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Lance, Inc.

 


Address:
P.O. Box 32368
Charlotte, North Carolina 28232
U.S.A.

Telephone: (704) 554-1421
Fax: (704) 554-5562


Statistics:
Public Company
Incorporated: 1926 as Lance Packing Company
Employees: 5,916
Sales: $461.5 million
Stock Exchanges: NASDAQ
SICs: 2052 Cookies & Crackers; 2068 Salted & Roasted Nuts & Seeds; 2096 Potato Chips & Similar Snacks; 2064 Candy & Other Confectionery Products


Company History:

Lance, Inc. is one of the most profitable snack food makers in the United States. Lance snacks are ubiquitous in 35 states, particularly in the Southeast, and are found in vending machines, convenience stores, and, beginning in the 1990s, supermarkets. Although most of the $27 billion industry is dominated by PepsiCo's Frito-Lay, Anheuser-Busch's Eagle Snacks, and Nabisco, Lance has shown no signs of surrendering its distinct niche. It "scooped" the industry in 1988 by replacing the saturated fats in its products with vegetable oils. The company achieved net sales of $487.98 million in 1994.

In 1913 Philip L. Lance and his son-in-law, Salem A. Van Every, founded the Lance Packing Company. They offered roasted peanuts to area merchants, as well as peanut butter, which they packed by hand. The business began when a customer asked Philip Lance, primarily a coffee dealer, to obtain 500 pounds of Virginia peanuts. The customer soon withdrew from the deal, but Lance was unwilling to disappoint the farmer who sold them to him. He roasted small quantities of the nuts himself on his kitchen stove and packaged them in brown paper bags which he sold for five cents a bag to passersby in downtown Charlotte.

Confident of providing a nutritious, profitable food, Lance bought a mechanical roaster and moved the business out of his home. A mill allowed him to supply merchants with both peanuts and peanut butter, which he spread on crackers for customers to sample. This led to an innovation: the first packaged peanut butter cracker sandwiches. By now the company's predilection for peanuts and for single-serving packages was well established. A soldier stationed at a nearby World War I training base provided the recipe for Lance's next snack food: peanut brittle.

After Philip Lance's death in an auto accident in 1926, Salem Van Every assumed control of the company and incorporated it. The company grew dramatically during this period, earning its first $1 million in sales in 1935 and the first $2 million in 1939. It began baking its own crackers in 1938, a change reflecting the increased scale of operations. Salem Van Every died that same year, and his son Phil became president.

While candy came to dominate the company's product line before World War II, wartime sugar rationing swayed Lance towards baked goods, specifically peanut butter sandwiches and cookies. The company's maintenance shop also helped the war effort by making certain tools, such as a wrench for attaching warheads to bombs. Phil Van Every's successor, his son, Philip Lance Van Every, brought a new management style to the company, hiring consultants and implementing a unique administration style called multiple management. However, the company reached a rare landmark in 1944, Lance's only year to date in which annual sales volume did not increase. This was undoubtedly precipitated by the austerity of wartime; postwar fortunes would rise again as new sales districts were organized and many operations were automated. Lance achieved an annual sales volume of $14 million in 1950, and the decade ended with annual sales at Lance of $26.5 million. A new line of packaged saltine crackers for institutional use introduced in 1953 proved an enduring success.

The 1960s brought many changes. The company, which had been 80 percent owned by the Van Every family, made a large public share offering on December 7, 1961. In order to further diversify, a committee was formed to locate potential acquisitions, and Bullock Manufacturing Company in Conyers, Georgia, was acquired to produce potato chips. Although the unit posted a loss that year, it offered Lance an entrance into the chip business. A record 87,000 accounts were opened in 1962 through 96 sales headquarters. Lance operated in 23 states at this point and was prompted to move its plant to a new 231-acre site. The next year, Lance set its record for lowest cost of delivery.

The last half of the 1960s was particularly productive for Lance, as the company spent $2.5 million to expand its Charlotte plant. After Bullock Manufacturing became profitable in 1968, Lance acquired Food Processors, Inc., a Wilson, North Carolina, sweet potato plant. The next year a distribution center in Greenville, Texas, was completed to facilitate service to the southwestern sales territories. Revenues in 1969 were $57.8 million, up from $26.5 million in 1960, while earnings per share increased from $0.72 to $1.81.

Since the company's beginning, all of its individually-packaged products, including the very first roasted peanuts, had sold for five cents each. On March 6, 1970, the last of the nickel merchandise was produced, and henceforth, the snacks would sell for a dime apiece. Nevertheless, the company continued to add new sales territories, totaling 1,111 in 1970.

The following year, a new vending machine was developed capable of carrying anything in the company's line of snacks. To meet the increase in demand, the manufacturing area of the company's plants was increased to 485,000 square feet with the addition of a 15,000 square foot candy department. Plans were drawn for a new potato chip plant and a new baking plant in 1971. Over the next two years, the company sold Food Processors, Inc., and replaced the Georgia chip plant with a new 60,000 square foot facility in Charlotte. Another 25,000 square feet of space was added for truck maintenance and shipping functions. The same year, board chairman Phil Van Every retired and was replaced by Glenn Rhodes.

The company was shaken in 1973 by high materials costs and federal price controls. Newly acquired Tri-Plas, Inc., a plastic food container manufacturer, performed poorly at first. Another major cost was the energy required by the new factory space. In 1974, federal price controls were removed and the escalation in raw materials prices slowed. The company acquired more manufacturing capabilities: a 23,600 square foot plant in Arlington, Texas, for potato chip production and Hancock's Old Fashion Country Ham of Franklinville, North Carolina. Although demand was so high that sales expansion was limited for part of the year, 75 new territories were created, down from 125 the previous year. This came in spite of a price increase of the snack line from ten cents to 15 cents, which also required retooling of the vending machines.

In the mid-1970s, concerns over energy availability prompted Lance to install propane gas storage in its plants, providing increased energy sources. In 1976, a development and exploration partnership was formed with C&K Petroleum Co., Inc. of Houston, Texas, in order to deal with the extreme shortage of natural gas that had developed by that time. The company also made efforts to conserve as much as possible. Although unprecedented pork prices hurt Hancock Ham, the Tri-Plas subsidiary continued to grow. A.F. "Pete" Sloan succeeded the retiring Glenn Rhodes as chairman of the board.

Sales territory continued to grow in the late 1970s, expanding into New England and the Great Lakes. The company bought a 44,431 square foot factory 25 miles from Charlotte for its Tri-Plas subsidiary. Although rising energy costs remained a prime concern, increasingly expensive packing materials also spawned a major conservation effort. However, sales and earnings continued to rise, perhaps reflecting a new 20 cent snack price. Lance's Charlotte plant was expanded yet again, adding high-speed wrapping machines, and the Midwest Biscuit Company of Burlington, Iowa, was purchased. The new subsidiary supplied midwestern grocery stores with crackers and cookies, mostly under private labels. Lance also created an audiovisual studio dedicated to the production of training materials in 1979, and bought a new site for its Tri-Plas west coast operations in 1980.

The 1980s proved a challenging period from the beginning. Due to a dismal domestic harvest, peanuts had to be imported for the first time. In response to the shortage, the company's packaged salted peanuts were diluted with sesame sticks, and its Peanut Bar and Redskins snacks were temporarily dropped from the product line. Even after the next year's improved harvest, government price supports kept prices high. In March 1980 the suggested retail price of Lance snack increased a nickel to 25 cents. However, the combination of all these factors resulted in net sales of $249.3 million for 1980.

The company concentrated on construction in 1981, completing or starting a vending machine repair shop, an efficient peanut roaster room, and 52,000 additional square feet of shipping space in Greenville, Texas. Lance modernized its fleet with more efficient tractors and larger (45 foot) trailers. A new convenience pack of "Captain's Wafers," salted crackers commonly found at restaurant salad bars, helped Lance break into the supermarket market. Soon the snacks were packaged in groups of eight, which became known as Home Paks, for this market, in spite of some reluctance by Pete Sloan, who believed "a supermarket sale takes away a vending machine sale." (In the 1990s, "Club Paks" containing 18 snacks would be offered through mass merchandisers.) In spite of a lackluster economy, 1982 proved successful, owing partly to the sale of Hancock's Old Fashion Country Ham to Smithfield Packing Company.

In spite of increased competition, Lance continued to prosper for the rest of the 1980s. Net annual sales increased 9.4 percent in 1984 to $337.4 million, spurred by more generous incentives. New sales districts continued to be added, and several new snacks were developed. Lance did acquire a Melbane, North Carolina, granola producer, Nutrition-Pak Corporation, but by this time the market for granola bars had peaked, and the unit was closed in 1988. However, a taste for healthier snacks remained. A launch of reformulated snacks dubbed the "Snack Right" program coincided, more or less, with Lance's 75th anniversary. Saturated fats and cholesterol were the targets of this campaign. The company even changed the way it labeled nutritional information to specify the different types of fat (saturated, polyunsaturated, etc.) that were included. Manufacturing capacity continued to be increased in the areas of peanuts and potato chips, which also began to be packaged in "family size" bags.

Like the preceding decade, the 1990s began with serious challenges which Lance met successfully. Its large number of customers provided some protection from the recession. Its social concerns were focused on recycling programs throughout its facilities and offices. After his retirement in April 1990, chairman of the board and CEO Pete Sloan was succeeded by J.W. "Bill" Disher, elected chairman and president. Technological advances during this time included the successful implementation of automated route accounting, which, with the aid of hand-held computers, enhanced the productivity of sales representatives. Regional offices were consolidated into the central accounting department, and to remain competitive, new attention was given to marketing research and Leslie Advertising of Greenville, South Carolina, was retained to develop a new marketing plan. In 1990, chocolate bars, including some Mars brand products, were successfully tested in vending machines, and Lance began producing its own. Production capacity was increased with the purchase of a Columbia, South Carolina, plant, which began operations as Vista Bakery late in 1992.

The individual serving sector of the market, Lance's home ground since the beginning, has enabled the company to keep operations simple and provided a diversified clientele, tempering economic fluctuations. Moreover, the company has managed to keep costs down, earning the loyalty of its many blue-collar consumers, in part by usually only introducing new products when similar ones have proved successful for competitors. Although the company has traditionally relied on availability, not advertising, as a main marketing tool, it rediscovered television and radio advertising in the mid-1990s to support its expansion into the supermarket. A historically debt-free company, Lance seemed well poised to prosper in the next century.

Principal Subsidiaries: Midwest Biscuit Company; Vista Bakery, Inc.





Further Reading:


Anderson, Dick, "Getting There Second," Southpoint, June 1989, pp. 18--20.
Bary, Andrew, "Fresh Growth in Store," Barron's, February 16, 1992, pp. 23--24.
Hannon, Kerry, "Why Steal Your Own Sales?" Forbes, May 18, 1987, pp. 208--210.
Hiestand, Michael, "Lance Inc: 'We're Not in the Junk Food Business'," Adweek's Marketing Week, May 9, 1988, pp. 26--30.
"The History of Lance," Charlotte, N.C.: Lance, Inc., 1992.
James, Frank E., and Alix M. Freedman, "Lance Cuts Fat From Junk Foods to Sell Snacks as Healthier Fare," The Wall Street Journal, March 29, 1988, p. 36.
Kimbrell, Wendy, "Southern Powerhouse," Snack Food, February 1994, pp. 26--41.
Lahvic, Ray, "Snack Baker Captures Impulse Sales," Bakery, April 1988, pp. 70--78.
"Lance, Inc," Wright Investors' Service, October 23, 1991, pp. 3--5.
Price, Scott, "Lance's Big Cheese," The Business Journal, December 5, 1988, pp. 8--9.
Rickard, Al, "Lance Labels Tell It All," Snack World, April 1988, pp. 39--40.
Robinson, Russ, "Snack Maker Replaces Fat, Oils with Low-Cholesterol Substitute," Greensboro, NC News & Record, March 12, 1988, p. 4.
Sage, Earl R., and Linda E. Swayne, "Lance, Inc.," in Cases in Strategic Management (2): pp. 429--445.
Smith, Doug, "Counter Attack," Snack Food, October 1991, pp. 38--44.
------, "Lance's Anti-Recession Recipe," Charlotte Observer, July 29, 1991, pp. I1--I2.
Tippett, Karen, "The Conservative Flavor of Lance," FW, June 26, 1990, pp. 49--51.
"To Win Hearty Market Share, Lance Gets the Lard Out," Business North Carolina, October 1988.
"Value Added: Baking's Key to Prosperity," Milling & Baking News, November 29, 1988, pp. 24--35.
Van Every, Philip Lance, The History of Lance, New York: The Newcomen Society in North America, 1974.

Source: International Directory of Company Histories, Vol. 14. St. James Press, 1996.




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