July 2005“Life is what happens while you’re busy making other plans.”
John Lennon, English singer and songwriter for the Beatles, 1940-1980.
Candy Industry’s 60th Kettle Award winner, David Hawk, was surprised to receive the recognition this year. Given his personal and business philosophy - one that recognizes the need to embrace change as it presents itself – it’s not surprising that Gertrude Hawk Chocolates looks to another banner year.
Opportunistic? Yes. Entre¬preneurial? Definitely! An obsessive planner? Not so much. Mind you, Dave Hawk, chairman and director of R&D at Gertrude Hawk Chocolates will be the first to emphasize that the Dunmore, Pa.-based confectionery company does more than its share of planning.
“We do a strategic plan every year,” he acknowledges. “It’s important. At the same time, the way our business has grown this past year had nothing to do with our strategic plan.”
As this year’s 60th Kettle Award winner, Hawk’s accomplishments attest to his ability to grow a third-generation family business well beyond his grandmother’s wildest expectations. The company grew 33% during the past two years and fiscal 2004 sales approached $90 million.
Hawk admits that much of Gertrude Hawk’s success has come from responding to the marketplace, in essence, living the plan.
“I’ve always been better at seeing opportunities as they present themselves then choosing the path to take,” he says. He mentions former Beatle great John Lennon and his view on life and planning: “ Life is what happens while you’re busy making other plans.”
“We’ve planned, but we’ve been open to life,” Hawk stresses.
That openness probably best describes the man that emerged winner amidst three other strong Candy Kettle candidates – Dr. Basil Atkinson, ceo of Atkinson Candy Co. and Judson-Atkinson Candies; James Buffardi, cfo for Ferrara Pan Candy Co., and Spaulding Goetze, ceo of Goetze’s Candy Co.
Hawk admits that he was “thrilled to be nominated. And that’s the absolute truth. I didn’t expect to win and was completely flabbergasted, completely surprised when my name was announced.”
His recovery was quick, however, and Hawk graciously thanked his family, colleagues, friends and committee members for the honor at this year’s Kettle Award reception, which was held at the Intercontinental Hotel during the All Candy Expo show.
“It’s a great award,” he continues. “I even remembered meeting Don Gussow [founder of the Candy Kettle Award and former owner/publisher of the magazine] once. But I was young then.”
By today’s standards, Hawk’s still pretty young now; he’s 54. And yet, the man’s a seasoned confectionery veteran, having been involved since he was 6.
“I always had a tremendous interest in the family business even when I was a little bitty boy,” he explains. “I’d come down with my dad to the plant on Saturdays. Of course the business was pretty small then; we only employed about 20-30 people then. After all, there were gas stations then that did more business than we did.” Unless they’re large multinational or regional chains, that’s not the case anymore. Much of that growth has come from Hawk’s appreciation of his father’s entrepreneurial spirit and his ability to act on opportunities.
Upon graduating from Penn State with a degree in business in 1971, the strapping 6’ 4” young man immediately joined the family business. It was a true partnership with his father, he says, one that endured 22 years. During that time, the company evolved from an established family business to a formidable midsized corporation.
Hawk recalls 1982 as one of those critical times where life stepped in and helped reshape the business.
“A good friend of mine asked me whether I had heard that Avon was thinking of selling chocolate in their catalogue,” he says. “Well, when I heard about this, I made it a point to contact Avon. I made an appointment and went to see them about making their chocolate.
“Of course, a large company like Avon had very specific demands and requirements. One of them was whether we could make 25,000 units per day. I assured them we could. The truth is we had never made 25,000 units daily in our lifetime. It was way more than we could bite off.”
Nevertheless, Hawk’s pitch worked, earning the fledging company a project that lasted two years.
“We put all our resources into it and did it well,” he says. “Of course, they drove us crazy. In the cosmetics business, it’s all about how something looks. They really don’t care about the taste.”
The true turning point, nevertheless, didn’t come from getting the account; it came from what the account did to the company.
“The Avon business forced us to become a real manufacturer,” Hawk explains. “I thought we were chasing sales. What happened is that we learned how to put in a second shift, how to set up standards, improve our quality control and put in a real manufacturing line. Becoming a modern-day manufacturer wasn’t the reason we did those things, but that’s what happened as a result.”
After two years Avon decided that food wasn’t really its core competency and opted to focus on cosmetics. But as so often happens to entrepreneurs, another opportunity presented itself. A marketing company involved in the fundraising business came to Gertrude Hawk with a proposal for making chocolates.
As it turns out, Gertrude Hawk had its own fundraising business. “It was my grandmother, Gertrude, who founded the business during the Depression days in 1936, that got us involved in fundraising. She started making chocolates for a small church group, which was seeking to raise money. Back then, it was revolutionary.”
Although Hawk wasn’t going to sell the Gertrude Hawk line of products to another fundraising organization, he was willing to create a new line of 10-12 products for the marketer.
“Five years after we created Chocolate Specialties, it had grown to represent 35% of our volume,” Hawk says.
Today, fundraising, while still a critical component for Gertrude Hawk, particularly in Pennsylvania, New York and New Jersey, accounts for 7% of total sales. The two largest segments – and currently the businesses that hold the greatest growth potential – are ingredients and retail. Each comprises 30% of the company’s sales.
The ingredients business represents new business, coming into the picture only 11 years ago when the company began producing chocolate and compound bits for the ice cream manufacturers. Thanks to internal research and development efforts, Gertrude Hawk was able to offer tiny, filled moulded chocolates/compounds capable of delivering flavor in an extremely cold medium.
That segment has now expanded into bakery, beverage, snacking and foodservice applications. The potential for added growth surfaced about a year ago when – once again - research and development efforts led by Hawk revealed a “new opportunity to expand what’s available to ice cream makers.”
Through panning, the company was able to link together different flavors and textures, thus enabling dairies to add crispness to ice cream. To do so, and remain competitive, Gertrude Hawk committed itself to a Dumoulin automated panning system, a $1.5-million investment.
“There are plenty of companies that have standard panning operations, operating near the borders with low labor costs,” Hawk says. “We can’t compete with that. What we are doing is going after the business in a more sophisticated fashion. And with the automated panning system, we can produce such inclusions as pretzel particles that are coated with a jalapeño cream cheese or honey mustard flavors.”
As exotic as those inclusions sound, Hawk assuresCandy Industrythat they taste great and pack a powerful punch as flavor components.
Bill Aubrey, president and ceo of Gertrude Hawk, concurs. Moreover, the ability to explore and experiment seems endless. He points out that the automated panning system can coat particles as fine as coconut shreds, and do so with consistency and detail.
The capabilities for inclusions and/or toppings not only encompass ice cream applications, but increase product development options in bakery – “toppings on a donut”; beverage – “sprinkles on a coffee”; even snacking and foodservice “milkshakes”.
Ironically, much of these panning ingredient breakthroughs stem from an earlier decision by Hawk to invest in conching/refining equipment.
“We decided to invest in our refining system back in 1985-86, the primary motivator being to make oil-based centers for our meltaways. We wanted certain flavor characteristics and couldn’t get them from suppliers,” he explains.
“When you make caramels and centers, you are able to dissolve sugar in water,” Hawk says. “However, if you are producing chocolate or compounds, the cocoa butter won’t dissolve the sugar particle. Consequently, you wind up with larger particles of sugar. Refining breaks down those particles and makes them so smooth that you can’t detect them on your tongue.”
Noting that most mid-sized companies do not refine their own centers, chocolates or compounds, Hawk believes this capability gives the organization an advantage.
Aubrey also sees it as being “key to our inventiveness. We can mould and now pan a broad range of products while simultaneously taking costs out of the system.”
An example of that inventiveness can be seen in the company’s Frango business [Frangos are mint chocolates sold by the Marshall Field’s department store, which is based in Chicago].
Hawk recalls the day that Marshall Field’s announced it was closing down its Frango production line, which was located on the 13th floor at its flagship store on Chicago’s State St.
“They called me and advised me that the switchover was going to be announced the next day and that I should expect some phone calls from the Chicago media,” he says with a smile. “Well, I thought, why would anyone in Chicago call me in Dunmore, Pa.? These kinds of things [a switch to contract manufacturing] happen everyday.
“Sure enough, the next day I was inundated with calls. I mean the move to shift production was front page news in theChicago Tribune.”
Eventually, the hubbub died down. More importantly, sales increased, thanks in part to an ongoing collaboration between Marshall Field and Gertrude Hawk to develop new flavors. Thus, Chicagoans and Frango Mint aficionados had the opportunity to try a broad range of Limited Edition varieties, ranging from assorted liqueur and assorted coffee packs to Candy Cane, Dreamsicle, Lemon Lime, Cherry and Hot Fudge Sundae Frangos.
It’s that kind of “ideation,” that bodes well for the company’s future,” says Aubrey. The recently appointed president who formerly headed up Kraft’s Chutney cheese division and previously oversaw sales and marketing for its pizza division doesn’t hold back when assessing the company’s sole shareholder.
“Dave and Betsy Holden, the former co-ceo of Kraft, were two of the best people I’ve had the opportunity to work for,” he says. Leaving Kraft, nevertheless, necessitated Hawk to put on his best Northeastern Pennsylvania charm. Thus, when a headhunting firm contacted Aubrey about working for a midsized company, he was a bit leery of leaving a giant such as Kraft. After meeting Hawk and his wife, Annie, Aubrey was soon won over.
It was a combination of the man, the business, and the place, he says. Aubrey points out that he and his wife find the rolling hills and small-town environment wonderful.
“Since he was captured into the business at the age of 10, Dave has a passion for confectionery that’s hard to match,” he adds. “He loves R&D. He has 43 years experience and yet, he’s still a young man.
“Plus, I completely trust the man. He’s a good person; his word is good. Dave’s committed to doing the right thing. In the short term, it’s all right to make less money as long as we’re doing the right thing.”
That said, both men are committed to growing Gertrude Hawk.
“Dave’s skills are more inclined toward innovation and R&D, while I’ve been brought in to introduce more discipline as well as business acumen.”
Aubrey’s immediate aspirational goal is to break the $100-million sales mark in less than five years. He expects to post “high-single digits or low double-digits” this fiscal year, sales that will be driven by the company’s flagship divisions: ingredients and retail.
“We’ve broaden our offerings in ingredient inclusions, “he points out. “We can provide wonderful inclusions, be they moulded or panned products.”
As for retail, Aubrey dubs the future “exciting.” He points out that during the past several years, the company drove growth through geographic expansion. Currently, it has 74 units throughout Pennsylvania, New Jersey and New York. Depending upon the type of store and its location, sales range from $200,000 to $900,000 annually, he says.
Today, the emphasis in investment has shifted toward ingredients, he says, as a way of balancing growth for both. Still, Aubrey believes retail sales growth will average about 3.5% this fiscal year, spurred by research and development and a bit of “guerilla marketing.”
“We’ve introduced our glazed roasted nuts, which are produced in-store, and they’ve proved extremely popular. Moreover, they don’t cannibalize any other products in the store.”
He also cites the company’s dipped strawberries program, which attracts a different kind of purchase, as having grown retail sales significantly.
“To drive retail sales in our larger markets, we have to do it through innovation and new products.”
The remaining aspects of Gertrude Hawk’s business, which includes fundraising (15% of the business), wholesale (7%), Frango mints (7%) and contract manufacturing (10%) also represent opportunities, opportunities that require nurturing.
“We need to continue originating new ideas, simultaneously tightening up the process we have to bring them out to our customers,” he says.
To do so requires a re-investment in both people and processes.
“We have so much to offer to our customers with our R&D team,” Aubrey says. “We need to get them in front of the customer. We don’t do that enough.”
One reason, perhaps, is that they’re kept busy in the plant. On average, Gertrude Hawk spends about $3 million in capital improvements, with 40% dedicated to ongoing maintenance and the remainder to “ideation” he says.
A walk through the company’s 175,000-sq.-ft plant, built in 1992, confirms the commitment. For example, there are 10 one-shot moulding lines in the plant. As Hawk points out, “I don’t think there’s anybody in the country with more capacity. We have produced a tremendous range of products in various flavors and sizes, from baking bits to 6-oz. bunnies.”
And Hawk hopes to do so for a long time. Although he has two sons and two daughters, one of which works in the business as director of marketing, Hawk understands that family succession doesn’t necessarily translate into business success. He, together with Aubrey, look to establish a board of directors that will ensure a strong business plan for the future.
The other driving force behind Gertrude Hawk involves community.
“Dave views the company as a community treasure,” Aubrey says.
Hawk agrees. “Not to sound boastful or anything, but we are an important company in our little town. There should be more companies our size that are locally owned and operated. It’s those kinds of companies that support the community. And it’s been my goal for a long time to keep the company locally operated. I realized that there wasn’t anything a bigger company could offer us, even with their scale.”
Part of that realization stems from Hawk’s insistence on keeping Gertrude Hawk not only technologically current, but sophisticated in its internal affairs as well.
“Back in 1992, I realized that we needed some outside help. So I used a headhunter and we hired David Speakman, a v.p. from ConAgra, as chief operating officer. I needed someone that could blend ‘big company’ thinking and systems onto a small chassis.
“And it worked. We put in a sophisticated MIS [Management Information System] program, put in financial controls, revved up our QC system and improved manufacturing in general.”
Speakman semi-retired about two years, Hawk explains, which led to bringing Aubrey on board as his replacement in 2003.
“After a year, I realized Bill was making all the decisions of president and ceo, so I thought it best to make him so,” he says.
Kicking himself upstairs, so to speak, has also worked out well, allowing Hawk to devote more time to R&D.
“At times, I have to rein him in,” says Aubrey chuckling. That’s alright, though. It’s part of living the plan.
At a glance: Gertrude Hawk ChocolatesHeadquarters:Dunmore, Pa.
Sales: $90 million
Sales breakout: Ingredients – 30%; Retail - 30%; Fundraising – 15%; Contract Manufacturing – 10%; Frango – 7%; Wholesale – 7%
Manufacturing: 1 plant - 175,000 sq. ft.; warehouse – 150,000 sq. ft.
Employees: 325-625 (plant); 450 (retail)
Brands: Gertrude Hawk; Mark Avenue
Retail stores: 74 (Pennsylvania, New Jersey New York)
Management: David Hawk, chairman & director of R&D; Bill Aubrey, president & ceo