Allen Foods, Inc.

views updated

Allen Foods, Inc.

8543 Page Avenue
St. Louis, Missouri 63114
U.S.A.
Telephone (314) 426-4100
Toll Free: (800) 888-4855
Web site: http://www.allenfoods.com

Wholly Owned Subsidiary of Royal Ahold NV
Founded: 1901 as L. Allen & Sons Company
Employees: 450
Sales: $245 million (2002 est.)
NAIC: 422490 Other Grocery and Related Products Wholesalers

Based in the St. Louis area, Allen Foods, Inc. is a subsidiary of Dutch supermarket giant Royal Ahold NV. Allen is a small part of Ahold's U.S. Foodservice operation—the second largest food service distributor in the United States, trailing only SYSCO Corporation. Allen is a wholesale distributor to restaurants, hotels, shopping mall food courts, riverboat casinos, high schools and colleges, military bases, and prisons in a six-state territory located within a 300-mile radius of St. Louis. The largest distributor in the St. Louis market, Allen serves communities as far east as Terre Haute, Indiana, and as far west as Topeka, Kansas. The company does a limited amount of international business, all of which is related to its longtime military contracts. Allen's 300,000-square-foot warehouses stock more than 13,000 different items. Its delivery fleet and 122 full-time drivers average 90 routes per day, and the company employs a computerized routing system, "Roadnet," and GPS tracking. To insure product integrity, Allen is converting to trailers with three compartments, each of which will be capable of maintaining temperatures appropriate for different types of products.

Origins and Growth

Allen Foods was founded by Louis Allen, who immigrated to St. Louis from Poland in the 1890s at the age of 23. Impoverished, he left behind his wife, who soon gave birth to a son, Harry. The family would not be reunited until four years later, when Allen was finally able to send for them. His was truly a rags-to-riches story, an embodiment of the American dream. He started out as a peddler of clothing and small household goods, at first on foot. Because competition was greater in the city, he decided to try his luck in the countryside. According to the O'Fallon Historical Society, Allen had just 50 cents in his pocket after buying his merchandise from the city's wholesale houses on his first day in business. He hauled his wares on his back across the Eads Bridge that spanned the Mississippi River until he reached the Relay Depot in East St. Louis, Illinois. Having no idea which of the outlying communities would offer the best opportunity, he simply asked the clerk how far 50 cents would take him by train. The answer was the village of O'Fallon, Illinois. However, once he arrived, Allen faced an unexpected complication—the local marshal demanded that he pay $1.75 for a peddler's license in order to business in the area. Since he had no money, the marshal and the town clerk decided not to jail the young man. Instead, he was allowed him to peddle his goods in hopes that he would be able to pay for his license, thus enriching the town's treasury without incurring the expense of feeding a prisoner. O'Fallon turned out to be a fortunate choice for Allen. At the end of the day, he was able to pay for a three-month license.

For four years, Allen walked his country route in the small communities surrounding O'Fallon: Lebanon, Shiloh, and Summerfield. He was successful enough to bring his family to the United States from Poland. He was also able to take the next step in his career and buy a horse and wagon from which to do business. In 1901, Allen and his three sons—Harry, Ben, and Al—established the L. Allen & Sons Company general store, taking over a former barbershop in O'Fallon and selling groceries and other merchandise. As he had done before, Allen built upon success. By 1904, he and his family were able to move to a larger location. Because they needed only half of the space, they adding clothing to their product mix. (In 1929, according to the O'Fallon Historical Society, the Allens opened a clothing store in Chicago. Launching a new business on the dawn of the Depression proved to be unfortunate timing, and the venture was ultimately sold.) The profitability of this store then led to the family opening a retail grocery store in O'Fallon in 1912. Over the next 30 years, this operation grew into a regional grocery store chain, with locations added in such Illinois communities as Belleville, Breese, and East St. Louis. The company also developed a grocery delivery service and during World War I found customers in the officers and their families living at a military facility now known as Scott Air Force Base, located near Belleville, Illinois. In 1917, "Scott Field"—named after Corporal Frank S. Scott, the first enlisted man to die in an air accident—opened to train pilots.

Postwar Focus on Distribution

World War II proved to be a turning point for the Allen family business. In 1941, the company received its first federal contract to supply large quantities of food to the Scott air base. In addition, Al Allen began to sell canned good to other bases as well as to other large institutional customers. From his tailor shop, brother Ben made uniforms for the troops stationed at Scott. By war's end, L. Allen & Sons food distribution business was so successful that the family eased out of retail groceries to concentrate on its growing institutional food operations. In addition to supplying Scott, the company also began to supply restaurants in the postwar years. As the business expanded, Ben Allen decided to close the tailor shop and went to work for the family company, taking over buying. By the end of the decade, the distribution operation outgrew the O'Fallon facility, and the Allen family elected to move to St. Louis, taking over a much larger warehouse.

Renamed Allen Foods, the family business entered the 1950s and embarked on a new era. A moment that marked this passage, and severed the family's business ties to O'Fallon, came on May 23, 1953, when the drygoods store the Allens had run since 1904 was destroyed by fire. They decided against replacing the store, and Harry Allen, who had been running the operation, joined his brothers Al and Ben at Allen Foods. Operating out of St. Louis, the food distribution business expanded, leading to the company to relocate to larger accommodations on Gustine Avenue. Another major step taken during the 1950s was the acquisition of Halben Foods Manufacturing Company, which began the transformation of Allen from a food distributor to a "broadliner" able to manufacture its own products. Under the brand name "Lasco" (drawing on the initials of the company's original name, L. Allen & Sons Company), Halben would ultimately provide food service operators with a range of more than 300 food and beverage products, including a complete line of cocktail mixes and other beverage mixes, salad dressing, gravy and sauce mixes, ready-to-use sauces, and dessert mixes. In addition to Lasco products, Halben also developed a private label and custom design product program that could create items to customer specifications as well as offer the services of its own research and development staff to formulate new products.

In 1968, Allen made another advance in its evolution when it added frozen foods to its inventory. The company then moved into restaurant equipment and furnishing, as well as restaurant design, accomplished by the 1972 Allen acquisition of Bensinger's Inc. The growth of the company was so strong that it soon outgrew its warehouse capacity once again. In 1972, Allen moved into a new warehouse located in the St. Louis community of Overland. It had been built in 1969 for the Bettendorf super-market chain, but when Bettendorf was subsequently acquired by Schnuck Inc. the warehouse went unused for three years. Allen continued to utilize its old Gustine Avenue facility, converting it to use by Halben for food manufacturing.

In the 1980s, a third generation of the Allen family took over leadership of the company when, in 1982, 42-year-old Stanley Allen was named president. He had been working for the family business since graduating from college in 1962. He was joined in the running of the company by other family members of his generation: Rick Allen, Joel Allen, and Louis Cohen. Allen Foods enjoyed exceptional growth during the 1980s. Stanley Allen told the St. Louis Post-Dispatch in 1996, "Our company profited from the industry boom in the 1980s. … As more women went into the work force, the novelty of eating out grew like crazy." To take further advantage of that trend, Allen once again expanded its operations, adding fresh produce in 1986. A year later, this segment was bolstered with the acquisition of Marske Produce Company, a Soulard, Missouri, company. During this period, Allen attempted to expand internationally, hoping to build on the overseas business it conducted through military contracts (essentially the sale of Lasco cocktail lemon and lime concentrates at military PXs and general stores). The company worked with the Missouri Department of Economic Development as well as with U.S. Senator John Danforth of Missouri to gain access to countries such as Germany and Japan. In the end, however, Allen was confronted with a number of protective measures that thwarted its attempts to break into these markets. On the domestic front, Allen looked to secure new business by turning 6,000 square feet of its warehouse into a quasi-supermarket where, on a cash-only basis, individuals could buy the same bulk products the company supplied to large restaurant customers. These offerings, under both the Lasco and brand-name labels, included 50-oz. cans of soup, gallon containers of mustard, and large bags of meatballs. Primarily, the idea was to find a way to fend off new competition like Sam's Wholesale Club, which sold a limited selection of institutional-sized food products.

Company Perspectives:

Louis Allen and his descendants have built Allen Foods on integrity, honesty, and trust, ideals that remain the foundation and strengths of Allen Foods.

Last of Founder's Sons Dies in 1995

During the 1990s, Allen expanded its range of institutional customers to include gambling riverboats and prisons. As Stanley Allen told the St. Louis-Post Dispatch regarding the trend the company was responding to, "What are we building? Prisons, sports stadiums and gambling riverboats." For a wholesaler operating out of St. Louis, finding new outlets was important because, as he commented, "It's pretty flat in this market now. We also happen to be in a region that's not growing in population. Our business has to come at the expense of our competition, it appears." Moreover, the entire food service industry was undergoing a period of extreme consolidation with a few deep-pocketed companies swallowing up smaller companies. Able to take advantage of their sheer size to better control costs and undercut their rivals on price, these mega-concerns continued to grow larger, while regional, family-owned-andoperated companies like Allen Foods were fast becoming relics. Ben Allen, the last of the Allen brothers who founded the business with his father finally quit working at the company in 1995. Two years later, at the age of 92, he died as the result of a lengthy illness. He left the business in the hands of third- and fourth-generation members of the family, but Allen Foods, like so many other family businesses, was soon destined to become part of a corporate giant.

In December 2002, Royal Ahold acquired Allen Foods for an undisclosed amount that analysts pegged to be around $100 million. Not included, however, was Halben, which the Allen family retained and would continue to operate. Stanley Allen remained as president of Allen Foods, and cousin Richard Allen continued to serve as an executive vice-president. During the 1990s, Netherlands-based Ahold had been one of the more aggressive players in the food industry, primarily by acquiring supermarket chains. In the previous three years, it expanded into the food distribution business. The first step was the 2000 acquisition of U.S. Foodservice, followed by a number of smaller purchases involving regional food distributors such as Parkway Food Service, PYA Monarch, and Alliant Foodservice. Earlier in 2002, Ahold acquired Lady Baltimore Foods Inc., an Allen rival in the Kansas City market. Although Wall Street seemed unimpressed with Ahold's purchase of Allen Foods, it was apparent that the Dutch firm was committed to growing U.S. Foodservice by continuing to roll up regional businesses.

Less than a year after becoming part of the Ahold family, Allen Foods lost its direct ties to the family that gave the company it name and nurtured it for a century. Both Stanley Allen and Richard Allen left the company in September 2003, leaving Allen Foods with no members of the family involved in its leadership for the first time in its history.

Key Dates:

1901:: L. Allen & Sons Company is founded.
1912:: The family opens a retail grocery store.
1941:: The company receives its first military contract for food distribution.
1949:: The company's headquarters are moved to St. Louis.
1968:: Frozen foods added to the company's inventory.
1972:: Bensinger's Inc. is acquired.
1987:: Marske Produce is acquired.
2002:: Royal Ahold NV acquires Allen Foods.