Spreading success

By Hedda T. Schupak

After his father's death in 1995, Mark Peters inherited a butter company with 200% employee turnover, no banking relationship and a huge tax bill. Today, Butterball Farms is a world-class butter supplier that focuses on improving people's lives.

When Mark Peters was thrust into the leadership of Butterball Farms in 1995 at age 30, he was tasked not only with carrying on the business founded by his father, Leo, but also with turning around a company that would have sent many a seasoned executive running. Its physical plant was outdated, its accounting methods were antiquated and its corporate culture was horrendous. The annual employee turnover rate exceeded 200%; desperation was the only reason anyone would consider working there.

Leo Peters had left the company in good financial shape at the time of his sudden death, but the festering problems were overwhelming. Mark had his work cut out for him.

Butterball Farms, based in Grand Rapids, Mich., began in 1951 as Butterball Turkey—the same brand that graces many a Thanksgiving table. Leo spun off and sold the turkey business in the mid-1960s but retained licensing rights to the name.

What to do next? Logic would indicate a company called Butterball should make, well, butterballs. And butter pats, butter rosettes, tubs of butter, sticks of butter, butter in the shape of corporate logos and gourmet flavored butters.

“My father was brilliant. He wrote all his own patents and even defended a few,” Mark says. “But he was self-centered. It was his business, and he was going to run it his way.”

Mark Peters, who had worked for the company on and off since age 12, realized that the authoritarian culture his father instilled and the rigid control he maintained over every aspect of the business were not conducive to attracting or retaining talent. He had tried quietly introducing a culture shift at the plant before Leo’s death but the elder Peters caught on, seized the materials he was using for guidance and put an immediate stop to any deviation from his own rulebook.

To complicate matters, the same autocratic attitude Leo Peters exhibited at work caused problems for the family, both before and after his death.

A secret estate plan

Leo Peters’ first wife, Helen, who died in January 1958, had inherited some money in the 1950s, roughly about the time Leo was starting up the Butterball business. In order to protect her assets—and the family’s house and cottage —in case the business failed, Leo created a trust with their six daughters as beneficiaries, according to Mark. But when Helen Peters died unexpectedly, the house and the cottage went to the children along with the money, and Leo went to court to get the properties back.

In December 1961 Leo married Nancy, who had been the older children’s nanny after the death of their mother. Mark Peters says it all was very “Sound of Music,” something Nancy Peters laughingly says is entirely true. She not only is a gifted musician, but also was actually playing the Mother Abbess in a civic theatre production of the show around that time. Leo, though not a soldier like Baron von Trapp, had instilled a military-like order in drilling his older daughters to keep house and prepare meals. (One of the six children from his first marriage, who was severely afflicted with Down syndrome, has since passed away.)

“Leo was a total control freak. There’s no other way to say it,” says the second Mrs. Peters. “He could be very loving, but if you crossed him, there were consequences,” she says. Nancy and Leo had three children: Mark and his two full sisters.

Though Leo Peters could be difficult, Nancy says, he had some very fine qualities: intelligence and even a sense of humor, though she acknowledges that as he aged the humor grew rare. Nancy believes it all stemmed from a tough childhood. As a sickly and intellectual child among rowdy siblings, Leo took a lot of teasing, she says. She suspects his autocratic behavior was a veneer to ensure he never would feel vulnerable again.

Though Leo’s passing was quick, Mark sensed the end was possible. Leo had had a heart attack 13 months prior but went to work straight from the hospital. When he collapsed at home in June 1995, he never regained enough mobility to leave the hospital. Six weeks later he was dead at age 86.

“He was so strong-willed,” his son says. “He’d try every day to get up to go to work, but he just couldn’t do it. One day, he didn’t even try to get up, and that’s when I knew he was going to die.” And at that moment, Mark recalls, his emotions were spinning in so many directions it never even crossed his mind to ask, “Dad, what should I do with the company?”

“Because I’d worked there on and off, I had some knowledge,” Mark says, “but I had to ask to be included in meetings. Sometimes it was yes, sometimes it was no.” Mark quit more than once over the years—and a few times Leo fired him.

“He would tell me I wasn’t good enough to run the business, and I always said, ‘If you think that, then sell it,’” Mark recalls.

When the will was read, Mark says, he was as stunned as everyone else to learn the company was his at age 30. Leo had left him the whole of Butterball Farms, with nothing allotted to any of his sisters, half or full. What’s more, Leo had also named Mark as the trustee of the marital trust established for his mother.

Nancy remembers how horrible that day was, and the total shock in the room when the will was read. To this day, Mark doesn’t understand why his father kept his plan secret. When he asked the estate’s attorney if his father purposely left things a mystery or simply hadn’t gotten around to discussing his intentions, Mark says, the attorney responded, “Do you really think your father didn’t understand what he was leaving?”

The older siblings, according to Nancy, were less surprised than anyone else. They expected nothing from the business, and they got nothing. The money Leo Peters had used from their mother’s inheritance trust to build the business was repaid in full, and the trust was divided up among the sisters.

Mark’s full sisters were stunned, Nancy recalls. Nevertheless, she believes nobody blamed Mark for what happened; they could see he had had no idea what the plan was.

Nancy suspects the business was left entirely to Mark because Leo didn’t want the company to be sold, which is likely what would have happened if it had been divided up. Her daughters didn’t have any real interest in running the company, she says.

But even though the sisters didn’t blame their brother for the situation and he was willing to make some gifts to them, the news was hard to take. It even took its toll on mother and son. While Nancy and Mark say they have a great relationship now, there were problems, according to Mark. Nancy at first didn’t understand how much cash was required to meet expenses, he says—and once she did see, she had to learn to trust that he would be willing and able to provide for her.

He was. He moved some things in the business around; put some trademarks into her trust and licensed them back as a means to get cash flowing to his mother. Mark emphasizes that he wanted this process to be transparent, especially given how secretive Leo had been.

Nancy took an office at the plant and for a long time came in regularly, but as time passed and trust grew between mother and son, she tapered off. Eventually, Mark says, her office was needed for space, and with her permission, it was reassigned to a staffer.

Lessons learned the hard way

At the time of Leo Peters’ death, the company’s cash position was strong. Also to the positive, the company had no debt, a suite of niche products—many of which were trademarked—and a great reputation among chefs.

But Leo had, in Mark’s words, “run a $12.5 million company with a pen and a checkbook.” He had no banking relationships at all; he preferred to pay for everything, including a renovation, with cash. He had no depreciation on his books; he simply expensed everything.

While the books looked healthy, the plant badly needed upgrades; lots of specs had to be brought up to date. Although the company had no debt before Leo passed, a huge estate tax bill was due to the IRS after.

Mark had no financial background, and his first two lessons in finance were not pleasant. First, he learned, paying for everything out of pocket quickly resulted in greatly reduced cash flow, to the point where the company got into a serious crunch. Second, he learned, no bank wanted to take a risk on a company it knew nothing about, whose founder had died without a succession plan and whose cash was rapidly flowing in the wrong direction.

“I knocked on a lot of bank doors, and I got some bad deals, but I learned a lot about what banks want,” Mark reflects. Ultimately, he was able to secure an equipment loan and a line of credit using the company’s real estate as collateral. It wasn’t the best deal, but it was necessary to ensure Butterball Farms’ survival.

Mark made some gaffes along the way, not the least of which was a brief foray into retail. (“We got slapped on that one!” he says.) But overall, he says, “We were well blessed,” and he didn’t make too many major mistakes. There was a bit of a struggle to find the right balance between dealing with end users and dealing with distributors, but that, too, got sorted out.

Changing the culture

Mark was determined to change the company’s reputation as an employer of last resort. The turnover was so extreme that “one year we had to file between 800 and 900 W2s for 200 positions, 120 of which were direct labor production jobs,” Mark says.

A team of consultants was called in, and among their tasks was to establish a new mission statement. But after weeks of wrangling, what they came up with still was focused on the product.

“I tried to memorize it, but it didn’t mean anything to me,” Mark says. “How could I expect it to mean anything to anyone else?” It simply didn’t resonate, so out it went, to be replaced with one that’s simple and to the point: “Enrich lives.”

Supporting this mission are six “guiding principles”: “Have integrity in all interactions; Anticipate and address customer needs; Diligently pursue excellence; Promote continuous learning and innovation; Make the work place an enjoyable and integrated part of life; and Communicate openly and honestly to promote effective teamwork.”

Out went the old rulebook as well. “The employee handbook was ridiculously thick. It practically told people how to walk,” Mark says. “I tend to be a bit dramatic. Shortly after Dad passed, I called a company meeting and I ripped up the rulebook in front of the employees. Then I handed out a skinny book of guidelines.”

Even positive change isn’t without its bumps. There were managers internally who knew where Mark wanted to take the company—and who had been in on his earlier efforts to institute change—but there were others who were old-school and loyal to his father’s methods, and they were cut loose. One employee in particular had to go. Leo Peters died at 6 a.m.; by 10 a.m. that same day, Mark Peters had fired the employee. It was a statement as much as a necessary personnel move.

It took a year and a half to hire a CFO. “It’s more important to get the right person than to get a person right now,” Peters explains. Three times Butterball got to a final candidate—only to discover it wasn’t going to be a good fit —before current CFO Steve Whitteberry was hired.

Tika Morgan joined the company right after high school in 1992. She says she saw a difference in working conditions when Mark took over.

“Our benefits changed, raises came about and the equipment was upgraded,” she says. “It’s a much better environment now. He did a lot to benefit the employees.”

Morgan began as a production worker, rising under Mark Peters to trainer and, eventually, to her current position as a team leader in the flavor rooms, where flavored butters are made. She says she appreciates the lack of micromanagement since Mark took over. “They [the managers] let us do our thing,” she says. “They don’t hover throughout the day.”

The company’s tuition assistance program does not require a course of study to be job-related. If a production worker wants to study to be a nurse, so be it. Butterball Farms still helps foot the bill, knowing the person will leave after graduation.

“Sometimes we develop people to a level where they have to move on,” Mark says. “There are no new challenges for them here—but we get the best of them while they are here. We can’t guarantee employment forever, so they have to be ready for the next job.” Tika Morgan is studying psychology at the local community college, with plans to go on for her bachelor’s degree and some day become a caseworker.

It’s a win-win situation, notes David Riemersma, the non-family president of the company. “We enrich them, they enrich us,” he says.

“Working for a family business is no different from working for any other business,” says Riemersma, a non-family executive who joined the company straight out of college in 1997 and worked his way up. “You have to believe in the company’s mission and vision.”

Surviving the recession

Even though it concentrates solely on butter, Butterball Farms has created a niche. It diversified its marketing by expanded investment in business-to-business advertising. In 2011 alone, it introduced between 20 and 30 new SKUs. The company does business with plenty of A-list names, including McDonald’s, an early and loyal customer, as well as Sysco, Land O’ Lakes and Birdseye.

The one thing Butterball Farms hasn’t done is become a household name in its namesake product. While its 2006 acquisition of Stirling Creamery Ltd. of Stirling, Ontario, came with some Stirling-branded dairy products, they are limited to the Canadian market. Butterball in America, at least as far as the consumer is concerned, still means turkey.

That doesn’t matter, company staffers say. They note that Butterball Farms is making it through tough economic times with few ill effects. In the 17 years since Mark Peters took over, the company has grown from $12.5 million to more than $40 million in annual sales. It operates plants in both the U.S. and Canada.

“When things slowed down at other companies, [the recession] didn’t really affect Butterball,” Morgan says.

Yet, as in many other companies, technological advances have cost some workers their jobs. When Butterball Farms installed an automation system that was going to make 90 positions obsolete, Mark and the other top managers not only told the affected people almost a year in advance, they also phoned all their business contacts in an effort to place as many workers as possible.

“The response we got from the community was amazing,” Mark says. “We were able to place every one of our employees who wanted to work.” Some took the opportunity to go back to school, others decided to retire, but in the end all the affected people ended up where they wanted to be, according to the company.

“We worked with each employee individually as to their post-job goals,” says Riemersma. “We said, ‘Here’s what we will do, here’s what we need you to do.’” In fact, he says, the company was so successful in placing employees that it needed to use temps to replace of those who were hired before the automation was fully operational.

Though he’s the driving force for positive change at Butterball Farms, Mark Peters still is feeling the way with his own family. At 47, he’s already begun to think about succession planning—yet another sharp contrast to his father’s approach.

“I don’t want to be 80 and still working in my business,” Mark says. Even now, some of the entrepreneurial excitement he felt when he first took over is gone. “I like to get my hands dirty, get people fired up,” he says. Things move much more slowly in a mature company.

Given the top non-family talent on his management team, employee ownership is one viable possibility for succession, but could family ownership be another?

His own daughter, at six years old, is barely old enough for elementary school, let alone the CEO’s office. And because of the family’s past rifts, he hasn’t had close relationships with his nieces and nephews, even though some have worked at the company.

Might one of them someday be groomed to take over the family business? Mark doesn’t dismiss the idea, but admits, “I’m just not ready to have that conversation.”

Meanwhile, he and his team continue to spread Butterball Farms’ success far and wide.

Hedda T. Schupak, former editor-in-chief of Jewelers’ Circular Keystone magazine, is a retail analyst focusing on the fine jewelry, fashion and luxury markets.








The Source of Pride


Community involvement is one of the basic tenets of Mark Peters’ vision for Butterball Farms, and as the founding member of The Source, he knows the value of giving back.

The Source—a consortium of employers in the Grand Rapids area —is a non-profit employee support organization designed to help employees keep their jobs, receive training to enhance employment or move up in employment across companies.

Caseworkers help clients who may have lost jobs, have housing or childcare issues, are coming off government assistance or recovering from addiction. The Source acts as a broker —it doesn’t do direct counseling but refers clients to the appropriate agencies that can help.

It began with Peters’ vision of sustainable work opportunities for former felons. He worked to assemble a group of local companies willing to commit to hiring ex-prisoners. Butterball Farms has some former felons on its payroll, and Peters says they’re great workers. He put together a matrix of performance and attendance to see how they compared with non-felon colleagues. As it turned out, they did very well.

Together with Fred Keller of Cascade Engineering, another area business, Peters began asking local businesses to join in. “I did the ask —$500 a month from six companies in year one,” Peters says. “I asked them to try it just for a year.” Most companies’ cost of employee turnover is higher than that, he points out. The consortium now has 19 member companies.

The Source is a point of pride for Peters, but it’s not the only organization that Butterball Farms supports. The company also contributes to other community groups, as well as various charitable events and scholarship programs.

— H.T.S.







Copyright 2012 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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May/June 2012

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