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109 years and going strong.

While most "next generation" BE 100s CEOs only have to contend with one family business legend, Charles H. James III has to face a legacy of entrepreneurship that spans three generations. Reflecting on the challenge of managing C.H. James & Co., a 109-year-old Charleston, W.Va.-based food wholesale and trucking company, James explains: "Every day when I walk into my office, I have to face my great-grandfather, [C.H. James II], and my grandfather, [Edward L. James], and my father [C.H. James II] is just a phone call away. Over the years I've come to realize that I'm not just managing a family business. What I'm really overseeing is a family trust."

Despite the pressure to continue his family's legact, the 33-year-old Wharton MBA is certainly not overwhelmed by the watchful eyes of the elder James. For C.J. James III, who is called Chuck by those who know him, the pressure of growing his $18 million family business has been a source of inspiration more than anything else. One might think that guiding a regional distributor of fruits, vegetables, chickens and eggs nestled in the mountains of West Virginia into the 21st century might not appeal to a hotshot Ivy Leaguer. But James says: "I've never viewed this company as a local business selling food in Charleston. I always saw it as a base from which to build an international food distribution empire."

But propelling a century-old company into the major leagues is not easy in an industry that is constantly evolving. "Food distribution has gone the same way a lot of other industries have. The big companies get bigger and the small companies go out of business," says Darryl Breed, a C. H. James client and chief of the U.S. Department of Agriculture (USDA) fruit and vegetable commodity procurement branch.

In fact, through the mid-1980s, C. H. James & Co. found itself losing market share and profits to fiercely competitive, large supermarket chains, food cooperatives and discount food warehouses. As a local business serving schools, hospitals and restaurants throughout a 10-county region in West Virginia, Ohio and Kentucky, sales leveled off to about $4.3 million per year.

By shifting the company's emphasis to higher volume sales with federal government agencies, C. H. James & Co. has established a foothold in the more lucrative national and international food distribution markets. The result: The company has averaged a 38% annual increase in sales over the past five years, while winning prestigious national small business awards for outstanding service along the way.

And that's only the beginning. If you give him a few minutes, James will enthusiastically talk about his 18-month timetable to further expand his company through acquisitions and to bring in new partners.

In January, he took the first step. James consolidated the company's local business accounts and their assets into a separate operating division. He then sold 49% of the assets for an undisclosed amount, creating the Wending James Food Service, an operating unit of C. H. James & Co. At a time when capital for small businesses is scarce, James found a low-risk way to finance future acquisitions. And as he points out, "All the while, I am still maintaining financial, managerial and operational control of what has traditionally been my business base."

Some may think this is an unusually aggressive business strategy for a small-town company. But for James, it's the only way to do business in the 1990s. And that is why C. H. James & Co., which is ranked No. 72 on the BE INDUSTRIAL/SERVICE 100, has been selected as a 1992 BE Company of the Year.

Continuing A Legacy

Charles H. James started C.H. James & Co. with his three brothers in 1883, peddling fresh fruits and vegetables, which were in short supply in West Virginia. The company quickly became the largest wholesale food operation in the state, however, the Depression of 1929 forced it into bankruptcy. His son, Edward James, reestablished the business in 1931 by selling eggs and later, poultry. By 1941, the company had made a solid comeback, posting $200,000 in revenues. By the time Edward James died in 1967, the business passed the million-dollar mark in sales. Then, under the leadership of Charles H. James II, and with help from his brother Edward James Jr., the business posted profits every year until 1983. (See "100 Oldest," June 1976.)

After working two years as a banking associate for Chicago-based Continental Illinois National Bank and Trust Co., Chuck, whose undergraduate degree is from Morehouse College, attended The Wharton School in Philadelphia. When he returned to his hometown in May of 1985 with his wife, Jeralyn Chuck was itching to join the family business. His three sisters, Sheila, who trains marketing reps for IBM in Atlanta; Stephanie, who is a medical doctor in New York; and Sarah, a student at Spelman College in Atlanta; were engaged in other pursuits.

Fresh in his mind was his thesis paper, which chronicled his family's three previous generations of entrepreneurial success. The paper also contained what he wanted his contribution to the legacy to be.

"We dropped off the BE 100 when I first came back. I wanted to get back on the list, and I wanted to get federal contracts for national distribution accounts," says Chuck, speaking in smooth, easy tones.

Accomplishing those tasks wouldn't be easy. It soon became evident that in personality, work habits and his approach to business, the younger James was the antithesis of his father. The older James was very deliberate in his business decisions. He always seemed to labor at his desk. The younger James was less risk-adverse. His strong analytical skills helped him make quick business decisions. Seeing the two working together every day, prompts James' mother, Lucia to remark, "My husband sees the glass as half empty all the time, my son always sees it as half full."

In most situations, conflicting business styles often set the stage for a classic father versus son confrontation. But that could never happen. Chuck has carefully managed his way past conflicts, and allowed his ideas to be incorporated into the company's business strategy one by one.

He explains: "I would say to my father: 'Daddy did you run this business in the '60s and '70s the way your daddy did in the '40s and '50s?' And he'd say, 'No." Then I'd say, 'Well then, how do you expect me to run it today based on a formula that was successful more than 20 years ago?"

Despite the freedom and control he has, James realizes the value of his father's experience and consults with him often. "See this button," he says pointing to his office phone. It's a speed-dial to Dad."

Changing For The Better

The business officially changed hands in 1988, when C. H. James II was persuaded to lighten his workload after suffering several heart attacks. He prepared for retirement by liquidating the business and selling it to his son. "It was a leveraged buyouts since my father took most of what he had accumulated with him," says James.

Although the family won't say just how much that was, the Charleston, W. Va.-based Commerce Bank, which extends a $5 million line of credit to the company, financed the deal. James repaid his debt to Commerce Bank in 18 months, even though he was given a 10-year amortization period.

Installed as CEO at the age of 29, James' first adjustments were designed to move the company toward a more professional management structure. A company "mission statement" was distributed to the firm's 25 employees, and staffers were encouraged to participate in implementing it. He wanted the employees to believe in the company's potential for growth as much as he did. Changing the corporate culture of the business was an uncomfortable process at first, but the desired results have been achieved.

"Chuck allows people to become more involved in the company and the decisions that are made. That makes you feel more responsible for your job and the outcome," says the firm's comptroller Rebecca Caines, one of three managers in the company. Caines, who monitors the company's cash flow, budgeting and government contracts, adds that the firm has "cut back expenses, revamped a lot of jobs and streamlined operations to become more productive." In addition to the cutbacks, James is investing in training programs and performance incentives to improve the productivity of his employees.

Going National

With his staff of sales professionals, truckers, packers and loaders prepared to handle an onslaught of new contracts, James is more than primed to go for even larger accounts. "The same principless that enabled the firm to be successful for 100 years locally will help transform C.H. James into a national and international business," says James. For starters, the company's credit relationship with banks and purchasing relationships with national suppliers have been established over three generations. The James family reputation as astute businessmen also makes the fourth-generation CEO well-connected and well-respected. Just last summer, he was appointed to the board of directors of Commerce Bank, the third-largest bank in the state. He is also treasurer of the West Virginia Economic Development Authority and serves on the board of trustees of the University of Charleston and the board of directors of the Charleston Area Medical Center.

With these connections and relationships in place, all the company needs to do now is win contracts. "We started looking at some of the government direct contrcts and bids servicing veterans hospitals on a regional and national basis. Those contracts are literally designed for firms like ours that are out here slugging it out in the trenches," says James.

And James is slugging away and winning. "Chuck is always aggressive. He prefers to spend more time working on larger scale projects that are going to make more money in the long run," says Matthews D. Smith, assistant vice president of commercial loans for Commerce Bank.

Indeed. Last year, 50% of the company's revenues came from competitive bidding contracts. Another 27% came from contracts under the Small business Administration's (SBA) 8(a) minority set-aside program. As a result, 77% of the company's total revenues were from national distribution. When he became president of C. H. James & Co. in 1987, the company did not have any national contracts.

One of the company's largest contracts, a $4.7 million deal to provide canned foods for "Operation Dessert Storm" was terminated when the war ended earlier than anticipated. The Department of Defense would not take delivery of an estimated $2.5 million worth of goods that C. H. James & Co. had purchased and was prepared to ship. At press time, a contract settlement was still being negotiated.

Although his father, and none of his predecessors, ever accepted set-aside business from the federal government, James has made it work. The SBA's 8(a) program is a good revenue generator, but James stresses that, "We have always viewed the 8(a) program as gravy on the meal -- something nice to have, but nothing to predicate our entire business strategy on."

The company has an ongoing relationship with the Department of Veterans Affairs to supply VA hospitals with orange, grapefruit and blended juices, pears, kidney beans and pork and beans each year. The agreement is worth more than $1 million a year. The United States Department of Agriculture also signs a "blanket purchase order" under the 8(a) program for $2 million worth of goods each year.

James' success in the national marketplace helped his business capture U.S. Department of Agriculture Minority Contractor of the Year Awards in 1988, 1989 and 990. He was also lauded as the SBA 1990 Mid-Atlantic Region Minority Small Businessman of the Year. And the company won the U.S. Department of Commerce 1988 Minority Supplier Distributor Firm of the Year award as well.

A Company For The Future

With the national distribution business firmly established, James has begun looking for ways to improve sales locally. In 1990, he approached John A. Wendling, a friend and local businessman who had sold his wholesale meat and cheese distribution business to his son in 1985. Wendling, 52, purchased a 49% stake in C. H. James & Co.'s local distribution business. A new company, Wendling James Food Service, was formed, with Wendling as president. It operates as a subsidiary of C. H. James & Co. and has a reciprocal relationship with Dixie Provisioners Inc., Wendling's son's business.

The two companies use each other's warehouses to increase their local sales volume. By making joint purchases, their buying power has tripled. And by purchasing goods from each other at cost, both businesses have expanded their product offerings.

"As a food-service company, we can cover a lot more ground than just selling produce. Now we're trying to build our business to include smoked meats, some fresh meats and a lot more frozen foods," says Wendling. He adds that by selling the new-product offerings to local schools, institutions and restaurants, sales could increase by $1.5 million annually within two years.

And in less time than that, James plans to purchase a new company. "I want to stay in food and distribution, but I am considering buying a group of local franchise restaurants if I could distribute food to them through C. H. James & Co. I might also look at obtaining a beverage-distribution center, a cannery or a hamburger processing plant," says James with a smile as he reviews his options.

Whatever type of business he purchases, odds are that C. H. James & Co. will be in bood shape when James passes it on to his sons, C. H. James IV and Nelson. "This is what really defines our family," he says proudly. "It is truly an honor to be able to do what I do, and hopefully have something to pass on to the next generation.
COPYRIGHT 1992 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:B.E. 100s Company of the Year; C.H. James & Co.
Author:Scott, Matthew S.
Publication:Black Enterprise
Article Type:Cover Story
Date:Jun 1, 1992
Previous Article:Wired for success.
Next Article:Mr. Touchdown.

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