The 100-year-old Start-up
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.
It really hit him, Marty recalls, at the company's 75th anniversary party, in April 1960. He remembers standing in his tuxedo in The Latin Quarter, a grand old Detroit support club from the Roaring Twenties, surrounded by more than 500 friends and customers who had come to honor M. Jacob & Sons. And he remember thinking, as the music played, that the most familiar faces -- executives from The Stroh Brewery Co. and Pfeiffer Brewering Co., and soft-drink bottlers like Faygo Beverages Inc. and Vernors Inc. -- represented the company's past. Where its future was, he didn't know.
The answer, and the key to the company's second major transformation, was that quintessential '60s word, "plastics."
Unlike bottle distributors elsewhere, which had major reservations about the impact of plastic on their profit margins, M. Jacob & Sons embraced plastic containers with the same enthusiasm it had shown for new glass bottles in the '20s. Marty's father, Ben Jacob, made the decision, and Marty (along with a cousin, Elaine Jacob, and Bob Stieler, a young salesman who joined the company in 1956) implemented it. "We couldn't afford to be proud," he explains. "If we didn't sell plastic, someone else would do it for us."
In this third incarnation, the company began representing a host of new suppliers. It expanded operations into the western half of the state, attracting such major new accounts as Amway Corp., the giant direct-sales company, which began buying a variety of plastic bottles and tubes for its home and personal-care products. By the late 1960s, plastic was a bigger portion of the company's overall volume than glass, and the preplastic slump was a distant memory.
By 1977, M. Jacob & Sons was selling nearly $20 million worth of bottles to Michigan companies -- but Marty's outlook was starting to turn bearish again. The state's economy was declining with the fortunes of the auto industry, and Marty, who had taken over as president in 1966, kept an informal tally of the plants that closed and the customers that moved south. Unit sales fell off, and profits shrank. "There was so much bad news," he recalls. "We'd keep asking each other who in Michigan we weren't selling to. We couldn't come up with anybody."
If only he could diversify -- yet that seemed much easier said than done. During the '70s, Marty had considered wholesaling paper products, but found the field overcrowded. For a while, the company tried selling metal cans, abandoning the idea when it discovered how much new expertise its sales force would need to be effective.
Marty was desperate to reinvent the business one more time. "I can remember even talking about shoelaces," he says. He needed good ideas, and he didn't know where he was going to get them.
As it turned out, he only had to look across the breakfast table.
Marty didn't see his 23-year-old son as an idea-generator at first.He was more concerned with making sure Joel came into the business by a less demoralizing route than the one he himself had followed. But because of that concern -- intentionally or not -- he helped give Joel a fresh perspective on the bottle trade.
When Marty had joined the company 36 years before, no one was looking to him for bold ideas about how to breathe life into M. Jacob & Sons. He was expected to save his breath for loading and unloading trucks and railroad cars. Instead of going to college, as Joel did, he served briefly in the Army, then came home at the end of 1945 and went to work for his father and uncles. Because he lacked experience, they thought he should start at the bottom, where his efforts were needed.
He was happy to have the job, but he didn't look forward to coming to work in the mornings. "They didn't treat me like a boss's son," he says, "but like another insect working under a foreman." Marty's older brother had gone into the furniture business, and his cousins had become doctors, lawyers, and architects. There were plenty of days when he could understand why they did.
Only when a job became available was he given a chance to move ahead. He was placed in charge of shipping, then purchasing, and used his new positions to learn the finer points of managing the warehouse -- how long it took to order from each supplier, and thousands of details about products. Finally, after being nearly invisible for eight years, his elders moved him into sales. "It was out of the blue," he says. "They asked me if I had white shirts and ties and a couple of suits."
So when Joel began to talk about working at M. Jacob & Sons, Marty wondered if it would be right for him. He still regretted his own decision at times. And he had known other sons of bosses who had gone to work for their fathers out of a sense of obligation; some couldn't wait to sell their companies after their parents died.
"I wanted him to search his soul," Marty says. "I told him that if he wanted to do something else -- to be a doctor or a lawyer, or go off to the mountains and collect rocks -- he wasn't going to break any hearts. . . . I said if he came in, it would be neat, but he had to have something worth paying for -- something that the company needed, that was marketable. Because if he couldn't add value, it wouldn't make much sense for him to be here. He'd be disappointed. And when the boss's son comes along and doesn't know anything, he's the boss's idiot son as far as everyone else is concerned."
What's more, Marty explained, there would be no guarantees about the future. "For him to succeed me as president, he'd have to show what he could do. It wasn't enough that his name was Joel Jacob, because he wouldn't just be working for me, but also for the cousins and the widowed aunts. They owned the business, too."
Joel listened, but he didn't have any of his father's doubts. He had prepared to work at M. Jacob & Sons -- and no place else -- from the time he was a small boy. Although his two older sisters showed no interest in the company, he was fascinated by the family tradition. "I felt like I was part of it," he says. "The company was founded just 20 years after the Civil War. Max Jacob died in 1945, but I felt like I knew him."
When Joel was 13, he went with his father to his first meeting of the National Association of Container Distributors, in Bermuda. His grandfather was one of the founders of the group, and its members included descendants of other bottle families from all over the country. Everyone expected that Joel would be bored by the business meetings and end up spending his time in the swimming pool. But he stayed close by, listening to hours of presentations and taking a genuine liking to the bottle clan.
His interest never waned, even when he went off to college. At Michigan State University, Joel studied business and took courses in packaging engineering. Marty always refused him summer jobs in the warehouse or as a shipping clerk ("We had people who could sweep floors and stuff envelopes," the elder Jacob explains). But one year, Joel was allowed to paint the warehouse ("because we didn't have anybody who could do that"), and he proved he could get a job done on time. He spent his senior year at Arizona State University, seeking out a bottle distributor in Phoenix for part-time work. And although he loved Arizona, he headed back to Detroit a few works after he graduated, ready to show his father what he could do.
Joel wasn't given specific responsibilities, so he spent the first several months watching how the business worked. He sat next to Frank Buchanan, the purchasing vice-president, in the large center office that was filled with desks.When Buchanan got on the telephone with a supplier or a customer, Joel would listen in to the conversation, and he remembers how nervous he was when one day, the vice-president turned a call over to him. An aggressive buyer from Ford Motor Co. ordered 1,000 eight-ounce plastic bottles with closures, then said he assumed that freight was included in the quoted price. "I didn't know, so I signaled to Frank," Joel recalls. "And Frank whispered, 'They pay."
The more he learned, the more he wanted to try things on his own. So the following summer, he headed off on his whirlwind tour of the customers. He brought his catalogs wherever he went, and talked bottles to anyone who would listen. He met hundreds of people, hurried through dozens of submarine sandwiches, and wrote orders here and there, mostly small ones. In the process, he visited nearly every K mart around -- and had a break-through idea that months of office brainstorming might never have produced.
Wandering through the stores, he noticed the empty spray bottles K mart sold for watering plants. Joel was struck by the poor quality of the printing on them -- the letters were often smudged -- and by the fact that the bottles were frequently out of stock. Why not deliver a better one, at a better price? He knew the best suppliers; M. Jacob & Sons had been buying from them for years. What did it matter that the Jacobs had never sold to mass merchandisers before? If they succeeded, Joel told his skeptical father, there was no telling how far they could go. "The best way to kill enthusiasm is to tell a kid it won't work," says Marty, "even if you know it won't." So he told Joel to give it a try.
His pitch worked at K mart, and it worked at Frank's Nursery, a Detroit-based grarden-supply chain, as well. Both agreed to test Joel, and he bent over backward to service the accounts and learn as much as he could about his new customers. He contracted to have the sprayer and plastic bottles screwed together at a facility just minutes from his office, so he could keep tabs on any problems. And he built a sizable stockpile of spray bottles in case he got some lucky breaks. Sure enough, K mart called one day -- one of its other suppliers had messed up -- and Joel sent a truckload of sprayers to Atlanta within 24 hours.
In the meantime, realizing that he knew very little about his new business -- and seeing that no one inside M. Jacob & Sons could help -- he hit the road to learn about the retailing world.
In January 1983, he went to the National Housewares Show in Chicago. He wanted to see how different types of companies presented themselves to the buyers. All day long, he walked up and down aisles in the sprawling McCormick Place complex, collecting brochures, taking pictures, and sniffing for ideas. He came back with about 50 pounds of trade magazines and a new name for his branch of the company. It should be called Sprayco, he told his father, so retailing people could remember it; M. Jacob & Sons was too cumbersome a name to promote. He hired an artist to design a logo -- a bottle with mist coming out of the nozzle -- and began putting it on everything in sight.
He entered a Cleveland marathon sponsored by Revco Drug Store Inc., because it would give him an excuse to talk with the Revco buyers again and, Joel says, because "I knew it would make an impression." It did. "I limped around the office for several days, but we got the business."
In the spring of 1984, Joel flew to Greenville, N.C., the home of an M. Jacob & Sons supplier called Empire Brushes Inc. He had taken a liking to Empire's 37-year-old president, Joe Gantz, at the Chicago housewares show; now he wanted to see what he could learn from Gantz's company. How did Empire manage its relationships with customers and sales representatives? How did it structure pricing policies and prepare for trade shows? He spent hours with Empire's top marketing people, and talked with Gantz long into the night. Gantz warned Joel not to move too fast, stressing the importance of a quality image. "Don't oversell what you can do," he warned, "or you might not get another chance."
A few months later, Joel flew to New York City to see Jerry Kearns, that year's president of the National Housewares Manufacturers Association. A major supplier to M. Jacob & Sons, Kearns's company, APL Inc., also sold products to retailers directly, and Joel wanted to tap into Kearn's experience. He brought along an introductory offer he had just printed up: 13 spray bottles for the price of 12. Kearns, with 35 years in business, studied the price sheet and shook his head. "He said it looked cheap," Joel recalls. "He said, 'Throw away those sheets and just give them 8% off their opening orders and one reorder at the same price.' How was I supposed to know? I had never done it before." Kearns coached Joel on the fundamentals of packaging and displaying. He gave him ideas for setting up a national sales organization, passing along the names of some of the better representatives he had worked with. And he spoke about basic values -- not burning bridges, playing it straight, shipping on time. On the plane home, Joel's head was spinning with new ideas.
In August 1984, he ran an ad in Hardware Retailing ("100-year-old company seeks experienced representatives for new product line of plant and garden sprayers") and spent $15,000 putting together a booth for the National Hardware & Lawn & Garden Show in Chicago. After four days, more than 90 rep firms had stopped by booth 9042. "It was exhausting -- I lost my voice," Joel says. "I didn't stop talking for the whole show." He took the resumes back to Detroit, and within 10 days, Sprayco had a network of sales representatives across the country, including Alaska and Hawaii.
Two months later, he was back in Chicago at another National Housewares show. Although exhibit space had been filled for weeks, Joel asked Jerry Kearns to help him out, and he ended up with a tiny, 10-foot basement booth in a back alley of the McCormick Place annex. By the third day, he was exhausted, but he was in the booth at eight in the morning, giving a pep talk to his new reps over coffee and doughnuts. Already, they had orders for spray bottles from more than 40 retailers, and Joel showed them his new line of travel containers -- plastic toothbrush holders, soap dishes, and little bottles for corrying lotions and shampoo. All day, he refused to sit down ("you can't afford to look tired, because it turns people off"). And when he did take breaks, he would slip his red exhibitor's badge into his jacket pocket ("if anyone knows you're an exhibitor, they're not going to spend their time with you") and wander the aisles in search of still more new ideas.
Today, Joel Jacob works out of a small, windowless office neatly lined with enlarged photographs of generations of Jacob men and their delivery vehicles. All but one wall, that is, which is plastered with pages ripped from trade magazines -- lists of the top 100 discounters, the top 50 drug chains, even the top 30 "deep discounters," with names like Rock Bottom and Get It For Less. This year, Joel says, Sprayco will ship several million units of product to about 150 customers. Retailers are buying both the spray bottles and the new lines of travel accessories, which are offered in clear plastic bags with printed bar codes, ready for display at checkout counters coast-to-coast. More than 70% of the orders are coming from the sales reps, who can call Sprayco directly on a special toll-free number.
All of this has transpired in less than three years -- and just two new people have been added to the company payroll, which now totals 24. "Every day," Joel says, "we're shipping all the new orders with the same people, the same warehouse, the same accounting department."
Sprayco still contributes no more than 10% of overall sales to M. Jacob & Sons, but it may soon be the tail wagging the company dog. "A lot of 100-year-old companies really look like they're 100 years old," Joel says. "But my goal is to build on all our experience. I want to become an important source of a lot of quality products, not just bottles. I'd like to dominate a whole category, like a Rubbermaid."
"A few years ago," says David Levine, M. Jacob & Sons' controller for the past 20 years, "you used to have a pretty clear sense of what was coming up around here. Things were on such an even keel. . . . Accounts either got bigger or they got smaller." But Joel's arrival changed many of the company's old rhythms. "Almost every day," notes sales service administrator Lila Starck, "the comes into the office with new samples or new cardboard displays. He'll lay them out and tell everybody what's going on and what he's think about. It's been like watching the birth of a nation."
Marty's hands-off approach to Joel's training has clearly paid off. The son's brainchild has become the business within the business that the father was searching for; and once again, M. Jacobs & Sons is being reborn. But the changes have come so quickly that the older man sometimes feels he hs lost control. He speaks of Joel's energy with a voice full of pride -- and just a tinge of regret.
"I'd look at what he was doing and I wouldn't understand it," Marty says. "He'd talk about how we were gonna do this and then we were gonna do that. I used to tell him he couldn't buy groceries with his 'we're gonnas.' . . . It's one of those cases of the son teaching the father -- for the good of the company.
"People say, 'Wow, you've got your son in the business. You can sit back and take it easy.' Well, I used to think the same thing -- how nice it would be to get together for breakfast. But, you know, we don't do that much anymore. I get so drained from all that enthusiasm, I feel like I need a shower and a change of clothes."