Harry London Candies, Inc.

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Harry London Candies, Inc.

5353 Lauby Road
North Canton, OH 44720-1572

Telephone: (330) 494-0833
Toll Free: (800) 321-0444
Fax: (330) 499-6902
Web site: http://www.londoncandies.com

Wholly Owned Subsidiary of Alpine Confections, Inc.
Founded: 1922
Employees: 215
Sales: $51.5 million (2003)
NAIC: 313300 Confectionery Manufacturing from Purchased Chocolate

Harry London Candies, Inc. is a North Canton, Ohio-based confectioner primarily known for its high-quality chocolate products. The company also offers caramels, mints, and toffees. A subsidiary of Alpine Confections, Inc., Harry London produces some 2,000 different items in its 200,000-square-foot plant, some sold under the company's own name and others under the label of such major customers as Disney, Universal Studios, May Company department stores, Federated Department Stores, and the Sally Foster fundraising firm. These relationships have helped to even out the seasonal nature of the business, which peaks at Valentines Day and Easter. The Harry London plant is a tourist attraction in the Cleveland-Akron area, attracting school tours and motorcoach groups as well as football fans visiting the Pro Football Hall of Fame in nearby Canton. From behind glass walls, visitors can watch the candy being made and, after the 45-minute guided tour, purchase products from the onsite chocolate store, the largest in the Midwest, offering more than 500 varieties of chocolate and other candies. Harry London also operates a fundraising department to help non-profit groups to make money through candy sales. In addition, the company offers a number of gift items aimed at the corporate market.

An Amateur Chocolate Maker in the Early 1900s

The man who gave his name to Harry London Candies was Harry Alfred London, born in Reynoldsville, Pennsylvania, in August 1900, the eldest of eight children. To help support the family he quit school after fourth grade and went to work for a company that would become part of Republic Steel Corporation. In his spare time, he learned the art of chocolate making from his father, Gilbert London, who knew recipes that had been passed down through generations in the London family, stretching back to the family's European roots. Father and son gained a local reputation for producing handmade chocolates as holiday gifts, and the treats proved so popular that friends offered to buy them. At Gilbert's urging, Harry quit the steel mill and in 1922 launched a small chocolate-making business that would become Harry London Candies. He started out in the basement of his home, and as sales picked up he moved out and over the years relocated to a series of larger Canton, Ohio, locations to keep pace with demand. In addition to possessing skill in chocolate making, London was also something of a tinkerer, building his own equipment to enrobe candy in chocolate. Some of the machines he designed continued to be used several decades later.

Harry London ran the business until his death in March 1969. His first wife had died in 1943, but his adult children from that marriage had no interest in joining the family business. He remarried, taking Iloa Campbell as his wife. After his death in 1969, she ran the company for several years before enlisting the help of her daughter and London's stepdaughter, Bonnie, along with her husband Cedric Waggoner. It was Waggoner's flair for salesmanship that drove the company's success in the 1970s and 1980s. One of the company's most popular products was called the London Mint, a chocolate mint meltaway. It was Waggoner's idea to reproduce the $100 bill for the box cover, as was a giant foil-wrapped chocolate "kiss" about as large as a volleyball. In the early 1980s, he took the company international and began exporting Harry London chocolates. Sales grew steadily so that after a dozen years foreign sales accounted for 7 percent of total revenues. The Ohio Department of Agriculture, which maintained a Hong Kong office, was especially helpful in finding Asian distributors for the company. It also organized trade shows in Hong Kong, Singapore, and South Korea that Harry London and other Ohio companies found useful.

Third Generation Takes Charge in the Late 1980s

In the late 1980s, a third generation became involved in the business, as three of London's grandchildrenMercedes, Joe, and Alison Waggonerinherited the business. Joe Waggoner was instrumental in modernizing the plant. He grew up in the business, but after a four-year stint in the Army returned in 1988 and recognized that the company could no longer perform so many functions manually and remain competitive. He studied new technologies used around the world and began to incorporate them into Harry London's efforts to automate some of its systems, while retaining the key handmade steps in the chocolate-making process. Many of the technologies were not even designed for candy making. Some of the baking techniques, for example, were originally used by pharmaceutical companies and others were developed for semiconductor manufacturing.

Another key member of the third generation was Mercedes' husband, Peter Young. He held a law degree from the University of Michigan and a master's degree from the London School of Economics and was forging a career at a major glass manufacturer, directing its international business affairs, when the Waggoner family approached him about helping to lead Harry London at a time when Cedric Waggoner began to step away from the business. Young agreed to work at Harry London for a maximum of two years. He eventually stayed seven. Young took advantage of his international sales experience to forge strategic alliances with other gourmet candy makers and initiated a strong marketing push to expand oversea sales. At home he played a key role in moving the company to a new plant. Having made significant upgrades to its technology, Harry London was now looking to increase volume, a goal that could be achieved only by employing larger machines. However, the available equipment, although able to quickly produce large quantities of a product, was not flexible enough to meet the company's needs. A key factor in Harry London's success was that the company could produce a wide variety of items and was willing to complete rush orders for major customers, both of which required the ability to quickly switch over to different product runs. To wed size with adaptability, Harry London had to invest in custom-built equipment that would not only produce a vast array of products but also simultaneously package them in several ways, including boxed, bagged, twist wrapped, and flow wrapped. Although it made a concerted effort to make certain that production lines utilized space efficiently, the company was still in need of more space and a larger facility. However, its North Canton location was not able to accommodate expansion, forcing the company to look elsewhere to locate a new plant. It was Young who spearheaded this move and undertook negotiations with local government agencies to secure the most advantageous terms.

In 1994, Harry London agreed to a property and real estate tax abatement plan offered by Green, Ohio, to build a 100,000-square-foot plant on a site close to the Akron-Canton Regional Airport. The company had hoped for a ten-year, 10 percent tax break that would have resulted in savings of more than $850,000 but settled for a plan that saved $644,000 over ten years. It was also a good deal for Green, which would receive more than $200,000 in taxes on undeveloped land owned by the airport and not previously subject to taxes. Moreover, the community expected to collect another $1.8 million in income tax during that period. Harry London also received help from Stark County, receiving further tax abatements and millions of dollars in industrial revenue bonds to aid with construction costs.

In 1995, Harry London moved into its new facility, the most modern chocolate manufacturing plant in the country. Situated in a more visible and accessible location, it was also built with tourism in mind. While the former plant was simply too small to host large groups and tours, the new factory was designed to cater to motor coaches, including an entrance portico to allow tour-bus visitors to enter and exit the building while shielded from the elements, additional women's restrooms, and parking spaces large enough for motor coaches. A tour program was also devised, featuring a documentary on the history of chocolate, a tour of the plant, and a visit to the "Chocolate Hall of Fame" and a retail store selling Harry London products. In the first six months after opening the new plant, the company conducted more than 400 tours, accommodating some 20,000 people. Although the Harry London factory was not a target destination in itself, it served to compliment the other tourist attractions in the area, such as Canton's Pro Football Hall of Fame, Akron's McKinley Museum, and Cleveland's Rock 'N Roll Hall of Fame, making the entire area more of a desirable destination.

Company Perspectives:

Chocolate needs to be simple and pure, rich and complex, and filled with blends that are subtle . . . yet irresistible.

Late 1990s Bring Rapid Expansion

Despite the major addition of space, Harry London quickly outgrew its new location as the company enjoyed rapid growth in the second half of the 1990s. It took advantage of its new equipment to add items, giving the company a competitive advantage in private label work. The major customers, such as Disney and Universal Studios, preferred to do one-stop shopping with a trusted vendor like Harry London rather than contract their business to a dozen smaller specialty chocolate companies. Aside from growing the wholesale business, Harry London also opened six retail stores in Ohio to move even more candy. In July 1999, the company opened an addition that more than doubled the plant's original floor space to 220,000 square feet, allowing it to increase efficiency, which was crucial in its efforts to be the low-cost producer in each of the 2,000 items it made while at the same time maintaining high quality. For a relatively small companygenerating revenues anywhere from $20 million to $40 million, according to what company officials reluctantly told the pressHarry London's success was balanced on a knife's edge, simultaneously attempting to match variety and quality with low prices. Previously, the company had to warehouse raw materials and finished products in the same space, but with the extra room it could now install dedicated systems to provide better inventory control of both raw materials and finished goods, thus leading to lower overhead costs and an increased ability to competitively price its merchandise.

In 1999, Cedric Waggoner retired and Young replaced him as CEO. A majority interest in the company was sold to HLC Holdings LLC, an affiliate of private equity fund Lombard North America Partners. Harry London's sale mix at this stage was 50 percent branded wholesale products, 30 percent private label contract business, and 20 percent retail margin sales. It was also during this period that the company was contacted by Home Shopping Network about hawking Harry London products on television. In early 2000, Young signed a deal to develop and produce some exclusive HSN items and recruited his 33-year-old sister-in-law, Allison Waggoner, to serve as the Harry London pitchwoman. As director of marketing, she had recorded some radio commercials but had never appeared on camera. Nevertheless, in March 2000 she was dispatched to HSN's Tampa, Florida, studios with a five-pound box of assorted chocolates. The first appearance lasted just eight minutes but proved successful enough to warrant return visits; as sales increased, Harry London graduated to hour-long shows. Within two years, HSN sales were accounting for about 10 percent of the company's total revenues.

In December 2000, Young finally left Harry London and moved his family to Washington, D.C., to resume his international law career. His replacement as CEO was Rex Mason, a former general manager of Bristol-Myers Squibb subsidiary, hair-care products manufacturer Matrix Essentials. His primary focus when he took over was to improve Harry London's systems and customer service operations, which had lagged behind the company's ability to produce massive quantities of high-quality chocolates. Although customers were pleased with the products, they were never certain that the items they ordered would arrive on time. Mason also began to lessen the focus on private label work, looking instead to build up the Harry London brand name.

The growth Harry London achieved during the 1990s came with a cost, however. Although it remained profitable, it carried too much debt for a company its size and rate of growth, the result of spending $13 million to build and expand its plant and the cost of opening seven specialty retail stores in Ohio in the late 1990s. Unable to refinance its debt, the company then breached its credit agreements. In January 2003, Harry London filed for Chapter 11 bankruptcy protection, listing $34 million in assets and $33 million in liabilities. With the cooperation of its primary secured creditors, KeyCorp and BankOne, Harry London continued to operate normally as it took steps to complete a financial restructuring. In the meantime, in an effort to focus on its core business, the company closed seven of its eight retail stores, keeping only the one that was part of the plant tour.

Although several companies inquired about entering into a financial arrangement with the company, Harry London found a more suitable partner in Alpine Confections Inc. and signed a letter of intent to have the Salt Lake City, Utah-based company fund and implement its reorganization plan. After an amendment of the plan, Alpine received court approval to acquire Harry London at a cost of $10 million to $15 million. The privately owned Alpine was founded in 1994 by partners R. Taz Murray and David Taiclet, who entered the candy industry after earning their Harvard MBAs. Over the next decade, they acquired three candy companies: Kencraft Candy of Alpine, Utah, makers of specialty hard candies; Salt Lake City's Maxfield Candy, makers of chocolate candies; and Vancouver, Canada-based Dynamic Chocolates. Along the way, Alpine lined up deals to produce chocolate products under the Mrs. Field's and Hallmark names.

Although Harry London was no longer a family-run business, with Alpine bringing in its own management team, installing senior vice-president Terry Mitchell as the company's new president, there was no threat that the Harry London name would suddenly vanish. Alpine recognized the brand's strength and was eager to grow it even more. The workers' jobs were also secure, as the new owners looked to take advantage of Harry London's excess production capacity to produce other confections, which would likely result in even more employment opportunities. Alpine was also committed to producing quality products, in keeping with the tradition passed down by Harry London himself. Moreover, Harry London was now part of a larger company that was continuing to grow. In 2004, Alpine acquired the venerable Fannie May and Fannie Farmer brands and retail stores from Archibald Candy Corporation.

Principal Competitors

Cadbury Schweppes plc; Godiva Chocolatier, Inc.; Hershey Foods Corporation; Nestle S.A.

Key Dates:

Harry London launches a chocolate-making business.
Harry London dies.
The company opens a state-of-the-art plant.
HLC Holdings LLC acquires a controlling interest.
Alpine Confections acquires the company.

Further Reading

Fuhrman, Elizabeth, "Alpine Wins Court's Blessing for Harry London Purchase," Candy Industry, August 2003, p. 14.

Harrow, Victoria Reynolds, "Diverse & Efficient," SBN Akron, September 1, 1999, p. 18.

Snook, Debbi, "Chocolate Factory a Sweet Tour," Plain Dealer, December 23, 1995, p. 3E.

Thompson, Lynne, "The Taste of Success," SBN Stark, February 1, 2002, p. 14.

Whitehouse, Tammy, "1999 Northeastern Ohio Entrepreneur of the Year: Going for a Sweet Ride," SBN Cleveland, July 1, 1999, p. S13.

Ed Dinger

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