Ferrara Pan Candy Company

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Ferrara Pan Candy Company

7301 West Harrison Street
Forest Park, Illinois 60130
U.S.A.
Telephone: (708) 366-0500
Fax: (708) 366-5921
Web site: http://www.ferrarapan.com

Private Company
Founded: 1921 as Ferrara Candy Company
Employees: 1,200
Revenues: $300 million (2006 est.)

NAIC: 311340 Nonchocolate Confectionary Manu- facturing; 424450 Confectionary Merchant Wholesalers

Ferrara Pan Candy Company is the maker of such popular and classic American confections as Atomic Fireballs, Jaw Busters, Red Hots, Lemonheads, Boston Baked Beans, and Black Forest Gummies. Ferrara Pan Candy also manufactures products under several licenses with Disney, Sun-Maid, and Planters, as well as bulk and commodity candy products and seasonal specialties, such as chocolate-coated nuts and raisins, as well as Jordan almonds. The processes Ferrara uses to produce its candies are known as hot panning, cold panning, and starch molding, and though the company maintains a factory site it built upon in 1919, it boasts high-tech manufacturing and packaging facilities in Canada and Mexico as well.

FERRARA AND FAMILY START PANNING CANDIES IN AMERICA

Salvatore Ferrara, an Italian pastry and candy maker, immigrated to the United States from Nola, Italy, just before 1900. Over the next few years, Ferrara worked with the crews and foremen at the Santa Fe Railroad as an English interpreter. In 1908, however, he moved to Chicago to pursue his calling. He opened a retail pastry and confection shop there and began to produce pastries, wedding cakes, and the sugarcoated almonds that he had learned how to make in Italy. Ferrara's Jordan almonds became his shop's most popular item.

From 1908 to 1921, Ferrara's candy business grew significantly, and he developed a market throughout the Midwest for his confections. Together with his brothersin-law, Salvatore Buffardi and Anello Pagano, Ferrara formed a partnership in 1921 and expanded his confectionary business as a separate division under the name Ferrara Candy Company. A new manufacturing facility on West Taylor Street in Chicago was built during this time.

Many of the candies the three made were panned. In that process, a center (such as a nut, fruit, or hard candy) or a grain of sugar was tossed in a rotating pan while dry granulated sugar and other ingredients were added, by a person known as the panner. The center would then accumulate layers of flavor and color, increasing in size like a culturing pearl or a snowball rolling downhill. Although in the early 20th century most of the Ferrara Candy's items were sold as bulk commodities to retail outlets, the company introduced its own branded Red Hots, small cinnamon hard candies, in 1932.

ESTABLISHING BRANDED ITEMS

By World War II, Ferrara was manufacturing an assortment of nonbranded candies, including chocolate and nonchocolate panned items, extruded or enrobed items, and hard candy. Nello Ferrara, a lawyer by training and Sal Ferrara's son, joined the company in 1947, after serving in the army and as a Japanese war crimes prosecutor in Tokyo after the war. Under the younger Ferrara, the company embarked on a major change in direction and began to concentrate more on establishing branded items. After deciding to focus on panned candies, the company changed its name to reflect that process: Ferrara Pan Candy Company.

In 1954, the company expanded upon its Red Hots success and added another branded item, the Atomic Fireball, a very hot cinnamon jawbreaker that soon became a bestseller. Each Fireball started off as a single grain of sugar, and doubled in size every 24 hours as successive layers of liquid sugar, one of which contained cassia oil, a hot form of cinnamon, crystallized around the ball. It took two weeks to make, and the final sugary layer was a bright red. Lemonheads, a hard sour candy, was Ferrara Pan Candy's next branded success; it was introduced in 1962 and gained immediately and tremendously in popularity.

GROWTH THROUGH LICENSING, ADVERTISING, AND NEW PRODUCTS

By the 1990s, Ferrara Pan Candy was well established in convenience stores, mass merchandisers, and drug chains. It had revenues of slightly less than $100 million a year and almost 450 employees. Its physical foot print, the manufacturing site, had grown since 1980 from 56,000 to 320,000 square feet. From 1990 to 1993, after several years of 15 to 20 percent annual increases in sales, the company fully doubled its sales. Although its bulk (generic candy) operation was flourishing, about 80 percent of its total sales in 1991 (up from 60 percent just two years earlier) was due to its branded items.

As a result, Ferrara Pan Candy continued its marketing focus on packaged branded retail sales and contract manufacturing. The reason for the emphasis on branded items, according to Salvatore Ferrara II in a 1993 U.S. Distribution article, was that "there's always a war on commodity items, and brand loyalty for these items is not very strong. Generally, commodity items are bought on the basis of who has the cheapest price today, and not necessarily who has the best product." The company greatly expanded its television and radio advertising for Lemonheads and Atomic Fireballs. In 1992, after acquiring the license for Black Forest and Mellos "gummies" candies, it added advertising for the Black Forest brand as well. While concentrating on several key markets, including Los Angeles, Denver, and Chicago, Ferrara Pan Candy also began to advertise on national television.

In late 1993, the company strengthened its presence in the grocery retail/supermarket business with the purchase of Thomas J. Lipton Co.'s $50 million fruit snack business and its children's entertainment licenses from entertainment companies Walt Disney, Hanna-Barbera, and Warner Bros. The purchase helped the company compete with the candy giants. Two days after sealing the Lipton deal, Ferrara also secured the right to manufacture fruit snacks and other confectionary products under the Jurassic Park movie license. "We [wanted] to be known … for the quality of our product, and we [wanted] to receive a fair price for it. … And when the Lipton and Jurassic Park deals popped up, we felt they would fit in perfectly with our new strategy, so we jumped on them," Ferrara explained in the U.S. Distribution Journal article.

COMPANY PERSPECTIVES

The Ferrara Pan Candy Company is equipped with the latest of automatic manufacturing and packaging equipment. All confections are made from the very finest of pure, wholesome ingredients and a continuous program of research is employed for the development of new products.

The Jurassic Park license helped to transform Ferrara Pan Candy Company from a small player to a major player in the candy market. The company was soon selling a line of dinosaur candies and fruit snacks in the United States, parts of Europe, South Korea, Australia, and New Zealand. Moreover, it signed a lease on a 300,000-square-foot warehouse and distribution facility. (The company would purchase the facility outright in 1996.) Over the next few years, Ferrara Pan Candy leveraged its fruit snack lines to expand its distribution base from smaller specialty stores to mass merchants, gaining wider acceptance in the nation's supermarkets. At the same time, it continued to boost awareness of its branded candies.

Other licensing deals followed. Ferrara Pan Candy acquired the right to manufacture fruit snacks and other confectionary products under the Flintstones movie license in 1994. Two other 1995 licensing deals, one with Sun-Maid to produce chocolate-coated raisins and another with Planters to manufacture chocolate-coated peanuts, gave the company another foot in the door with candy buyers for supermarket chains and movie theaters. When, in 1995, the company purchased Chiodo Candy Company, an Italian hard candy manufacturer, its sales were growing at a 30 to 35 percent rate.

Also during this time significant changes came to the company's production methods. After the passing of the North American Free Trade Agreement (NAFTA), Ferrara Pan cut its Chicago workforce from 800 to about 500, having established a plant in San Luis Potosí, Mexico, to avoid high, subsidized sugar prices and tariffs on imports. "It's not something we wanted to do," said Ferrara in a 2001 Associated Press wire, "It's something we were forced to do. … It's just not fair that sugar prices are two to three times what our competitors pay." In 1999, the company added a plant in Mississauga, Ontario, and in 2002 another in Brampton, Ontario. A third plant in Juarez, Mexico, came on board in 2003. The new plants were outfitted with the latest in technology and automation.

In late 1999, in response to shrinking confectionary shelf space in supermarkets, Ferrara Pan joined with American Licorice, Goetze's Candy, Necco/Stark/Haviland, Spangler Candy, and Van Melle USA "to consider ways to enhance the candy industry by increasing placement and distribution of products" and to explore opportunities for production efficiencies, according to a Professional Candy Buyer article. The group, which called itself the Candy Alliance, began to work on cooperative efforts around direct and brokered sales management and advertising and promotion. Ferrara Pan, in particular, began to move its fruit snacks away from licensed, one-time rollouts to contract managed and private label accounts.

At the same time, the company looked for ways to expand its product line. In 1998, Ferrara Pan purchased the trademark and product line of the German Black Forest and Mellos gummi candies. Also that year, it introduced Cherryhead, Grapehead, Orangehead, and Applehead hard candies and Sour Gummies. Spangler and Ferrara Pan Candy formed an agreement that created Lemonhead and Atomic Fireball lollipops in early 2001 that were licensed and distributed by Spangler. Also in 2001, the company aggressively began to market its Black Forest line, which became the second most popular branded gummi candy sold nationally. By 2001, Black Forest was the fastest growing brand in its category and one of the 15 best-selling chewy candies in the United States.

A NEW CENTURY IN BUSINESS

In 2002, with sales growth ranging from 5 to 10 percent annually for the $200 million company, Ferrara Pan began to focus on expansion internationally. This occurred during a year when the domestic candy industry grew by only 1.6 percent to $15.8 billion. To keep its branded items in the public eye, the company launched a television and print advertising campaign for Lemonheads, Red Hots, and Black Forest gummies. According to Ferrara II, in an article that appeared in Candy Industry in 2002, the campaign was worthwhile: "First we saw some increases in the sales of our traditional packages, which demonstrates to us that the business, specifically the branded business, does respond to advertising."

KEY DATES

1908:: Salvatore Ferrara opens a retail pastry and confection shop in Chicago, Illinois.
1921:: Ferrara, with Salvatore Buffardi and Anello Pagano as partners, expands the business, establishing Ferrara Candy Company.
1947:: Nello Ferrara becomes head of the company.
1954:: The company introduces the Atomic Fireball.
1973:: Sal Ferrara II joins the company as general partner.
1992:: The company acquires the Jurassic Park license.
1993:: The company purchases Thomas J. Lipton Co.'s fruit snack business; adds a facility in San Luis Potosí, Mexico.
1995:: The Chiodo Candy Company is acquired.
1998:: The company acquires the trademark and product line of German Black Forest and Mellos gummie candies.
2004:: Ferrara Pan Candy introduces Narbles, its first panned dextrose candy.

Together with American Licorice, Necco, Palmer, and Spangler, Ferrara Pan helped establish Imagination Confections LLC in late 2003. The new joint venture would be the sales and marketing company for the candy produced from long-term license agreements that the group forged with Disney. On its own, Ferrara Pan introduced Narbles, its first panned dextrose product. Narbles were named product of the year in 2004 in the nonchocolate category of the rankings in Professional Candy Buyer.

By the middle of the decade, Ferrara Pan employed about 1,000 people at its five plants in the United States, Mexico, and Canada. Its Forest Park factory alone used about 250,000 pounds of sugar every day, so of course sugar pricing remained a concern. The cost of sugar was still significantly less outside of the United States, being 15 cents per pound in Canada and Mexico and around 28 cents per pound at home.

The company still was investing heavily in its growth along multiple channels. In 2006, with high-end chocolate one of the fastest-growing segments of the candy industry, Ferrara Pan took on exclusive distribution of four European premium Kraft Foods' chocolate brands, Toblerone, Terry's, Milka, and Cote D'Or, with plans to introduce them to the mass, grocery, and drug channels. It also began to look for ways to build the company's presence in Mexico and around the world. Toward that end, in 2007, it purchased Embaré, a Brazilian manufacturer of caramels.

The Ferrara family remained in control of, and committed to, the company as it approached its 100th anniversary. "We enjoy the business and I don't know what [else] we'd do," Sal Ferrara II said in a 1993 U.S. Distribution Journal article; his sentiment seemed to hold true more than a decade later. Beyond pure enjoyment, he explained, the family legacy served another purpose: "we do not want to leave our children a lot of money, we want to leave them jobs—something to work for, something to earn."

Carrie Rothburd

PRINCIPAL COMPETITORS

The Hershey Company; Mars Inc.; Nestlé S.A.; American Licorice Co. Inc.; Haribo of America; New England Confectionary Company (NECCO); PEZ Candy Inc.; Spangler Candy Company; Brach's Confections Inc.; Chupa Chups S.A.; Tootsie Roll Industries Inc.