Tootsie Roll Industries, Inc. and its consolidated subsidiaries have been engaged
in the manufacture and sale of confectionery products for over 100 years. This
is the only industry segment in which the Company operates and is its only line
of business. The majority of the Company’s products are sold under the
registered trademarks TOOTSIE ROLL, TOOTSIE POPS, CHILD’S PLAY, CARAMEL
APPLE POPS, CHARMS, BLOW-POP, CHARMS MINI POPS, CELLA’S, DOTS, JUNIOR
MINTS, CHARLESTON CHEW, SUGAR DADDY, SUGAR BABIES, ANDES, FLUFFY STUFF, DUBBLE
BUBBLE, RAZZLES, CRY BABY, NIK-L-NIP, and TUTSI POP (Mexico).
The Company’s products are marketed in a variety of packages designed
to be suitable for display and sale in different types of retail outlets. They
are sold through approximately 30 candy and grocery brokers and by the Company
itself to approximately 4,000 customers throughout the United States. These
customers include wholesale distributors of candy and groceries, supermarkets,
variety stores, dollar stores, chain grocers, drug chains, discount chains,
cooperative grocery associations, mass merchandisers, warehouse and membership
club stores, vending machine operators, the U.S. military and fund-raising charitable
organizations.
The Company’s principal markets are in the United States, Canada and Mexico.
The majority of production from the Company’s Canadian plants is sold
in the United States. The majority of production from the Company’s Mexican
plant is sold in Mexico.
The domestic confectionery business is highly competitive. The Company competes
primarily with other manufacturers of confectionery products sold to the above
mentioned customers. Although accurate statistics are not available, the Company
believes it is among the ten largest domestic manufacturers in this field. In
the markets in which the Company competes, the main forms of competition comprise
brand recognition, as well as competition for retail shelf space and a fair
price for the Company’s products at various retail price points.
The Company has historically hedged certain of its future sugar, corn syrup
and soybean oil needs with derivatives at such times that it believes that the
forward markets are favorable. The Company’s decision to hedge its major
ingredient requirements is dependent on the Company’s evaluation of forward
commodity markets and comparison to vendor quotations, if available, and/or
historical costs. The Company has historically hedged these major commodities
and ingredients with derivatives, primarily commodity futures and option contracts,
before the commencement of the next calendar year to better ascertain the need
for product pricing changes or product weight decline (indirect price change)
adjustments to its product sales portfolio and better manage ingredient costs.
The Company will generally purchase forward derivative contracts (i.e., “long”
position) in selected future months that correspond to the Company’s estimated
procurement and usage needs of the respective commodity in the respective forward
periods.
From time to time, the Company also changes the size of certain of its products,
which are usually sold at standard prices, in response to significant changes
in ingredient and other input costs.
The Company does not hold any material patents, licenses, franchises or concessions.
The Company’s major trademarks are registered in the United States and
in many other countries. Continued trademark protection is of material importance
to the Company’s business as a whole.
Although the Company does research and develops new products and product line
extensions for existing brands, it also improves the quality of existing products,
improves and modernizes production processes, and develops and implements new
technologies to enhance the quality and reduce the costs of products. The Company
does not expend material amounts of money on research or development activities.
The manufacture and sale of consumer food products is highly regulated. In the
United States, the Company’s activities are subject to regulation by various
government agencies, including the Food and Drug Administration, the Department
of Agriculture, the Federal Trade Commission, the Department of Commerce and
the Environmental Protection Agency, as well as various state and local agencies.
Similar agencies also regulate the businesses outside of the United States.
The Company maintains quality assurance and other programs to insure that all
products the Company manufactures and distributes are safe and of high quality
and comply with all applicable laws and regulations.
The Company’s compliance with federal, state and local regulations which
have been enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, has
not had a material effect on the capital expenditures, earnings or competitive
position of the Company nor does the Company anticipate any such material effects
from presently enacted or adopted regulations.
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