Sweetie Grows Candy Business

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Tom hi res_300When Tom Scheiman was looking to expand B.A. Sweetie Candy Co. Inc., he was thinking big. His ambitions became reality this past year with the purchase of warehouse space where the store’s square footage doubled and its shelving capacity grew monumentally. In addition, SKUs increased by 800 to reach 4,500 with bumps during holiday seasons, and the company has transformed its shipping process with new loading docks.

The decision to go from 20,000 square feet and 12-foot ceilings to a 40,000 square foot building with 22-foot ceilings just down the road was predicated on Scheiman’s strong belief that candy sales are not slowing down.

The 46-year industry veteran has uniquely positioned the company at the intersection of all commercial channels, with the store’s retail sales accounting for 30 percent, wholesale at 55 percent — “the bread and butter” — and e-commerce at 15 percent.

Located in Cleveland, Sweetie is the wholesale supplier to 175 c-store and grocery chains including Heinen’s Inc., in addition to serving more than 380,000 consumers annually and shipping about 800 Internet orders weekly.

The company employs 50, including four buyers assigned to snacks, direct sales manufacturers, broker sales manufacturers and seasonal. The store, open seven days a week, operates nine checkout stations — seven for retail and two for wholesale — expanding to 15 during holiday peaks.  

The store has “an incredibly high average retail ring of $24.25,” reports Scheiman, a 2009 Candy Hall of Fame Inductee. Since increasing its footprint, sales have grown by 11 percent, driven largely by a new soda pop department, which stocks more than 35,000 bottles.

“At trade shows, we talk grandkids, not business, and we share ideas. We have one goal — the success of the industry.” – Tom Scheiman, B.A. Sweetie

Most of the time, the company carries $3 million in inventory, amounting to roughly 400,000 pounds and covering nearly every candy item on the market, available in every flavor, by every manufacturer, Scheiman proudly states. The store also features a large Pez dispenser collection, as well as a wall lined with all Jelly Belly Candy Co. variations — the biggest collection outside of the company store in California, Scheiman reports.

The brightly lit, concrete-floored warehouse-style layout features steel shelving and aisles neatly arranged by segment, with a definite focus on nostalgic products. The latter, in fact, is the store’s top selling sector, even though the volume per transaction has dropped significantly, he says.

Aside from nostalgic confectionery, including such favorites as candy buttons, Pixy Stix and Pop Rocks, Sweetie carries old-fashioned soda pop in more than 300 flavors. The soda is adding 7 percent to the average sale, Scheiman reports. Among the selections are 19 root beers, 16 birch beers, 12 cream sodas and pop (Coke, Pepsi and 7Up) made with pure cane sugar and imported from Mexico. Why? “It definitely tastes different,” he claims.

Organic Making GainsSweetiesCLE-building-sign_300

It’s the organic sector that has had the largest percentage increase of all segments, Scheiman notes, adding it has the potential to explode once “the industry figures out how to price these items to be more mainstream.” He explains that products in the sector currently command 50 percent higher prices.  

He reports continued growth with everyday items including M&M’s, gumballs, gummies, Sixlets, Dryden & Palmer rock candy and novelty products. The colored candy trend, popular for wedding buffets, is also strong, Scheiman says. “A dozen or so manufacturers have capitalized on marketing straight color or straight flavor individual candies.”

Scheiman adds that he’s noticed an uptick in the sugarfree sector, which he now calls part of the mainstream market. Sugarfree has “always had legs, but now health conscious moms with young children are purchasing more of these products,” he explains.

But not surprisingly, Sweetie’s largest retail segment is count goods, with candy bars priced at 99 cents and down, offering the company its largest return with most products enjoying a 35 percent margin.

b.a.sweetie print-8_300Buying Big, Selling Small

The Sweetie business model is structured around purchasing and warehousing large quantities, then selling to retailers looking for less than case orders. As evidence, Scheiman tears open a shipment of more than a dozen boxes of banana-flavored taffy, each box filled with 24 bars.

“No one can sell all of these boxes of taffy,” he says with assurance. “But I can break down the amounts and sell retailers the exact quantities they want.”

Sweetie also rebags candy to sell to consumers under its namesake label at a competitive price. Again, it’s an example of the company buying in quantity at a good rate and reselling at a good margin.

So far, sales in the new location are up 45 percent compared with a similar period this past year, with 30 percent more inventory. Scheiman anticipates more consumers will be drawn to the Cleveland warehouse, in part the result of some eye-catching signage. The property sits along a major highway, prompting the installation of a large, freestanding, colorful, spiral lollipop mimicking the store’s logo, which 135,000 cars pass daily.

Retailing Has Its Tangles

Sweetie buys direct from 177 manufacturers, with some brokers on-site weekly for meetings. “Our direct suppliers know how important it is that Sweetie is the first on the street with new items and that our warehouse is full of fresh product,” he states.

Most of the time, that process runs smoothly, but sometimes issues arise. Foremost among them are two recurring problems relating to pricing and delivery.

Scheiman explains that salespeople will pitch at price points that are well above similar products in the category. “The key is for pricing to fit in the category,” he explains. This is his golden rule for manufacturers, particularly start-ups or those looking to expand distribution. He notes the reality is that manufacturers need “to follow the leader.”

b.a.sweetie print-18_300Despite this source of occasional disagreement, Scheiman describes a very fraternal relationship with many manufacturers. “At trade shows we talk grandkids, not business, and we share ideas. We have one goal — the success of the industry.”

The other issue that challenges business is delays in deliveries. Too often, he says, it will take up to 17 days between order placement and product arrival. This results in the need to keep inventory longer and order greater quantities, which is not part of the business plan.

He maintains mergers and acquisitions generated this climate of slower order fulfillment, stating that the norm formerly was 10 days to have an order filled.

He also is militant with respect to product presentations. “Incomplete presentations are immediately rejected until all of the necessary information needed to list a new item is submitted,” he explains.

The facts he requires include all UPC information, case weights and packs, lead times, minimum order requirements for pre-paid freight, backorder policies, best buy date policies and contact information for everyone involved.

Internet Roars As Own Beast

Acting as an Internet retailer is a beast all its own, according to Scheiman. What’s required to drive consumers to a site and achieve sales success is completely different from store-front retailing. He says consumer-friendly sites such as Amazon have set the standard. “A few clicks and you’re done,” he says, shrugging his shoulders.

But he understands site promotion is key. “It’s like a volume dial — you can really turn it up and it will result in sales,” he says, explaining the company has used Google Adwords, where an ad appears when certain search terms are entered and fees apply only when that ad gets clicks.

candy.today.1_300He reports that Sweetie’s greatest success online has been with sales of nostalgic products and party candy including gummi bears and jelly beans ordered in specific color profiles.

While Scheiman wraps up his Cleveland expansion, he’s taken on another. The company’s Phoenix location, opened in 2010, is moving from its current 5,000-square-foot location to a 13,000-square-foot facility. The store is run by daughter Dawn and son-in-law Mike with son Joe serving as marketing director and four-year-old grandson Giovanni pitching in with merchandising. The store is growing to 3,500 SKUs and nine employees, including one buyer. Its business is composed of 75 percent retail and 25 percent wholesale.

As a hybrid creature himself, Scheiman the salesman, wholesaler and online retailer continues to thrill at the prospect of selling candy every day. It’s something that can bring people of all ages together, he says, and that will never change. CST

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