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A sour taste of bankruptcy


CHICAGO - Clutching a wad of cash in a white-gloved hand, Carla Newman scours the nearly empty Fannie May candy shop for remnants of her childhood.

Every holiday, a slim box picturing a Chicago skyline would find its way onto the coffee table.

Easter called for boxes filled with Mint Melt A Ways and their bright-green taste of spring. Christmas was time for Trinidads, with golden chocolate and the crunch of coconut.

And for Valentine's Day, Cupid always delivered piles of Pixies, oozing with caramel.

But now - as Fannie May's parent company files for bankruptcy and prepares to shut down the century-old Chicago candy giant and its legion of retail stores tomorrow - Newman is hoarding chocolate.

"It kills me that this is happening right on Valentine's Day," says Newman, 58, a retired schoolteacher shopping for herself and her three grandchildren.

"A Chicago without Fannie May is like a Chicago without snow, a Chicago without the Cubs. It's a part of this city's heritage."

Chocolate slump

Although Chicago and the surrounding region manufacture the greatest volume of candy in the country and employ the largest number of candy workers, the economic picture here has become increasingly sour.

In the past decade, the region's candy industry has shrunk by 38 percent, down to about 7,400 workers, according to Illinois employment officials.

Analysts who track the confection industry say the true downfall of companies such as Fannie May rests in America's changing chocolate-eating habits.

During the company's heyday in the 1950s and '60s, people often took a box of chocolates when they visited friends and relatives.

Businesses such as Fannie May and Russell Stover in the Midwest and See's Candies on the West Coast tapped into such social niceties with glossy boxes filled with sweet surprises. You reached in, hoping for one with caramel filling rather than pineapple or peach.

But "times have changed, and Americans are on low-carbohydrate diets," said Leonard Teitelbaum, a managing director at Merrill Lynch who tracks the candy industry.

"Polite company brings wine or flowers, not sweets."

High-end sweets

When people do indulge, they tend to choose a more decadent treat - one that sells for more than $60 a pound, rather than midrange chocolates at $10 to $20 a pound. The public is developing a discriminating attitude about its chocolate, and companies such as Fannie May haven't kept up.

Although there have long been niche players in the business, analysts say the trend toward the high end took off with Godiva, a subsidiary of Campbell Soup. Godiva has always been marketed to people with a taste for finer goodies.

Now Godiva has found itself having to reach even higher, reflected in the recent launch of its G line. A pound of G chocolates costs $100 and has a shelf life of three weeks. They are described as "edible works of art."

In contrast, a pound of Fannie May Pixies costs $18.95.

Although Fannie May recommends that Pixie lovers eat the candy within three weeks, the company said the treats could last indefinitely if carefully wrapped and frozen.

Younger consumers

"Godiva is sold in a sleek gold box with a modern but classic-looking print. That appeals to a younger audience," said Nicole Hanrahan, director of the Candy Institute, a nonprofit research group based in Chicago.

"The average Fannie May customer was 65 years old, and their packaging looks like grandma candy. Fannie May didn't change as times changed, and that killed them."

Taking advantage of the consumer shift, more boutique companies are cropping up to sell chocolate as they would wine, coffee or cigars. Half a dozen new high-end chocolatiers have debuted or expanded their presence in Chicago since 2000, while dozens more have been launched in New York and in California.

Three companies - Mars, Nestle and Hershey - control about 80 percent of the chocolate market in the United States, Teitelbaum said. What's left of the market is small and highly competitive.

Declining sales

Sales of Fannie May and its sister brand, Fanny Farmer, which is sold mainly on the East Coast, had been declining steadily for several years, industry sources say. The parent company, Archibald Candy, was already struggling financially from acquisitions made in the past decade, when it fell short of paying its debt.

After filing for bankruptcy protection last month, the candy maker agreed to sell the two brands and 31 retail stores to privately held Alpine Confections in Utah for an undisclosed amount.

The deal requires the approval of the U.S. Bankruptcy Court and would allow Alpine to manufacture the candies and run some of the stores.

Today, the Fannie May factory stands empty, the trucks long departed with the last batch of chocolate-covered cherries. When the company's 250 stores nationwide close their doors this weekend, 3,000 jobs will vanish. Six hundred had disappeared when the factory closed.

Just two blocks from one of Fannie May's largest stores on Michigan Avenue, the face of Chicago's chocolate future has set up shop.

Cordon Bleu-trained chef Katrina Markoff isn't just selling candy - she's selling a lifestyle.

Inside her cozy Vosges Haut-Chocolat boutique, attendants in chic black pants and snug shirts serve chipotle-chili-spiked hot chocolate in champagne flutes and discuss the benefits of mixing curry with milk chocolate or olive oil with white chocolate. Each ingredient was picked up from "my travels throughout the world," Markoff says.

Founded in 1998 in Markoff's kitchen, the $4 million privately held company has two factories and retail shops in Chicago, as well as stores in New York and Miami.

Shoppers lean down to peer through the glass-and-steel cases at a handful of precisely placed truffles, which cost $37 for nine pieces.

Visitors browse through a stack of lingerie, slip on the $900 leather jackets and read about a $3,900 weeklong chocolate and yoga retreat Markoff will lead this year in Oaxaca, Mexico.

Comfort food

That's not what draws Carla Newman to Fannie May's L-shaped counter at the store on Michigan Avenue. For Newman, chocolates are about familiar flavors and comfortable memories.

Years ago, Newman recalls, her grandmother regularly took her to a Fannie May store on the avenue, where the two would press their noses against the glass counters and stare at row after row of sweets. Was this a day for chocolate-covered caramels? A bag of butter creams?

Today, the hunting is slim. At this store, the white counters are marred with milk chocolate smudges, and only a sprinkling of sugar remains inside the empty display cases.

A wicker basket, once overflowing with chocolates in the shape of long-stemmed roses, holds just shredded red ribbons.

The Los Angeles Times is a Tribune Publishing newspaper.

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