No fudging here Featured

9:38am EDT July 22, 2002

One of J. Barry Gasaway's favorite questions is: "Why not?"

"Everywhere I've worked, I caused problems because I'd say, 'Why not this?'" he says.

The self-proclaimed visionary says it's his creative side making him ask the same question about transforming his 11-year-old, family-owned business, Noelle's Candies, into Chocolate Works, a projected $20 million confectionery with a national presence.

To find the answer, he asked his brother, Robert, whose cautious, conservative attitude challenges Barry's animated just-go-for-it demeanor.

"If I can convince him to move forward, then it's probably not a bad idea," says Barry, president of Pickerington-based Chocolate Works.

In 1998, he did just that by working with Robert, the company's vice president of operations and production, to devise a business plan for his vision of producing and marketing a higher quality chocolate nationally.

After they spent two three-day weekends locked in a hotel room to hash out the details, Robert joined his brother's "why not" refrain: "We could've stayed a two-brother business. Do we want to stay this size, or do we want to get serious?"

The brothers got serious, and they credit a class from the Ohio Foundation for Entrepreneurial Education, where Barry also has been a teacher, for helping them formulate the details of the grand concept.

"Without a doubt, we would not be in business today without the OFEE experience," Barry says, noting that even though the business was reaching the $1 million mark, the brothers didn't feel like they were on solid ground. "Something could've happened that would've caused us to go out of business easily. It wouldn't have taken too much at that point to tip the scale and say, 'This isn't worth it.'"

Barry, after all, could easily have re-entered the corporate world with all the sales and management experience he previously got running multimillion dollar sales operations with Bell Telephone, Xerox, Tandy and Iomega corporations. Robert, too, could have walked away from the family business and marketed his 25-plus years of expertise as a certified public accountant.

Instead, they took Barry's "Why not?" attitude to see if there was a valid way to alter and strengthen their plans.

They watched trends and market research, which pointed toward a huge pool of people who have a lot of extra money and want to spend it on upscale, higher priced chocolates. Barry's line of questioning entered the picture again.

"That's the highest growth area in my industry," he says. "So why not be there?"

Already they've seen results: They've gained a more upscale and wider customer base, such as travelers visiting a gift shop at Port Columbus International Airport and customers of Sugarbush Gourmet Gift Baskets, and the premium boxed chocolates have opened doors for them. For instance, as Noelle's Candies, the brothers had a difficult time getting their handmade novelty items -- which include chocolate lollipops in the shape of clowns and Ohio State sports symbols -- accepted at Riverside Methodist Hospital.

"We put this line in there and it sold out in a couple of weeks," Barry says.

The brothers are projecting sales to skyrocket to $20 million by 2003 -- with a gross margin growing from 38 to 42 percent between now and then.

That's fast growth. Still, they're confident they can do it. Here's why.

No sugar coating

With no answer to the "Why not?" question discouraging them, the brothers started the company's transformation by making sure they hadn't glazed over any facet of their new business plan.

  • First, there was the matter of the company's name.

    As they told people their company was "Noelle's," they heard responses like, "Oh, you are a local candy company."

    "I went to Bob and said, 'I think we need to sound more global,'" Barry says. "So 'Chocolate Works' gave us a wider stage to play on."

  • The Gasaways knew they had to make sure their new product was, in fact, high quality chocolate.

    "If you want to put out a premium chocolate, it can't be all mirrors," Barry says.

    They focused on getting the best possible grades of chocolate available and devising new recipes to increase the shelf life of the candy since it would be distributed farther away.

    From a marketing standpoint, the Gasaways said their chocolate would be different -- and the quality noticeable. They ordered the chocolate makers to give their products a taste that would set them apart.

    "The consumer is going to know the difference," Barry says. "I have a great respect for the customer, because they don't put up with bullshit."

  • They also needed to find capital to move forward -- a task that made the brothers realize they would have to stand their ground.

    First, they decided to seek angel capital -- $400,000 for equipment, an inventory ramp up and funds for raises for key employees to aid retention. They also wanted talent -- someone who could give them not just funding but advice regarding the company's growth.

    They received offers right away but stuck to their guns about only giving up 20 percent of the company.

    "Had we listened to the first few people," Barry says, "they wanted more than half. We turned people down. For example, one wanted us to step aside."

  • One of their investors opened the door for Chocolate Works to jump start its national sales. Gerry Geddis, CEO of Gerald Stevens Inc. flowers and gifts, had been a friend of Barry's since the two worked at Tandy Corp. Geddis later worked at various executive positions at Blockbuster Entertainment Corp., then co-founded Florida-based Gerald Stevens Inc., which, since its start in May 1998, has grown through acquisition to 325 locations, 3,500 employees and more than $300 million in revenue.

    He invested in Chocolate Works, but more important, he gave the company some of the expansion expertise it needed to grow.

    "From my end, I get to exchange ideas with great business guys -- that's probably the first benefit I get," says Geddis, who admits that selling flowers -- which, much like chocolates, are perishable products often purchased on emotional whims -- is quite a change from his previous careers in videotapes and electronics.

    The partnership also helps him fulfill one of his goals to do something unique in the floral arrangement delivery business.

    "From Day One, I had the idea that with every arrangement delivered, [there] would be a free piece of chocolate with it," Geddis says.

    Chocolate Works created a special Gerald Stevens brand chocolate and has started distribution by inserting one golden-wrapped piece in bouquets.

    "[Barry] and his group came up with a great blend for us that makes the chocolate bar unique, and most people haven't seen or tasted that flavor in a dark chocolate bar before," Geddis says.

    Already, customers are asking where they can get more of the chocolate, and Geddis is selling a larger bar in his Boca Raton, Fla., store.

    The goal is to make chocolates an add-on sale with the flowers. Geddis expects to expand the offerings from the bars to boxed chocolates in stores and in Gerald Stevens gift baskets and to add the products to his other acquired stores across the nation as they switch to the Gerald Stevens name.

    "The candy business has never been big on Mother's Day," Barry says to illustrate one possibility. "But it could be huge if the guy buying flowers has the opportunity to add on chocolates."

  • The change to Chocolate Works gives the Gasaways a challenge to find new markets. For example, they plan to begin selling on the Internet and use a distribution channel including a direct sales staff, a candy broker network, confection brokers, candy distributors, catalogs and their own retail stores.

    The Gasaways knew they didn't want to pull up their roots. The company had become known for Noelle's Candies -- named for Barry's daughter -- so the novelty candies were made a brand of Chocolate Works and the brothers are seeking new outlets for distribution. Earlier this year, they reached an agreement with Hallmark. They're also working on a deal to sell those candies in bulk to membership shopping clubs.

    "For us, if that works, it could be a million-dollar operation," Barry says.

An even sweeter vision

The Gasaways are seeking a second round of funding -- $1 million -- to continue to build the infrastructure of people, facility and equipment.

Already, in addition to the brothers' years of experience, the company's management team includes Dan Rich, director of network sales and marketing, who spent 15 years in management with Tandy, and Karen Gasaway, buyer and director of retail and corporate sales.

One part of the expansion plan in the works is to move the company's local operations, now housed in a retail strip mall, to a freestanding building farther south in Pickerington to be used as a chocolate factory. They want it to open by October.

"We definitely don't want to miss Christmas," Robert says.

They'll keep a production plant they have in West Virginia, since they feel a dedication to support the economy in that area, where they grew up.

Barry's creative mind has high hopes for the Pickerington operation: a retail area; upscale folk art and products such as candles or woven, pewter and wood items; birthday parties for children; an open window for tours to see the factory at work; animated characters; and an old-fashioned ice cream factory.

Helston Capital Group has been analyzing Chocolate Works' goals and needs, such as equipment, marketing and distribution channels, to develop a detailed presentation for investors in this round.

Mike Mizesko, a Helston investment banker and president of OhioAngels.com, says the Chocolate Works concept is unique in that it differs from mass market players and companies dependent on retail stores. The Gasaways also have developed other ways to utilize the Gerald Stevens relationship, such as corporate programs in which employees can order products via company intranet systems.

"It's Mother's Day, and if I'm an employee of Lucent, it doesn't mean I'm driving to Anthony-Thomas. I'm clicking and, guess what, at my door is a beautiful bouquet of roses and a pound and a half of chocolates," Mizesko explains, adding that the infrastructure creates an opportunity for Chocolate Works to truly be an e-commerce fulfillment shop.

Meanwhile, Mizesko says, Helston will try to bring focus to Chocolate Works' growth.

"A consumer product company can do 500 different things and 20 of them will be right, but we're going to whittle them down to three," Mizesko says, using hypothetical numbers.

"We serve them in an advisory capacity -- we're not on their board, and we can't say, 'Barry, do this,'" Mizesko says. "We can steer them and help them optimize the company to help them raise capital."

He's got quite the challenge to rein in Barry's long-range vision.

"I want to do a chocolate factory that's an experience," Barry says, noting he sees himself dressed in period costume, greeting customers to a tourist-attraction chocolate factory -- Chocolate World -- that could be seen from I-70 and serve as both a family entertainment and educational stop.

"What we're doing here," he says, referring to the Pickerington factory in the works, "is a forerunner of that."

In fact, Barry envisions building as many as 20 Chocolate World tourist attractions across the country one day.

"This is a $26 billion industry I'm in. What's a few billion here and there?" Barry says, returning to the "Why not?" ritual.

Geddis says one of Barry's key strengths is his skills as a salesman.

"I think the true belief he has in his product, and how to get the customer excited about it, is what has made the business grow," Geddis says. "And with us, they've never missed an order. There's the quality product, great enthusiasm, and they deliver what they say they're going to deliver on. "Put those three together and you've got a winning business."

How to reach: Chocolate Works, 868-5551; coming soon, www.chocolate-works.com

Joan Slattery Wall (jwall@sbnnet.com) is associate editor of SBN Columbus.