Ruling the Roost

A Door Shuts, A Window Opens

Bob Sparboe was interviewed when he was inducted into the Twin Cities Business Minnesota Business Hall of Fame two years ago, and cited Albert Einstein’s belief that “Every one of life’s experiences is a system of energy. You can respond negatively to positive experiences and positively to negative ones. It’s really up to you.”

Sparboe had plenty of opportunities to test that idea. Egg prices dropped dramatically during his early years in business, and few farmers wanted to raise his day-old chicks to become mature layers. So he started selling 20-week-old hens, called pullets. Disease ravaged the pullet population, and there were transportation problems in moving the birds. So he went into egg production. He needed to reduce his feed costs. So he created his own formula, got mills to produce it on a contract basis, and increased his egg production and lowered his operating costs as a result. He eventually sold feed mixes and nutrition-management services to other egg producers, and in 1970, he made that business into a division of Sparboe Companies called Agri-Tech. (The Sparboe Companies also include two 1987 acquisitions: Center National Bank, which does commercial, retail, and agribusiness banking, mostly in Minnesota; and Center Insurance Agency, which covers agribusiness clients in 15 states. But the “vast majority” of Sparboe Companies’ revenues come from selling eggs, according to Schnell.)

Sparboe’s example showed her that “the door would shut, but a window would open,” Schnell says. “Our whole history is about changing directions in the face of a tragedy or problem of some sort.”

After her father’s death, Schnell found herself focusing on the belief he’d expressed so often. “He always joked that he would live forever,” she says. “He lived his life that way. So his death was really a shock for everybody. But I thought about what he said—how it’s more about how you react to a situation than the situation itself—and I tried to respond as positively as I could and move forward.” When she met with the company’s managers the following Monday morning, her message was “business as usual.”

“I described it like a marathon,” Schnell remembers. “‘We’re in this race, and we’ve had to stop for a minute to tie our shoe, but we need to stay in the race, because if we don’t, we’ll be mowed over by the other runners.’ I think that’s exactly how Bob would have wanted us to view it.”

She doesn’t care to be called an “heir apparent.” (Her two brothers, Garth and Mark, are employed outside of Sparboe Companies, in real estate and the mortgage business, respectively.) But Schnell does say that she and her father had discussed the future of Sparboe Companies, and that she felt well equipped to become CEO: “As part of my dad’s inner circle, I’d been very involved in direction finding for the company, and I’d had a seat at the executive management table for 15 years. So I felt very prepared.”

“Beth isn’t in a leadership role because her father passed; she was being groomed for that leadership role,” says Tres Lund, CEO, chairman, and president of Edina-based Lund Food Holdings, corporate parent of the Lunds and Byerly’s grocery-store chains. Lunds has been a shell-egg customer of Sparboe’s since the early 1990s, and Schnell managed the account for years. “The baton had been passed all but formally,” he adds.

“Any second- or third-generation family-business leader needs to understand the business-to-business values and heritage of their company,” Lund observes. “I see Beth understanding and embracing her father’s legacy, but also having the drive to advance the business at all levels.”

Cheaper by the Dozen

In 2004, Bob Sparboe said that Sparboe Companies’ annual revenues were about $260 million. Schnell won’t give a more recent number.

“Because we’re in the commodity business, our revenues are all over the board,” she says. “It is so competitive. It is a business of percents of pennies—thousandths of a cent.”

Producers’ egg prices have been volatile for the past few years. Unlike other agricultural commodities—milk, for example—“our prices are not subsidized, and [are] set by pure supply and demand” in a cyclical market, Schnell explains.

Earlier this year, she finished a two-year term as chairwoman of the American Egg Board, a producers’ group based in Illinois and appointed by the United States Secretary of Agriculture to promote consumption of eggs. In its annual report, the board says prices “collapsed” in 2005, following “overheated” demand from the high-protein diet fad of recent years. In response, producers had added millions of birds to their flocks, resulting in a surplus of eggs.