J & J Snack Foods Corp. (NASDAQ:JJSF) manufactures nutritional snack foods and distributes frozen beverages, which it markets nationally to the food service and retail supermarket industries. The Company’s snack food products are soft pretzels marketed under the brand name SUPERPRETZEL and frozen juice treats and desserts marketed under the LUIGI’S, FRUIT-A-FREEZE, WHOLE FRUIT, ICEE, BARQ’S and MINUTE MAID brand names. J & J is a manufacturer of soft pretzels in the United States, Mexico and Canada. Other snack food products include churros (an Hispanic pastry), funnel cake and bakery products. Its frozen beverage products are the ICEE brand frozen carbonated beverage and the SLUSH PUPPIE brand frozen uncarbonated beverage. It operates in four business segments: Food Service, Retail Supermarkets, The Restaurant Group and Frozen Beverages. The company markets its products through a network of food brokers and independent sales distributors, as well as through its direct sales force. As of September 26, 2009, it operated 4 stores.
The company was founded in 1971 and is headquartered in Pennsauken, New Jersey. Over the years the company has shown steady growth internally and through strategic acquisitions. The two most recent acquisitions are Parrot Ice in February 2010, and California Churros, Inc. in June 2010.
J&J was selected by Forbes magazine as "200 Best Small Companies" from 2003 to 2007, qualified as having shown consistent pattern of positive growth during a five-year period, as well as over the last 12 months. Criteria used by Forbes includes sales and earnings growth, return on equity and long-term debt.
J&J Snack Foods reported a 4% sales increase from last year's first quarter, from $149.1 million to $155.6 million. Net earnings were $7.1 million in the current quarter compared to $7.1 million last year. Earnings per diluted share were $.38 for the first quarter compared to $.38 last year. Operating income decreased 5% to $11.0 million in the current quarter from $11.5 million in the year ago quarter. On February 11, 2011 the Board of Directors declared a regular quarterly cash dividend of $.1175 per share of its common stock payable on April 6, 2011 to shareholders of record as of the close of business on March 15, 2011. This is the same distribution as last quarter, which then marked a 9.3% increase from the preceding one.
Over the past five years, J&J Snack Foods has maintained a steady growth in sales, net earnings, and stockholders' equity. The only year they experienced negative net earnings and earnings per share growth was in 2008, which was attributed to world wide economic challenges and record commodity input costs (particularly in ingredients such as wheat and dairy).
The following table contains important financial metric ratio trends over the past five years for J&J Snack Foods calculated with aggregated annual financial data.
J&J has the lowest debt-to-capital ratio of any company in the Packaged Foods & Meats industry, with 0.21%, making them, essentially, debt-free. The debt-to-capital ratio is an important measure of how a company is financing its operations along with some insight into its financial strength, relative to other companies in its industry. This low ratio reveals that the company is more prone to equity financing versus debt financing. This may indicate a stronger financial strength and a decrease in its overall default risk. The next lowest debt-to-capital ratio ranking companies include: Tootsie Roll Industries (TR) with 1.11%, Overhill Farms (OFI) at 1.35%, Skypeople Fruit Juice (SPU) with 8.61%, and Sanderson Farms (SAFM) reaching 8.91%.
For most of the previously displayed metrics, J&J Snack Foods has tended to hover around the industry average over the past five years. Competitors included in this industry comparison include Kraft Foods (KFT), ConAgra Foods (CAG), and Lance (LNCE). Aside from its Operating Margin, J&J has maintained fairly consistent ratios over the past five years with little variation.
Perhaps the most notable distinguishing metric is J&J's Cash Conversion Cycle (CCC), which has fluctuated between 30 and 40 days, unlike the industry average which has fluctuated between about 45 and 60 days. A company's CCC measures how long a firm will be deprived of cash if it increases its investment in resources in order to expand customer sales; it is a measure of the liquidity risk entailed by growth. Thus, this result is consistent with the previous assertion that J&J Snack Foods is uniquely less risky than its immediate competitors.
J&J has a relatively high Asset Turnover compared with many of its competitors, which is consistent with its lower Gross and Operating Margins. For companies in the retail industry you would expect a very high turnover ratio - mainly because of cutthroat and competitive pricing.
Overall, J&J has had a fairly average Return on Investor Capital (ROIC) compared with the industry. The only striking difference comes from ConAgra Foods which returns an impressive range between 20% and 25%. ROIC assess a company's efficiency at allocating the capital under its control to profitable investments. The return on invested capital measure gives a sense of how well a company is using its money to generate returns. Generally, a company that can sustain an ROIC in excess of 15% for a number of years probably has an economic moat (i.e. a large and sustainable competitive advantage). 
Food service was J&J Snack Food’s largest segment in 2010 with 62.7% of companies total external sales. Sales to food service customers increased 5% last year. Food service segment's target customers come from snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theaters; warehouse club stores; schools, colleges and other institutions.
The primary products sold by the Food service segment are soft pretzels,frozen juice treats and desserts, churros, funnel cakes and baked goods. Most popular product soft pretzels marketed under the brand name SuperPretzel as well as other pretzels' brand Pretzel Fillers, Pretzelfils etc.. Frozen juice treats and desserts marketed under the LUIGI'S, Fruit-A-Freeze, Whole Fruit, ICEE, Barq's and Minute Maid brand names. Funnel cakes primarily sell in amusement parks under the brand The Funnel Cake Factory . The Company’s bakery products include primarily biscuits, fig and fruit bars, cookies, muffins and donuts are marketed under the Mrs. Goodcookie,Camden Creek, Readi-Bake, Country Home, Mary B's, Daddy Ray's and Pretzel Cookie brand names, and under private labels. Except for frozen juice bar and ices sales decreased 6% compared to FY2009, sales of other products in Food service segment was growth. Operating income in Food service segment increase from 2009 to 2010 primarily as a result of increased sales volume and lower ingredients and packaging costs of about $2 million.
Frozen Beverages division was responsible for 26.2% of the company external sales, make it second-biggest segment after food service. Frozen Beverages sell to the food service industry primarily under the names ICEE, Slush Puppie, Parrot-Ice and Arctic Blast in the United States, Mexico and Canada.This segment of sales are seasonal because frozen beverage sales are generally higher during the warmer months.
Frozen Beverage and related product sales was growth 8% in 2010. Beverage sales alone increased 13%, Gallon sales were up 10% in the base ICEE business. Service revenue decreased 4% for the year. Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, and increased from 2009 to 2010. J&J snack foods Corp. owned 38,600 and 35,700 frozen beverage dispensers at 2010 and 2009, respectively. Operating income in the Frozen Beverage segment increased 7.7% from 2009 to 2010.
J&J snack food’s Retail Supermarket segment, which contribute 10.93% of companies total external sales in 2010, consist of mostly products like soft pretzel, frozen juice treats and desserts which are much similar with food service segment. The division brands includes soft pretzel SuperPretzel, frozen juice LUIGI'S,Whole Fruit, ICEE, Barq's,Minute Maid , churros TIO PEPE, California Churros and LA Churros. The company’s retail supermarket customers are primarily supermarket chains. Within the retail supermarket channel, frozen and prepackaged products are purchased by the consumer for consumption at home.
Sales of products to Retail Supermarket segment increased 17% in FY2010 and 14% in FY2009. Operating income in the Retail Supermarkets segment increased 51.6% from 2009 to 2010 as a result of net volume increases in new product sale and net of decreased coupon costs and reduced trade spending for new product introductions of new frozen novelty items.
The Restaurant Group sell products directly to public. J&J Snack Food’s Restaurant Group, which generated $847,000 revenue in 2010, less than 1% of total sales, and sales in this segment decreased 33% and 23% in the fiscal year 2010 and 2009 respectively. The decline in sales primarily due to closing of stores in fiscal years 2009 and 2010 and by lower sales in general. J&J Snack Food operates Bavarian Pretzel Bakery and Pretzel Gourmet which is the chain of specialty snack food retail outlets in the Mid-Atlantic region in 2009, while operates two Bavarian Pretzel Bakery retail stores at September 2010. Sales of stores open declined approximately 7% for both years.
J&J snack foods supply's their products to vast variety of business entity's all over the U.S. and North America. To meet their customer demand they have strategically place manufactured and distribution centers. For its snack food products, the Company maintains warehouse and distribution facilities in Pennsauken, Bellmawr and Bridgeport, New Jersey; Vernon (Los Angeles) and Colton, California; Scranton, Pittsburgh, Hatﬁeld and Lancaster, Pennsylvania; Carrollton (Dallas), Texas; Atlanta, Georgia; Moscow Mills (St. Louis), Missouri; Pensacola, Florida; and Solon, Ohio. These centers allow J & J to meet their customer demand and keep their shipping and inventory costs at a minimum. The frozen beverages products require more attention and centers to keep the products in their desirable state. the frozen products operates in 130 company managed warehouse and distribution facilities located in 44 states, Mexico and Canada. This allow's the Company to directly service its customers in the surrounding areas. The Company’s products are shipped in refrigerated and other vehicles from the Company’s manufacturing and warehouse facilities on a ﬂeet of Company operated tractor-trailers, trucks and vans, as well as by independent carriers. The Company’s primary east coast manufacturing facility is located in Pennsauken, New Jersey. Its a 70,000 square foot building on a two-acre lot where soft pretzels are manufactured and also serves as the Company’s corporate headquarters. They also own a 128,000 square foot building adjacent to its manufacturing facility. In which they have constructed a large freezer for warehousing and distribution purposes. The Company’s primary west coast manufacturing facility is located in Vernon (Los Angeles), California. It consists of a 137,000 square foot facility in which soft pretzels, churros and various lines of baked goods are produced and warehoused. Included in the 137,000 square foot facility is a 30,000 square foot freezer used for warehousing.
J & J Snack Foods has developed a national marketing program for its products. For both Food Service and Frozen Beverages market segments, they have deployed a strategy which supply's sellers of their goods with equipment bearing the J & J brand names. They do this by providing ovens, mobile merchandisers, display cases, warmers, frozen beverage dispensers and other merchandising equipment and point-of-sale materials. An example of this would be the frozen drink machines you see in stories like 7-eleven or gas stations, which advertise the J & J brand ICEE. They also participate in more face-to-face marketing strategies by taking part in trade shows and in-store demonstrations. The Company’s ongoing advertising and promotional campaigns for its Retail Supermarket segment’s products include trade shows, newspaper advertisements with coupons, in-store demonstrations and consumer advertising campaigns.The Company develops and introduces new products on a routine basis. The Company evaluates the success of new product introductions on the basis of sales levels, which are reviewed no less frequently than monthly by the Company’s Chief Operating Decision Makers.
The Company’s principal marketing program in the Food Service segment includes supplying ovens, mobile merchandisers, display cases, warmers and similar merchandising equipment to the retailer to prepare and promote the sale of soft pretzels. Some of this equipment is proprietary, including combination warmer and display cases that reconstitute frozen soft pretzels while displaying them, thus eliminating the need for an oven. The Company retains ownership of the equipment placed in customer locations, and as a result, customers are not required to make an investment in equipment.
J&J Snack Foods' marketing strategy could be described as “a growth-by-acquisition strategy can grow up alongside an innovation-centered organic growth strategy”. J&J originally sold its soft pretzels, however basically soft pretzels have no variety, the same shade and size of brown. The companies made and sold its products are pretty much the same way. What’s making their customers differentiate J&J’s products from others on the market? J&J Snack foods are making soft pretzels in different sizes, shapes and forms at the beginning. Many years ago, J&J put its health food oat-bran pretzel on the market, and followed come up with a low-carbohydrate pretzel. They had good taste and attractive price, moreover these innovation products delivery health concepts to the marketplace. Throughout the years, J&J has made several acquisitions, including a rival soft pretzel manufacturer, which helped solidify the company’s standing in the soft-pretzel market, and a frozen beverage and snack manufacturer, which allowed J&J to broach a new market while staying in the snack-food arena. J&J’s growth was based on acquisitions and innovations. The company’s products is going on in its research center, come up with different categories, such as their frozen novelties apart from traditional beverages and snack foods. J&J acquired the frozen beverage such as the stock of ICEE, Whole Fruit and Fruit-A-Freeze to support the company’s business. 
J & J is also involved in global marketing effort to fight hunger. Through their Caring with Cookies campaign the company has joined forces with the School Nutrition Association to raise funds for the fight. The goal of the program is to improve the health, strength, and lives of children around the world. They do this by helping less developed countries build strong and sustainable school feeding programs. The program informs k-12 graders of the worlds epidemic and ask for their support. They will help to raise money by selling sleeves of cookies and accepting donations.
1. Gerald Shreiber - Founder, Chairman, Chief Executive Officer and President
2. Dennis Moore - Chief Financial Officer, Principal Accounting Officer, Vice President, Secretary and Treasurer
3. Robert M. Radano - Chief Operating Officer
4. Daniel Fancher - President, Subsidiary
5. Gerald Garfield Law - Senior Vice President, Divisional
6. Leonard Lodish - Director
7. Peter Stanley - Director
8. Sidney Brown - Director
Gerald Shreiber has served in his current position (above) since JJSF's inception in 1971. He has a 22 percent controlling interest in the company and is the only member on the J&J Board of Directors with more than vote (3). this voting control on the Board has a significant impact; it only takes Gerald Shreiber's vote and one other Board member to control the operations of the company.
In addition to his leadership skills as CEO, Mr. Shreiber has a broad range of experience in production, marketing, and finance. Furthermore, unlike some CEO's, Gerald Shreiber is very involved in almost all levels of the firms production. The performance of J&J is greatly impacted by his leadership and decisions. As further incentive for his dedication to the company, Shreiber also receives a bonus equal to 2.5 percent of the company's net earnings.
The following are ideals that Gerald Shreiber has instilled in to his company (as expressed through his quatations).
1. Ideas can come from anywhere in the organization - "At J&J, ideas are allowed to well up from within the company. The main conduit is a teleconference call every Friday morning that includes members of the company’s management and the research and development department."
2. Constant innovation of your entire business is key if you want to grow in the industry - “You have to reinvent yourself before someone else does.” Either you are going to be proactive in leading the evolution of your business or you are going to be reactive in trying to keep up with the businesses that evolved first."
3. It is essential to have a concrete vision of the future of your business - "That’s why any growth needs well-defined, measurable goals in place that your company can work toward. With defined goals also comes the responsibility of consistently reviewing them, something my management team and I do monthly."
4. Once you've made the decision to acquire another company, it is then that you must change your view from a Financial mindset to a Human Resources mindset - "Acquisitions are like your children, once you’ve made the decision to buy another company, you must consider the people and culture you are acquiring along with the company’s name and product line."
5. You must treat the organization like a team or family - "We recently promoted 8 people to vice president positions, all of whom were promoted internally . . . we also discourage not working as a team."
J&J Snack Foods competes within the Baked Products, Beverages, Nonalcoholic Beverages, Juice, Food, and Canned & Frozen Foods industries.
Demographics, consumer tastes, and personal income drive demand. The profitability of individual companies can vary: while quick-service restaurants (QSRs) rely on efficient operations and high volume sales, fast-casual restaurants (FSRs) rely on high-margin items and effective marketing. Large companies have advantages in purchasing, finance, and marketing. Small companies can offer superior food or service. The industry is labor-intensive: annual revenue per worker is less than $50,000. Restaurants compete with companies that serve meals or prepared foods, including grocery stores, warehouse clubs, delis, and convenience stores. In addition, restaurants compete with home cooking.
J&J Snack Foods direct competitors are:
However, they also compete with:
The Company has several large customers that account for a significant portion of its sales. Their top ten customers accounted for 42%-43% of their sales during fiscal years 2008-2010, with their largest customer accounting for 8%-9% of their sales in 2008-2010. Three of the ten customers are food distributors who sell their product to many end users. The loss of one or more of their large customers could adversely affect the business.
The Company competes against national and regional manufacturers and distributors on the basis of price, quality, product, variety and effective distribution. Many of their major competitors in the market are larger and have greater financial and marketing resources than they do. Though the company is believed to be the only natural distributor of soft pretzels, there are also numerous regional and local manufacturers of food service and retail supermarket soft pretzels as well as several chains of retail pretzel stores. For their frozen beverages, several companies also have the right to use the ICEE name as J&J does. The company is also competing with large soft drink manufacturers for counter and floor space for its frozen beverage dispensing machines. Competition also exists in frozen juice treat and dessert and bakery product markets.
J&J snack food is exposed to the market risks arising form adverse changes in commodity prices, affecting the cost of raw materials and energy. Raw materials are used for production of products which is a large part of variable cost that subject to price volatility and fluctuations due to factors such as weather conditions, global supply and demand or agricultural uncertainty.  The price increases will particularly impacted by increases in wheat and dairy costs because the demand for its principal products such as pretzels, biscuits, funnel cakes and cookies.
(Wheat prices from 2000 to 2010)
In 2007, the costs of commodities began to rise sharply, which had a great impact especially on wheat. For the company’s long term consideration, J&J snack foods not allow margins to deteriorate further. J&J snack foods corporation announced that it will be increasing prices across many of its product lines because of continuing unprecedented commodity cost increases impacting its ingredients input costs. It was J & J's second price increase in a six month period as it attempts to recover more of the commodity cost increases which have been impacting its margins.
As for the milk and sugar commodities, they have had trends that are quite the opposite of one another for probably opposing reasons. Although the decrease in the price of sugar in 2007-2008 was probably due to the global recession, the price of milk increased greatly due in all probability to the scare of diseased cows - thus putting "good" milk at a premium. In the next couple of years following, milk has returned to what would be a more normal price for the commodity. The price of sugar, however, has skyrocketed coming out of the recession - nearly quadrupling its price in just 3 short years.
In FY 2008, J&J’s gross profit as a percent of sales decreased 3.09 percentage points in 2008 from 2007 to 30%, operating income decreased 11% to $43.4 million and net income declined 13% yo 27.9 million.  Again, the major factor impacts J&J snack foods’ net earning was increases in cost of raw materials.