Rock Co. Bottler of the Year
January 1, 2007
Buffalo Rock Co. Bottler of the Year
By ELIZABETH FUHRMAN
2007 brings product additions and production expansion
What are some perks of being in business more than 100 years? Knowledge of the industry and long-term experience make for a strong company. But sometimes it is not your history but your most recent accomplishments that make you an overachiever in the industry.
This is the case for Buffalo Rock Co., Birmingham, Ala., with its 106 years in business and average 30 years experience among its executive leadership team. Longevity and continuity speak volumes, but the company isn’t resting on these accomplishments and letting the changing industry pass it by.
“What we have chosen, as a company, is to go down the path of continuous improvement and never get off,” says Matthew Dent, executive vice president and chief business operations officer.
Buffalo Rock — as a private, family-owned Pepsi and Cadbury Schweppes bottler — has the flexibility to make quick decisions. James Lee III, president, chief executive officer and fourth generation of the founding family, brings more than 40 years experience to his more than $575 million-company. He sees the management team’s staying power and knowledge of the industry as huge advantages.
“They know the ins and outs of the company,” Lee says. “They know everyone’s personality and the team has good continuity. Overall, we have very little turnover in our management ranks, and fortunately we are able to promote within the company, which is good for morale.”
But during the 106 years, the sixth-largest Pepsi bottler and the ninth-largest Cadbury Schweppes bottler also has seen the industry change in more ways than Lee can remember.
“It’s rapidly changing, with all different niche companies and niche products entering the market,” he says. “The consumers themselves are going through a transformation with carbonated soft drink consumption, and as a result those brands are not growing as well. And we compete against strong Coke bottlers. In the South, every Coke bottler is a very strong competitor, which makes us a better operator because we have to be better to compete.”
The growth of niche beverages adds challenges for the bottler. “We’re constantly introducing new products, whether they are CSD brand extensions by Pepsi or Cadbury [Schweppes] or additional offerings of waters, juices and energy drinks,” Lee says.
These new SKUs and improved strategies by the parent companies have contributed to growth during the past few years, Dent says. “We went through, and we’re still going through a series of big process improvements,” he says. “We have more integrated strategic plans than we’ve had in the past, in terms of integrating parent company direction and tying that into our route system. In general, the partnership with our parent companies is as strong as it has ever been.”
Buffalo Rock attributes some growth to the parent companies’ innovative new product introductions. “We have been lucky to have some very successful brand innovations during the last couple of years that are helping us succeed,” Dent says. “It’s not just what we’re doing that is providing growth, but what the parent companies are doing as well.”
Non-carbonated and premium non-carbonated products are the fastest-growing segments of Buffalo Rock’s business, Dent says. “Innovations in these segments have been very strong additions for us, such as the Lipton Brewed Teas and [Starbucks] Frappuccino extensions,” he explains.
But innovations in carbonated soft drinks also have benefited the company. “Because we are in the South, we are still a CSD marketplace,” Dent explains. Flavor additions such as Sunkist Cherry Limeade and the Dr Pepper Soda Fountain Classics line have been strong launches, as have energy drink additions. This summer, Buffalo Rock picked up the distribution rights for Hansen’s Monster, Lost and Rumba brand energy drinks in addition to the energy drinks it carries for Pepsi such as SoBe’s No Fear and Adrenaline Rush and Mountain Dew’s MDX and Amp.
Buffalo Rock made the decision in 2006 to carry Pepsi’s lemon-lime Sierra Mist instead of 7 Up. “It was a tough decision to drop 7 Up because the company had been a 7 Up bottler for more than 40 years,” Lee says. “It had to do more with system alignment, and Sierra Mist is an excellent product.”
Making the switch to Sierra Mist has increased Buffalo Rock’s presence in the lemon-lime category. “It’s really helped from an alignment standpoint with national and regional customers, due to their ad structures and how they go to market with our system,” says Warren Austin, vice president of customer development, sales and service.
Changes to product lines, manufacturing and the way Buffalo Rock goes to market do not just come from upper management’s ideas but from within the whole company. “Several years ago, we really got serious about our processes around empowering our people,” Austin says. “The sales force is out there day in and day out, and they are not scared to make decisions.”
That employee empowerment, called “Team Rock,” applies to all aspects of our business. “That adds agility with our people being more involved, gives them a certain ownership and allows them to move quicker,” Dent says.
The company has a process through which employees can send in ideas for improvement. Teams are then formed that are involved in the decision-making process. “A lot of times, we’re amazed with the ideas that they have come up with,” Austin says. “There are improvements we’ve made because they have taken ownership.”
Continuous improvement efforts have visibly helped speed up the growth of the organization’s overall ability, no matter the task or challenge at hand, Dent says, with the company more clearly integrating parent company direction, including introducing new product innovations, all the way down to the route system.
“Part of our increased ability can be attributed directly to the implementation of the Balanced Scorecard Management System, which was developed in 2004 and implemented at the start of 2005,” Dent explains. The scorecards have provided Buffalo Rock’s 14 distribution centers with consistent focus and similar performance measurement metrics, which has really created a company with centralized strategy and stronger execution capabilities. These metrics are monitored continually and measured quarterly against preset targets, with employee partners being rewarded for achieving performance targets through participation in quarterly paid “gain-sharing incentives.”
“All of our various locations have the same strategic objectives that we’re measuring daily, weekly and monthly,” he continues. “Everybody knows where we stand in regard to what goals we have set out to accomplish together.”
The company also has upgraded its handheld system to wireless technology. “The wireless handhelds can send information back to the warehouse, and be able to get the load picked before the person ever gets in,” says Roger Barker, senior vice president and chief financial officer. “The DDE [Delivery and Distribution Engine] inventory system tracks loads when we ship them. We can scan the loads and automatically take them in and out of inventory, and we are able to unload the truck and have all the information right there as they are scanned.”
“Using this technology will ultimately increase efficiency more than 40 percent,” Barker says. “It’s taking out all the manual reads, manual counting and human errors that would cause the need to come back and recalculate.”
But the biggest benefit the new handhelds have provided the sales force is the ability to make quick decisions. “The people have the data right there in the system any time they want it, right there in the field,” Barker says.
Buffalo Rock’s 14 distribution centers are run by 12 general managers who are responsible for all activities of more than 2,400 employees. At the corporate office, the company has a brand manager, Ike Beasley, director of corporate development and selling strategy, who is the direct link to the parent companies and who considers marketing for the current brands, future innovations and the parent companies’ merchandising standards. The planograms for all of Buffalo Rock’s beverage sets are centrally maintained on a quarterly basis by Lashanta Lawrence, corporate marketing administrator. Additionally, the company employs two key strategic sales experts, Dick Hanson, executive director of premise strategic sales and marketing, who handles all fountain, coffee, cold bottle and full-line vending, and Christian Miller, executive director of retail strategic sales and marketing, who manages all retail customer strategy for key accounts and local trade.
All brands run on every route where the company holds the franchises. “Brand management is more segmented by delivery method and customer type, and it is everybody’s job to promote our brands and provide opportunities for growth,” Dent says.
Buffalo Rock plans to continue expanding its business through new products from its franchise companies and with other products it will pick up in the future. “Obviously, the innovation that is coming from the parent companies is very much appreciated, and we’re aligned to execute those innovations,” Dent says. “I think Buffalo Rock has always been known for innovating, and will continue to look at packaging innovations as well as other brands that we may represent in the future to further drive growth.”
Buffalo Rock uses a sales system it calls AIM Selling (Analyze, Improve, Monitor), a process that it has benchmarked against Anheuser-Busch’s IMPACT selling, with the help of the Russell Training Group. When a new product is ready to go to market, the company plugs it into the program calendar and execution plans are created that everyone can plan against. Every quarter, the company plans innovations for the next quarter. The process has to be very organized because certain new products may have to be outsourced from other manufacturers and because the sheer number of marketing activities is so high, Dent says.
“If you look at our SKU count in a four-year timeframe, we’ve doubled the number of SKUs that we carry,” he explains. “That is very tough on the infrastructure we currently have. As we move forward with innovations from our parent companies, we’re looking at another 100 SKUs next year. Operationally, that is very difficult to handle and will continue to be — this is why we must continue to improve.”
In 2006, Buffalo Rock outsourced 12 percent of its business. These outsourced products included Pepsi’s non-carbonated products, bottled waters and hot-fill items such as the Starbuck’s Frappuccino and Gatorade, and were brands for which the company did not have production capability.
The Birmingham plant produces more than 50 million cases a year and none of those cases include water, which has prompted the company to add an additional facility. “We are out of room in Birmingham,” says Scott Parks, vice president of corporate manufacturing, facilities and operations. “We don’t have any ability to expand our manufacturing facility in Birmingham. For example, we don’t even have the room to put in a water line, something we have desperately needed in recent years.”
This month, Buffalo Rock acquired Southeast Canners in Columbus, Ga. The acquisition will enable the company to produce an additional 15 million cases of product, with the new plant operating under the name Sun Fresh Beverages Inc. The purchase will further allow the company to manufacture all of their water needs, and plans also are in the works to add an additional high-speed PET line with flexible secondary packaging capability.
“We continually ran out of bottled water each of the last three years,” Lee says. “Sun Fresh will allow us to better service our customers throughout our current distribution area. It will also allow us additional production lines for our non-carbonated and carbonated beverages where we will be able to supply other Pepsi bottlers in our region.”
Buffalo Rock will retain all 50 Columbus employees, and promoted a 23-year employee-partner, Tony Pope, to manage the new facility’s plant operations. In addition, plans are being executed to increase the workforce at Sun Fresh by nearly 30 people to be able to run continuous operations throughout 2007. As a result of the additions, the capacity of all Buffalo Rock’s manufacturing capabilities will increase by nearly 30 percent.
Buffalo Rock’s distribution area covers all of Alabama, western Georgia and the panhandle of Florida, and the company covers a population of about 6.5 million. Currently, the company’s bottling facility in Birmingham produces most products to be shipped to the 14 distribution centers. The farthest point from the Birmingham plant is about 270 miles.
In 2006, Buffalo Rock doubled the size of two of its distribution centers located in Newnan, Ga., and Pensacola, Fla. It also added a distribution center in Talladega, Ala., to better service its customers and increase market share in an area with a population base of more than 220,000. Additionally, Lee sees a possible need in the future to open another distribution center somewhere on the Gulf Coast because of the area’s population growth, increasing seasonal draw and overall demands on service.
In regard to its distribution centers, Buffalo Rock operates in a fairly decentralized manner. “Our general managers at each division level really take ownership in the business, as if they did own the business,” Dent says. “They are responsible for the entire operation including sales growth, profitability and even organization and leadership development. Each of them is running a nice size company locally.”
Path to perfection
Buffalo Rock won the highest level of the 2006 Alabama Quality Awards for its Alabama distribution divisions, and a second level award for its corporate logistics, manufacturing, operations and facilities in Birmingham. Based on the Malcolm Baldrige National Quality Awards, the Alabama Quality Awards process judges recipients on criteria for performance excellence in all aspects of the business.
“We are on a long-term journey of improvement, and we have our sights set on the national award,” Dent says. “We aren’t just picking one piece of our business and saying we’re going to be the best bottler in the country at that function… we have our sights on being the best organization, period. We’re constantly improving everything we do.”
In 2007, Buffalo Rock plans to continue down the path it has been on for the past couple of years and feels it has been successful at “growing organically as well as externally,” Dent says.
“Not only do we have to look out for new customer opportunities, we have to look for opportunity within the massive customer base we already service,” he continues. “We already have a lot of routes handling customer needs every day. We’ve got to find ways to increase what we have to offer them in service value and in product offerings. We may only sell fountain to a restaurant chain today, but we should be selling coffee, tea and bottled water in the future.
“We’ve got to organically grow within those customers to extend our reach in terms of various product lines. That is something we’ve been very focused on but still have much room for improvement.”
While 2007 also will have challenges such as escalating raw material prices, the need to increase product prices to maintain margins, the need to grow shelf space, and bringing the new manufacturing facility online.
“I think the second manufacturing facility will really enable us to be a regional manufacturing and distribution company that is well positioned for future industry growth,” Lee says. “I am excited about what our company has to offer our customers and consumers going forward.”
Natural disasters are not something a company wants to think about, but reality sets in when a company is challenged with four major storms and hurricanes (Rita, Dennis, Ivan and Katrina) in a 13-month period. Buffalo Rock was awarded the Florida Sterling Quality Achievement award in 2006 for its comprehensive disaster-preparedness plan, a plan generated from its experiences dealing with the storms and benchmarked against other major organizations. The award is given to organizations for being role models in establishing approaches, methods, strategies or processes from which other organizations can learn.
“We really learned from Ivan,” says Roger Barker, senior vice president and chief financial officer. “Although we had conference calls daily leading up to the storm on what we needed to do, we found out that we missed a lot of things. After Ivan, we regrouped and asked, ‘Where do we need to improve?’ That’s really how the plan started. We were so far ahead with the last storm because we had our processes in place.”
Buffalo Rock’s disaster plan can be initiated in as little as five days before a hurricane hits. The key steps in the plan are the identification of sources for additional product, preparation for employee activities and protection, taking care of customers and finalizing communication procedures when the storm hits. Key items such as a refrigerated trailer, cooking capability on wheels, portable fuel and cellular backup are critical to the plan. Buffalo Rock’s newly purchased facility also will help alleviate some concerns about operations if a disaster were to occur.
“When a hurricane is coming, we have good communication among all our general managers and corporate departments,” says James Lee III, president and chief executive officer. “From here to the Gulf Coast, we did have some damage from Ivan and Katrina. We were able to get into the marketplace quickly and help out the Red Cross as we were prepared for the hurricane because we had all our procedures in place. Consequently we were supplying them with beverages and some food items as well.”
“It doesn’t just have to be a hurricane along the Coast,” Lee continues. “It could be a tornado or a fire in the facility. Now we’ve got plans in place to cover any type of disaster.”
At a glance
Buffalo Rock Co.
2006 sales: More than $575 million(Beverage Industry estimate)
Years in business: 106
Distribution area: Alabama, western Georgia and the Florida panhandle
Bottling facilities: 2
Cases produced annually: More than 50 million
Total facilities: 1.2 million square feet
Distribution facilities: 14