American Licorice Company

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American Licorice Company

2796 NW Clearwater Drive
Bend, Oregon 97701
U.S.A.
Telephone: (541) 617-0800
Toll Free: (800) 220-2399
Fax: (541) 617-0224
Web site: http://www.americanlicorice.com

Private Company
Incorporated: 1914
Employees: 800
Sales: $100 million (2005 est.)
NAIC: 311340 Nonchocolate Confectionary Manufacturing

The American Licorice Company produces and markets a best-selling brand of licorice candy in the western United States—Red Vines—and also produces Sour Punch, Snaps, and Super Ropes candies. Descendants of founder Martin Kretchmer own and manage the firm, which is headquartered in Oregon and maintains production facilities in California, Illinois, and Indiana.

BEGINNINGS

The company was founded in 1914 in Chicago by German immigrant Martin Kretchmer. Kretchmer had worked for several years prior in a partnership called Gottmann and Kretchmer, which manufactured chocolates. An early advertisement informed Chicagoans that Gottmann and Kretchmer, located on Jackson Street, made Surinam chocolates, which were “delicious ‘bitter sweet’ and a big seller. A full line of novelties in new penny goods always on hand.” By 1914 Kretchmer had struck out on his own, forming American Licorice Company and erecting a manufacturing facility. Sales of the company’s first product, Black Licorice Vines, were good, and in 1919 production was moved to larger quarters in the northwest part of the city.

In 1920 a new product, Raspberry Vines, was introduced. Unlike black licorice, which used the pungent extract of the Glycyrrihiza glabra bush root for its flavoring, the chewy red candy had a fruity taste. It was also popularly known as licorice, because the texture and extruded ropelike shape were the same as its stronger-flavored older sibling. Raspberry Vines sold well, especially on the West Coast, and in 1925 Kretchmer’s youngest son Clarence, after attending college, became involved in the business. He headed to California to open a plant in San Francisco. That same year the firm was asked by comedian Charlie Chaplin to create a licorice shoe as a prop for his classic film The Gold Rush, in which his character eats shoe leather to avoid starvation.

In the 1930s American Licorice introduced a new product called Snaps, which featured a pastel-colored sweet candy coating over a chewy black licorice center. Kretchmer’s son Clarence continued to oversee California manufacturing. In 1952 the Raspberry Vines product was renamed Red Vines, and six years later its packaging was updated to add a plastic tray.

In 1963 the firm began using a new manufacturing technique that produced the longest pieces of licorice to date, which were marketed as Red Ropes and Licorice Ropes. Two years later Clarence Kretchmer, who had assumed leadership of the firm from his father years before, was named Man of the Year by trade publication Candy Industry.

In 1970 Clarence Kretchmer retired and the firm’s San Francisco operations were relocated to the neighboring town of Union City. Six years later the Chicago plant was similarly moved to a 40,000-square-foot space in nearby Alsip, Illinois. During the 1970s American Licorice also added a new brand, Super Ropes, and in 1983 it began offering Red Vines in a jar for those who enjoyed keeping a large supply at hand.

In the late 1980s the firm began converting its Alsip licorice production facility to use a new continuous cooking technology, though the Union City plant continued to make Red Vines in batches. It was one of the first companies in the industry to adopt the more modern system.

SOUR PUNCH DEBUTS IN 1990

In 1990 American Licorice began making a new sour-flavored candy called Sour Punch Straws. When originally offered in 240-count boxes, the response was not exceptional. A smaller package was introduced a year later, however, and sales shot upward. Over the next decade the firm added numerous variations on Sour Punch including chewy Bites, Ropes, Beanz, and Twists. The 1990s also saw the introduction of a sugar-free version of Red Vines, as well as new flavors including apple, lime, and lemonade.

Many Americans had begun to turn to healthier eating habits and natural foods, and in the mid-1990s American Licorice responded by creating several varieties of candy that used organic ingredients and had no preservatives. In 1997 the company debuted Herbal Candy Chews and real fruit Twisletts, and in 1999 it introduced a natural licorice called Riza. The latter was made from root extract and sweetened with blackstrap molasses, while a Berry variety used organic cane sugar. Both were available in Bites, Vines, Super Rope, and Bar formats. Natural licorice was held to have medicinal powers for treating a variety of ailments and was also used by some for suppression of coughs.

Flagship product Red Vines, which over the years had become especially popular at movie theater concession counters, was the number one nonchocolate candy brand in the western United States and the number six candy there overall. The firm was also trying to make inroads in the Midwest and the East, where Hershey’s Twizzlers was the top brand in the category.

The company’s licorice output was 80 percent red and 20 percent black. While U.S. sales of black licorice were not high, in Europe and especially the Netherlands it was extremely popular, with a wide range of variations in sweetness and saltiness available. Dutch consumption was about five pounds per person per year, almost half the world-leading U.S. chocolate consumption level of 11.5 pounds.

CANDY ALLIANCE FORMED IN 1999

Small to midsize candy makers such as American Licorice faced many challenges at this time, including the high cost of sugar due to government price supports, the growing practice of retailers charging “slotting fees” to guarantee placement on store shelves, and an industry trend toward consolidation that strengthened the hands of such giants as Hershey, Nestlé, and M&M/Mars. To fight back, in November 1999 American Licorice joined with Ferrara Pan, Spangler, Goetze, and New England Confectionary (NECCO) to form the Candy Alliance LLC. The Forest Park, Illinois-based Candy Alliance would work to promote the firms’ mutual interests by coordinating ingredient purchasing to get lower prices, creating cooperative marketing and distribution programs, and cross-licensing and developing joint products. It was particularly effective at promoting seasonal candies, the popularity of which around holidays such as Valentine’s Day, Easter, Halloween, and Christmas was on the rise.

COMPANY PERSPECTIVES

American Licorice is one of the oldest companies in the U.S. candy industry. Since its establishment in 1914 by a candy entrepreneur, American Licorice has brought enjoyment to people through its products. American Licorice respects and continues in its tradition of producing such premium-quality candies as Red Vines Black Licorice and Original Red Twists, Snaps bite size licorice pieces, and Super Ropes candy.

During 2001 the company’s sales were boosted by a copromotion with the hit Dreamworks-animated film Shrek, whose title character appeared on product packages. A new ad campaign for Sour Punch was also launched in print and on television with the slogan “Available in six flavors. Seven if you burp.” New products in the line included fantasy fruit flavors in Day-Glo color packages, and the company licensed the Sour Punch name to Spangler for use on candy canes as well.

On the heels of the natural foods/health trend, the food industry was also broadening its reach to embrace more diverse flavors from other cultures, and in 2002 American Licorice introduced Chili Punch Hot & Sour Straws in Mango and Tamarind flavors. New Red Vines variations added during the year included Purple Grape, Green Watermelon, and Blue Raspberry. The firm also introduced a candy called Twisty Punch and relaunched Snaps, which had been dropped three years earlier after the Illinois plant fully converted to continuous production and could no longer make batch candy. Snaps would largely be manufactured in California, with some final processing done in Alsip. When its packaging options were expanded, sales increased to triple their previous level.

LEAN MANUFACTURING PRACTICES ADOPTED IN 2002

Still looking for ways to remain competitive, in the early 2000s American Licorice management began considering the possibility of moving some production to Mexico, which candy companies like Spangler had begun doing to take advantage of lower labor and sugar costs. Instead, in 2002 the company decided to restructure its operations and adopt the lean manufacturing techniques pioneered by automaker Toyota. Management of the Illinois and California operations was also merged, as were the sales and marketing activities of the various brands. Changes to production processes helped boost output by as much as a third in the first year, while recycling efforts were increased dramatically. Waste reduction of 80 percent at the Union City plant led to annual savings of $48,000 and receipt of the 2003 Waste Reduction Awards Program of the Year Award from the California Integrated Waste Management Board. American Licorice subsequently purchased a spiral dryer that helped eliminate much of the 150 tons of candy discarded annually because of inconsistent drying, saving an additional $265,000 per year.

In 2003 Red Vines packaging was updated, and the company added new products including Neon Punch and Sour Punch Omegas. During the year a joint venture called Imagination Confections was formed with Ferrara Pan, New England Confectionary, Spangler, and molded chocolate maker R. M. Palmer to make candies based on characters licensed from the Walt Disney Company, which would start with a Winnie the Pooh line the following Easter. The natural Riza licorice also became part of the Red Vines line under the name European Style Licorice Bites, and in 2004 Sour Punch got a promotional boost when it was featured in the DC Comics Justice League series. American Licorice’s annual sales were estimated at $75 million by Candy Industry magazine.

In the 1990s American Licorice’s headquarters, and CEO John Kretchmer, had moved from California to Bend, Oregon, when it became difficult to recruit business workers in the San Francisco area, where the computer industry had driven salaries skyward. In late 2004 the firm began construction of a new $1.4 million headquarters building there, which was modeled in part on the design of its original 1925 California factory. It would house a staff of 35.

KEY DATES

1914:: American Licorice Company founded in Chicago; Black Licorice Vines debut.
1920:: Raspberry Vines are introduced.
1925:: San Francisco plant is opened.
1952:: Raspberry Vines are renamed Red Vines.
1963:: Red Ropes and Licorice Ropes are introduced.
1970:: The San Francisco plant moves operations to Union City, California.
1976:: Chicago production is moved to Alsip, Illinois.
1990:: Sour Punch brand debuts with candy straws.
1990s:: Headquarters moved to Bend, Oregon.
1999:: Joint marketing alliance is formed with four other candy makers.
2002:: Restructuring and implementation of lean manufacturing begins.
2005:: Company establishes a new plant in Indiana and a research facility near Chicago.

NEW PLANT, RESEARCH FACILITY ADDED IN 2005

In early 2005 the company signed a 15-year lease on a 285,000-square-foot former Whirlpool warehouse in LaPorte, Indiana, and in March began making Sour Punch candies there. The work had been moved from the now-250,000-square-foot Alsip facility, where more than 300 employees worked in three shifts around the clock. They would continue making products for other companies under contract, while nearly 200 more would be added in LaPorte. American Licorice was aggressively seeking to double sales within five years, helped in part by national distribution through Wal-Mart, Target, and Walgreen’s stores. Its products were available at the firm’s own candycabinet.com Web site, as well.

The year 2005 also saw the company open a new research division in the Chicago suburb of Burr Ridge, which would work to create new products for it and other candy makers under chief creative officer Tim Walsh, a fourth-generation descendant of founder Martin Kretchmer. The facility had been developed in cooperation with BCH of England and ExtruFoods of the Netherlands, and would be used in part to train employees for the new LaPorte plant, as it had a fully operating, miniaturized version of the continuous production line used there.

Top seller Red Vines continued to be made at Union City in a traditional batch process that took three days and gave the candy a softer, chewier texture that helped it remain distinctive from its competitors. Manufacturing of the 1,100 miles of candy produced each day began with corn syrup and wheat flour that were loaded from trains into seven silos, from which they were electronically pumped into kettles where flavoring and coloring were added by workers. After several hours’ cooking at 190 degrees, the dough was pumped into covered cans, where it cooled for 12 hours before running through extruders to create ropes and vines, which were twisted, cut into proper lengths, and then dried and packaged for final shipment to stores. Approximately 250 tons of Red Vines were produced each week.

The firm’s Sour Punch brand was now available in a wide range of shapes and sizes, and included Sour Punch Blast, which combined two flavors via a dual-extrusion process. In 2005 two-color Sour Punch Ropes were introduced as well, and the following year Sour Punch Sip-N-Chew Straws added a new 11-inch drinking straw format. The most popular Sour Punch flavors were Strawberry, Apple, and Blue Raspberry.

Nearing the century mark, American Licorice Company had firmly established itself as a leading producer of licorice and other candy products. Its Red Vines brand was the top-selling licorice in the western United States, while Sour Punch, Snaps, and Super Ropes also had devoted followings.

Frank Uhle

PRINCIPAL SUBSIDIARIES

Sour Punch Product Group; Innovation Resources Group; ALC Resources.

PRINCIPAL COMPETITORS

The Hershey Company.; Cadbury Schweppes plc; Jelly Belly Candy Company; Haribo of America, Inc.; Tootsie Roll Industries Inc.; Farley’s & Sathers Candy Co. Inc.; KLN Enterprises.