Steve Silk (MBA 1978), shown here with his Smith Brothers actors, is a master at fashioning turnarounds.
Photo by Saverio Truglia
Adorning boxes of "Smith Bros" cough drops ever since they took over the family company in 1867, William and Andrew, the firm's bearded, fraternal namesakes, were familiar faces to generations of sniffling, wheezing Americans. But in recent decades, due to a series of indifferent owners and some powerful competition, the brand began a decline into irrelevance. The company's signature wild cherry–flavored product all but disappeared from retailers' shelves; by 2012, annual revenues had sunk to about $1 million.
Enter Steve Silk (MBA 1978), turnaround maestro and patron saint of lost businesses, with a plan to make the Bros a happening duo once again. As an executive at several food companies, Silk had revived other century-old brands such as Jell-O, Lea & Perrins, Hebrew National, and Armour. Based on those successes, New York–based hedge fund York Capital Management asked Silk to become CEO of Smith Brothers after it purchased the company in 2012.
"We're reemerging as a high-margin, health-and-wellness company," says Silk, speaking from Smith Brothers headquarters in Chicago. "We'll continue to make our traditional cough drops, but we've also introduced a variety of over-the-counter 'throat drops' appropriate for use at different times of the day—the evening drop has melatonin, for example—and we're now rolling out a line of medicated lozenges."
A Higher Authority
When Steve Silk took over at Hebrew National in 1999, the company had lost $6 million in the two years since ConAgra acquired it from the founding family. He began with nuts and bolts: exiting underperforming adjunct businesses (e.g., pickles and fresh poultry); shaking up the management team; improving the supply chain (thereby increasing plant productivity by 50 percent); and developing a sequenced regional expansion strategy (which eventually would go national). "Marketing aside, we could have never renovated the brand without these essential steps," Silk says.
But marketing didn't hurt. Silk, a former professional musician who at one time had considered becoming a rabbi, brought back Hebrew National's 1965 slogan "We Answer to a Higher Authority," stuck with the original recipe, and shunned artificial colors and flavors to appeal to an increasingly health-conscious public. A new ad campaign touting all this won a Clio Award. The result? Those $6 million of losses became $25 million in profits in five years.
Asked what's necessary to reinvent a tired brand, Silk explains, "Different skills are required, but notable among them are creativity, analytical know-how, the ability to seize the opportunity, and the passion to make it a crusade. Another key element is that our 150 employees are proudly loyal and totally focused on the company. And it's fun! Iconic brands like Smith Brothers get instantaneous consumer and media respect. The coverage we get—like on the Today Show or when 1,000 people showed up at a Walgreens in Chicago for one of our events—is priceless."
Silk notes that while Smith Brothers products are now found in 15,000 more stores than when he took over, those outlets are mostly regional players. He looks for the company to penetrate major, nationwide retailers this year on the strength of a national marketing effort, a broader innovation agenda, and Smith Brothers' demonstrated success in its current venues, which include Walgreens' 500 Chicago-area stores.
"I'm expecting that we'll triple sales and increase profits eight times over in the next three to four years," Silk says. "In truth, it's difficult to quantify how high we could go."
Steve SilkClass of MBA 1978, Section D