All in the family

Features - Cover Story

Fifth-Generation Goetze’s Exemplifies Industry’s Fun, Friendly Competition

June 18, 2011
Lisa Lupo

Lollipops. Chocolate bars. Caramels. Peppermints. Licorice. Jelly beans. Candy canes. Peanut butter cups …

There are as many mental images evoked by the word “candy” as there are manufacturers who create these sweet confections. And with more than $29.4 billion worth of candy sold annually in the U.S., that’s a lot of imagining.

Although a large bite of candy market share is taken by a few top companies, the confection industry consists predominantly of family-owned small businesses with fourth and fifth generations of 1800’s immigrants at the helm. Still today, in fact, the greatest concentration of confectioners remains in the eastern states of Pennsylvania, New York, and New Jersey to Ohio and Illinois.

With even some of the largest companies, such as Mars, Inc., still family owned, “we are overwhelmingly a family-company industry,” said Larry Graham, president of the National Confectioners Association (NCA), which represents both manufacturers and suppliers. In addition, two-thirds of NCA’s members, family-owned or not, are small businesses, he said.

Perhaps it is because of this family atmosphere that the industry tends toward friendly competition. Or perhaps it is simply because candy is fun. “It is a feeling of enjoyable fun and simple pleasures,” said Mitchell Goetze, president and COO of Goetze’s Candy Company and recently elected chairman of the board of NCA. “Our products compete, but they are so different.”

Goetze’s: A (Cow) Tale of Success

With the strong principles that are applied in the
day-to-day business of family-owned Goetze’s Candy, President Mitchell Goetze sets the bar high as Chairman of the Board for the National Confectioners Association. Some wise words from Goetze include:

Small Companies. “Focus on one thing and do it well.” Don’t try to be or do everything, instead do two or three things and be very, very good at them. Goetze’s began as a general candy house, and kept increasing its line until it was manufacturing a number of different candies and gum. Then the management took an in-depth look at its business and strategies and decided to shift its focus to what was most unique and what it did best: caramel creams. Today Goetze’s makes only Caramel Creams and Cow Tales in original, apple, chocolate, and strawberry; and gourmet Caramel Creams in double chocolate and licorice.

Automation. “It’s easier to keep a small crew of really great people than to have a large crew.” Through the years, Goetze’s has gradually increased its automation to increase efficiencies and safety, reduce the points of product contact, and increase ergonomics for its people. In doing so, the company has also increased the role and responsibility of the line workers so they no longer simply monitor product being processed but are actively engaged and hold decision-making rights on the production line. Goetze’s views engaging its people on the line as critical to obtaining the greater goals of the company to exceed throughput figures.

The CCPs. “We have $75,000 worth of metal detectors to make a 25-cent piece of candy.”As with many manufacturers, Goetze’s primary CCP is its metal detector. It is a control point into which the company has invested heavily, placing metal detectors on each of its five lines, whether the line runs daily or not.

The Master Plan. “We have a master plan for the next five years, but we use that in principle. We are not wedded to it.” Retaining flexibility enables the company to adapt to changes in the industry or its own production; and if something isn’t working, they are willing to pull the plug. However, change is not made for change sake, rather a slow, methodical approach is taken in every initiative. The systematic approach is applied to plant and equipment changes and upgrades as well—when an investment is made, it is done so that it immediately begins to make money, and it works.

The Supply Chain. “They are our closest friends.” It’s not easy to become a supplier for Goetze’s, but once you are, you can expect the company to remain loyal to you—as long as you continue to provide the safety and quality for which the company chose you. “We have very valued vendor relationships. We look at it as an insurance policy.”

Company Culture. “We’re not always easy to live with, but we are always fair.” Goetze‘s employees tend to stay for the long haul. The company promotes from within and has multi-generations of families in its ranks; management takes an active part in the plant processes, with even the elder, semi-retired Goetze members continuing to work at the plant and visible on the floor. Even with increasing automation, the company has had enough growth and natural attrition that it has not had to let any employees go as a result of that. It is a function of the company’s team culture and participation by management and line worker alike. “You can have all the rules you want, but if everyone isn’t involved and embracing the core purpose of any initiative, you’ll just be pushing those rules uphill…..And that never works.”

Goetze’s, itself, is a fifth-generation company. The Baltimore-based manufacturer of Caramel Creams and Cow Tales includes five active Goetze family members on its management team: third-generation Melvin (who passed away just after QA’s visit to the plant); fourth-generation brothers Randle and Spaulding Sr.; and fifth-generation “day-to-day managers” Mitchell; his brother, Executive Vice President of Operations Todd; and Vice President and CFO David Long. [For more on Goetze’s, see A (Cow) Tale of Success.]

It may seem that complexity would result from having an industry of so many small companies that are so different, but Graham sees it as a legislative advantage. “We benefit by the number of small companies. It is easier for members of Congress to see the effects [of legislation] on small candy makers from their own communities.”

Although the industry remained fairly stable through the recession, any advantage is helpful in facing current legislative and consumer advocacy issues, including pending sugar reform bills, nutrition and anti-obesity advocacy, front-of-package labeling legislation, and the industry’s role in ensuring a safe food supply.

Sugar Reform. Such legislation currently at issue is the U.S. Sugar Policy. Under current law the U.S. government sets legal limits on the amount of sugar that domestic processors can sell, and on allowable import amounts. As a part of the U.S. Farm Bill, the policy comes up for review in 2012.

“The current sugar program artificially limits the supply of sugar in the United States, causing tremendous and sometimes irreversible harm to U.S. candy makers, especially smaller candy companies,” said Graham earlier this year in support of sugar reform. Not only has this impacted jobs, but also, he said, “U.S. companies cannot compete on our own soil with foreign candy companies who pay much lower world sugar prices and import their candies into the U.S.”

What the issue really boils down to, added NCA Senior Vice President, Strategic Communications, Susan Smith, is fair competition with international manufacturers. According to the law, “85 percent of the sugar we use has to come from the U.S.,” Smith said, which causes higher prices for American confectioners, and makes it difficult for them to compete with global manufacturers of similar products. “We just want to compete in a free market.”

It’s not that the industry does not want to source domestic product; in fact, except for cacao which cannot be produced in the U.S., the majority of ingredients in most candies are domestically sourced, Smith said. Goetze’s is one company that sources everything possible from within the U.S.—regardless of cost. This includes everything from its silos of sugar to the American-made hairnets donned by employee and visitor alike. The only non-U.S.-manufactured materials the company buys are those that are not available domestically, such as cacao and one particular film packaging material.

In addition to supporting U.S. businesses, Goetze’s works with domestic suppliers to enable the building of strong relationships. “We want to be able to go to the factory, talk the same language, and have them come here,” Goetze said. “We don’t buy on price, we buy based on the source.”

However, he does not see reason to pay a higher price than is fair or that distorts the global playing field, as he believes the current sugar policy does. “We live in the biggest economy in the world; we have the highest standards in the world. There’s a price we pay as manufacturers to keep that standard. That’s fine, but don’t force U.S. manufacturing to do things you don’t require of other countries. Don’t put undue anti-competitive pressures on us and expect U.S.-made products to grow and flourish long-term,” he said.

“What makes for a healthy category or healthy industry is having healthy competition.”

A Healthy Balance. The balance that is needed to ensure healthy competition is also applicable to the balance needed to ensure a healthy diet—another area of current advocacy in which the candy industry is often targeted. Unfairly targeted, as Smith said, and as NCA works to prove through scientific research.

In fact, noting that only two to three percent of the calories in the average American’s diet come from candy, Smith said, “Candy provides a taste of happiness in our lives—a moment of enjoyment. We are not the cause of obesity.”

One study, published in April in Nutrition Research, has shown that people who indulge in candy and chocolate as an occasional treat actually “tend to weigh less, have lower body mass indices (BMI) and waist circumferences, and have decreased levels of risk factors for cardiovascular disease and metabolic syndrome.”

Although candy contributed modestly to caloric intake on days it was consumed, the study showed that there was no association of total candy intake to increased weight/BMI, suggesting that over time consumers are able to balance longer-term caloric intake.

Such studies are important to the NCA in its continuous fight against the targeting of confections in health and weight issues, as well as its efforts to educate consumers on balance of food intake and activity, Smith said.

It isn’t simply a matter of informing consumers, she added, it is also getting information to scientists and providing ideas for areas in which research is needed; conducting and disseminating science-based research itself; and holding discussions on health, nutrition, and the effects of candy on diet.

“Let’s find sensible solutions,” Goetze said. “You gain weight when a calorie goes in and it doesn’t go out. To point a finger at any one food category, I think is unfair.” The obesity issue is not a matter of consumption of any one food, he explained. It is a matter of consumer practices and a balanced diet. Michelle Obama’s “Let’s Move” campaign is a good example of this, he said. “With activity, snacks and treats can be consumed in moderation.”

At the same time, he said, industry members need to take responsibility for advancing this balance. “We are calorie-in companies. We need to spend as much time to understand and support the calorie-out initiative.” It is a responsibility that Goetze’s puts into practice.

An entire section of the company’s Website is devoted to “The Average Kid.” As explained on the site: “The Average Kid plays outside, but also plays video games. The Average Kid eats his spinach, but also likes sweet snacks too, because the Average Kid knows that being healthy is more than eating a ton of fruits and veggies. In fact, being an Average Kid simply means leading a balanced lifestyle.”

Food safety. As far as pathogenic risk, candy and chocolate are fairly safe foods, Graham said. However there are food safety practices that are critical to any food manufacturer, and, as Goetze explained, candy is a ready-to-eat food, often consumed by children, so while the ingredients may not be of high risk, it is still critical that manufacturing be done in a hygienic environment to protect the product.

In addition, with the recent passage of the Food Safety Modernization Act, the NCA is putting forth efforts to help its members understand the regulations and what is needed for compliance. In many ways, however, Goetze sees the Act as simply solidifying things that previously were optional. “We don’t need more cumbersome regulation, but we need to be responsible, as food manufacturers, to what we should be and are doing.”

Traceability is expected to be the greatest challenge for the industry particularly in relation to cacao sourcing for chocolate, for which there are no domestic options. Because of the amount of warmth, sun, humidity, and shade needed, cacao trees can grow only within 20 degrees of the equator, Smith said. In addition, because of the amount of attention and care needed by the trees, cacao is grown by small farmers on three- to four-hectare plots. The beans are bought and sold on exchanges in New York and Boston and brought in at various ports in Boston, Philadelphia, and Baltimore. From there the beans are roasted and processed, so while there are a number of kill steps, it can be very difficult to trace the beans back to the original farm. “How far back will we need to trace? To the processor or to the farm?” Smith asks.

Being an industry of small, multi-generational family businesses can also pose food safety challenges, particularly when manufacturing is still being conducted in a facility built in 1928, as is the case at Goetze’s. When the candy company decided to upgrade its plant to increase food safety, it required commitment, Goetze said.

Part of this commitment was the placing of Director of Manufacturing and Quality Assurance, Herb Berwald, at the helm of the initiative. “We are constantly trying to improve our systems, “ Berwald said, explaining, “If we were going to move forward, it had to be everything. It takes people; it takes time; it takes money. If we’re going to move a 110-year-old company forward, it’s a big commitment.”

Too often, he added, food safety is seen as a cost until something happens, but Goetze’s takes a proactive approach, validating its food safety systems at least twice a year with random mock recalls and involving all employees in the initiatives.

The change started when the company decided it wanted to achieve scores of 100 percent on its audits. It had been getting scores in the mid-90s, but wanted to continue to improve. “It’s that document that started it years ago,” Goetze said. “We asked ourselves, what do we need to do to get a 100? That’s when the enormity and complexity of it hit us.”

What was needed was focusing on everything, from the small, such as installing non-touch systems at every hand washing station, to the large, including management and employee buy-in and compliance to a culture change, he said. “You have to sit everyone down and explain that the commitment to succeed is not solely for Mitchell Goetze, or Goetze’s Candy, but is a commitment to food safety. And it won’t work unless all do their part.”

Speaking in One Voice. Everyone taking part is just as important to the success of the confection industry as it is to any one company. As NCA chairman, Goetze would like to see more involvement from the industry. With all the areas of pressure under which today’s manufacturers are operating, he said, “People typically don’t get involved, because the pressure is so great.”

It can be extremely difficult, he said, “balancing the regulations and regulatory pressure as well as understanding that we all play part in a safer food supply, while putting thought into our procedures, and balancing all the pressures that manufacturers are under.”

But, as in any industry trade association, the more companies that get involved the better it is for that industry. “When we go to Washington to talk to people about the sugar program, it’s not only the large companies that make an impact.” Rather, he said, it is having a large number of companies—and, as Graham noted, having Congressional representatives see the presence of, and impact on, their local, neighboring business.

Every Thursday, Goetze said, a conference call takes place with confectioners from more than 30 companies comprising the Public Policy Committee of the NCA. The current discussion is on pending front-of-package labeling requirements. “We have 30 friendly competitors on the phone, all talking in concert in order to benefit the industry.

“The saying that a rising tide raises all boats is true,” he said. “As with anything in history, when people speak in one voice, things change. And if I am to survive as a U.S. manufacturer, things have to change.”

“I want to buy here [in the U.S.]. But when costs get tight … it drives people overseas.

“Why aren’t there more candy companies in the U.S.? That’s why.”

The author is Managing Editor of QA magazine. She can be reached at llupo@giemedia.com.