"The company's biggest strength is the uniqueness of its flour, the way it appeals to the naturalness that more and more consumers are searching for. But Frank diluted his genuine advantages by expanding. I have to give him credit for being wise enough to see his mistakes and rectify them. Now, he's going back to basics, and the market is going back there with him."
While laboring to keep the company going, Bill O'Connor went hunting for a financial expert who could help find more cost savings. He found William Walsh, a comptroller at International Minerals & Chemical Corp. Walsh jumped into the fray with both feet.
"It was a nightmare," Walsh remembers. "Most commodity vendors demand prompt payment, with no ifs, ands, or buts. I spent 70% of my time on the phone with vendors, trying to get extended terms. Most assumed I was lying and would never pay them. There was one guy, a fruit supplier, to whom we owed $800,000. He called on me one day to say he was going to try to put us into bankruptcy. We eventually worked things out, but, I tell you, this company was almost over the brink. We didn't fear bankruptcy every day -- we feared it every hour."
The company managed to show a small profit in 1979 of less than $10,000. But the cash squeeze remained relentless. In 1980 Sands, Taylor & Wood posted a loss of $170,000. As Sands puts it, the company was still "discombobulated."
Surveying the wreckage from his bucolic retreat, Sands could see that the rest of his acquisitions had to go. "That was the value of living up in Vermont," he says. "You could see it from afar. And I just said, 'This is ridiculous. I'm gonna sell everything."
Sands continued to distill Sands, Taylor & Wood to its core. He liquidated the remainder of the wholesale bakery supply and distribution end, which did roughly $12 million in sales, and in 1980 sold it to Nutmeg Bakers Supply Co., in Beacon Falls, Conn. The sale freed up cash the company had invested in inventory and receivables, and wiped clean a $200,000 loss. With all modes of bakery distribution gone, the company focused on its 200-year-old cash cow, family flour. Sands kept his home in Vermont, but took over again as full-time company president, and commutes to Brighton at least once a week.
In 1981, O'Connor and Sands sold the " Johnson-Middleby division to L. Karp & Sons Inc., a Chicago-based manufacturer and distributor of bakery ingredients. All of the division's inventory and assets were liquidated and sold to Karp for the same amount they had originally cost. According to O'Connor, that divestiture was one of the hardest decisions of his life.
"Karp moved the plant to Chicago and laid off close to 80 out of the 100 people employed there," he says. "Frank and I knew that was going to happen, and it was very agonizing for us both. Some of these people had been with the company for over 40 years. I still feel very sorry about the dislocation we caused in their lives." Even sacrifices like these, though, did not prevent the company from losing close to $1 million that year.
Undaunted, Sands sloughed off his one remaining acquisition, Goodhue Products, in the spring of 1983, selling it to Bill O'Connor for about $125,000. The long roller-coaster ride from diversification to divestiture had finally ground to a halt.
"We're now reaffirming the qualities that distinguish us from the others," says Sands, "the qualities we've had since the beginning." The company has launched an aggressive advertising campaign to spread its all-natural gospel, spending about $150,000 a year on radio and magazine commercials. Sands's wife, Brinna, has taken charge of consumer relations, and New Englanders frequently can hear her on the radio, espousing the wholesomeness of King Arthur Flour. By flaunting the intrinsic merits of its product, the company has rediscovered its identity and reversed its decline. For the latter part of 1982 and all through 1983, the ledger numbers were back in the black.
King Arthur currently accounts for 25% of the New England market, compared to 6% in 1963, placing it third behind General Mills's Gold Medal and Pillsbury's Best brands. In the 10-to-25-pound bags, King Arthur outsells Gold Medal and Best combined two-to-one. Although national consumption of family flour has leveled off, the industry continues to be a scrappy one. Private labels, which make up about 10% of the market, are constantly introducing natural brands in attempts to cut into King Arthur's turf. But Sands is less of a worrier these days. "We have tradition, and we've gained trust," he proclaims. "No one can touch us."
The natural-foods industry is growing at about 15% a year, and Sands, Taylor & Wood, having prefigured that boom, is positioning itself to ride the wave. Sands may have learned the limits to growth, but his competitive instinct remains strong. Last year, the company introduced a stoneground whole-wheat flour that has already captured 50% of the market, an impressive blitzkrieg into potentially rich territory. In addition, the company recently hired a new food broker, Morris Alper & Sons Inc. in Framingham, Mass., which has increased distribution of King Arthur Flour in its current market area and is helping it move onto grocery shelves in metropolitan New York and surrounding New Jersey areas. "Right now those states amount to only a very small percentage of our sales, but we have a foot in the door," he says. "Laying the groundwork will have to go slowly, and it will be a year or so before we make any serious inroads. But it will pay off in a big way. That market is twice the size of New England."
Despite Sands's close brush with disaster in the late '70s, he hasn't lost his enthusiasm for both new markets and new products. "I've gotten that preoccupation with growth pretty much out of my system," he says, "but I get itchy from time to time. I still have ambitions for my company."
