The 100-year-old Start-up

M. Jacob Sons was founded in 1882 . . . and 1921 . . . and 1963 . . . and again in 1982. Four times now, one generation has succeeded another, and reinvented the family business.

Tweet

In June 1982, when Joel Jacob was barely a year out of college, he took off on a three-month tour, the likes of which no one in his family's business had ever seen. Early each morning, he would climb into his Pontiac J2000, check the map, and begin another day of cold calling throughout Detroit on the smallest-volume customers, some of whom hadn't laid eyes on an M. Jacob & Sons salesman for many years. But now that Joel had come into the company -- a 97-year-old distributor of bottles and plastic containers run by his father, Marty Jacob -- he intended to shake away the cobwebs. The last thing he wanted was to become infected by his father's gloom.

At least 10 or 12 times a day, Joel would march through a customer's door with his catalogs, introducing himself as Joel Jacob from "the bottle company," the company his great-grandfather started. Out-going, intense, always in motion, he would ask about the businesses: What did they make? How did they use the bottles and jars they bought from M. Jacob & Sons? Customers would often invite their young visitor to tour the premises, which was the part Joel liked best. He learned, for example, how one customer used plastic vials for storing artificial eyeballs, another used plastic bottles to apply glue to the seams of man-made reservoirs, and a third used the same bottles to squeeze oil into outdoor clocks. He was impressed by their ingenuity -- but he didn't find much new business.

Then, around mid-August, he took a filier: He stopped in at the world headquarters of K mart Corp., in Troy, Mich. For some reason, just sitting in the huge, plantfilled lobby, watching as hundreds of sales-people from all over the world milled around waiting to sell their wares, got his adrenaline flowing. He called his father on a pay phone to report on where he was.

What on earth, asked Marty Jacob, did he think he was doing there?

Joel reminded Marty that on one level, the world's largest discount retailer (1984 sales of $18.6 billion) was just another small customer of M. Jacob & Sons, buying around $40 worth of one-quart bottles a year to hold ink in the corporate print shop. But what if they could supply retail merchandise for K mart stores, like the vendors in the lobby? Wouldn't that be a new way to approach the bottle business?

As he left the building, Joel asked the recepotionist for a list of buyers. A few weeks and many phone calls later, he was back for an appointment. No, he told the buyer, his company had never done business with a retailer of any kind -- but it did supply the plastic bottles to the companies that made K mart's brand of suntan lotion, shampoo, and mouthwash, and it had never let them down. No company in the United States, he added firmly, knew bottles better than M. Jacob & Sons.

In November, the first order came through: K mart wanted 3,300 plastic bottles equipped with trigger sprayers, for sale in the lawn and garden departments of its Midwestern stores. Less than two years later -- before Joel's 26th birthday -- he was running a new division that was shipping millions of units to retailers nationwide. And he had a hundred-year-old company acting like a start-up again.

It was a major change of direction, the kind most businesses never attempt -- or, if they do, fail to pull off. Yet this wasn't the first time M. Jacob & Sons had been through such a transformation. Indeed, the company had reinvented itself at least twice before Joel even appeared on the scene.

The company was started by Joel's great-grandfather, an enterprising Russian-born Jew named Max Jacob who came to the United States in 1882 and soon settled in Detroit. In those days, bottles were handblown and expensive, and Max sensed that he could make a living by collecting used bottles door-to-door, then reselling them to local breweries and other large users. He cultivated friendships with brewery foremen at the city's downtown saloons, securing their goodwill and loyalty. As the business grew, Max took on more and more people -- employing 40 at one point. There were many bottle peddlers in Detroit at the turn of the century, just as there were in other big cities. But Max Jacob outmaneuvered them all, becoming the city's undisputed king of used bottles.

By 1915, Max's sons were entering the company -- and soon, they were reinventing it for the first time.

New technology had begun to make cheaper, mass-produced bottles widely available. So in the early 1920s -- while continuing to collect and resell old bottles -- the Jacob brothers struck up relationships with the nation's leading bottle manufacturers, serving as a distributor between the manufacturers and dozens of local beverage companies. William, the eldest son, was a salesman; Sam spent a few years driving the horse-drawn delivery wagon; and Ben, Joel's grandfather, was the family bookkeeper and cashier.

The Jacobs eventually developed customers throughout the state of Michigan. At the same time, they built a reputation for reliability and product expertise -- advising businesses on which types of bottles and jars worked best in which kinds of settings. By the late 1940s, when young Marty Jacob arrived on the scene, M. Jacob & Sons was a solid family company with sales of around $1 million, providing millions of bottles each year to Detroit-area makers of industrial cleaners, health and beauty aids, and pharmaceuticals -- easily the biggest bottle jobber between New York City and Chicago. The hope was that the company would continue to grow.

And grow it did, modestly, for 10 years or so -- but then the growth stopped. More and more breweries and beverage companies went out of business, bought their bottles from other distributors, or began using aluminum cans. Sales volume, which had increased to around $6 million in the decade after World War II, began falling, eventually dropping by more than 50%. The older Jacobs, who were in their seventies, didn't fully appreciate the problem. But 33-year-old Marty, who had a wife and three children to support, most certainly did.

 1 | 2 | 3 | 4  NEXT