Reinvention through innovation: despite the sluggish economy, a number of B.E. 100s companies are winning the battle for market share and profits by retooling their enterprises - B.E. 100s Overview

Black Enterprise, June, 2003 by Derek T. Dingle

If there were a slogan to describe the attitude and activity permeating America's largest black-owned businesses, the tag would be "Rebuilt to Last." For the last few years that maxim has exemplified the spirit of the BE 100s--our ranking of the 285 largest black-owned industrial/service companies, auto dealerships, advertising agencies, banks, insurance companies, investment banks, asset managers, and private equity firms.

A perfect example of this new outlook is the overhaul of Wesley Financial Corp., formerly Wesley Industries Inc., (No. 55 on the BE INDUSTRIAL/ SERVICE list with $65 million in gross sales). A longtime supplier of the automotive industry, the company's father-and-son management team, Delbert and Dorian Mullens, decided to move into a defensive posture, literally. Today, one of Wesley's core products is rocket launchers. "We're out of iron casting," says Delbert of the Bloomfield Hills, Michigan-based company. "We're in manufacturing and defense," adds Dorian. "We've purchased a company that makes rocket launchers, and we're the only company licensed by the Pentagon to sell [them to the Department of Defense]. We've moved from a product organization to a portfolio organization. We are diversifying within multiple industries so that if one industry does you harm, the entire organization doesn't have issues."

The Mullens aren't alone in their strategic direction. To manage in these unpredictable times, BE 100s CEOs have readjusted revenue and profit goals; revamped operations into lean, mean, customer-service machines; and reorganized businesses by creating new products and services or acquiring established entities. In short, they've reinvented their companies through a series of innovative maneuvers.

Has the restructuring worked? Quite frankly, the jury is still out. Last year was among the toughest for the BE 100s. In 2001, the punishing blows of the Sept. 11 terrorist attacks, war, and recession staggered American business. In 2002, companies continued to feel the pain induced by anemic business spending; waning consumer confidence; rising energy prices; and the realization that war, at home and abroad, would have to be factored into near-term business plans. As a result, 2002 revenues for the top BE 100 INDUSTRIAL/SERVICE firms and leading 100 auto dealerships were flat: up $20.9 billion from $20.3 billion in 2001--a mere 3.23% jump.

A considerable number of black entrepreneurs, however, piloted their companies to soaring heights. There were 55 industrial/service companies and auto dealerships that grossed $100 million or more. And 23 of this collective group produced more than $200 million in revenues.

Houston-based CAMAC, a freshman from the 2002 list, still leads the pack with $1.09 billion in gross sales. The performance of the energy producer and distributor made it the second billion-dollar monolith to be included among the BE 100s since TLC Beatrice International Holdings Inc. TLC Beatrice, the massive conglomerate of offshore grocery stores and food manufacturers belonging to late financier Reginald Lewis, exited our ranking in 2000 after management liquidated Lewis' holdings.

A NEW WAVE OF INNOVATORS

This push for reinvention has also produced a number of serial entrepreneurs who once again grace the BE 100s. One returnee, billionaire Robert L. Johnson, sold BET to media giant Viacom in 2000. Over the last two years, he developed RLJ Development L.L.C. (No. 71 on the BE INDUSTRIAL/SERVICE 100 with $49.4 million in sales) through the purchase of Hilton and Marriott hotel properties. When Charles H. James III divested North American Produce from his family-owned enterprise, C.H. James & Co. Inc., in 1999, he knocked it off the 2000 BE INDUSTRIAL/SERVICE 100 list. Two years later, he sold his stake in an online produce supplier for more than $20 million. His latest venture, PrimeSource Food Service Equipment, grossed $139.9 million in 2002 and debuts on this year's list at the 30th spot. At press time, James was in the process of selling his controlling interest in the company.

OPERATING IN THE SLOW LANE

Some lost big in an effort to remake their companies, especially those in the automotive industry. Rising foreign competition, product recalls, poor selling models, and profit-deflating financing deals overtook legions of auto dealers. A number of companies were forced to hawk their franchises in 2002. Much of Mel Fart Automotive Group (No. 2 on the 2002 BE AUTO DEALER 100 list with $353.3 million in sales) was put on the auction block The former megafranchise and largest black-owned company in 1999 skidded off this year's auto list after Farr was forced to sell his stores back to Ford Motor Co. due to stalled sales, internal management problems, and a failed strategy to serve inner-city customers who had bad credit. Farr is now left with a Hyundai franchise and a used-car operation.

GAMBLING DURING TOUGH TIMES

Other BE 100s firms found opportunity despite hard times. Last year's BE Company of the Year, gush Communications of NYC Inc. (No. 14 on the BE INDUSTRIAL/SERVICE 100 list with gross sales of $260 million), grew due to the extension of its Phat Farm men's, women's, and children's clothing lines. "We sold 150,000 pairs of teen colors in just two weeks," maintains CEO Russell Simmons, who says the female-oriented Baby Phat exceeded sales estimates and Phat Classic sportswear line continues to be a best seller. And Simmons recently launched new ventures, including a beverage company and a financial services company for the hip-hop community.