Dot Foods, Inc. Business Information, Profile, and History

Company Perspectives:

To positively and significantly contribute to the success of our business partners.

History of Dot Foods, Inc.

Dot Foods, Inc. is the largest food redistributor in the United States, serving more than 3,000 food distributors with coast-to-coast deliveries from 480 manufacturers. With headquarters in Mt. Sterling, Illinois, this family-owned and operated business has experienced strong and steady growth since its inception in 1960. From a one-man operation delivering 15 different products from the back of a station wagon, to a thriving national corporation employing over 2,000 people and delivering goods from an inventory list of over 40,000 products, Dots Foods is the quintessential American success story. Despite its tremendous growth as a company, Dot Foods remains the "family business" it always was, operating on values of innovation, integrity, hard work, and respect for others.

Robert Tracy founded the company, and today seven of his 12 children are involved full time in the operation of the business. Dot Foods transports food and related products from manufacturers to food processors and foodservice distributors. The company has distribution Centers in Ardmore, Oklahoma; Liverpool, New York; Modesto, California; Vidalia, Georgia; and Williamsport, Maryland, and a fleet of 500 multi-temperature tractor-trailers, operated under Dot Transportation, Inc. Dot Foods also owns and operates Principal Resource, a company that performs telesales, telemarketing, and database management for foodservice clients.

1960s Roots in Dairy Delivery

Fueled by a passion to operate his own business, Robert Tracy founded Associated Dairy Products with his wife Dorothy in 1960. Initially, Robert worked out of his home, delivering three kinds of milk powders, cocoa, and other ingredients to ice cream manufacturers. He used the family station wagon for deliveries. Business grew enough that he soon switched to a pickup truck and then leased a delivery truck to handle larger orders. After just a year in business, Tracy invested in a small fleet of trucks and hired drivers to transport products.

Early on, Tracy set a precedent for exceptional customer service, and as a result his business grew steadily and was profitable each year. The company's increasing business volume had rapidly outgrown the rented warehouse space in Mt. Sterling, so in 1962 Tracy built Quonset hut warehouses to better handle his burgeoning business. By 1977 volume had increased so much that the company invested in building larger and more permanent warehouse facilities at the Mt. Sterling location.

Through 1978, Associated Dairy Products' focus had remained primarily in the product areas of dairy and ice cream-related items. Principal customers included dairy, bakery, and meat packing businesses. In 1981, Tracy renamed the company Dot Foods, Inc., in honor of his wife and partner, Dorothy. After two decades, Dot Foods had all the markings of a successful regional business. Sales had doubled every four years since 1961. By 1982 Dot Foods' employee roster had grown to 67 employees. The company now had a fleet of 24 trucks, and made deliveries to nearly 30 states. A second generation joined in company leadership in 1985, when Tracy's son Pat became president of Dot Foods. Robert Tracy was CEO.

Business Shifting to Foodservice Side: 1980s

According to company estimates, until 1980 about 80 percent of its service was to food manufacturers, and 20 percent was to foodservice distributors. Dot Foods reversed those statistics by 1990, resulting in a new and more lucrative direction for the business. In the company published book Dot Foods: Redistributors to the Nation, "this shift in business direction changed the future of Dot Foods. They foresaw the consolidation in the food manufacturing industry and slowly converted to food-service distribution. In so doing, they started on a new avenue of growth and prosperity."

Dot Foods soon became the dependable middleman in the foodservice food chain. As a "re-distributor," Dot delivered products directly from manufacturers to wholesale distributors, who in turn, delivered the products to retail foodservice, convenience stores, retail grocery stores, vending suppliers, and more.

The shift in service focus was a wise one. Dot Foods was poised to benefit from the significant growth in the foodservice industry nationwide. In 1988 Dot erected a state-of-the-art corporate office headquarters and began laying the groundwork for use of computers that would keep the company on the cutting edge technologically within the food distribution industry.

Seeking to expand Dot's product offerings into new areas, in 1990 Tracy created Arctic Foods, to specialize in frozen food distribution. Dot and Arctic operated concurrently until Tracy merged the two business entities in 1994 as a result of customer feedback. That same year Dot began a 40,000-square-foot addition to the Mt. Sterling warehouse which further enabled expansion to new markets.

Significant Nationwide Expansion: 1990s

By 1994 Dot Foods had grown larger than its founder had originally envisioned. Dot employed more than 600 people nationwide, with two-thirds of them working from the Mt. Sterling headquarters. Tracy established Dot Transportation, Inc. to efficiently operate and manage the fleet of specialized delivery trucks. At that time Dot was an industry innovator, using special trucks built to handle multi-temperature shipments of products. The multi-temp trucks made it possible to transport frozen, refrigerated, and room temperature dry products all in one truck. This capability helped Dot's smaller distributor customers to compete and operate more effectively in the marketplace.

Dot solidified its presence on the East Coast by opening a distribution center in Williamsport, Maryland, in 1994. The eastern region warehouse featured a multi-temperature facility which company literature stated was "the prototype that signifies our commitment to future growth and to technological innovation." Following a long-range goal of expanding to the West Coast, Dot established a second regional distribution center in Modesto, California, in 1995 (though the company had used warehouse space in Stockton, California, since 1989). Burgeoning business volume pushed Dot to add on to that center in 1998.

By 1996 the company's product offerings numbered 21,000, gleaned from 215 suppliers, and Dot Foods employed more than 900 people. That year Dot expanded warehouse space for the eastern market by purchasing a 30,000-square-foot facility near the existing Williamsport distribution center. Already heavily invested in the dry and frozen food distribution business, Dot took steps to grow in the refrigerated product area. An $8 million expansion to the Mt. Sterling facility increased storage space for perishables, doubling the distribution center's storage capacity. At that time Dot was the only company using the multi-temperature trucks and the only business of its kind providing service to all 50 states.

Gaining a Competitive Edge Through Technology

Also in the 1990s, Dot Foods made technology a company priority as a means of maximizing business efficiency and customer service. Dot utilized the Internet as a means of communicating with customers before most of its competitors were on board.

In 1996 the company installed and began implementing a technologically sophisticated warehouse management system designed by MARC Global (Material and Resource Control). The system resulted in improved management and accuracy of inventory and greater efficiency in moving products in and out of the warehouse. Within two years Dot implemented the computer system at all of its warehouse distribution centers.

Early on, Dot Foods had made technology part of its plan, using EDI, or electronic data interchange, when others were managing product movement on paper. A 1998 article in Voice of Foodservice Distribution cited Dot as one of three industry role models because it was "striving for world-class status in logistics in an effort to create both a competitive advantage and to reduce costs." According to the article, Dot boasted the fastest lead time in the industry because of the company's ability to deliver product anywhere in the United States within two days. A big reason for that efficiency was that Dot owned and managed its own fleet for distribution. But Dot's underlying management information system and the multi-temperature trailers helped Dot maximize use of storage space and efficiency throughout the process.

Throughout its four-decade history, Dot Foods demonstrated a commitment to the personal and professional development and well being of its employees. Dot established an employee retirement plan in the 1970s, which was unusual for a small family business. During the 1990s the company created a program to offer employees with five years of service or more no-interest home loans for up to $50,000. Further illustrating a commitment to its employee satisfaction in the workplace as well as in their personal lives, the company created Dot Foods Learning Center in 1997, serving both the educational needs of Dot employees and the community. Dot's project partners were the local community college and the school district.

Dedicated Employees Show Gratitude

The Tracy family's employee focus did not go unnoticed. In 1999 Dot Foods' personnel responded with a very tangible and public show of gratitude. Many of the company's 1,200 employees donated to raise $25,000 among themselves to purchase a 53-foot trailer as a way to say thanks to company founders Robert and Dorothy Tracy. The trailer featured the Dot logo displayed in silver and gold mirrors, and the message "The employees at Dot Foods/Dot Transportation, Inc. give this trailer in honor of our company founders Robert and Dorothy Tracy, whose commitment to a dream enriches the lives of many." Among the many things employees appreciated was that despite financially tempting offers to relocate company headquarters to a larger town or city, the Tracys remained committed to staying in Mt. Sterling and making Dot Foods an involved and vital member of that community.

In 1999 Dot Foods reinforced service to the southeastern United States by opening a distribution center in Vidalia, Georgia. By 2000 Dot employees numbered 1,500 nationwide. Founder Robert Tracy said employees were Dot Foods' "single greatest asset." The company projected that business would continue to double every five years.

To accommodate growth, Dot's Mt. Sterling distribution center got a 126,000-square-foot addition, increasing dry capacity storage space and bringing the facility to nearly 650,000 square feet. Thanks to the warehouse addition, Dot was able to maintain more dry groceries as well as have additional capacity for a new area of business, light equipment and supplies. Dot made approximately 5,000 new products available to customers in the equipment and supplies area. Those items included glassware, flatware, servingware, china, and janitorial supplies.

First Billion-Dollar Year: 2001

In 2001 Dot Foods recorded its first billion-dollar year with $1.25 billion in sales. To expand its reach to become more of a full-service player to its distributors, Dot Foods acquired Principal Resource, of Dallas, Texas, that year. Principal Resource provided telemarketing, data analysis, and direct-mail campaigns to many of Dot's existing customers.

Reinforcing distribution to the northeastern region, Dot Foods purchased the Drescher Corporation in Liverpool, New York, in 2002. A subsidiary of US Foodservice, Drescher was a food redistribution company with $400 million in annual sales and a customer base of 1,200. The acquisition resulted in no immediate changes for employees of either company. At the time Drescher had about 250 employees.

By 2002 Dot offered its customer base a selection of 40,000 foodservice-related items and employed 1,800 people company-wide. Dot leaders recognized recent and future potential growth in the convenience store market which was influenced by the on-the-go lifestyle of so many consumers. As a result, the company focused more on expanding opportunities to serve the convenience store market, their "c-store distribution channel." Dot reinforced how the company's extensive product selection, coupled with minimal and flexible ordering requirements, could benefit c-store distributors, helping increase inventory turns, decreasing inventory investment, and improving customer service. The c-store market responded with business growth.

Factors in Dot's Formula for Success

The list of factors contributing to Dot Foods' success was lengthy. Companywide use of technology was certainly one factor. The Dot Expressway, part of the company's edotfoods arm, facilitated customer access to information and ordering capability, and minimized duplicate data entry. This "Virtual Store Front" concept, gave distributors easy online access by linking them directly to the warehouse to purchase products or view what was available. The company also maximized efficiency in the distribution process through Dot Transportation Services, Inc., which boasted a very high rate for on-time delivery.

Dot Foods served a board range of customers, from huge companies such as SYSCO to small, local distributors; the company treated them all as valued members of the Dot family Customers, especially smaller distributors, who appreciated Dot's minimal ordering requirements, ordering flexibility, and delivery frequency. The company was also able to pass on manufacturers' specials and discounts directly to the customers. Distributors could do business with multiple suppliers on one order, with one delivery, and one bill.

In 2004 Dot Foods' sales reached 1.9 billion, and there were no signs of waning growth. Serving 3,300 distributors and working with 480 manufacturers, Dot's leadership was poised to find the best ways to meet the needs of its diverse clientele. The company estimated that it gained 200 new customers each year. A new Dot Foods distribution center opened in early 2005 in Ardmore, Oklahoma. It enabled the company to better serve customers in Texas, New Mexico, and Oklahoma. The company planned to double that facility's storage capacity in 2006.

Dot Foods' Mt. Sterling headquarters and distribution center remained on the cutting edge in the industry with the latest freezer cooler scheduled for installation. The company also had plans to further refine efficiency by automating some warehouse operations. Dot leaders did not rule out additional acquisitions or expansion into new business territories as they guided their father's company into what looked to be a profitable and successful future.

Principal Subsidiaries: edotfoods; Dot Transportation, Inc.; Principal Resource.

Principal Competitors: Regional Redistributors; Purity Wholesale Grocers, Inc.

Chronology

• Key Dates:
• 1960: Robert Tracy founds Associated Dairy Products.
• 1961: Fleet of trucks is added to business.
• 1977: Company builds its own warehouses.
• 1981: Company is renamed Dot Foods, Inc.
• 1985: Pat Tracy becomes president of Dot; Robert Tracy is named CEO.
• 1988: Dot erects new headquarters.
• 1990: Arctic Foods is established.
• 1994: Dot Foods merges with Arctic Foods; Dot Transportation, Inc. is established; company expands to warehouse in Williamsport, Maryland; Dot opens distribution center in Modesto, California.
• 1997: Pat Tracy becomes CEO; John Tracy becomes president.
• 1999: Dot opens distribution center in Vidalia, Georgia.
• 2001: Company acquires Principal Resource.
• 2002: Company acquires Drescher Corporation.