Jorge Nolasco and Jason Ilarraza
Operations and Supply Chain Management
Naval Postgraduate School
February 28, 2013
This Case study is based on Jelly Belly and the actions taken by the founder, to grow the Company, and loose the company to Goelitz Inc. The focus of the case study will address Jelly Belly's strategy and sustainability, strategy and capacity management, and sales and operational planning.
At 18 David Klein was in business selling popcorn with his uncle while attending UCLA. He worked his way through law school by selling popcorn. David decided not take the bar exam but pursue a career he was captivated by, making and selling candy. David Kline a quirky and creative candy maker has invented over 450 types of candy. His most famous candy was Jelly Belly.
David first opened and operated a wholesale nut and raisin business and attained experience and a reputation in the Los Angelos Area with local distributors of nuts, raisins, and candies. While operating and maintaining the wholesale nut and raisin business, David developed a gourmet jelly bean, he coined Jelly Belly. Jelly Belly’s competitive dimension was quality. David’s vision was to create a high-end jelly bean, with a premium quality, flavor, and a unique shape. David created the original 8 flavors in 1975.
David approached Herman Goelitz, president of the Goelitz Candy Inc., a generational candy business, founded in 1869, primarily known for fine candy corn, with a business proposal for production of the Jelly Belly. Mr. Goelitz began business with David and began the production of the 8 flavors David had created in 1976. The first flavors were Very Cherry, Tangerine, Lemon, Green Apple, Grape Jelly, Licorice, Root Beer, and Cream Soda.
David was familiar with the successful main stream marketing strategies of McDonalds and Burger King. He created the Jelly Belly logo, in bright yellow and red. Soon after, David acquired a space in a store front operation. He wanted a place to sell, where publicity could be generated, that was bright and cheerful. He attained a space in the ice cream parlor with $800. He placed a stand in the corner of the parlor.
The product was appealing yet it did not sell; the price for the jelly beans was outrageous. The candy industry was late in getting price increases, the candy industry was locked into low end prices. Afraid to make better candy because distributors would not purchase on the basis that customers did not want to pay more for a quality candy but expected to pay a low price for candy. Total sales for the first seven-day period was $44.
David called the associated press and invited the press to his store front in the parlor, and created a set up to demonstrate to the press that he was doing well with the Jelly Belly business and to expose the press to the taste and quality of the Jelly Belly. The press report declared Jelly Belly to be the new candy craze.
David continued with the momentum he had received from the press conference. David appeared on TV shows, radio shows and phone orders were directed to the ice cream parlor. Pres. Ronald Reagan, sampled Jelly Belly’s and loved them. He ordered 60 cases monthly. Local distributors began to sell and make a profit from Jelly Belly. $5 would ship 2lbs anywhere in the US. Soon after he established push carts in Holly Wood, Beverly Hills and Century City. The carts were visited by celebrities and this attracted more publicity.
The demand for Jelly Belly grew at a very rapid rate after David worked diligently on attaining publicity for Jelly Belly. Goelitz Candy Inc. did not have the resources to support the demand for Jelly Belly. The back log for Jelly Belly grew rapidly reaching a climax of over a one year waiting list for delivery. David did not take needed action to plan for and mitigate the risk of having one supplier and logistics failures.