Schwans Digital Transformation Strategy

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Schwans Digital Transformation Strategy

Key Takeaways

  • Founded in 1952 by Marvin Schwan, then 23-years-old. Schwan began delivering his family's ice cream product in a 1946 Dodge panel van. The ice cream was delivered to rural families in Minnesota. Today Schwan's is a privately held company valued in the billions and employs over 7,500 people. The company is still headquartered in Minnesota.
  • The company has been using its delivery hubs in the Chicago metro area as an innovation lab for the company's rebranding efforts (noted below). The innovation lab has been working to develop new technologies that can support the customer and employee experience. The company has already begun launching some of these new technologies in select neighborhoods in the U.S.
  • Schwan's has overall low ratings from employees. On Glassdoor, the company has a rating of 3.2 stars out 5 from 1,223 reviews; on Indeed, the rating is 3.1 stars out of 5 from 1,800 reviews. Although the rating of a 3 is technically an 'average' rating, it's a lower rating than would logically be desirable. According to Glassdoor, ratings at these levels mean employees think the company is just 'OK' as opposed to 'satisfied' or 'very satisfied.

Introduction

This report provides an overview of the Schwan's Company, highlights about the company's recent and planned digital transformation efforts, and an overview of some of the company's corporate challenges. These findings are presented below.

Schwan's Company Analysis: Digital Transformation

Company Overview:

  • Founding History: Founded in 1952 by Marvin Schwan, then 23-years-old. Schwan began delivering his family's ice cream product in a 1946 Dodge panel van. The ice cream was delivered to rural families in Minnesota. Today Schwan's is a privately held company valued in the billions and employs over 7,500 people. The company is still headquartered in Minnesota. A full timeline of the company's history can be found here.
  • Annual Revenue: ~$3 billion
  • Funding History: Schwan’s was acquired by CJ CheilJedang Corp. for $1.8 billion on November 15, 2018. No other information about the company's funding history was found to be publicly available. (See the Research Strategy section below for more information).
  • Products and Services: Schwan's key service is its grocery delivery service. The company delivers frozen grocery products directly to customers' doorsteps, including meats, seafood, frozen entrees, potatoes, bread, rice, vegetables, fruit, breakfast foods, snacks and appetizers, pizza, ice cream and frozen novelties, and desserts. Aside from home delivery, the company operates six business segments: 1) retail brands, 2) food service, 3) Schwan's chef collective, 4) strategic partner solutions, 5) global supply chain, and 6) shared services. Retail brands include Red Baron, Tony's, Freshetta, Kahiki, Mrs. Smith's, Edwards, Pagoda, Bibigo, Sabatasso's, and Stilwell. Schwan's food service segment provides food products for businesses, such as schools, convenience stores, and food service companies. The company's strategic partner solutions segment offers third-party manufacturing and packaging of food and beverage products such as ice cream, pies, snacks and appetizers, beverages, sauces, and aluminum packaging. The global supply chain segment houses the company's ingredient-sourcing, manufacturing, and logistics businesses and operates over 40 food-production lines and four refrigerated distribution centers in the U.S. The shared services segment houses the company's corporate functions (i.e. product R&D, management/leadership, strategic development, IT, HR, finance, legal, communications, etc). Lastly, the company's chef collective segment (founded in 2015) is a partnership program with top chefs from around the country to explore innovative cooking techniques.
  • Corporate Values and Mission: The company's core mission is to contribute "to the global community by providing the best value with [its] products and services." The company's vision is to be a global lifestyle company that inspires health, happiness, and convenience. The company's values are exceptional talent, exceptional culture, to be the "first, best, and different", building ecosystems, and shared value. The company's guiding principles are integrity, passion, creativity, and respect. The company also seeks to develop and maintain personalized connections with its customers; the company seeks to earn its customers' trust and to listen and follow up with their concerns.

Digital Transformation Strategic Initiatives

Recent/Past Initiatives:

  • Connecting with Customers: The company has been using digital tools to connect with its customers in ways that best work for the customer. In doing so, the company has selected digital tools that aren't just tactical, but also have a meaningful purpose in helping to drive customer relationships. Email, text, the Schwan's app and website are all key tools the company has been using to connect with its customers.
  • Partnership with TTEC: Schwan's has partnered with TTEC to handle some of its phone and chat messaging. TTEC is a global customer experience company.
  • Innovation Lab: The company has been using its delivery hubs in the Chicago metro area as an innovation lab for the company's rebranding efforts (noted below). The innovation lab has been working to develop new technologies that can support the customer and employee experience. The company has already begun launching some of these new technologies in select neighborhoods in the U.S.
  • AWS Two-Way Messaging: In 2021, Schwan's launched a test pilot with Amazon Web Services to use a two-way messaging service that allows Schwan's to connect with customers when one of the company's mobile stores will be visiting their neighborhood to see if the customer would like them to stop by. It appears this test was likely an early pilot of the 'Digital Door Knock' feature (noted below).

Future Initiatives:

  • Digital Door Knock: The company has been running tests around the concept of a 'digital door knock' which allows the company to connect with a customer about an upcoming delivery and enables the customer to respond back. According to one media article, Digital Door Knock works "by implementing device-driven customer confirmations. [...] Local team members can communicate with customers directly to confirm that the customer is interested in having their neighborhood driver stop by, or confirm if the customer will be at their residence at the time of the scheduled stop critical in the delivery of fresh frozen food. Digital Door Knock also affords the opportunity for customers to make any last-minute changes to their existing order, even after the local team member has departed the neighborhood delivery hub."
  • Digital Rebrand: Schwan's is working to rebrand its home delivery service into a "modern, mobile retailer" called 'Yelloh!'
  • Delivery Route Optimization: The company is also working to digitally transform its delivery services by optimizing delivery routes. The delivery routes will be determined by a technology that takes into account what and when customers are interested in purchasing something, resulting in fewer driving miles and routes that are more efficient.
  • Product Recommendations: In August 2022, the company announced they will be implementing Amazon Web Services machine learning technology to make personalized product recommendations to customers based on their past purchases.

Executive Quotes:

  • "Yelloh is unique in food delivery because we operate a nationwide footprint of local delivery hubs that enable us to deliver our products directly to customers, no matter where they live. Over the past 70 years, we have developed a rich history of trusted relationships and customer connections at the door. We are excited to take those seven decades of experiences, develop innovative solutions and evolve even faster to deliver a quality experience that lives up to our values and exceeds customer expectations. As we transform into a modern, mobile retailer, we want to supplement and improve our services to meet our customers where they are at the door or on their smart phone while staying true to our roots and delivering delicious frozen food and meals with great personal service. - Paul Schwan, executive chairman and CEO.
  • AWS is critical to our digital transformation, and we look forward to harnessing its industry leading cloud capabilities as we enter our next stage of growth. In just a few short weeks with the solution that AWS Professional Services helped us to build, we were able to realize increased productivity, mileage savings and, most importantly, an enhanced, more on-demand experience for our customers. With AWS and their Professional Services team, we are able to access insights that allow us to stay ahead of the competition by optimizing our product innovation processes and delivering premium experiences wherever and whenever consumers choose to engage with our brand.” - Kevin Boyum, Chief Strategy Officer

Tech Stack:

Schwan's Corporate Challenges

Employee Ratings Are Lower Than Desirable

  • Challenge Description: Schwan's has overall low ratings from employees. On Glassdoor, the company has a rating of 3.2 stars out of 5 from 1,223 reviews; on Indeed, the rating is 3.1 stars out of 5 from 1,800 reviews. Although the rating of a 3 is technically an 'average' rating, it's a lower rating than would logically be desirable. According to Glassdoor, ratings at these levels mean employees think the company is just 'OK' as opposed to 'satisfied' or 'very satisfied'.
  • Why It's Considered a Challenge: According to international leadership consultant and coach, Richard Trevino II, "unhappy or disgruntled employees can damage [a] company's culture, resulting in a poor or hostile work environment which often translates to reduced profit margins and dispirited employees. Disgruntled employees can pose a risk to [a] company by providing poor service -- thus turning customers off -- and they can create a negative work environment by creating stress and disharmony within the workgroup. Some disgruntled employees may purposely set out to cause trouble with unethical behavior, ranging from spreading rumors or stealing money and equipment."
  • Company Impact: Although specific data about how these employee ratings are impacting the company's operations (e.g. turnover rates, low productivity, etc) are not publicly available, the most commonly reported complaints about the company, according to Glassdoor, are as follows: 1) long hours, 2) poor management, 3) lack of appreciation/reward for working hard, 4) micromanagement stemming from the upper managerial levels, and 5) lack of work/life balance.

Reputational Scandals & Lawsuits

  • Challenge Description: Schwan's has been involved in a significant number of scandals over the past several years. These scandals include a class action lawsuit against the company for allegedly some of its products (here and here), a lawsuit regarding sexual assault by an on-duty Schwan's delivery driver, and a legal scandal involving the company's charitable foundation, among a handful of other legal scandals.
  • Why It's Considered a Challenge: According to legal firm, Baker Dublikar, "Business lawsuits can be very expensive and may demand a significant portion of [a] company's time. Aside from legal costs, the resources required to manage a lawsuit can be damaging for businesses that are both small and very large. Furthermore, the outcome of legal action could impact [a] company's reputation. If [the company] is unsuccessful in the courtroom, a stigma could follow [the] business around for years, which can result in decreased sales or other difficulties. Furthermore, litigation can have negative effects on crucial business relationships. Often, these disputes are so severe that they result in a permanent rift between business partners, companies, employees, and other types of key relationships."
  • Company Impact: The full extent of the impact these legal troubles have had on the company is not publicly known, however, it can be logically deduced that these scandals not only pose reputational harm to the company but potentially cost the company millions of dollars in financial damages. This is supported, for example, by one of the lawsuits that is seeking $5 million from Schwan's. Another example supporting this logic is a decade-old lawsuit by a former Schwan employee, wherein the employee was awarded $3.6 million in damages. Another lawsuit of the company resulted in a $10 million settlement.

Research Strategy

To conduct this research, our team relied on the company's official website, third-party company databases such as Crunchbase and Zippia, press releases, executive interviews, and media outlets (e.g. Entrepreneur, Legal Newsline). Information regarding the company's funding history was not found to be publicly available. This was determined after analyzing the company's website along with third-party company databases that routinely report this type of information (e.g. Crunchbase). This lack of data appears to be due to the fact that the company is privately held and therefore is not required to publicly announce investor information. The company's press releases and articles published by third-party media outlets were also investigated in an effort to uncover this information, however, no relevant insights were found. Additionally, uncovering corporate challenges the company has faced proved to be quite challenging, as the company appears to conceal most of the specifics and insights about its internal operations. The vast majority of what the company does disclose is positive in nature. And although some of the company's corporate challenges were detailed in case studies of the company, this information was omitted because the case studies that presented them were published by other companies that have already helped Schwan's overcome these challenges (as evidenced here). Despite these challenges, we were able to uncover two ongoing challenges the company has been facing, which include lackluster employee ratings and a number of prominent lawsuits. However, it should be noted that, due to the same issues highlighted above, specific insights and hard data on how these challenges have ultimately impacted the company were not found to be publicly available, aside from some key lawsuit figures. Note: Some of the sources used in this report extend beyond Wonder's standard two-year relevancy time frame, this is either because the information used is historical in nature, still relevant to the given topic, or is an objective fact that does not diminish over time.


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