Vienna Sausage Manufacturing Co. Business Information, Profile, and History

History of Vienna Sausage Manufacturing Co.

Vienna Sausage Manufacturing Co. and its subsidiaries produce and distribute its famous Vienna Beef hot dogs and nearly 900 other products, including deli meats, soups, condiments, breads, and desserts. Approximately 15 percent of its 1994 sales of $95 million were generated through retail channels: Vienna's primary market is foodservice, with sales to licensed Vienna Beef vendors forming the bulk of its business. In Chicago, where Vienna generates roughly 40 percent of its annual revenues, there are some 1,500 licensed Vienna Beef sellers. The company also owns and operates ten distribution centers in the Southwest and Southeast and exports its products to licensees in Germany, Japan, Hong Kong, Mexico, and Canada.

Sausage-makers Samuel Ladany and Emil Reichl emigrated to the United States from Austria-Hungary in 1890. The occasion of the World's Fair/Columbian Exposition in 1893 brought the pair to Chicago, where their products sold successfully enough to convince them to remain in that city. Ladany and Reichl opened their first facility, adopting the name Vienna Company to emphasize its link with the Austrian city, which was considered by many at the time to be the capital of sausage-making. Sausages, along with other kosher delicatessen products, such as frankfurters, knockwurst, pickled corned beef, salami, and bologna, formed the early core of Vienna's line. These products were sold in a retail store at the front of their shop.

The Vienna Company's sausages, in keeping with dietary laws associated with kosher food preparation, were 100 percent beef, distinguishing them from the more common pork and pork/beef blended sausages, and rigid supervision and inspection of their products assured consistency in quality. Soon the Vienna Company began selling to other retailers, and the company's reputation spread throughout Chicago. Peddlers' routes carried Vienna's products to a steadily growing list of clients. The company also became active outside of Chicago. The company began to hire jobbers, beginning in Detroit around the turn of the century, to distribute its products. The jobber maintained a stock of Vienna products to deliver to stores in his area, permitting quicker delivery and more widespread distribution. Before long Vienna's kosher products were sold throughout much of the country. Vienna soon expanded its line to included non-kosher foods as well.

The Great Depression had an unexpected effect on Vienna's business. Prices dropped as people had less and less money to spend. Frankfurters, for example, could be bought for as little as a penny apiece; buns, too, cost a penny. Vendors discovered that they could combine the two and sell the sandwich for a nickel. The hot dog market boomed. Vienna began to seek out hot dog vendors to sell its products, often finding them locations, providing signs, and teaching them selling techniques. In return, the vendors agreed to sell only Vienna products, and to advertise the Vienna name at their stands. By then, Vienna ruled Chicago's hot dog market and the hot dog had become Chicago's favorite ethnic food. More and more Vienna hot dog stands opened across the city, creating a loose franchise business. The company's sales grew steadily.

The start of the Second World War had a significant impact on the country's eating habits. Delicatessen meats had long been considered lunch or snack foods, and were sold primarily through delicatessens, butchers, and meat markets. The introduction of rationing during the war, coupled with food shortages, increased the share of delicatessen foods in people's diets; these foods also proved convenient for feeding the Armed Forces as the United States entered the war. By the end of the war, the change in American diets seemed permanent. More and more delicatessens and convenience and fast-food restaurants appeared. Vienna's fortunes rose with these trends. By this time, it had greatly expanded its original Halsted Street location, and a second refrigerated facility was leased nearby.

At the same time, large supermarket and chain stores were achieving their first success. These stores responded to the increasing demand for delicatessen products by adding these items to their stock. Advances in refrigeration were making it possible to store meats longer, and to sell products in smaller, self-service packages. Although Vienna virtually owned the Chicago hot dog stand market, it had not yet entered this new and increasingly important market. The announcement that New York-based Hygrade intended to enter the Chicago market forced Vienna to create a line of pre-packaged products for supermarkets. The company designed a new logo, featuring a large blue V and a frankfurter on a fork, which quickly became known nationwide, and developed a national advertising campaign to accompany the launch of its pre-packaged delicatessen line. Hygrade was forced to retreat from Chicago.

The success of this launch encouraged Vienna to expand its operations. Rather than continue to ship its products from Chicago, Vienna decided to open production facilities on the West Coast for its sales there. Renting space in Los Angeles, Vienna opened its first facility outside of Chicago in 1952. Production was limited at first to cured and pickled meat products, such as corned beef and beef tongue. The addition of smokehouses allowed the Los Angeles facility to produce pastrami, roast beef, and other meats. Strict control was maintained over the recipes and ingredients, so that Vienna's products on the West Coast would taste exactly the same as in Chicago. With its mild climate, which encouraged the year-round consumption of deli meats, the California market proved extremely lucrative for Vienna. The following year, Vienna took over its own distribution in the Southeast, by then another principal market, leasing cooler space and refrigerator trucks in Miami.

Steady increases in sales led Vienna to purchase land in Los Angeles and to construct a modern facility in 1964 in order to produce the full line of its all-beef products. Soon after, Vienna added a distribution center in San Francisco, which received Vienna products from Los Angeles and distributed them through Northern California, the Pacific Northwest, and Nevada. Less than five years later, Vienna's West Coast sales had outgrown its Los Angeles facility; a new wing was constructed for the factory in 1969.

Back in Chicago, Vienna had added a third facility for processing its products. By the start of the 1970s, however, operating the three plants was proving too costly and inefficient, as duplication of personnel, handling, and transporting stock and products among the three factories cut severely into the company's profits and compromised its competitiveness. In 1972 Vienna merged its operations into a single, newly constructed modern facility. At this time, the company dropped its kosher meat line, in part because of the limited growth potential of that market, and in part because the dietary laws surrounding kosher foods would have required maintaining a separate processing facility. Its kosher meat products were merged into Sinai Kosher Foods, with Vienna retaining a principal interest in that company. Sinai, and Vienna's share in it, was later purchased by Norris Grain Co., before being bought up again by Sinai management.

Its kosher foods, however, had provided Vienna with not only a national distribution network, but also a national reputation. The company capitalized on its name, opening distribution centers--generally large cooling warehouses--in Cleveland, Houston, Dallas, Phoenix, San Diego, and Tampa. Increases in its distribution business led Vienna to expand its product line into non-meat items. By the end of the 1970s, Vienna generated $50 million in annual revenues. Jules Ladany, who had taken over the company from his father, Samuel Ladany, died in 1979. The younger Ladany was succeeded by his son-in-law, Jim Eisenberg, who had joined the company in 1956. Three years later, Eisenberg, along with Jim Bodman, who had been with Vienna since 1964, reached agreement with the Ladany family for a leveraged buyout. Eisenberg was named chairman and Bodman became president.

The new management increased Vienna's expansion into non-meat products. Apart from the special high-sided poppy-seed buns that had become virtually a requirement for its hot dogs, the company established several subsidiaries and opened separate facilities for producing pizza, pickles, and pickled products, kosher foods such as matzo balls and blintzes, frozen prepared soups, and specialty desserts, as well as other delicatessen products and supplies. Vienna's emphasis remained on its core market of sandwich shops and delicatessens. Vienna also began licensing its products overseas, principally in Japan and Germany. Its licensing agreement required that it products be made exactly the same and with the same high quality as in Chicago. In partnership with Japan Tobacco, Vienna formed The Chicago Co. in Tokyo to operate a chain of hot dog stands in that country. Vienna next expanded into Hong Kong, Singapore, Indonesia, Mexico, and Canada. Vienna's foreign ventures together contributed approximately three percent of its annual revenues.

In 1986 union pressures forced Vienna to stop boning its own meat. The company began purchasing boxed meat, but was dissatisfied with the quality. The following year, Vienna opened an abattoir, the Big Foot Cattle Co., in Harvard, Illinois, where it began slaughtering and hotboning the cattle--particularly bulls, the beef of choice for the Vienna Beef hot dog--for its products. The company's European sales snagged in 1989, however, with a ban by the European Community on hormone-raised animals. This meant Vienna's German licensee, Dieter Hein Co., could no long import the bull meat essential to maintain the taste and consistency of the Vienna Beef hot dog. Vienna experienced a further difficulty with a rise in hot dog "counterfeiters," that is, hot dog stands advertising the Vienna name while selling other cheaper and inferior-quality brands. Vienna instituted stricter inspections of these stands and tightened enforcement of its trademark, including filing several trademark infringement suits.

Entering the 1990s, Vienna had grown to a $100 million company offering nearly 900 products alongside its biggest selling franks. Ninety percent of its revenues were from foodservice vendors, including important sales to vendors at ball parks and stadiums in Chicago and other cities. The 1994 strikes of both Major League Baseball and the National Hockey League depressed Vienna's earnings. During the 1990s, also, consumers were becoming more and more aware of their diets, particularly their diets' fat content. In response, Vienna launched its "Deli-Lite Franks," featuring a nine percent fat content. Early sales, however, were disappointing. Other product innovations, such as Vienna Turkey Breast Pastrami, were more successful. The 1992 purchase of David Berg & Co. sausage manufacturers further strengthened Vienna's Chicago and Midwest position. Future plans called for Vienna to step up its advertising spending, which in 1993 accounted for less than two percent of its budget, in order to remain competitive against the country's larger retail suppliers. But the key to Vienna's future would remain its dedication to Chicago's--and much of the country's--favorite hot dog.

Principal Subsidiaries: Big Foot Cattle Co.; Bistro Soups, Ltd.; Chipico Pickles; Pie Piper Products, Ltd.; Sula Supply; Vienna Beef, Ltd.