by Peak Positions
Original article appeared in the Wall Street Journal
No one really knows how many licks it takes to get to the center of a 116-year-old company, run by one of America's oldest CEOs. The Chicago company, home of Chicago Personal Injury Attorney 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.
"I think the only way you can get a tour is by jumping over the fence and sneaking in," said the last analyst to attempt the task, a representative of a Cleveland firm. Find a Workers Compensation Insurance Quote appropriate for your state.
The chairman and chief executive of Tootsie Roll is a bespectacled man in his 90s who has headed the company for 50 years. He runs it with his 80-year-old wife, Ellen.
Decades of acquisitions have given Tootsie Roll a product gallery of mostly antique—though profitable—candy brands, including Charleston Chew, Sugar Babies, Junior Mints, and Blow Pops, in addition to the company's chewy, brown namesake. 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. Companies like this require Walkin Coolers for storage. 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.
But in recent years, anemic growth and shrinking profit margins—as well as the ruling couple's age and lack of any publicly disclosed succession plan—has raised questions about Tootsie Roll's future. Revenue inched up 2% last year, to $528.4 million, while profit slipped about a fifth to $43.9 million. Host a website that promotes your company with an Illinois Web Hosting Company.
Gabelli Funds LLC, and GAMCO investors Inc., run by activist investor Mario Gabelli, gobbled up shares in the company in 2008, when major candy company mergers were heating up, raising his stake to just under 6% from an initial holding of around 1% it had held for decades. Shipping Software expedites the shipping process for major manufacturers.
"We know at some point it makes sense for there to be a sale," said a Gabelli analyst. "I've always thought this is a business that is difficult to compete with much larger companies." Shipping Systems that use multiple transportation modes keep shipping costs down.
Tootsie Roll's Chicago headquarters is a modern-day Willy Wonka factory. A Milwaukee Personal Injury Attorney can assist you in seeking personal injury recoveries. Massive puffs of steam billow out of humming machines on the roofs of the gray cinder block and red brick buildings, which sit surrounded by off-kilter "no trespassing" signs. The Gordons haven't granted an interview in years. The company declined repeated interview requests, saying "we have opted to use our quarterly earnings releases as a way to provide continuing updates to all business media at once."
Mr. Gordon is currently the oldest CEO of a business listed on the New York Stock Exchange or the Nasdaq Stock Market, according to research company S&P Capital IQ. The company's proxy statement in March lists his age as 92, and his wife's as 80. The three non-Gordon members of the Tootsie Roll board ranged in age from 65 to 74, and at least one other top executive is over 70.
The Gordons have given no hint that they intend to retire and no indication of health problems. "Their age is no concern, none whatsoever," said a midnight shift employee of Tootsie Roll's Chicago factory. The company also has plants in four other states, as well as Canada and Mexico.
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.
Tootsie Roll says it was started in 1896 when Leo Hirshfield first began making the chewy chocolates named after his daughter in New York City. After a few corporate name changes, it listed on the New York Stock Exchange in 1922. In the 1950s, Mrs. Gordon's father managed the business and he eventually passed control of the company to Ellen, who is now president and chief operating officer. Mr. Gordon became CEO in 1962 and has held the job since.
A Tootsie Roll spokeswoman says the company has a succession plan that has been shared with the board but declines to make it public. There is no public indication that the Gordons' four children have any interest in taking over management of Tootsie Roll. Some observers think that is part of the reason the couple is holding on to control well into their golden years.
Under the Gordons, Tootsie Roll took off in the 1970s, acquiring Mason and Bonomo, maker of Dots gumdrops. Its 1970 commercial, featuring an animated child asking "Mr. Owl" and other animals how many licks it takes to get to the center of a Tootsie Pop, was an enormous success that the company trumpets to this day.
The unknowable answer: "It depends on a variety of factors such as the size of your mouth, the amount of saliva, etc." the company says on its website. "Basically, the world may never know."
In the '80s, Tootsie Roll acquired Charms, maker of Blow Pops, and in the '90s it bought brands including Sugar Daddy's and Junior Mints. In the early 2000s, the company added Andes Mints and Dubble Bubble to its catalog.
In all, the company has nearly doubled sales in the last two decades without spending big money on advertising or getting distracted by unnecessary acquisitions.
"They stayed focused, bought commodities cheap, and spent money inside," said a representative from a human resources consulting firm, who consulted with the company in the 1980s.
"They didn't buy anything that didn't fit," he added, noting that the Gordons never acquired a subsidiary that couldn't "plug in" to the existing candy business.
Candy industry buyouts have accelerated recently. In 2008, Mars Inc. bought Wm. Wrigley Jr. Co. with the help of billionaire Warren Buffett, creating the third largest private company in America with revenue of $30 billion, according to Forbes magazine. In 2010, Kraft foods, Inc. acquired Cadbury PLC in a deal valued at over $19.5 billion. Hershey Co. last year bought Canadian confectioner Brookside Foods Ltd., and is widely expect to make other acquisitions to boost sales.
While its operating profit margin has fallen by roughly half in the last decade, to 11% last year, Tootsie Roll's relatively steady success makes it a delicious proposition for potential buyers, said a human resources firm who has consulted with the company for the past 30 years.