by Doug Powell
Mark Collette of the Houston Chronicle writes that Paul Kruse’s father had warned him about the perils of family-run businesses, but he couldn’t escape his place as the obvious heir of a dawning ice cream empire.
This year, it took barely two months to undo everything.
Ironically, Blue Bell’s food-poisoning crisis could give it a one-up on competitors, because it already has been forced to make expensive changes to equipment and safety protocols that other ice cream makers soon will have to emulate under new federal regulations. It took most of the year to upgrade while other brands gobbled up market share.
Under Paul Kruse, Blue Bell’s annual sales grew by 70 percent from 2006 to 2014, versus just 8 percent for the entire U.S. industry, according to figures from the market intelligence firm Euromonitor. It rose from fifth to third in U.S. market share. Relative to its own past, it abandoned any notion that slow was better, roughly doubling the geographical reach it had attained in the previous century. In 2014, for the first time, Blue Bell stole the No. 1 spot in brand sales from Dreyer’s, the longtime U.S. favorite.
Before the listeria crisis struck in March, it sold more than $333 million, according to Euromonitor figures updated in August. As a privately held company, Blue Bell doesn’t publicly disclose sales. But by that reckoning, it had, in one quarter, sold more than half of what it did in all of 2010 – and peak summer sales hadn’t even set in yet.
All that production came with a price. Brenham plant workers said sanitation was hurried. Hot water ran low. And federal records showed that problems reached to plants in Oklahoma and Alabama, negating the possibility that the listeria outbreak was a failure of one supplier, one machine or one employee. Somewhere amid all that growth, reality couldn’t keep up with the clean country image. Worse, it hadn’t been keeping up for years. Epidemiologists this year determined that illnesses from as early as 2010 were caused by Blue Bell – retroactive medical sleuthing made possible by the DNA database.
Had Blue Bell folded, it would have joined the majority of third-generation businesses, only a small percentage of which survive into the fourth, according to various consulting firms.
Unlike public companies, which send CEOs packing after six years on average, family bosses are entrenched, raising a host of challenges, said Andrew Hier, senior partner of the Cambridge Family Enterprise Group. They may have more difficulty coping with shifts in technology over time. Decision-making becomes more complicated in the so-called “cousin generation,” with more personalities at the table. Though privately held, Blue Bell now has hundreds of shareholders. Kruse’s cousin, Greg Bridges, is the vice president of operations.
After 10 illnesses and three deaths linked to Blue Bell, it now has been forced to modernize. It faces a task like Odwalla, the homegrown juice brand roiled by E.coli poisonings in 1996, and, more recently, Chipotle, the fast-food burrito chain plunged into crisis from at least four separate disease outbreaks in a span of months.
Odwalla had to abandon its raw-is-better philosophy and start pasteurizing its juices. Similarly, Chipotle is instituting pathogen testing standards unlike any others in fast food.
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