R. M. Palmer Co.

views updated

R. M. Palmer Co.

77 2nd Avenue
West Reading, Pennsylvania 19611
U.S.A .
Telephone: (610) 372-8971
Fax: (610) 378-5208
Web site: http://www.rmpalmer.com

Private Company
Incorporated: 1948
Employees: 600
NAIC: 311330 Confectionery Manufacturing from Purchased Chocolate

1948–90: MAKING A MARK WITH SEASONAL CARICATURES

EVOLVING PRODUCT LINES TO INCLUDE EVERYDAY ITEMS

2000–07: INCREASED EMPHASIS ON ALTERNATIVE RETAIL CHANNELS AND EXPORTS

PRINCIPAL COMPETITORS

1948–90: MAKING A MARK WITH SEASONAL CARICATURES

In 1948, Richard M. Palmer started manufacturing chocolates for the Easter season. In an effort to stand out, Palmer Co. began manufacturing “caricatures in chocolate.” Baby Binks, Timid Timmy, Flopsy, and Wooly Willy were not the usual standing or seated Peter Rabbit, but were instead hollow-chocolate “Palmer personalities.” Palmer received patents on his original four Easter items. He opened shop with four employees and an investment of $25,000 with which he bought some secondhand equipment and rented a small space in Sinking Springs, Pennsylvania.

When the W. T. Grant Department store placed an order for $20,000 worth of chocolate bunnies with Palmer Co., the new venture was on its way. As Palmer’s confections caught on with consumers, the company expanded its product line. In 1951, Palmer moved operations to a 50,000-square-foot plant in Reading, Pennsylvania, then the center of the worldwide Easter candy business. By 1958, the company had outgrown its second facility and moved on to a third, a 120,000-square-foot building in West Reading, Pennsylvania.

Although Palmer continued to focus on chocolate Easter items, by the 1960s, the company expanded its product line to produce Christmas novelties as well. After Richard M. Palmer, Jr., took the helm of the company in the early 1960s, the company also began to decorate its items using bows and icing, an innovation that became a Palmer hallmark. It retained its commitment to the value side of the chocolate seasonal candy market, keeping the price of its items low.

Throughout the 1970s, the company continued to evolve and grow, adding Valentine’s Day chocolates. In 1970, it was the first to introduce flavor combinations, such as peanut butter-, caramel-, mint-, and fudge-filled chocolates, into the seasonal novelty business. In 1978, Palmer began to ship its products abroad.

Seasonal sales exploded for candy manufacturers in the 1980s as candy buyers tapped into the potential of seasonal items. Palmer added Halloween-themed candies in 1980. Throughout the decade, the company ran three shifts a day, seven days a week, for 12 weeks straight during the Easter season, Palmer’s busiest time of year by far.

EVOLVING PRODUCT LINES TO INCLUDE EVERYDAY ITEMS

Although growth slowed in the 1990s, between 1996 and 1998, Palmer invested $15 million to increase production capacity and to develop more everyday items. It added a Bauermeister system for producing its own coatings in 1996 and an Aasted molding line capable of turning out 80,000 pounds per day in 1997. “We’re still a seasonal company,” Richard M. Palmer, Jr., explained in Candy Industry in 1998, “but I think our challenge as we go into the next millennium is to broaden our thinking to both seasonal and nonseasonal niches.” Palmer’s nonseasonal items then represented a growing line of peanut butter cups, caramel cups, chocolate-coated pretzels, and mint products. Palmer, Jr., who had been inducted into the Candy Hall of Fame in 1991, boasted in a Professional Candy Buyer article in 1998 that, “We have the product experience, the packaging design capabilities, and we know how to provide retailers with margins.” Also in 1998, Palmer acquired the assets of Candy Max, another maker of seasonal candies. It merged Candy Max into its international sales channels in time for the 1999 Easter season.

Palmer Co. also began looking to evolve its marketing strategy in the 1990s. “We have historically been a push-type marketer where we’ve focused our effort on sales to the retailer. I think as years go by, we may have to come to grips with the pull side of marketing also,” Palmer, Jr., maintained in Candy Industry in July 1998. This meant contests and other advertising strategies directed toward consumers and, beginning in 1991, several licensing deals. The first of these licensing agreements with Warner was not quite successful. However, a decade later, in 2001, Palmer entered into a licensing deal with NASCAR, and by 2005, NASCAR-licensed chocolates and candies accounted for half of all the company’s licensed sales.

2000–07: INCREASED EMPHASIS ON ALTERNATIVE RETAIL CHANNELS AND EXPORTS

Beginning in 2000, the seasonal confections segment more or less stopped growing while the number of players vying for seasonal sales continued to increase. At the same time, many of the traditional candy manufacturers’ customers, merchandisers such as supermarkets, drugstore chains, and large wholesalers, were consolidating, narrowing the field with which R. M. Palmer Co. did business to primarily Wal-Mart, Target, and four national grocery chains. However, true to its roots, in 2002, Palmer produced 200 different Easter items and 350 million chocolate bunnies, representing continued growth in both seasonal and novelty sales. It obtained the rights to market Golden Books Publishing Co.’s Peter Cottontail character.

By then, the company controlled more than 30 percent of the seasonal chocolate novelty market, leading the competition. Its growth in other areas as well meant that, while it had once laid off 80 percent of the workforce after April, it employed a year-round staff of between 650 and 950 employees, according to the company’s vice-president of sales and marketing in a 2002 Reading Eagle article.

A custom one-shot molding line and two new foil-ers were part of Palmer’s multimillion-dollar facility upgrades in 2002. The molding line, Palmer’s fourth by Danish company Aasted-Mikroverk APS, was also capable of producing flat-back novelties, eggs, and balls. Palmer also invested in a 35,000-square-foot add-on to the cooler space in its Exeter, Pennsylvania, warehouse.

COMPANY PERSPECTIVES

Innovation in product design as well as manufacturing methods. Palmer’s dream was—and still is our guiding vision—to delight the public with contemporary products of unique design and with striking, full color packaging.

In the face of continuing consolidation, less shelf space, and a diminishing domestic market in 2003, Palmer placed increased emphasis on alternative retail channels and on exporting its products. It redesigned its packages for its top export markets. At the time, approximately 5 percent of the company’s sales came from export to Canada, Mexico, South Korea, Australia, New Zealand, and Russia, its largest trading partners.

The company also headed in a new direction in 2003, marketing novelty candies inspired by the movie The Cat in the Hat. Outsourcing production for the fruit-flavored jelly pops, and red fish to another manufacturer, Palmer signed a licensing agreement with Universal Studios consumer products group. It joined with American Licorice Co., Ferrara Pan Candy Co., New England Confectionery Co., and Spangler Candy Co., to form Imagination Confections, which made and marketed Disney-themed characters, beginning with those of Winnie the Pooh. In 2004, as “the popularity of Marvel’s characters becomes more widespread with each generation,” Palmer created Valentine’s Day and Easter novelty candies featuring Spiderman and the Incredible Hulk. However by 2005, according to Palmer in a Candy Industry article, “the licensing craze has crested; it probably peaked about two years ago although it remains at a very high level.”

Because of changes in merchandising options for candy manufacturers, the result of continued consolidation, Palmer had 50 percent fewer customers in 2005 than in 1991, but revenues were twice as large at $150 million. At the company’s Reading, Pennsylvania, plant, the hollow-mold machine ran 24 hours a day, from five to seven days a week, depending upon the time of year. However, the seasonal confections niche had ceased growing significantly, and, as a result, competition among candy makers increased, and the company decided to focus its efforts on its other products. Palmer, Jr., waxed poetic on the topic in a 2005 Candy Industry article: “[J]ust as a rising tide lifts all boats, an ebbing tide can leave many high and dry. Since the year 2000, the segment hasn’t grown very much.”

Despite industry setbacks, Palmer remained optimistic. His company’s growth had averaged 5 percent or better for the prior several years. Given competitive costs and rising costs of transportation and ingredients, this was no small accomplishment. As supermarkets and mass merchandisers and drugstore chains started to make a comeback after three years of decline in 2005, he announced in the 2005 Candy Industry article that “[I]t looks good for 2006. There’s more business than ever in the value side.”

With its original vision still intact in 2007, R. M. Palmer Co. continued “to delight the public with contemporary products of unique design,” according to the company as quoted in a March–April 2005 Food and Drink article. It also elected to remain in the value segment of the chocolate business, staying out of competition with Hershey, Mars, and Nestlé, and investing in making its own compounds and centers. “Over the years we have stayed efficient enough so that we can offer many products at the retail level of a $1 price point,” Palmer told Reading Eagle in 2002. “That’s where many of our competitors fall behind.”

Carrie Rothburd

KEY DATES

1948:: Richard M. Palmer starts the company in Sinking Springs, Pennsylvania.
1951:: Palmer moves operations to a 50,000-square-foot plant in Reading, Pennsylvania.
1958:: The company moves to a 120,000-square-foot building in West Reading, Pennsylvania.
1998:: Palmer acquires the assets of Candy Max.