Tabasco CEO shares ‘secret sauce’ behind family business

This piece is brought to you by the Prairie Family Business Association.

The locals call it Cajun ketchup.

To the rest of us, it’s Tabasco sauce – the most well-known pepper sauce in the world.

Next year, the brand will turn 150 years old. But every day, CEO Tony Simmons literally starts from scratch.

Simmons arrives at the Tabasco blending area at 9 a.m. “and they will have up to 96 barrels of mash waiting to be mixed with vinegar to start making Tabasco,” he says. “And I’ll check those barrels before they start.”

When “60 Minutes” visited a few years ago, Simmons explained he wants to taste a bit of salt and then wait for the heat to hit.

“Tastes like candy,” he said then.

Success has been sweet for Simmons and the generations before him to make up one of the country’s oldest and largest family-owned-and-operated businesses. Along the way, they have formulated best practices that can apply to almost any family business. Simmons will be a featured speaker March 30 at the Prairie Family Business Association’s annual conference in Sioux Falls.

“We’re kind of a unicorn in some ways,” Simmons says. “To be a fifth-generation business that is still family run and still has a family board is a little different.”

Seeds of success

Simmons’ great-great-grandfather, Edmund McIlhenny, loved to garden and loved to eat. As the story goes, he was given seeds of Capsicum frutescens peppers in the 1860s that had come from Mexico or Central America.

McIlhenny’s wife, Mary Eliza Avery, and her family had settled on Avery Island in south Louisiana. There, he sowed the pepper seeds and loved the spicy peppers they produced.

The diet of the post-Civil War South was bland, especially for Cajun country. So McIlhenny crushed his spicy peppers, mixed them with Avery Island salt and aged a mash for 30 days in crockery jars and barrels before blending it with French white wine vinegar and aging it at least another 30 days.

He packaged it in small cologne bottles fitted with sprinkler fitments, and it became so popular with his friends that the banker decided to test the market.

“At the end of the Civil War, he lost his banks and was destitute,” Simmons said. “He was forced to live on Avery Island in his father-in-law’s house because he couldn’t support his wife and children. As he traveled looking for work, friends and family encouraged him to bring some of his pepper sauce to sell, which he did.”

McIlhenny grew his first commercial crop in 1868. The next year, he sent out 658 bottles at a $1 wholesale price to area grocers.

He labeled the bottles “Tabasco,” a word of Mexican Indian origin believed to mean “place where the soil is humid” or “place of the coral or oyster shell.” McIlhenny patented his product in 1870, and by the end of that decade the sauce was being sold as far away as England.

His oldest son ran McIlhenny Co. from 1890 to 1898 and then resigned to join Theodore Roosevelt’s Rough Riders and help save the snowy egret from extinction with a bird sanctuary on Avery Island.

“We’ve got a lot of stuff going on down here besides making Tabasco,” Simmons said.

On Avery Island

Avery Island, where Simmons lives, is home to 20 acres for growing peppers. Each is hand-picked. The seeds are sent to farmers in Latin America and Africa, who use them to grow 10 million pounds of peppers. They mix them with salt and grind them. Then the mash comes back to Avery Island, to be aged for three years in oak barrels once used by some of the country’s premier whiskey makers.

The sauce is processed on the island, where the company can produce 700,000 bottles per day.

“This is our only production facility,” Simmons said. “Every bottle in the world is made here.”

A map of Avery Island

The “island” is actually a mountain pushed up through the Earth. It’s about 2,200 acres and home to several other family enterprises.

“We’ve been mining salt since 1865 and have had oil and gas production since the 1940s,” Simmons said. “One hundred years ago, we were pretty remote, so we built housing for employees.”

About 180 employees and family live on the island. Many places are weekend or summer homes. There’s also a tourist attraction – Jungle Gardens – an enlarged version of the original bird sanctuary that includes flower gardens, alligators, deer and raccoons living in the hills and marshes.  Each year, 120,000 visitors tour the gardens and Tabasco, and stop at the museum and cafe.

Egrets on Avery Island

Avery Island

Family values

Simmons moved to Avery Island in 2000. At age 48, he was on the board of McIlhenny Co. and had been running a heavy equipment business in North Carolina. He thought he would sell it and consult. His cousin, who was running McIlhenny, said, “If you want to work, why don’t you come work for your family?”

Family members are far from guaranteed a job at McIlhenny Co.

“We’re very upfront with our cousins, from a very young age, not to plan your life around working for the family business,” Simmons said. “We just don’t hire many family. We feel like we can’t afford to fill up the ranks of mid-management with people who may or may not be competent.”

Most senior leaders are not family, but there is a succession system that the family knows, Simmons said.

“If you’re a young family member, and you’re interested, let us know,” he said. “If we hire a family member, it’s under the understanding that if we hire you it’s because we think you have the capability to one day run the company.”

A family manager will mentor the individual, “and it’s also that family manager’s job to decide if you’re continuing to grow in that position. And if they decide you’re not capable of continuing to move up, you will be asked to leave. And if you’re not prepared to work for us under that auspice, then don’t come here.”

Simmons was named president and chief operating officer in 2012, and CEO about a year later following his predecessor’s unexpected death. Simmons’ cousin is chairman of the board.

“We run the company very much like a public company,” he said. “We do audited financial statements with an outside auditor. We do a quarterly letter to shareholders. We do an annual shareholder meeting that is very well attended. We try to be very transparent in what we do.”

The company is an outstanding model for other family businesses, said Stephanie Larscheid, executive director of the Prairie Family Business Association.

“There is so much to learn from McIlhenny Co. and its long legacy of family leadership,” she said. “We can’t wait to welcome Tony Simmons to Sioux Falls to hear his incredible story firsthand.”

Simmons is mindful of the tradition he’s inherited and the future he helps direct. In addition to McIlhenny Co., he is the seventh generation of family to run Avery Island Inc. He’s into his ninth generation of shareholders.

“And 250 employees depend on this business. I’ve got fourth- and fifth-generation employees,” he said. “This is a business. And the family depends on the business.”

He was asked, in that “60 Minutes” piece, what would happen if there were a mega-offer to buy Tabasco.

That would be up to the shareholders, he replied.

But as for the CEO’s recommendation?

“You know, I like owning a family business,” he answered.

The Prairie Family Business Association is an outreach center of the USD Beacom School of Business. To learn more about the organization, visit fambus.org.

Tabasco CEO shares ‘secret sauce’ behind family business

Meet Tony Simmons, the CEO of Tabasco-maker McIlhenny Co., who will speak March 30 at Prairie Family Business Association’s annual conference.

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