Robert Tracy wanted to have his own business. He didn’t expect it to grow as big as it has. The modest powdered-milk delivery service he started in 1960 evolved into a national food redistribution company. The second generation joined the business in the 1980s and, over the next decade, introduced a series of technologically sophisticated innovations that changed the food industry supply chain.
Today, Dot Foods Inc. is the U.S.’s largest food redistributor. Last year, it delivered more than 100,000 products from 650 suppliers to 4,000 distributors across the country. In 2012, Dot Foods, which employs close to 4,000 workers, had sales of $4.5 billion.
Robert, who was known as RT, was 34 when he started the business and already the father of eight children. He and his wife, Dorothy, would have four more—a total of 12 in 20 years.
Dorothy, a born organizer, took on the major household responsibilities. Without her support, her children say, RT could not have raised a big family and simultaneously built his business. The company, originally called Associated Dairy Products, was renamed Dot Foods to honor Dorothy in 1966.
The business expanded quickly, and RT and Dorothy expected their children to pitch in. Growing up in a big family and having real responsibilities in the business imbued all of the Tracy offspring with a strong work ethic, appreciation for teamwork and sense of fairness that have served them well as sibling partners in the business.
The extended Tracy family numbers 75 members, with 47 in the third generation and three in the fourth. All of the second-generation members own stock, as do all of the third-generation members through a grandchildren’s trust that does not transfer to them until age 35.
Five third-generation members currently work in the business. As more enter the job market, few will have the opportunities for advancement in the family business their fathers and uncles had. The second generation has been anticipating that possibility for the past 20 years.
“We welcome talented family members in the business,” says John Tracy, 54, Dot’s CEO, “but we don’t have enough top positions for all of them. We’re preparing the third generation to be great owners, not managers, and finding other ways to include them in the business.”
Responding to customer demand
RT founded his company in Mount Sterling, a farming community in western Illinois. He planned to run the business from his home and use the family station wagon to deliver milk powders and other ingredients to dairy and ice cream manufacturers in the area. But his customers wanted more frequent deliveries and a greater variety of products than a home-based business could provide. So RT rented a warehouse, bought some trucks and hired drivers to transport the products.
The volume of business kept multiplying, fueled by demand and the company’s reputation for customer service. In the 1970s and ’80s, sales doubled every four years as the company widened its customer base and expanded deliveries to more states.
Dot Foods did not set out to invent a new way of distributing food products. Rather, it recognized a flaw in the delivery system and fixed it. The established food products supply chain moved from the manufacturer to the distributor to the end users. The food manufacturers delivered their products in full truckloads, an obstacle for small distributors who couldn’t afford to buy in such large quantities, own warehouses or maintain big inventories. Dot stepped in with a solution. It already had a fleet of trucks and warehouse space in several distribution centers. It could buy full truckloads from the manufacturers, consolidate products in its distribution centers and resell the products in smaller than truckload quantities to distributors.
It was a win-win situation for everyone. Manufacturers increased their sales by giving small customers who had previously been too costly to serve access to thousands of products. And distributors could requisition just the quantities they needed in one order, in one delivery, and get one invoice for multiple manufacturers. Dot handled all the logistics and received fees as the middleman.
As word spread of the advantages of redistribution to manufacturers and distributors of all sizes, Dot made its reputation as an industry trendsetter. In the 1990s, it was the first to communicate with customers electronically. It formed Dot Transportation to operate and manage the logistics of specialized trailer-trucks it had designed to transport frozen, refrigerated and dry food products all in one load. Later, it set up the Dot Expressway website to allow distributors to track their purchases and place orders online, and a virtual storefront that links distributors to the warehouse to make purchases or just see what’s available online.
Meanwhile, Dot was adding more distribution centers and computerizing the warehouse systems to more accurately track the movement of products in and out of the warehouses. Its eight distribution centers cover 3 million square feet of warehouse space.
With these innovations, Dot streamlined the redistribution chain and achieved the fastest lead time in the industry. It boasts that it can deliver products anywhere in the U.S. on two to four days’ notice and have them arrive within 15 minutes of the scheduled delivery more than 96% of the time.
Although the business is largely computerized now, Dot tries to maintain RT’s personal touch with customers. Every other month it invites a different group to the company to tell Dot what it’s doing right and how it can improve its services.
RT stepped down as CEO in 1996. “Dad was a true entrepreneur with fire in his guts,” says Dick Tracy, 44, executive vice president of food services, “but he didn’t want the business to be so big. It was growing like a weed and wasn’t fun for him anymore. He used to love greeting the employees by name. He couldn’t keep up with the new technology, but he always approved the expansions and innovations his sons recommended.”
Joe Tracy, 48, is Dot’s president and COO. He remembers RT as a man in a hurry, sometimes gruff and abrupt, but softhearted underneath. “He’d get up early to check on the trucks and then go into town for coffee and a doughnut with the locals,” Joe says. “He loved talking to people, especially employees at every level of the business.”
Rules and values
Even in a farming community, a family with 12 children was unusual. The Tracy children refer to their mother, now 84, as a saint and the backbone of the family and the business. Dorothy held to the philosophy that life is all about giving and having fun. When the older kids were growing up, she did all the cooking and cleaning herself and still found time to serve on the school board. Her humor carried over to her kids, who enjoy ribbing one another. Dick, the youngest, jokes that his parents had 11 misfires before finally getting it right with his birth.
“A big family has to have rules,” says Jean Buckley, 56, president of the Tracy Family Foundation, “and they have to be the same for everyone. We had dinner every night at 6 and we were all in bed by 9 so Mom could read the paper in peace. We only had one telephone, and Mom kept a three-minute hourglass timer next to it. When all the sand trickled to the bottom, the conversation ended.”
Jean says her parents didn’t preach to the kids about fairness and teamwork but taught those values by example. “When you grow up in a big family, you learn quickly that life isn’t all about you. Everyone’s contribution is important, but what counts most is what we do together.”
The eldest son, Don Tracy, 63, works outside the business as a partner in a law firm but also does legal work for Dot. Pat, 62, the second son, followed his father into the business. Pat served as president from 1985 to 1996, when he succeeded his father as CEO and John became president.
During the 1980s, four more sons joined the business. Tom, 61, an accountant, is Dot’s controller; John, now the CEO, started in outside sales; Jim, 59, a lawyer, worked in the legal department; and Joe worked in the warehouses. Dick, the youngest, joined in 1991 and started off in sales. Two sons-in-law also work for Dot. The five sisters all held part-time jobs in the company before choosing to be stay-at home moms. Jil Tracy, Jim’s wife, is a state representative in the Illinois House.
The second generation was raised to collaborate, but there was also healthy competition in the family, says Joe. “We love to debate and don’t shy away from conflicts,” he explains. “Our parents often didn’t see eye-to-eye. We learned from listening to them argue at the dinner table that people could have different perspectives and still share a common vision. Our comfort level with disagreements was good preparation for the business.”
For decades, Dot had had an all-family board and no process for selecting company leaders. As the business grew larger, the second generation pushed RT to open the board to outside members in 2002. The current board of nine includes five family members—four full-time employees and one who doesn’t work in the business—and four outside directors. After RT died in 2006 at age 82, the board selected John as the new CEO and Pat became board chair.
Jill Kanin-Lovers was one of the first outside directors to join Dot’s board and currently chairs the compensation committee. Over the 11 years she has served on the board, Dot has grown exponentially. “This is a family of learners,” Kanin-Lovers says. “They are always looking for ways to do things better and to bring new talent into the business. Rule No. 1 is family harmony, but that doesn’t mean they don’t disagree. They speak with tremendous candor, but never destructively. When the board meeting ends, they are family again and all go out to dinner together. The values of the family run deep, and those values are brought into the business.”
RT believed employees were the company’s single greatest asset, and he set an example of how to value them. In the 1970s, when Dot was still a small family business, he established an employee retirement plan. In the 1990s, Dot began offering employees no-interest home loans of up to $50,000 after five years of employment. In more than 52 years in business, Dot has never laid off one employee, not even in the late 1980s when it lost two big contracts with wholesale clubs. It bet correctly that the frozen food side of the business would grow fast enough to enable it to hold on to all the employees. Dot’s respect for its workers was returned in kind. In 1999, they raised $25,000 to buy a 53-foot trailer to thank the company for refusing offers to relocate outside of Mount Sterling.
Governance and engagement
For the past 20 years, says John, the Tracys have done everything that family business consultants preach. “Because of our large numbers, we were forced to have policies in place so that we could deal with problems when they came up, and they always do,” John says. “Having forums that have a framework for discussing issues has helped. Things are never perfect, but more third-generation members are showing up at meetings and asking questions, and our all-around communication is improving.”
The second generation wanted to find more ways to engage family shareholders who didn’t work in the business. To learn how other family businesses did it, family members attended seminars at the Family Business Forum at Southern Illinois University and worked with the Family Business Center at Loyola University Chicago.
In 1995, the Tracys set up a family council on which four second-generation and three third-generation members serve. The council, run by John, meets four times a year to discuss governance and family policies on such matters as divorce, adoptions and second marriages. It also holds an annual family meeting for family members 21 and older and shareholder meetings for family members 25 and up.
In 1997, the family established the Tracy Family Foundation to support education, economic development, and youth and family leadership in Brown County, where the business is headquartered. The foundation board has ten members, including three from the third generation. Last year, it started a Next Generation Advisory Board to prepare younger family members to be leaders and philanthropists.
Pat’s daughter Lauren Tracy, 32, is Dot’s business development manager. Lauren, an MBA, had worked for Kellogg Co. and USA Rugby before joining Dot full-time six years ago. “Working in the business isn’t the right fit for everyone in my generation,” she says, “but I really wanted to carry on my grandparents’ legacy. The second generation has done a phenomenal job of creating opportunities for family members to get involved. Serving on the family council and the foundation board got me thinking about what it means to be part of this family and what my generation can do to keep this connectivity going into the fourth generation.”
The family has set up a Facebook page and hires members of the third generation to write a family newsletter three times a year. Each issue includes pictures and stories about someone from each branch of the family. But the family’s favorite way of connecting is at the Tracy clan’s annual vacation in the Ozarks, a tradition RT and Dorothy started when raising their kids. “This is pure family time,” says Joe. “Time for sports, hanging out, and the morning Grandma sets aside to make a pancake breakfast for all the kids.”
Keeping a big family and a complex business working smoothly takes a lot of planning and a healthy dose of good humor. At home, the Tracy children learned how to collaborate; in the business, they learned to be innovators and problem solvers. As RT liked to remind his children, “Each of us has an important role to play in the family, but it takes all of us to make the wheel go round.” That’s a lesson the Tracys have learned well.
Deanne Stone is a business writer based in Berkeley, Calif.
Copyright 2013 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.