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November 27, 2010

Sweet success: Fannie May back after bankruptcy

CHICAGO — A half-dozen years ago iconic chocolatier Fannie May, loved by Chicago candy devotees who passed down their affections for mint meltaways, caramels and vanilla buttercreams from generation to generation, was all but finished.

The candy company launched in 1920 was in bankruptcy. More than 200 of its retail stores were closed. Customers who worried they would never be able to buy the chocolates again stripped display cases and emptied shelves of the confections.

But six years after its 2004 near-meltdown, Fannie May has seen a turnaround and is thriving again thanks to what its executives say has been a mix of the old and the new: a strict adherence to decades-old chocolate recipes and growth and expansion in online and retail sales.

"It was tumultuous, it was crazy," said David Taiclet, president of gourmet food brands for 1-800-Flowers.com, which now owns Fannie May. "But what survived is people who care about the product, care about the experience."

The result has been online sales that have more than doubled since 2006 for a brand approaching $100 million in revenue annually. By the end of this year, Fannie May will have opened five new retail stores in the Chicago area for a total of 85 stores in Illinois, Indiana, Iowa, Michigan, Missouri and Ohio — nearly double the 45 stores the company opened after emerging from bankruptcy in 2004.

Genny Ryan, 43, now lives in Charlotte, N.C. but grew up eating Fannie May candies in South Bend, Ind. Ryan brought her children Jack, 11, and Tess, 8, into the company's flagship Michigan Avenue store on a recent trip to Chicago. The family's red-and-white Fannie May shopping bag was filled with meltaways, buttercreams and pixies.

"I said 'I have to stop and get some,'" Ryan said. "I haven't had any in forever."

Fannie May, which produces about 10 million pounds of chocolate a year, is as synonymous with Chicago as Ghirardelli Chocolate is with San Francisco or Hershey's is with Pennsylvania.

"I think Chicago is really rooting for Fannie May because they want a candy to call their own," said Beth Kimmerle, a confectionary historian who once worked for Fannie May and is author of "Chocolate: The Sweet History."

It's been a whirlwind past two decades for the chocolate maker opened 90 years ago in downtown Chicago by H. Teller Archibald. In 1991, the family that owned Fannie May sold to a private equity group. By 2002, the company filed for bankruptcy to restructure debt built up from several acquisitions.

Archibald Candy Corp. emerged from bankruptcy in late 2002 with creditors as owners only to file for bankruptcy again in 2004. That's when the stores and a candy manufacturing plant on Chicago's West Side closed, putting hundreds out of work.

"I felt terrible," said Dorothy Phelan, 60, of Chicago, who remembers the candies from when she was a little girl. "It's just something that is part of your memories."

Utah-based Alpine Confections Inc. stepped in and bought the Fannie May and Fannie Farmer brands for $38.9 million in 2004. That October, it reopened 45 stores, some where shoppers lined sidewalks to buy the candies.

It was that customer loyalty and Alpine's experience in the candy business that jump-started Fannie May's growth, Kimmerle said.

"They're savvy about the confectionary business to begin with," Kimmerle said. "So I think part of their growth strategy is realistic expectations as opposed to the venture capitalists who started getting more ambitious."

Two years later, in 2006, 1-800-Flowers.com purchased certain Alpine Confections brands, including Fannie May, Fannie Farmer and Harry London for $85 million. Taiclet credits Fannie May's growth in online sales to 1-800-Flowers.com's e-commerce experience.

Fannie May was able to transition from bankrupt brand to growing enterprise because company leaders refused to change decades-old candy recipes and used a smart, steady plan for growth coupled with increasing online sales, Taiclet said. The candies are now made at a plant in North Canton, Ohio.

"Now that we're kind of through what I would call the early stage," Taiclet said. "Now the vision is just much bigger and broader. We're convinced we have a winning formula."

That vision now includes offering franchises in areas like Florida, Virginia and Washington, D.C., Minnesota, Iowa and Illinois. Taiclet said he hopes to have between 100 and 150 franchises to complement the company-owned stores.

Marcia Mogelonsky, a global food analyst who specializes in candy and chocolates for Mintel International in Chicago, said while the popularity of high-end gourmet chocolates may have hurt Fannie May, the brand's consistency cemented a customer base and allowed for stability.

"It has not tried to become trendy, which is an important thing, which is probably why it has survived," Mogelonsky said. "The brand will have to think about what to do in 20 years, but in the chocolate industry that's a long time."

In the meantime, Fannie May will continue to cater to customers like Phelan, who stopped into the downtown Michigan Avenue store to buy a box of chocolates as a hostess gift for her brother's Thanksgiving dinner.

"We couldn't have Thanksgiving without some Fannie May candy," Phelan said. "Part of our tradition is to have Fannie May."

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