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History
Under Favorite Brands ownership, the formerly independent Farley's and Sathers companies were combined with the Dae Julie Company and with Trolli. Under Favorite Brands' management, Dae Julie was rolled into the Farley division while Sathers and Trolli remained as separate divisions. Favorite Brands was eventually acquired by Nabisco, and then shortly afterwards, Nabisco itself was merged with Kraft Foods.
After the merger, as Kraft divested brands, divisions, and assets, Farley & Sathers emerged as a new company in its own right though shorn of a few key business units. The North American Trolli operation, which had been retained by Kraft, was eventually sold to the Wrigley Company, who subsequently sold it to Farley & Sathers. Much of the history of these companies is intertwined: Sathers bought much of its bulk candy supplies from Farley; the growth of Farley Foods before Favorite Brands was in no small part due to the implosion of E.J. Brach's which itself became part of the new Farley's and Sathers organization; the problems at Favorite Brands could be partially attributed to a resurgent E.J. Brach's after it merged with the Brock of Chattanooga candy company to become "Brach and Brock". When sold by Kraft, Farley lost its fruit snack business but kept the Dae Julie gummi plant; with Farley & Sathers' purchase of the Brach and Brock company, it regained a fruit snack business though it had lost its advantage as first to market in the category. Many plants and distribution facilities were closed, consolidated, or replaced over time.
Sathers
John Sather, a local grocer in Round Lake, Minnesota, established the Sather Company in 1936. He purchased trainloads of cookies to sell to stores throughout southwestern Minnesota.
By the early 1960s, Sathers distributed products to the five-state Midwest region. The territory grew and product lines and operations changed to include the addition of a nut roasting operation in the 1960s. With the addition of telemarketing in 1967, the customer territory expanded to eleven Midwest states. With this increase, Sathers added tractor trailer units to its trucking fleet.
Sathers was primarily a rebagger. Rebaggers purchase product in bulk, in pallet-quantities or container loads if imported, and repackage it into smaller retail packaging. One source Sathers used was Farley Candy Company though many other sources were used as well. Many of its chocolate products were provided by the Haviland Candy Company, a division of NECCO.The Sathers company is considered to be the innovator behind packaged "pegboard" or "hanging bag" candy, now one of the candy industry's primary marketing programs for general line candies. Another innovation was the telemarketing system it implemented when its sales force quit en masse due to low wages. The sales people had been required to not only sell the product, but also to deliver it and stock it on store shelves. Sathers' telemarketing initiative is considered one of the earliest implementations of this process, where orders were taken by phone and the customers would unpack and stock the shelves themselves.
The company continued to expand and in 1972, Sathers went nationwide with product distribution when it secured half of the national Kmart business. When it acquired Chattanooga-based Kitchen Fresh Company in 1983, the remainder of Kmart's national business became Sathers'. Sathers' expansion continued with the company purchasing the Bayou Candy Division of the American Candy Company in 1985; Powell's Candy Company (of Hopkins, Minnesota) and Northstar Candy Company (of Rogers, Minnesota) were both acquired in 1991. Sathers now had three manufacturing facilities—(a nut roasting and processing plant in Chattanooga, Tennessee and two confectionery plants in Hopkins, Minnesota and in New Orleans, Louisiana)—in addition to their two distribution centers.
Farley
In 1870, Gunther Farley and two of his brothers founded Gunther Chocolate Company. Gunther Chocolate Company later merged with another, smaller, Farley-family-owned candycompany in 1891, becoming Farley Candy Company.
As it grew, Farley Candy moved its operations from North Franklin Street in Chicago, then to Superior Street, and then, in 1951, to the north suburb of Skokie. It passed to a third generation of the Farley family, represented by Preston Farley, who managed it until 1968. In that year, Preston Farley sold a majority interest in the company to Raymond Underwood.
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During the Preston Farley and Underwood years Farley was primarily a manufacturer of jell and other products, manufactured in starch moguls; Farley also produced cinnamon imperials, a panned product, and a line of hard candies including sanded lemon hard candy. Preston Farley invented the Farley Jet Cooker, subsequently licensed to the Staley Company. The Jet Cooker is now known as the Staley Jet Cooker per the licensing agreement, and is still used today in the manufacture of confections and paper.
In 1974, William Ellis purchased 100% of the company. In the same year he purchased the Lakeside Candy Company, located in Zion, Illinois and commonly known as Zion Candy, which produced a full line of individually wrapped hard candies such as starlight mints and butterscotches.
In 1981, Farley was operating out of its plants in Skokie and Zion, Illinois when a third plant was added. A 103,000-square-foot (9,600 m2) plant, formerly used to produce the York Peppermint Pattie and Power House bar was purchased from Peter Paul-Cadbury. This plant became Farley Candy Company's primary chocolate manufacturing site, though it also produced other products.
In 1985, Farley bought a vacant 265,000-square-foot (24,600 m2) warehouse in Chicago on 31st Street, and converted it for confection manufacturing. This large plant became the primary manufacturing facility for Farley when it came online in June 1986. This plant was used primarily to manufacture a newly emerging category of candy: Fruit snacks, and later, Fruit Rolls. Fruit Snacks were manufactured using the same equipment and processes as gummy candies, using real fruit juice as an ingredient and vitamins added, formed and molded in starch moguls. As gummy candies became more popular, this plant and equipment was used to meet rising demand for those products as well.
In 1988, Farley took over the operations of Jaffe Candy, located in Compton, California, establishing a 50,000-square-foot (4,600 m2) packaging and distribution center on the West Coast. Also in 1988, Farley's leased a 253,000-square-foot (23,500 m2) warehouse distribution center in Bedford Park, Illinois. With four candy manufacturing plants and two distribution centers, Farley Candy Company was the second largest bag candy manufacturer in the United States and was the largest private label general line candy manufacturer.
In 1990, Farley purchased a 142,000-square-foot (13,200 m2), former E.J. Brach's factory, located in Melrose Park, Illinois. This plant was used for a wide range of products, but primarily produced hard candies, eventually replacing the plant in Zion, Illinois and concentrating production facilities within a smaller radius of the company's warehouse/distribution center. One of the main products produced on state-of-the-art equipment at this plant was Starlight Mints, at a much lower cost than those from competitors such as E.J. Brach, for which it was a mainstay product.
In 1993, facing capacity shortages, Farley (which had changed its name to Farley Foods USA to allow for future expansion to products outside of confections) purchased a 144,000-square-foot (13,400 m2) manufacturing plant in Oklahoma City, Oklahoma along with a 100,000-square-foot (9,300 m2) warehouse in Moore, Oklahoma. These buildings had been the main production and warehouse facilities of the Bunte Candy Company. They were sold to the American Candy Company in 1990, which then sold them to Farley.
In 1994, Farley leased a 480,000-square-foot (45,000 m2) warehouse and distribution center on 43rd Street in Chicago which was closer to expressways and to its major production facility at 31st Street. This new warehouse replaced the 253,000-square-foot (23,500 m2) Bedford Park facility.
In September 1995, William Ellis received a heart transplant at age 71. In August 1996, Farley Foods was sold to Favorite Brands International with Ellis taking a 14.3% ownership stake in the new company.
Favorite Brands International
Farley and Sathers first came together under the Favorite Brands International name in 1996. Favorite Brands had been created a year earlier, in 1995, with the purchase of confectionery business units from Kraft Foods.
Kraft business lines acquisition
Favorite Brands International (FBI) was formed in July 1995 to purchase the branded and private label caramel and marshmallow businesses from Kraft Foods for an estimated $204 million. It was funded with investments from the Texas Pacific Group (TPG) and InterWest Partners.
With the purchase of the Kraft business units, Favorite Brands became the largest manufacturer of marshmallows and the leading manufacturer of wrapped caramel products in North America. They also produced a significant percentage of the private label marshmallows sold. The Kraft caramel business enjoyed a market share greater than 50% at the time of the purchase, while the Kraft-branded marshmallows enjoyed a marketshare greater than 60%. In addition to consumer candy and marshmallows, Favorite Brands also acquired the industrial caramel and marshmallow businesses of Kraft. This business supplied the dehydrated marshmallows (with a 98% share of the market) marshmallow creme and caramel for use in breakfast cereals, instant hot chocolate mixes and taffy apples. Favorite Brands received film credit for supplying the truckloads of marshmallow creme used in the film What Dreams May Come.
With the acquisition came a confectionery manufacturing facility located in Kendallville, Indiana. Built in the 1920s and situated on 32 acres (130,000 m2), this became the main manufacturing facility after 4 other Kraft marshmallow manufacturing lines were relocated from Buena Park, California, Canada and Garland, Texas (2 lines).
Sathers Candy and Farley Foods acquisitions
In 1996, Favorite Brands purchased the Sathers Candy Company and the Farley Food Company.
Kidd Marshmallows
Also in 1996, Kidd & Company was purchased. Kidd was the second largest marshmallow and marshmallow creme manufacturer in the U.S. with sales of over $32 million in 1995. Favorite Brands had now purchased the top two marshmallow producers in North America.
Founded in 1895 by Albert Eugene Kidd, it initially produced a wide array of products including face powders, roasted peanuts and lemon drops. In 1917, the company began manufacturing marshmallows. By 1938 Kidd & Company had concentrated its focus on the marshmallow business, and especially marshmallow creme. It used a casting method of production, pouring marshmallows individually in molds. In 1947, they opened a 14,000-square-foot (1,300 m2) plant in Ligonier, Indiana. In 1948, shortly after Kidd brought their new plant online, Alex Doumakes patented a new, more efficient process for producing marshmallows using extrusion. This method forced a rope of marshmallow through a die under pressure, which was then cut into the bite-sized pieces familiar today. Alex Doumakes later started his own marshmallow company. Kidd's plant was updated and expanded over the following years and ultimately grew to be 110,000 square feet (10,000 m2). The Stay-Puft marshmallow bag props in Ghostbusters (1984) were produced by Kidd & Company.
In 1987, Kidd & Company built an additional plant west of the Rocky Mountains, in Henderson, Nevada. This plant was 118,000 square feet (11,000 m2) and was destroyed on May 4, 1988, when the PEPCON rocket fuel plant located next to it exploded. Rebuilt with more space in 1989, it continued as the west coast manufacturing and distribution point for Kidd & Company, and became a popular tourist attraction due to its guided tours.
After Kidd & Company was sold to Favorite Brands International in 1996, the Ligonier plant was closed in 1996 and production moved to the former Kraft plant located less than 30 miles (48 km) away in Kendallville, Indiana. After Kraft gained control of Favorite Brands and the Kendallville and Henderson plants in 2000, they closed the Henderson plant in June 2001 and relocated the manufacturing equipment to Kraft's plant in Kendallville, Indiana. Today the specially designed building with its clean rooms is used by the Clark County Maintenance department.
Ligonier, Indiana celebrates its Kidd's Marshmallows production heritage by holding the Ligonier Marshmallow Festival every year since 1992, even though marshmallows are no longer produced there.
Dae Julie acquisition
In early 1997, Dae Julie was purchased. Dae Julie was founded in 1963 as a candy importer by David Babiarz. In 1990, Mr. Babiarz went on to start a new business and built a new plant to support it. The new business registered as Candyland, and the new facility was a 120,000-square-foot (11,000 m2) state-of-the-art manufacturing plant located in the Chicago suburb of Des Plaines, Illinois. The primary product focus of Candyland was Gummy candies for which demand was rapidly rising, though the starch-molding equipment could be used for a wide range of products. A trademark search revealed 30 other companies using the name Candyland, so the decision was made to use the Dae Julie name on Candyland products. At the time of its acquisition in early 1997 by Favorite Brands, it was considered one of the top Gummy manufacturers in the country, with annual sales of over $40 million (at manufacturer prices). Overall retail sales of Gummy products was estimated to be between $150 million and $175 million in the year of acquisition, with Nabisco's Gummi Savers accounting for $40 million of that total (at retail). Trolli, Farley Candy and Ferrara Pan were the other large producers at the time for the U.S. market.
North American Trolli acquisition
Later in 1997, the North American operations of Trolli Gummies was added.
Gummy Bears were originally developed by Hans Riegel Sr. of Bonn, Germany in 1922. He then started the Haribo (acronym for Hans Rigel, Bonn) company to produce the little rubber bears.
A different German candy company was started in 1948 by Willi Mederer. Originally the company was named Wilmed, but in 1975 the name was changed to Trolli. The company developed Gummy Worms in 1981 and sold them under the Trolli brand name, using a rainbow-haired Troll as their mascot. In 1986, to expand its market and lower its shipping costs, Mederer began producing Trolli-branded gummies in a plant located in the U.S. in Creston, Iowa.
Favorite Brands purchased the Trolli U.S. manufacturing facility in 1997 and licensed the Trolli name from Mederer for use in the United States. The license applies only to North American sales. An example of a different Trolli license holder is TREXCO.
Favorite Brands
In 1995, Favorite Brands was formed to purchase the largest United States manufacturer of marshmallow products. Then, in 1996, it purchased the second-largest manufacturer of marshmallow products.
By the end of 1996, Favorite Brands enjoyed the number-one market position in branded marshmallow products, including the Jet-Puffed marshmallow brand, which had a 79% share of the branded marshmallow market and a 47% share of the total marshmallow market. In addition, Favorite Brands was the market leader in the ingredient marshmallow category, selling dehydrated marshmallow bits to every major cereal manufacturer in the United States, and was believed to have a 98% share of that market.
In 1996, Favorite Brands' Fruit Snack business held the number-two market position with a 22% market share and it was the second-largest general-line candy supplier in the United States. The Sathers product line was the leading brand sold in convenience stores across the country.
With the 1997 addition of Trolli and Dae Julie, Favorite Brands held the number two market position in the gummi market; Trolli having a 15% share.
By the end of 1997, Favorite Brands was the distant, fourth-largest confectionery company in the United States. At that time, only Hershey, Nestle and Mars were larger. However, Favorite Brands declared bankruptcy three years later.
The president and CEO of FBI, Al Bono, formerly CEO of California Gold Dairy Products of Petaluma, California, was quoted as saying: "Business is business, whether it's dairy or chocolate confections or selling lamps". David Bonderman, speaking for TPG which had invested $512 million in the venture, was later quoted to say that Favorite Brands was one of the worst investments his group had ever funded. Favorite Brands was TPG's first major investment in the food and beverage industry.
Before coming together under the Favorite Brands umbrella, the individual companies were mostly privately owned, with their owners taking a daily, hands-on interest in their operations. Under Favorite Brands' ownership, the companies were stripped of these owners and they were replaced with a management team that had little experience in confections or consolidating the operations of acquisitions. The first management group was replaced by an interim set of management. This interim management was then replaced within a year by still another group. The parallels with the recent experiences at E.J. Brach's (see section below) were striking: rapidly changing upper management - three CEOs in as many years; a disconnect with customers and their needs - reducing promotional support and product choice; a marked increase in overhead expenses, including a large office complex, as well as increased spending for financing and consultants.
The deal seems to have been structured so that the investors' options would remain open: one option being to hold the investment briefly and then flip it, either as a whole or by spinning off the acquired components. Another option was to take the company public. The stated option was to operate the companies so that their synergies could be tapped to reduce the costs of production and distribution sufficiently to offset the ongoing financing expenses associated with the formation of Favorite Brands. While Texas Pacific may have ultimately hoped to take the company public, it became apparent that Favorite Brands' rollup strategy was fundamentally flawed. The company paid too much for its assets and took on too much debt. The acquisitions did not mesh well together, having different operations, different products, and different customers-thus leading to severe difficulties in integrating the operations and achieving any benefits from the company's size. Systems and reporting were quickly integrated, but getting the various Operations, Sales, Marketing and Distribution components working together presented an ongoing problem. When key executives from acquired companies left, Favorite Brands lost an incalculable amount of trade relations and knowledge of the candy business, which had a debilitating effect on business. Some orders were now delivered late or only partially filled, providing an opening for competitors to seize all-important shelf space. Another common experience Favorite Brands shared with the travails which Brach's had endured was the loss of a well-known brand name; Favorite Brands was to lose the 'Kraft' name on its packaging effective October 1997. In addition, Favorite Brands' products were facing ever-increasing competition from competitors such as Brach's, including in the heretofore high-margin Fruit Snack and Gummi product lines.
Timeline
1860s Henry Heide Candy Company begins business
1890s Farley Candy Company established
1900s Brach's Candies begins production in the backroom of a Chicago store. Brock's Candy of Chattanooga begins production of penny candies, peanut brittle and jelly candies.
1920s Bobs Candies is formed
1930s Sathers Candy Company begins operations
1960s Dae Julie begins business as an importer, later as a manufacturer
1980s Trolli Gummis begins production in the U.S.
1994 Brach's Candy purchases a controlling interest in Brock's Candy of Chattanooga
1995 Favorite Brands International created with purchase of Kraft Caramel, Marshmallow, Dinner Mints and Peanut Brittle businesses. Henry Heide, Inc is sold to Hershey Foods.
1996 Favorite Brands International acquires Farley Foods, Sathers Candy and Kidd Marshmallow businesses
1997 Favorite Brands International acquires Dae Julie and the Trolli Gummi businesses
1999 Nabisco buys Favorite Brands International
2000 Nabisco is merged with Kraft Foods by Phillip Morris
2002 L Catterton Partners form Farleys & Sathers Candy Company made up of assets from the former Farley Foods, Sathers Candy Company, and the Kraft Taffy business from Kraft; Chuckles and several other Henry Heide brands purchased from Hershey Foods.
2003 L Catterton Partners continues its acquisitions with the purchase of four old-line gum lines from Hershey Foods.
2005 L Catterton Partners buys the Trolli Gummi business, which had been part of the Favorite Brands group of products, from Wm. Wrigley Jr. Company, which had acquired it as part of a larger group of businesses from Kraft. Bob's Candies is acquired.
2007 L Catterton Partners buys the Brach & Brock Candy Company
2012 L Catterton Partners buys the Ferrara Pan Candy Company and renames the new entity Ferrara Candy
2017 L Catterton sells company to Ferrero SpA
From Wikipedia’s article on Farley's & Sathers Candy Company, shared under CC BY-SA 4.0.3