About Pickles and Chocolates

Walter Bick passed away on October 17, 2011. Readers will know him and his wife Jeanny as the founders of Bick’s Pickles.

His obituary tells the story of surviving the holocaust, their immigration to Canada and their eventual purchase of 160 acres in Ontario which is now the Scarborough Town Centre. A glut of cucumbers in 1944 presented a dilemma – plow them under or get creative. They got creative and Bick’s Pickles was born. Growth, product diversification and new plants resulted in the well known Bick’s Pickle brand. After more than thirty years of successes the company was sold to Robin Hood Flower and is now owned by J M Smucker.

The Hershey Chocolate Company opened for business in Canada in 1963. Locating in Smith Falls, Ontario because of the access to a thriving dairy industry, ample water supply, an eager work force and a central location with excellent transportation infrastructure. The location story includes the Smith Falls Chief of Police stopping cars passing through and encouraging interested parties to locate in their town. By happenstance one of them contained a Hershey search party looking for a plant site. It was to be their first outside of the United States. Brands are very familiar including OH Henry, Eat More and Peanut Butter Cups.

Smucker and Hershey are NYSE listed companies. They have strong balance sheets, competitive dividend yields, and reasonable price to earnings multiples. Hershey has a sparkling return on shareholders equity. Not so for Smuckers. You may not want to add them to your portfolio, Hershey because of a slow earnings per share growth and Smucker because of the low return on shareholders equity.

Apart from the food business and NYSE listings, Bicks [ Smuckers ] and Hershey have something else in common. The stories do not end well as both companies have closed or are closing their Canadian manufacturing operations. While their origins were different – Bicks as a startup, Hershey as a Canadian subsidiary – the outcomes are the same.

In the absence of being a fly on the wall of their respective board rooms, it is impossible to know their stories. Some of the issues will be well known and the usual suspects. They will include proximity to markets, taxes, labor costs, raw material availability, efficiencies of size and so on. Hershey did have a bacterial contamination event which forced some production curtailment.

Still and all a view from thirty thousand feet leaves one wondering why such significant competitive advantages were frittered away.