Former Candy Industry Kettle Award Recipients provide their perspectives on some of the most challenging issues facing the confectionery industry today.
Since 1946, Candy Industry has been bestowing a Kettle Award on individuals working within the confectionery industry. As founder and publisher Don Gussow remarked in creating this unique honor, the Kettle Award was meant as “recognition of the contribution for ‘great or good’ of the industry, not only on the part of the person selected for the distinction, but of every member of the confectionery field who has devoted himself in whatever measure to make the business of candy making and selling a more profitable and happier one.”
This year, Candy Industry has reached out to Kettle Award recipients, asking if they could respond to four specific topics affecting the confectionery industry. The following individuals — Herman Rowland (1988) Herman Goelitz Candy Co. now Jelly Belly Candy Co.; Richard Palmer Jr. (1991); R.M. Palmer Co.; James Hanlon (1992), Leaf Inc. North America, retired; Duane Fox (1993), Spangler Candy Co., board member; Pat Hurley (2000), Spangler Candy Co.; Jim McGovern (2001) Peerless Candy Co. , now JM Consulting; Sal Ferrara (2002) Ferrara Candy Co., Inc.; David Hawk (2005) Gertrude Hawk Chocolates; William Kelley (2006) Jelly Belly Candy Co.; Gary Guittard (2008) Guittard Chocolate Co.; John Brooks Sr. (2010), Adams & Brooks, Inc.; and Pierson Clair (2011) Brown & Haley, Inc. — responded.
Although their answers may have varied in length; the wisdom remained constant, exemplifying the experience and expertise of those who have devoted their lives to their companies and to the industry. Candy Industry is proud to share their responses and “points of light” with our readership and thanks them for their participation.
[Editor’s note: Responses have been edited for length and style.]
Candy industry: As the U. S. Farm Bill nears passage, once again all efforts at sugar reform have failed. What will it take for the confectionery industry to have a serious chance of convincing a majority of politicians to revamp U.S. sugar policies?
Rich Palmer: Either an act of God or an act of Congress, but of the two, I think God will move faster. This spring I celebrated my 40th anniversary of working at Palmer and being in the industry. During that time, nothing has changed. I believe we would be better off by spending our time and effort elsewhere than trying to reform the sugar program. This is such a political animal. Every state has its own farmer niche; no politician is going to stand up to this lobbying group because it’s such a firestorm.
David Hawk: To be honest, this question hovers a couple of pay grades above my level in the world. On the other hand, I just can’t understand how our sugar polices continue to exist in the light of how many other farm support programs have been eliminated. I think the only way to get Congress to revamp U.S. sugar policies is to mount a campaign making the general public aware of how much these policies cost them.
Sal Ferrara: I believe it will always be an uphill battle. The sugar growers have very deep pockets, much deeper than ours. The reality is that not that many jobs have moved over the borders in our industry because of high sugar prices. The U.S. confectionery manufacturers represent a small percentage of sugar usage, so it’s hard to be heard.
Bill Kelley: The curious case of the U.S. sugar policy must be one of Washington’s oldest oddities. Although over the years Washington has gotten rid of many outdated programs, its overall record is abysmal. This Depression-era program is a real head scratcher. No one seems to know why it still exists. Therefore, PAC money rules the day. Recently, in a rare moment of sanity, Congress eliminated ethanol subsidies because someone in Congress woke up to the fact that tax dollars were being spent in a highly inefficient program. With the highly inefficient sugar program, the age-old argument is that no money from taxpayers is going to sugar growers. However, that does not account for the $4 billion that is quietly lifted each year from consumers’ pocketbooks.
The sugar growers’ main argument is that our sugar policy responds to foreign predatory trade practices and provides a stable price for sugar. However, they seem oblivious to confectionery jobs leaving our country for overseas destinations. The hard candy industry has been especially hard hit. Here are some examples: Lifesavers moved to Canada, Peerless closed its doors, Brach outsourced much of its production to South America. Most likely, none of these jobs will return to the U.S. We need to insure that more erosion does not occur.
Only persistence will eliminate this menace. NCA members need to be certain that their Congressional representatives know their feelings about sugar. NCA’s political issues meeting each fall is an excellent vehicle to take the message to Washington. However, getting the message out is an everyday event. Each new member of Congress must be educated on the destructive nature of the sugar program.
Herm Rowland: The sugar users are going to have to put together Millions of DOLLARS and promote directly to the consumer explaining what this law costs the consumers and how many companies and jobs have moved out of the United States because of the law. We need to point out to each congressman that is blocking the passage of a farm bill what it will take to fix this problem. All the effort for all the years the sugar users have done does not seem to have any effect.
Duane Fox: The U.S. sugar support program contained in the Farm Bill coupled with executive orders to limit sugar imports has a very long convoluted history that began in 1981. It has been a program that benefits a few at a cost to many. We are not going to change the minds of our congressional leaders by just pointing out the inequities. As an industry, we have strived to do this for years without success. Unfortunately, our congressional leaders fail to see, or choose to ignore, the real cost impact on the American consumers of $1.9 billion annually; nor, do they appreciate the “jobs lost.”
To effective challenge the continuation of this program, we need to change the focus of the confectionery industry efforts by relating the program to “jobs.” Specifically, to the number of jobs lost vs. the alleged number of jobs protected. Using the government’s own figures, the program has cost 112,000 manufacturing jobs and that’s not counting the jobs lost further down the supply chain. The alleged number of jobs saved or protected in the sugar industry (with the support program) is less than 20,000. At a time when our country needs more manufacturing jobs, it makes little sense for the continuation of such an archaic costly program.
Jim Hanlon: Regarding the Farm Bill and the sugar situation, we are like the guy who brought a knife to a gun fight. As long as the growers have and use a massive PAC [Political Action Committee], we are not going to get our representatives to go against them. In short, prospects are not good.
John Brooks Sr.: If there were an easy answer to this one, it would have been fixed long ago. I certainly don’t even have a half-baked suggestion. We have done a lot.
Jim MGovern: We need a new government with representatives that will respond to their constituents’ needs without the focus on chasing financial incentives. A return to doing what is right for the country, without pandering to the “current” popular event but back to what is important and fair! We are a country of free enterprise that is the most regulated in the world, protecting our food sources as well as our public. Renegades such as the peanut debacle of PCA are an example of how regulations can fail when food industry owners/operators ignore what is right. Regulations and laws need to be followed by our manufacturers as well as our regulators, lawmakers and enforcement entities.
Sensitivity needs to return to the moral and ethical standards our country was founded upon and be owned by all of us, honoring our commitments and what is true and right. As Americans, we compromise or dilute to assuage our opponents rather than say no when it needs to be said and meant. Those same standards that guarantee our freedoms require our responsibility to uphold them and abide by the laws we elect our representative to write.
It is our responsibility to hold our government responsible for what is written as it applies to our workplace, markets and corporate responsibility for our employees and goods manufactured.
Pierson Clair:It is possible for sugar to become a free market commodity once again through the unified efforts of all sugar users in the United States. This effort, like many changes of the legal structure of our country, will require many years of coordinated focus. In 1934, the federal sugar program, named The Sugar Act, was enacted. This federal act controls the importation of sugar by tariff rate quota. The National Confectionery Association, the trade magazines, and the Coalition for Sugar Reform have done an exemplary service for the consumers of the United States by working to remove this artificial cost placed on sugar. Every member of the confectionery industry should engage in this debate to remove these additional costs on sugar in the United States.
Pat Hurley: It will take a grass roots push to Congress from the people. When the consumer realizes what this is costing them, then they will cause Congress to act.
Candy industry: As a result of increased commodity prices, U.S. confectionery manufacturers have had to squeeze costs out of the manufacturing process and the supply chain. What steps have you taken to ensure your products remain competitive?
Rich Palmer: We have taken three basic steps to remain competitive. First, we’ve absorbed some of the higher costs and worked on becoming more efficient. Second, we’ve downsized our packaging. And third, we’ve put in minor price increases. With regards to automation, we’ve invested heavily over the past few years to improve productivity. As a result, our current capital expenditures this year reflect ongoing improvements. Also, given the seasonal nature of our product line, we typically don’t have long runs like other companies. Given the shorter production runs, our criteria for capital improvements are different.
David Hawk: We’ve worked on reducing scrap and increasing yields, making the most of more expensive ingredients. We’re also looking at installing some new equipment that will increase our efficiency. However, we haven’t gained enough savings from those measures to avoid increasing prices.
Sal Ferrara: The reality is that higher commodity pricing leads to new retail price points, which in the long run actually works to our benefit. Once these new price points are established, they stick. The consumer accepts the new cost of the pleasure to enjoy our goods.
Bill Kelley: Jelly Belly Candy Co. considers itself to be an American manufacturer and as such does everything it can not to export jobs. But in order to stay in this country we must drive our costs as low as possible. We continue to invest in labor saving machinery in our factories while reassigning workers in order to hold steady on jobs. Most of our efficiencies in the past few years have come in packaging. Historically we have been a bulk candy company. We have been investing in upgrading packaging equipment, not only because we now do more packaging, but because the latest machines get the job done faster and better. The results are worth the investment.
Gary Guittard: We continuously review our operations and response time speed to raw material price changes. Nonetheless, it’s important to fight the urge to change product specifications and enter the slippery road of incremental degradation.
Herm Rowland: We have done three things: 1. Automate; 2. Automate;
3. Automate. Also what helps us is an increase in pound sales through selling more of what we make every day and launching very good new items. By increasing our pounds per man hour, we increase our output, which reduces the cost of our overhead, allowing us to offset increasing costs.
John Brooks Sr.: We always squeeze costs out of processing and the supply chain. I don’t know of any novel approach to commodity cost fluctuation. That’s always with us.
Duane Fox: Squeezing out costs today in manufacturing and in the supply chain is a challenge. It requires teamwork trying to find the best right answers through win-win understandings with suppliers. Manufacturing today requires significant investment in new technology and equipment to increase the productivity opportunity of employees. One has to invest in new technology not just on the manufacturing floor, but throughout the organization. Squeezing out costs also requires working with new and established suppliers to find the best right answers that will add value to your product.
Jim Hanlon: To remain competitive, I suggest forming long-term partnerships with key suppliers. If they are comfortable that we are in this together, they will share information and want us to be successful.
Pierson Clair: The significant price increases for most of the confectionery industries’ raw material commodities have proven to be a major challenge to all manufacturers. In order to offset some of the increase in costs, our company’s solution was to increase throughput. Our engineering department has done a wonderful job of improving our efficiencies.
Pat Hurley: To remain competitive, we are looking at always providing something extra in the way we do things, whether it’s addressing allergen issues, product safety or producing kosher items.
Candy Industry: Most recently there’s been an uptick in new product launches by the confectionery industry. Are you currently focused on increasing the number of new product launched this year? What is the focus of your new product launches: Cleaner ingredient label; innovative concept; improved or channel-focused packaging; or new flavor trends?
Rich Palmer: We typically introduce 15-20 new products every year. We’ll probably do the same this year, with a mix of seasonal and everyday offerings. Given the commodity increases, it’s become harder for us to roll out new products and still hit a certain price point while providing value to the customer. As mentioned earlier, we’ve been involved in reducing our packing, which lowers our costs and helps the environment.
David Hawk: We are continuously introducing new products, while hopefully discontinuing a similar number of poor performing items. And we’ve definitely increased the number of new products we develop. The two biggest drivers of new products are cleaner labels and new flavor trends.
Sal Ferrara: Our category is all about variety. Variety translates to new products, innovation, trendsetting or following. We recognize this and adhere to the strategy.
Bill Kelley: At Jelly Belly Candy Co., new products and product innovation are vital to our success. In 2006, we were recognized as having launched the most new items (non-chocolate chewy) of any U.S. company. We are launching a number of new products this year, each with a different goal. This summer we will introduce a new gift bag line for the specialty trade, which is intended to appeal to consumers looking for a more traditional candy gift.
We are also introducing two products that blend candy and games: Uno and Apples to Apples are fun games that have been around, but are now more exciting with the inclusion of Jelly Belly jelly beans and Jelly Belly-themed playing cards.
Both the new gift bag line and the card games are good examples of leveraging well-known brands through licensing and taking candy into a new use-occasion: entertainment.
We have also been active in securing licenses with other brands, such as Sunkist, Snapple, Hello Kitty and Peter Rabbit. We believe in the power of two strong brands working together.
Our recentSunkist re-launch is also an example of “cleaner ingredient labels” because we re-launched with all natural ingredients. I think consumers are actually reading ingredient labels these days.
With regard to flavor trends, we pay attention to them but are never trendy. We prefer that a flavor be well-known enough to be recognized so that our consumers are amazed how closely our bean matches the real thing.
Gary Guittard: We have many present customers either making new products that address the aforementioned categories as well as new customers following the same path.
Herm Rowland: We have introduced new products and new packaging to catch the interest of the consumer. We only put out new products that feel right in our guts. If we are not excited about the products and packaging, it won’t work well in the market. You have to have a WOW factor or it won’t be successful. We find holes in the market where we are not doing well and fill them with great products.
Duane Fox: In years past, manufactures would run new products up the flag pole just to see how they would fly or stick; not today! Manufactures cannot afford to have failures in the market place and cannot risk tarnishing an established brand. Today, it is all about market study, venting buyers, striving to know where the customer is going and understanding their desired outcome. This is followed by analyzing sales, marketing and cost data; looking for that edge in successfully bringing a new product to market. It is, indeed, a much different challenge today. Though it is challenging, at the same time, there are opportunities and rewards for manufacturers that truly do their homework.
John Brooks Sr.: Yes, we are currently focused on launching new products. That’s always important, for all the reasons noted as well as others. We will always be doing that.
Jim Hanlon: New products. I feel there not enough truly innovative products. Too many line extensions and me-too items.
Pierson Clair: As Brown & Haley approaches its 100th anniversary, our celebration will take many forms. Our first initiative has been to increase the family of ROCA buttercrunch to seven outstanding flavors. This summer and fall we will be adding Dark ROCA buttercrunch and Dark Chocolate Peppermint ROCA buttercrunch. These two new members of the family will give the consumer more variety. Both of these products being enrobed in dark chocolate capitalize on the healthy trend associated with dark chocolate involving antioxidants and flavonoids. Additionally, we have done a complete packaging redesign, integrating our famous ROCA buttercrunch pink with a distinct color for each of the seven ROCA flavors. This new packaging will be available in the fall of 2012.
Pat Hurley: We look at providing a clean wholesome treat that can be enjoyed by all ages by focusing on improved packaging and new flavor trends.
Candy industry: What do you believe is the most pressing issue facing the confectionery industry? Also, what’s the most promising opportunity that you believe awaits your company?
Rich Palmer: Childhood obesity, as related to dietary standards promulgated by the government, is and will be a major challenge for us. The confectionery industry, together with several other segments, is in the government’s crosshairs. Although we’ve always maintained that candy makes a great treat in moderation, there are others – as seen recently in New York City – that would like to shrink serving sizes in the name of protecting consumers. Candy or sugary snacks could be next.
With regards to opportunities, those lie with new products. Oh yes, we also would like to see a later Easter.
David Hawk: I think the biggest long-term challenge facing the confectionery industry is the sustainability of the key ingredients we use, namely cocoa, coconut oil, and palm, with cocoa being the biggest issue. Picking the most promising opportunity is a tough one. We have found that there are lots of opportunities out there. You just have to stay alert as they present themselves, and move quickly to take advantage of them. Sometimes easier said than done!
Sal Ferrara: Consolidation of the marketplace and customer base is becoming a bigger issue for the smaller manufacturer. This trend plays into the strength of the bigger manufacturers. So this can be the answer to either question depending on your size.
Bill Kelley: In my mind, the biggest threat to our industry remains the health issue. Obesity is the number one health concern in America. I don’t believe that we are a large part of the problem, but the fact that no one needs to purchase candy works against us. Because we are fun and taste great, we must be causing this problem! The fact that candy contributes only a small percentage of calories to both adult and children’s’ diets ameliorates the problem, but does not stop us from being a target of activists.
We have wisely moved away from positioning candy as a nutritious food (implying daily consumption) to a treat (implying occasional consumption). One can hardly find per capita consumption numbers any longer, which is a good thing. Candy is a calorie-dense product. We cannot change that, but we can work around it. Smaller portion sizes are a good concept. Some manufacturers are offering lighter versions of their current brands, such as wafers in chocolate bars. The trend toward more all natural ingredients will help our cause.
The fact that certain health officials say that moderate consumption of dark chocolate and cocoa are positively associated with cardiovascular benefits, is a good thing. Consumption of dark chocolate is up as a result.
There is little doubt that artificial colors will be under increasing attack in the coming years. Even if government regulation is unchanged, the consumers will demand that their products be made with ingredients that fit their definition of all-natural.
The continuing problem of child labor in West Africa will be with us for many years. Significant progress has been made, but this is such a sensitive and emotional issue that it must be monitored constantly.
Gary Guittard: The most pressing problem in deflationary times is making compromises to the product quality. Our opportunities are presented to us by our customers; this gives us a great view of the industry. Unfortunately, I’m not at liberty to say what our customers are up to.
Herm Rowland: The most pressing issue is President Obama, socialism, government interventions in our business and massive overreaching regulations. We cannot concentrate on our business. We have to keep our mind occupied with what the government is going to do next. Regulation, Regulation, Regulation. Tort reform. We are being sued for the craziest things on a constant basis. The attorneys that we call corporation chasers are really making a mess out of business. The laws have to be changed.
We can’t wait for President Obama and his czars to be gone. This will save the country and help business get back on track to turn this country around. This country will come roaring back under a capitalistic and conservative leader.
Duane Fox:In my judgment, the industries’ challenges are perhaps its greatest opportunities. The consolidating channels of product distribution are a challenge, as is product sustainability; however, it also represents opportunities to be creative. Internet product sales and distribution is a challenge, but again it is an area of great opportunity. It requires an open minded-flexible management style in searching for the best right answers with discipline to corporate values. Companies with such management styles will survive the challenges presented and convert them to opportunities. It is called real growth!
We should all be reminded of a quote from Winston Churchill, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”
John Brooks Sr.:I am not sure there is a pressing issue looming, which is going to put our industry out of action. There are many issues, though. Take your pick.
Jim Hanlon: The most pressing issue affecting the industry is the continued growth of a “nanny state.” Politicos and “do-gooders” who wish to regulate what we eat and drink to match what they think (in their wisdom) is suitable are a real concern.
Jim McGovern: The U.S. food industry competes in a highly regulated industry against global competitors that operate in an environment with fewer regulatory requirements, poorly compensated labor forces and less-that-satisfactory working conditions. The U.S. market is demanding third -party inspection of U.S. manufacturers -- at great additional cost -- over and above the Federal Food and Drug Administration requirements. The cost of the guarantee for the United States being and having the safest food supply in the world is shouldered by those who employ our citizens in the safest manufacturing environments. All these costs are pushing enormous pressure on our manufacturers and make it increasingly difficult to compete. The playing field is NOT level for the U.S. food manufacturer!
Pierson Clair: We are constantly looking for skilled employees who would like to join the ROCA buttercrunch family. Manufacturing jobs in the confectionery industry require skill and dedication. Fortunately the National Confectioners Association has listened to the industry and has begun addressing this critical issue in part with the formation of The Confectionery Foundation, which is focusing on education.
As for the most promising opportunity, Brown & Haley is in the fortunate situation where our products export well. We have been gaining export expertise for more than 50 years. The rising middle class in heavily populated countries around the world eagerly await the arrival of fine confectionery manufactured under strict American good manufacturing practices. The future is very bright for Brown & Haley and for the American confectionery industry.
Pat Hurley: With regards to the greatest challenge, food safety is what the confectionery industry needs to keep focused on. As for the opportunity, continuing to offer a treat that is enjoyed throughout the United States remains our best option.