Later today, my grandmother is meeting up with her nephew (his grandmother was my great-grandmother), but before that happens, we are scheduled for the Hammond’s Candies Factory tour in Denver. Hammond’s is one of the biggest old-fashioned hard candy manufacturers on the planet. Personally, I’m not really much of a hard candy guy – I’d rather own something like Little Man Ice Cream – but I do love a good business, especially touring production facilities (I’m always interested in how people structure things), so I was excited about the chance to run some numbers in my head as we learned about poundage sold, ingredient lists, and product line profiles.
The Hammond Candy Factory Retail Shop
Before you go on the tour, you spend time in the retail shop, where the dozens of varieties of flavors made by the hard candy company are on display and available for purchase. The retail shop was a brilliant idea. It serves as an inventory storehouse, generates cash, makes people not mind the wait until their tour begins, and has the opportunity to hook the customer on the product.
A Look at the Production Floor in the Hammond’s Candies Factory Tour
We were let back into the factory, where a tour guide explained the process of candy making to us. He said that Hammond’s does approximately 1,200,000 pounds of candy a year, and looking at their wholesale catalog and retail store configuration, it is clear that almost all of that is in the form of hard candy. It’s hard to say, but it seems like on a wholesale basis, revenue is almost assuredly somewhere between $10 million and $20 million per annum based upon a conversion of retail prices to wholesale then applying it on a per ounce basis to the annual poundage production.
[mainbodyad]Without knowing product mix, though, it is hard to pinpoint. The biggest risk, in my opinion, would be raw sugar prices and corn prices on the commodity market because the two main ingredients are sugar and corn syrup. There are approximately 130 employees. I would expect the business to generate net income in the low seven figures annually, but that is impossible to say without knowing the employee benefits, average payroll hour expense, etc. I’m getting sidetracked now, but I was running figures in my head during the tour trying to value the various components.
The firm is still family owned, as it has been since 1920, so who knows what the balance sheet looks like. I’ve seen some family firms where the main business is a small part of the overall net worth picture because the family members used the profit to expand into apartment complexes and banks, building an empire in plain site that not even their friends realize exist. I’ve seen other family firms where the business has been bled dry and on the brink of bankruptcy by poor management or excessive dividend payments to stockholders to support a lifestyle that the family members could not afford from their own human capital were they to rely solely on the job market. It comes down to the competency and culture of the founding family. Every family is different.
The next few hours, we will be meeting my grandma’s nephew, who owns a chain of chiropractic offices throughout the greater Denver area, as well as his family. She is so excited to see him, and I know my mom adores him, so it should be fun. In any event, I know myself – I’m going to be running the financials of the candy manufacturing business the rest of the day, drifting off in mid-conversation thinking about worker compensation costs (how bad is Colorado to, say, California, which is horrible, or Utah, which is fantastic?).