Archibald Holds Fast to Decades of Quality
By Susan Tiffany

Like many confectionery companies in the late 20th century, Archibald Candy Corporation has seen its share of change. With a heritage that spans 80 years, the changes it has witnessed internally and externally have been dramatic.

The most recent change that has affected Archibald was in 1991 when it was acquired by the Chicago-based investment group, The Jordan Company.

Unlike many acquisitions, this was not one where the new owners were driven by a cost cutting mentality in order to get a return on their investment. Says President/COO Ted Shepherd, "Jordan is based in Chicago and New York, but the primary group that's responsible for the Archibald Candy business is located in Chicago, so they knew the brand and the products.

"On top of that," he says, "they saw a lot of opportunities in building brands and products in an industry that clearly has a lot of opportunity for innovation and growth."

Unlike other investment groups that have grown through acquisitions, The Jordan Company believes in leaving the management team in place at the time of the acquisition. Says Shepherd, "They believe in the group they have in place and they let them run the business."

That continuity in management has allowed the philosophy of company founder H. Teller Archibald to flourish - "Make the best quality candy possible and always sell it fresh."

Continuity beyond the management ranks has also helped keep Archibald running on a smooth course. Says Rick Lelli, vice president of operations, "One of the strengths of the company is we have tremendously loyal employees. Some of them have worked for the company for more than 40 years. This has been their lives, working in downtown Chicago."

The familial environment that has characterized Archibald for decades still exists despite ownership by an investment group, says Lelli. "That's been a bit of the trick. Jordan acquired Archibald to make sure that we were doing things to be competitive in the marketplace and to protect the quality of the candy while not damaging the culture or the people who have worked here for years. We treat our employees very well and they return the favor by being very loyal to the brand."

Double duty

These days, the workload for management and staff to grow the group, which includes such well-known box chocolate brands as Fannie May and Fanny Farmer, has practically doubled with the added responsibilities of integrating Archibald's most recent acquisitions.

Sweet Factory, a national bulk candy retailer, was purchased in December 1998. Then in June 1999, Archibald bought Canada's leading box chocolate retailer Laura Secord.

Of the latter acquisition, Shepherd effuses, "We couldn't be happier with the management team that's in place. The name has an 80 percent brand awareness, and we've been able to grow that business since the acquisition."

As for the role that acquisitions will play in Archibald's future, Shepherd says, "We acquired the two companies, which doubled the size of the organization in about six months' time. Clearly we plan to selectively acquire as we look forward. In the near term, if the appropriate business becomes available that allows us to either expand into new marketplaces geographically or expand into new channels, we'll absolutely look at that business."

Once the integration of both Sweet Factory and Laura Secord become firmly entrenched, everyone at Archibald will return their full attention to the company's ongoing strategy - growing the existing store base and expanding the availability of the product range in key selling seasons through fundraising, department stores, mail order, and the card and gift business.

The card and gift business has been a gold mine for Archibald and its partner Hallmark. Archibald supplies 5,000 of Hallmark's Gold Crown stores with a co-branded product line that carries both the Fannie May Candies and Hallmark names.

By adding the company's 725 retail outlets to some 12,000 points of availability that their products have during holiday seasons, "and adding our mail order customer data base and business-to-business data base, we reach a lot of people for a company of our size," Shepherd stresses.

Another new avenue for growth is a new concept store that the company opened in Boston last month that combines the strengths of the Fanny Farmer, Laura Secord and Sweet Factory brands.

Since Boston is a Fanny Farmer market (the city where the company was founded in 1919), customers at the new shop can purchase Fanny Farmer box chocolates, and Laura Secord ice cream. Sweet Factory fans will find a section of the store devoted to bulk candies.

"Sometimes when companies cobble three or four concepts together it doesn't necessarily always fit," says Shepherd, "but we're watching this very carefully."

Two more such shops will be open in time for the Christmas selling season - one in Detroit, the other in Chicago.

North of the border

Growth opportunities in Canada, home of the Laura Secord brand, are the responsibility of Jim Waechter, vice president of sales and operations.

Of the employees who work at the suburban Toronto headquarters, Waechter says, "We all have a history with Laura Secord. We know the brand and the goals for the brand. Archibald understood that was a necessity in maintaining the brand value and keeping the business going."

One of the Canadian group's challenges, Waechter says, is driving crossover selling. "We have three distinct customers - chocolate only, ice cream only, and one that does a bit of both. We've spent the past several years increasing the marketing within those two poles to get more crossover business."

"Ice cream brings dual delight" is a catch phrase that illustrates what Laura Secord is doing in crossover selling. Says Waechter, "When a customer buys an ice cream cone, for an extra 50 cents we'll put one of our pieces of chocolate on it. That way we introduce the chocolate and it drives consumption in that business.

"We do 18 million transactions a year in ice cream," Waechter continues. "If we can turn 10 percent of those ice cream-only people into chocolate, we can grow our own business."

A co-branding agreement with the national grocery chain Loblaw's is also strengthening the Secord brand in its strongest markets (the provinces of Quebec and Ontario), and beyond.

The agreement has put Secord shops in two Loblaw's outlets, with more to come. These shops, says Waechter, "Have had great success."

In U.S. retail operations, improved customer service has been targeted by Joe Chipollini, vice president of retail operations and business development, as a growth strategy.

"We've really keyed in on improvement not just of middle management, but also the store managers, and the employees in the store. We've introduced training programs for customer service because we feel that's very important to continued growth of the business," Chipollini says.

"One of the big issues we're confronted with is the pool of people in the retail environment," he continues. "It's very difficult to get good people. Companies that are going to succeed are the ones that are going to get the people, train the people and get dedication to the business. That's one of our key strategies."

A strategy that is designed to bring excitement to customers of Fanny Farmer/Fannie May is anew look. As new gift ideas are developed, thereby broadening the customer base, "We have to freshen up our stores," say Chipollini. "We have made significant changes in the shops, but it's been a gradual evolution. We've gotten away from a sterile look by adding beige walls, wood trim, and cabinets and hutches."

Continuous upgrading

Like Archibald's retail operations, upgrades in manufacturing are continuous, especially in the infrastructure of the 60-plus year old factory.

Despite the challenges encountered with manufacturing in a multi-story facility, not to mention its age, Archibald management is committed to keeping the company in Chicago.

Says Shepherd, "We're a cornerstone company in the city and in this neighborhood. Bringing Laura Secord production in-house, we are around 75 percent capacity (18 million pounds annually). With additional capital investment in this facility we could grow another 25 percent on top of that."

Design and age have not prohibited Archibald from getting maximum use out of the facility, or maintaining the quality of its production.

Right at the very beginning of the process, raw materials like nut meats and dried fruits, which have already been inspected by suppliers, are again inspected by Archibald.

"We add significant cost to our product as a result of what gets done in this room, but we think it's very important," Lelli stresses.

All Archibald's nut meat vendors perform inspections on automated equipment, yet Lelli says, "we do this manual process of at least two passes to assure our customers that they are getting a product without any contamination."

Cherries, pineapple, raisins and other fruits are also manually inspected to guarantee their level of quality.

Archibald's penchant for top quality raw materials extends even to butter - the source from which all Fanny Farmer/Fannie May butter creams flow.

"We receive our butter in one-pound blocks that we unwrap individually. We get more precise control, and we can control the freshness by making sure every block is wrapped," says Lelli.

The principle of freshness extends beyond the factory. If product isn't purchased within 30 days after its production date, it is returned to the factory where its life cycle comes to an end.

"We think that's what makes us different from other companies. Finest ingredients, freshest product means the highest quality products in the marketplace," says Lelli.

The need for flexibility, and continuing the commitment to quality has Archibald employees packing 80,000 boxes each day of Fannie May and Fanny Farmer chocolate.

Because the Fannie May and Fanny Farmer boxes are cupped, it must be hand packed. "Cupping requires very significant hand movement that makes it difficult to automatically pack," says Lelli. "This gives us tremendous flexibility to change our pack outs on a yearly basis if we need to."

With Archibald's acquisition of Sweet Factory, it rebuilt a section of the factory to house a panning department that was part of that acquisition. Ten SKUs (amounting to 850,000 pounds annually) are made there including malt balls, panned raisins, peanuts, almonds, and coffee beans.

Coming on-line next month will be a capital investment as a result of the Laura Secord acquisition - a Rheon KN400 encrusting machine. It will manufacture 200- and 300-gram Laura Secord Easter eggs. Lelli explains, "It has the capability to put two different fillings together, so in the case of Laura Secord eggs, they have a different flavored center from the outside."

A sweet collaboration

An essential ingredient to the success of the transition of Laura Secord production from the Toronto factory to the factory in Chicago has been the exact duplication of recipes by the Chicagoans.

Archibald constructed a test kitchen this year, "knowing we were going to be producing the Laura Secord product," says Lelli. Of particular importance in the line are the liqueur-filled truffles.

"Gerry Meyers, our R & D manager was instrumental in developing these 70 SKUs," which Lelli describes as, "dynamite products." And, labor intensive ones, as well, that require hand decorating with a cake decorator.

But before Meyers and his team even go to full production runs, they started on the bench top making every item in the Secord range. The products then met the palates of a panel of employees who have received formal training in sensory evaluation.

The panel's task was to compare the samples with Canadian-made products. If they got a degree of difference of four or greater, the sample didn't pass, Lelli explains.

"But we had to go further than that," he stresses. "When the Chicago panel said it passed, we then had to have the Canadian taste panel approve the Chicago-made pieces. Once both groups approved, the senior staff had to test and approve. But only after the three groups passed a piece would it go into production."

Not just a candy-maker

Archibald is not only a confectionery company, but a distribution company as well. Some of its biggest investments are in its fleet (25 tractors and trailers).

Like all that the company does, its fleet too, is anything but ordinary. "New trailers have to be specially modified with racking on the inside to accommodate the candy racks so they don't roll," Lelli explains.

From the factory, the fleet transports product to all but 20 shops. The company's distribution center in Philadelphia services 44 shops, and the remainder (260) are served by the Chicago distribution center, near Midway Airport.

Says Lelli of Archibald's investment in the fleet, "We have to continue to do this to support the retail side of our business. We consider it a core competency."

Archibald's lifeblood

Without supply chain management no department in Archibald would run smoothly. The department, headed by Vice President Alan Petrik, is responsible for purchasing, demand forecasting functions, and customer service.

This 20-plus year veteran of Archibald playfully adds, "For fun, I manage construction and real estate for all 740 stores, the leasing and legal activities."

Maintaining quality is the ongoing challenge that Petrik, like Archibald's other managers, faces daily. "We are constantly being challenged to maintain our quality base of employees, and bringing in more quality people as we grow."

Another important goal, he says, is maintaining the strong relationships the company has with its vendors. "We operate on the concept of a three-legged stool, which can be referred to as quality, price and service. Quality, price and service is very important for us because the balance of all three means that the stool will remain standing."

The foundation for growth at Archibald still remains its chocolate. Says Shepherd, "When we get our products in consumers' mouths, we win every time. It's just a matter of appropriately packaging and merchandising products in a location that makes sense at a time that makes sense. We continue to grow our business with that strategy."

©1999 Latini-Hohberger Dhimantec