• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Sweet Hearts of KC: Distinctive Boxes, Tasty Candy Build Russell Stover?S Business

Posted on: Tuesday, 14 February 2006, 06:00 CST

By Joyce Smith, The Kansas City Star, Mo.

Feb. 14--Scott Ward once went home without a heart-shaped box of chocolates on Valentine's Day.

A newlywed at the time, Ward loaded up on jewelry, a stuffed bear and a photo album -- but no candy. For that oversight, the future co-president of Russell Stover Candies almost spent the night outside the bedroom.

Still, Ward came away with a story that he now uses as a sales pitch -- or warning -- for lovers. Consumers seem to be open to the message.

Valentine's Day is the single biggest sales day of the year for this family-owned, Kansas City-based company. Today, Mrs. Ward and millions of other loved ones will receive one of Russell Stover Candies' bright red boxes.

As the nation's largest manufacturer of boxed chocolates, Russell Stover is striving to keep its sweet spot as well as gain market share with new upscale products and innovative packaging.

It's uniquely situated in the candy hierarchy. Russell Stover products -- which range from the signature boxed chocolates to bagged candy, candy bars, Easter eggs and chocolate bunnies -- are nearly as convenient to buy as Snickers and M&Ms. But Russell Stover considers its candies to be higher quality with greater cocoa content and greater fineness, yet less pricey than, say, high-end Godiva chocolates.

The company's three brands -- Russell Stover, Whitman's and Pangburn's -- bring in about $500 million a year. Its boxed products account for more than 16 percent of the more than $2.5 billion in U.S. boxed candy sales, the company says.

Russell Stover has more than 4,300 employees at its headquarters at 4900 Oak St.; five factories in Abilene and Iola, Kan., Colorado, Tennessee, and Texas; and eight distribution centers in the United States and Puerto Rico.

Brothers Tom and Scott Ward, who serve as co-presidents, identify a broad range of competitors for "share of stomach." These include candy bar manufacturers such as Mars Inc. and The Hershey Co.; regional favorites like See's Candies Inc. and Fannie May Confections Inc.; and even small local chocolatiers such as Andre's Confiserie Suisse and Panache Chocolatier in Kansas City. Russell Stover products are available in groceries, drugstores, specialty stores, card shops and mass merchants in more than 20 countries.

In fact, 95 percent of the company's sales come from its 70,000 wholesale accounts.

Russell Stover candy also can be bought through 60 retail stores across the country and over the company's Internet site.

The Wards have several strategies to build market share:

-- Introducing new products, including an upscale line.

-- Revamping Valentine's packaging and other seasonal products to entice tweens, teens and women, while also offering smaller, more expensive packages for young women to give as gifts.

-- Using television ads on ESPN and SpikeTV to reach male consumers for Valentine's Day.

-- Adding more retail locations, including six new stores across the country this year.

-- Increasing orders from longtime wholesale accounts. For example, its Weight Watchers brand sells in just two Costco regions out of 10.

-- Adding new accounts including more grocery store chains.

-- Exploring new candy categories -- though the Wards won't reveal which ones for competitive reasons.

-- Continue offering cross promotions as its does with Hogue Wines, Kahlua coffee liqueur, American Greetings and Hallmark.

"We want to make quality candy that the majority of the people in the United States can afford," said Tom Ward, co-president. "That's kind of basic but it's a lot harder to do than to say."

1923 beginning

Affordable quality candy has been the goal of the company nearly since its beginning in 1923 when Clara Stover first cooked up her chocolates in her Denver kitchen as an incentive for husband Russell's sales clients.

The chocolates were more popular than his products and the couple decided to whip up a chocolate business. The first store opened in 1923 and the Stovers sold 120 pounds of chocolate for $90 on their first day.

Within a year they had five stores in the Denver area and 30 employees working out of their home. When machine-dipping systems came along that would help them better keep up with demand, they resisted, preferring the more costly hand-dipping because it made for a thicker chocolate coating.

In 1945, Russell Stover purchased a Kansas City company that had a steady sugar allotment, a rarity during World War II, and he relocated the company to the area. When he died nine years later, the company had 35 stores and sold its chocolates in some 2,000 drugstores and department stores throughout the Midwest.

In 1960, Louis Ward, the company's longtime box manufacturer and father of the current co-presidents, purchased controlling interest in the company with plans to expand nationally. His challenge was to widely distribute the perishable products while maintaining the company's reputation for freshness. He did so by opening more efficient factories, along with distribution centers, across the country.

But when some hot new automated machine failed to produce the same quality product, Ward tossed it out and went back to old-fashioned methods. The company still hand dips more than 25 million pieces of chocolate each year.

"He tried to revolutionize all of it," said Tom Ward. "But making candy is all about time and temperature and trying to accelerate that is not good. They have equipment that will make candy but not Russell Stover candy."

Louis Ward had a stroke in 1993 and his sons became co-presidents, splitting duties according to their interests. A sister, Linda O'Hara, also is an owner. One of their first moves was to buy Whitman's Candies -- a Philadelphia company founded in 1842 that had a strong following and was of similar size to Russell Stover.

Growth opportunities

Russell Stover Candies doesn't want to tweak much with its successful recipes, but it has made some concessions to the marketplace.

The company has introduced sugar-free, low-carb, diabetic, and even a Weight Watchers by Whitman's line of candies that are sold year-round. A new upscale line, Private Reserve, for the "chocolate connoisseur" is doing better than anticipated, the Wards said.

New packaging also allows the company to aim at different demographics without changing the chocolate. Felt-covered Valentine's boxes are designed for tweens and teens through such slogans as "You Rock" or "Love Ya." Other boxes scripted "For My Man" are made for women to give as presents. Other fancier boxes are mostly for young women to use as hostess gifts or for other occasions.

The company also is an official licensee of Looney Tunes and Peanuts characters and Elvis "All Shook Up" boxed chocolates.

Russell Stover's retail stores -- including five in the Kansas City area -- also are an important part of the company's strategy. While other candy companies such as Godiva and Hershey's also have opened retail stores, they generally offer their standard candy products. Russell Stover stores offer every candy the company makes along with caramel-covered apples, chocolate covered strawberries, cookies, biscotti, hostess gift boxes, coffee, and Blue Bell ice cream.

"It's a good way to build the brand, a way to add to the whole candy experience," said Susan Fussell of the National Confectioners Association, Vienna, Va.

Chocolate is a discretionary purchase so sales are influenced to a large extent by the economy, Tom Ward said. Russell Stover Candies tried to cut costs by making more candy with fewer workers, especially by streamlining packaging procedures. New $500,000 machines wrap 350 to 400 bars a minute.

But where it can't cut costs is in the formula.

"We make something that people eat for enjoyment," said Tom Ward. "It's a treat, it's not something people have to eat. They want to buy it because of the way it tastes."

------------

------------

To reach Joyce Smith, call (816) 234-4692 or send email to jsmith@kcstar.com .

-----

Copyright (c) 2006, The Kansas City Star, Mo.

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

Unknown:RSC, Unknown:MRS, NYSE:HSY, Unknown:ABC, NYSE:WTW, NASDAQ-NMS:COST, NYSE:AM,

Source: The Kansas City Star (Kansas City, Missouri)

More News in this Category