Broughton Foods Co.

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Broughton Foods Co.

210 Seventh Street
Marietta, Ohio 45750
U.S.A.
(614) 373-4121
Fax: (614) 373-2861

Public Company
Incorporated: 1933 as Broughton’s Farm Dairy, Inc.
Employees: 375
Sales: $72.3 million (1995)
Stock Exchanges: OTC
SICs: 2026 Fluid Milk; 2024 Ice Cream & Frozen Desserts; 5451 Dairy Products Stores; 1382 Oil & Gas Exploration Services

Broughton Foods Co. is a regional dairy that distributes its fluid milk, ice cream, and other dairy products throughout the eastern United States. The company has operations in Ohio and West Virginia. Led by members of the Broughton family for its first half century, the public, yet closely held, firm (only nonvoting stock is sold publicly) was guided by Chief Executive Officer Rod M. Collier in the mid-1990s. Members of the founding family continued to play important roles in the day-today operation of the company, with Carl L. Broughton acting as chairman of the executive and finance committees, John R. Broughton serving as treasurer and assistant secretary, George W. Broughton in the role of executive vice-president of sales and marketing, and David J. Broughton acting as financial analyst.

Neither a member of a dairy cooperative nor an affiliate of a larger food conglomerate, Broughton Foods is rather unique in the fragmented, competitive dairy industry. Though it is a relatively small player on the national scene, the business has been characterized as “a sizable force in the dairy industry.” The company worked diligently in the late 1980s and early 1990s to maintain its independent status in the face of dairy industry consolidation, relying especially on product diversification. By the mid-1990s, its product line included fluid milk, ice cream, frozen yogurt, ice cream novelties, fruit juices, and cottage cheese, among other foods, beverages, and condiments. The company even had three soda fountain-style restaurants serving Broughton’s brand ice cream.

Early 20th Century Origins

The history of Broughton Foods Co. can be traced to 1910, when John H. Broughton started selling the yield of his father’s Marietta, Ohio, dairy farm. The Broughtons delivered their milk, butter, and vegetables to customers via horse-drawn wagon and sold the farm produce in a family-owned grocery store. They began expanding their dairy business from its headquarters in southeastern Ohio on the Ohio River in earnest in 1919, purchasing a second farm, building their first full-fledged dairy (including an early Universal Milking Machine), and acquiring a dairy delivery truck.

Eldest son Gerald joined the growing business in 1931 following his graduation from Ohio State University with a degree in dairy technology. A second son, Carl, took a more circuitous route to the family farm. After a two-year stint at Ohio State University, he dropped out of that school’s business administration program to move to California. When the Great Depression shrunk job opportunities out West, Carl was compelled to return home to the family business, where he, too, would make his career.

In 1933, Broughton patriarch John H. was killed in an accident involving a newly installed ice-making machine. His sons reorganized and incorporated their company as Broughton’s Farm Dairy with Carl as president and youngest sibling Robert, who would graduate from Marietta College in 1939, as secretary-treasurer. Broughton’s chalked up $30,000 in sales during its first year.

The interwar period brought a period of expansion, especially in the retail end of the business. Gerald Broughton, who continued with the family company, has been credited with launching the ice cream business in 1934. Broughton’s opened a restaurant that same year featuring the company’s namesake ice cream. Six more store/restaurants located throughout southeastern Ohio and northern West Virginia followed over the course of the next seven years. Broughton’s promoted itself as the “Brightest Star in the Milky Way” during its early years.

World War II Labor Shortage Brings Contraction

A dearth of employees during World War II (even President Carl Broughton was called to duty from 1943 to 1945) forced the closure of all but one of Broughton’s retail stores. The company used a strategy of acquisition to bounce back in the postwar era, acquiring dairies in Ohio, West Virginia, and Kentucky. Having forged a strong position in the business, Broughton began to diversify within the dairy industry via the 1960 creation of the Broughton Foods Division. With primary operations in Parkersburg, West Virginia, this business segment produced portion-controlled dairy and nondairy coffee creamers. These aseptically packaged products were sold to supermarkets, fast food restaurants, and dining facilities in hotels. Relocated to Charleston, West Virginia, by the early 1980s, Broughton’s food division had added table cream, nondairy whipped topping, whipping cream, egg nog, dips, and dairy and nondairy sour cream to its roster of products. Meanwhile, the company’s dairy division was also growing to produce cottage cheese, yogurt, ice cream, ice milk, and frozen novelties, as well as a full line of fluid milk. By 1975, food products contributed more than 20 percent of Broughton’s more than $35 million in annual sales. The company’s diversification included a 13-year foray into college and university dining halls. In 1980, it also created Bro-Well, a small oil and gas drilling subsidiary.

Over the decades, Broughton’s need for fresh whole milk began to exceed its own dairy’s production capacity. As a result, the company cultivated long-standing relationships with many other independent dairy farmers, eventually forging a network of more than 200 exclusive suppliers.

When Carl Broughton retired in 1975, Broughton’s board of directors elected Executive Vice-President Samuel R. Cook to succeed him. Cook would serve in that capacity for more than 20 years, when he was succeeded by President Rod M. Collier.

Technological Changes Revolutionize Dairy Business

The perishability of milk and its derivatives has always been a challenge to dairymen. As late as 1919, a lack of refrigeration compelled Broughton to deliver its milk to town twice each day to account for spoilage. The impact of this factor has been mitigated over the course of the 20th century via improvements in processing, storage, and delivery.

Processing advances have concentrated primarily on lengthening shelf life through the elimination of bacteria. The most common method, pasteurization, heats milk to about 160°F (72°C) to destroy microorganisms, thereby extending the shelf life to 14 to 21 days under refrigeration. In the 1970s, many dairies began implementing ultrahigh temperature pasteurization (UHT), which steam-heats milk up to 265°F (130°C) or higher, lengthening shelf life to months instead of weeks. Broughton became the first U.S. dairy to adopt uperization, a European variation on UHT. According to company literature, this technology, which places the product on a spiral flow for more uniform heating, is “100 percent effective against contamination without affecting product taste.” By the early 1990s, Broughton was uperizing 3,000 gallons of product per hour. The company applied UHT to the production of half and half, whipping cream, and ice cream and frozen yogurt mixes for food service. The process gave these products a shelf life six to nine times longer than conventional methods, thereby allowing for broader distribution.

Broughton also adopted aseptic packaging processes to lengthen the shelf life of some of its products. Originally developed in Europe after World War II, aseptic packaging unites the product with the packing process in a totally sterile environment. Most familiar to Americans is the aseptic drink box. Broughton applied aseptic packaging principles to its production of table cream, whipping cream, half and half, and related foods, most often portion-controlled for institutional food service. In addition to their longer shelf lives, aseptically packaged products do not require refrigeration until the package’s seal is broken. These high-tech processes have helped make the company “one of the nation’s leading producers of half and half,” with millions of coffee creamers made each month.

Broughton’s modes of delivery have also come a long way since the 1920s, when its unrefrigerated Model T truck limited delivery to nearby Marietta. Efficient transportation is a key factor in the perishability equation; every hour that raw milk spends en route from any of Broughton’s more than 200 supplier dairies, for example, is an hour subtracted from the processes that extend its shelf life. Over the years, the company accumulated its own fleet of refrigerated tank trucks for transport of raw milk and refrigerated tractor-trailers for delivery of finished product. By the late 1980s and early 1990s, Broughton boasted specialized dual-temperature vehicles that allowed the delivery of frozen and refrigerated products in the same shipment. But as fleet management issues became increasingly complex in the early 1990s, Broughton abandoned its company-owned vehicles in favor of a full-service lease arrangement. This change reduced the company’s annual transportation costs by more than $700,000.

Company Perspectives:

Broughton Foods Company has been an innovative company guided by traditional wisdom. From its beginnings, the company has grown steadily to become a respected foods producer of premium quality products. The Broughton emphasis has always been on quality. Technology, research and development, the exclusive use of superior quality milk and ingredients, and unparalleled service have given Broughton a reputation for excellence.

High Competition Brings Reduced Returns in the Early 1990s

Broughton’s quest for efficiency was a necessity of doing business in the highly competitive environment of the 1990s. With multibillion dollar giants like Kraft Foods, Dean Foods Co., Borden Inc., and ConAgra Inc. topping the industry, Broughton executives realized that their work was cut out for them. In 1992, the International Dairy Foods Association forecast that rapid industry consolidation would reduce the number of fluid milk processing plants by 30 percent, to less than 400, by the turn of the 21st century. Although generally regarded as a weakness, Broughton perceived particular strengths in its comparatively small size. In 1990, Executive Vice-President and Director of Marketing George Broughton told Dairy Foods’ Jeff Reiter, “We hold our own well because we are more flexible than larger competitors, better able to react quickly to changes in the market, and have a better rapport with customers.”

In addition to its focus on cost-effectiveness, Broughton concentrated on new product introductions in the late 1980s and early 1990s. In a 1990 profile for Dairy Foods magazine, George Broughton called new product development “critical,” noting, “Right now, there are a lot of mergers going on in the industry, and we need to either grow or die.” Broughton launched nine new product lines in 1989 alone, many of them focused on the growing “healthy” segment of the industry. Consumer demand for foods with reduced fat, calories, sugar, lactose, and cholesterol provided many opportunities for new versions of traditional products. These were distributed by Broughton to private labelers as well as under the company name. To broaden its lines beyond dairy (especially into fruit juices), Broughton also distributed other companies’ goods under its trademark.

The company grew and retained its independent status in the early 1990s. But although sales increased 31.7 percent, from $55.9 million in 1990 to $73.5 million in 1994, its net income declined 14.4 percent, from $846,000 to $724,000 during that same period. And as the company cut prices to retain its customer base, it slid into a $380,000 shortfall in 1995. Newly elected Chief Executive Officer Rod Collier blamed fluctuating expenses, overcapacity in particular market segments, and regional competition for the loss, but expressed his belief that “the Foods Division still represents [Broughton’s] greatest opportunity for future growth and profits.”