Company Forecasts Growth, New Jobs

The state has made no decision yet, but Tuesday morning it gave Necco Candy Co. of Revere a chance to plead its case for keeping a lucrative tax relief agreement with the City.

The tax agreement, called a tax increment financing (TIF) agreement, allows for a shifting percentage of property tax relief on the company’s massive factory at American Legion Highway. The program is allowed and administered by the state’s Economic Assistance Coordinating Council (EACC).

On Tuesday, the EACC met, and they were there to discuss why Necco has come up so short in creating new jobs over the last three years. Job creation was the exact reason that the tax relief was granted in the first place, and according to the EACC, Necco has fallen very far off in creating jobs.

David Smith, Necco’s Chief Operating Officer, detailed the company’s plan, saying that their owner – American Capital of Maryland – was now fully behind rebuilding the company.

While Necco still isn’t creating the jobs it needs to, Smith indicated that it is in a much better place than last year, and might create jobs in the coming year.

“I’ll speak from the heart,” he told the Council. “This thing was within an eyelash of going away last summer…Things had gone downhill rapidly…There was no business plan a year ago that had us getting out of this tailspin. That’s why American Capital was considering selling the business or even breaking it up into pieces and going away.”

He said that American Capital took Necco off the sale block in February, and that signaled a renewed interest in building the company and creating jobs in Revere. In the time that the company was for sale, Smith said that Necco began to solidify its operations – leading to a positive result despite not being able to find a buyer.

“Over the five months the company was for sale, business activity wasn’t what they thought it might be,” Smith said. “There maybe weren’t a lot of anxious buyers. There was a lot of interested parties. I met with them all, but it’s like buying a car. You kick the tires and say ‘I don’t think I want it.’ The good thing is that during that time the company stabilized…We had a great Valentine’s season this year as opposed to the year prior, which was just the opposite.”

Over the last 60 days, Smith indicated, they have formulated a strategy that they believe will allow the company to grow by 15 percent this year in volume and pricing. They will do that with a three-pronged approach.

First, he said they are really attacking the convenience store/gas station customer market. He indicated they recently signed a new deal to sell Necco Wafers and Clark bars at 7-11 convenience stores, though that agreement has not yet been implemented. Making inroads into that new market for selling Necco candy, Smith said, could pick up revenues – which are down 25 percent over the last two years.

“As a definite retail customer base, that is a new market,” said Smith. “One reason we want to do convenience stores is they are open 24/7 and there is no seasonality like in the big retailers such as Wal-Mart…That’s far more desirable. That turnover in product is much more consistent and much more predictable. That is incredibly important to ramping up the level of activity in the factory.”

Secondly, Smith said they hope to expand their contracted manufacturing, such as making chocolate candies for other companies. The contract business used to be very large at Necco, and they still hold open-ended contracts with Hershey’s, Smith said, but they need to increase the business to get overall revenues back up.

Third, he said that American Capital plans to invest $2 million into the factory this year. There have been no capital improvements to the factory for several years.

“This kind of money invested by our ownership is a clear signal we are in position and plan to restart the business,” said Smith. “Ultimately, jobs will come from this. I don’t know what we’ll be making. If it’s Necco Wafers, it will mean a lot of jobs. If it’s bulk chocolate manufacturing, it will mean some jobs.”

One recent change in the company’s business plan is American Capital’s new willingness to go after Necco’s original business plan – that being to buy out smaller candy companies and absorb them into the Revere facility.

“There’s a very real possibility that strategy could be reinitiated,” said Smith. “I don’t know that it will…Six months ago when we met with the Revere City Council that strategy wasn’t a possibility. Today, it’s quite different. All the upside is in front of us…In this situation, we’re in the right place at the right time.”

One thing that was brought out by the four-member Committee was that Necco is totally dependent upon American Capital – and not in charge of its own destiny.

American Capital sent no communications to the Committee, nor did it have a representative at the hearing. At times, also, Smith said it was hard for him to speak to the ownership’s intentions – especially when it came to why Necco was taken off the sale market.

“I could speculate, but that’s for them to decide,” he said. “They’re the owners.”

While Committee members seemed enthusiastic about Necco’s presentation of a plan with details that will hopefully create jobs and get them back into compliance, the lack of information from American Capital did seem to be a concern.

The Committee will make a recommendation at their board’s June 29th meeting on whether to keep Necco in the program or boot them out. That recommendation will be voted on at the June 29th meeting.

Several City officials, including Mayor Tom Ambrosino and Councillors Dan Rizzo and Tony Zambuto, spoke in favor of keeping Necco in the program. Likewise, several union officials that represent Necco workers also lent their support to the company.

“I felt better and reassured after hearing their plan,” said Councillor Zambuto.


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