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Hindman: In tough times, plan for growth

Despite its third consecutive year of flat sales, Clark National, Inc., Elk Grove, IL, is not hunkering down and merely hoping for the best. Donald D. Hindman, president and chief operating officer of the foodservice distributorship, has charted a strategic plan that places the $340 million company on an aggressive growth course - including expansion beyond its territory.
"Our goal next year is 8 percent organic growth and, come hell or high water, we're going to hit that number next year. All of our division presidents' compensations are tied to growing at an 8 percent organic rate. All of our sales management personnel are tied into that as well as the sales people and our corporate headquarters staff. Everybody has skin in the game to grow at 8 percent because that's the growth rate that we need to hit our return," declares Hindman in a recent interview.
Clark National, a family-owned distributorship that placed 13th on the ID Top 50 roster in 2001, faced two significant economic setbacks last year. First, the weakened economy wrecked havoc among industries in its territory. "We do a lot of business in northwest Indiana, which was hit by the steel industry going into bankruptcy again. When the steel industry lays off 100,000 people in northwestern Indiana, which it just did, restaurants don't do as much business," Hindman points out. Clark's business interests in Detroit, Chicago and Cleveland were also lagging due to a sluggish economy. "For the last year and a half we've been battening down the hatches and running lean and mean, and really focusing on our internal operations and running the fundamentals of the business," he says.
Second, as for independent restaurants, which constitute 30 percent of its business, Hindman says the distributorship is down 10-15 percent. "We have 50 percent between B&I and restaurants and both of those segments are pretty far down. Hospitality and hotels is another 10-15 percent of our business and that segment has been devastated. Vending is 10 percent of our business and that has been devastated. Industrial packaging is growing part of our business but it's down," Hindman reports.
However, have no fear, Hindman, who joined the company in 1994 after a law career, is endeavoring to boost sales through diversification. The distributorship is gyrating away from strictly restaurant business into segments that are not affected by cyclical ups and downs. One of its targets are theater concessions, which Hindman believes fares better than other segments even in hard times because people still want to go to the movies to forget about their troubles. Hindman says the hot concession market is growing quickly, currently accounting for 20 percent of the company's business.
Another target is healthcare. "People get sick and go to the hospital whether the economy is good or bad. Our acute care business is very good as well as long-term care business. We're also getting into the assisted-living segment, elderly care business, residential retirement communities. We think that's a high growth industry, with the aging population, and we're going to grow in that area as well," Hindman explains. "We're diversifying away from just the down the street foodservice business."
Hindman has not forgotten the all-important sales staff in the field and recently instituted a daring 50:50 incentive program on gross profits from new accounts for six months. "In other words, we split the profit with them for six months on new accounts," he notes. "That enables them to make a lot of money on new business."
Realizing that everyone, including DSRs, retreat into a comfort zone when times get tough, Hindman hopes that this incentive will draw them out of their burrows into prosperity. "We have 200 sales people and if we can get them to work one more hour per day, that will generate 10,000 new accounts per year," he says, adding that the reaction to the incentive plan will surely be very positive.
A new member of UniPro Foodservice Inc., Atlanta, Hindman anticipates that this affiliation will build Clark's value proposition to its customers and help them grow their sales. "Our new pitch to our customers is not that we can save you money and drive costs out of the supply chain, but we can help you grow your business. That's what operators want to hear right now. They, especially independents, want to hear that their foodservice purveyors will help them grow their business and compete with the big guys," Hindman points out.
Through UniPro the distributorship is offering menu planning, food cost analysis, food cost tracking software, wait staff training, co-branding opportunities with manufacturers, rebate tracking, all of which help the operator run his business more efficiently. In addition, Clark launched a web-based learning site for DSRs and operators. Sales people, for example, can fine-tune their selling techniques by studying individual modules, completing assignments and handing them in for grading, and finally taking a test. Operators can go on and learn about wait staff training, menu planning, recipes and portion control and other topics.
Another important part of Clark's business is its equipment and supply division, Choice Restaurant Equipment & Supplies, in Florida, which Hindman says is doing pretty well. "The E&S business for Clark is a $35 million and it's a very profitable segment for us and it helps us become more important to our customers," he notes.
Despite the economy, Hindman still sees operators investing in their restaurants, new facilities are being opened and country clubs are refurbishing their kitchens. "We do a lot of sport venues, football stadiums, basketball arenas, and those places are still picking up new contracts for concessions and whenever a new B&I company takes over the concession, he has to retrofit the kitchen so we do some work for our national accounts in that area. There's always a need to refurbish a kitchen. I'd like to be optimistic and think that's a sign of good growth," he states.
While the economy was the single biggest challenge facing the industry last year, Hindman says that in the New Year the greatest challenge for him will be helping the independent restaurant operator survive and compete against the chains. Hindman says that independents constitute half of Clark's broadline business and the company relies on the success of independent operators.
"We're an independent and we go to market as a nationally-branded independent distributor and we have a lot more appeal with the independent restaurant operator because of that. We like to say that the Syscos and the U.S. Foodservices of the world are great for TGI Fridays and Applebee's but we have a lot more empathy for the plight of the independent operator because we're an independent," Hindman says, noting there is a special and natural bond between independent distributors and independent operators. "They like the fact that we're family owned, they like the fact that they can talk to the owner of the company. They can get a question answered quickly. We feel more like a family business than the corporate guys. Although we're a big company, we don't feel like just another number."
Does Hindman feel threatened by the ravenous corporate distributorships? No. "We're having one of the best profit years in the history of our company because of cost containment measures and better purchasing. Profit wise we're doing very well and as long as we hit our return expectation, as shareholders and owners of this business, we're having a lot of fun. We have no reason to sell out. We're making a lot of money. It's great to be a private company with our size and to pull down $10 or $15 million a year of earnings off of that business is a great thing," Hindman says.
All of this spells confidence for a better 2003.
"Absent a war with Iraq, I think conditions in 2003 are going to be a lot better. All forecasts point to a swift recovery in 2003. So we're going to budget for better economic circumstances than we had in 2002, which was pretty dire," he says.
So confident is Hindman that he is expanding is horizons - from coast to coast.
"As the economy comes out of this slowdown, we anticipate that within about a year we'll go back on the acquisition trail and acquire medium-sized independent broadliners and paper specialists. Our goal is to someday be a national company and we want to reach a half a billion in sales within three years. And we're going to have to rely on acquisitions to do that. We're in discussions with three or four companies now and one of them is a very substantial foodservice distributor in the southeast and we'd like to move into the southeast. That's an area with a lot of growth for us," he forecasts.

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