|Successor||Rowntree Mackintosh Confectionery|
|Henry Isaac Rowntree
Rowntree was an English confectionery business based in York. Rowntree developed the Kit Kat, Smarties and Aero brands in the 1930s, and the Rolo and Quality Street brands when it merged with Mackintosh's in 1969.
Founded in 1862, the company developed strong associations with Quaker philanthropy. Throughout much of the nineteenth and twentieth centuries, it was one of the big three confectionery manufacturers in the United Kingdom, alongside Cadbury and Fry. By the time the company was acquired by Nestlé in 1988 it was the fourth largest confectionery manufacturer in the world. The Rowntree brand continues to be used to market Nestlé's jelly sweet brands, such as Fruit Pastilles and Fruit Gums.
In 1862, Rowntree's was founded at Castlegate, York by Henry Isaac Rowntree, as the company manager bought out the Tuke family. In 1864 Rowntree acquired an old iron foundry at Tanners Moat for £1,000, and moved production there. In 1869 the factory was staffed by 12 men. By 1869 Rowntree was in financial difficulties and his brother, Joseph Rowntree, joined him in full partnership, and H.I. Rowntree & Co was formally established.
In 1881, Rowntree introduced Fruit Pastilles, competing against French imports of the time, and the product proved to be a great success, accounting for about 25 percent of the company's tonnage by 1887. This success allowed the company to invest in a Van Houten press, which enabled it to produce chocolate with the cocoa butter removed, in order to compete with Cadbury's successful Cocoa Essence. In the 1890s, Rowntree transformed from a small family business into a large-scale manufacturer, as sales more than quadrupled due to an increased demand among the public for confectionery.
In 1890, in order to cater for this increased demand, Rowntree acquired a 20-acre site at Haxby Road on the outskirts of York. The Tanners Moat site had become too small for Rowntree's needs, and the company had noted the success of Cadbury's purpose-built factory in Bournville.
Robert Fitzgerald has accused the company of being slow in new product development and marketing compared to its major competitor of the period, Cadbury. Fitzgerald suggests that Joseph Rowntree imitated the successes of competitors, (Cadbury's Cocoa Essence, French fruit pastilles) and that under his leadership, the company did not introduce any innovations of its own.
1900 to 1945
Rowntree had struggled to make a milk chocolate product of comparable quality or value to Cadbury's Dairy Milk. Joseph Rowntree even described the growing market for milk chocolate as a fad. Rowntree's poor performance in the category became a major problem from 1914 onwards, as British public preference continued to move towards milk chocolate, and away from the more bitter cocoa essence products. Rowntree's two major rivals, Cadbury and Fry, merged in 1918, and although Rowntree was invited to partake in the merger, the company declined to do so. Meanwhile, the Rowntree board was torn as to whether it should become a low turnover, high quality product company or a mass producer of cheaper lines. Seebohm Rowntree inherited a struggling company when he succeeded his father as chairman in 1923. By 1930, as a result of all its problems Rowntree was approaching bankruptcy.
In 1927, the company began to market its fruit gums, and its pastilles from 1928, in the now familiar tube packaging.
George Harris was appointed marketing manager for chocolate bars in January 1931. Harris had learned the latest marketing techniques while he was in the United States. According to Robert Fitzgerald, "It was Harris's drive and insight which inspired his firm's renaissance in the 1930s." In 1932 Rowntree appointed a new advertising agency, the London branch of J. Walter Thompson. Thompson undertook extensive market research in order to discover what consumers wanted. As a result of this research the Black Magic assorted chocolate box was launched in 1934.
In January 1935 Rowntree decided to abandon its attempt to compete with Cadbury Dairy Milk. In May 1935 Rowntree launched the Aero, an aerated milk chocolate. The Chocolate Crisp, a wafer-and-chocolate bar later known as the Kit Kat, was also launched in 1935. In 1937 the Dairy Box of assorted chocolates was launched, using the market research that had been undertaken for Black Magic. Chocolate beans were first sold loose in 1938, but were later packaged in a cardboard tube and branded as Smarties. Polo, the distinctive mint with a hole in the centre, was developed in 1939, but its introduction was delayed by the onset of war. Harris was made company chairman in 1941.
1945 to 1988
In 1969, the Rowntree board rejected a £37 million takeover bid from General Foods. In 1969, Rowntree entered into a long-term agreement with Hershey whereby Hershey would produce Rowntree products under license in the US. Rowntree merged with John Mackintosh and Co in 1969, to become Rowntree Mackintosh. Mackintosh produced Rolo, Munchies, Caramac and Quality Street.
In 1971, Rowntree Mackintosh acquired Menier Chocolate of France. In the same year, the board attempted to diversify the business, and made a bid for Bovril, but lost out to James Goldsmith's Cavenham Foods.
In 1978 the Hershey contract was renegotiated, giving Hershey the rights to the Kit Kat and Rolo brands in the US in perpetuity.
Kenneth Dixon was appointed as chairman and chief executive in 1981. Between 1981 and 1987, Rowntree invested nearly £400 million in upgrading its manufacturing facilities and developing high volume, product dedicated equipment for several of the company's leading global brands, including Kit Kat, After Eights and Smarties.
Between 1983 and 1987, Rowntree spent nearly £400 million on acquisitions, including Tom's Foods for £138 million (1983), Laura Secord Chocolates for £19 million (1983), Hot Sam Pretzels for £14 million (1986), the Sunmark confectionery business in the US for £156 million (1986) and Gale's honey for £11 million (1986).
Between 1982 and 1987, the number of UK staff was reduced from 19,700 to 15,600.
In 1987 Rowntree operated 25 factories in nine countries and employed 33,000 people, including close to 16,000 in its eight UK operations. Group turnover was £1.4 billion, with the UK and Ireland accounting for 40 percent of the total.
Takeover by Nestlé
On 13 April 1988, the Swiss confectioner Jacobs Suchard began a dawn raid on Rowntree's shares, which had been under-performing the market, although they were beginning to improve, taking a 14.9 percent stake in the company by 9:15 am. As a result, the managing director of Nestlé, Helmut Maucher, contacted Kenneth Dixon, the chairman of Rowntree, offering to act as a white knight. Nestlé was the largest food company in the world, and had been interested in Rowntree previously, but the Rowntree board would aggressively contest any attempted takeover, and Nestlé had never undertaken a hostile takeover before. However, Nestlé was worried about the potential of Rowntree falling into the hands of one of its major competitors. Rowntree was the fourth largest chocolate manufacturer in the world, after Mars, Hershey and Cadbury, with a 7 percent global market share.
Nestlé eventually won control with an offer valuing Rowntree at £2.55 billion. Strategically, Nestlé had always seen Rowntree as a perfect fit for its own operations. Nestlé had strength in the block chocolate bar business, and Rowntree had strength in the countline branded chocolate business. Rowntree's strong global brands were the key reason for Nestlé's interest. Due to potential synergies between the two companies, Nestlé believed that savings of between 5 to 15 percent of Rowntree's operating costs could be made if the companies were to combine.
The takeover was controversial, as Nestlé was effectively protected from similar takeover attempts under Swiss law. After the Nestlé takeover, the Rowntree chocolate ranges began to use the branding "Nestlé Rowntree", before eventually the Rowntree name was dropped from the packaging altogether, except on Rowntree's Cocoa and the "Fruit Pastilles" and "Fruit Gums" lines. The "Mackintosh" branding was dropped from all former Rowntree Mackintosh products except for Mackintosh's Toffee.
In the six years following the takeover, the Nestlé Rowntree workforce was reduced by 2,000. The Nestlé Rowntree factory in Norwich closed in 1994, and Rolo, Yorkie and Easter-egg production was moved to York.
In September 2006, it was announced that the manufacture of Smarties was to be relocated to Hamburg, resulting in 645 job losses at the York factory. Production of Dairy Box was relocated to Spain, and Black Magic to the Czech Republic.
Nestlé has invested more than £200 million in the Rowntree business since 1988, making the York site one of the world's largest confectionery factories. Nestlé's global research centre for confectionery is also based in York, and recently doubled in size following a £7 million investment.
Current branded products
The Rowntree brand is also used on a number of ice lollies (made by Richmond Foods) for Nestlé. The brand has a similar marketplace to that of the Trebor Bassett division of Cadbury's, and competes head-to-head with this company in a number of fruit-gum categories.
The company largely eschewed advertising before its establishment as a public company in 1897, when it employed S. H. Benson as its agency. Before 1930, the company considered that quality products would speak for themselves, and did not need advertising to sell their benefits.
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- New York Times Archive, Company news; Suchard Drops Out; published 25 June 1988, accessed 26 August 2007
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- Nestlé UK to roll out Rowntree Randoms
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