"’Who buys Valentine’s Day hearts? I asked myself," he says. "Well, men do. And what do men like, something solid, like a blue ribbon." Thus, one of the concepts touted amongst retail buyers that year by the company was a red heart with a blue ribbon, Murray says.
In showing the new Valentine’s Day offering, one of the buyers asked Murray whether the company was trying to sell her a package of meat.
"It became known as the meatpacker heart," Murray says with a self-effacing sigh. "That’s when I realized I wasn’t meant for product development."
Murray does, however, admit to having earned a "decent reputation" in executing transactions. After all, since 1993, Murray, (in conjunction with partner Dave Taiclet during the Alpine Confections period), acquired Maxfield's, Kencraft, Dynamic Chocolates, Fannie May Candies, House of Brussels and Bogdon Candy Co.
And despite all the preparatory work involved in preparing for and negotiating such deals, ranging from assessing products and processing compatibilities to performing due diligence and calculating risk assessment economics, the acquisition process doesn’t really end when the legal papers are signed. Rather, that’s when the real challenges surface.
As Murray points out, "It’s about melding different cultures together, which rarely is an easy task." And there are plenty of Harvard Business School casebook examples to cite as proof.
Thus, when Dynamic Confections acquired House of Brussels in October 2006, Murray was both elated and anxious. The company, which was founded in 1983, had evolved into a premium chocolate retailer revered in Vancouver and Western Canada.
Having built its reputation on offering high quality chocolates, the company at one time boasted 19 retail outlets. It also sold to high-end department stores such as Macy’s, Nordstrom and the like.
Unfortunately, in an effort to speed up expansion, the company overextended itself and wound up in bankruptcy.
"Whenever you buy something out of bankruptcy, there’s always a huge risk," Murray says. "You don’t know whether the brand has been tarnished given its absence in the marketplace."
Still, Murray recognized that the House of Brussels brand represented the premium component critical to Dynamic Confections’ continued growth.
Given its reputation in Canada, and mindful of how loyal consumers can be to a brand, Murray wanted to take his time re-introducing the House of Brussels portfolio under the Dynamic Chocolates’ roof.
"We wanted to make sure we did it right," he says.
The man charged with integrating the process was Keith Elliott, president of Dynamic Chocolates. Having joined the company’s sales force in 1991, a mere two years after its founding, Elliott has a history not only with Dynamic Chocolates, but with Canadian confectionery sales.
Acquired by Dynamic Confections in 1999, the company has grown rapidly throughout Canada on the strength of its Botticelli brand, a mid-tier line that competes well against such majors as Hershey and Cadbury, posting double-digit gains annually.
"We’re in every major retailer throughout Canada," says Elliott.
The company also realized sales from its promotional or value brand, Dolce D’or and had a growing private label/contract manufacturing business, one that accounted for more than 30% of its revenues.
For Elliott, the House of Brussels’ acquisition was immediately welcomed, despite the immediate issues that accompanied the purchase.
"Our first responsibility upon acquiring the brand in October 2006, was to assure the buyers that we would get the product delivered for the holiday rush," Elliott said. Despite facing the challenges of incorporating new recipes, new processes and new employees into their existing 55,000-sq.-ft. facility, the company managed to meets its requirements for the season.
Once the dust settled after the holiday season, Elliott and his management team reviewed the line of House of Brussels products and recognized that certain commitments needed to be made to ensure the brand’s heritage as well as future positioning.
In going over the original recipes, it was obvious that the House of Brussels’ reputation for quality stemmed from using only the best ingredients, beginning with Belgian chocolate and continuing with the finest creams, nuts and caramels. The company even employed its own chocolatiers, Elliot pointed out.
By insisting on the authenticity of the recipes, Dynamic Chocolates could reassure buyers that the quality inherent in the name, House of Brussels, remained.
Management at Dynamic Confections and Chocolates, however, recognized that the kind of labor costs incurred by House of Brussels in the past were incompatible with today’s marketplace realities, especially for a brand that posted only $5 million in sales in 2006.
Hence, the need for an integrated sales force to take advantage of the growth in premium and dark chocolate products, Mitchell asserts.
Those opportunities, he says, coupled with the company’s new sales realignment, should enable Dynamic Confections to double, perhaps triple its size in three to five years, pushing it to the $100-million revenue mark.
Such bravado doesn’t come from mere wishful thinking. Mitchell, a long-time sales executive with experience in nutritional bar sales, believes the company’s brands are primed to fuel the growth. And he’s confident that the internal reorganizational moves – such as a lean yet responsive sales force -- can sustain that.
The lean characterization doesn’t just apply to sales, however. The addition of Ray Peterson, a 25-year veteran from Mars Snackfoods, as chief operating officer, signals another investment in expertise by Dynamic Confections.
Having consulted with Dynamic Confections on and off during the past year, Peterson formerly joined the company in mid-January.
"Murray wanted to add someone to the management team with candy manufacturing experience, which was my recommendation," he says. "In the end, they chose me."
With three patents to his name, Peterson fits the bill. By focusing on four key elements – quality, good manufacturing practices, safety and a lean organization – he’s confident that the operations side can deliver cost savings and enhanced profitability to the company.
Already, Peterson can cite several examples of what some may term "low-hanging fruit" moves that are already paying dividends.
"At Kencraft [which produces a variety of premium decorated lollipops and candy canes], we were handling sugar deliveries in 50-lb. bags. By installing an automated sugar handling system, an innovative turnkey system that uses a 30,000-lb. super bag, we’ve brought about labor and ingredient savings."
The system, which enables direct transfer of sugar from a bulk truck into the super bag, doesn’t require a separate filtering system. The sugar is pumped throughout use points in the plant and dispensed, using load cells, on an as-needed basis to production lines.
"Not only did we eliminate manual bag handling, but we were able to get – on average – a 5-cent discount on bulk sugar purchases as a result," Peterson says. "We realized a payback on our $200,000 investment in eight months."
Peterson also foresees Dynamic Chocolates moving over to a bulk handling system for chocolate this year. Currently, block chocolate is melted in one of three tanks (dark, milk and white) and then pumped into the plant’s three moulding lines.
The move would not only cut down on labor, but also provide Dynamic Chocolate with better formats of chocolate, i.e., customized, blended chocolates.
But it’s not just about incorporating ingredient or processing technology, the Mars veteran emphasizes. It’s also about protecting one’s most valuable resources: skilled personnel.
"As a seasonal company, we have to become a ‘breathable’ organization, to expand and contract depending upon the level of sales intensity," he says.
Peterson places a high value on skilled operators, one that he believes the company must nourish as it continues to grow. Thus, he advocates cross-training and job rotation during periods of low activity in the plants.
"Say we have six cooks that work during the busy season," Peterson explains. "During our off period, we’d still retain those people, but assign three of those employees to another area, such as packaging. We’d still pay them their skilled wage, and we’d rotate the packaging assignments with all six cooks to keep everyone’s competencies at high levels. Come the busy season, we still have our highly skilled crew in tact."
Peterson’s mix of lean manufacturing and "breathable" operations bodes well for the future; he expects total savings during the first year of implementation to deliver between $2 - $4 million dollars in cost savings, a result of a 5% to 10% bump in productivity.
But what will happen once all the "low-hanging" fruit is picked?
Smiling, the new chief operating officer asserts that "the benefits of lean will increase. As we roll it out, get it into place during the next two to three years, it will make us a leaner, more competitive operator in the confectionery market."
It’s no surprise that many midsized manufacturers are experiencing difficulties today, particularly if they don’t have the manufacturing where-with-it-all or knowledge base of lean manufacturing, he adds.
"If you’re not changing with the managerial tide, particularly as costs go up, you simply can’t stay competitive," Peterson says. "Our goal is to get better at what we do everyday."
Jeff Zonneveld, plant manager at Dynamic Chocolates, echoes those statements. "It’s all about continuous improvement. Our challenge is to fully utilize the automation we have to maximize efficiencies."
It’s also about encouraging the operators to take more responsibility for the line, for the products. Given the competition prevalent in the chocolate market, particularly with premium chocolates, quality must be the foundation for future growth.
"Our operators monitor the quality on the line hourly, checking for tempering slopes, temperatures, weights, appearances," he adds.
Call it pride of ownership, craftsmanship. It’s an element every well-built company thrives on.
At a glance
a division of Dynamic Confections
Plant: 55,000 sq. ft., three chocolate moulding lines.