Sweet survival

After doubling its sales volume over 2000 to 2004, St. Stephen, N.B.-based Ganong Bros. was hit hard by the strengthening Canadian dollar in 2005 and lost a significant amount of its stateside business. Canada's oldest chocolate company that distributes to the retail trade was forced to step back and re-evaluate its strategy, and really focus on building its core strengths, including its strong community ties and family involvement in the business.

HQ: St. Stephen, N.B.

Offices: St. Stephen, Toronto, Cincinnati

Founded: 1873

Employees: Just under 400

Marketing department: Eight, including a senior marketing manager, an assistant product manager, a marketing co-ordinator and four regional sales managers reporting to VP sales and marketing Greg Fash

Ownership: Ganong family and private shareholders

Brands: Delecto Boxed Chocolates, Fruitfull Fruit Jellies, Sunkist Fruit First Fruit Snacks, Ganong Brand seasonal and everyday confectionery

Agency partners: C2 Communications (Moncton, N.B.), OnBrand Design, Toronto (package design)

After doubling its sales volume over 2000 to 2004, St. Stephen, N.B.-based Ganong Bros. was hit hard by the strengthening Canadian dollar in 2005 and lost a significant amount of its stateside business. Canada’s oldest chocolate company that distributes to the retail trade was forced to step back and re-evaluate its strategy, and really focus on building its core strengths, including its strong community ties and family involvement in the business.

Ganong’s eight-person marketing team, including VP sales and marketing Greg Fash, had to be savvier with its leaner budget. So it focused its dollars on web communities like Chatelaine.com and LOULOU.com, as well as PR efforts through a partnership with the Canadian Breast Cancer Foundation and media events hosted by company spokesperson Bryana Ganong.

Since two of its core brands – Delecto boxed chocolates and Fruitfull fruit jellies – are primarily gift-giving products, Ganong concentrates most of its marketing efforts around the December holiday season. Its third-biggest performer, Sunkist Fruit First fruit snacks, is supported by frequent package and product innovation, like last year’s launch of sugar-free fruit snacks.

The company already has a rock-solid relationship with St. Stephen, population 4,500, which it fosters by coproducing the community-led Chocolate Museum and annual Chocolate Fest. For the latter, Ganong hosts tours of its factory for four days, over which it attracts an

average of 4,000 to 5,000 visitors, exceeding the town’s population.

Its focused efforts are beginning to pay off: This year, it’s just about back up to its peak numbers and a full staff of almost 400, and continues to grow, with plans to expand the branded products’ presence in Asia. President David Ganong aims to double the business again over the next five to 10 years, proving that a small, family-controlled Canadian business can hold its own against the big guys.

Strategy spoke with Ganong and Fash about how the company has strengthened its brand with community efforts, cause marketing and online tactics, as well as how it supplements its branded business by picking up contract work from its Goliath competitors, which keep closing more and more of their own plants.

How have you stayed competitive all these years in a sea of big competitors?

DG: I think, first, we need to be focused on selective markets. We can’t compete well with everything. We can compete well in the assorted boxed chocolates business and the fruit snacks business. [Much of our] production equipment services both the chocolate confectionery side of our business and the sugar confectionery side of our business, which is unique, and it helps us with some of our costs.

And we also, in the recent past, have taken advantage of industry consolidation and change by taking on contract pack business that somebody else wants to shed, which helps us bulk up, reduce our unit costs and buy materials in a competitive way, such as rail car loads of sugar and glucose as opposed to smaller quantities.

So there are a whole series of pieces that have to come together in order to remain competitive, and a determination to survive and to grow, which has been part of the culture of the business.

GF: I think companies like Ganong have to be really conscious of the winds of change in our industry and be nimble enough to react to those changes very quickly. Certainly over the last decade there’s been enormous change in the confectionery industry, both in the United States and in Canada. So there are shifts in strategy, not just on the product side, but recognizing that there are new customers in the market, alluding to contract pack and private label, and still maintaining our strong emphasis behind branded development. So really there are three legs on the stool – on the contract pack side, on the private label and on brand development.

How do you stay top of mind across Canada with a limited budget?

GF: It’s a challenge. We try to communicate as much as we can through the inserts in our packaging. We use that as a vehicle for dialogue to draw consumers back to our website. Beyond that, we do use web and print media, in a targeted, integrated way to try to get our messaging out.

Most of our online work has been done through engaging web communities, and running promotions and points of interest within web-based communities, whether hosted by a particular magazine or through the Canadian Breast Cancer Foundation website. So it’s really finding ways to integrate and leverage pre-existing web communities as opposed to buying banner ads. It was one of those things that evolved when we built our media plans. We don’t have a huge budget to engage in big media purchases, so we tried to find things that fit with our target market, and that moved beyond just a straight advertising message and hopefully engaged people more than just one time.

We did it with LOULOU last year. We did a print buy in the magazine and integrated with the web. We’ve done it with Chatelaine in the past. We sent a virtual chocolate with Chatelaine – people paid a certain amount for the virtual chocolate that was donated to the CBCF. The response was very favourable. We paid for the media, but we try to be more engaging and interactive [than just banner ads].

A lot of products we market are seasonal, so consumers don’t see them every time they visit the store. They see them primarily for a six- to eight-week period when they’re on the shelf, so we have to be very, very conscious of having terrific packaging and graphics.

What have some of your biggest challenges been over the years?

DG: Competing as a small guy in what has been a globalizing business, and understanding the implications of that. We are now in an industry that is working with, to a great extent, mega international brands, and competing in the key markets, particularly in Canada, in that area has been a challenge. It’s been a challenge forever for the company and continues to be. So I think hacking out our space in the consumer’s mind, hacking out our space on the shelves against the very large companies, many of them – most of them now – foreign-owned, has probably been our single largest challenge over the years.

How do you think you’ve succeeded in resonating with consumers?

GF: One of the biggest challenges for a company of Ganong’s size is competing in the branded side of the business, understanding today’s consumer.

Maybe 25 years ago, Canada was a much more homogenous place than it is today, and just accessing information, understanding the shift in regionality and in the makeup of the consumer nationally is a big, big challenge today.

So the traditional things that might have worked 25 years ago – big media campaigns, making your point on television or on radio or in magazines – is not going to work for a company like Ganong today. It’s too expensive. So we’ve opted for a more interactive approach and talking to our consumers in different ways.

Number one is direct communication and interaction. We’ve run contests, for example – we’ve asked consumers what they’d like to see in an assorted box of chocolates.

We related to the consumers’ desire to support causes. We’ve been a supporter and a partner of the Canadian Breast Cancer Foundation now for four years. Consumers have told us that’s important to them.

And third is that the family name, Ganong, stands for five generations of involvement with the company. Bryana Ganong, who is David’s daughter, has acted as the company spokesperson for the last four years. We try to approach this as developing long-term relationships with customers as opposed to big, expensive

media campaigns.

How do you reinforce Ganong as a family brand?

GF: Bryana Ganong has taken on the role of trying to introduce our products to the media. We’ve hosted an annual media reception for three years now in Toronto, and we’ve run some promotional events with her. Three years ago in Toronto, we had a one-ton block of chocolate cut up in the form of a pink ribbon and had it at Union Station, and we did some sampling. It was to draw attention to our relationship with CBCF, as well as sample our chocolates [pre-holiday]. Bryana has also made herself available for interviews and really promoted the new products.

Her image has been in paid media as well. She really does a great job of representing the brand, as a fifth-generation Ganong in the business. We’ve found through research that consumers find it extremely positive to purchase from a family-run company. The challenge is bringing some personality to life behind that image of a family brand. So by having someone out there saying here’s what we stand for and here are our products, we believe that adds an enormous amount of credibility to the message and to the strength of the brand.

What are some advantages and disadvantages of staying a family business?

DG: I think it’s better to position it as privately held rather than just family. Although the family is in control of the business itself, other interested parties also participate as shareholders. The company is able to take decisions that have long-term implications, rather than have to deal with the analysis on a quarterly basis and make sure that each quarter’s numbers live up to analysts’ expectations. The downside to that, of course, is the ability to raise capital. If you are in a public market, it’s much easier, assuming that your financial results are up to expectations.

Can you talk a bit about new product launches?

GF: You have to continually bring new ideas to the market. But I

would say today, versus even four or five years ago, we’re trying to be

more selective in how much innovation we bring to the market. You can expend a tremendous amount of internal resources on new products, and a lot of times new for the sake of new is a very expensive mistake, so we really have to focus on things that matter. I’ll give you a couple of examples.

Eighteen years ago, Fruitfull was Canada’s first fruit snack containing real fruit jelly. This was an innovation in the market, and it has stood the test of time. It is a traditional favourite, number one in the category, and we have added to that by putting chocolate on it in the last couple of years as a way to extend the range.

Another example of new in the fruit snack market was the introduction last year of Sunkist, which is a brand we produce under licence in Canada. We developed and introduced a product called ‘No Sugar Added’ fruit snacks because of concerns about childhood obesity in the Canadian market. It’s a calorie-reduced, portion-controlled fruit snack. Those kind of things we can get behind and support. But just adding new lines and extending products for the sake of activity is not very productive, certainly not for a company of our size.

Since you started being more selective, how many product variations/launches have there been?

GF: Over the last six years, I would say 80% of the products we manufacture, on the branded side of our business, have either been modified, repackaged or completely reintroduced.

That’s significant. Can you give an example of a product that’s been modernized?

GF: One example would be the changes we made to the Delecto range, because we wanted to make sure our assortment reflected today’s consumers’ desires. So we went out and asked them what kind of chocolates they wanted in the box. And first-year results have been very, very positive.

How did you go about asking consumers?

GF: The nice thing about boxed chocolates is that it’s a bit of an experience, unlike opening a package of crackers or cookies. In every box of assorted chocolates, there’s a road map that tells you which pieces are in there and where they’re located in the box. That gives us a chance to talk to consumers, which we’ve taken advantage of. We asked them to go to our website and tell us what they liked about the chocolates, which ones they preferred, which ones they’d like to see [more of]. So it was talking to them through the box in the first place, and building from there.

What kind of response rate did you have?

GF: It was very high [30,000 unique responses]. And we did offer a contest – to win a trip to come down to New Brunswick for a family of four. It showed the relationship between consumers and boxed chocolates is stronger than it is perhaps with other food products.

Can you talk a bit more about your community efforts?

DG: There has been a very long history of Ganong working with the community here in New Brunswick.

Two unique examples are the Chocolate Museum and Chocolate Fest here in St. Stephen. They were driven by the community, not the company, though of course we’ve been very supportive, and it’s a not-for-profit corporation that’s owned half by Ganong and half by the municipality. In fact, we hope the Chocolate Museum is going to double in size to make it more of a destination point. It does draw people into the town, it is a benefit to the community, as is the Chocolate Fest that runs the first week of August every year, and pretty much sells out the hotel rooms in the area.

And the company has maintained a very strong influence in working with youth. We sponsor a Ganong basketball tournament each year at the high school, and work with hockey teams and with other youth groups in the community. And we would be one of the major supporters of any activity that takes place in the community – that’s part of our donations budget.

Why do you feel it’s so important to have such strong community ties?

DG: Well, first, there’s a long history of it, so you could say there’s a bit of baggage there. But we would like to continue to take that tradition forward. It’s one way we can give back in ways that can be helpful and beneficial to our employees and their children. For example, there are now several Ganong scholarships for graduates of St Stephen High School.

We are well-regarded. I think we put back in the community to earn that trust, and the community supports us, like with the Chocolate Fest. The municipality works with us when we do expansions. It’s a good mutual benefit.

What prompted you to partner with the Canadian Breast Cancer Foundation?

GF: Cause marketing had been growing for some time. From a marketing perspective, I was attracted to the CBCF on a couple of different levels. One, our products, boxed chocolates in particular, are associated with family times like Christmas and Mother’s Day, and different kinds of gift-giving. And the

CBCF is a grassroots, family-driven organization with an incredible passion for their cause. So we could relate to that. It was a Canadian cause, which we could also relate to, as a Canadian company.

And it’s continued to be that kind of synergy right from day one. They’re a terrific organization, with a great management team. And they haven’t lost that grassroots touch. The pink jellybeans were just one opportunity that came out of discussions with the Run for the Cure team members. They said: ‘Gee, if we could do a pink jellybean and sell it at the [CIBC] branch level, we could raise a lot of money.’ So we figured out how to do it for them. It paid off in a very substantial fundraising program.

Any plans to do something like that again?

GF: We’re working on that right now, with a special box of mints that we’ve produced just for the CBCF Run for the Cure that you’ll be seeing at CIBC branches hopefully in the very near future.

What kind of lead times do you have to work with? If you decide you need to respond to changing tastes, how quickly can you respond with a product?

GF: We can respond pretty darn quickly, but the other answer is we shouldn’t! Ideal world, we’re planning now for Christmas 2009. That’s what we should be doing. The fact is the market moves so quickly today we are planning that way, but we may have to react much closer to Christmas 2008 than we’d like to simply because of changes in the market. So you have to be nimble enough to do that.

DG: Also, in terms of pace, as we try to broaden ourselves beyond the borders of Canada, there are quite different tastes in some parts of the world. For example, we have done some innovation on products that are less sweet, because that’s where the Asian taste is. And we developed a real fruit jelly without any sugar on the outside. While that is a custom taste in North America, it is not in most of Asia. So we have done some development of products that meet with the Asian tastes as a vehicle to try to get a foothold in that marketplace. It is not a gigantic amount, but it is a growing business.

When did you enter the Asian market?

DG: We’ve been doing some business there since 1990. And, depending on the exchange rates and other factors, it’s been strong at times and weaker at times. At this point, we do have one of our senior people taking a fairly major initiative along the Pacific Rim, south of Japan, and at this stage it certainly has promise and some firm business.

Where does your contract pack business come from?

DG: Right now, 100% of it would be Canada and the U.S. We’re not opposed to other places, but we’ve not solicited. Part of the opportunities on the contract pack side come from the fact that this industry is going through a very dramatic rationalization. And that creates opportunities for folks like us that have capabilities, and in some cases capacity – although we don’t have much of that right now – and most of that’s taking place here in North America.

Cadbury was the most recent one to announce a global restructuring, with 5,000 jobs lost. Hershey is going through that same process. This year it’s closing every one of its Canadian plants. And the Turtles plant in Toronto was recently sold. So there’s a lot going on. And in some cases, these companies have certain products they want to continue to market, but they just don’t have the manufacturing capabilities or the manufacturing cost structure to continue to make them.

In terms of your branded business, where is your international focus right now?

DG: China, Hong Kong and Singapore.

What’s your biggest overall focus right now?

DG: The most important piece of our business today, and tomorrow, will be our branded business. That’s where we have the greatest amount of security, that’s what’s going to see the company forward, over the next three decades.

But we are not exclusively focused on the branded side of our business, because we also know that we need to grow faster than our branded business is going to allow us to grow. Although we’ve had growth in the last several years, we’re still a relatively small guy in an industry that is dominated by giants. In fact, we’re about the last of the Canadian-owned. On the chocolate side, we are the last of the Canadian-owned companies that distributes to the retail trade.

We know we’ve got to grow faster than we’ll grow our brands, so we’ll continue to focus on private label and contract pack both within and outside of Canada to help us bulk ourselves up further and become a more competitive manufacturer. And when we do that, that’s going to help us be more competitive on the branded side as well.