Ushering in a new historyOn November 9th, Berliners, Germans and the world will celebrate the 20th anniversary of the fall of the Berlin Wall - that passionate and historic piece-meal dismantling of brick and mortar by thousands, which provided a prelude to the eventual unification of West and East Germany. As ecstatic and celebratory as that day proved to be in 1989, the subsequent days, months and years following that event once again demonstrated that it’s easier to tear down than build.
The integration process of East German businesses into a free enterprise, capitalistic mode during the next two decades had its share of failures and successes. Few former East German companies, however, have had as rich a history as Halloren, Germany’s oldest existing chocolate factory based in Halle/Saale, just 30 kilometers southwest of Leipzig and in the heart of the former German Democratic Republic (East Germany).
Halloren’s origins date back to 1804 as a honey cake bakery. The company grew from its small-town roots into a sizable chocolate factory and brand. Its famed Halloren Kugeln, cream-filled chocolate-enrobed “buttons,” were developed in 1952. They were fashioned after the buttons worn by local salt miners and have evolved into a regional signature treat, one that’s recognized by nearly every consumer in eastern Germany.
Since its transition into a privately held company in 1992, which was engineered by Chairman Paul Morzynski, Halloren has not only re-emerged as a successful company with a rich tradition for quality chocolate products, it’s established itself as a business model for midsized entrepreneurism - one that’s carved out a double-digit growth path within an extremely competitive segment.
As Klaus Lellé, the company’s ceo points out, “Eighty-two percent of the German chocolate market is dominated by eight great players. The remaining 18% falls between 167 companies.” Halloren is in that pool of 167.
Despite such odds, Halloren posted 38.5 million euros in sales last year, a 16% gain from 2007. The revenue surge stemmed in part due to a “fantastic December” and the purchase of Delitzscher Schokoladen GmbH, a 20-million euro chocolate company that closed its doors in September 2008, explains Lellé.
And while acknowledging that 2009 could prove to be a “hard year,” a combination of recessionary influences as well as anticipated higher cocoa prices, the chief executive foresees Halloren reaching 55 million euros in sales this year. This excludes any possible acquisitions, which the company has acknowledged it is in the process of finalizing. So what’s the secret to such rapid expansion?
Again, there’s no overnight success formula to the company’s recent growth. First, and foremost, it reflects a commitment to build on the company’s heritage, in this instance, the Halloren brand that’s exemplified by the Kugeln. In addition to reinvigorating Halloren’s Kugeln tradition – the company now offers 17 varieties - management has also moved to launch more contemporary product lines within its Confiserie and Chocolaterie business units.
As Lellé explains, “The Halloren Kugeln is a specialty treat that’s enjoyed throughout eastern Germany; we have 98% distribution in this part of the country. Today, our distribution within western Germany is 37%. Obviously, we still have plenty of room for growth there.”
In conjunction with pushing the Kugeln product line into western Germany, Halloren has also made inroads with products from its Chocolaterie and Confiserie divisions. Since 2005, both business units have grown in excess of 19% annually. Today, the two account for nearly two-thirds of the company’s sales (Confiserie, 36%; Chocolaterie, 22%) while the Halloren segment comprises 42% of all sales.
In Chocolaterie, the product range compromises a broad gamut of hollow chocolate figures and chocolate balls, all of which are sold to either confectionery shops and/or chains as well as high-end wholesale confectionery partners such as Feodora and Hachez.
In addition, the company owns five retail shops in and around Halle (a sixth is planned for Leipzig), where it sells such items. The ingenuous designs of the moulded hollow items, coupled with the company’s ability to manufacture them using the latest automated technology, has positioned it well for additional market penetration.
Within the Confiserie division, the company again sees growth potential through innovative products developed under its stable of brands such as Mignon, Weibler, Confiserie Dreher and Maître Paul.
That, coupled with its recent licensing agreement to produce chocolate bars and pralines for Mövenpick Fine Foods, a division of the Swiss-based hospitality and gastronomy group, the Mövenpick Group, has opened a new revenue stream for the company.
“When we signed on with Mövenpick last February, we focused on producing chocolate bars initially,” Lellé says. “Beginning last September, we expanded that effort to nine chocolate bars and three assortments of pralines.” That move has proved beneficial for both partners, he adds.
Moreover, such new product development underlines one of Halloren’s strengths, which – thanks to investing in flexible processing technologies – provides the company with a speed-to-market ability not typically found amongst its midsized competitors.
“We look to introduce between 10 and 12 products a year, with a life cycle ranging between five, eight and 10 years,” he adds. And unlike many other companies whose new product success ratios hover below the 50% level, Lellé touts an 80% new launch success percentage.
One of the keys to such a success ratio is the company’s commitment to investment, both in personnel, infrastructure and processing equipment. As early as 1995, the company constructed new office and production buildings next to the original factory site.
Then in 2006-2007, Halloren invested nearly 7 million euros in another new production building as well as the installation of a Chocotech Frozenshell line.
“Our capital expenditures budget in 2008 and 2009 totals about 2 million euros for each year, with monies last year going to packaging, enrobing and filling lines. This year our investments will focus on packaging lines.”
Today, the company has two main production areas encompassing 4,000 square meters (43,056 sq. ft.) for its Confiserie and Halloren divisions. Within the Halloren production area, Halloren Kugeln production begins with an extruder pumping cream, which consists of fondant, milk powder, butter, invert sugar syrup, aroma and cocoa powder (for versions containing chocolate) into a Winkler & Dünnebier depositor.
The depositor, which operates at 30 cycles per minute, lays a row of 38 centers onto a belt. The belt conveys the centers first under a milk chocolate bath, then through a cooling tunnel, followed by a second enrobing, this time in dark chocolate.
About eight employees typically man the Halloren Kugeln line, which can produce six tons per shift.
Once enrobed, the Kugeln centers head toward a Hatec packaging line. There, depending upon the type of packaging required, boxes are formed and a Schubert pick ‘n place robot places the Kugelns into 125- , 200- or 250-gram boxes.
During Candy Industry’s visit, 12 chocolate pieces were being packaged into 125-gram boxes at a rate of 120 packs per minute. The boxes were then hand-packed, 20 to a case, into cartons.
Adjacent to the Halloren production area is the recently built production area for Confiserie products, primarily pralines. There, a Chocotech Frozenshell unit anchors the production process.
As the first German manufacturer to install a Frozenshell line, Halloren has used the technology to its advantage, both from an efficiency perspective as well as a product development view.
Through the use of ultra-cooled tools, the unit can create thin-walled shells with a minimum of processing steps. At Halloren, the Frozenshell tool measures 600 by 600 millimeters and has 156 metal forms on the plate. Operation begins with the tool plate moving onto a bath of tempered chocolate. The height of the shell is determined by how deep the tool descends into the chocolate.
After dipping, the tool moves onto a transport belt, first depositing a tiny drop of chocolate as a fixing point, then almost simultaneously blowing out the formed chocolate shell onto the belt. The belt then moves the shells toward a leveling roller, which ensures equal height for all shells. After cooling, the shells move toward a Chocotech one-shot depositor. A subsequent Chocotech Pralimat depositor provides the added flexibility of a second filling or special toppings. The shells can then also be enrobed in chocolate to create a typical praline. At present, the line turns out 312 pieces per minute. Currently, the company has four sets of tool shapes: triangle, cup, oval and square.
Within the new Confiserie building, a glass-paneled viewing gallery was built into the production area on the second floor. The gallery allows visitors to see actual chocolate production and serves as a modern counterpoint to the company’s museum, which was expanded in 2007.
In addition to explaining the origins of cacao, from where it’s grown to how it’s harvested, fermented, dried and processed, the museum also houses historical documents, furniture, processing equipment and even past wrappers, tins and boxes tied to Halloren’s history.
One of the most astounding areas within the museum is a “chocolate room,” where 19th century figures wearing chocolate attire are on display surrounded by chocolate walls, furniture, utensils and domestic items - even a chocolate chess set.
More than 100,000 visitors come to see Halloren’s historical museum each year, stopping by the factory store for a 15% discount on a broad range of Halloren products. The museum also houses a small chocolate shop where personalized chocolate lollipops and other items are produced. Even chocolate courses for interested individuals are held twice a week at the museum.
“We can’t afford a marketing budget such as Ferraro’s, which approaches 350 million euros,” says Lellé. Consequently, the museum does a great job of providing an interactive educational forum for the history of cacao and chocolate, while delivering an interactive marketing message for Halloren and its product line, he adds.
In a way, it’s most apropos that the museum is helping usher in a new historical chapter for Germany’s oldest chocolate factory.
AT A GLANCEHalloren Schokoladenfabrik AG
Headquarters: Halle/Saale, Germany
Sales: €38.5 million ($49.5 million)
Employees: 460 (Halloren Schokoladenfabrik AG, Delitzscher Scholadenfabrik GmbH and Weibler Confiserie Chocolaterie GmbH)
Products: Chocolate pralines and truffles, chocolate Kugeln, hollow figures, semi-finished chocolate products.
Brands: Halloren, Mignon, Delitzscher, Weibler and Maître Paul.
Sales breakout: Branded – 84%; private label – 13%; exports – 3%.
Management team: Paul Morzynski, chairman; Udo Eberhardt, vice chairman; Dieter Braun, supervisory board; Klaus Lellé, ceo; Andreas Stuhl, cfo; Michael Josefus, coo; Ralf Schlusnus, v.p. – operations; Tino Müller, marketing director.