Business Mindset Helps Omaha Steaks Meet Challenges

The Simon family's 100-year journey from custom butcher to direct-marketing behemoth.

By Dave Donelson

Bruce Simon, the fifth-generation CEO of Omaha Steaks, has a theory to explain why the direct marketer of beef and other foods survived to mark its centennial this year. “The sign of a successful family business is not to let the family part affect the operations of the business,” he says.

Bruce and his cousin Todd Simon, senior vice president, adopted the practices of their fathers and uncle, who took great care to put the interests of the company ahead of family members’ desires. “We try to run the business without letting family matters get into our decision making,” Bruce says. “We are sort of cold about that.”

That focus on business as business helped Omaha Steaks become a $450 million enterprise that employs nearly 2,000 full-time workers and an additional 3,000 during the peak-demand fourth quarter. The company processes meat in three plants around the Nebraska city for which it’s named and distributes its products from two other facilities. Omaha Steaks ships some 14 million pounds of meat annually to 3 million active customers and operates about 70 retail stores in 26 states. It’s believed to be the nation’s largest direct-response marketer of steaks and other frozen gourmet foods.

Like many of America’s most successful family businesses, Omaha Steaks was founded by hard-working immigrants. The founder, J.J. Simon, fled religious persecution in Latvia with his son, B.A. (they went by their initials since their names were difficult for Americans to master), and arrived in Omaha via Ellis Island in 1898. The territory around the booming city not only reminded them of their homeland but also was a burgeoning center of the trade they’d left behind, meat cutting. The pair worked as butchers in several markets around Omaha before founding their own shop in 1917. To house the new enterprise, B.A. bought a building formerly occupied by a furniture maker, Table Supply Company. By deft manipulation of the sign outside to make room for the word “Meat,” Table Supply Meat Company was born.

B.A.’s son, Lester, joined the little butcher shop in 1929. The third-generation member made his mark by negotiating a contract to supply beef to the Union Pacific Railroad in 1942. As the country’s largest railroad transported troops and equipment essential to America’s role in World War II, word quickly spread across the nation about “Omaha steaks.” In 1952, Lester Simon capitalized on the product’s growing reputation by running mail-order magazine ads for fine cuts of meat and began shipping products directly to restaurants and consumers in wax-lined cardboard boxes filled with dry ice. In 1966, the company officially changed its name to Omaha Steaks.

When Lester’s three sons—Stephen, Fred and Alan—came aboard, they pushed the company into even higher gear. Stephen, who was VP and general manager, handled the restaurant food service business, while Fred (Todd’s father) served as executive VP and led consumer direct marketing. Alan (Bruce’s father) became CEO and today at 83 serves as chairman of the board. His brothers Stephen and Fred passed away in 2006 and 2015, respectively.

From wholesale to retail
While family ownership often provides business continuity, it can also stifle creativity. Not so at Omaha Steaks. “As evident from our 100-year history, we have always been one of the most innovative direct-to-consumer food brands focusing on items that deliver a premium experience,” Alan says.

“The major inflection point was in the 1970s,” explains Todd, 53. “That’s when we switched from being a wholesaler to being a direct-to-consumer company.” His father, Fred, assiduously studied the techniques of direct marketing to take the company in that direction. “My dad had the good sense to know what he didn’t know, so he learned from some of the best brains in the direct-marketing industry,” Todd says. “Then he insisted that the people he worked with in the department learn the proper application of direct-marketing techniques. The company experienced meteoric growth between 1994 and today. We’ve more than tripled the size of the business since then.”

Bruce, now 60, joined the company in 1981 while Todd came aboard in 1986, both after graduating from the Wharton School at the University of Pennsylvania. Their siblings, as well as their uncle Stephen’s children, pursued other career paths. The two cousins had spent summers working at the plants for pocket money. Todd recalls folding shipping boxes at the age of 10 for 2 cents each.

“I came in as assistant plant manager after college,” Bruce recalls. “I was being tested as a family business manager my entire life. Alan saw to it that I understood what it’s like to cut meat all day—he made sure the guys in the plant taught me. From there, I started buying meat.” He progressed to managing all purchasing and running the IT department until Todd’s father, Fred, saw the writing on the wall.

“Fred decided I should be president,” Bruce says. “I was having lunch with him and my dad and he said, ‘Alan, you ­really shouldn’t be president anymore. Bruce is running the business anyway, and you should give him the authority to do it. He’s ready for it.’ I almost fell off my chair.” Bruce became president and CEO in 1994.
“We were lucky to have Alan and Fred and Steve to model our business lives after,” Bruce says. “It’s fun to spend all that time with your dad. Sometimes, you want to kill ’em, but not very often. We’re all working on the same thing.”

Family strength in adversity
One big factor that helps the cousins maintain objectivity is their familial relationship, according to Todd. “We’re not as close as if we were brothers, which is kind of the best advantage. Bruce is older than me, so we really didn’t grow up together either, which means we don’t have any of those horrific experiences that siblings have with each other. There are plenty of bonding experiences siblings have as well, but the fact we’re first cousins allows us to have a more professional relationship than perhaps we would have if we were brothers.”

Their business relationship (along with the company’s balance sheet) was tested when Bruce came down with a serious illness just as the worldwide financial crisis struck in 2008. “I had a staph infection in my hip and was out for almost a year,” Bruce explains. He answered emails and kept on top of matters during frequent meetings with Todd, who assumed the leadership position temporarily.

“I was about the only person who met with him,” Todd recalls. “I would see him every week and keep him up to date and get his input on certain decisions. I was worried about Bruce and worried about the company and our customers, but we got through it.”

The cousins became closer during the process and gained some important insights, too. “What we learned from that is that we’re glad we’re a private company,” Todd says. “We also learned that it’s a good thing we are very judicious in how we manage our balance sheet.” Bruce adds that while Omaha Steaks didn’t add personnel or replace employees who left during the downturn, the company didn’t lay anyone off, either.

Non-family stakeholders
“Family ownership affects operations in a number of ways, all of them positive,” Todd says. “Bruce and I, like our fathers before us, are around. We’re walking the halls, participating in meetings, all of which is a great benefit to the way we operate.”

Bruce and Todd are the only family members currently employed at Omaha Steaks. Bruce says that while family ownership is important, so are excellent non-family managers. “Since I’ve been with the company, we’ve never had more than five family members in management positions,” Todd says. “With an employee base approaching 2,000 people, we have some 20 non-family senior executives. It’s important that people have a career path in the business, since that enables us to hire and retain great employees.”

Strength in the management ranks helps, too, when it comes to resolving differences of opinion purely on the basis of business principles. “You don’t get to be 100 years old unless you can resolve problems,” Todd points out. “We used to say that when there was a difference of opinion we would close ourselves into a room and shout at each other for 30 minutes until we came out with a consensus.” He adds that today, “As much as we can, we involve our management team, because we very much value people at every level of the business making their own decisions.”

The chain of command is clear, however. “There aren’t that many things Bruce and I disagree about,” Todd says. “When there are, we talk face-to-face, we talk with our team, we bring in opinion leaders in the organization. Sometimes we agree to disagree, but at the end of the day, Bruce is the CEO, and if we just can’t come to an agreement, he gets to make the call.”

“Todd and I trust each other, just like our parents did,” Bruce says. “We have each other’s back and common goals.”

Changing the menu
What might be a persistent headwind in the company’s growth is related to its primary product, beef. According to the U.S. Department of Agriculture, Americans’ beef consumption dropped 15% over the past decade, owing to both higher prices relative to chicken and pork and health concerns about red meat.
“At some time or another, every food has been villainized, from spinach to Gummi Bears,” Todd says. “We are a specialty producer of some of the finest beef in America, and beef is always going to be part of Americans’ diet. While beef consumption has dropped over the last five decades, our business has continued to grow because we offer a specialty choice.”

In addition to a wide assortment of beef cuts, Omaha Steaks sells a variety of flash-frozen fish, cooked vegetables, soups and specialty side dishes as well as desserts and even wines. The growing number of households outsourcing “home-cooked” meals is a trend that’s definitely positive for Omaha Steaks.

“We’re the original home-delivery meal company,” Todd says. “You’ve always been able to buy center-of-the-plate items from us, as well as side dishes and dessert. We’ve also sold a number of prepared entrees that can be easily cooked in the microwave, [in the] oven or on the grill.” Crockpot meals are also available, and in August Omaha Steaks began offering skillet meals.

The company uses a constantly evolving arsenal of direct-to-consumer marketing tools, including direct-mail catalogs, OmahaSteaks.com and Amazon.com. Another mainstay of the business is brick-and-mortar retail. “We’ve been able to keep our retail store business steady,” Todd says. “It’s interesting that a lot of the online companies are starting to think about retail stores. We’ve been in that business since 1976. We always knew that in order to get maximum market penetration, we needed to have an on-the-ground retail presence as well as a delivery business.”

Planning for the future
Ownership of Omaha Steaks is exclusively in family hands. “You have to be working in the company to have voting ownership,” Bruce explains. “Todd and I are the principal shareholders, along with my dad.” Stephen’s estate owns non-voting shares via a trust under the direction of Todd and Bruce.

Bruce’s older daughter is finishing her education at Sotheby’s Institute of Art with an eye toward a career in a related field. His younger daughter is a freshman in college. Todd’s kids are 7 and 10.

“Succession is built into the way we run our business,” Todd says. “We have a highly competent professional management team, any of whom I would trust with more responsibility. If we have family members who want to come into the business, we would consider that, but just as Bruce and I did, you have to start at the bottom unless you’ve had a job someplace else.”

“Todd and I get offers to sell all the time,” Bruce says. “We don’t feel like selling, and we don’t have any plans to. We’ll cross that bridge when we come to it. [Todd] is seven years younger than me, so he’s got seven years longer to figure it out.”

The Simons feel their focus on business equips them well for the future. “We are poised and ready for continued growth and success for generations to come,” Alan says.

Todd agrees. “If you want to have a business that endures for 100 years, you have to have established norms about how the business operates,” he says. “One of the things that works for us is to clearly delineate the functional areas in the business the family participates in and to make space for the family members to run a part of the business while still having a strong professional staff that brings new ideas and innovation. As family members, you have to be open to be challenged by each other and by your team. You’re not running a kingdom, you’re running a business.”                                       

Dave Donelson is a business writer in West Harrison, N.Y. 

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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November/December 2017

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