Tootsie Roll President and COO Ellen Gordon runs the venerable candy maker with an eye toward the future. Featured

7:00pm EDT March 16, 2004

The last several years haven't been kind to Chicago's candy-making industry. In 2001, Mayor Richard M. Daley pleaded with Congress to revise the U.S. sugar policy after Brach's Confections Inc. announced it would cease operations at its Chicago confections plant by 2003.

Most recently, the Archibald Candy Corp., the parent company of Fannie May and Fannie Farmer candy, closed and filed for bankruptcy in January. Employment by Chicago's candy manufacturers has fallen from approximately 15,000 workers to 8,000 since 1970, according to published reports. Yet, somehow, Tootsie Roll Industries Inc. continues to thrive in a struggling market.

Headed by the husband and wife team of Melvin and Ellen Gordon, the company's 2003 fourth-quarter sales of $92.1 million were 2 percent higher than fourth quarter 2002 sales, according to the company's most recent financial statement. With approximately 1,950 workers and annual sales close to $400 million, President and COO Ellen Gordon attributes much of Tootsie Roll's continued success to effective promotions and marketing, and selective acquisitions.

Whether it's the legendary Tootsie Roll -- the company produces more than 60 million a day -- or more recently acquired brands such as Junior Mints, Charleston Chew or Sugar Daddies, the Gordons stick with tradition by packaging all of the company's brands in its brown, red and white image. And the Tootsie Roll, though slightly smaller than the original, still sells for the same one-cent unit price that it did more than 100 years ago. Automation and technology have helped keep the Tootsie Roll at the same price, Gordon says.

"We update our products to make our packaging contemporary and fresh, while we also maintain some of the old nostalgia," Gordon says. "And that's really important because, while we want to perpetuate some of our products as part of Americana from generation to generation, we have to make sure we're contemporary, awesome, cool."

Even diet fads don't seem to affect business. Most of the candy is low fat, and Tootsie Pops contain no fat.

"There is a place in a well-balanced diet for a sweet or a treat," she says. "We believe that, and our sales have been very, very good."

A family affair

At age 71, Gordon doesn't have the typical corporate executive background. She spent the first 20 years of her "50-some-year" marriage to Melvin raising their four daughters, while Melvin, 83, has served as chairman of Tootsie Roll since 1962.

Gordon studied at Vassar and Wellesley colleges while starting a family before transferring to Brandeis University, where she first majored in mathematics and then in Russian. She says she always had an interest in linguistics, and that it has helped her with analytic work in business. She attended Harvard graduate school before leaving to join her husband at Tootsie Roll.

"Many years ago, as a housewife, Ellen listened to business skills and became attuned to them and became enamored with business as a career," says Melvin Gordon. "She's had a good background by listening to the problems I faced in business."

In 1978, Ellen Gordon was one of only two women to be elected president of a company on the New York Stock Exchange. In a time when the feminist movement was still gaining steam, Gordon was doing the unthinkable. It was so uncommon that she says she would receive letters addressed to Mr. Ellen Gordon.

"There just weren't very many women executives -- it was very scarce, so it was different," she says. "People weren't used to seeing women as executives. I think men weren't used to having women in their groups, and I think it was an adjustment. It was an adjustment for women, too, and a lot of that is better now, although it is continuing."

Gordon considers her husband a mentor, someone who was instrumental in her learning process as a businesswoman. But that doesn't mean the couple always agrees on everything. To resolve disputes, the two negotiate like typical business partners would.

"We've had a pact since we began," says Melvin Gordon. "We don't do anything until we lobby each other until we come to a consensus."

Ellen Gordon says that, for the most part, the system works well.

"I've done it for so many years that I'm used to it," she says. "You've got to talk it out, persuade each other. The awful thing is he tried to lobby me in the middle of the night at two in the morning.

"He would tap me on the shoulder and say, 'What do you think of ... '"

Staying ahead of the pack

Acquisitions have played a major part in Tootsie Roll's ability to not only stay afloat while others sank but in its ability to increase profit margins. In 1988, Tootsie Roll bought out the Charms Co., known for its Charms Blow Pops. That investment made Tootsie Roll Industries the world's largest lollipop producer.

Five years later, the company purchased the caramel and chocolate brands of the Warner-Lambert Co., which included Junior Mints, Sugar Daddies, Sugar Babies and Charleston Chew. And it ventured into the cotton candy business in 2000 with the acquisition of O'TEC Industries and its Fluffy Stuff Cotton Candy. Also that year, it acquired Andes Candies, which includes the Andes Créme de Menthe Thins, Cherry Jubilee Thins and Toffee Crunch Thins, as well as a line of Mint Patties.

A lot of care goes into purchasing another company or product.

"It has to be a brand," says Ellen Gordon. "And it has to have a niche, a message, and we take a look at it and see what we can bring to the table, if our marketing or manufacturing expertise can help it. We have to look at it and see what potential there is for us and how it fits into our organization."

Tootsie Roll has walked away from some deals that management did not consider "the right fit for various reasons," Gordon says. But there are still deals to be made -- the company plans to continue growing its line of brand names to keep it going for another 100 years.

"We keep our nose on the times," Gordon says. "Styles have changed. We keep coming out with new products and things that would fit the times better and fit the consumer better at that time."

The company also continues to invest in its own equipment to stay lean and productive. Tootsie Roll invests millions of dollars to ensure that its plants are state-of-the-art, Gordon says. The company continually implements new equipment and updated information technology to run more efficiently, using its in-house design team to build some of the machinery.

Monitoring costs

As the race for the White House heats up in the upcoming months, free trade and the loss of manufacturing jobs -- including those in the candy-making industry -- will be hot campaign issues.

Many in the industry blame government subsidies to sugar growers for the rising cost of sugar. Tootsie Roll has tried to combat the problem by buying futures for sugar to hedge. However, Gordon says sugar isn't the only cost factor to monitor; corn syrup, cocoa, chocolate, packaging and labor also play a major role.

Gordon says she can't comment on whether the same issues that have shut down other candy manufacturers or driven them out of Chicago and the United States could also force Tootsie Roll out of the area. (The company also has plants in Tennessee, Massachusetts, Wisconsin and Mexico City.)

"We're happy to be here," Gordon says. "We've been here since the 1960s."

Gordon says she and her husband eventually plan to hand the business over to their four daughters, who are all experienced business professionals.

Bottoms up

Brainstorming for new ideas at Tootsie Roll doesn't always start at the top; the process often flows from the bottom up. Gordon says the company cross-trains its employees in various areas to encourage creativity, and she has an open-door policy in which any employee may request an appointment to speak with her.

"We try to get the ideas of the people who work for us to come out because we know they have the key," Gordon says. "As the employees begin to get in touch with you, their confidence increases and our confidence in them does, and then their performance increases."

Despite reports of a recent labor dispute and threatened strike by one of the company's unions -- the union in February ratified a new four-year pact --Gordon says employees tend to stay at Tootsie Roll for their entire careers.

"I like that because it gives us a chance to know everybody and their families, and I like having that feeling that it's a good company, a profitable company," she says. "I want people to be happy. They spend a lot of time at work and you take them away from their families by making them come to work, so I want it to be a good place. But it's not always perfect. Some days it's not so easy."

Melvin Gordon describes his wife as a persistent leader with an uncanny ability to multi-task.

"Ellen has a sharp, keen mind and the ability to see into the future," he says. "She comes in with a list arm's length long and gets everything done in a day. She won't take no for an answer."

HOW TO REACH: Tootsie Roll Industries, (773) 838-3400 or www.tootsie.com