Wednesday, August 29, 2012

Pop, pop, Tootsie Pop, Dad.

Just when you think that there are no goofball, mom-and-pop outfits left – especially those that are household words (other than the few, the proud, the pink slipped companies I’ve blogged about over the years: the peeps who make peeps and Zippo lighters) – when up pops an article in the WSJ on Tootsie Roll Industries.

First off, I have to say that I do NOT like that “Tootsie Roll Industries” name. Come on, industries???? They make Tootsie Rolls, Sugar Daddys, and Junior Mints? How industrial is that?

I know, I know, candy is an industry, and I’m being something of a heavy metal industry bigot here. But how much more happy-making the company name would be if it were Tootsie Roll Candymakers, or Tootsie Roll Confections. Fortunately, they make up for it a bit with their URL, which is just plain tootsie.

Anyway, Tootsie’s been around for a good long time, well over 100 years, and they haven’t rested on their laurels. Over the years, they’ve built out their brand by buying up the companies that made Dots and Black Crows (now called Crows for some PC reason I don’t quite understand), Sugar Babies and Sugar Daddies, wax lips, and Charleston Chews. (For those who take trains out of North Station, now you know why the Charleston Chew factory is derelict.)

When I look through the Tootsie portfolio, I’m wondering whether they might not be in collusion with the dental industry.

It can’t just be my imagination. Tootsie really does seem to specialize in filling-loosen-ers. All they’d need to do would be to add Bonomo Turkish Taffy, Frenchies, Bit O’Honey and Squirrel Nuts, and they’d about have the cavity-refilling niche zipped up.

Although I do like Tootsie Pops, I’m not the biggest fan in the world of the eponymous Tootsie Roll. If they’re completely fresh, that’s one thing, but they do have a habit of drying up – especially those mini-ones. The waxed wrapping sticks when you try to peel it off, the those desiccated little suckers are hard to get down.

So I have my doubts about “105 year old Minnie Larson of Muskegon, MI,” who, according to the Tootsie site:

…says the secret to long life is "peace and quiet, a single life, and an endless supply of Tootsie Rolls."

Maybe they grow teeth stronger up in Muskegon, MI. Or maybe because of its proximity to Tootsie HQ in Chicago the Tootsie Rolls are fresher. But I have my doubts about any 105 year old who’s still chomping down on Tootsie Rolls. On the other hand, Minnie doesn’t actually say that she eats them. Just that she relies on an endless supply. Maybe she does something else with them, up there in Muskegon, in all that peace and quiet. Maybe she’s living in a log cabin made of shellacked Tootsie Rolls. Maybe she uses them for craft projects. Maybe she uses them in jello-molds. Which may explain why she’s single.

Anyway, at 105, Minnie Larson is not all that much older than Tootsie’s CEO, 90 year old Melvin Gordon, one of the country’s oldest and most reclusive CEOs:

The 116-year-old company, run by one of America's oldest CEOs, has become increasingly secretive over the years, severing nearly all of its connections to the outside world. Tootsie Roll shuns journalists, refuses to hold quarterly earnings calls, and issues crookedly-scanned PDFs for its earnings releases. The last securities industry analyst to maintain coverage of the company stopped last year because it was too hard to get information.

Melvin runs the company with his wife Ellen, at 80 a mere broth of a girl. (Ellen was the connection for Melvin: her father ran the business.) The Gordons – with all that old time candies on their roster – clearly value things old. The non-Gordon board members range in age from 65-74.

Mr. Gordon likes to joke with visitors about the Tootsie Roll's robust shelf-life, and he and his wife have worked hard to ensure that the company stays out of the clutches of competitors.

As noted above, that robust shelf-life is really nothing to brag about. I suspect that many a tooth’s been broken, many a filling removed, by some unsuspecting purchaser conned by the robust shelf-life, without considering the cost of that robust shelf-life.

On the other hand, the Gordons appear to have rather robust shelf-life themselves, and are considered in fine fettle. And why not hang on as long as you can?

The Gordons control the company, primarily through their majority ownership of its powerful class B stock, each share of which is worth 10 votes to common stock's one vote….With their control of Tootsie Roll comes perks. Mr. and Mrs. Gordon each get an official salary of $999,000 a year, which the company says is a cap on executive salaries for tax reasons. The pair together received total compensation of $7.6 million last year. That includes bonuses as well as $1.2 million the company spends annually for the Gordons' use of a company plane to visit factories and to commute between their home in Massachusetts and their Chicago apartment, which the company pays $10,000 a month to rent.

As with the Tootsie Roll, however, the Gordons’ shelf-life is not infinite. Nonetheless, they don’t seem to have a succession plan – their offspring apparently don’t want to run Tootsie – so there are investors who’d like to have a go at it, and it’s unlikely to remain stand-alone once the elder Gordons are gone.

While profits of the half-billion dollar company are down, the company is consistently profitable and, at around 8%, last year’s profit was not completely pathetic, either. Plus Tootsie’s sitting on $67M in cash.

That’s yummy enough that someone is going to want to take a bite out of Tootsie. And roll in into some mega conglomerate.

I hate to see these quirky little family companies die out, but so it goes.  As long as the new owners keep pumping out Junior Mints, I’m happy.  At my age, the rest of their wares are pretty much off-limits.

No comments: