The third-generation company was founded in 1949 by Rufus Kiolbassa and his wife, Juanita, as a slaughtering plant in San Antonio, at the same site where it still operates as a much different business today. After nearly 10 years of successfully operating the plant, the Kiolbassa family was rocked when Rufus was diagnosed with brain cancer, which led to his death in 1960 at the age of 45. Then a college senior, Rufus’ son, Robert, quit college to assume the leadership role at his father’s company, where today he is CEO. About 30 years later, in the mid 1980s, Robert’s son, Michael was graduating from Southern Methodist Univ. in Dallas after studying finance. He showed some interest in getting into the meat business and following in his father’s and grandfather’s footsteps, but Robert pushed him toward a more corporate type of career. After graduation, Michael pursued a career in the banking industry, during a time when the oil bust of the mid 1980s was in full swing. This made his stint in banking a short-lived endeavor. It was then that Michael came to his father and said, “You made me come to the sausage plant all these years growing up. You can’t stop me from working for you now,” he reportedly told his dad.
As a business and finance expert, it didn’t take Michael long to identify the parts of the business that were falling short and where the opportunities lurked. Realizing the commodity side of the business wasn’t a sustainable option for the future, he zeroed in on sausage processing as a profit center.
“It was a hard business,” Michael Johnson, Kiolbassa’s marketing and brand manager says of the slaughtering operation. “There was no margin in it.”
Michael Kiolbassa, who now holds the title of president, saw sausage processing taking the company to the next level. The company had established a respectable sausage business since its 1949 founding, using Rufus’ recipe and technique. “We decided at that point we really wanted to focus solely on our sausage business,” says Michael Kiolbassa. Production was ramped up and the company started marketing products to independently owned restaurants and small butcher shops in the San Antonio area.
Kiolbassa is known for being the No. 1 quality, premium sausage, a reputation that doesn’t come with a bargain price tag. “We’re the highest-priced sausage on the shelf, but still the biggest-selling sausage in the San Antonio retail market and in a 200 mile radius of the city’s borders,” says Johnson.
Years ago, the company began what has become a corporate tradition of donating a considerable portion of its revenues and thousands of pounds of products to local charities. Michael Kiolbassa also produced a series of attention-getting, if not altogether truthful, radio advertisements. One of the original ads boasted that the Kiolbassa sausage products were available to anyone hearing the message, laughs Johnson. “In reality, the products were only in about three grocery stores,” but the ads resulted in many customers asking for the sausage at their grocers. That was the Genesis of the company’s retail business boom, a segment that now constitutes the majority (about 85 percent) of its $21 million in annual sales.
Rings, links and baseball diamonds
Appealing to sausage buyers, especially in the San Antonio region, requires anything but a shotgun marketing approach. In Texas, sausage consumers tend to be divided into two camps, preferring either rings or links. “The rings and links buyers are two completely different personalities,” says Johnson. Buyers of ring sausage tend to have their mind set on that style, whereas link buyers are more likely to deviate and perhaps divide their loyalties. “The ring is more traditional; it’s more of a Texas style and tradition,” says Johnson of the loyal sausage-ring buyers, who tend to be purists in their meat-purchasing behavior.
Utilizing beef as the basis for a majority of its sausage products, which include Polish-style beef, jalepeno beef, country style and a chorizo, is one point of distinction for the company’s brand. With “Real meat, real smoke, real sausage!” as its marketing mantra, Kiolbassa sausage’s signature taste is derived using hickory smoke (except for its mesquite-smoked line). “It’s the way they’ve been doing it for 60 years,” Johnson says.
Its sales in Texas are anchored by HEB’s chain of supermarkets, but Kiolbassa products are also distributed to retailers in Oklahoma, Arkansas, Kansas and Northern Mexico. Pushing products beyond the current region is the goal behind current marketing campaigns and its commitment to improving its processing operations. Building the brand in Texas and now beyond the Lone Star State is made possible, in part, by promoting products in high-profile venues, including the Houston Astros home field.
Kiolbassa has been the official sausage of the Houston Astros for the previous five years, in part because of Michael Kiolbassa’s fondness for baseball. During the course of a nationwide tour of all the Major League Baseball stadiums with his son, Michael noticed that almost all of the professional stadiums had a partnership with a hot dog company, from Fenway Franks to Dodger Dogs. However, no such sponsorship existed at Houston’s Minute Maid Park. After negotiations with concession officials (led by Aramark), Kiolbassa filled that roster position, and as part of a sponsorship agreement, created the Grand Slam Griller for the stadium. As part of the agreement with the Astros, Kiolbassa is allowed to market and sell the product at the stadium and offer the Griller at retail stores in the region, using the Astros logo on the label of the products. “We put our name in very small print, on the back of the package because we want the Astros brand to be the main brand on the front.”
Besides its more traditional sausage products, Kiolbassa also manufactures its version of a Polish kolache, an Old World-style specialty featuring a skinless, all-beef sausage wrapped in dough that is baked around the sausage, not unlike a pig in a blanket, but with a bovine twist. Kiolbassa ships its sausage to a San Antonio-area bakery, which wraps the sausage in dough and ships them to retail customers. One of the biggest customers is the Valero chain of convenience stores, which are well known in the region for their kolache offerings. The Kiolbassa-labeled kolaches are baked fresh and sold in about 200 Valero locations to date.
Focused on the future
Kiolbassa officials still pride themselves on maintaining relationship based business partnerships, with loyalty as the cornerstone. This explains why the company has worked with the same lenders and insurance companies for many decades. “In fact, I have some brokers that work for me and we made a deal on a handshake; there are no contracts. Our handshake is as good as our word and our word is all that we are as people. You won’t find many companies out there like that.”
Through the years, the company has toyed with the idea of diversifying its product line and it processes a small amount of bratwursts that are vended at Astros games and a limited number of cured, smoked hams for sale around the holidays. “We’ve talked about getting into other segments of the market but our core competency is smoked sausage,” says Johnson. Appealing to a diverse customer base, however, is part of the company’s growth plan, including recent negotiations with officials from the U.S. government’s military bases that resulted in putting Kiolbassa products in all of the commissaries throughout the state of Texas and several more in New Mexico. The company is also on the lookout for more traditional food- service partnerships, but only where the Kiolbassa brand gets top billing, not the foodservice customer- which tends to be rare. Johnson points out that as a foodservice supplier margins are thinner and price, rather than brand is what’s being negotiated. That’s why the company is always on the lookout for partnerships like they have with the Astros and the Valero c-stores. “We love those kinds of deals,” he says. “We’ll foodservice all day long if it means we can get branding opportunities.”
Moving forward, Kiolbassa has embarked on several initiatives to ensure product consistency and increased market share. Part of this campaign includes establishing stronger relationships with its raw product suppliers and holding them to quality standards that have been raised. Pushing its quality agenda has even resulted in the company parting ways with several suppliers in the past year, “because they weren’t living up to the quality that we demand.” Cutting the number of meat suppliers it works with to include just a handful is a reflection of the company’s commitment to raising its quality standards. It has also meant rejecting combos of meat and refusing shipments of casings that didn’t pass muster.
Operationally, Kiolbassa is implementing a sophisticated inventory management system and is adopting Lean manufacturing as a tool to improve the quality of the company’s management and productivity. This also has implications for providers of the company’s raw materials. Part of the future growth will include “picking out the suppliers that can really support us in our endeavor to become ‘Lean.’”
Kiolbassa is posturing itself to fend off its new competition as it evolves from a regional to a national brand.
Johnson says the company is poised for future success. “We’re trying to become more savvy and strong enough that we can hold our own when those national companies come in and try to take a chunk out of our market share.”