Wells Enterprises Inc. turns 99 this year, and it has plenty to celebrate. Beyond surviving for nearly a century, the company has achieved an enviable record of growth. Wells is the U.S.’s largest family-owned and -managed ice cream producer. In 2006 its sales passed the $1 billion mark, placing it in a select group of family firms with revenues of that size.
Located in Le Mars, Iowa, Wells manufactures more than 500 ice cream flavors and frozen novelty products under its brand name, Blue Bunny, as well as licensed ice cream products for major U.S companies. The Wells family’s commitment to preserving and growing its business, which included making bold changes in family management and the board of directors, has allowed it to gain a strong foothold in the hugely competitive ice cream industry.
The U.S. market for ice cream and related frozen desserts reached $25 billion in 2009, and the giant multinational companies Nestlé and Unilever control half of all sales. Wells is a distant third with about a 5% market share, yet over the past three decades it has managed to double its revenues every ten years. Mike C. Wells, the company’s third-generation CEO and president, says Wells intends to double its size again in the next decade, although he admits that jumping from $1 billion to $2 billion in sales will be more difficult than going from $500 million to $1 billion.
“Our goal is to be the No. 1 ice cream company,” says Mike. “We may not be able to beat Nestlé and Unilever in market share, but we can be No. 1 in quality and customer service.”
Two generations of partners
Fred H. Wells founded the family enterprise in Le Mars in 1913. He started off delivering milk from his horse-drawn carriage and later began producing ice cream with his four sons. The popularity of their product encouraged Fred and his brother, Harry C. Wells, to set up a partnership in 1927 to distribute their ice cream in Sioux City, about 25 miles from Le Mars. Harry’s son, Fred D. Wells, also joined the company.
One year later, the company sold its Sioux City distributorship to a competitor, along with the right to use the Wells name. When the brothers decided to resume selling ice cream in Sioux City in 1935, they had to create a new brand name. The winning entry in their “Name That Ice Cream Contest” was Blue Bunny, inspired by a local department store’s Easter window display featuring colorful rabbits.
The post-World War II economic boom triggered a new era for Wells’ Dairy. Recognizing an opportunity to take its business to the next level, it made two major investments. In the 1950s, it built a new facility in Le Mars for manufacturing ice cream products; in 1963, it constructed a fluid milk processing plant.
The first generation had established the partnership model of leadership, and when the second generation took over in 1954, it followed suit. The new partners were Fred D. Wells, the son of Harry C. Wells, and his four cousins, Harold R., Roy F., Harry L. and Fay R., the sons of Fred H. Wells. In 1977, the company incorporated under Iowa law as Wells’ Dairy Inc. With the death of one second-generation partner and the retirement of another, the ownership and management of the company fell to brothers Roy and Fay and their cousin, Fred D. Wells.
The partnership succeeded, says Fay Wells’ son Doug J. Wells, because his father and uncles were willing to work six and a half days a week to grow the business. “They had a lot of respect for one another and recognized each other’s talents,” he says, “They could fight like cats and dogs, but they always found a way to reach consensus.” Also working in their favor, he says, was their knowledge of both the financial side of the business and the food science. “They knew how to develop formulas and flavors,” says Doug, “and had a lot of fun coming up with the different combinations that made their ice cream so popular.”
Expanding horizons
Wells’ Dairy entered a second period of ambitious expansion in the 1980s. It built a new facility for its growing fleet of trucks used to deliver milk around Iowa and added new corporate offices. In 1983 it made its first reach out of state when it bought a facility in Omaha, Neb., and remodeled it as a processing plant for milk, yogurt and fruit juice. At the same time, it undertook a major project to enlarge its plant in Le Mars. The increased square footage allowed Wells to double its production capabilities. Then, in 1992, it built a second facility on the south side of town—a 900,000-square-foot plant with a freezer 12 stories tall. With the completion of the second plant, Wells’ Dairy claimed the title of the world’s largest manufacturer of ice cream in one location. The Iowa State Legislature dubbed Le Mars the “Ice Cream Capital of the World” in 1994.
Wells had succeeded in making Blue Bunny a regional brand. Now with its large and sophisticated new facilities up and running, the company launched an aggressive campaign to expand its brand nationally.
Lansing Crane, the former chair and CEO of venerable paper company Crane & Co. Inc., joined Wells’ board in 2010. Reflecting on the company’s growth, Crane says, “The public thinks of ice cream as a consumer product, but the heart of the business is superior manufacturing, innovation and a high degree of technology, and Wells excels in each of those areas.”
The third generation started learning about the family business by working summer jobs as high school and college students. Mike Wells began running routes for the dairy in 1977. After graduating from college in 1981, he worked in sales in Omaha before returning to Le Mars, where he was named director of retail sales and transportation and, later, executive vice president of that department.
Doug Wells has fond memories of his first summer job making ice cream sandwiches. After graduating from college, he began working in quality control and production. Later, he was promoted to an executive management position in the supply side of the business. Doug’s brothers Gary M. and Dan W., and Mike’s brother, Greg A., also followed similar trajectories in the company.
In 2001, the second generation stepped aside, passing the reins to the next generation. Gary was CEO, Dan was president of the procurement group and Greg worked in sales. Mike and Doug continued focusing on their areas of responsibilities, and in 2005 they were named co-presidents. Mike was in charge of demand, sales and marketing; Doug oversaw the supply side.
The third generation continued the expansion of Blue Bunny into western markets. In 2003 it built an ice cream manufacturing plant in St. George, Utah, with the capacity to run two production lines of packaged ice cream of different sizes. With three ice cream manufacturing facilities in operation, Wells had the capacity to significantly increase production of its Blue Bunny brand and to become a licensee, manufacturing ice cream for other companies under their brand names.
In 1988, Mike and his father, Fred, started shipping milk and ice cream from its facility in Omaha to a Wal-Mart store in Topeka, Kan., starting a business relationship between the two companies that continues today. “We built our business with Wal-Mart one store at a time,” says Mike. “We manufacture their store brand ice cream, Great Value, and they carry our Blue Bunny brand. That’s part of our business model. We manufacture the store brands of other companies and, in exchange, they carry Blue Bunny in their stores.” As one of Wal-Mart’s top 100 suppliers, Wells had to develop new technology to comply with the giant retailer’s mandates for inventory, safety and quality controls. “Wal-Mart is a demanding partner,” says Mike, “but it’s fair.”
Wells has also built a profitable partnership with Weight Watchers. In 2004, the weight-loss company approached Wells about developing new products under the Weight Watchers label. Wells’ research and development department designed and manufactured new frozen products that doubled Weight Watchers’ business in six years. “Weight Watchers and Wells are examples of good licensing partners,” says Mike. “The combination of our manufacturing capabilities and its strong brand name allowed Weight Watchers to build a much larger capital market.”
A new leadership structure
The partnership model of leadership that had served the company well through most of its history came into question in the third generation. By 2006, Wells had become a billion-dollar company with a national reach. Family and non-family management engaged in long discussions about how Wells could best position itself to grow and thrive in an increasingly competitive industry.
“We knew the weaknesses of inbred family management,” says Doug. “We spent a lot of time identifying opportunities to improve and the additional professional expertise we’d need to do it.” Wells’ family owners brought in several outside consultants to hear their perspectives and, along with the company’s professional managers, considered the mix of judgments and opinions. The final proposal to change the management structure and reconstitute the board won shareholder approval. Under the new plan, Wells would have a CEO/president in charge of the business, hire more outside talent and add three outside directors to the board.
In 2007, Mike was named CEO and president of Wells’ Dairy Inc. Gary, Doug, Greg and Dan Wells stepped down from their positions. Gary, Doug and Greg, who had been, respectively, CEO, co-president, and senior vice president of operations before they stepped down, still serve on the company’s board of directors.
“It was a difficult but necessary decision,” says Mike. “Given the challenges facing the company, we realized that our business’s needs were greater than the family’s. We had to streamline our structure, and we started at the family management level. Now Wells has the structure and discipline of a publicly traded company and the advantages of being privately held.”
Mike says that the transition was handled amicably but also acknowledges the sacrifices family executives made in stepping down. Doug, like all of the third generation, had spent his adult years working in the family business, and he says it was difficult to walk away. “It wasn’t my goal to retire at 55,” he says, “but sometimes you have to look at yourself in the mirror and ask what you want to do and what’s the right thing to do. It was a critical time for the business. We couldn’t only think of the family; we have responsibilities to our employees and to our town. We’re the biggest employer here.”
Adding outside directors to the board was another critical building block in navigating the transition. The three new directors had either run family businesses or sat on family boards, and each brought experiences, connections and new perspectives that would enrich Wells’ thinking in moving forward.
Deborah Hylton, president of Hylton Consulting in Chapel Hill, N.C., was invited to join the Wells board in 2008 and is now the board chair. “The restructuring of management and board was not a reflection on the leadership of the other family members,” she says, “but rather a reflection on the family’s strength in embracing change and innovation. Mike has a real passion for the business and its role in the industry, and the right combination of talents to lead the company.”
Shareholders’ council
In August 2008 the board proposed setting up a shareholders’ council to facilitate communication among the board, managers and shareholders. The council would provide opportunities for shareholders to raise questions, learn more about the business and how it functions, and nurture pride in the family legacy.
A group of shareholders sprang into action, forming a task force under the guidance of Jennifer Pendergast, senior consultant at the Family Business Consulting Group. Within a few months it had developed a charter and resolved the question of eligibility. Spouses and trust beneficiaries would have the same status as other shareholders. After getting approval from the shareholders, the council approved the slate of four candidates, representing two family branches and two generations, at its January 2010 meeting.
Sue Wells Sargeant, the older sister of Mike and Greg Wells, is the council’s chair. A retired nurse who lives on the East Coast, she had never worked in the business. “I feel blessed to be the beneficiary of the hard work of family members who’ve been active in the business,” she says. “Now I have a chance to give something back.”
Sargeant works closely with Deborah Hylton, the board chair, to respond to shareholders’ requests. A survey showed that their immediate interest was in learning how to interpret financial statements. Sargeant and Hylton worked with the Family Business Center at Loyola University in Chicago, which had developed a webinar on reading financial reports.
In just two years, the shareholders’ council has accomplished what the board had hoped, Hylton says. There’s more family participation and a greater sense of family identity. But, Hylton notes, “It’s not once and done. The council helped us understand what shareholders want, but their concerns will change as the business changes. Now we have a mechanism for staying in touch.”
“As the only daughter in the family, I wasn’t expected to work in the business and I hadn’t served on the board, so it’s gratifying to be part of it now,” Sargeant says. “I’m really proud of being a Wells, and I love our ice cream.”
Targeted efforts
In 2008, Wells sold its Le Mars milk plant to the Dean Foods Company and its dairy yogurt plant in Omaha to a Mexican company, Grupo LALA. In 2010, Wells changed its name to Wells Enterprises Inc. The new name recognized the family ownership of the company while ending customers’ confusion about whether the company still distributed milk. The divestitures also marked Wells’ new focus on expanding nationwide sales of its core businesses, ice cream and frozen novelty products.
Over the past four years, Wells Enterprises has flourished under Mike’s leadership. The company has set a new sales record and reduced its debt. (Mike declines to disclose current revenues but says they exceed $1 billion.) Mike’s son, Michael J. Wells, is associate marketing manager of Wells’ retail brand.
“We are a great example of a family business that protected the family by putting the business first,” CEO Mike Wells says. “Shareholders are enjoying greater benefits because the company has accomplished great things. We made tough decisions in 2007, and we’ve been proven right.”
Deanne Stone is a business writer based in Berkeley, Calif.
Copyright 2012 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.