Nothing But Opportunities
January 1, 2005
Nothing But Opportunities
by James Dudlicek
Goodness of milk and people continues to drive development at Wells’ Dairy.
The folks at Wells’ Dairy know ice cream isn’t generally considered a health food, but faced with competition from other decadent treats while a nationwide obesity debate rages, the frozen segment really enjoys an enviable position.
“We have not touted the overall benefits, or lack of negatives,” says Mike Wells, president of the Le Mars, Iowa-based company’s demand group. “If I have a choice to eat a bowl of ice cream or a candy bar, if you really get down to the nutritional value of a cup of ice cream or a novelty item, it’s just not a bad food to eat, period.”
Consumers seem to agree, for that or other reasons. Total sales of Wells’ 500-plus Blue Bunny®-branded ice cream, frozen novelty, fluid dairy and cultured products approached $840 million last year. An increasing number of those products have been in the better-for-you segment, in which Wells has proven itself a leader. Whether you want fat and no sugar, sugar and no fat, neither or both, there’s bound to be a product for you under the Blue Bunny label.
The top-selling new product of the past year is an easy guess. “It’s pretty much of a slam dunk — it’s Carb Freedom,” says chief executive officer Gary Wells of the company’s Splenda-sweetened line of ice cream and novelties aimed at reduced-carbohydrate dieters.
Mike Wells elaborates on this success. “We made a fundamental shift in sweeteners, from aspartame to Splenda, in our better-for-you products. That switch really enhanced the quality and texture of our products,” he says. “Carb Freedom products have been a raging success for us. Previous to that, our better-for-you segment — primarily reduced fat, no sugar added — has been a tremendous success.”
Gary Wells adds: “Five years ago, you didn’t have near the quality in these types of products. Innovation and technology has advanced to the point where a lot of these products are just as good as full-fat products, so you don’t feel like you’re cheating yourself.”
And while the low-carb dieting rage may be waning, Wells’ Dairy still sees a continuing demand for such products. “We’ve been serving the diabetic community with our Sweet Freedom products,” Gary Wells says of another Blue Bunny NSA line. “The Carb Freedom products appeal to dieters. It has been leveling off, but we see it as an ongoing niche. It’s a big enough business that we don’t think it’s going away any time soon.”
In fact, whatever trend or consumer demand comes next, the Wellses are confident a Blue Bunny product will be in the forefront of that arena due to the company’s research and development agility.
“I think our ability to engineer specific products or product profiles for specific needs of consumers is a strength of ours,” says Dan Wells, president of strategic planning and administration. “Our R&D center is very good at the lowfats, the alternate sugars. Other new technologies, like ultrafiltration of milk, will allow companies to build products designed for specific diets. It will actually segment the category even more over time.”
The latest Blue Bunny product seems poised to revolutionize the snacking segment: IncreDiples, a line of yogurt-based snack dips teeming with flavor, not to mention the live, active cultures so beneficial to nutrition.
“Traditional dips are sour cream-based,” Mike Wells explains. “When you look at fat, calories, carbohydrates, all the things people are cutting back on to create better eating habits, it’s a category people are steering away from if they want to eat healthy. This allows us to put a product in the marketplace that fits the lifestyle of the consumer who wants to continue to eat healthy but has to have a certain amount of indulgence.”
But even the tremendous growth of the better-for-you segment hasn’t slowed development or sales of Blue Bunny’s traditional lines.
“I can say without fear of contradiction that 100 percent of our Carb Freedom growth is incremental. We didn’t cannibalize any full-fat growth,” Wells says. “We grew full-fat sales while introducing the low-carb products.”
Although Wells’ Dairy markets fluid milk products in a limited marketing area around its fluid plants in Le Mars and Omaha, Neb., the company sees frozen desserts and cultured products, both of which enjoy national distribution, as its bread and butter.
The company’s largest business is in the retail segment, Wells explains. “We’re in 36 states with branded product down through the center of the United States, southeast, southwest — I call it an inverted T,” he says. “From a foodservice standpoint, we have national distribution.” The company also is strong in vending and convenience store sales.
Aiming for national distribution in all channels, Wells’ Dairy seeks to build upon the image of ice cream and novelties as a fun category. “Our challenge and opportunity is to put the fun into the category and to drive innovation to allow consumers interaction with our products regardless of the channel — to walk away not just being satisfied but being delighted,” Mike Wells says.
That means investing in new technology and, according to Doug Wells, president of the supply group, “continuing to push the envelope for innovation in all aspects of our products.”
Dan Wells concurs. “Seeing the big picture in terms of where the marketplace is really going is something that we seem to be very good at,” he says. “The designer products you can engineer by ‘component-izing’ milk and using parts of milk to either beef up protein or reduce fat or take the lactose out — those are things that we’re going to be looking at.”
The Wellses are also quick to note they’re proud of their quality and heritage, which dates back to 1913. The company was founded by the Wells family and currently is owned and managed by its third and fourth generations.
Even with such strengths, Wells’ Dairy is not immune to market forces, whether they be commodity price volatility or fickle consumers.
“Consumers are continually looking for more value,” Doug Wells says. “Processors continue to try to figure out how to meet consumers’ expectations. With more and more segmentation going on, manufacturers have to respond quicker to meet those expectations. The successful companies are rising to the challenge and meeting those needs. Our customers expect more. They expect faster responses to emerging trends. They expect better service. As a processor, manufacturer and marketer, we’re just trying to figure out all those needs, how to reduce our cycle time, how to better fulfill those customer expectations and consumer needs.”
The dairy industry has a great opportunity, Mike Wells says, to showcase the added value of its products, especially with the scientific research linking dairy calcium to weight loss and the coming of new trans fat labeling regulations. “I think our industry has an opportunity for the consumer to see in a very positive way there is some added value to our products,” he says. “You look at the battle for share of stomach. The consumer only has so many dollars. It’s either buy ice cream or cake or salty snacks or cookies, so it’s really a competition for what Mom’s going to buy for her family. It’s getting down to what are the health benefits of this product versus that product, what makes it easy for me — novelties, portion control — and just the overall fun the ice cream category represents. And we’re seeing more and more yogurt consumed as a snack and a dessert item.”
Mike Wells says industry consolidation is a challenge, as burgeoning competitors become more of a threat to family-owned companies like his. But Dan notes that the company took some wise strategic steps in the last decade to make itself more competitive now and beyond.
“We did find ourselves quite lucky with the strength of the dollar in the ’90s,” he says. “We built our South Ice Cream Plant through the ’90s. The strength of the dollar compared to European currencies was very favorable. Most of our equipment comes out of Europe, so our timing was very good. Now, the dollar has flip-flopped and weakened substantially, representing a barrier to entry for competition. If they had to buy out of Europe right now, they’d be paying substantially more for the same equipment that we bought in the past.”
The family also views geography as a key asset. “We are close to our raw-material supplies, we’ve got an excellent labor source and we can process a finished product here in northwest Iowa and ship it to the market,” Doug Wells says. “To ship finished products to market is an opportunity, rather than have to ship raw materials to major metropolitan markets, process there and then distribute. It allows us an opportunity to define our niche, be more in control of our destiny.”
That control helps combat shrinking margins, which Gary Wells sees as a significant long-term challenge. “It puts a real premium on operating efficiently and creating innovations in our operations that will help us drive down costs and be more competitive,” he says. “We’ve got to be the best to win that game. We’ve developed some very good internal programs and systems to drive our true efficiencies higher each year and get more out of the assets we have.”
Mike Wells stresses the importance of innovation in the face of increased category commoditization. “When you look at the price of a half-gallon of ice cream, it’s as low as it ever has been in the face of the highest commodities prices ever,” he says. “With pressure from retailers, pressure from competition and from the consumer, the ice cream category is really commoditized. Kind of like a 12-pack of Coke — you don’t buy it unless it’s on sale.”
Wells’ Dairy is well known for its extensive line of Disney co-branded ice cream and novelty items, and more recently began manufacturing and marketing a line of better-for-you frozen treats for Weight Watchers. While the new products are currently on the market, the arrangement is the subject of litigation between Weight Watchers and a previous licensed manufacturer.
But the association heralds even more opportunities. “One of the beautiful things about Weight Watchers is this enormous club with millions of people,” Dan Wells says. “Combining Wells’ technology and innovation in good-for-you products is a perfect fit for the Weight Watchers profile.”
Company and Community
It’s difficult to separate Wells’ Dairy from the Le Mars community. In fact, with the company’s facilities spread out at seven locations within the town of 9,500, you can’t go far without seeing the Wells name.
That will change somewhat before long, as the company is constructing a centralized campus south of Le Mars that will house management, marketing and research teams under one roof. “We think the central campus will greatly enhance our ability to communicate and work together,” Gary Wells says. “We’re designing an environment that’s going to promote team work and open communication. We think everyone will benefit by just being more aware of everything that’s going on, and a better overall view of the big picture and how they can better contribute to it.”
Dan Wells elaborates. “We’ve decided to lay out the office setting in an open atmosphere. We won’t have a lot of private offices. That’s in an effort to promote synchronization between people and groups, promote creativity via simple contact with each other,” he explains. “We’ll be in an environment where our R&D people will be relatively close to our marketing people and engineering people. The whole idea is to create a culture of communication and cooperation, and speed to market is a key output.”
The Wellses have endless praise for the quality of work force they’ve been able to attract to a part of the country they admit might not have the bells and whistles of a big city.
“The people who have decided to come and work for us come here because they can leave large metropolitan areas and relax in a small-town atmosphere where the crime rates are low, education is high and you can let your children out on the streets at night,” Dan Wells says.
Greg Wells, senior vice president of human resources, describes the upper Midwestern work force as engaged. “We try to involve our employees in as many aspects of our business as we can,” he says. “Coming from a farming community, these people have skills that might not be available in an urban environment.”
The company has no shortage of executive talent either, Gary Wells notes. “If we’re going to be a billion-dollar company, we need top-quality executives,” he says. “I find it interesting that the people we’re attracting are very much interested in working for a family company, a more stable environment, as opposed to publicly traded companies.”
Evidence of a good working environment is the wall of fame at the company’s visitor center, featuring long-time employees. Average tenure at retirement exceeds 30 years.
And the closeness doesn’t end at quitting time. “The access to leadership is very important,” Greg Wells says. “That access can be coming into our offices, or the fact that we go to church with our employees or our kids go to school together and we can talk about issues away from work. That’s an important dynamic.”
Wells’ Dairy is a firm believer in giving back to the community, in Le Mars as well as its other marketing areas. Blue Bunny is a big part of the town’s Ice Cream Days, an annual summer festival. The company is a big supporter of the YMCA and promotes family physical fitness programs. Continuing its interest in wellness, the company is involved with the Juvenile Diabetes Foundation, Children’s Miracle Network and the American Heart Association.
Employees are encouraged to get involved with local schools, says public relations manager Lesley Bartholomew. “They’re given time away from work to go read to a class or put our expertise in front of high school students as partners in education,” she says.
In addition, Wells family members sit on various local and state boards, and the company is a sponsor of Students in Free Enterprise (SIFE), a program that helps college students develop business skills. “We see it as good corporate responsibility,” Greg Wells says, “to give back to those communities who’ve helped make us what we are today.”
Into the Future
With a combination of talented management, innovations, quality ingredients and a labor force possessing a strong work ethic and small-town family values, the future appears to hold nothing but good things for Wells’ Dairy as it approached the century mark.
Beyond flavors and formulations, innovations continue. “We think we’re very state of the art with RFID,” Doug Wells says. “It’s no secret Wal-Mart is looking for its top 100 suppliers to lead the industry in those efforts. We have an active RFID program, and an RFID lab to test various concepts and continue to meet the needs of our customers.”
For all the company has done so far, its leaders see it continuing the same work, albeit bigger and better. “We’ll be doing the same thing on a bigger scale,” Gary Wells says.
And it looks like the whole Wells extended family of employees and community members will be with the company every step of the way, continuing to foster a culture of togetherness that the Wellses say makes their enterprise unique.
“We put our people first, try to realize they are our most important asset, that the people who work for this company really are going to drive our success,” Gary Wells says.
Doug Wells agrees: “That is our culture, our philosophy — tapping into people’s experiences, their expertise, their wisdom, to work in teams, to continue to identify opportunities to improve ourselves, our company, our products.”
Or, as Gary so optimistically concludes, “We have nothing but opportunities.”$OMN_arttitle="Nothing But Opportunities";?>