Michael Ryan didn’t set out to run a chocolate company. Neither did Barry Gasaway, although he immersed himself in the industry earlier than Ryan. When their paths crossed, however, the two recognized the opportunity to revitalize a local icon whose legacy goes back 88 years. And thus, for the past five years, the duo have been intimately involved in turning around the fortunes of Columbus, Ohio-based Maramor Chocolates.
The fact that these two entrepreneurs from different industries have teamed up together and set Maramor Chocolates on a triple-digit growth curve almost defies logic. (Editor’s note: It actually happened at a golf course resulting from a forgotten pair of golf shoes, but we’ll tell that story a bit later.)
Nevertheless, their savvy skills suggest that you don’t need to be born into the industry to capitalize on trends and technology and carve out a successful niche.
Consider these milestones: First, Maramor Chocolates has – through a successful combination of contract manufacturing, licensing/private label business and branded/seasonal items – evolved from a regional manufacturer into a national player.
Second, in venturing into organic confections four years ago, the company has successfully established itself into one of the industry’s fastest growing niches well before other competitors.
Thirdly, with the debut of its Omega-3 chocolate line into 5,000 GNC stores this spring, the company stands poised to spearhead a push into functional confections that many long-established operations have only dreamed of doing.
And this is from a midsized company [Candy Industry estimates 2008 sales between $10 to $15 million] that’s only beginning to build on its momentum.
“Sales percentage growth between 2007/2008 is 300%,” says Ryan, owner and president of the company.
So how did a couple of non-chocolate entrepreneurs get involved in the business and what did they do to resurrect it from the doldrums?
Let’s first focus on the man who purchased the company, Mike Ryan.
It’s clear that Ryan’s Irish heritage – complete with twinkling blue eyes, a ready smile and carrot-colored curly hair - has helped him close more than one sale. But it was neither looks nor luck that drove Ryan, his father and brother, into establishing a successful family business involved in automotive die-casting, a company called Rimrock. Rather, it was a commitment to exceed customer expectations that fostered success.
But even with a 75% market share, it became clear to the family that ongoing globalization was going to whittle away that dominance in a very finite marketplace. With the gradual but constant erosion of clients abroad to China, the Ryans became convinced that it would be wise to sell the business. With the sale of Rimrock in 2000, Ryan became free to take his experience and knowledge elsewhere.
“At first I was thinking of writing a book, something akin to ‘Good to Great.’ Since I’m not as smart as author Jim Collins, my book was going to be From Bad to Good,” he says with a self-effacing smile.
That idea evolved into forming his own private equity fund whose mission would be to facilitate turnarounds. Having watched manufacturing in the United States literally disappear in face of cheaper foreign competition, Ryan sought out industries that were safe from such influences - food, health care and distribution.
“I decided that I wanted to get involved in a business where I could sell my products to 300 million Americans,” he explains. “Simply put, I wanted to be in consumable goods. Even if the economy slows down, people will continue to purchase those products.”
To Ryan, the odds of growing a company from 0.5% to 2% of a market that had 300 million consumers was a better bet that watching a 75% share of a few automobile manufacturers shrink continually.
Within those parameters, Ryan added another criteria; the business had to be local since he and his wife had a young family.
“That’s when I stumbled across Maramor, a chocolate company whose Columbus roots went back to 1920. The chocolate company fit nicely within the food category and the family that owned it was experiencing a tough time.” In 2002, Ryan opted to become involved in his first turnaround, purchasing Maramor and joining the ranks of the U.S. confectionery industry.
Fast forward a year and Barry Gasaway enters the picture. His story tracks a bit differently, although it does have some similarities. As a national accounts manager for Iomega, a manufacturer of removable storage drives, and formerly with the Tandy Corp., parent company of Radio Shack, Gasaway had established an impressive track record in the constantly changing computer sector.
The cut-throat nature of the business, however, had prompted Gasaway to consider other alternatives. As it turned out, it was Gasaway’s mother that indirectly steered him toward the seductive allure of chocolate.
“My mother was a traditional stay-at-home mom,” he explains. “But twice a year she made her own candies and chocolates with my aunt. She would then proceed to sell them, donating the money to charity.”
As Gasaway was getting ready to make some sales calls on computer industry clients, he received a call from his mother. Apparently, sales hadn’t gone as expected and she informed her son that he’d need to purchase 50 lbs. of bulk Easter candy.
Resisting at first, Gasaway finally agreed to purchase the lot and give it away to his clientele.
“In addition to customers, I wound up giving it to my banker, my travel agent, anyone I could think of,” he says. Later that year, as Gasaway was preparing appointments for end-of-the-year visits, a client set the ground rules for some precious face time.
“He essentially told me that if I wanted to get an appointment, I would have to bring some of that same chocolate with me. Otherwise, there was no need to see him, we could get together at the next trade show.”
It didn’t take Gasaway long to call his mother and plead for another batch. That turn of events prompted him to take a deeper look at the confectionery industry.
After doing his research, Gasaway felt confident enough that Columbus, Ohio could support another retail wholesaler.
So in 1989, Gasaway established Noelle’s, which was named after his daughter. Using his mother’s recipes, he hired two candymakers to produce an assortment of creams, clusters and chocolate lollipops.
“My experience in the computer industry taught me that there are three key areas to running a successful business: First, you have to get the product offering, pricing and packaging right,” he says. “Second, it’s critical to get the distribution right. How do you get your product to where it’s supposed to go. And thirdly, you have to communicate what you have. Typically small businesses have a problem with No. 3.”
Of course, communication, together with a creative knack for discovering what customers and consumers want, was Gasaway’s forte. The business gradually grew, with the former computer salesman using his skills to acquire licensing tie-ins to such movies as the “Pink Panther,” “Babe” and the “Flintstones.”
“With licensing, you gain immediate access to the retailer,” he says. Gasaway’s constant drive to grow Noelle’s left him poised to become the sole chocolate supplier for Gerald Stevens, a national floral company that seemed destined for a major growth surge.
Unfortunately, a corporate miscalculation by Gerald Stevens on the impact an early Easter would have on sales, exacerbated by its earlier decision to go public, shook investor confidence. The sales shortfall destroyed its financial underpinning and forced the company into bankruptcy.
“We took a hit on that, with Noelle’s getting stuck with unpaid bills and unusable packaging materials,” Gasaway said.
That’s when Gasaway and Ryan had their encounter on the golf course. Although both had chatted with each other on the telephone, nothing had happened between the two.
A face-to-face encounter, however, prompted a meeting the next day.
“Barry had the industry contacts, distribution network and a line of products we didn’t have,” Ryan explains. “We had the infrastructure.”
A day later after their chance encounter at the golf course, the two had a deal.
It took a lump of coal, however, to prove the true “diamond” value of this “soft merger.” As Gasaway relates, a chocolatier friend of his came over to show him a piece of chocolate that had registered some impressive seasonal sales.
“He brought me this piece of chocolate one day, something he had been playing with at his store. I asked him what it was and he told me, ‘A lump of coal.’ Okay, I said. He then went on to tell me that he had been experimenting prior to Thanksgiving and had come up with this item just before the holiday. He decided to put it out on the shelf to see if it would catch on. He eventually sold 1,700 pieces.
“In looking at the product, I could see what he was getting at,” he says. “However, you have to make an item talk, you need to package it right. Well, I had some count good cartons available. I thought we could easily change the box to look like a chimney and put a grumpy Santa on it. I took it to an ECRM planning meeting and that’s what the buyers immediately focused on. This is our fourth year in handling the product and we will sell a couple of million of these things. In the end, you have to have the product taste as good as it looks and look as good as it tastes.”
Then there’s the challenge of producing it effectively and efficiently.
This is where Ryan’s experience in the automotive die-casting sector paid off. Upon purchasing Maramor, it was obvious to Ryan that the company needed to automate some of its production techniques.
Although Ryan knew something about technology and automation, having been schooled in lean manufacturing, Six Sigma, Kaizen and various other cutting-edge manufacturing philosophies, he didn’t know anything specifically about confectionery processing and technology.
“Well, there was this magazine we were receiving, called Candy Industry,” he says. “I figured the companies that were advertising there were pretty legit, so I decided to investigate.”
Within two year’s time – and $3 million later – Maramor no longer resembled its former self. Within the 22,000 sq.-ft. building, Ryan rebuilt the kitchen area, introducing more melters and new Sollich tempering units. He installed a new Chocotech enrober as well as expanded the packaging area, adding five flow wrappers.
Most importantly, he recruited John Pierson, the former director of operations at Rimrock, to join the Maramor team as its v.p. of operations.
With Pierson’s arrival, Maramor was poised to embrace not only lean manufacturing, but also robotic depositing of complex moulds. It was a matter of transforming a batch and queue system to one of continuous production.
“The key to every process is to add a moving conveyor, then everything falls into place,” he says. Take, for example, the lump of coal production.
“Initially, all the pieces were hand-wrapped,” he says. “Our record for the day was 1,000 pieces. Today, our record for lump of coal production is 80,000 pieces.”
Pierson cites another example, one involving contract manufacturing of chocolate bars for a major confectionery company.
“Originally, we had 24 people on the packaging line,” he explains. “However, by working with the customer and conducting a value stream analysis, which looks at increasing speed and taking labor out, we were able to identify areas where we could make improvements.”
By investing in a carton erector, a case taper and a case date coder, Pierson was able to transfer seven people from that line to other operations.
“We look at every step of the process,” he continues. “Sometimes, it’s simply changing the way a flow-wrapped bar falls on a conveyor.”
In other cases, it is applying some common sense to basic manufacturing techniques.
That kind of thinking led to the robotic chocolate coloring of moulds used to produce chocolate lollipops. Ryan, who had developed a relationship with Nickolaus Koch, a former ABB employee that had spent time at Rimrock, was convinced that “one of the best young engineering minds” could come up with a solution.
Ironically, Ryan had encouraged Koch to purchase his own robotic technology company and had become an investor in Koch’s upstart robotics firm. He was sure that the process of hand painting chocolate colors onto a mould could be automated using robotic techniques prevalent in automotive die-casting.
Not only was the handpainting of chocolate lollipop moulds a labor-intensive process, it required skills not every employee possesses. Moreover, mistakes made by employees can vary from mould to mould. Whenever a robot makes a mistake, it’s consistent and can be easily corrected, Ryan points out.
The Robotec Solutions prototype involved the use of four Fanuc robots with a depositing nozzle and four miniature cooling tunnels. Moulds are placed onto a conveyor that lead to the first depositing area. The robot releases the colored chocolate exactly onto a designated position on the mould.
The mould then moves onto another conveyor which leads out of the robotic cage for a short cooling cycle. It is then conveyed back to the cage for a second deposit. The process is repeated until all various chocolate-colored details are rendered.
An operator takes the mould and then paints over the deposited colors with a final chocolate color. The mould is then placed onto another conveyor that leads to a hand-depositing station for chocolate and stick placement.
Pierson explains that not only did the company adopt the robotic model from automotive die-casting, it also literally solved a depositing challenge by adapting technology used to spray a release agent on moulds for the chocolate lollipop process.
“We couldn’t find a nozzle to do the job of precisely depositing the chocolate onto the mould,” he say. “The nozzle technology used in die-casting atomizes the releasing agent. But all we wanted was an on/off capability, so we developed the nozzle to do that.”
After months of fine-tuning, Scott Swisher, chocolatier, set the Robotec Solutions unit in motion. Not only was labor reduced significantly (50%) but output and quality were greatly enhanced.
Ryan, Pierson and Swisher believe that further refinements can be implemented into the operation, with even the final hand-painting and hand-depositing steps fully automated. Demand, however, will dictate the timing of those investments.
However, such out-of-the-chocolate-box thinking isn’t relegated only to processing technology. It also extends to marketplace strategies and new product launches.
Four years ago, when the low-carb fad was at its peak, Ryan and Gasaway sat down to strategize whether it would make sense for the company to launch a low-carb product. The other option involved going organic.
“It was clear to us that the low-carb movement was a fad,” Gasaway says. “When’s something’s a fad, you have to catch it and then find a way to get rid of it. With organic, it’s more of a lifestyle change. It’s a slower path, but the trend is certainly in that direction. The idea was to jump in early and do the heavy lifting so that as it grows, we grow with it.”
Today, Maramor offers a range of organic dark and milk chocolates. Most importantly, the company’s entry into the organic segment set the stage for its next strategic move, functional chocolates.
While attending a social event, Ryan was approached by Dr. Joseph Maroon, a board-certified neurosurgeon and vice chairman of the Department of Neurological Surgery at the University of Pittsburgh’s School of Medicine.
Maroon, a tri-athlete as well as team neurosurgeon to the Pittsburgh Steelers professional football team, had done extensive research on fish oil, which he viewed as being the best natural anti-inflammatory remedy available. (Editor’s Note: Dr. Maroon has written a book on the subject, entitled “Fish Oil, The Natural Anti-Inflammatory.”)
Conscious of the reluctance of some consumers to ingest fish oil, even if in a capsule, Maroon believed its introduction into chocolate would help promote its use. Ryan indicated he would consider the suggestion.
When Ryan quizzed Gasaway about the possibility of launching such a product, Gasaway responded by saying, “We can’t get started fast enough.”
By double encapsulating the fish oil in powder form, the oil was rendered tasteless. It also allowed the company to introduce a meaningful dose of EPA/DHA Omega-3 essential fatty acids found in fish oil, a full 315 milligrams. Typical fish oil capsules deliver 300 milligrams. In addition, chocolate consumption itself naturally aids in enhancing absorption of fish oil in the digestive system.
Within 10 weeks, the company had its Omega-3 line ready. Fortunately, Maroon was affiliated with GNC, a national chain of retail stores selling supplements, vitamins and other dietary products, serving as a member for its Scientific Advisory Board. Anxious to entice consumers to the benefits of fish oil, he recommended the company sample Maramor’s Omega- 3 chocolates.
By the end of spring, GNC had committed to having Maramor Omega-3 chocolates – available in dark and milk varieties - in 5,000 retail units.
The Omega-3 line gives consumers “the green light to indulge,” states Gasaway while providing the benefits of antioxidants found in dark chocolate and omega-3 found in fish oil. Most importantly, the benefits come in a good-tasting format.
“We only use premium chocolate,” he says.
It’s the same philosophy the company uses for its organic line, Gasaway says. “We’re in the food business, great flavor is our first criteria.”
The national debut of chocolates with Omega-3 was at the All Candy Expo. During the coming months, the company will unveil several other functional chocolates including a “red wine” chocolate featuring resveratrol, an amino acid produced in the skins of grape whenever grapes are under stress. Resveratrol stops the aging process of grapes until that stress is removed. It reportedly does the same for humans.
But at Maramor, it’s not just about creating new branded products. It’s also about creating opportunities for cooperation, be it through co-manufacturing, private label or licensing.
And while Ryan admits he’d like to ideally see his sales mix reach 80% branded, he appreciates and values the role of being an efficient, quality manufacturer for others.
Having come from a industry that created the automated production line, Ryan comprehends how lean manufacturing can foster an ebullient environment for creativity.
Despite many members of the management team being “manufacturing nerds at heart,” there’s plenty of room for Gasaway’s third rule of running a successful business: you have to tell a good story.
In fact, one of the new product launches on the horizon this fall exclusively at Walgreens will be Maramor’s European line, a rollout that truly personalizes Ryan’s experiences in Europe. Based on European recipes, but all made in Columbus, the line features four specialty flavors: English Toffee, Champagne Cream, Irish Cream and Swiss Mousse. Each 5-oz. box also includes Ryan’s story relating to the creation of each chocolate.
It’s a way of bringing European taste at an affordable price, he says. As Ryan, points out, “We’re here to fill niches.”
Sounds like an ideal way to drive growth, even if one’s background isn’t in automotive die-casting.
At a glanceMaramor Chocolates
Sales: $10 to $15 million (Candy Industry estimate)
Plant: 22,000 sq. ft.
Products: Chocolate items
Sales breakout:Contract manufacturing – 33%; private label/licensing – 33%; branded /seasonal items – 33%
Management team:Michael Ryan, president; Barry Gasaway, v.p. – sales; John Pierson, v.p. – operations; Scott Swisher, chocolatier; Diane Myers, director, marketing & customer relations; Rita Harshe, director, accounting & human resources.