If You Can’t Beat ‘Em, Join ‘Em
“If You Can’t Beat ‘Em, Join ‘Em”
Standard Candy’s revenues jump 30% through contract manufacturing.
“My skill set is not in marketing,” Spradley explains. “When you sell to a retailer, your job is only about 25% done. You’ve got to convince the retailer’s customers to buy the stuff, and I don’t really know how to do that or enjoy it.” However, Spradley knew that he was skilled in one-on-one selling. “And contract manufacturing is basically selling to one person,” he says.
The Back-Door Bonanza
So Standard began producing candies to be sold under the brand names of other confectioners or retailers, effectively allowing Standard to grab market share that already was held by other small- and mid-sized companies.
“The margins on contract manufacturing are not very big, but if you manage your costs, you can make pretty good money,” Spradley notes. After entering into contract manufacturing agreements in 1993, Standard’s revenues jumped about 30%.
Sweetening the Pot
The added revenues, in turn, allowed Standard to finally sweeten its own branded business. About two years ago, the company committed funds to marketing and hired someone to oversee the branded business, which, as a result, has grown in excess of 40%.
Company-wide sales hit an impressive $30.4 million in 1998, and Standard expects to reach sales of $37.5 million in 1999.
Success on both the branded and contract sides bred a new challenge for Standard to overcome — how to handle essentially two different businesses.
“We tried to run as a combined company, but there was a lot of discussion and a lot of time spent trying to figure out who was responsible for what, allocation of resources and where new capital investment should go — a lot of nonproductive time,” Spradley notes.
Two Are Better Than One
“Finally, we just decided to split up the business into two operating divisions, letting each division focus on what it does best and allocating its resources as it best determines,” Spradley says.
Standard Candy now has the best of both worlds: a healthy contract-manufacturing business, as well as its own branded candy concern that’s making headway in a very competitive market.
Writer: William Bike