November 2007

Candy Industry's 62nd Kettle Award recipient, Jorge Farber, continues to lead family-owned Madelaine Chocolate Novelties toward future growth, despite facing more complex market dynamics as well as a challenging operational environment.

Whenever anyone calls Madelaine Chocolate Novelties, something rare happens — a real person answers the phone. One question – instead of the dozen or so encountered on automated screening systems – typically gets the caller to the right person.

Should someone ask for Jorge Farber, president and ceo of the Rockaway Beach, N.Y.-based chocolate specialty company, they do have the option of speaking to him in any one of seven languages (English, French, German, Hebrew, Yiddish, Spanish and Italian).

Born in Argentina, raised in France and having studied in the United States (he earned a Ph. D. in psychology), Farber carries a certain continental “savoir faire” wherever he goes.  

Since September 18th, however, the candy executive walks about with another attribute; call it a kettle glow. As the 62nd recipient of Candy Industry’s annual Kettle Award, Farber recalls the emotional roller coaster ride he experienced as if yesterday.

“Even though I had been nominated once before, that doesn’t make a difference,” he says. “No matter how prepared you are and what expectations you have, once your name gets called, you get into a different dimension.

“Yes, you can expect; yes, you can think, and yes, you can hope, but you still don’t know what it feels like until it happens. It’s really an amazing feeling, considering the people who were nominated with me [Editor’s note: Along with Farber, Charles Flavelle of R.C. Purdy Chocolates and Judy Cooley, The Hershey Co. were Kettle Award nominees this year.] as well as the roster of previous winners. I still feel a slight float now and then.”

Considering that it was five years ago that Candy Industry last visited Farber and his team at Madelaine Chocolate Novelties, there have been few changes since then and now.

And while Farber’s personality hasn’t altered much since then — even after being awarded the U.S. confectionery industry’s highest honor — the marketplace and the company have undergone several transformations to make the now a bit more interesting.  

First, Madelaine Chocolate Novelties is in the midst of ushering in the next generation of family executives and managers. The process enables owners Farber, his wife, Vivian, and cousin Norman Gold to focus on more strategic and long-term planning.

In addition to the Farbers’ daughter, Estee, handling international sales as well as contributing to product development, there are three nephews involved in operations: Sam Farber, v.p. of production; Jeremy Kaye, assistant plant manager; and Shea Gold, panning operations manager.  

“It’s exciting and rewarding to see a phased transition to the next generation,” Farber says. “It’s providing me with new motivation, regenerating the energy level.”

Still, at a spry 59, Farber doesn’t see himself stepping away from Madelaine Chocolates anytime soon. Nevertheless, he recognizes that his role of building up the business, both from a sales perspective as well as from an operations viewpoint, has entered into another phase.

“Today’s consumers are demanding quality confections in markets that have traditionally been closed to gourmet manufacturers,” Farber says. “We are known for our use of premium chocolate in the manufacture of all of our products, so we are perfectly poised to take advantage of the opportunities created by consumers’ demands. That’s why the company has now focused its attention on expanding the Madelaine  brand.  Farber continues, “I strongly believe in our product, we’re high quality at a mid-range price. You get your dollar’s worth of product with Madelaine. It’s just a matter of having the right programs, the right presentations to take advantage of some great opportunities.”

Whereas in the past, revenue streams were equally divided amongst branded, private label and contract manufacturing sales, Farber hopes to boost branded products up to 50% within five years. “It’s not that this will diminish our volumes in private label or contract manufacturing,” he explains. “With our expanded capacity, we will be able to accommodate our customers and penetrate the marketplace with our own brand.”

To that end, Madelaine has launched a display program for every season, including Thanksgiving, Christmas, Valentine’s Day and Easter. Filled with gourmet novelties and panned confections, these “stores within a store” enable mass retailers to feature “Your Gourmet Chocolate Shop” in minimal space for maximum returns. “Whenever and wherever they see another Madelaine product, they will recognize that the brand stands for fine chocolate,” Farber says.

The increased popularity of dark chocolate offers Madelaine another opportunity for growth and branding. “The demand for dark chocolate is not a fad; it’s not a transitory thing,” this year’s Kettle winner asserts. “Americans are acquiring a taste for dark chocolate.”

They are also acquiring a taste for dark chocolates that have a higher cocoa content. Both of those trends bode well for the company since — as a chocolate specialty manufacturer — it can meet those demands through branded as well as non-branded products.

“We’ve expanded our line with both dark chocolate items as well as high cocoa content chocolates and watched our sales grow,” he says.

“Our introduction of dark chocolate items, specifically 72% cocoa content, has really been successful,”  says Joan Sweeting, v.p. — sales & marketing. The line features 1.8-oz. bars, mini hearts and panned fruits, nuts and bridge mix. “And for Valentine’s Day 2008, we are launching our famous chocolate roses in an all natural, dark chocolate version,” she adds.

While Farber looks to chart the company’s growth toward more branded sales, its private label and contract manufacturing business continues to grow. How? Investments in new technologies in engineering and confectionery manufacturing have enabled Madelaine to upgrade and expand its lines.

Well-documented in Candy Industry’s article on Madelaine Chocolate Novelties five years ago (June 2002), the company has been one of the leaders in introducing such process innovations as Aasted-Mikroverk’s Frozen Cone concept as well as Theegarten-Pactec’s high-speed foilers.

Today, thanks to those concentrated investment efforts — about $10 million during the past seven years -- the company remains well-positioned to address ongoing demands for more efficiencies.  

Take production of the company’s famed foil-wrapped chocolate roses, a Madelaine icon. “We used to run the roses on a spin-moulding line,” explains Sam Farber, v.p. — production. “We’d produce about 9,000 roses per shift. Each mould would hold about 20 roses. Today, we’ve shifted production of our roses to the Frozen Cone line where we can get 55 roses per mould and produce more than seven times as much per shift, about 70,000 roses.”

Those kinds of improvements remain an ongoing effort, he adds. Sam cites the recent installation of a Carle & Montanari pick ‘n place feed and foiler last year. The unit enables the company to handle a range of filled and solid chocolates that are non-circular in shape (hearts, leaves, cups, etc.) at high speeds — 500-plus pieces per minute.

Again, it’s all about boosting output without boosting cost.

Norman Gold, v.p. & cfo, points out that the company’s younger generation, are now the “hands and eyes on the factory floor.” As a result, he can devote more time to focusing on productivity gains.

“Our goal is to minimize the number of processes involved in making an item” he explains. “Part of that effort involves streamlining the operation. It can be as straightforward as ensuring all necessary materials are staged at the beginning of the line, thereby cutting out additional tasks and steps or as challenging as sharper scheduling,” Gold says.

“We’ve also made large strides in purchasing,” he continues. “Currently, we purchase some items directly from overseas, eliminating the middle man. For example, in packaging materials, we’ve cut our costs between 20-30%.”

Scott Wright, v.p. of corporate development and quality assurance, and Gold’s brother-in-law, notes that the company has embraced the lean manufacturing model, aggressively pursuing the goal of “reducing the number of times a person touches the product.”

Naturally, the gains made in manufacturing only deliver benefits if accompanied by gains in sales. “Jorge recognized that and hasn’t neglected bulking up the company’s sales department,” says Sweeting. She cites the addition of Richard Butler, national sales manager, as a key personnel move, one that helped expand the company’s broker network.

In addition, the acquisition of Fiesta Nut & Confections in late 2002, gave the company a new product segment, panned chocolate items. Since the acquisition, Madelaine Chocolate Novelties has expanded Fiesta’s sales threefold, tapping into the demand for chocolate-covered fruits and nuts.

The company’s technological knowhow and expanded sales and branding efforts have resulted in the development of many new product lines, including bite-sized, milk chocolate confections with a variety of delectible fillings for every season. Sweeting describes the new confections as “creamy peanut butter or smooth caramel, surrounded with a perfectly moulded, premium, rich, milk chocolate shell.”

The seasonal varieties include a host of Gooey Ghouls for Halloween and a variety of jolly Santas and smiling snowmen for Christmas. The Easter eggs, aptly called Hatchers, feature foil designs that are reminiscent of traditional dyed Easter eggs.  In keeping with Jorge’s vision to brand Madelaine’s products, the Hatchers will be packaged in small keepsake Easter baskets, as well as in bulk.

Sports lovers will be able to order peanut butter-filled soccer balls, caramel-filled basketballs and bite- sized, peanut butter filled footballs. Moreover, Farber emphasizes that there are even more surprises in store as Madelaine experiments with new flavors and multiple filling combinations.

Building on its foiled tradition, the company is working on introducing a Madelaine Grand Estate Collection, an assortment of foiled chocolates packaged in a boxed chocolate format.

And more marketing muscle will be used to introduce customers and consumers to the company’s Advent line of chocolate calendars, a long-time “interactive” format that is staging a comeback among younger parents anxious to introduce traditions into their households.

The company is also working on “Wow!” bars, 2.75 pounds of all natural milk, dark or white chocolate bars, containing 44 1-oz. squares cubes that can be broken off for baking or simply snacking.

“It makes for an impressive party bar or as a gift for home bakers,” Sweeting says.

It’s also not coincidental that Jorge was the one who came up with the idea.

Jorge, of course, points to his daughter, Estee, as the person who will provide new product concepts in the future.

“She’s been moving into product development more and more,” he says. Estee herself notes that she’s still learning, although she does point that she helped develop the Hatcher Baskets, “which are really cute.”

What’s most important, however, is that she can spend time “absorbing and learning” from her father.

“I am most impressed by how well he handles himself, by how he’s so ethical in every decision he makes. I want to learn as much as I can from him,” she says.

Those learnings aren’t relegated to the younger generation, however. As Wright points out, the company’s senior management, with Jorge at the helm, no longer has to row the ship. “The company is in a transition phase whereby it can be a more strategic-driven operation.”

Of course, the opportunities afforded are not without their unique challenges. “Today, confectionery manufacturers need ‘exit strategies,’ a euphemism for accepting back products that don’t sell,” Farber  explains. “Twenty years ago, it was a different kind of business. Today, it is a no-risk retail environment. With every sale, wholesalers run the risk of having to offer a credit. It’s changed the equation. One has to be very nimble as well as cautious.”

There’s also been another challenge that Farber and his team have had to contend with, and that’s rising costs, be they in ingredients, packaging, equipment or labor.

“Cocoa prices have gone from $1,400 a ton to $2,100,” he says. “Whereas the Euro was less than a dollar a few years ago, today it’s more than a $1.40. Keep in mind that many things we purchase, such as moulds, foils and machinery come from overseas. Add to that the increases in sugar and milk prices, and you’re faced with some serious cost concerns.”

To address those issues, the company has reviewed how it sources its materials. In addition, Madelaine Chocolate Novelties has turned up its efficiency meter.

“We’ve looked at our labor distribution, our production planning. Our aim is to reduce the per unit cost through increased efficiencies while simultaneously increasing sales,” Farber says.

Given that the company continues to shift its products from bulk items to finished packaged goods, a 60-40 ratio currently, reduced handling and increased throughput loom even larger.

Add to that the demands of today’s post 9/11 environment — an environment that requires much more documentation on everything ranging from Bioterrorism Act compliance to traceability issues, and it’s clear that the business of producing chocolate and confections has, indeed, become more complex.

“It’s definitely more challenging and more stressful today,” emphasized Vivian Farber, executive v.p. and general manager, and Jorge’s wife.

“Customers back then, many of whom date back 50 years and continue to do business with us, were solid,” she says. “They’ve become like family.”

Thus, annual visits to such customers by Jorge and Vivian remain mainstays at Madelaine, partly because of their loyalty, partly because these customers have grown with the company and its products.

The ability to accommodate such accounts alongside corporate clients has enabled Madelaine to tiptoe through a potential minefield of customer-service headaches.

“Our problem is we actually do try to please everybody,” Vivian says. And, along with the rest of the Madelaine team, she applauds Jorge for continuously striving to do so.

At a glance: Madelaine Chocolate Novelties

Headquarters: Rockaway Beach, N.Y.

Sales: $60 million (Candy Industry estimate)

Employees: 450

Products: Chocolate novelties, filled chocolates, moulded and panned chocolate products

Output: 20 million lbs. annually

Plant: 200,000 sq. ft. (15 moulding lines)

Brands: Madelaine, Hatchers, Gooey Ghouls, Love & Kisses, Fiesta, Penny Lane, Grand Estate Collection

Management: Jorge Farber, president & ceo; Vivian Farber, executive v.p. & general manager; Norman Gold, v.p. & cfo; Joan Sweeting, v.p. – sales & marketing; Carlo Volpi, v.p. plant manager; Sam Farber, v.p. – production; Philip Lewis, director, IT engineering;  Scott Wright, v.p. – corporate development/quality assurance; Richard Butler, national sales manager; Leah Kaye, traffic manager; Susan Harris, office administrator; and Chaim Spector, purchasing.