Sweet or Sour? At this Point, it’s Hard to tell if Situation will End Positively for City

February 10, 2011
By

-By Seth Daniel

seth@reverejournal.com

As the sale of the Necco Candy Company looms, many are hard-pressed to figure out if the city has a Mercedes Benz within its borders or just a typical four-door sedan.

According to union officials who represent Necco workers, the company is no international prize, and the hope for a positive sale that would benefit workers and the City has only a narrow window of opportunity at this point.

Contrary to union opinions, Necco officials indicated at a public meeting last week that they hope to find a buyer that would keep the company intact – including its brands and its factory/property.

“On behalf of the senior management team, there is nothing more desirable than to keep its company here in Revere. We have pride in who we are and what we make,” said Tony Bretti of Necco.

But others monitoring the situation aren’t totally buying that pledge, noting that Necco people might want to stay here, but their owner American Capital is pulling the strings and they’re willing to liquidate the company for the highest bidder.

Union officials in Washington D.C. that are monitoring the Necco situation closely said that they are trying to combat the sale of the company to a strategic buyer – one that would most likely strip the company of its brands and move all of the manufacturing elsewhere.

He said such strategic buyers would include all of the big candy manufacturers like Hershey’s or Mars, and would also include investment buyers who would “strip and flip” Necco.

“It’s very unlikely a company would buy Necco and move production to Revere – not likely to happen,” said Ray Scannell, a researcher for the national Bakers, Confectioners, Tobacco and Grain Workers International (BCTGW). “The dream of a strategic buyer – especially one of the big boys – is pure hallucination. It indicates you don’t know anything about the candy business in North America…It’s conceivable [American Capital] would liquidate [the brand names] and then sell [the property] separately. That’s one way to maximize the sale price, but that’s a disaster for Revere and the state. Only the City and the state of Massachusetts can make them care about that at this point. Dreams about Mars and Hershey coming in to save it is not a constructive use of time.”

Scannell said that the top three candy companies – Hershey’s, Mars and Nestle – are in no way expanding in America, and especially not in Massachusetts.

Hershey’s has closed almost all of their factories in English-speaking North America, including their historic, original factory in Hershey, PA. With those closings, all of their workers have been shown the door and the jobs have gone to Mexico.

“Why would Hershey need a plant in Revere?” he asked. “They don’t. They’re getting out of America and expanding in Mexico. They’ve been very upfront about that.”

With Mars Candy Company, a recent purchase of chewing gum giant Wrigley’s has moved them into the number one candy company slot.

It has also given them a huge amount of excess factory space, meaning they have no need for any new factories like Necco, Scannell said. Likewise, they are also getting out of North America and expanding production overseas.

For Nestle, they are moving their business away from candy completely, concentrating on stronger industries like bottled water and pet food.

“None of the big three are expanding operations in North America,” he said. “Buying Necco, which is mostly empty, would require them to move production of their brands to the Necco plant. From where would they do that? They’re all getting out already.”

So, what kind of asset is Necco?

According to Scannell, it’s a mid-level company that had a viable plan under former owner Dom Antonellis. Necco served as a company that bought up smaller candy companies and moved their manufacturing to Revere. Antonellis had the experience in the candy industry to know all of these smaller brands and to be able to negotiate successful mergers.

This was seen when they bought out the Havilland brand, Squirrel Nut Zippers and the Clark Bar brand and brought production to Revere.

By no means were any of those deals on par with a Snickers bar, but they did bolster sales and increase chocolate production.

“This is a small to mid-level company and it’s not even a global or continental company,” said Scannell. “It’s got very limited distribution in several regions. Antonellis had a view that we think worked. The trouble with mid-sized companies is they either grow or die.”

And union officials are uneasy when talking about the death of the company, as they wonder if it can even stay in business long enough for a sale.

Valentine’s Day is the bread and butter of Necco – most especially with the Sweethearts Candy – and there are some changes this year that have raised eyebrows.

First of all, the packaging seems to have been changed completely. The familiar box that has held candy hearts for decades is not the same. Also, the Necco logo has been changed on some products.

Scannell said those things could point to the fact that, due to allegedly missing production deadlines earlier this year, Necco has lost important distributors.

“We’ve heard they lost some big distributors and this suggests they had trouble with their old suppliers,” he said. “That has everyone concerned about what will happen in the next two weeks because that’s it for Sweethearts…They missed Halloween, which was a disaster, and they had an incomplete presence during the Christmas season. It really is all on Valentine’s Day and Easter to see if they can make enough money to get through the lean months. It also depends on American Capital keeping their mitts off any profits that might be made.”

Another concern is American Capital, and just what they’re plans are for the factory.

Last year, the venture capital company separated its candy company from the factory/property – indicating that they might want to sell them separately.

Scannell said the union has brought to the table what it considers “good” buyers who want to buy the property and the candy company and strengthen its brands with the current workforce.

However, he said that American Capital is not interested.

“Apparently American Capital is dreaming that they can land some strategic buyer and catch a premium, not so much for the candy company, but for the factory,” he said. “I hope local authorities take a good look at what the situation is. I know for a fact that American Capital is just looking to get the most money out of the deal.”

American Capital and Necco have said in a press release late last year that they will not comment any further on any aspects of the potential sale.

Nevertheless, Scannell said state officials and Revere officials are the only ones left with any pull in the upcoming sale – and he hopes they use that power wisely.

“The one thing to bring home to Revere is the strategy that was the original strategy at Necco is still viable,” he said. “The City and state will really have to help make that happen. It might be disaster if the company gets in the hands of someone who wants to liquidate it. The City and state have a say in that because the taxpayers are on the hook…Do you make life as difficult as possible for the potential pillagers of this company and do you make life easier for the white knights and the City and state have a role in that equation. No one else does now. American Capital has already said they can get a better deal from someone who wants to liquidate the company.”

  • http://profiles.yahoo.com/u/P7S27UVVZ467GZNV6ZSQACRFXA Dave

    “what they’re plans are for the factory.”

    What? I’m used to seeing Facebook postings with the wrong “there”/”their”/”they’re”, but in a _newspaper_?

    Maybe if Revere started educating their residents properly, it might produce someone who could come up with something creative to do with the Necco site rather than using it to host a hopelessly dying candy-manufacturing operation.

  • ArnoldLayne

    Although you did find a grammatical error, your assumption that it was due to mis-education may be off the mark. For example, I surely know the difference between the possessive ‘its’ and the contraction for ‘it is’, but I still sometimes commit the error of swapping their usage. I usually find it during proof reading. I think a lot of publications – most – these days have scrapped the proof- reading process. I share your disgust for the type of error you found.
    BTW, what’s your creative idea for a Necco replacement?

  • Ccarlsontmg

    I noted the failure to meet distributor production agreements over the past year at critical holidays resulting in significant lost sales apparently. With this in mind, why would any potential buyer look at this bunch of crackerjack employees as part of their plan for the future success of their new acqusition. More likely they would be looking to find a superior production facility somewhere else for the purchase.
    The quoted comment about American Capitol wanting the most money out of the deal was humorous. The United States economy runs on the principles of capitolism. The citizens of Revere should bear this in mind.

  • http://www.kleendrybh.com Carpet Cleaning Boca Raton

    Thanks for providing such a great article, it was excellent and very informative

  • bb

    Personally I stopped buying NECCO products after they stopped making candy raisins and didn’t give a damn when customers begged them to continue making them. Their management obviously lost interest in what the customers want long ago.

  • Pewaukee Fan

    When NECCO left Pewaukee, it lost its manufacturing capability to make Candy Raisins. NECCO’s Revere facility does not have the capability to make gummy products and it would have cost over $1 million to add that capability. NECCO did not want to disappoint its customers, but had no way to satisfy them.

  • Sbslaw

    The ruination of the conversation hearts starting in 2010 when they changed all the flavors and texture will be the final blow. I bought tons of the hearts every season, but spit them out last year they were so horrible and the response to my email (and many others that I note were sent by other shocked fans) was that they were sticking with the disgusting new formula come hell of high water. Now I read that their employees are unionized. They don’t have a chance.

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