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

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 Farr 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 who had 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, Rush 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.

The Heritage Networks (No. 61 on the BE INDUSTRIAL/SERVICE 100 list) posted a 102% increase in revenue, from $30.5 million to $61.5 million, despite the most severe advertising slump in television history. How was this accomplished? “We actually found a way to benefit from the recession by getting bold instead of retracting and by benefiting from other people’s retractions,” says Frank Mercado-Valdes, CEO of the New York City-based seller of TV syndication time. (Heritage makes its money as commissions when it sells advertising against air time of reruns and original programming.)

While the shaky economy unnerved other companies into canceling their weekend shows, Heritage charged forward in 2002. It launched three original properties — ‘N Gear, Livin’ Large, and Weekend Vibe — through partnerships with Dick Clark Productions; Carsey-Warner, one of the leading TV program distributors; and Vibe magazine.

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