COOKING UP DEALS.

How two black food companies whipped up lucrative partnerships with a major firm

WHEN IT COMES TO FORMING CORPORATE relationships, Michele Hoskins, founder and president of Michele Foods Inc., believes that it's the smaller company that must knock--repeatedly and, if necessary, loudly--on the larger company's door.

William F. Williams, co-founder and president of Glory Foods Inc., believes that such relationships come about because the larger company sees that an alliance with a smaller one can be beneficial to both parties, and it's often the larger company that initiates the contact.

However such partnerships are formed, both companies can boast of a relationship with General Mills, the multibillion-dollar Minneapolis-based food Goliath whose products are as ubiquitous as neighborhood grocery stores.

Its relationship with Calumet City, Illinois-based Michele Foods involves a 13-city promotional tour that links General Mills' Bisquick biscuit and pancake mix with Michele Foods' syrups. The partnership is expected to increase Michele Foods' sales by half a million dollars, says Hoskins. The association between Glory Foods, of Columbus, Ohio, and the consumer food products company is a bit more complex, but no less rewarding. With the help of a third party, Stairstep Initiative, a Minneapolis organization that works to build community among African Americans, Glory Foods was able to enter the highly competitive frozen foods market, expanding its established line of canned, preseasoned, Southern-style vegetables. The alliance resulted in the formation of Siyeza Inc. (South African for "We're coming"), the manufacturing company of Glory's frozen foods, which is expected to generate $12 million in sales this year, says Alfred Babington-Johnson, president and CEO of the Stairstep Initiative Companies and chairman of the board of Siyeza.

"The Michele Foods-General Mills association is the start of a trend," says Gary M. Giblen, managing director and consumer and retailing analyst at First Albany Equities in New York. "Such deals will accelerate because consumer marketing has become more fragmented. Thirty years ago, you could do one mass-market campaign. Now there's a lot more regional marketing and a lot more tailored marketing to different segments, such as African Americans."

Two-product, or cross-branding promotional campaigns are not unusual in the food industry. That such campaigns are beneficial to both companies is evident in the Michele Foods-General Mills association. "For Michele Foods it makes perfect sense," says John Renwick, a food analyst at Morgan Stanley Dean Witter in New York. "It puts the company on the map. Bisquick is a product people know very well. They might not know Michele's syrup very well, but this puts her in the face of the consumer." The idea is to create some excitement in the supermarket to get consumers' attention, Renwick adds.

Small business owners like Williams and Hoskins seeking to form partnerships with major corporations must network, develop strong business and marketing plans and have plenty of persistence to land such deals.

A PLAN OF ACTION

Hoskins' road to the alliance with the food giant is marked with the same tenacity and courage that has characterized her rise in the business world. In 1984, Hoskins, a divorced mother of three, sold her car and condo and moved in with her mother with the goal of turning a generations-old secret family recipe for breakfast syrup into a marketable product. Today, Michele Foods is an $8 million company whose three flavors of syrup can be found on the shelves of stores such as Wal-Mart and Kroger's.

Nearly five years ago, after doing some research, Hoskins discovered that Bisquick, the batter she used in trade show demonstrations, was one of a handful of mixes that didn't have a syrup. Most pancake mixes, she says, are coupled with a syrup manufactured by the company that makes the mix, but General Mills didn't make syrup.

"That meant that every time you made a Bisquick pancake, you had to use a competitor's syrup," she says, adding that she was "amazed" that the company hadn't taken advantage of consumers' propensity to buy the products together.

Hoskins called General Mills but didn't receive a favorable response, so she went on to pursue other accounts, most notably one with Denny's, the restaurant chain that in the early 1990s was facing lawsuits over discriminatory practices. In 1994, she signed a $3 million contract with the chain, becoming one of Denny's first minority- and women-owned suppliers.

But Hoskins was still looking for a "slam dunk," a deal that would get Michele Foods into more retail stores. As evidence that networking pays off, she ran into Gerald Fernandez, president of the Multicultural Food Service and Hospitality Alliance for General Mills, while attending a food show for industry women. She broached her "fantastic idea" of a relationship with General Mills to him, and Fernandez suggested she attend and donate her syrup to a breakfast that Steve Sanger, the General Mills chairman and CEO, was going to attend in Minneapolis. She did both, but before going, she wrote Sanger a letter outlining her concept.

At the breakfast, Sanger publicly mentioned Michele Foods' participation in the event. Later, at the opening of a plant, Hoskins introduced herself to him.

When she returned to Illinois, Hoskins wrote another letter citing the benefits of a relationship: it would legitimize the food manufacturer in the black community and would give it entree into the market. "And the third thing would have been my slam dunk," says Hoskins. "If I could partner with General Mills on the retail level, that means that wherever they are, I could possibly be there, too."

Talks started with General Mills' executives, but what prompted the company to get serious was Hoskins' appearance last spring on Oprah. Before that, Hoskins had asked its official if she could reveal the impending partnership but they refused.

On Oprah, she mentioned her relationships with other companies. This got the attention of Sanger, and shortly afterwards, Hoskins signed a contract.

In addition to the 13-city promotional tour, the two companies also agreed to sponsor a dollar-off coupon if both products are purchased together. Last fall, bottles of Michele Foods' syrups carrying neck hangers for similar discounts appeared on store shelves.

But from Hoskins' perspective, the most important aspect of the relationship is the impact on her company's bottom line. "I'm seeing results because I'm able to use the leverage of General Mills," she says. "My sales are up and I'm very excited about it. It's giving me a strength that I never had. When I call a buyer, and say `I would like to introduce my product to you and I would like for you to consider putting it in your retail chain,' and then add that I'm doing a promotion for General Mills, the buyer's attitude becomes, `If your syrup is good enough for Bisquick, it should be good enough for us to consider.'"

Autumn Boos, General Mills' director of ethnic marketing, calls the relationship groundbreaking. "We're very excited about the potential of what this partnership can bring both for Michele's business and for the Bisquick pancake opportunity," says Boos.

WHEN OPPORTUNITY COMES KNOCKING

Although Williams' relationship is not as direct as the Michele Foods' alliance, it has proven to be just as financially rewarding.

Williams and two partners launched Glory Foods in 1992 after three years of developing a product line that today includes 22 varieties of canned, Southern-style vegetables and condiments. The company's products, which generated $12 million in sales last year, can be found in 8,000 stores in 29 states. BLACK ENTERPRISE selected Glory Foods as "Emerging Company of the Year" for 1996.

The company's frozen products, Glory Foods Southern Selections, a line of oven-ready and microwaveable frozen entrees and side dishes geared to consumers looking to save time and money, which were introduced in January 1998, are the result of a chance encounter. Although Williams had signed a contract to produce frozen greens for Churchs Chicken, the fast-food chain, entering the frozen foods market was not part of Glory Foods' future.

"I had no interest in going into that arena," says Williams, citing its entrenched competitiveness. "There are rules. You don't go treading on Mr. Bubba's [your competitor's] property," he adds, laughing.

But in 1996, Williams received a call from Babington-Johnson of the Stairstep Initiative. Working with Michael "Ted" Cushmore, General Mills senior vice president and president of Gold Medal, now retired, Stairstep opened the door to Sanger's office.

General Mills, which has a program devoted, in part, to social investing, had been in discussions with the owner of a packing plant in North Minneapolis. The owner was looking for investors but his company's largest client withdrew its business. Efforts to salvage the company failed, leaving behind an idle, 65,000 square-foot facility.

That failure didn't undermine the food maker's belief that something viable could develop using the factory. After meeting with Sanger, Babington-Johnson secured a letter of intent for $1.5 million from General Mills.

Shortly after concluding that phase of the deal, Babington-Johnson visited his mother in Knoxville, Tennessee, where he had the opportunity to sample Glory Foods' collard greens. He couldn't believe they had come from a can. When he returned to Minneapolis, he contacted Williams.

Although the two men discovered they had a lot in common, Williams had some initial misgivings about getting involved. He didn't know how well Glory Foods could work with a nonprofit and was concerned about being dominated by the food giant.

But he saw the modern facility in Minneapolis and the promise it had for jobs in the black community. There was also a letter of intent. Here was a chance to get into the frozen foods market, so Williams gave his okay. Eighteen months later, Siyeza began producing Southern Selections.

"Bill Williams is a very impressive businessman," says Austin Sullivan, General Mills senior vice president of corporate relations. "When a business is run by a tough, bottom-line oriented businessman, your chances of having it succeed are much, much greater."

Capitalization for the new company, Siyeza, came from a Glory Foods no-interest, no-term loan for $1.4 million and $50,000 in equity, a General Mills no-interest, no-term loan for $1.5 million, and a U.S. Bancorp purchase of $1.2 million in preferred stock. General Mills also lent the expertise of employees from a variety of departments such as marketing and manufacturing. Stairstep, which owns two-thirds of the company, contributed $100,000. Glory Foods owns the remaining third and is currently Siyeza's sole customer. Williams is the company's president and Babington-Johnson serves as its chairman. Ultimately, the plant will employ 150-175 people and partial, employee-ownership is also in Siyeza's future.

Both Williams and Hoskins recognized that forming partnerships would be lucrative opportunities for them as well as General Mills. "The best advice I can give to anyone is to do your homework," Hoskins says. "Research the company you feel you can really partner well with. Know their weaknesses."

Hoskins says minority business owners should find out what relationships the company has with other minority-owned businesses and what it is doing to market to minority consumers. "Take that [information] as high up as you can," Hoskins adds. "Show them where their bottom line can change."

FOOD INDUSTRY RESOURCES

American Institute of Food Distribution
 28-12 Broadway
 Fair Lawn, NJ 07410
 201491-5570

Issues statistical and analytical summaries on food
distribution; represents canners, packers, manufacturers,
brokers, wholesalers and retailers.

Association of Sales &
Marketing Companies
 2100 Reston Pkwy., Suite 400
 Reston, VA 20191
 703-758-7790

Represents brokers in the consumer goods
industry.

Borden Foods
 Ron Cosey
 Supplier Diversity Manager
 180 E. Broad St.
 Columbus, OH 43215
 Fax: [phone]

Provides information on who buys your specific
products.

General Mills Inc.
 Paul Schupmann
 Manager of Supplier Diversity
 P.O. Box 1113
 Minneapolis, MN 55440

Provides brochure; certification form to enroll on
the company's database.

McCormick & Co. Inc.
 Sheila Dews-Johnson
 Manager of Supplier Diversity
 18 Loveton Circle
 Sparks, MD 21152

Manages supplier diversity activities and coordinates
buying opportunities.

National Association for the
Specialty Food Trade Inc.
 120 Wall St.
 New York, NY 10005
 212-482-6440

Represents food manufacturers, processors,
importers, retailers and brokers of specialty and
gourmet foods; sponsors International Fancy Food
and Confection Shows.

National Food Processors Association
 1350 I St. NW, Suite 300
 Washington, DC 20005
 202-639-5900

Represents commercial processors of vegetables,
meats and canned goods; conducts research on
food safety, nutrition and industry concerns.

Philip Morris Companies Inc. (Kraft Foods)
 Sharon Patterson
 Manager of Supplier Diversity
 3 Lakes Dr.
 Northfield, IL 60093

Provides supplier profile form and literature.

The Pillsbury Co. Jane Winston
 Manager of Minority Supplier Development
 200 S. Sixth St., Mail Stop 21X3
 Minneapolis, MN 55402
 [e-mail]

Provides supplier profile form and brochure.

The Procter & Gamble Co.
 Howard D. Elliott, Associate Director for
 Historically Underutilized Businesses
 1 Procter & Gamble Plaza
 Cincinnati, OH 45202

Provides brochure with information on their program
and what they buy; certification form to
enroll on the company's database; directs you to
who buys your specific product.

Snack Food Association
 1711 King St., Suite 1
 Alexandria, VA 22314
 703-836-4500 or 800-628-1334

Represents snack manufacturers and suppliers;
hosts annual conference.