Russell Stover Candies Inc. History

Company History:

Russell Stover Candies Inc. is considered one of the largest manufacturers of boxed chocolates in the United States. It sold its candies primarily through about 40,000 accounts (drug stores, card and gift shops, and mass merchandisers) in the mid-1990s, but also through 50 Russell Stover Candies retail shops and various department stores.

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 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 twentieth century: quality, service, and value.

Legend connotes 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. But 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. But 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?--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 which 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.

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 which eventually plagued his Eskimo Pie undertaking, Russell Stover was still eager to run his own company. In 1924, the Stovers began selling boxes of their "Mrs. Stover's Bungalow Candies." The interest of nearby residents had already been kindled by the inebriating bouquets emanating from the Stover kitchen. So, 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 later that year, in Kansas City, where the company would eventually be headquartered. Russell Stover named himself president of the corporation and Clara served as vice president. Sales boomed during the remainder of the 1920s.

Despite widespread hardship during the Depression years, 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 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 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. 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 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 1980s and into the 1990s 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 it presence in drug store and card shop distribution channels.

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's 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's 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.

By the early 1990s, Russell Stover Candies was generating sales of an estimated $250 million. It had since closed some of its original production facilities, and was operating four factories in Tennessee, Colorado, Virginia, South Carolina. A fifth facility was scheduled to open in Abilene, Kansas, in 1995. It also owned several distribution centers scattered around the United States and maintained a fleet of refrigerated delivery trucks.

In 1993 Russell Stover Candies strengthened its position in the boxed chocolates market when an affiliate acquired the Pennsylvania-based Whitman's Candies. The 150-year-old confectioner was generating about $60 million in sales annually in the early 1990s. Critics unsuccessfully contested the merger in court, claiming that the resultant market share would give Russell Stover Candies an unfair advantage. With the addition of Whitman's Chocolates, Russell Stover Candies and affiliates had estimated sales of over $300 million by 1994.

By 1994, Russell Stover Candies was selling its candies in 50 company owned retail outlets, department stores, mass merchandisers, drug stores, and card and gift shops. It employed a work force of 4,400. Consumption of boxed chocolates surged at double-digit rates throughout the early 1990s, sustaining the legacy of growth initiated by Clara and Russell Stover in 1923.

Further Reading:

• Candy Man "Russell Stover" Found Sweet Smell of Success in Denver. Kansas City, MO: Russell Stover Candies Inc., 1994.
• Moyle, Mike, "Preat Files Antitrust Suit to Block Chocolate Company Merger," PR Newswire, April 15, 1993.
• Tiffany, Susan, "Russell Stover: A Paragon of Excellence," Candy Industry, October 1994, p. 26.
• Washington, Barbara A., "Candy Company Molds Chocolate to Client's Needs," Kansas City Business Journal, September 17, 1990, sec. 1, p. 8.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.

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