S.E. Rykoff - S.E. Rykoff & Co. Expansion

S.E. Rykoff & Co. Expansion

On June 15, 1967, Saul's son in law Roger Coleman was elected president and chief executive officer of S.E. Rykoff & Co. Coleman had been a board member of the company since 1960. In 1969, Rykoff was generating about $900k in profits on sales of $54 million. Coleman believed that expanding Rykoff's distribution network, sales force and product offerings were the best way to increase value of the company. Rather than relying solely on internal expansion, Coleman initiated the strategy of acquiring small regional wholesale distributors in markets that Rykoff wanted to enter. Roger Coleman viewed it far easier to buy an establish wholesale grocery company in a new territory rather than build a sale force and distribution network from scratch. In 1969, Rykoff purchased S&W Fine Foods of San Francisco (later acquired by Del Monte Foods). S&W had a strong distribution network in Northern California.

To fund the acquisition and internal growth strategy and to satisfy the Rykoff family members looking for liquidity, S.E. Rykoff & Co. became a public company. In October 1972, S.E. Rykoff & Co. issued 400,000 shares at $25 par value in the over the counter market (NASDAQ). S.E. Rykoff & Co. was generating $1.9 million in profits with revenue of $75.9 million. 200,000 shares were used to repay short-term debt and to augment working capital. The remaining 200,000 shares were sold by family members.

With the new access to capital and less of the Rykoff Family involvement, S.E. Rykoff & Co. purchased Louis Enders a Brooklyn, New York based food product supplier that distributed in New York, New Jersey and Connecticut. In the Enders deal structure, S.E. Rykoff & Co. exchanged 130,000 share of company stock for ownership of Louis Enders business and operating assets. Louis Enders management was kept in place and S.E. Rykoff & Co. products were added. In March 1973, S.E. Rykoff & Co. purchased the assets of Schuss Wholesale Grocery Company of Portland, Oregon. In addition, S.E. Rykoff &Co. purchased the southern California and Arizona coffee distribution business of General Foods for an undisclosed amount. In 1974, S.E. Rykoff & Co. purchased Reliable Glassware & Equipment Co. of Los Angeles ($1.5 million in sales) for an undisclosed amount of cash. That same year, S.E. Rykoff & Co. purchased C.L. Chaban Co. ($2 million in sales) a San Francisco distributor of restaurant supplies and equipment.

Even though S.E. Rykoff & Co. was busy integrating these acquired companies into SERCO, Roger Coleman was focused on internal growth by expanding product lines and increasing the commission based Rykoff sales force. Between 1972 and 1974, S.E. Rykoff & Co. expanded the sales force from 250 to 300 salesmen. In 1974, S.E. Rykoff & Co. obtained the bulk of its sales (78%) from food items. It did not distribute meat, produce or dairy. Rykoff produced a very limited amount of its own products chiefly pancake syrups, barbecue sauces and mayonnaise at its downtown Los Angeles warehouse. The majority of its food products were canned and dried goods packed by other food companies. Rykoff distributed a very limited amount of frozen foods. About 14% of Rykoff's sales came from paper goods and chemicals. The remainder was from glassware and restaurant equipment.

By 1975, S.E. Rykoff & Co. was generating $163 million in sales with $5.1 million in profits, had 1,220 employees with 930 in California. Rykoff distributed in California, Alaska, Hawaii, Nevada, Oregon and through the Louis Ender division on the east coast. Under Roger W. Coleman, CEO leadership, S.E. Rykoff & Co. had tripled its revenue and increased profits by 500% in less than 10 years.

In April 1976, S.E. Rykoff & Co. announced plans to build a new 250,000-square-foot (23,000 m2) distribution center in the Bay Area of San Francisco with delivery in October 1977. The new distribution center replaced the 70,000-square-foot (6,500 m2) center that was acquired with the purchase of C.L. Chaban Co. in 1973. The new distribution center would provide much better service to Rykoff’s customers in the Bay Area, northern and central California.

In September 1977, S.E. Rykoff & Co. purchased the business and assets of Food Service and Design Corp. of Boston for an undisclosed sum. Roger W. Coleman’s vision was to expand Rykoff’s foodservice equipment sales on the east coast by providing kitchen and restaurant design. Foodservice equipment such as dish washers, ranges, ovens, mixers etc. have much higher margins than wholesale groceries. In addition, Rykoff’s equipment customers tended to purchase their groceries for Rykoff.

In 1979, S.E. Rykoff & Co. decided to close the metropolitan New York Division. Rykoff originally expanded into the New York market by purchasing the Louis Ender food company. The distance between Los Angeles and New York proved too much from a management stand point. The division had lost money between 1976 and 1978. A strike in early 1979 by the Teamsters would result in continued losses, the result was S.E. Rykoff & Co. decided to close the operations.

By 1981, the entire US foodservice industry was $51 billion dollars and the largest foodservice distributor only had 3% of the market. S.E. Rykoff & Co. was the largest foodservice distributor on the west coast. The company was generating $315 million in sales and had over 500 salesmen working on 40% commission. 65% of Rykoff’s sales were from house brands and 35% from nonfood items like glassware, cooking equipment and restaurant supplies. At this time, Roger W. Coleman, CEO was on recorded saying that he believed that the wholesale food industry would not consolidate and no company would dominate nationally, largely because of great regional differences.