Utz-Standing

March 1, 2005
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Utz-Standing
By Andy Hanacek
Despite a rugged snack food landscape, regional manufacturer Utz Quality Foods has continued to win its daily battles and expand its marketplace.
The quote, “Winning isn’t everything, it’s the only thing,” has often been linked to legendary NFL head coach Vince Lombardi.
In actuality, it was lesser-known UCLA football coach Henry Russell “Red” Sanders, who offered that instant classic in 1955, even though he rarely gets the credit for it.
So while people incorrectly attribute the quote, maybe the folks at Hanover, Pa.-based Utz Quality Foods, Inc. should voice their case for credit. After experiencing such a high level of success for more than a decade, it wouldn’t be a surprise Utz’s employees mumbled that mantra in their sleep. That’s because success hasn’t been everything at Utz, it has been the only thing.
This winning attitude, coupled with superb results, earned for Utz Snack Food & Wholesale Bakery’s “Snack Manufacturer of the Year” award in 1998.
Now, it’s time to add another accomplishment to the tally — SF&WB’s 2005 “Snack Manufacturer of the Year,” Utz’s second such award in eight years, a run of dominance that compares in scope to Lombardi’s own run of five NFL championships in seven years.
“[Success is] primarily a continuation of what our goals have been over the years: quality products [and] distinguishing the product from others in the marketplace,” explains Mike Rice, Utz’ chairman and CEO. “Hopefully, the consumer who’s looking for a distinctive product will notice a perceivable difference in our brands.”
Consumers have noticed, and have done so for the last 15 to 20 years, says Rick King, president and chief operating officer. As a result of this connection to consumers, sales have grown at an average annual rate of 10% at Utz, which manufactures potato chips, pretzels, tortilla chips, extruded products and other snack food and distributes its products across parts of 13 East Coast states as well as nationally through club stores and mass merchants.
Growth and the goal of differentiation were key reasons for Utz’s 1998 nomination, and the company certainly hasn’t let go of the ideals that worked years ago. Back then sales were $160 million, and today, the company annual revenues top $275 million, a growth rate of 71.9%.
As a part of its winning formula Utz’s core expansion strategies include reinvesting big-time into the company, using foresight in planning, purchasing and construction, and aggressively but wisely expanding into new geographic markets. Combining those strategies with clear in-house communication has kept Utz at the top of its game, something any coach, not just Lombardi, would be proud to say of his players.
Winning: The Only Strategy
If you talk to any coach today in any sport, they’ll tell you that being prepared and having the proper system in place are the most important pieces to building a winning franchise. All the other parts will fall into place around those strategies.
In recent years, Utz has rewritten the playbook for building a successful regional snack operation.
Jack Corriere, senior vice president and general manager, has been with Utz for 26 years and has watched the company continue to be aggressive while other companies might have eased off the accelerator. The company’s strategy on growth sounds simple, but it’s something Utz puts tons of thought into anytime an opportunity arises.
“First, you have to pro forma the sales — nothing starts without sales,” Corriere explains. “Once the sales build into an area, you look into how you can best service them … from all sides, as well as what the employment picture is. Are there people available and do their wants and needs fit our industry?
“Once we decide what all those pros and cons are, we make the decision of where we will produce the product and how — what’s the big picture?” he says.
Just as important is re-examining the big picture inside the walls of Utz’s four plants. Utz sank more than $15 million in capital into expanding and streamlining its operations in 2003 and about $7 million in 2004. On average, Rice says, Utz puts $10 million to $11 million annually into capital improvements, and the company plans to maintain that level.
“[During] the last 15 years, there really hasn’t been a time when we weren’t planning or executing … expansions or additions to equipment, distribution centers or manufacturing facilities,” Rice recalls.
“We are, in the next few years, expanding several of our company-owned distribution centers, [and] we’ll be adding new lines at the Kindig [Lane] facility for corn products and extruded snacks.”
Those additions will be helped by the preparedness and big-picture focus that Utz’s management team has had during its expansions.
“We really have the physical capability of expanding any of our plants simply by adding equipment at this point,” Rice adds. “So for the next five years our focus will primarily be on equipment additions rather than plant expansions.”
Improving Speed to Market
“Making product is one thing, getting it to market is a whole other avenue,” Corriere says. “If you can’t get your product to market, it’s worthless, so we’ve concentrated real effort on trying to get the product efficiently to market.”
Utz’s distribution network is the company nervous system — a meticulously maintained and frequently updated system that features 800 routes across the 13 East Coast states (plus Washington, D.C.) Utz serves. Of those routes, 585 are company-owned (up from 450 in 1998), 155 are master distributors (up from 100 in ’98), and 60 are independent distributors.
With its network in place, Utz can manufacture and deliver product to one of its 35 distribution centers within 48 hours. Within three working days, Utz can get product to the distribution center of one of its warehouse-club or mass-merchant customers, which have become an increasing part of its growing business.
Such quick turnaround requires constant upkeep of its 700 route trucks and 30 tractor-trailers. That’s where Utz’s on-site maintenance facility comes into play.
“We have to keep those trucks in ‘A-1’ condition, and that’s what we do,” Corriere says. “We do a lot of our maintenance in-house to make sure that fleet is a first-line truck fleet.”
Maintaining this fleet, he adds, goes a long way toward determining many of Utz’s expansion strategies. Once the company’s geographic footprint reached a certain size, company distribution centers became necessary.
“It’s a continuing challenge: how do we get to our trucks and service them and make sure they’re running optimally?” he says. “We’ve got road mechanics out there who, in some cases, work out of our distribution centers and our satellite centers, so they can do the preventive maintenance and keep the trucks going. [But] for any major repairs, we bring them back to Hanover and do them here.”
Planning also has put the rest of the distribution network in a strong position for future expansion. Consider that two years ago Utz increased the size of its Hanover-based “World Distribution Center” — where its tractor-trailers are loaded for national distribution — from 72,000 sq. ft. in 1998 to 100,000 sq. ft.
In fact, a walk through any of Utz’s four plants or the World Distribution Center reveals plenty of room to expand its operations, store products and ship them to new markets. (For specifics on Utz’s plant expansions and streamlining project, see “Streamlined,” on page 30.)
All the investment in physical additions and streamlining of the four plants doesn’t mean geographic sales growth was always easy. Utz, like other regional salted snack producers, has to fight the fight to stay relevant as its reach expands. Continuing to innovate new products can help that process, and Dylan Lissette, vice president of marketing, says that Utz’s distribution network makes staying relevant among consumers that much easier.
“It’s not inherent to Utz, but it’s the beauty of the DSD [direct-store-delivery] system,” Lissette explains. “It doesn’t take shoving 10,000 cases out to some distribution system throughout the entire country and waiting to see what happens. Really, because you’re essentially making to order, it almost builds upon itself.”
Tom Dempsey, senior vice president of sales & marketing, adds that Utz’s meticulous analysis of data coming from its solid DSD network via handheld computers gives new products, such as Utz Select Gourmet pretzels or Utz’s new line of natural products, even better odds at survival.
“We’ve got incredible data-information recovery, and … we’ve been able to access that data within 12 hours of it being uploaded to our system,” Dempsey says.
A program called “Utz Focus” allows the company to go to the store level and know penetration and sell-through for any store on a route, Dempsey adds.
“Rather than throwing a whole bunch of product out and hoping one sticks, we can surgically put it out and make sure it sticks,” he says.
On top of all the challenges of being a regional snack distributor, Utz is finding that more of its key customers, mainly national accounts, are located outside the company’s DSD area. This is especially true as the retail environment consolidates and alternate channels of distribution become a greater part of doing business today, King says.
“The mechanics of delivering value are more challenging,” he adds. “The mechanics of handling the business are more complex. We have people in the air a lot more of the time than we used to, calling on [our national customers], because you simply have to be face-to-face.”
Utz is willing to invest in having sales representatives flying across the country to serve national accounts because of the potential payoff.
“[Club stores and mass merchants] are really the way that we, through their cross-docking facilities, get beyond our 13-state-plus-Washington, D.C., DSD marketplace,” King says.
Innovation in Communication
At Utz, communication is integral to its innovation and expansion strategies. Both management team and employees put a bounty of thought into creating new products or renovating current ones to meet the needs of consumers. King says that the process of innovation mostly is more applied than pure science.
“We seldom develop [the] new, first-to-market products that seem to spring from Fortune 500 R&D departments,” he explains. “Rather, we try to quickly recognize new items or packaging concepts that seem to have market potential, or ‘legs,’ as applied to our various classes of trade.”
Once a new product or packaging application is discovered in the marketplace, the concept is brought to a “product development subcommittee” for review, after which it is recommended to the full Product Development Committee (PDC). Both groups include specialists and managers from all areas of the operation. It’s a way to keep ideas grounded in reality, Dempsey notes.
“One of the things I wanted to make sure of when I got here was that marketing didn’t go off on a blue-sky mission on things that sounded great but had no way of being executed or [sold],” he says. “Through this Product Development Committee, we get all the disciplines together to make sure the blue skies and great ideas are executable.”
Such communication helps keep Utz flexible, which it needed to be, for example, when addressing trans fat recently. Rice says that there wasn’t really an option other than to reformulate and remove it from its line of corn products, including the cheese ball and cheese curl lines Most of Utz’s products had nominal amounts of trans fat, if any at all.
However, when it came to Utz’s Homestyle line of potato chips, Utz has refused to budge based on consumer feedback.
“The inherent characteristic of [Homestyle chips] is hydrogenated oil, and the consumer wants that product and wouldn’t buy it if it wasn’t there,” Rice explains. “In that case, we’re doing nothing about it, because it’s targeted to people who prefer that taste profile.”
A consumer-needs focus has helped Utz in a few other areas of innovation as well.
On Utz Select Gourmet pretzels, the company took the age-old idea of internally flavoring pretzels, spruced it up and used it to enter a new, growing category.
“So many things in the salted-snack category have been around,” King says. “Either some local or regional specialist has been doing it, or it’s previously come and gone. There are relatively few things … that are brand new.”
Internally flavored pretzels were not revolutionary — even Utz had been making them under a less-distinctive line, the Country Store pretzel sticks line. Under the Select Gourmet banner, Utz made the bold taste of the internal flavor “very obvious in our packaging,” according to King, and used that as a differentiating factor.
“We, from the beginning, have built our [pretzel] business on anything but gut-fillers, [instead making] differentiated products with a lot of character and a lot of taste,” King adds.
Dempsey explains that Utz’s cohesive line taps into most consumer needs in the category, and that has helped fuel a resurgence in pretzels of late. In fact, since 1998, Utz’s market share in pretzels in Philadelphia, America’s leading pretzel market, has risen from 14.8 to 23.1.
Of course, Utz sells more than just internally flavored pretzels. When you walk into Utz’s Outlet Store at the Carlisle Street plant, you’re faced with walls full of Utz products. Everything from Grandma Utz Handcooked Potato Chips to Utz Baked Tortilla Chips to Utz Cheese Curls are on display in a wide variety of package sizes. Utz offers small bags (less than 1 oz. in some cases), large bags (14 oz., for example), bulk plastic containers and even bulk metal canisters that feature officially licensed logos of professional sports teams on the outside. And the gargantuan line is continuing to grow, now that Utz has unveiled its new Natural line.
Launched in January, the line consists of all-natural kettle chips and tortilla chips and carries high hopes for the company.
What’s distinctive about the Natural line is that it’s cooked in expeller-pressed sunflower oil instead of the typical cottonseed, peanut or corn oils. The tortilla-chip line also adds organic flour to the mix. King says that the positive aspects of the products have the company excited about the Natural line’s chances.
“We feel we’ve got a great entry point,” King says, “because we really married good-for-you, natural components into items that also have up-market positioning, which is a proposition that is clearly working at retail.
“We’re differentiating a product that, No. 1, tastes good, [and] two, has gourmet positioning even without the expeller-pressed sunflower oil or without the organic flour, and [we’re] creating a win-win situation for the consumer,” he adds.
Hitting Home Runs
Utz has used innovation to its advantage, but it also has used its marketing dollars wisely. Consider Utz’s partnership with another traditional winner, the New York Yankees. The Utz billboard in right field at Yankee Stadium, unveiled in 1996, has had quite an effect on the brand’s share of the New York market. The billboard features the traditional “Utz girl” logo and the phone number for Utz’s New York City metropolitan master distributor.
In 1998, two years after the sign’s introduction, Utz had a market share of 6. Since then, New York market share has doubled to 12 on potato chips and pretzels.
“It gave us almost instant credibility in the market by having that sign,” Dempsey says. And the timing couldn’t have been better, because the Yankees ended up winning four of the next five World Series.
“It certainly increased our exposure in New York and nationwide — a lot of Yankees fans aren’t only in New York,” he adds.
The exposure has been a bonus, and that the sign lends credence to the brand on a national level, since the Yankees are such a nationally watched team.
On top of that, Lissette says, the sign allows Utz to read its wholesale clubs and mass merchants outside of its core distribution area.
“If it wasn’t for that national customer of ours, the fact [is] that somebody in Texas or California might see the sign [but not know the product],” Lissette explains.
In the mid-’90s, New York City was in Utz’s line of sight simply because of its location as a contiguous market. King says Utz pinpoints the high-growth areas up and down the East Coast.
“We find that our best growth opportunities seem to lie on the I-95/I-85 corridors, both north and south,” he explains.
Along that corridor beyond New York is New England, where the company has made its most recent push. Utz worked out a deal with Reading, Pa.-based snack manufacturer Bachman to acquire Master Distribution Rights for the Bachman brand and to distribute both companies’ products through former Bachman distributors in each New England state except Connecticut and Vermont. Utz is currently on target with its goals in that region, specifically penetrating the Boston metro area only one year after entering the market, Dempsey says.
“There are still some strong regional players in that marketplace, … and we’re not serving all the major supermarkets up there,” he notes. “To be an important player in the salted-snack category, you really need to service all the major supermarkets, and we’re not there yet. We will be eventually, but not yet.”
At Utz, Dempsey adds­, there’s no big rush to overtake any market, let alone Boston.
“We have a binding faith here that our quality and DSD service puts time on our side,” he says. “And if we do the right things, over time we’ll get to where we want to go.”
Patience and a rock-solid vision of the future is what builds success stories. Utz has taken those ideas, combined them with superior product quality, top-notch communication and distribution and won big over a sustained period of time.
Maybe some of the beautiful, Southwestern-style artwork adorning the walls of the Hanover office should be replaced with a few images of ol’ “Red” Sanders or Vince Lombardi, in honor of dominant winners.
At the least, Utz pays homage to Lombardi on a daily basis by continuing to live up to a quote that actually came from the Hall-of-Fame coach:
“There is no room for second place. There is only one place in my game, and that’s first place.”
At a Glance
Company: Utz Quality Foods, Inc.
Founded: By Salie and Bill Utz in 1921.
Annual Sales: $275 million
Headquarters: Hanover, Pa.
Employees: 1,900
Routes: 800 (585 company-owned, 60 independent distributors, 155 master distributors)
Products: Potato chips/kettle chips (50%), pretzels (20%), cheese curls/popcorn (10%), tortilla and corn chips (10%) and other, including pork rinds, meat snacks, dips and salsa (10%)
Retail breakout: Supermarkets (60%), club stores (15%), convenience stores (10%), mass merchants (5%) and others (10%)
Brands: Utz, Grandma Utz, Utz Kettle Classic, Utz Homestyle, Mystic Chips
Plants: Four, in Hanover; High Street (535,000 sq. ft. for potato chips and potato storage); Carlisle Street (255,000 sq. ft. for kettle chips and potato storage); Broadway (127,000 sq. ft. for pretzels); Kindig Lane (272,000 sq. ft. for tortilla and corn chips, extruded and popcorn products, and warehousing). Also operates its 102,000-sq.-ft. World Distribution Center, at
Manufacturing Capabilities: 18 kettle lines @150 lbs./hr.; 6 continuous chip lines (3 @2,000 lbs./hr., 1 @1,400 lbs./hr., 1 @3,200 lbs./hr., 1 @4,200 lbs./hr.); 9 pretzel lines @ avg. of 1,100 lbs./hr.; 2 tortilla chip lines @2,000 lbs./hr.; 1 corn chip line @1,000 lbs./hr.; 3 baked curl lines @1,250 lbs./hr.; 1 fried curl line @650 lbs./hr.; 1 popcorn line @650 lbs./hr.
Distribution: Parts of 13 states DSD from Maine to North Carolina, and Washington, D.C.; 35 distribution centers; national to warehouse clubs and mass merchants
Fleet: 700 route trucks; 30 tractor-trailers; 24-hr. vehicle-maintenance garage
Key Personnel:
Chairman/CEO: Mike Rice
President/COO: Rick King
Sr. V.P., GM: Jack Corriere
Sr. V.P., Sales/Mkt.: Tom Dempsey
V.P., Manufacturing: Terry Schmoldt
V.P., Marketing: Dylan Lissette
V.P., Sales Operations: Don Hartlaub
V.P., Key Accts.: Jack Landsman
V.P., Nat’l Accts.: John Warehime
V.P., Northeast: Steve Liantonio
V.P., DelVal: B.J. Zellers
V.P., South: Les Erving
V.P., P.R.: Jane Rice
CFO: Todd Staub
V.P., H.R.: Gary Laabs
UTZ cover story
The Group that Keeps on Giving
At Utz Quality Foods, Inc., it’s not just success that has been maintained throughout the years, it’s also the gift of giving that has shined a bright light into the lives of the underserved in the area.
Led by Jane Rice, vice president of public relations, Utz gets involved in making the lives of residents of Hanover and the surrounding areas of southern Pennsylvania that much better.
The giving nature at Utz certainly has trickled down, through history and along the corporate hierarchy. Utz always has been known for its community service, and when Rice took over the company, it was continued and caught on at all levels.
Additionally, many Utz employees can be found sharing their talents and abilities through various community programs, Jane Rice says.
“It’s so easy to write a check,” she explains. “[But] our people are truly involved. Associates on the potato crew, on frying and packaging lines, in route sales and in the office are sharing their time and talents with the Boy Scouts or Big Brothers/Big Sisters, serving on school boards and other service and charitable organizations.
“We have a Sunshine Committee that’s comprised of employees, and they do fundraising events throughout the year,” she adds. “At Christmastime they shopped for gifts for needy children through the Red Cross.
Today, employees find themselves involved in quite a few programs. Several managers are on various hospital boards within the region, and Utz still is a strong supporter of the Children’s Miracle Network.
Utz also contributes heavily to campaigns supporting the arts within the region. Rice says that capital campaigns for the performing-arts center and library in Hanover and the 80-year-old Majestic Theatre in Gettysburg, Pa., have strong personal and financial support from Utz.
But the giving doesn’t end there. Rice and others in the company often go beyond what is expected to give back even more to the community. For example, Rice began a nonprofit organization called “Sweet Charities” to help handle the multitude of requests that she receives through Utz from the underserved and underprivileged. Though “Sweet Charities” is not a part of Utz, the snack company is a benefactor, and Rice certainly doesn’t hide her affiliation with Utz while working with the organization.
“When you’re serving on boards and committees, you have to step up to the plate,” she says. “There was a time when I felt we didn’t need to create so much awareness, but I’ve found over the years that it’s important to show that giving is something you believe in, and then you make it more credible.”
With the tradition of giving woven tightly into the fabric of Utz, southern Pennsylvania residents can continue to believe, hope and feel good about themselves and their community, even if the chips might seem to be down.

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