Tootsie Roll Industries Inc. may just be the modern version of the Ma and Pa candy store.
After all, it is one of the few publicly owned companies that is run by a husband-and-wife team, Ellen and Melvin Gordon; it sells candy; and the Gordons view their family-oriented firm as a slice of Americana.
But there the similarity might end. The 1.5 million-square-foot Tootsie Roll factory on the Southwest Side could hold thousands of the old Ma and Pa stores that once dotted the country.
While those anachronisms have atrophied and died, Tootsie Roll has grown and prospered through its 89 years.
Last year, the firm`s sales climbed 19 percent, to $93.1 million from $78 million a year earlier. More impressive was the 54 percent jump in profits in the same period, to $8.8 million from $5.7 million.
Over the last five years, the brown Tootsie Roll has seemingly turned to gold. The price of its common stock soared on the New York Stock Exchange from $5.87 in 1980 to a high of $53.75 a few weeks ago. On Friday, it closed at $47.50, up $1.37 and still more than 50 percent higher than the year-end close of $31.
In addition, the company declared a 42-cents-a-share cash dividend last year and 3 percent stock dividend, the same percentage it has declared annually for more than 15 years.
So successful was 1984 that last month the firm realized a long-time goal when it signed an agreement to acquire, for an undisclosed amount, Cella`s Confections Inc., a New York-based manufacturer of chocolate-covered cherries that had 1984 sales of about $12 million. The deal is expected to close later this summer.
While the Gordons say they do not court analysts the way some executives do, the numbers they have produced over the last five years have made the stock quite appealing.
”It`s a consumer franchise second to none,” said David Leibowitz, an analyst with American Securities Corp. in New York. ”Name me an alternative to a Tootsie Roll. They don`t exist. Who else has a 1-cent product? Who else has the Tootsie Roll variety? It`s a household name.”
Leibowitz, who has watched the company for the last decade, says the Gordons` management record ”speaks for itself.”
”In the short term I see a continuation of the current trends,” he said. ”The Cella was a heck of an acquisition. They got it very, very cheaply. They have proven they can compete with the multinationals and even grow.”
The Tootsie Roll operation has come a long way from that day in 1896 in New York when an Austrian immigrant named Leo Hirschfield hand-rolled that first chewy, chocolate substance he named after his daughter Tootsie.
It sold for a penny then, and children of all ages still buy substantially the same product for a penny, according to Ellen Gordon, the firm`s president. It was America`s first hand-wrapped candy.
”Our products are bought by adults for their children, but then they also eat them as a treat for themselves,” she said.
Hirschfield took Tootsie Roll public on the New York Stock Exchange in 1922, nine years before Ellen Gordon was born. During the Depression, Ellen Gordon`s father, William Rubin, acquired a stake in the company. The Gordon family holds about 50 percent of the some 2.8 million shares of common stock. That stake keeps the firm independent and family-oriented, the couple said.
”We have no interest whatsoever in being bought,” she emphasized.
”We like what we`re doing,” Melvin Gordon agreed. ”It`s a way of life.”
Indeed, Melvin Gordon, 65, has been a director of the company since 1952 and chairman of the firm since 1962, succeeding Rubin as chief executive. Ellen Gordon, 54, has been president of the company since 1978 and a director since 1968.
Through the years, the company has changed, making acquisitions, moving, expanding, adding products.
In 1966, Tootsie Roll moved its operations to Chicago, the candy manufacturing capital of the United States, where it joined such giants as Brach, Curtis, Mars and Cracker Jack.
Six years later, the firm bought the Mason and Bonomo division of Candy Corp. of America. Such household names as Mason Dots and Crows were added to Tootsie Roll and Tootsie Roll Pops, the lollipops wrapped around the chewy center.
Events don`t always run as smoothly as a lollipop licks, though. In 1974, sugar prices jumped more than 600 percent, to 60 cents a pound from 9 cents. That was compounded by a huge leap in cocoa prices.
”We had to take a hard look at things,” Ellen Gordon said. ”We had to make some pieces smaller and increased the price of other items, but that was true of the entire industry.” That year, Hershey reduced the size of its chocolate bar, and Nestle increased prices.
While the company must suffer the vicissitudes of the market, it has endeavored to be as self-sufficient as possible.
”We try to be vertical wherever we can,” said Melvin Gordon. ”We have our own sugar refinery, probably the only candy manufacturer in the world with its own. We have our own printing press and rebuild our own machinery in house. We bought our own advertising agency.”
Advertising has taken a large slice of the corporate budget through the years, but how large is a company secret. The Gordons have placed the lion`s share where their favorite consumers cut their sweet teeth, on weekend morning television kid shows.
”We believe we were the first candy company to advertise on television on a regular basis; we were on Pinky Lee and Howdy Doody in the late 1940s,” Melvin Gordon recalled.
While some may not consider children discriminating consumers, the Gordons know they are their most loyal customers.
”When a child goes into a store to buy a Tootsie Roll, he wants a Tootsie Roll,” Melvin Gordon said. ”The most economical shopper around is the child with 10 or 25 cents, and we have to cater to that.”
Generations of kids come back again and again. So do their children. The lines have expanded from the basic Tootsie Roll to the Pop, various flavored Tootsie Rolls, grape and cherry gum, the Mason lines, Bonomo taffy and, as of the end of summer, the Cella products.
While the Gordons stress that adults eat the firm`s traditional line, the Cella acquisition will put Tootsie squarely into an adult market, particularly in the ”changemaker” segment. ”Changemakers” are those small, foil-wrapped candies restaurant customers often grab in lieu of change.
”That is a big part of Cella`s business,” Ellen Gordon said. ”We wanted to make sure we bought a leader, and Cella`s is the first in its field of chocolate-covered cherries. We`d been looking at the company since 1978.” After surviving the cocoa-sugar price crisis, the candy industry was then hit with the panic that came in the wake of the Tylenol deaths in the fall of 1982, when many parents became concerned their children might get contaminated candy while trick-or-treating. Just as the traditional Halloween candy-buying season was beginning that fall, seven Chicago area people died after taking Extra Strength Tylenol capsules.
According to the National Candy Association, Halloween sales that year did drop, but the year`s consumption still climbed slightly to 3.80 billion pounds from 3.63 billion in 1981.
Ellen Gordon said that Tootsie Roll was ”not so badly hurt” by the Tylenol scare. While 1982 sales for the year were up only slightly, to $76.09 million from $75.97 million in 1981, earnings increased to $4.7 million from $3.3 million. The following year sales climbed to $78 million before soaring last year to $93 million.
The Gordons cited two primary reasons for last year`s jump:
— Increased distribution by selling more of their products in the stores that already had Tootsie Roll items, and by making inroads in stores that didn`t carry their products.
— Introduction of new products. The ”foot of Tootsie” that sells for 50 cents was rolled out. ”It`s a winner,” said Ellen Gordon. Another new product was cherry bubble gum with a cherry center and grape bubble gum with a grape center.
A rising public concern with nutrition and good health hasn`t hurt the candy business, the Gordons say. In fact, they reject the contention that candy is not healthy.
”We eat candy every day, and we have been blessed with good health,”
Ellen Gordon said. ”We think there is a place in a well-balanced diet for candy. We hear this more and more from nutritionists. We think that the era that you hear of candy as junk food is over.”
Also helping the candy industry in general has been the stable price of commodities in recent years, they said.
In the first quarter of 1985, Tootsie Roll reported sales of $19.5 million, up from $16.5 million a year earlier, with earnings reaching $2.04 million, up from $1.36 million in the year-earlier period.
Through the years the firm has gone international, with a factory and distribution in Mexico, sales and distribution in Canada, and a licensee in the Philippines.
The success of Tootsie Roll has not gone unnoticed. In May, Ellen Gordon was awarded Candy Industry magazine`s Kettle Award for outstanding achievement in 1984.
The firm`s past growth has hinged on a smooth working relationship between husband-chairman and wife-president, but what happens when the couple, who have been married 35 years, have conflicting ideas?
”When one of us feels strongly that something is not in the best interest of the company, he tries to convince the other,” she said. ”If one cannot convince the other, we abandon the proposal.”