Small candy makers forced to rethink their business strategies

For the manufacturer of Chick-O-Stick, Slo Poke and Mary Jane candies, it’s a good time to be in the confectionery business — if only they could get enough people to make their sweets.

While sales for Atkinson Candy’s offerings are up fivefold since 2019, staffing at the 90-year-old company has been cut in half during that time. Some mechanical workers, attracted by higher pay in industries including oil and gas, have left the family-owned business. Employees who make the artisanal treats have proven especially difficult to retain as they are drawn away by generous government aid programs, said Eric Atkinson, the firm’s 68-year-old CEO. 

With fewer people, it can now take Atkinson up to three months to deliver an order to retailers and wholesale distributors, compared to two weeks before the COVID-19 pandemic — if it can even fill it. The labor shortage in 2021 was so severe that the company lost out on millions of dollars in sales simply because it didn’t have enough employees, its CEO said.

“It’s like listening to fingernails on a chalkboard,” said Atkinson of the stress from dealing with the lost sales.

Rethinking how to do business

Atkinson is not alone. Executives at small and mid-size candy companies said they are besieged by a slew of challenges weighing on their businesses, including higher shipping costs, labor shortages and commodities that often aren’t being delivered in the quantities they were promised.

“We’re in a different time where you have to rethink how you do business,” said Joe Colyn, a partner at JPG Resources, where he helps baking and confections clients procure ingredients.

For sweets makers, issues impacting their business, their bottom line and in some cases their outright survival, are nothing new. They have weathered wars, recessions, depressions and disruptions in supplies before.

But CEOs interviewed said the degree to which so many things are hitting them all at once is forcing them to rethink how they do business and overhaul key parts of their operations that have been largely unchanged for decades. They include everything from how they go about hiring and retaining workers to when and how much of an ingredient or packaging they purchase in advance.

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Christopher Doering/Food Dive

 

Small and mid-sized chocolate and candy companies make up a significant portion of the National Confectioners Association’s 600 member companies, about half of which are manufacturers. These include all kinds of operations, from multigenerational companies that have been in families for decades, to new ones just getting started.

“There’s no question that the challenges faced across the industry — supply chain, inflation, labor shortages, broad pandemic impact and more — have disproportionately affected small and mid-sized companies compared with their larger counterparts,” Carly Schildhaus, a spokesperson for the trade group, said in an email.

Daniel McCarthy, an assistant marketing professor at Emory University, suggested some smaller players in the category play defense by raising capital through investors or taking on manageable debt while they have the opportunity. These companies also should be prudent stewards of their balance sheet by carefully watching their spending, and raising prices like their bigger CPG competitors are doing, he said.

“The good thing that they have going for them that other larger [industries] would not is the fact that the [cost for their product] is so low,” McCarthy said, noting a 20% increase for a candy bar is far easier for consumers to digest than a similar increase on an item like a car.  “In that sense, it’s a more defensible position that they are in.”

Atkinson, whose candy business is facing higher costs for everything from sugar to peanuts — which have seen costs increase more than 20% — has passed on some of its higher expenses to consumers through price hikes. The most recent one took place last week.

“We try to maintain a modicum of a profit and most of the items were under water or headed there,” he said. 

Despite the hardships infiltrating the industry, chocolate and candy sales remain robust, helping to at least partly offset higher expenses and labor challenges. Chocolate and candy sales were up 11% in 2021 from the prior year, according to NCA’s State of Treating report, and Schildhaus noted the segment is “seeing strong performance” again this year.