Simple Formula for Success
December 3, 2008
Sometimes the simplest premise has the biggest impact. Notice a product missing from the market place? You’ve got an opportunity on your hands.
At least that’s what led Truco Enterprises principals David L. Silver and Roy L. Truitt to establish what has now grown into a $70 million Hispanic food marketer and distributor.
“Circa 1992, why did we get into this business? Quite frankly, I thought there could be a better salsa out there in the marketplace,” Silver says. “I thought there could be a better drink mix, better tortilla chip, etc. … We also saw that there was a void in the business model. Most of the [food] companies up until that date had a business model that was basically a fully self-contained model where they owned the factory.”
Rather than following the status quo, Silver and Truitt instead formed a partnership to bring high-quality Hispanic food to the market using a virtual business model. The duo shared seasoned business backgrounds ranging from the apparel business to electronics to investment banking.
“Having systems and branding backgrounds, we felt that the business model should be a virtual platform and that you need to enable each partner within the supply chain to apply their expertise to the final product and delivery of that product,” Silver says.
This combination of creative business strategy and high-quality product continues to deliver for the Dallas-based entrepreneurs who licensed the On The Border (OTB) restaurant brand in 1992. Truco now markets and distributes more than 230 SKUs including tortilla chips, margarita mixes, queso dips, salsas - and more recently frozen entrees and appetizers.
Products span several retail categories and are processed in 24 food plants located around the country. Still, executives say, all products bear the same OTB branding and Truco signature.
“We set up a state-of-the-art fully integrated collaborative supply chain system. The key drivers behind the vision was to develop a culture that was built on trust, work ethic and integrity that is committed to delivering the best product on a timely basis at the best value,” Silver says.
And Truco executives have the numbers to back up the system’s efficiency. The company has seen compound annual growth of 20 percent per year for the last 15 years, Silver says. In addition, Chicago-based research firm Information Resources Inc.’s data indicate that OTB tortilla chips and salsa con queso rank among the top 10 selling brands (dollar sales) in their respective categories.
The last two years have seen Truco parlay its shelf-stable success and brand recognition into the freezercase. In October 2007 the company launched frozen fajita kits in Steak and Chicken varieties. This past July, the company added a line of four frozen appetizers: Chicken Quesadillas, Deluxe Taquitos, Supreme Queso and Creamy White Queso with Spinach.
“It’s been a really unique and interesting time getting into frozen and seeing how the brand is extending and being well-received,” Silver says. “I think it’s a major milestone and it was a test of the brand ? the viability, the transference.”
Truco executives have high expectations for the frozen category and are excited by its performance so far.
Says Vice President of Marketing & Brand Strategy Dawn Grosvenor, “While we have expanded into other categories, we feel that the frozen category yields the highest growth opportunities within the next 12 to 24 months.”
Grosvenor adds that Truco hopes to see the frozen category grow to 50 percent of its revenue in the future.
An initiative slated for early next year likely will help push the company in that direction. Truco has four new frozen appetizers in development for launch in early 2009.
“Our goal is to revolutionize quality in the appetizer section of the supermarket,” Grosvenor says. “It’s the very same guiding principle of what founded the brand that still directs us … to certain sections of the grocery store to look and say, ‘Here is a prime opportunity at which we can deliver high-quality, premium products as an alternative to the current selection.’”
Also helping to drive growth is Truco’s cross-category merchandising programs. OTB-branded products span several retail food categories - salty snacks, frozen entrees and appetizers, drink mixes - creating a unique situation suited to cross-category merchandising, Grosvenor says.
“We’re able to address two to three categories in one merchandising program that drives incremental sales across core areas that might be flat or a little up over last year,” she adds. “When we look at meal occasions, in our research we find that a female consumer who is on a bi-weekly shopping pattern is looking for thematic solutions - for instance Italian night, breakfast night or Mexican night. Mexican night has expanded. It’s not just taco night anymore.”
And it’s here that Truco executives say its outside the box strategies combined with simple quality and follow through pay off.
“We’re very fortunate because there really is not another company out there operating like Truco today,” Grosvenor says. “Typically licensed brands are segregated around manufacturers or suppliers. Truco is unique in that we are able to carry the message of the brand, sustain velocity and provide the quality and competency of the brand across categories.”
Fast FactsTruco Enterprises
Top executive(s): David L. Silver, co-founder, principal and president; Roy L. Truitt Jr., co-founder, CEO
Founded : 1991
Annual sales: $70+ million
Primary products: Frozen fajitas, quesadillas, queso and taquitos as well as shelf stable tortilla chips, drink mixes, salsa, queso and soups
Brands: On The Border
Channels served: Retail -- club, mass, grocery, c-store
Distribution: National and some international
On the Web: www.otbfrozen.com