A sour taste of bankruptcy

Chocolate: Changing times and changing tastes have driven the parent company of candy-makers Fannie May and Fanny Farmer out of business.

February 14, 2004|By P.J. Huffstutter | P.J. Huffstutter,LOS ANGELES TIMES

CHICAGO - Clutching a wad of cash in a white-gloved hand, Carla Newman scours the nearly empty Fannie May candy shop for remnants of her childhood.

Every holiday, a slim box picturing a Chicago skyline would find its way onto the coffee table.

Easter called for boxes filled with Mint Melt A Ways and their bright-green taste of spring. Christmas was time for Trinidads, with golden chocolate and the crunch of coconut.

And for Valentine's Day, Cupid always delivered piles of Pixies, oozing with caramel.

But now - as Fannie May's parent company files for bankruptcy and prepares to shut down the century-old Chicago candy giant and its legion of retail stores tomorrow - Newman is hoarding chocolate.

"It kills me that this is happening right on Valentine's Day," says Newman, 58, a retired schoolteacher shopping for herself and her three grandchildren.

"A Chicago without Fannie May is like a Chicago without snow, a Chicago without the Cubs. It's a part of this city's heritage."

Chocolate slump

Although Chicago and the surrounding region manufacture the greatest volume of candy in the country and employ the largest number of candy workers, the economic picture here has become increasingly sour.

In the past decade, the region's candy industry has shrunk by 38 percent, down to about 7,400 workers, according to Illinois employment officials.

Analysts who track the confection industry say the true downfall of companies such as Fannie May rests in America's changing chocolate-eating habits.

During the company's heyday in the 1950s and '60s, people often took a box of chocolates when they visited friends and relatives.

Businesses such as Fannie May and Russell Stover in the Midwest and See's Candies on the West Coast tapped into such social niceties with glossy boxes filled with sweet surprises. You reached in, hoping for one with caramel filling rather than pineapple or peach.

But "times have changed, and Americans are on low-carbohydrate diets," said Leonard Teitelbaum, a managing director at Merrill Lynch who tracks the candy industry.

"Polite company brings wine or flowers, not sweets."

High-end sweets

When people do indulge, they tend to choose a more decadent treat - one that sells for more than $60 a pound, rather than midrange chocolates at $10 to $20 a pound. The public is developing a discriminating attitude about its chocolate, and companies such as Fannie May haven't kept up.

Although there have long been niche players in the business, analysts say the trend toward the high end took off with Godiva, a subsidiary of Campbell Soup. Godiva has always been marketed to people with a taste for finer goodies.

Now Godiva has found itself having to reach even higher, reflected in the recent launch of its G line. A pound of G chocolates costs $100 and has a shelf life of three weeks. They are described as "edible works of art."

In contrast, a pound of Fannie May Pixies costs $18.95.

Although Fannie May recommends that Pixie lovers eat the candy within three weeks, the company said the treats could last indefinitely if carefully wrapped and frozen.

Younger consumers

"Godiva is sold in a sleek gold box with a modern but classic-looking print. That appeals to a younger audience," said Nicole Hanrahan, director of the Candy Institute, a nonprofit research group based in Chicago.

"The average Fannie May customer was 65 years old, and their packaging looks like grandma candy. Fannie May didn't change as times changed, and that killed them."

Taking advantage of the consumer shift, more boutique companies are cropping up to sell chocolate as they would wine, coffee or cigars. Half a dozen new high-end chocolatiers have debuted or expanded their presence in Chicago since 2000, while dozens more have been launched in New York and in California.

Three companies - Mars, Nestle and Hershey - control about 80 percent of the chocolate market in the United States, Teitelbaum said. What's left of the market is small and highly competitive.

Declining sales

Sales of Fannie May and its sister brand, Fanny Farmer, which is sold mainly on the East Coast, had been declining steadily for several years, industry sources say. The parent company, Archibald Candy, was already struggling financially from acquisitions made in the past decade, when it fell short of paying its debt.

After filing for bankruptcy protection last month, the candy maker agreed to sell the two brands and 31 retail stores to privately held Alpine Confections in Utah for an undisclosed amount.

The deal requires the approval of the U.S. Bankruptcy Court and would allow Alpine to manufacture the candies and run some of the stores.

Today, the Fannie May factory stands empty, the trucks long departed with the last batch of chocolate-covered cherries. When the company's 250 stores nationwide close their doors this weekend, 3,000 jobs will vanish. Six hundred had disappeared when the factory closed.

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