lean Cuisine. The brand extension offered 13 traditional “meat and potato” dishes. The introduction of new Family-Size and Party-Size versions of Stouffer’s most popular entree lines harkened back to the Family Casserole experiment of the 1960s. The company did not, however, abandon its diet line. Stiff competition from Healthy Choice and Weight Watchers continued, yet the frozen food category as a whole declined by 6 percent in 1990. That year, Stouffer’s won the right to print exchange information from Weight Watchers popular diet plan on Lean Cuisine packages, making the Stouffer product equally compatible with Weight Watchers’ nutrition guidelines. Stouffer’s regrouped in 1991, expanding the Lean Cuisine line to 34 varieties, reducing fat, sodium, and cholesterol, lowering prices, and launching a new national television campaign for“the taste you can love for life.”

While most of the frozen food market languished in the early 1990s, one segment that did enjoy growth was that of frozen sweets, especially low-calorie frozen desserts. Lean Cuisine entered this market, dominated by Weight Watchers, with five desserts in 1991 and Lean Cuisine ice milk in 1992.

By early 1992, Stouffer’s had regained its lead in frozen foods on the introduction of Lean Cuisine Macaroni and Cheese, which quickly became a best-selling variety. The Lean Cuisine line was expanded for a second time in the decade with eight new entrees, half of which offered vegetarian alternatives.

That year also saw a major change in Stouffer’s product image. In 1992 the company introduced a new logo that replaced the corporate identification used since the 1950s. The new black oval and red slash “seal of quality” was just one part of a package redesign that included a modernization of the typeface, simplification of the ingredients lists, clearer nutritional information, more attractive food images, and a toll-free number for Stouffer’s Consumer Information Center. Vernon Stouffer was posthumously inducted into the National Frozen Food Association Frozen Food Hall of Fame in 1992 in recognition of his contributions to the industry.

Stouffer Foods Corp. hoped to break out of the frozen foods slump with the 1993 introduction of its Lunch Express lines. The two sub-brands were associated with Stouffer’s standard “red box” and Lean Cuisine lines, but were intended specifically for lunchtime consumption. The total of 24 new products continued the frozen foods trend toward ever-greater market segmentation. The nine or 10 ounce meals could be microwaved in about five minutes, eaten right from the package, and purchased for under $2. Stouffer’s hoped that Lunch Express would carve out a new niche for itself and, at the same time, expand the frozen food industry, which had experienced virtually no growth in the 1990s.

Once a family-owned, Midwestern dairy stand, Stouffer Corp. grew to encompass a restaurant chain, an award-winning hotel group, and an internationally-recognized producer of frozen foods. After consolidation in the early 1990s, the company has focused on the business that revolutionized the frozen food industry.