Wednesday, August 22, 2012

See's Candies Moves East

This week Fortune features an article about the planned eastward expansion of See's Candies.  For folks on the west coast, you are quite familiar with the See's chocolate shops and airport kiosks that sell fresh delicious chocolates.  The company does not have any shops east of the Mississippi though.  That will change over the next few years, according to plans described in the article.  The company, owned by Warren Buffett for the past forty years, aims to expand with up to 30 new stores in the eastern part of the United States in upcoming years. 

The See's expansion offers some interesting challenges.  First, the company will have to introduce themselves to those on the east coast and deal with existing luxury chocolate brands such as Godiva that have a significant share in that region.  Second, the supply chain will be a challenge.  The chocolates do not have preservatives.  Thus, they have a short shelf life.  The company will need a factory close to its east coast locations.  Third, the firm must expand its appeal young mothers, according to its new head of marketing, Tracy Cioffi.  She notes, "We can't focus on great-grandma anymore." 

As I read the article, I kept thinking that the company could learn a great deal from another highly successful California retailer that expanded eastward after many years of focusing on the west coast.  That company would be Trader Joe's.  The firms have much in common:  fiercely loyal customers, longtime employees who enjoy working there, strong profits, and a reputation for quality products.   Trader Joe's found success on the east coast through a careful and methodical expansion strategy, rather than rushing to open tons of new stores all at west.  It appears that See's will do the same.  The article mentions that See's uses pop-up stores to test new locations before committing to a new store.  That makes a great deal of sense too. 

Still, the company will face challenges.  On the west coast, the firm generates a great deal of revenue through on-line and phone orders.  The stores help build the brand, and they encourage people to try the product.  Yet, the company depends on on-line sales to achieve strong profitability.  It will need to do the same on the east coast, but without the long-time customers who know the firm well and have been ordering particular chocolates by phone or on-line for years.

One final note: I learned in the article that Lucille Ball trained at See's plant for her famous chocolate factory scene on the hit show, I Love Lucy.  Here's that classic clip:

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