Alfred Ritter GmbH & Co. KG

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Alfred Ritter GmbH & Co. KG

Alfred-Ritter-Strasse 25
D-71111 Waldenbuch
Germany
Telephone: (49) 7157 97-0
Fax: (49) 7157 97-399
Web site: http://www.ritter-sport.de

Private Company
Incorporated: 1912 as Alfred Ritter Schokolade- und Zuckerwarenfabrik
Employees: 770
Sales: EUR 247 million ($259 million) (2002)
NAIC: 311320 Chocolate and Confectionery Manufacturing from Cacao Beans

Alfred Ritter GmbH & Co. KG is one of Germany’s leading chocolate manufacturers. The company was number one in the German market for 100-gram-chocolate bars in 2002 with a market share of 25 percent. Alfred Ritter’s square chocolate bars are well known: about 95 out of 100 Germans recognize the Ritter Sport brand. Ritter has a strong position in other European markets, including Denmark, Italy, Austria and the Netherlands. Ritter Sport chocolate bars are also available in 60 countries around the world. The grandchildren of company founder Alfred Ritter own and control the family enterprise.

1912 Origin

The Ritter company was the offspring of a sweet liaison that had nothing to do with business. On July 4, 1912, Alfred Ritter, a master candy maker, and Clara Göttle, a woman with a sweet smile who owned a candy store in Bad Cannstadt, a small German town near Stuttgart, got married. Shortly after, the newlyweds launched their own business, which was named Alfred Ritter Schokolade- und Zuckerwarenfabrik (Alfred Ritter chocolate and candy factory). In a rented space in a house in Bad Cannstadt, where the couple took up their first residence, they established a small candy production facility that was more a workshop than a Fabrik, or factory. However, the name reflected the high ambitions of the Ritters. Their business liaison turned out to be very successful. Alfred Ritter was a skillful creator of a never-ending stream of sweet novelties, which were made with the help of a handful of workers and then sold in his wife’s store. Alfred oversaw the production and logistics part of the business. Clara took care of marketing and sales, as well as of the financial side.

Only two years after its foundation, the family business suffered its first severe crisis. When World War I broke out in the summer of 1914, Alfred Ritter was drafted into the army and the candy production had to be shut down. In 1917, he was discharged from the army for health reasons and transferred to a civil job at the Stuttgarter Schokoladefabrik Eszet, a chocolate manufacturer in Stuttgart. There he learned first-hand about the industrial manufacturing of chocolate, especially so-called Kremschokolade, or “cream chocolate.” Cream chocolate bars were not solid but hollow and were filled with different kinds of fillings.

Alfred Ritter was lucky enough to return to his business before the war ended. Soon after hostilities ceased and peace was declared, sales moved upwards again, so much so that the Ritters ran out of space. The couple decided to buy an inner-city property in Band Cannstadt, a house with a large warehouse space. After the move, the business resumed operations at the new facility. Inspired by his experience at the Stuttgart chocolate factory, Alfred Ritter launched his own chocolate brand. “Alrica,” the combination of each of the first two letters of “Alfred Ritter Cannstadt,” was a cream chocolate for which the master created fillings such as orange cream, raspberry cream, rum cream, and other varieties. While the cream fillings were made in-house, the chocolate mass was purchased from other manufacturers. Cream chocolate was only one of many products made at the Ritters’ candy factory. The company made a variety of filled chocolate and candy sticks, streusel balls, pralines filled with truffle cream or brandy, and sweets made from marzipan. By now, the company’s different products, which were brought to the store by hand or pulled there on a small wagon, ran into the hundreds. Orders outside of Cannstadt were first delivered by a horse-drawn carriage to the town’s train station.

By 1920, Alfred Ritter Schokolade und Zuckerwarenfabrik employed some 40 workers, and the demand for Ritter candy products kept rising. In 1923, the company opened a second store in Bad Cannstadt, which was also managed by Clara Ritter. Three years later, the Ritters bought their first delivery truck. At that time, the number of employees had already doubled from six years earlier. This was partly due to the fact that candy products were still made mostly by hand. Another reason was “Alrika,” Ritter’s brand name cream chocolate, which became a big seller. However, the property in Bad Cannstadt had already reached its limits and, most importantly, did not allow the installation of machinery for the mass production of chocolate. Once again, Alfred and Clara Ritter started looking for a bigger site.

Struggles During the Depression and World War II

The onset of the Great Depression in the fall of 1929 was a gift and a challenge at the same time. On one hand, it provided opportunities to acquire financially struggling businesses. On the other hand, the demand for sweets dropped significantly. After considering a number of manufacturing sites that had been put up for sale at the beginning of the economic crisis, the Ritters decided to move their business to Waldenbuch, a picturesque town of 2,500 south of Stuttgart. The factory they first leased and later bought was built as a chocolate factory, and the property seemed to be spacious enough to contain future expansions. On July 1st, 1930, all production operations were moved to the new location.

Expanding the business at the peak of an economic depression was a bold move. To make sure that their skilled workers remained loyal to the company, they were shuttled back and forth between Bad Cannstadt and Waldenbuch by bus every day. At times, production was completely shut down to weather the crisis. Extra space on the property was utilized to grow different kinds of berries which were used to make fruit-flavored cream fillings. Not surprisingly, with fixed costs up and cash flow down, the Ritters ended up deeply in the red.

Despite all difficulties, Alfred and Clara Ritter kept up faith in their business. Soon after the move to Waldenbuch, they decided to start manufacturing solid chocolate bars in four varieties. Two years later, they added another chocolate product. As the story goes, Clara Ritter suggested making a solid chocolate bar that would fit in any jacket pocket without breaking. Unlike the common rectangular shape, this chocolate bar was square. To distinguish it from the conventional bars, it was called Ritter’s Sportschokolade —Ritter’s Sports Chocolate. The new launch was soon supported by advertising posters for display windows and by commercials in movie theaters. However, Ritter’s Sportschokolade was only one among about 100 different products of its kind.

The suffering of the masses stirred up enormous political tension in Germany and helped launch one of the darkest chapters in the nation’s history. In 1933, the leader of the National Socialist Party, Adolf Hitler, became the new German chancellor. At first, his massive, government-subsidized job creation campaign helped curb the unemployment rate. However, after a couple of years, as the Nazis gained more control over Germany’s economic affairs, new economic problems began to surface. The Ritter chocolate and candy factory recovered somewhat between 1933 and 1935. In 1935, the German government started cutting back on cocoa imports. Ritter was not able to buy enough cocoa and other raw material and began to launch candy products made from less restricted materials, such as jelly beans, fruit gum products, and candy sticks.

After World War II began in September 1939, it became increasingly difficult to maintain production. Many male workers were drafted into the army and raw materials became even more scarce. In 1940, production operations were shut down in Waldenbuch. Until the end of the war, the premises of the Alfred Ritter chocolate and candy factory were used by other businesses. For a limited time, electric appliances manufacturer AEG turned the Ritters’ factory into a site for making replacement parts for certain weapons. Later, the company’s premises were employed as a warehouse. Even immediately after the war ended in 1945, the chocolate factory was used by another manufacturer to make toothpaste.

A New Start in the Postwar Era

In 1946, the Ritter enterprise resumed operations. The company started out with six people making soft candy products and “nutrition sticks,” bars made from soy flour and dry bread crumbs, which were made primarily for schoolchildren’s meals. The war had left the chocolate factory, including its machinery, untouched. The main problem during the years immediately following World War II was the same as before the war: scarce raw materials. Sugar was rationed and cocoa was simply not available. Bartering was common between businesses. Some wholesalers who were Ritter’s customers exchanged sugar for finished candy products. Customers had to bring their own packaging materials. Then, in 1947, Ritter’s warehouse burned down.

The introduction of a new currency—the Deutsche Mark—in the three western sectors of Germany marked a new beginning for the country, its people, and the economy. Beginning in 1950, cocoa was available again in West Germany without any limitations. Ritter immediately resumed the manufacture of Ritter Sport chocolate and soon offered the company’s entire prewar product range.

Company Perspectives

Since 1968 people have been able to enjoy “Ritter Sport” outside of Germany. Today the chocolate squares are being marketed in more than 50 countries. The chocolate that finds admirers worldwide is made with great know-how, state-of-the-art manufacturing technology, and much care in Waldenbuch and Dettenhausen. In Italy and Austria, Switzerland and Denmark, the United States and Japan—the concept of the “other chocolate” is understood everywhere because one sees, feels, and tastes the difference. Because the brand “Ritter Sport “matches people’s taste and way of life, the chocolate squares from Germany are on everyone’s lips in more and more countries around the globe.

In April 1952, company cofounder Alfred Ritter died at age 66. He was succeeded by his only son, Alfred Otto Ritter, who had returned to Waldenbuch wounded immediately after the war. However, he was soon afterwards taken prisoner by the French Allied Forces and not released until 1947. The 37-year-old had joined the family business in 1937, after he had gained some practical experience as an apprentice at three different candy and chocolate manufacturing companies. His elderly mother Clara remained actively involved in the business until she died in March 1959 at age 82.

Chocolate became increasingly more popular in postwar West Germany. American soldiers who gave out chocolate bars to German civilians after the war contributed to this trend. Rising living standards in the post-reconstruction years fueled the continuously growing demand, turning chocolate from a luxury item to a product that was widely enjoyed. While German chocolate manufacturers, including Ritter, enjoyed rising sales, another development began changing the industry. Until 1954, a 100-gram chocolate bar had cost at least DM1.00. In the summer of that year, the German chocolate maker Tobler undercut this unofficial price barrier. The move not only turned out to be a mistake for Tobler—the company was taken over by a competitor—but initiated a plunge in prices, creating financial difficulties for many smaller manufacturers, and a resulting wave of consolidation.

To stay competitive, Alfred Otto Ritter decided to radically cut down the number of products the company made and to invest heavily in advertising as well as in a cutting-edge production infrastructure. Beginning in the 1950s, more and more products were discontinued. By 1955, the company stopped making Christmas-related products and by the end of the decade had ceased the production of Easter candy. At the same time, Ritter focused its advertising on its chocolate, often with unconventional methods. In the 1950s, the company painted its advertising on the wings of a large model airplane and flew it within “reading distance” over people’s heads. When television was still in its infancy, the company created a cartoon to advertise Ritter Sport chocolate. Meanwhile, the prewar machinery in Waldenbuch was replaced by state-of-the-art equipment, resulting in lower cost. While production and storage capacity was greatly enlarged, the number of employees stayed the same. In addition, beginning in the mid-1960s, the company started to expand its distribution network. Until then, almost all of Ritter’s customers were located in southwest Germany, including the Frankfurt am Main area.

In the late 1960s, the company started a fruitful cooperation with the DEWE advertising agency which lasted many decades and greatly contributed to the company’s growing success. After conducting a detailed study of the market, DEWE suggested that Ritter switch to “mono-marketing” and focus solely on the production of square chocolate bars. They got the green light from Alfred Otto Ritter and created a campaign that transformed Ritter Sport from a chocolate product into a brand name. In 1969, the company stopped making rectangular chocolate bars and two years later ceased the production of pralines. At the same time, new fillings were created for Ritter Sport chocolate. The major national breakthrough came with the launch of a Ritter Sport bar with a yogurt filling. Supported by a massive national advertising campaign, the new creation and its marketing, which focused on feeling young and being active, tapped a huge market at a time when leisure, sports, and travel were starting to play an increasing role in people’s lives. The compact chocolate squares with the healthy filling were presented as a nutritious food that helped people stay fit.

The strategy was a huge success and catapulted Ritter Sport into the first league among German chocolate makers. By the mid-1960s, Ritter ranked among the 15 leading German 100gram chocolate bar manufacturers with a market share of roughly 5 percent. By 1970, that percentage had already doubled. In 1960, Ritter employed 190 people. Ten years later the number had grown to 260. During the same time period, the company’s sales almost tripled, reaching DM73 million in 1970.

Reaching for the Top and Out to the World

In 1970, the company’s TV commercials reached consumers in all of West Germany for the first time. The Ritter Sport brand was connected with a catchy slogan: “Square. Practical. Good.” Two years later, the company’s sales passed the DM100 million mark and Ritter’s market share among German chocolate bar makers kept growing. In 1974, the company made another bold move when it introduced a new packaging design. Each of the different variations of the square chocolate bars was wrapped in its own bright color. While other chocolate bars were traditionally packaged in darker colors, such as dark red and brown or royal blue, Ritter Sport bars stood out on the shelves with their bright yellow, orange, red, green, and skyblue packaging. Alfred Otto Ritter, however, was not able to witness the success of his decision. In late October 1974, he died from a sudden heart attack.

Key Dates

1912:: Alfred and Clara Ritter start a family business.
1919:: Brand name cream chocolate Alrika is launched.
1930:: The Ritters move their business from Cannstadt to Waldenbuch.
1932:: Ritter’s Sport Chocolate is introduced.
1940:: The company is closed down until the end of World War II.
1946:: Alfred Ritter Schokoladefabrik resumes operations.
1952:: Alfred Otto Ritter takes over responsibility for the family business.
1960:: Alfred Otto Ritter decides to focus solely on Ritter Sport chocolate bars.
1970:: A TV advertising campaign launches Ritter Sport as a leading brand.
1974:: Marta Ritter takes over responsibility for the family business.
1976:: “Knick-Pack” packaging is introduced.
1978:: A third generation of the Ritter family joins the company’s advisory board.
2000:: Ritter’s “higher prices for higher quality” campaign is launched.
2002:: Ritter Sport is the market leader in the 100-gram chocolate bar segment.

Alfred Otto Ritter’s wife Marta took up the challenge and assumed responsibility for the family business. At the same time, a three-person advisory board was formed with chairperson Marta Ritter and two close friends of the family who had been loyal advisors to the company on business matters over the years. The advisory board chose three top managers as directors who took care of the day-to-day business affairs. In 1978, the third generation of the Ritter family—daughter Marta-Luise and son Alfred Theodor Ritter—joined the advisory board that guided and controlled the company’s management. Five years later, Alfred Theodor Ritter became the board’s new chairperson. From then on, the two took turns in heading the board every five years.

Meanwhile, the company introduced another novelty in the chocolate industry in 1974. Previously, chocolate bars had been wrapped in cellophane or a thin aluminum foil, followed by a second layer of paper or carton. In the late 1960s, Ritter’s engineers were challenged to develop a new packaging solution for chocolate containing whole nuts, which could not be pressed into an exact form, since some nuts were bigger than others and protruded from the chocolate. Ritter started experimenting with plastic wrappings which at that time were used for packaging candy or chocolate-covered candy bars. However, a consumer survey conducted in 1972 revealed that their new packaging was hard to open. After some more experimenting, the company came up with a solution. The seam of the package was moved from the center of the package to the location where the first section of chocolate broke off. It was then sealed closed with a thin layer of special glue that was easy to open. The “Knick-Pack “was introduced in 1976 and became an instant hit. It was not only easy to open but also to close again. Since then, all Ritter Sport chocolate varieties have been packaged in the” Knick-Pack.”

In the 1980s, the domestic demand for chocolate began to stagnate. The industry panicked and prices plunged. Except for times when cocoa prices shot through the roof, this trend has continued into the new century. Competition became tougher and tougher. A number of competitors, among them the international chocolate giant Nestle, tried to launch square chocolate bars. However, Ritter defended its turf fiercely. The company was able to convince courts that consumers identified the square form with the Ritter Sport brand.

To meet the challenge of the stagnating domestic chocolate market, the company followed three strategies. First, it invested in strong advertising campaigns in both good times and bad. After a short interruption in the late 1980s, when the attempt to re-launch Ritter Sport in a new “high lifestyle” campaign was not accepted by consumers, the company returned to its roots, emphasizing high quality and its familiar slogan “Square. Practical. Good.” Second, the company looked to other countries for further growth. Until 1967, Ritter Sport chocolate was sold almost exclusively in Germany. By 1987, exports accounted for over 9 percent of the company’s sales. The chocolate squares were shipped as far as Australia, South Africa, Chile, Japan, Canada, and the United States. Third, Ritter tried to reverse the downward price spiral by raising prices. An initial attempt at this had failed in 1985, a year when cocoa prices climbed extremely high. When the company tried to compensate for the higher cost by increasing prices, sales dropped significantly. German consumers, known to be very sensitive to chocolate price changes, switched to cheaper brands. In the mid-1990s, prices for chocolate bars hit bottom again in Germany. They dropped so low that many manufacturers lowered the cocoa content and used lowe quality ingredients in order to cover their costs. When cocoa prices rose significantly again in 2000, Ritter decided to do the opposite. The company’s second attempt to raise prices was more successful than the first one. The price raises were accompanied by an improvement in product quality. A new advertising campaign focused on the product and its higher quality, explaining the new move to consumers. Sales dropped but not significantly. The introduction of the new Euro currency in Germany might have helped, too. Suddenly, a bar of chocolate that was sold for one German Mark cost “only” about 50 cents.

By 2000, there were fewer than 200 chocolate manufacturers in Germany and, with the exception of Ritter Sport, the industry giants dominated the market. During the 1980s and 1990s, the company had made increasing gains against its major competitor in the market for 100-gram chocolate bars. The leading brand, Milka, had a market share of 29 percent in the mid-1990s. Ritter Sport was number two with about 18 percent but number one in chocolate bar sales at gas stations. In a difficult market, the company managed to stay at the top. By 2002, Ritter Sport’s market share in the 100-gram segment had climbed to over 24 percent.

Looking ahead, Ritter Sport aimed at winning over younger people to lower the average age of the typical Ritter Sport consumer, who was 44 years of age in 2002. In 2003, the company was planning to introduce its new “Active-Range,” which was targeted at young people. Another priority was the company’s expansion into Eastern Europe, especially its joint venture with the Russian chocolate maker Odintsovo Confectionary Factory, where Ritter was planning to put out about 10,000 tons of Ritter Sport chocolate annually, beginning in fall 2003. Finally, the company abandoned the “mono-marketing” strategy and focused more on new product development, including a range of artificially sweetened chocolate bars, a number of bars with seasonal fillings (fruity for the white “summer chocolate “range and truffle fillings for the winter months), and a line of filled chocolate bars targeted at women. In addition, the company introduced its classic range in a broad variety of sizes—from mini to extra large. One possibility for the future was the introduction of chocolate made with organically grown cocoa from Nicaragua, where the company helped fund an organic farming project.

When Alfred Theodor Ritter joined the family business in the mid-1980s, a who’s who of the international chocolate industry tried to persuade the Ritters to sell the business. Even the consultants they had hired to help the struggling company advised them to sell. They refused. Eighteen years later, the founder’s grandson, at 49, imagined leading the company for at least another decade.