Promotion in Motion goes into overdrive
Promotion in Motion President and CEO Michael Rosenberg has transformed this diverse confectionery operation into one of the fastest growing companies in America.
It’s no coincidence that Promotion in Motion’s logo is a truck; it literally symbolizes how a young Michael Rosenberg became an entrepreneur. Back in 1979, when Rosenberg was attending American University in Washington, D.C. — often driving to and fro on weekends to his home in New Jersey — the idea came to him that there was an opportunity in using the sides of trucks as billboards.
A bit ahead of his time, Rosenberg faced a variety of formidable obstacles, including the lack of existing graphics technology as well as a lack of forward thinking. Nonetheless, his persistence led him to discussions with McDonald’s and the 3M Company, both of whom eventually embraced the idea. Unfortunately for Rosenberg, they didn’t go through his aptly named company, Promotion in Motion (PIM).
While his business prescience regarding semi-trailer advertising didn’t directly lead to profits, it did set the wheels in motion for future projects, several of which eventually steered him into confections.
Today, PIM’s logo reflects the very fast track the company’s been on. Last month, the Boston Consulting Group (BCG), in collaboration with IRI, announced that PIM had become the fourth fastest growing company within its Top 10 listing of small companies in the United States. As defined by BCG, “small” refers to corporations doing under $1 billion in scanned sales during 2012. Ranking is based on dollar/volume sales percent change and dollar share point change.
Last year, Allendale, N.J.-based PIM posted $225 million in sales, a 35% jump from 2011. According to Rosenberg, the company’s poised to replicate that same percentage gain this year. Once strictly a marketer of confections, the company now boasts a 300,000-sq.-ft. manufacturing facility that operates 24/7, employs 400 workers and houses three starch mogul lines, three automated belt coaters, eight pans, a new fruit rollup machine, 16 form/fill/seal baggers and an automated bag-in-a-box unit.
Current output consists of 6 million lbs. monthly, with that number projected to increase to 8 million by year’s end with the addition of a fourth mogul. In addition, a 100,000-sq.-ft. adjoining building is in the process of being converted to an allergen production facility, where all panning and enrobing involving nuts and dairy ingredients will take place.
Considering that PIM only began manufacturing its own products in 2005, and that Rosenberg himself never was involved in confectionery production until then, it’s really remarkable to see how the company has transformed itself into a manufacturing and marketing powerhouse.
Rosenberg’s “overnight” success, of course, took several decades. Nevertheless, it was his ability to think not just outside the box, but from underneath it, a 1,000 feet above it and through it that has created a truly remarkable and successful company.
As mentioned earlier, although Rosenberg’s semi-trailer advertising concept didn’t become a financial success, it did help him establish the corporation. In 1979, he opened an account with $150. The bank —as was common then — sent him a congratulatory letter on becoming a valued customer, a letter Rosenberg cherishes to this day.
A year later, he incorporated PIM and thanks to his knack for entrepreneurism, had $10,000 in the account. It was about this time that he came up with an idea that essentially laid the foundation for PIM.
“I saw this box of Barnum & Bailey animal crackers,” he explains. “I had just been to see the musical Annie and thought it would be a good idea if the crackers were made into the shape of Annie, Daddy Warbucks and Sandy. The idea coincided with the fact that Columbia Pictures was going to release the movie version of Annie. So I contacted Columbia Pictures.”
Columbia Pictures was intrigued, but indicated that they wanted $50,000 for the licensing rights, $50,000 that Rosenberg didn’t have. Still, others might have it, he thought, so Rosenberg started cold-calling cookie companies. As Rosenberg details, cold-calling proved chilling, to say the least. The rejections continued until he reached Interbake Foods.
A major supplier of Girl Scout cookies, Interbake was looking for a way to expand its presence on grocery shelves. The Annie cookies concept fit into their plans. They agreed to pony up the $50,000 as well as a 7 percent royalty fee, 5 percent which went to Columbia and 2 percent to Rosenberg.
Columbia Picture’s marketing of the Annie movie prompted grocers to purchase truckloads of Annie crackers. Although the movie proved to be a bomb, Interbake Foods sold plenty of Annie crackers. In fact, Rosenberg was in the bakery when the one millionth box rolled off the line, a box that’s framed and hanging in his office.
The success of Annie’s crackers prompted Rosenberg to look more closely at licensing. In perusing a trade magazine, he discovered that American Greeting’s Strawberry Shortcake characters had racked up a billion dollars in retail sales through licensing. He also discovered that the company was planning to introduce a new set of characters dubbed Care Bears.
And this is where Rosenberg embraces the confectionery world. Although both of his parents were involved producing and selling confections — his mother owned Estee Candies, producer of sugar-free candies while his father and uncle owned Arbee Candies — Rosenberg had not specifically targeted confections in his entrepreneurial pursuits.
For Care Bears, however, it was clear to him that gummi bears would be the perfect vehicle for leveraging the license. He obtained the license from Those Characters from Cleveland, American Greetings’ licensing arm, and contracted with a German gummi bear manufacturer that was already selling bulk items into the United States to produce the item. At the time, there were no American manufacturers producing gummi bears.
Getting the license and finding someone to manufacture the product was much easier than getting it to market, however.
“There was no way we could afford slotting allowances,” Rosenberg explains. “I had to rely on myself in selling the candy.”
One niche area that Rosenberg felt he could directly penetrate were movie theaters. By approaching several chains directly, he sidestepped traditional distributors. In this manner, the movie houses told the distributors they wanted the Care Bears product. It quickly made PIM a company that distributors now had to take notice, particularly since their customers were demanding the product.
Rosenberg also introduced an innovation regarding the packaging of Care Bear Gummi Bears.
“I was the first person to feature gummi bears in a box with a window,” he says. “We put the gummies in a bag first, then placed the bag into the box with a cutout window. This way, the gummies wouldn’t absorb flavors off the box and they wouldn’t clump or stick.”
As Rosenberg began to expand his move theater channel business, he happened to call on a fledgling new business dubbed Blockbuster Video in Fort Lauderdale, Florida.
“I sat down with Wayne Huizenga (Blockbuster Video owner) and saw him eat a whole box of our gummies,” he says. Needless to say, Care Bear Gummies found their way into first, hundreds, then thousands of Blockbuster Video Stores.
“Our business exploded with Blockbuster,” Rosenberg says.
That success prompted him to examine other niche channels, such as vending, concessions, the military, fundraising, correctional facilities and foodservice.
“I wanted to go to markets where I could go to the end users, then have distributors come to me,” he says. “It was all about building a special markets business.”
For a time, the Rosenberg name wasn’t well-received amongst distributors. Nevertheless, his ability to convince chains and independents within these specialty markets to purchase his products forced them to handle his products.
Always looking for new licensing opportunities, Rosenberg procured the Sun Maid license to produce chocolate-covered raisins under the brand name. He also developed Sour Jacks and co-branded with Fisher Nuts to produce a line of chocolate-covered peanuts.
Now a force within the movie theater confectionery channel, Rosenberg saw the need to expand his portfolio as well as level off the sales peaks and valleys in this specific segment.
“Come Christmas or summer, or whenever there’s a blockbuster move, we can’t make enough candy,” he says. “However, there are slow periods. The movie business is about peaks and valleys, and I don’t like peaks and valleys.”
By 1990, PIM was a $30-million business. Rosenberg felt it was critical to broadened the confectionery portfolio as well as further diversify the business. It was during this period that he once again showed an uncanny knack for recognizing an opportunity.
“When I looked at the fruit snacks segment, all I saw were cartoon-licensed fruit snacks,” he explains. “The fruit snacks segment was a bit disjointed and I believe there was an opportunity for a slightly healthier fruit snack that could be targeted toward schools.”
Rosenberg approached Coca-Cola about licensing a fruit snack under their Slice brand, a fruit snack that would be focused on using actual fruit. The new concept quickly took hold. Unfortunately, as sales started to build, the executives at Coca-Cola decided to limit the Slice brand to simply citrus beverages and told Rosenberg that the licensing arrangement was going to be cancelled.
A devastated Rosenberg argued the move would ruin his business. After some negotiation, an agreement was hammered out to end the relationship. It gave him some time to come up with a replacement brand
“I knew I was in the right church, but happened to be in the wrong pew,” he says referring to the Slice fruit snack episode. “It was a matter of taking it up a notch. That’s when I came up with the idea of licensing the Welch’s brand for fruit snacks. Whenever you think of the finest quality in fruit-based products, you think of Welch’s.”
Before presenting the proposal to Welch’s, Rosenberg realized that he needed product development expertise. In a holistic, fickle finger of fate way, Rosenberg’s uncle, who had worked with his father for Arbee, recommended he contact Basant Dwivendi, a food scientist with degrees in chemistry, food science and biology that had worked for the company.
Dwivendi, who himself says he has the “ability to see chemicals in my head,” also happens to be particularly knowledgeable about water activity, a key element when producing fruit snacks or sour candies. He’s also very adept at working with fruit purees, which aren’t particularly heat stable and have a tendency to turn brown.
After several months of tweaking various recipes and formulas, Dwivendi came up with the right formula. Rosenberg was ready to approach Welch’s with samples. Not only did the fruit snacks have a high fruit content, stemming from the use of fruit juices and purees, the ingredient label was much cleaner.
Although it actually took a year to negotiate the licensing agreement — “There were things I wanted and there were things Welch’s wanted,” Rosenberg says — the deal was finally inked in 2000.
“It was lightening in a bottle,” he says. “The Welch’s license transformed the shape of our company.”
Sales exploded. Before long, PIM was struggling to find manufacturers who could keep up with demand. The complexion of the business also changed, requiring more expertise and band width. Despite contracting out with American and Spanish manufacturing companies, Rosenberg realized that he would eventually have to start producing his own product in order to keep pace with sales growth.
In 2004, he found a former Mercedes-Benz parts warehouse for North America that fit the bill. In 2005, PIM took over occupancy, converting the building into a confectionery manufacturing facility.
As Rosenberg puts it, “We didn’t even own a screwdriver. We purchased everything piece by piece.”
Slowly, at times painfully, the company began putting in kitchens, moguls, drying rooms, packaging machines, even machine tooling and maintenance shops.
“We made every mistake we could have made and even some you couldn’t even think of,” he says. I didn’t know the difference between a micro switch and a proximity switch. It was a painful experience, but a blessing in disguise since it forced me in a very big way to learn about production. Setting up a production facility was way more complicated than I had anticipated. In the end, I wound up getting a PhD in candy manufacturing.”
A stroll through the 300,000-sq.-ft. plant reveals how quickly PIM has progressed. Three NID moguls, which average between 24 to 28 moulds a minute, are dedicated to Welch’s Fruit Snacks production. A fourth mogul, from Fast Track Engineering, is scheduled to go online by year’s end.
Fourteen drying room, five of which are double-sized, thus essentially the equivalent of 18 drying rooms, handle the necessary 12-to-24 hour curing needs. Each line boasts its own kitchen. A new Tanis kitchen will supply the fourth mogul line.
A mix of 16 Matrix and Bosch baggers, capable of running at 120 to 140 units per minute, handle the bulk of the packaging requirements. A new complement of baggers from Aquarius, featuring Multipond scales and rated at 400 units per minute, will come onstream when the new allergen facility is completed in 2015.
A TrianglePackage Machinery Co. bag-in-box unit turns out 22-count boxes of Welch’s Fruit Snacks boxes at the rate of 77 units per minute.
The panning department, which has three automated belt coaters and eight pans, produces all of the specialty products, such as yogurt-coated fruit snacks and chocolate-coated nuts. The entire department will move into an adjoining 100,000-sq.-ft. facility within a year and a half, creating space for additional drying rooms.
Rosenberg estimates total costs for the new manufacturing facility approach $60 million. Total capacity for the Somerset plant and a contract manufacturer in Spain is pegged at 200 million lbs. annually.
“We’re spending about $500,000 to $1 million monthly on capital expenditures, all focused on process improvements, plant throughput, packaging improvements, quality control and the like,” he says.
Although he’s now capable of talking production with anyone in the industry, Rosenberg hasn’t forgotten about capitalizing on opportunities. He’s excited about the company’s new line of Toggi wafers, a brand he acquired from his father and believes will strike a chord with consumers looking for a light yet flavorful wafer product.
The company is also on the verge of introducing a new Welch’s snack product for later this year that Rosenberg asserts “is the greatest product we’ve created to date.” While holding short of providing more specific details, Rosenberg does say that the product will be produced in PIM’s adjoining allergen panning and enrobing facility.
There’s also new stand-up gusseted bags for the Tuxedo Dark Chocolate Almonds, Sun-Maid Mil Chocolate Raisins and Fisher Milk Chocolate Peanuts. The company will also introduce a new merchandising vehicle, a fruit-cart fixture featuring Welch’s Fruit Snacks. Dylan’s Candy Bar retail shops, which has exclusive rights to the fruit cart, will roll out them out during the summer at its stores.
“The old-fashioned style fruit cart will feature 26 flavors of Welch’s fruit snacks in bulk bins, which will allow customers to mix and match flavors, or simply choose one flavor,” he says. “Dylan’s exclusivity to the carts ends after summer, and we’ll be making them available to retailers throughout the country.”
Rosenberg also sees opportunities abroad, particularly with countries such as Korea, Mexico, Canada and Brazil.
“We want to expand our international footprint and are looking to push into Europe, specifically the UK and Spain,” Rosenberg adds.
His goal for the next five years? Rosenberg doesn’t hesitate: “Drive the brands and add innovation to the category. We’re going to grow dramatically in the next five years. We have a lot in our innovation pipeline.”
Enough to propel them from the fourth fastest-growing company in the United States to first? To paraphrase Satchel Paige, don’t look back because PIM might be gaining on you.