NECCO Wafers are one of America’s most historic candies. Union soldiers carried them in the Civil War. Arctic explorer Donald MacMillan stocked them on his voyage to northern Greenland in 1913. The United States Army issued them to GIs in World War II. Generations of kids begged their parents for them at gas stations and checkout lines across the country.
After 170 years of operation, in May 2018, the bankruptcy court auctioned off the New England Confectionery Company’s (NECCO) assets. Round Hill Investments, of Greenwich, Conn., agreed to buy NECCO for $17.3 million. Though, just this week on July 24, 2018 and according to the Boston Globe, Round Hill abruptly shut down its operations and closed the doors at the Revere, Mass., candy factory. The company stated it had sold NECCO to another candy manufacturer but didn’t disclose the details. How could a company that survived catastrophic fires, wars, recessions, the Great Depression and so many other trials fail in today’s environment?
There’s no simple answer. But there are lessons we can learn and apply in our firms and businesses and in the advice we share with others.
- Embrace technology.
NECCO started when brothers Oliver and Silas Chase invented a candy making machine in 1847. This and subsequent machines essentially created the mass-produced candy industry. Somewhere along the way, NECCO lost its edge as a technology leader. More recent reports on NECCO’s manufacturing facility focused on the history and nostalgia of its 1940s era machines still in use. Finding new ways to automate manual tasks launched the company in 1847. But automation still drives growth today, and NECCO was unable to adapt.
- Carry your clients forward.
Although NECCO suffered growing criticism over the texture and flavor of its Wafers, its core customers resisted product updates. When NECCO replaced its artificial flavors and colors with natural substitutes in 2010, its customers rejected the changes. NECCO was forced back to the old formula — the one Millennials weren’t buying. Yes, you need to listen to your customers, but you also can’t let your customers stop you from repositioning for the future. Most will accept incremental changes even if there’s some grumbling — just don’t change too much at once.
- Focus on the core of today and tomorrow.
Like many consumer product companies, NECCO went through a diversification phase. They were making all kinds of candy and increasingly faced competition from lower-cost manufacturers. They eventually figured out that they needed to focus on their core products. But their core products were facing new headwinds from more health-conscious consumers with new taste preferences. You need to know when to protect your core and when to reconsider its viability.
- Limit long-term commitments.
NECCO took good care of its employees as every responsible business should. But high fixed labor costs and legacy employee benefits put them in a position where they couldn’t be nimble. Ultimately, NECCO may have failed its employees by not making the hard decisions sooner. Whether it’s a long-term lease, a partner buyout plan or multiyear service contract, you must leave room to pivot when unforeseen circumstances arise.
- Don’t become complacent.
Over its 170-year history, NECCO took many risks and experienced many failures. From that process, they achieved success over an exceptionally long period. So, what happened? Did they become complacent in their success or avoid taking risks? The temptation to avoid opportunities when things are going well can be the biggest risk of all. Calculated risk-taking should be part of your strategy. If your core is successful, protect it and keep an eye on the changing environment. When your core isn’t successful, take calculated risks knowing that some of the time you’ll fail before you ultimately succeed.
The AICPA provides many resources and tools to help small firms develop their practices and provide new services to their clients. When it comes to client services, consider thinking outside the box. Whether your clients ask for tax planning or need assistance with estate and trust planning, make sure they know you can help them with their financial planning needs. This webpage and worksheet can help you get started.
Lisa Simpson, CPA, CGMA, Associate Director – Firm Services, Association of International Certified Professional Accountants
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Originally published by AICPA.org