Company: KLN Family Brands
Year Founded: 1964
Annual Revenue: $500 million (2013, projected)
What It Does: Manufactures snack foods, premium pet foods, and candy.
Serial entrepreneur Ken Nelson knows that eating too much of a good thing can expand the waistline, so he limits himself to Archer Farms’ blue corn tortilla chips with flaxseed, one of the 1,500 snack food offerings his company makes.
That company, KLN Family Brands, is enjoying robust growth. Operating out of Perham (population 3,000) in northwestern Minnesota, KLN Family Brands is one of the nation’s four largest privately owned snack food companies and the state’s second-largest candy company.
Nelson didn’t get his start in the snack food business, though. He and his father, Darrell, nicknamed “Tuffy,” founded Tuffy’s Pet Foods in their hometown of Perham in 1964, when Nelson returned home after graduating from Notre Dame and completing a six-month stint in the U.S. Army Reserves. Seven years later, the father-son team sold Tuffy’s to H. J. Heinz Company.
Ken Nelson next launched Barrel O’ Fun, a snack food company, in 1973. “It felt like it would be fun to make potato chips and snacks and take them to the local store around the corner,” Nelson says. “I started small with used equipment.”
The early years were anything but easy, but Nelson kept at it. Three years after launching Barrel O’ Fun, the company was still reporting a loss. When Nelson’s accountant told him to shut down the firm in the first quarter of 1976, Nelson dug in. By the fourth quarter, the company was finally turning a profit.
Five years later, Nelson sold Barrel O’ Fun to Wisconsin-based G. Heileman Brewing Company. In 1987, after completing his five-year employment contract with Heileman, Nelson started Kenny’s Candy Company, focusing almost entirely on licorice, one of his childhood passions. Initially a supplier of red, black, and chocolate-flavored twists and bites, Kenny’s created the Juicy Twist brand in 1996. Kenny’s also created the Wiley Wallaby brand of Australian-style licorice in 2007. Today, Kenny’s is the official licorice supplier of the Minnesota Twins.
Meanwhile, shortly after Nelson’s departure, Heileman was struggling, and Nelson bought back Barrel O’ Fun in 1988. In 1995, he combined Barrel O’ Fun and Kenny’s Candy into KLN Enterprises, marketed as KLN Family Brands. In addition to Barrel O’ Fun, KLN makes snack products under the Rachel’s and Vic’s brands (among others), and manufactures private-label snacks for Target’s Archer Farms, Supervalu, and Nash Finch (among others).
In 2001, he repurchased Tuffy’s when its owners were about to close the Perham plant. “Tuffy’s has been an unbelievable buyback,” Nelson says. In the eight years, since purchasing Tuffy’s, the company has reached $50 million in sales by offering new premium and super-premium brands of organic pet foods, including NutriSource, Pure Vita, and Natural Planet Organic. Tuffy’s products are sold throughout the United States and in 14 other countries.
In 2011, Nelson started yet another business, Nutheads, which manufactures chocolate-covered snacks and Kookamunga Crunch, a caramel corn with nuts.
Rick Bischof of Bischof Distributing in Bismarck, North Dakota, has been distributing KLN products throughout North Dakota and western Minnesota since 2000. Last year, he bought $7 million worth of products from Kenny’s Candy and Barrel O’ Fun for supermarkets, convenience stores, and discounters, including Walmart.
“We get a very good response to the products, KLN has been a really good company to deal with, and it’s growing,” Bischof says. “The product line has expanded, the territory I sell the products in has expanded, and the products are now in more stores.”
KLN’s campus today consists of the four manufacturing companies Nelson started and has a total of 380,000 square feet of manufacturing and office space. The firm employs 1,300, drawing from a 40-mile radius around Perham. In 2013, KLN expects to report $500 million in sales.