The Mysterious Company behind Tootsie Rolls

Dated: August 23 2012

Views: 3426

You don't hear much about the company that makes Tootsie Rolls. And that's exactly the way executives want it.

Tootsie Roll Industries (TR +0.36%) is steeped in history, and has been run for 50 years by Melvin Gordon, 92, and his 80-year-old wife Ellen, The Wall Street Journal reports. The 116-year-old company rarely gives tours and interviews and doesn't like quarterly earnings calls. The similarities to Willy Wonka are so strong I wouldn't be surprised to see golden tickets packaged with Blow Pops one day.

There are no analysts covering Tootsie Roll -- why bother when you can't get any information -- and so the company goes largely ignored even as it continues producing some of the country's most beloved candies, including Junior Mints, Sugar Babies, Dots, Sugar Daddy's and Charleston Chews.

Though investors can buy shares of Tootsie Roll Industries -- they're priced at about $25 -- the Gordons retain tight control over the company by owning class B stock, each of which is worth about 10 shareholder votes, the Journal reports. Tootsie Roll shares are trading at about where they were a year ago, after falling to under $22 this spring.

Tootsie Roll is falling on tough times, however. Profits are falling -- by about 20% last year to a mere $43.9 million -- even though revenue rose 2% to $528.4 million, the Journal reports. Margins have been halved in the last decade to 11%.

But Tootsie Roll has accomplished an admirable feat: It nearly doubled revenue in the last 20 years without huge advertising budgets. The campaign it did spend money on long ago -- how many licks to the center of a Tootsie Pop -- continues to resonate.

It's unclear what the future holds for Tootsie Roll Industries, which started making candies in 1896 and went public in 1922. How long can 92-year-old Melvin Gordon continue to lead? Will any of the couple's four children take the reins (the Journal doesn't think so) and will Tootsie Roll continue to stay independent?

There has been intense consolidation in the candy business recently. Kraft Foods (KFT +0.65%) bought Cadbury in 2010 and Hershey (HSY +0.11%) is in buyout mode as it furthers its global expansion plans. Mars, a private company, bought Wrigley in 2008.

It's admirable to see Tootsie Roll still going strong, making candies in America and sticking to tradition. Here's hoping the Gordons can revive profits and set the company on course for another 116 years.

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Humberto Alcazar

I am lifelong El Pasoan who has seen El Paso grow from a small town in 1965 to the large city it is today. Attended Cathedral High School, graduated from University of Texas El Paso with an Industrial....

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