Sorbee International Ltd.

9990 Global Road
Philadelphia, Pennsylvania 19115
U.S.A.
Telephone: (215) 677-5200
Toll Free: (800) 654-3997
Fax: (215) 677-7736
Web site: http://www.sorbee.com

Private Company
Founded: 1978
Employees: 25
Sales: $35 million (2003 est.)
NAIC: 311340 Nonchocolate Confectionery Manufacturing

Philadelphia, Pennsylvania-based Sorbee International Ltd. is a manufacturer, distributor, and importer of sugar-free hard candy, soft candy, chocolates, chocolate bars, cookies, cereals, fruit spreads, and syrups. The company's other brands include DreamCandy, which in addition to offering low-fat, low-calorie chocolate bars is being positioned to move into other non-sugar niche markets; and Global Brands, a private label importer of chocolate bars, cereals, and other products. A private company, Sorbee is headed by its founder, Eliot Stone.

Company Founded in the Late 1970s

Eliot Stone grew up in Philadelphia, Pennsylvania, the son of Dr. Harold G. Stone, who ran a company, Medical Products Laboratories, Inc., that specialized in fluoride pharmaceuticals, selling what it called Ethical Dental Pharmaceuticals and Public Health products to dentists, doctors, pediatricians, hospitals, and clinics. The younger Stone went to work for MPL in the 1970s but soon turned his attention to the sugar-free candy business. According to Edward Prewitt writing for Fortune in a 1988 article, "In 1977, when a dentist gave his kids lollipops after cleaning their teeth, Stone began Sorbee International, now the world's leading manufacturer of sugar-free candy." Philadelphia Business Journal, however, offered a slightly different version of the story in a 1986 profile of Stone: "In 1978. . . he noticed the lollipops that dentists gave out were high in sugar content. 'It seemed a little silly to me for a dentist to be giving sugary candy to a kid who had just had a cavity or two filled,' he said." His interest aroused, Stone did some research, which led him to the dyrogenated dextrose sweetener called sorbitol, a sweet-tasting non-sugar substance. In 1978, he invested $100,000 to launch a company named after the sweetener, Sorbee and developed a sugar-free lollipop. Samples were sent out to drum up interest, then the company began to market the products to dentists, taking advantage of MPL's nationwide distribution channels to professionals in this field.

Sugar-free candy was an extremely small part of the confection industry, with sales at the time mostly limited to diabetics. Sorbee succeeded in carving out a niche selling to dentists and in the 1980s began to expand its distribution in response to telephone calls and letters it received from parents whose children had received the Sorbee lollipops at their dentist, wanting to know where they could buy the candy. The company began selling the product direct to customers, but the demand was such that it began seeking out other ways to distributed the lollipops. Sorbee first established itself in the retail channel through health food stores, but as sales increased, the company was able to move into drug stores, supermarkets, and other stores. Around 1984, Sorbee began expanding its line, adding two or more new products each year. By the mid-1980s, the company employed some 100 people and was generating sales "in eight figures," as Stone told Philadelphia Business Journal.

Stone Sidetracked by Video Business in 1980s

While Stone was working 12-hour days launching Sorbee, he became involved in another venture, again growing out of a personal experience. In 1983, he and his wife grew frustrated while visiting a video rental store because they could not find the tape they wanted and the clerk was rude. At the time, rental stores kept the tapes behind the counter and customers waited in line had to ask the clerk if a particular title was available or not. "I looked around," he told Philadelphia Business Journal, "and I saw all these people in the same situation we were in, and walking out because they couldn't find the movie they wanted. I thought 'I could run a video store better than this.' " In September 1983, he invested $300,000 to open a Philadelphia video store with 6,000 movies, employing a different system, one now taken for granted: empty boxes of available movies were displayed in the open for browsing, and when customers brought the box to the counter, they knew it was available. The venture was only four months old when Stone opened two more stores, launching the West Coast Video chain, the name intended to conjure associations with Hollywood.

Stone turned over the running of Sorbee to his father while he and his partner, Richard J. Abt, began franchising the West Coast concept in 1985. In 1988, the company acquired National Video, a network of 455 stores, so that with more than 650 stores in the fold, West Coast Video was briefly the largest video chain in the country. Although West Coast added another 200 units at its peak, other players emerged, most notably Blockbuster Entertainment, whose superstore format proved so popular that it surpassed West Coast Video. In 1991, West Coast Video tried to transform itself into a pure franchising company by selling its 59 company-owned and limited partnership stores to franchisees, part of a move that was to culminate in an initial public offering of stock. Less than a year later, however, the company's general partner, Stone-owned Red Lion Entertainment, the entity that owned the company-owned stores, filed for Chapter 11 bankruptcy protection, and West Coast Video Enterprises soon filed as well. Later in 1992, a reorganization plan was accepted that in part called for Stone to pay $375,000 out of his own pocket and pledge $1 million in Sorbee stock, a deal that would pay creditors 25 cents on every dollar owed. In exchange, creditors gave up their right to pursue legal action against Stone. He remained in charge of the company after it emerged from bankruptcy and changed the name to West Coast Entertainment, but it never recaptured the momentum of earlier years. In 1995, it was acquired by Marion, Ohio-based Giant Video Inc., at which point Stone severed his ties to the company he started.

Although it is uncertain how involved Stone was in the running of Sorbee during the time he headed West Coast Video, it seems likely, given his reputation as a workaholic, that he kept close tabs on operations. The sugarless candy niche had undergone a number of significant changes since Stone sold his first lollipop to a dentist office. New and improved bulking agents and sweeteners had come onto the market, allowing candymakers to produce sugarless hard candy that was almost identical to sugar hard candy in terms of feel, look, taste, and even the way it crunched. As a result of improving products, the sugarless candy category experienced steady growth in the 1980s. Moreover, an increasing number of consumers were turning to all manner of sugarless and low-fat products during the 1980s, including sugarless chewing gum, sugar-free sodas, and low-fat ice cream. Sorbee was one of the main beneficiaries of the trend that continued into the 1990s. In 1991, the company enjoyed a 12 percent increase in sales. It was only a matter of time before the big candy manufacturers took note of the money being made on the fast-growing sugarless candy niche, even though at the time it accounted for just 1 percent of the market. A key moment in the industry came in 1992 when M&M/Mars introduced the Milky Way II Bar, which contained less fat and about 25 percent fewer calories than the original Milky Way. It was one of the early attempts in the pursuit of a tasty, low-calorie chocolate, perhaps the ultimate challenge in the candy industry, which was divided between chocolate and non-chocolate products.

Regarding low-fat chocolate, Kitty Kevin wrote in a 1995 Food Processing article: "If the question of low-fat chocolate were merely one of finding an appropriate fat substitute—even though matching the characteristics of cocoa butter is quite daunting—it surely would have been accomplished by now. But the question is much more complex because of the legal definition of chocolate. Current legal standards don't allow for the replacement of milk fats or cocoa butter in chocolate. That leaves confectioners with few options other than to use less chocolate or change its particle distribution." Technically speaking, chocolate is the suspension of cocoa and sucrose particles in cocoa butter. To make a low-fat chocolate, therefore, required researchers to reduce the amount of fat needed to suspend the particles without sacrificing taste or texture.

Dream Bar Launched in the Mid-1990s

In the early 1990s, Sorbee launched the Dream Foods Co. division to make its play in the low-fat chocolate bar arena. In July 1994 it introduced the one-ounce DreamCandy Bar, imported from Wales, containing three grams of fat and 88 calories. It took the minimalist approach to producing a low-fat product, using real milk chocolate but making it chewy with the addition of caramel, honey, and nougat, and the use of polydextrose as a bulking agent also added to the bar's taste. It was sold in supermarket, convenience, and drug stores, and response was so strong that a second product in the Dream Bar line made its debut in 1996, the Peanut Butter Crisp DreamCandy bar. It combined peanut butter and crisps with a wrapping of real milk chocolate. It had 3.5 grams of fat and 100 calories. A year later, the WOW bar, a crunchy chocolate-covered peanut butter bar was introduced. With 3.5 grams of fat and 120 calories, it was slightly more fattening than the previous entries in the line. In 1995, Sorbee also introduced sugar-free bagged chocolates under its own label, including chocolate-covered peanut butter, cocoa creams, and peppermint patties.

Company Perspectives:

Our specialty is great tasting sugar free and zero sugar products!

During the 1990s, sugarless candies made increasing inroads in the coveted supermarket channel. To drive sales the company offered samples to consumers, conducted promotional price reductions, and also invested in television advertising. In 1997, the company signed Richard Simmons, the popular fitness personality, to act as the spokesman for the Dream line of candy bars. His name and face also appeared on the packaging, which exclaimed, "You're not dreaming, these are delicious!" Another significant marketing endeavor, launched in 1998, involved licensing. Sorbee brought out a line of sugar-free hard candy, using isomalt and aspartame, under the Kraft Foods' Crystal Light brand name, available in the four Crystal Light powdered diet drink mix flavors: lemonade, tropical fruit, assorted fruit, and iced tea. Sorbee signed another licensing deal with Kraft to sell sugarless hard candy under the Country Time Lemonade name. As the 1990s came to an end, the diet candy category was experiencing faster growth than candy overall, with low-fat chocolate the fastest growing part of it. Sorbee took advantage of the trend by introducing chocolate-covered cream wafers and also brought out a new upscale line of foil-wrapped hard candy. At the same time, Sorbee looked to become involved in regular chocolate as well, closing out the decade by introducing a line of affordably priced, boxed Belgian chocolates called Sweet Obsession. The two editions—the Classic Assorted Collection of 18 varieties of milk, white, and dark chocolates with flavored centers, and the Classic Coffee Collections of 16 chocolates with coffee-flavored centers—were priced between Godiva and Russell Stover.

With the start of the 2000s, Sorbee continued to add to its sugar-free products. After a great deal of research and consumer taste testing, the company debuted a line of five sugar-free cookies using the no-calorie sweetener Splenda. They included animal cookies, peanut butter, soft baked oatmeal, crunchy chocolate, and soft baked chocolate. Sorbee also added sugar-free, individually foil-wrapped jelly candies available in cherry, lemon, raspberry, peach, strawberry, and lemon flavors. In addition, the company introduced sugar-free milk and dark chocolate-flavored truffles, creams, and caramels. In early 2001, Sorbee brought out a new line of sugar-free hard candies, which came in chocolate, butterscotch, and coffee flavors.

Despite a downturn in the economy, sales of all candies continued to grow in the early 2000s. The sugarless candy segment then benefited greatly from the dramatic popularity of the Atkins diet and other low-carb diets. As explained by Candy Industry in a September 2003 article, "Many low-carb products are sugarfree. When sugar is removed from a product, the carbohydrate count in the product is often lower. That explains how manufacturers like Sorbee . . . can easily make the move to also offering low-carb products. Sorbee recently changed its sugar-free chocolate bags and bars to include labeling for lowcarb dieters. The new labeling provides the net-carb count on each bag."

Presumably, Sorbee prospered during the low-carb craze while it lasted, although the financial state of the private company has always been closely guarded. Nevertheless, on April 13, 2004, Sorbee petitioned the court in the Eastern District of Pennsylvania for Chapter 11 bankruptcy protection. According to the filing the company had $2,655,522 in total assets, compared to $3,057,720 in debts. When the company would emerge from Chapter 11 and in what form remained to be determined.

Key Dates:

1978:: Sorbee International Ltd. is founded.
1994:: The first Dream Bar is introduced.
1997:: Richard Simmons is signed as a spokesperson.
1998:: Sorbee signs a licensing deal with Krafts' Crystal Light and Country Time Lemonade labels.
2004:: Sorbee petitions for Chapter 11 bankruptcy protection.

Principal Competitors

Hillside Candy LLC; The Hershey Company; Kraft Foods Inc.

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