Warrell Corporation History

Company Perspectives:

Although the company has achieved considerable growth over our 38 years, the Pennsylvania Dutch candies commitment to selling exclusively to the specialty retail trade, keeping very high consumer value in it products, offering products at a fair price, and providing unrivaled customer service remains unwavered.

Key Dates:

1965:

Warrell family acquires Pennsylvania Dutch Candies Company.

1974:

Katherine Beecher Candies, Inc. is acquired.

1982:

Melster Candies is acquired.

2000:

The company's name is changed to Warrell Corporation.

2004:

Melster Candies is sold.

Company History:

Warrell Corporation, based in Camp Hill, Pennsylvania, manufactures candy under the Pennsylvania Dutch and Katherine Beecher brand names as well as private labels. Approximately 75 percent of sales are generated from co-manufacturing and private-label confections. With a 200,000 square-foot plant, Warrell manufactures candy in several categories. Dutch Treats include crunchy peanut squares, honey nut crisps, and peanut butter pillows. Pennsylvania Dutch specialties include apple butter, peanut brittle, funnel cake mix, and salt water taffy. Warrel makes a variety of old fashioned sandy candy in such flavors as cherry, licorice, root beet, and horehound. Another Warrel specialty is Old Fashion Stick Candy. Finally, the company makes a number of nostalgic items, including cashew coconut pie, peanut coconut pie, coconut strips, coconut marshmallow toasties, and flat mountain taffy. An on-site gift shop is also operated at the company's facility. It serves as a showroom for gift shop owners, a sample room, and a freestanding gift shop. The company is privately owned and operated by the Warrell family.

1950s Origins

Founded in 1957 as Pennsylvania Dutch Candies Company, Warrell Corporation at first made butter mints but soon added licorice, lollipops, and milk chocolate items. The products were either manufactured by the company or bought from others and packaged under the Pennsylvania Dutch label. It was a niche business that relied on a wide range of outlets, such as tourist attraction gift shops, restaurant retail sections, roadside stands, and country stores. By 1965, the company was generating sales of about $1 million, and it was at this point that Jonas Warrell helped his two sons, Lincoln (Warrell Corporation's long-time chairman) and Carroll, to buy the business. "Linc" Warrell earned a degree in chemical engineering from Pennsylvania State University in 1953 and then went to work for the Aluminum Co. of America, better known as Alcoa, where he became a technical salesman. However, he longed to run his own company, just like his father, who was president and chief executive officer of Carlisle Tire and Rubber Corporation. Carroll began scouting around for a manufacturer for the family to buy and came upon Pennsylvania Dutch Candies. The brothers, with the financial backing of their father, made a buyout offer, it was accepted, and they now became involved in the candy business, which neither knew anything about.

Linc Warrell considered his lack of industry knowledge to be an advantage in some ways, since he came to it was no preconceived notions about the right way to do things. For instance, he applied his training in chemical engineering to discard long-held practices in the candy industry that simply had no scientific basis. He was also willing to listen and learn and, despite being a part-owner, to serve in a supporting capacity. In a 2004 profile in Candy Industry, he recalled his first day at work: "They had brought up an old and quite dirty wooden desk, which had been in storage, and placed it in a shared office for me. Well, the first thing I did was to get some soap and water and clean that desk. I was then put in charge of purchasing janitorial supplies for the company, something that I also knew nothing about."

The company's previous owner stayed on to teach Warrell the business, and the future chairman was soon moved into sales, where he possessed a solid foundation. He knew from his days at Alcoa how to deal with customers and the professional conduct expected of a reputable sales operation. He hit the road and soon received a number of complaints from gift shop brokers and customers. The brokers in particular were unhappy with the way Pennsylvania Dutch Candies's was often late in making deliveries and slow to pay. Warrell took steps to resolve these problems, and he also raised retail prices on the company's products, in this way improving profitability for both the company and its customers. As a result, after just a year under new ownership, Pennsylvania Dutch Candies doubled its sales.

Katherine Beecher Candies Acquired in the 1970s

The company enjoyed steady growth through the remainder of the 1960s and into the early 1970s, adding about $1 million in sales each year. In 1974, Pennsylvania Dutch Candies expanded through acquisition by purchasing Manchester, Pennsylvania-based Katharine Beecher Candies, Inc., which was on the verge of bankruptcy. Beecher produced more than just candy, targeting the upscale market: fancy food distributors, department stores, food shops, and gourmet shops. About 90 percent of its business came from private label work, but the company was selling its products at or below cost. It was an untenable situation, leading Warrell to sit down with the major clients to discuss the situation. He convinced them to accept a price increase, which allowed Beecher to get on a solid footing. However, as the gourmet market began to contract, the company eventually dropped gourmet food items, only keeping on such Pennsylvania Dutch items as apple butter and corn relish. To become more of a mass market business, Beecher concentrated on candy and expanded its offerings to include party mints and anise mints, as well as some snack items. It also installed hot panning for sugar toasted peanuts and, in general, upgraded to state-of-the-art equipment to increase volumes and remain competitive by becoming a low-cost producer. The strategy worked, and by the early 1980s Katherine Beecher had become a profitable concern.

With one successful turnaround project under its belt, in 1982 Pennsylvania Dutch Candies considered a new challenge: Melster Candies, a Cambridge, Wisconsin, company founded in 1919 by brothers Harvey and Arthur Melster, who had converted a tobacco warehouse into a candy factory. It specialized in seasonal candy such as grained marshmallows (circus peanuts), chocolate coated whipped marshmallows, peanut butter kisses, and salt water taffy. After learning the business was for sale, Warrell and long-time president Bill Billman took a trip to Wisconsin to inspect the facility. Although it was in rough condition, they decided the company's real problems lay in sales and marketing, areas they felt they could correct. They bought Melster but soon learned that the former tobacco facility itself was the major challenge. "We didn't realize how naive we were in seeing what needed to be done in that plant," Warrell told Candy Industry in 1998. "Sales was only a minor problem. Production in every department was a problem, efficiency was a problem, motivation was a problem. The easiest solution was the financial arrangements."

As it had done with Beecher, Pennsylvania Dutch Companies gradually added state-of-the-art equipment to the Melster operation to make it a low-cost, quality producer that could operate a competitive player on the national stage. All told, Pennsylvania Dutch Candies estimated it spent about three times the original purchase price on upgrading the facilities. Warrell's scientific background was also helpful in turning around Melster. When he took over, the company was limiting the production on some of its items to a seasonal basis. For instance, circus peanuts were not made during the summer because of heat and humidity. Warrell realized that an open drying room window caused the problem and had air conditioning installed, thus allowing Melster to produce quality circus peanuts year-round and eventually become the country's largest producer of the candy. Despite all the money and effort, however, it was not until the early 1990s, almost a dozen years after Pennsylvania Dutch Candies bought the operation, that Melster finally turned the corner.

Warrell proved to be a tireless worker in all aspects of Pennsylvania Dutch Candies. He helped to expand the company's reach well beyond Pennsylvania Dutch country so that sales outside of Pennsylvania grew to 90 percent. According to son-in-law and vice-president of administration, logistics, and warehousing, Kevin Silva, "Linc would ensure that Pennsylvania Dutch had a presence in any town that had a show or a fair. For him there was no market too small nor no rack too good for Pennsylvania Dutch candies. His daughters always talk about visiting their mother's family in St. Louis. It would take several days to make the drive since Dad would be stopping at every roadside outlet to find out if they sold Pennsylvania Dutch candies." In the spring of 1996, Warrell, upon reaching age 65, retired, staying on as chairman but turning over day-to-day responsibilities to Billman and his sons-in-law. Nevertheless, he continued to come into the office every day, and instead of working half-days as planned, he continued to put in long hours. Near the end of the year, a salesman suggested they award Warrell a plaque for perfect attendance, since he had not missed a day of work since entering retirement.

New Packaging Look in the Mid-1990s

In 1996, Pennsylvania Dutch Candies updated its look, replacing its yellow candy bags featuring a red-and-green hearts-and-flower logo with a clear package and a more modern looking logo that suggested the look of an Amish quilt, employing teals, burgundy, purples, and greens to accent a picture of an Amish horse and buggy. The packaging makeover was a success with retailers, who believed the look was more in keeping with their own image, and resulted in even more distribution opportunities.

Pennsylvania Dutch Candies generated some $30 million in sales in 1998. To keep growing and remain competitive, the company began looking to relocate to a larger facility where it could consolidate its Pennsylvania manufacturing operations as part of a strategic long-term plan. Because the cost of building a brand new plant was too high, management was in the market to buy an existing facility that could be renovated. There was some thought of moving to a new area but the state stepped in to persuade the company to stay close to home. A large plant, the Iceland Seafood building, located in Camp Hill near Harrisburg, was available, but initially Warrell did not like the former frozen food processing plant, which had been on the market for two years. After revisiting it, however, he and Billman began to see the benefits the facility had to offer. It was large, some 200,000 square feet in size, providing the company was ample room to grow. Moreover, it had plenty of warehousing space and offered a fully equipped research and development lab, a full-service cafeteria, a suitable food plant infrastructure, and access to a rail line.

Warrell and his team decided to buy the property, paying $3.9 million, with the intent of spending a similar amount on renovations. The Pennsylvania Industrial Development Authority chipped in with a low-interest loan of $1.25 million, and Pennsylvania's machine and equipment loan fund awarded the company an additional loan of $300,000. An engineering firm was hired to help develop the retrofit plans, and key co-manufacturing customers were also consulted about plant improvements they would like to see. They brought in their own engineering and quality control people to provide their input, in effect giving the company the advice of high-priced talent for free. In the end, the cost of retrofitting the building cost far more than expected, some $7 million, but management was pleased with the result. A plant built from scratch would have cost an estimated $30 million, making the final $11 million price tag seem reasonable. Moreover, the company was now better able to attract even more contracting and private label business.

The operations of Pennsylvania Dutch Candies and Beecher were consolidated in the new plant, which opened in 2000. In that same year the company became Warrell Corporation, a name management believed was more suitable for its national standing. The company was confident that the U.S. candy industry would continue to enjoy strong growth and that with its new plant it was well positioned to take advantage. However, the company's business was also being conducted in a changing landscape. Consolidation was a major factor, one that already resulted in the elimination of many niche and specialty candies. To remain competitive, Warrell Corporation elected in 2004 to consolidate its own operations and focus on co-manufacturing opportunities. As a consequence, management decided that after all the money, resources, and effort it had put in turning around Melster Candies, it was time to sell the subsidiary. A buyer was found in Colorado-based Impact Confections. Warrell's project revenues for 2004 were $48 million, and there was every reason to believe that the niche candy maker would continue to enjoy steady growth in the years to come.

Principal Subsidiaries:Pennsylvania Dutch Candies Company; Katherine Beecher Candies, Inc.

Principal Competitors: Hershey Foods Corporation; Mars, Inc.; Nestlé S.A.

Further Reading:

• "Inside Warrell," Candy Business, July-August 2002, p. 20.
• "Linc Warrell Enjoying the Challenge," Candy Business, May-June 2002, p. 24.
• "Melster Turnaround Proves a Success," Candy Industry, April 1998, p. 24.
• Pacyniak, Bernard, "Linc'ed to Leadership," Candy Industry, August 2004, p. 16.
• Tiffany, Susan, "The Nuts and Bolts of Pennsylvania Dutch Co.," Candy Industry, April 1998, p. 20.

Source: International Directory of Company Histories, Vol.68. St. James Press, 2005.

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