Attraction to Necco Much Sweeter This Year

There is likely no candy that says ‘Valentine’s Day’ quite as well as a Necco Sweetheart, and while the Revere company is front and center during the lover’s holiday, February at the factory is a very quiet time.

All the Sweethearts have been made – with production on them ramping up as early as last May.

The little hearts have already been shipped out of the factory.

And now, while the world buys and eats those little hearts with cutesy sayings, the company’s employees and management take a much-needed breather.

From his office in the American Legion Highway factory, Necco CEO Al Gulachenski looked out the window last week while sitting down with the Journal and pointed to the parking lot.

“The goal is to fill the parking lot with employees,” he said. “I’d love to have 1,000 employees working here. We have new innovations, new products and are going after new markets. Now we have the operations in tact and the foundation is secure. We are leveraging our brands now and protecting them. We have a long way to go, but I’m excited about where we’re at.”

If things keep going as they are, a full parking lot might be a real possibility in the coming years.

Rebuilding from the Inside Out

The story of Necco over the last three years has been one of Gulachenski stepping in with some key managers and building the company up from its core foundation. Just about 18 months ago, after rebuilding internal functions at the factory, he assumed the role of CEO of Necco – no longer an employee of parent company American Capital of Maryland  – and is in it for the long haul.

“The company is going on the right path and we have started investing in products that will double the size of the company in a few years,” he said. “That’s a lot more than could have been said three years ago.”

Four years ago the company hit a very low point.

Employees and their union were unhappy.

Production was nearly at a standstill and the company was missing crucial shipping deadlines. Large customers, who had been stalwart buyers for decades, began cancelling their orders in frustration.

The state got involved and stripped the company of its status within its economic development incentive program, and the City nearly also stripped the company of its property tax break agreement – staying with the agreement after a contested vote of the City Council.

Then, the owners of the company – American Capital – put the old candy giant up for sale.

When no good offers were made, Gulachenski arrived in Revere.

Back to the Original

There was not a lot of love in the air at Necco on Valentine’s Day in 2010, but Gulachenski said he went to work rebuilding the company.

“I was brought in specifically by American Capital to work from the foundation out,” he said. “We had to be efficient and lean because you really have the deck stacked against you as a manufacturer in Massachusetts. Most candy manufacturers have moved to other countries, like Mexico, so you have to be efficient. The idea was to fix the company from the inside out.”

His first order of business was to reverse the plan that made Necco Wafers – the company’s oldest product – all natural. That meant using high fructose corn syrup rather than sugar in the candy.

It didn’t go well; Gulachenski reversed it.

“Sales had been cut in half,” he said. “That’s one of the first things I did. I changed it right back to the old formula. In the last 52 weeks, Necco wafer sales have increased 20 percent. Necco Wafers have slowly been making a return. I think people realize the old formula is back now. I think loyal fans that were turned off with the change have forgiven us and come back. We did nothing but return to the original and put it on the market.”

However, Gulachenski said the company has stuck with the same kind of change in the leading product, the Valentine’s Day favorite – Sweethearts. The candy conversation hearts still come in the original flavors, but they have remained also in the newer, trendier flavors as well. That is part of the long-term vision for the company.

“I would change it all back, but the sales are growing and there is momentum behind it,” he said. “If we keep only the flavors from the 1950s, kids might not eat it when they’re parents buy it and have a negative experience. The idea is to have a good experience with it as a kid and then buy it for their kids later in life.”

In addition to that, the company has added mynecco.com, which allows customers to personalize the hearts – a business that has created jobs and is very popular for weddings and anniversaries. This is the second Valentine’s Day holiday with the personalized heart option, and it’s proven successful.

Additionally, the company also offers a solid gold, $20,000 Sweetheart that can be purchased for those with not only sweet, but also expensive tastes.

“No one has ordered one yet,” said Gulachenski with a laugh.

Efficient and Lean

A major piece in solving the Necco puzzle, though, was working out strained relations with company employees in Revere. The three unions representing workers there had been through some bad times with former managers, and there wasn’t a lot of trust.

Some two years ago, all three contracts were worked out, and employees bought into an incentives program where if they met key production benchmarks, they would be rewarded.

“We have union employees that get paid a bonus,” he said. “If we have a good year, they have a good year. That’s everyone – even me, union or non-union…That was a good way of getting everyone pulling in the same direction.”

At the same time, Gulachenski has used such savings and incentives in the union contracts to keep the company in Revere.

Most candy companies – all the major manufacturers – have moved operations to Mexico where sugar is cheaper. Others have moved to Canada. Even Hershey’s no longer makes any chocolate at its world headquarters in Hershey, PA.

Due to convoluted sugar policies involving the federal government, the handful of domestic sugar producers and steep tariffs for importing sugar, the cost of such raw material is much higher for Necco than companies that move to another country.

“I get calls from Canada all the time,” he said. “They want me to move the operations to Canada to save money. It’s closer to here than Mexico, which is why they call me. It would be cheaper to operate, but if I did that everyone would lose their jobs and that would be that. I don’t want to do that.”

Betting on Clark

Now that things have been stabilized and the company is starting to grow, Gulachenski said they have invested in trying to grow the Clark Bar brand.

Right now – in conjunction with Hill Holiday advertising agency in Boston – the company has launched a trial market promotion. In that trial market, they have pushed the candy bar and launched a marketing campaign asking ‘Are you Clark Enough?’ It has been going on for six months, Gulachenski said, and will continue another six months.

After that, the peanut butter and chocolate treat will go nationwide if things pan out.

“At the end of the trial market, we’ll roll it out nationally and you’ll see the advertising all over the country,” he said. “If our plans hold true, the Clark Bar itself could be as much as 50 percent of our brand. It would be higher than Sweethearts, which are now by far our largest seller. It could surpass them by a long way.”

He said they chose the Clark Bar because the most successful candy bars on the market are all peanut butter/chocolate combinations.

Moving to the Big Time

For now, things are quiet at the Necco factory in Revere.

In a few months, the machines will begin humming again, starting up production for Halloween candy and the early Sweethearts.

And, if the rebuilding effort is any indication of the success of future plans, those machines will be humming quite a bit louder.

“Once you get the house in order, you go big time,” Gulachenski said.

CORRECTION – Feb. 19, 2014

It was reported above that many candy companies – including Hershey’s – do not make candy in America any longer.

According to Hershey’s, that is not correct.

In 2011/2012, the company invested $300 million to double the size of its West Hershey manufacturing in Hershey, PA, creating the largest and most technologically advanced chocolate plant in the United States and one of the largest chocolate plants in the world. The company also has a Reese’s plant in Hershey that makes millions of Reese’s Peanut Butter cups along with other Reese’s brand products. It also has a total of nine manufacturing plants in the United States and two in Canada.