Parks' 2nd chance Challenge: Franco Harris and Lydell Mitchell, former football teammates at Penn State, face a tough battle to return Parks Sausage Co. to prosperity.

September 22, 1996|By Sean Somerville | Sean Somerville,SUN STAFF

If Franco Harris and Lydell Mitchell are to turn around Parks Sausage Co., they must win over people like Charles Hurtt of West Baltimore.

Hurtt, 44, born just two years after Parks Sausage, used to go out of his way to buy sausages made by the Baltimore company. But he soured a bit on Parks last month when he bought three bags of sausage with expiration dates a day earlier.

"You're supposed to have 14 days before expiration date when you buy them," he said. "I'm a loyal customer. But they need to look closely at their products. You've got to understand something, if you do this for a second time, people are going to lose confidence."

Hurtt highlights the huge challenge: Now that the purchase by Harris is complete and the industry's slow summer season is over, customers will start demanding quality.

Harris, whose Pittsburgh-based Super Bakery has 10 employees and about $12 million in sales, took ownership of Parks earlier this month. He's looking forward to the challenge of turning around Parks, which a year ago had 20 times the employees and almost twice the sales.

"The dollars don't overwhelm me, but the physical bigness of it is overwhelming and there are a lot more people," he said.

To make Parks profitable, Harris and Mitchell, former football teammates at Penn State, will try to recapture grocery store business while getting the product to market with a leaner sales and distribution operation.

They will also try to boost food service sales -- those to schools, hospitals and other institutions -- through channels opened by Super Bakery, which sells vitamin-packed doughnuts to schools in all 50 states.

Raymond V. Haysbert, the former chairman and 44-year veteran of Parks who is acting as a consultant to the new management, said it would be smart for Harris and Mitchell to land big customers such as schools.

With high overhead, Parks needs to lower its "per unit" costs, he said. "The biggest way to push the volume up is to get big volume orders," Haysbert said.

The large overhead was largely the result of Parks' move in the late 1980s from a factory in Camden Yards to a $16 million plant in Park Heights. The company made the move to the 133,000-square-foot plant anticipating growth that would come from geographic expansion and new product development.

Instead, the company's sales plummeted from about $28.5 million in 1988 to about $20.5 million in 1995 as big customers like Pizza Hut turned to larger, lower-cost producers. By the time Haysbert filed for Chapter 11 bankruptcy protection and sold the company to Harris, it had more than $8.2 million in debt secured by collateral -- and was losing more than $2 million a year.

Harris got some help with the debt when secured creditors forgave more than half of the $8.2 million. Among those creditors was the city of Baltimore, which forgave $1.9 million of a $2.4 million loan of federal dollars for the new plant.

Debt forgiveness leaves Parks with $3.9 million in debt.

Harris actually started running the company in late June as part of an interim plan approved by a federal bankruptcy judge.

Starting with a go-slow approach, he called workers back to the Baltimore plant little by little, so that 90 of the roughly 130 workers are back on the job.

Harris and Mitchell also immediately closed distribution centers in New Jersey, New York, Connecticut and Philadelphia.

They will not call back 42 salespeople or the distribution 'N personnel who made up the remainder of Parks' 220 employees before the company shut down in May for one month.

Now, the company is relying on four or five in-house salespeople, along with about eight distributors -- who deliver and store products -- and four food brokers, who essentially sell them.

Mitchell said the move should cut distribution from 35 percent of the cost of production to about 15 percent.

"We basically move products from here to our distributors," said Mitchell, the national sales manager for Super Bakery who is running Parks. "What we're saying is that the game has changed little bit."

Parks' products are now available in about 80 percent of the stores that carried them before the May shutdown.

The company is still trying to get products into two New York grocery chains, which should put the company at 100 percent, Mitchell said.

And the company has moved to improve the taste and consistency of Parks products by returning to individual mixing of spices -- an expensive practice previously abandoned in cost-crunching.

Jeff Metzger, editor of Columbia-based Food World, said Parks' dumping of its salespeople was a "no-brainer" because only huge companies such as Coca-Cola Co. have been able to sustain independent sales forces. "Maintaining a sales force for a company the size of Parks was becoming economically unfeasible," he said.

But it did have its advantages, mainly full service of stocking shelves in stores, known as "store door delivery."

The alternative means slightly less service.

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