Candy is dandy: 1-800-Flowers buys Fannie May

May 01, 2006 9:30 PM  By

Last year, shortly after purchased cookie cataloger Cheryl & Co., vice president of investor relations Joseph Pititto told Long Island Business News that the company wasn’t done shopping for investments: “We have plenty of cash. We continue to look for good accretive acquisitions in the food, wine, and gift basket category.”

True to Pititto’s words, Carle, NY-based 1-800-Flowers last month agreed to buy Fannie May Confections Brands from Alpine Confections for approximately $85 million in cash. The $75 million Fannie May is the parent company of the Fannie May, Fanny Farmer, and Harry London candy brands.

The acquisition, expected to close this month, includes 52 Fannie May stores in the Chicago area and a 200,000-sq.-ft. manufacturing facility in North Canton, OH. As part of the agreement, Fannie May Confections will remain based in Chicago. Dave Taiclet will remain CEO, Terry Mitchell president, Matthew Anderson chief financial officer, and Alan Petrik chief operating officer.

It’s easy to see what Fannie May gets out of the deal. “This allows us to grow the Fannie May, Fanny Farmer, and Harry London brands more quickly than we ever could on our own,” says Taiclet. “As part of the family, we’ll be part of their marketing efforts to a customer base of 15 million people.”

For the $671 million 1-800-Flowers, the acquisition reinforces its goal of expanding its nonfloral gift offerings. In March 2005 it acquired $34 million Cheryl & Co. for $40 million; in November 2004 it purchased the $9 million Winetasting Network and its $2 million Ambrosia Wine subsidiary. The company’s other titles include food gifts book The Popcorn Factory, home goods catalog Plow & Hearth, and toys titles HearthSong and Magic Cabin Dolls.

Hungry for chocolate

The company had been aggressively searching the food, wine, and gift-basket market for possible acquisitions, Pititto says. “We’ve been looking for about two years at the chocolate category. While we develop and grow our own business, we’re looking at potential acquisition targets. We identified Fannie May brands, and we were able to do a deal. We both think it’s a great opportunity to grow that business.”

“1-800-Flowers is continuing to leverage its house file,” says Stuart Rose, managing director of Wellesley, MA-based investment bank Tully & Holland. “It’s one of their best assets. They’re known gift-givers.”

In addition to its manufacturing and retail operations, Fannie May Confections includes a Fannie May print catalog. According to its data card, it has nearly 35,000 12-month buyers, primarily women, who spent an average of $36 an order.

The acquisition also expands 1-800-Flowers’ retail presence. Although the company has roughly 80 franchise stores, it owns only 16, all of which are in New York and New Jersey. In addition, it owns nine Cheryl and Co. stores, all in Ohio, and six Plow & Hearth stores, in Virginia and Maryland.

“Typically, our business isn’t based on growing bricks-and-mortar, but where the bricks-and-mortar stores can afford us great brand recognition, we can build on that customer loyalty and brand recognition by using Internet and direct mail,” says Pititto.