Founded: 1923 as Mrs. Stover's Bungalow Candies
NAIC: 311330 Confectionery Manufacturing from Purchased Chocolate; 311340 Nonchocolate Confectionery Manufacturing; 445292 Confectionery and Nut Stores; 454111 Electronic Shopping
SIC: 2064 Candy & Other Confectionery Products; 2067 Chewing Gum; 5441 Candy, Nut & Confectionery Stores
Russell Stover Candies Inc. ranks as the largest manufacturer of boxed chocolates in the United States and the third largest U.S. chocolate maker, behind the Hershey Company and Mars, Incorporated. Through its three brands--Russell Stover, Whitman's, and Pangburn's--the company consistently captures more than 60 percent of all boxed chocolate sales in the United States. While boxed chocolate remains Russell Stover's mainstay, the firm has also branched into the production of bagged and individually wrapped candies and produces such seasonal favorites as chocolate Santas for Christmas and chocolate bunnies for Easter. Specialty items include sugar-free candies, the Net Carb low-carb line, and a premium line of chocolates called Private Reserve. Russell Stover Candies manufactures nearly 100 million pounds of chocolate each year at its four factories in Abilene and Iola, Kansas; Corsicana, Texas; and Montrose, Colorado. The company sells its candies through more than 40,000 wholesale accounts, including drugstores, card and gift shops, grocery stores, department stores, and mass merchandisers, throughout all 50 states, plus another 30,000 accounts in Aruba, Australia, Barbados, Belize, Bermuda, Brazil, Canada, Chile, China, Costa Rica, Denmark, Honduras, Iceland, Jamaica, Japan, the Marshall Islands, Mexico, the Philippines, Puerto Rico, South Africa, Suriname, and the United Kingdom. The company also operates around 50 Russell Stover Candies retail stores in the United States and offers online shopping on its web site.
Early Confectionery Adventures of the Stovers
Russell William Stover and his wife Clara started the company that would bear their name in 1923. According to company annals, they began the business in their Denver, Colorado, bungalow home, experimenting with new recipes and concocting new confections in their kitchen. They soon started selling their candies locally under the name "Mrs. Stover's Bungalow Candies." It was during the start-up of the enterprise that they established the tenets that guided the company throughout the 20th century: quality, service, and value.
Legend tells of an enthusiastic couple starting a candy company in their kitchen and building it into what would become one of the largest confectioners in the country. However, the Stovers were not neophytes to the candy industry. By the time Russell and Clara Stover began experimenting with their own recipes, Russell Stover had spent several years working for other candy manufacturers and had gained a strong grip on the business side of the candy industry.
Russell Stover's ancestors came to the United States from Prussia in 1728. John and Sarah Stover, Russell's parents, settled in Alton, Kansas. Russell Stover was born on May 6, 1888, in a sod house. The Stover family soon moved to an Iowa farm, where Russell Stover was raised and attended Iowa City Academy. Russell Stover studied chemistry at Iowa State University after high school. After only a year of college, he left to take a job as a sales representative for the American Tobacco Co. In 1911, one year after taking his first job, he married Clara Lewis, a farmer's daughter. The newlyweds settled on a 580-acre farm in Saskatchewan, Canada, that they had received as a wedding gift.
Russell and Clara Stover tried their hand at raising wheat and flax for less than a year. Bad weather and a rotten crop convinced Russell Stover that his future would not be in farming. The couple moved to Winnipeg and Russell Stover accepted a job with a Minnesota candy company. He gained four years of experience with the confectioner before they had a falling out. Russell Stover had received some faulty inventory and wanted the company to replace it with high-quality goods. Headquarters refused. Frustrated, Russell Stover resigned and accepted a position with candy maker A.G. Morris in Chicago, Illinois.
Russell Stover worked with A.G. Morris for one year before getting a better offer from Bunte Candy. He gained three more years of experience at Bunte before switching jobs again. This time, Russell Stover moved back to his native state, Iowa, where the Des Moines-based Irwin Candy Co. was floundering. Russell Stover went to work at Irwin in 1918 and was eventually able to turn the operation around. The Stovers had settled in nearby Omaha, Nebraska, by that time. While Russell Stover worked at Irwin, Clara began experimenting with her own creations at home.
At the same time that Clara was trying to fashion some new confectionery sensations, another inventor, Christian Nelson, was at work in the nearby town of Onawa, Iowa. His creation would soon become famous, and would also lead to the founding of Russell Stover Candies. Nelson was a part-time Latin teacher in Onawa who moonlighted as a soda jerk. One day in 1919 a local schoolboy entered the shop. With only a nickel to spare, the boy agonized over whether he should buy chocolate or ice cream. Nelson was intrigued by the dilemma. His solution was the "I-Scream Bar," a sandwich with vanilla ice cream filling and a coating comprised of chocolate and cocoa butter.
Nelson introduced his treat at the Onawa Fireman's Tournament. It was well received. Confident that his idea was a winner, Nelson approached several confectioners about the possibility of making and selling his I-Scream Bar. Seven companies rejected the concept as implausible, citing the bar's propensity to melt, lack of long-term consumer interest in such novelty items, and other potential flaws. Finally, Nelson presented his treat to Russell Stover in Omaha on July 31, 1921.
Nelson's proposal piqued Russell Stover's interest. He was also inspired by the 25-year-old entrepreneur's enthusiasm. Russell Stover went into partnership with the aspiring inventor. Russell Stover made several changes to the I-Scream Bar, changing its name to Eskimo Pie and removing the superfluous stick that Nelson had inserted at the base of the bar to hold it. Nelson patented the Eskimo Pie on January 24, 1922. The patent documented the creation as "an ice cream confection containing normally liquid material frozen to a substantially hard state and encased in a chocolate covering to maintain its original form during handling."
Nelson and Stover's venture was an instant success. To even Nelson's surprise, people rushed to buy the Eskimo Pie. In Omaha, a quarter of a million pies were sold in a single 24-hour period. As an Eskimo Pie craze swept the nation, the excited partners scrambled to keep up with the demand. Unable to serve the entire market themselves, Russell Stover opened a Chicago office and began licensing other companies to produce the treat. Within a year more than 1,500 manufacturers had been licensed to make and sell Eskimo Pies. In return, they agreed to pay Russell Stover and Nelson four cents for every dozen pies that they sold.
Russell Stover and Nelson initially profited handsomely from their flourishing enterprise. Unfortunately, many other companies began making their own versions of the Eskimo Pie without the originator's permission. As the market became overwhelmed with Eskimo Pie look-alikes, Russell Stover and Nelson struggled to protect their patent. They were soon doling out more than $4,000 daily in legal fees. In 1923, moreover, jealous competitors succeeded in having the patent declared invalid, thus placing Russell Stover and Nelson's operation at a distinct disadvantage to more established manufacturers. Disillusioned by the whole ordeal, the Stovers sold their interest to a lawyer for $30,000 and moved to Denver.
Company Founding and Early Development
As soon as the Stovers were situated in their Denver bungalow, Clara was again busy in the kitchen working on her candy recipes. Meanwhile, Russell Stover began devising plans to launch the family's own candy business. Despite the fiasco that had plagued his Eskimo Pie undertaking, Russell Stover was still eager to run his own company. In 1923 the Stovers began selling boxes of their "Mrs. Stover's Bungalow Candies." The interest of nearby residents had already been sparked by the inebriating bouquets emanating from the Stover kitchen. Thus, before the Stovers even began selling their candies an eager audience awaited.
Mrs. Stover's Bungalow Candies were an instant local success. Within a few months they had opened two stores and by the end of the year they were selling their candies in seven local shops. In addition, they purchased a specially equipped motorcycle with a sidecar to make deliveries. Early in 1925 they opened their first factory in Denver. To keep pace with mushrooming sales they had to open a second factory three years later, in Kansas City, Missouri, where the company would move all of its operations in 1932. Russell Stover named himself president of the corporation and Clara served as vice-president. Sales were booming by decade's end.
Despite widespread hardship during the years of the Great Depression, Mrs. Stover's Bungalow Candies remained profitable, though growth stalled. Strong demand for the hand-dipped chocolates eventually resumed, however, and the Stovers opened a third factory in 1942 near Omaha in Lincoln, Nebraska. The Stovers shortened their company's name to Russell Stover Candies in 1943. Reflecting his growing stature in the industry, Russell Stover chaired the Washington Committee of the National Confectioners Association during World War II. In 1946, moreover, he was awarded the confectionery industry's highest honor, the Candy Kettle Award.
Russell Stover's achievements in the confectionery industry went beyond sheer dollar volume sales. Besides introducing the Eskimo Pie, he had also patented dipping tables and a candy manufacturing process he termed the "Zephyr Freeze." Russell Stover continued to run the company until his death at age 66 on May 11, 1954. By the time he died, his Kansas City-based company was selling 11 million pounds of candy annually and generating annual sales of about $18 million through 40 Russell Stover shops and in about 2,000 department stores.
The Stover family and their partners continued to operate Russell Stover Candies until 1960, when the partnership was terminated and the venture was sold to Louis L. Ward, the company's longtime box manufacturer, for $7 million. Ward purchased the company with a partner, whom he soon bought out. In 1961 Ward took the company public as Russell Stover Candies Inc.
Evolving into National Supplier Under Ward
Under Ward's leadership, Russell Stover Candies evolved from a regional to a national supplier of boxed chocolates and candies. The company opened a fourth factory in 1969 in Clarksville, Virginia, which complemented Ward's efforts to expand sales on the East Coast. Along the way, Russell Stover attempted to engineer a merger with another major boxed candy firm, Fanny Farmer Candy Shops, Inc., in 1965, but the deal was abandoned when the U.S. Department of Justice filed suit to block it on antitrust grounds. In early 1968 Russell Stover entered into a preliminary agreement to be acquired by the Bristol-Myers Company for $190 million in stock, but the two parties soon mutually agreed to terminate the proposed takeover.
Throughout the 1970s Russell Stover Candies grew rapidly, carving out a niche in the second-tier boxed chocolates market. A common distinction between premium chocolates and most of Russell Stover's products is that the former usually contains no preservatives. As a result, top-tier chocolates usually have a shorter shelf-life and are often much more expensive. Despite its emphasis on the mid-priced market, Russell Stover Candies prided itself on quality and taste. Even through the late 20th century and into the 21st the company continued to cook its candies in small batches, often using the same basic recipes that it had been following since the 1940s.
Russell Stover Candies boosted its sales during the 1970s and 1980s through innovative marketing techniques. For example, the company achieved stellar gains with its heart-shaped chocolate boxes, which were especially popular during the Valentine's Day season. In fact, many customers came to associate Russell Stover Candies with its heart-shaped box. It achieved similar gains with its popular boxes of cherry cordials and its "Little Ambassadors," or miniature chocolates.
By the early 1980s, Russell Stover Candies was generating sales of about $150 million annually and profits of approximately $17 million. It was distributing its candies nationally and had assumed a dominant leadership role in the boxed chocolates market. During the 1980s Russell Stover Candies stepped up its expansion efforts, largely through product line diversification. It initiated a broad line of Easter items, for example, including Easter basket gift packs and its renowned chocolate-covered creme eggs. It also strengthened its presence in drugstore and card shop distribution channels.
In 1981 Russell Stover Candies also returned to private ownership. Ward and his family had controlled about 59 percent of the company, and he acquired the remaining shares for around $52 million. By acquiring full control of Russell Stover, Ward was able to merge the firm with his box-making concern, realizing some operational efficiencies, and he also eliminated what he considered to be costly reporting and proxy requirements.
As Russell Stover Candies boosted sales during the 1980s, it continued to observe the tenets of quality, service, and value originated by the company's founders. Evidencing these maxims was Russell Stover Candies' Clarksville, Virginia, factory. The plant was completely renovated in 1986. Many of its old-fashioned hand-dipping lines were replaced with advanced, automated enrobers, which improve consistency and cut production costs. It retained its small-batch cooking processes though, despite cost savings that it could have achieved by converting to large-batch manufacturing processes. It also maintained its own truck fleet so that it could ensure timely delivery of raw materials from suppliers, thus reducing the risk of ingredients losing their freshness.
In addition, the plant began roasting its own nuts to improve quality control. "There's much better control," explained Plant Manager Mike Rowlands in Candy Industry. "There's such a fine line between that deep color and a scorch. ... In everything we do there are several reasons why we do it to get a better product." Russell Stover Candies also established a school to continuously educate all employees, from executives to line workers, about the importance of adhering to old, proven procedures. The school was started in 1987 following the retirement of several of its senior candy makers.
Though the Virginia plant was the smallest of Russell Stover Candies' four production facilities, it was set up to operate 24 hours daily. It often processed 20,000 pounds of chocolate, 13,000 pounds of sugar, and 4,000 pounds of milk and cream in a single day. Reflecting the company's treatment of its workers, many of the plant's employees had worked there since it opened in 1969. "You get here and you just stay," related a line worker in Candy Industry. "Every day is a challenge." Eight of the plant's supervisors had been with the plant since it had opened.
Transition to New Leadership and Expanding Further
By the early 1990s, Russell Stover Candies was generating estimated sales of $250 million. It had since closed some of its original production facilities and was operating four factories in Cookeville, Tennessee; Montrose, Colorado; Clarksville, Virginia; and Marion, South Carolina. It also owned several distribution centers scattered around the United States and maintained a fleet of refrigerated delivery trucks.
In early 1993 Ward suffered a stroke that forced him into retirement. His sons Thomas S. and Scott H. Ward took over the leadership as copresidents. Later that year, the new leaders strengthened their company's position in the boxed chocolates market by acquiring the Philadelphia-based Whitman's Chocolates from Pet Incorporated for $35 million. Critics unsuccessfully contested the merger in court, claiming that the resulting market share would give Russell Stover Candies an unfair advantage. Founded in 1842 by Stephen F. Whitman, Whitman's was famous for its Whitman's Sampler assortment of chocolates, which was introduced in 1912 as a collection of the company's most popular pieces of candy.
Whitman's had at one time generated $200 million in annual revenues, but a decline in the quality of the product had contributed to a sharp sales drop, to less than $50 million by the time of its acquisition by Russell Stover. Under Russell Stover, the confectioner was reorganized as the subsidiary Whitman's Candies, Inc., and the production of its chocolates was initially shifted to existing Russell Stover plants. (Russell Stover had not acquired Whitman's Philadelphia factory, which was later shut down.) In 1995 Russell Stover completed construction of a new factory in Abilene, Kansas, where production of the Whitman's line was concentrated. This plant was later expanded to include a 59,000-square-foot box-making area, and with the inclusion of a 62,000-square-foot warehouse it ultimately encompassed 413,300 square feet.
By 1994, Russell Stover Candies was selling its candies in 50 company-owned retail outlets, department stores, mass merchandisers, drugstores, and card and gift shops. It employed a workforce of 4,400. The addition of Whitman's had helped push revenues over $300 million, and the company also launched a new expansion effort in 1994 when the exportation of its products began. Within a few years, 8.5 percent of Russell Stover's sales stemmed from the export market, with the initial targets including Mexico, the Caribbean region, and Australia. Also in 1994, Whitman's entered into a licensing agreement that led to the introduction of a line of products featuring Snoopy, Charlie Brown, and other characters from the long-running Peanuts comic strip. The year was also noteworthy for the release of the Academy Award-winning film Forrest Gump, in which a box of Russell Stover chocolates leads the title character to recall, "My mama always said, 'Life is like a box of chocolates. You never know what you're gonna get.'"
In February 1996 Louis Ward died at age 76 from complications of the stroke he had suffered three years earlier. The previous year, Forbes magazine had placed him 222nd on its list of richest Americans with a net worth estimated at $500 million.
From 1993 into the late 1990s, sales of Russell Stover products were growing at an annual rate in excess of 18 percent. Needing additional production capacity, the company opened a new, 285,000-square-foot plant in Iola, Kansas, located in the southeastern part of the state. This plant also aided in a counteroffensive against chocolate titans Hershey and Mars, who had responded to a flattening in chocolate candy bar sales in the early 1990s with an invasion of Russell Stover's turf via the introduction of boxed chocolate products as well as seasonal items that competed with Russell Stover's mainstay Santas and bunnies. Russell Stover began producing candy bars of its own plus new seasonal items, with most of these products sporting licensed characters, including not only the Peanuts gang but also Superman, Batman, Elvis Presley, the doll icon Barbie, and such Looney Tunes favorites as Bugs Bunny and Tweety Bird. In 1998, the firm's 75th anniversary year, Russell Stover expanded into the bagged candy sector with the introduction of Peanuts- and Looney Tunes-licensed products for Halloween. That same year, the company introduced a line of sugar-free chocolates and soon became the number one producer of sugar-free candies in the United States.
During an extremely busy 1999, several more expansionary moves were on the agenda. Early in the year Russell Stover acquired Pangburn Candy Company out of bankruptcy for $4.5 million. Founded in 1914 by H. T. Pangburn and based since its founding in Fort Worth, Texas, Pangburn produced the Millionaires brand of boxed chocolates and had garnered 1998 sales of $15 million. The Pangburn's line was soon being produced at Russell Stover's new $85 million plant in Corsicana, Texas, which opened in early 1999. Located southeast of Dallas, the Corsicana plant was Russell Stover's largest ever, and its third new factory in just a four-year span. The facility encompassed 462,000 square feet and had the capacity to churn out 128,000 pounds of chocolate candies each day. Russell Stover also signed a new licensing deal in 1999 to use the cartoon character Garfield, and it launched peanut butter and jelly cups filled with Welch's brand jelly. Finally, the company attempted to gain a much larger retail footprint by acquiring the struggling Rocky Mountain Chocolate Factory, Inc., a firm based in Durango, Colorado, which had around 230 company-owned and franchised stores in the United States, Canada, and Asia. Late in 1999 the Rocky Mountain board rejected Russell Stover's $16.3 million takeover offer after the firm's operating results showed improvement.
Responding to New Challenges in the Early 21st Century
Slower sales at the beginning of the 21st century because of the weaker economy led Russell Stover to close its factories in Marion, South Carolina, and Clarksville, Virginia, in 2000 and 2002, respectively. These facilities had been the company's two oldest plants. At the same time that the company was contending with consumers cutting down on discretionary purchases, including chocolates, the surge in popularity of low-carbohydrate diets meant that another portion of consumers would be forgoing its products because of their high level of carbohydrates. Russell Stover responded quickly, however, becoming one of the first national candy companies to roll out a line for carb watchers. The Net Carb line, launched in 2003, racked up sales of more than $60 million during its first year on the market.
Russell Stover continued to adjust its production capacity by turning another of its factories, the 30-year-old facility in Cookeville, Tennessee, into a warehouse in 2006. This left the company with just four plants. Also in 2006, Russell Stover pursued another sector of the diet world by launching a new Weight Watchers by Whitman's line in partnership with Weight Watchers International Inc. Overall revenue at the company reached an estimated $575 million by 2006.
During this same period, Russell Stover continued to move beyond its traditional boxed chocolate business through a series of new initiatives. The growing popularity of gourmet chocolate purveyors, such as Ghirardelli and Lindt & Sprüngli, both owned by the Swiss firm Chocoladefabriken Lindt & Sprüngli AG, prompted Russell Stover to launch its own premium line, Private Reserve, in late 2005. The company followed up with the introduction of an Organic line in the summer of 2006 and a slew of additional gourmet offerings in the spring of 2007: Whitman's Solo, Russell Stover Urban, and Internationale and Origin Select varieties. Simultaneously, new packaging initiatives were launched, including 100-gram Russell Stover chocolate bars and assorted miniature chocolates placed in trendy roll-top bags. The spring 2007 rollout was backed by an extensive television advertising campaign. The new product bonanza prompted Candy Industry magazine to name Russell Stover its 2006 "Manufacturer of the Year." It also provided clear evidence that Russell Stover Candies, while maintaining its traditional leadership position in boxed chocolates, had the ability to respond quickly and aggressively to a rapidly evolving confectionery marketplace.
Principal Subsidiaries
Pangburn's, Inc.; Whitman's Candies, Inc.; Ward Paper Box, Inc.
Principal Competitors
The Hershey Company; Mars, Incorporated; Nestlé S.A.; Godiva Chocolatier, Inc.; Chocoladefabriken Lindt & Sprüngli AG.
Further Reading
Adamy, Janet, "Catch the Wave," Wall Street Journal, October 25, 2004, p. R8.
Amire, Roula, "New Leadership Propels Russell Stover," Candy Industry, June 1998, pp. 68-69.
------, "Russell Stover: Chocolate's Driving Force," Candy Industry, June 1999, pp. 20-22.
Balaban, Dan, "Russell Stover and the Chocolate Wars," Kansas City (Mo.) Business Journal, March 28, 1997, pp. 1, 55.
Butcher, Lola, "Russell Stover's the Name; Lou Ward's Winning the Game," Kansas City (Mo.) Business Journal, June 15, 1987, pp. 1+.
Candy Man "Russell Stover" Found Sweet Smell of Success in Denver, Kansas City, Mo.: Russell Stover Candies Inc., 1994.
Everly, Steve, "Russell Stover to Close Plant," Kansas City (Mo.) Star, February 24, 2000, p. C1.
------, "Russell Stover to Close Plant," Kansas City (Mo.) Star, October 27, 2001, p. C1.
------, "The Taste of Success: Russell Stover Tradition Flavored with Growth," Kansas City (Mo.) Star, April 20, 1999, p. D1.
Freudenheim, Milt, "Louis Ward, 76, Manufacturer Built Fortune in Candy Business," New York Times, February 13, 1996, p. B7.
Pacyniak, Bernard, "Busting Paradigms," Candy Industry, October 2006, pp. 20-22+.
Pinder, Jeanne B., "Pet Sells Whitman's Brand in Deed with Russell Stover," New York Times, March 9, 1993, p. D3.
Salmans, Sandra, "Stover Bids to Acquire Its Shares," New York Times, September 23, 1981, p. D2.
Smith, Joyce, "Sweet Hearts of KC: Distinctive Boxes, Tasty Candy Build Russell Stover's Business," Kansas City (Mo.) Star, February 14, 2006, p. D1.
Stagemeyer, Suzanna, "Russell Stover Savors Sweet Spot," Kansas City (Mo.) Business Journal, June 25, 2007, pp. 1+.
Stover, Clara, and Phil A. Koury, The Life of Russell Stover: An American Success Story, New York: Random House, 1958, 242 p.
Thompson, Stephanie, "Russell Stover Plans to Be a Chic Chocolatier: Grandma's Favorite Candy Maker Wants a Piece of the Gourmet Market," Advertising Age, February 12, 2007, p. 10.
------, "Russell Stover Turns to Peanuts, Looney Tunes to Broaden Candies," Brandweek, May 11, 1998, p. 48.
Tiffany, Susan, "Russell Stover: A Paragon of Excellence," Candy Industry, October 1994, pp. 26-28+.
Trollinger, Amy, "Russell Stover Seeks Sweet Spot," Kansas City (Mo.) Business Journal, October 29, 1999, p. 1.
Vendel, Christine, "Ex-Head of Candy Firm Dies: Russell Stover Grew Under the Leadership of Louis L. Ward," Kansas City (Mo.) Star, February 11, 1996, p. A1.
Washington, Barbara A., "Candy Company Molds Chocolate to Client's Needs," Kansas City (Mo.) Business Journal, September 17, 1990, sec. 1, p. 8.
— Dave Mote; Updated by David E. Salamie
