Fannie May Confections Brands, Inc.

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Fannie May Confections Brands, Inc.

8550 West Bryn Mawr Avenue, Suite 550
Chicago, Illinois 60631
U.S.A.
Telephone: (312) 453-0010
Toll Free: (800) 243-0245
Web site: http://www.fanniemay.com

Wholly Owned Subsidiary of 1-800-Flowers.com
Incorporated: 1920 as Archibald Candy Corporation
Employees: 900
Sales: $75 million (2006 est.)
NAIC: 311320 Chocolate and Confectionery Manufacturing from Cacao Beans; 311330 Confectionery Manufacturing from Purchased Chocolate

Fannie May Confections Brands, Inc. is a regional manufacturer of boxed chocolates. Its brands include Fannie May, Fanny Farmer, and Harry London. The Fannie May brand has long been a favorite in Chicago and surrounding areas, while Fanny Farmer is a venerable East Coast brand. Harry London was based in Canton, Ohio, before combining with Fannie May. Fannie May Confections operates a production facility in Ohio, and corporate headquarters are in Chicago. The company runs roughly 50 retail Fannie May candy shops in the Chicago area. It also sells its candies by mail order, through its web site, and at select grocery chains and other retailers. Fannie May was once the nation's largest boxed chocolate maker, and had hundreds of retail stores throughout the Midwest. The company went bankrupt in 2002 and was later acquired by Utah-based Alpine Confections, Inc. In 2006, Fannie May was bought by the flower and gift basket delivery firm 1-800-Flowers.com.

CHICAGO ORIGINS: 1920

Fannie May Confections Brands, Inc. began as a single candy shop in 1920. H. Teller Archibald and his wife Mildred Archibald opened Fannie May on Chicago's North LaSalle Street, in the heart of the city's central business district, the Loop. Funding for the enterprise evidently came from Mrs. Archibald's family, and the business was very soon a Chicago success. Chicago had a thriving candy industry, which had taken off after the Columbian Exposition in 1893. While most candy makers of that era were small, family-run businesses, new technology introduced in the early 1900s made larger enterprises possible. New equipment enabled manufacturers to mass-produce candies of uniform dimensions and quality. Around the turn of the century, Chicago was home to many large-scale candy companies, such as E. J. Brach & Sons, Wrigley's Gum, Ferrara Pan Candy, and Mars. Cracker Jacks originated in Chicago, as did Frango Mints, the delicacy sold at Marshall Field's department stores. According to Joel Glenn Brenner, author of The Emperors of Chocolate: Inside the Secret World of Hershey and Mars, the Archibalds chose Fannie May as the name of their shop to give it a consciously old-fashioned ring. Successful Chicago companies like Wrigley could churn out sweets by the thousands and even export them abroad. Fannie May was meant to hark back to the little shops of the just-vanished last century, with a kindly old lady in the kitchen hand-dipping chocolates. So Fannie May began with a 19th-century aura, even as it rapidly expanded in a quite 20th-century fashion.

By 1930, there were some 35 Fannie May shops across Chicago, and the company was bringing in approximately $300,000 annually. As the enterprise flourished, H. Teller Archibald became almost as well known for his race horses as for his candy company. His horses frequently had "Candy" in their names: Candy Pig, Candy Maid, Candy Queen, and so on, and they were often major contenders in East Coast stakes races. The Archibalds divorced in 1929, and in 1930, the beginning of the Great Depression, Mildred Archibald won $1 million in alimony, plus a house and car, in a delayed settlement. The award attests to both the wealth of the young company and to Mrs. Archibald's part in it. The New York Times notice of the alimony award (June 15, 1930) said that Mildred Archibald claimed to have "financed the candy enterprise at its inception and had a great deal to do with the growth and management" of the firm. Nevertheless, H. Teller Archibald continued to run the company after the divorce. He died in 1936, only 56 years old, of a heart attack he suffered at a Boston area racetrack.

After Archibald's death, the company was run by family members, who had married into the family of the cofounder of Montgomery Ward. The Thornes were one of the wealthiest families in Chicago, with a renowned estate on the city's suburban North Shore. The Thornes also were known for their interest in architecture, and Mrs. James Ward Thorne endowed the famous miniature rooms of period furniture at Chicago's Art Institute. Five Thorne brothers had run or been top executives at mail-order pioneer Montgomery Ward from the 1890s until 1920, when they left in a boardroom shakeout. However, members of the Thorne family owned a controlling interest in Fannie May until 1992, when they sold the company to an investment firm.

WORLD WAR II AND AFTER

Fannie May continued to be a Chicago-area institution. During World War II, when chocolate and other raw ingredients were rationed, the company cut its service rather than alter its recipes. In the war years, Fannie May retail shops closed down for the day when their goods were all sold. Immediately after the war, in 1946, the company introduced a new candy—the Pixie, a caramel and pecan confection enrobed in chocolate—that continued as a bestseller for decades. By the 1950s, Fannie May had established itself in grocery stores throughout the Chicago area. It was also one of the first major chocolate manufacturers to sell frozen candies. It retailed through Chicago's ubiquitous Jewel groceries and Osco drugstores, as well as through the Giant food store chain in the Washington, D.C., area.

In 1970, the company came out with another best-selling product, a chocolate and coconut affair called the Trinidad. Under family management, Fannie May seems to have grown slowly and steadily. In the 1980s, the company was headed by Charles Morrow, husband of Martha Thorne. He oversaw the development of a new line of candies, Sweet Persuasions truffles, while Fannie May continued to manufacture its time-tested recipes at its Chicago plant. The company eventually had several hundred retail shops in the Chicago area and beyond, while doing little to update its image or press for expansion. A new chief executive in the 1990s, James Tindall, recalled the company's earlier management style in an interview in Crain's Chicago Business (January 21, 1994): "If a retailer was interested in selling Fannie May candies in a freezer case, 'you had to call'," Tindall said. "More than once. It was a test to see how interested (retailers) were." In other words, the company let business come to it, rather than pursuing new opportunities, and even so, Fannie May was not quick to take on new partners. Likewise, in another reminiscence about the firm, Candy Industry editor Bernie Pacyniak recalled how a little Fannie May shop had stood for years, basically unchanged, half a block from a west-side Chicago train station. In the January 2004 issue he mused, "I always wondered how the folks at Archibald were able to sustain that site," as apparently it did not seem to do much business. The retailing image was evidently quite staid, though that seemed to suit its customers just fine.

COMPANY PERSPECTIVES

Fannie May stands for premium chocolate. We developed this by combining a delicious product, stimulating advertising, elegant packaging and selective distribution. Fannie May's standards of excellence include maintaining our product's high quality by requiring special handling during storage and display. Our growing popularity as a premium quality product is due to our innovative approaches in manufacturing, advertising and packaging.

SALE IN 1992

Archibald Candy Corporation had been family owned and operated since 1920. It had grown comfortably, while doing little to update its image. By the early 1990s, Fannie May was still manufacturing its sweets out of its Chicago plant, and it had 100 retail outlets in the Chicago area. Another 150 or so stores operated in 13 states beyond Illinois. Although the private company did not need to release sales figures, Archibald was said to be profitable. Little seemed to have changed at Archibald over the years, aside from the occasional introduction of new candies and the expansion of its retail shops. Then in 1991, the Thorne family decided to sell the company. The family did not explain the decision, but sold the firm for an undisclosed price to an investment firm called The Jordan Co. The Jordan Co. had been in business only since 1985, and in six years it had acquired 35 private firms. According to the Chicago Sun-Times (November 5, 1991), Jordan specialized in making "investments in medium-sized family-run companies" and it let "the people who run them run them." A Jordan executive went on to explain to the Sun-Times that the new owners would do little to interfere with Fannie May's way of doing business: "We're very hands off. Usually we have people running our companies who are smarter than we are. We want to grow the company much the way it's grown in the past."

The sale to Jordan was finalized in 1992, but despite the new owner's assurances, the candy company did begin to grow and change rapidly. In August 1992, Fannie May made its first major acquisition, buying Fanny Farmer Candy Shops. Fanny Farmer was a venerable East Coast chain of candy shops that had much in common (though Fannie and Fanny were spelled differently) with its new owner. Fanny Farmer Candy Shops was founded in Rochester, New York, in 1919, making the firm a year older than Fannie May. A businessman named Frank O'Connor started the company, naming it in honor of one of the leading culinary artists of his day, Fannie Merritt Farmer. Miss Farmer had suffered a paralyzing stroke while a teenager. When her disability kept her from finishing school, she turned her attention to cooking. She founded her own cooking school in Boston and taught disabled students at Harvard. O'Connor was not related to Miss Farmer, but rather inspired by her. He changed the spelling of her name when he opened his first shop, perhaps for legal reasons. In any case, Fanny Farmer Candy Shops was in many ways an East Coast parallel to Fannie May: founded in an age of mechanization, it projected an air of hominess; it grew gradually in its region until it encompassed some 330 shops by 1985; and by the 1990s it was afflicted with what Crain's Chicago Business (February 21, 1994) called a "dusty image." In the late 1980s, the number of Fanny Farmer retail shops fell to about 200, and the firm was sold to a French company, Midial S.A.

At the time of the acquisition, Fannie May's annual sales were estimated at $85 million, and Fanny Farmer was pegged at approximately $40 million. The combined firm, still called Archibald Candy Corporation, now had some 463 stores, spread across both the Midwest and the East Coast. Production expanded at Archibald's Chicago plant, and the firm became one of the largest chocolate-makers in the United States, along with Russell Stover, See's, and Whitman's. Archibald's big expansion came at a time when the boxed chocolate industry was relatively stagnant. Industrywide sales were some $576 million in the early 1990s, remaining flat or falling. The largest competitors struggled for ways to make their products stand out. Fannie May, for example, began selling truffles, a more elegant candy, in late 1992, apparently in order to compete against European makers and premium chocolateers such as Godiva.

KEY DATES

1920:: Mildred and H. Teller Archibald found Archibald Candy with first the Fannie May shop in Chicago.
1936:: H. Teller Archibald dies; the firm passes to the Thorne family.
1946:: The company begins selling Pixies.
1970:: Fannie May introduces a new candy, the Trinidad.
1992:: The Thornes sell the company to investment firm Jordan Co.; Fannie May buys Fanny Farmer.
1999:: The company acquires the large Canadian candy maker Laura Secord.
2002:: High debt pushes the company into bankruptcy.
2004:: The Fannie May and Fanny Farmer brands are acquired by Alpine Confections.
2006:: Alpine sells Fannie May Confections Brands to 1-800-Flowers.com.

Soon after the Fanny Farmer acquisition, Fannie May got a new chief executive, James Tindall. Tindall introduced non-chocolate products, such as gummy bears, premium coffee, and ice cream, to some Fannie May retail shops. The company also pushed to get its chocolates in many more venues, such as drugstores and supermarkets. However, Tindall resigned to start his own company in 1994, after little more than a year in the job. He was succeeded by Ted A. Shepherd, who came to Fannie May after years of working for candy company M&M Mars. Between 1995 and 1999, Fannie May greatly increased the number of venues carrying its products, and sales at Fannie May retail shops began to pick up. The company brokered a licensing agreement with card-maker Hallmark in 1998 and began selling Fannie May chocolates in Hallmark's 5,000 retail stores. In addition, Fannie May began buying other candy firms. It bought a California chain of candy stores, Sweet Factory, for $28 million in 1998. Then in 1999, Fannie May acquired Canada's largest chain of chocolate shops, Laura Secord. Laura Secord had 175 stores, selling its own brand of boxed chocolates. The price for the firm was $42 million. These acquisitions boosted Fannie May's revenue to $270 million by the end of the 1990s, and the company had surpassed rivals to become the largest chocolate retailer in North America.

BANKRUPTCY AND NEW OWNERS IN THE EARLY 21ST CENTURY

Fannie May had borrowed heavily to finance its acquisitions in the late 1990s, and by the early 2000s, debt had grown to some $170 million. The company had long been profitable, but only modestly, growing some 2 to 3 percent a year while it was owned by the Thorne family. By 2002, the company could no longer support its debt, and it filed for Chapter 11 bankruptcy. Under Chapter 11, a business can continue operating while it arranges with its creditors for payment of its debt. The company arranged to sell its Canadian subsidiary, Laura Secord, and it was to emerge from bankruptcy in late 2003. But the Laura Secord sale fell through. This sent Fannie May into turmoil. In January 2004, the company announced that the Fannie May and Fannie Farmer brands were being acquired by a Utah-based candy company, Alpine Confections. The deal included the rights to the names and the retail shops, though most of the retail outlets were immediately shut down. Fannie May's Chicago factory also shut down, putting hundreds of people out of work. The sudden loss of Fannie May shops put Chicagoans in a tizzy. When the shutdown was announced, crowds made runs on their favorite Fannie May sweets.

Alpine Confections was founded in 1993 by two Harvard Business School friends, R. Taz Murray and Dave Taiclet. The business was a conglomeration of several candy or sweets businesses, including Maxfield Candy Co., maker of boxed chocolates; Kencraft, known for sugar Easter eggs; the Peppermint Place candy retail stores; licensed products under the Mrs. Fields' Original Cookies name; and several other boxed chocolate manufacturers. The company had sales of $80 million in 2003, and Fannie May's sales that year were $183 million. Alpine paid about $39 million for the distressed Fannie May. Alpine was able to reopen about 50 Chicago-area Fannie May shops about a year after the acquisition, and demand was apparently very strong. Alpine made Fannie May and Fanny Farmer brand candies at its plants in Salt Lake City and in another facility it owned in Canton, Ohio.

Nonetheless, Fannie May's sojourn with Alpine Confections was brief. In 2006, Alpine announced that it had sold three of its brands: Fannie May, Fanny Farmer, and Harry London, as well as its Ohio plant, to the flower and gift delivery company 1-800-Flowers.com. The three units came together as Fannie May Confections Brands, Inc., which became a wholly owned subsidiary of the florist. The purchase price was $85 million. By that time, Fannie May had revenue of about $75 million—far less than in its heyday in the late 1990s. The new owners hoped to be able to grow the candy company again. 1-800-Flowers operated through phone and Internet orders, delivering not only flowers but candy, gourmet foods, stuffed animals, and other gift basket items. It also owned a mail-order subsidiary called Plow & Hearth, which sold mostly home and garden products, the children's toys catalog retailer Hearthsong, a cookie company, a popcorn company, and a gourmet foods subsidiary called GreatFoods.com, so the fit with Fannie May was not hard to see. Fannie May continued to be run out of executive offices in Chicago, with Alpine's Dave Taiclet as chief executive. Although the ownership was new, the company planned to continue to use the same recipes and ingredients on which it had based its fame since 1920.