Chocolate 2.0

A look at Bissinger French Confections' homespun tech upgrade.

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Case Study 02

To bring his old-world company into the 21st century, this chocolate maker cooked up a homespun technology upgrade

Who: Bissinger French Confections
Where: St. Louis
What: High-end candy maker
Revenues: $6.5 million
Problems: Outdated technology; companywide inefficiencies
Solution: An IT "beauty contest" to explore the company's options

Ken Kellerhals remembers vividly his first Christmas as owner and CEO of Bissinger French Confections, a candy company in St. Louis that has been making its handcrafted chocolates in much the same way for more than 400 years.

Ruefully, Kellerhals refers to that holiday period as the "'96 fiasco." Through aggressive salesmanship, the opening of a new store in Minneapolis, and a refinement of his catalog mailing list, Kellerhals had managed to boost sales by 25%. But because he didn't have an accurate sense of his inventory, he was taking orders for more candy than Bissinger could actually produce. And because he lacked the ability to efficiently schedule his employees and the production of his various candies, he ended up running his plant for 18 hours a day and paying $189,000 in overtime during that period of three months. For a company with $2.8 million in sales, he says, "it was a disaster."

In the end Bissinger was able to fill the orders. But Kellerhals didn't have the tools to analyze his costs and figure out if in fact the company had actually made any money. The experience led to an epiphany. The CEO realized that the old-fashioned tracking systems and office procedures would have to go.

And so began the technological education of Ken Kellerhals, now 43, a man who admits that when he embarked on his upgrade adventure, all he knew was "how to turn the computer on and off." In his pursuit of technology, however, he was going to have to walk a fine line to preserve the heritage of the sweetshop's storied past.

The Bissinger family had begun creating its fine delicacies in 17th-century Paris and served as confectioners to King Louis XIV and Napoleon Bonaparte. Karl Frederic Bissinger was named "Confisseur Imperial" by Emperor Louis Napoleon. A descendant, also named Karl Bissinger, brought his recipes and chief candy maker to the United States in 1863, and his son (yet another Karl Bissinger) founded the company in St. Louis (where it now has four retail outlets) in 1927. The business stayed in the family until 1946 and then went through several owners before Kellerhals (who spent 14 years in banking as a commercial lender and 3 years in charge of operations at a toy company) and a group of investors bought Bissinger six years ago.

"We thought Bissinger was the best-kept secret" of the candy industry, says Kellerhals. Under the previous owner, he says, the company had been run as a small business, with no real growth plans and consequently no bank debt. But he saw the potential for growing the business, particularly through corporate gift programs and the company's catalog. To grow the company, however, he had to make it more professional, spend some money, and take a few chances.

One thing Kellerhals would not refashion, however, was the quality of his product. "We have a tremendous following of people who've been ordering from us for years," he says. "Our true competitive advantage is that the candies are handmade." To produce the candy by machine, Kellerhals explains, would mean changing the company's tried-and-true recipes, which in turn would alter the candies' taste. If you use a machine to place caramel in the center of a candy, for example, you have to first liquify the caramel, which permanently changes its consistency. Bissinger hand-dips solid caramel into chocolate and shaves off the extra chocolate when it hardens.

But just because the company was going to stick with copper pots and wooden spoons did not mean it had to continue using handwritten logs to monitor inventory and production. When Kellerhals first got to Bissinger, he recalls, the head candy maker at the 25-person plant kept a written diary of how much candy was made each day. The hardware that was in use, two PCs and 15 dumb terminals, could handle only data entry.

Ken Kellerhals, CEO of Bissinger French Confections: "We needed to look at recipes, at how much products were costing us."

The company did have three fairly decent software programs -- for order entry, shipping, and accounting -- that over the years had been customized to the business's needs. The problem was that the programs couldn't communicate with one another. That led to some inefficiencies. Price changes had to be entered into the three different systems, for example. And because the programs were not integrated, Kellerhals couldn't pool the data and perform the kinds of analyses he wanted.

"We needed a plant schedule," says Kellerhals. "We had to come up with some way to know what to make and when to make it. It's a tricky thing in this business because freshness is so important." For the company's inventory of some 900 products, the CEO wanted to generate a schedule for the entire year that would spell out what needed to be made when, broken down into months, weeks, and days. He wanted to compare production totals for each month with those for the same months of the previous year. With that ability in hand, Kellerhals hoped never to get caught flat-footed again, especially during the holiday season, when the company made 55% of its total annual sales.

Kellerhals knew he also had to start analyzing costs more effectively. "We needed to look at recipes, at how much products were costing us," he says. "When a nut crop fails, for example, it can have an enormous impact. Pecans can go from $3 a pound to $5 a pound." Without a thorough analysis of his costs and an understanding of how they affected his production and profitability, Kellerhals couldn't know the full effect of such increases.

"He had a clear vision of what he wanted to get out of his [computer] system," recalls Bryan Sapot, the consultant who eventually overhauled Bissinger's information technology. "He just wasn't quite sure how to get there."

Kellerhals's first step was to seek advice from associates and peers. He turned to some of his board members, some of whom had companies that had gone through a similar technological overhaul. He talked to hardware vendors like IBM and to contacts he had made in previous jobs. Mostly, he asked them for names of IT specialists who could help him.

Eventually, Kellerhals came up with a list of eight IT consultants, ranging from Big Five accounting firms to smaller local outfits. He then held what amounted to an IT "beauty contest." In a two-week period in the spring of 1997, "contestants" paraded through his office to showcase their talent.

By the end of the technopageant, Kellerhals realized that the upgrade was going to cost him a lot more than he had expected. "Their price tags made me gulp," he recalls. Some IT teams quoted bids as high as $500,000. Kellerhals, who had incurred significant debt to buy the company, thought the project would cost him about $50,000 but was prepared to spend as much as $100,000.

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