Dear Mr. Berko: Please give me your thoughts on Tootsie Roll Industries. I’ve been buying Tootsie Rolls for over 50 years, and until several weeks ago, I did not know that this is a public company. I have enough cash in my account to buy 1,000 shares of Tootsie Roll Industries and will do so if you think it’s a good long-term investment.
— KD, Durham, N.C.
Dear KD: No! Two thousand times “no!” Don’t buy this stock!
“Tootsie” is defined as a young woman, especially one perceived as being sexually available. “Tootsie” is also a South African slang word meaning “jackass.” Tootsie Rolls were the chewy, chocolaty creation of Leo Hirschfield, an Austrian immigrant who began selling these homemade candies in his New York City shop in 1896.
A dozen years ago, Tootsie Roll Industries (TR-$30) was a candy company incarnate with about $500 million in revenues from sugar-soaked products essential for promoting heart disease, tooth decay in millions of Americans and Type 2 diabetes and preparing America’s children for a lifetime of obesity. Today TR is still a candy company incarnate with $500 million in revenues, selling Dots, Charms, Charleston Chew, Dubble Bubble, Junior Mints, Sugar Daddy, Sugar Babies and more. Obesity is an epidemic in the U.S., and it hurts my heart to watch obese parents and their obese children shoving high-calorie foods into their mouths. According to the National Institutes of Health, 39 percent of the U.S. population was considered obese last year, thanks in part to TR’s toothsome, delectable, scrumptious, savory and divine candies.
I wouldn’t recommend the stock because I think revenue growth (if TR has revenue growth) 12 years hence will have been more a result of commodity inflation and unit price increases than a result of an increase in candy consumption. TR has a sweet 40-plus-item product portfolio, most of which I nostalgically remember from when I was a kid in the 1940s and ’50s. For grins and giggles, a close acquaintance (with whom I discussed this column) took his two grandsons (ages 10 and 13) to Walgreens. I joined them. We found the massive candy aisle, and their dad said, “Buy your hearts out.” They shopped for 20 minutes, spending $27 and $32, respectively, but the only TR product they selected was a box of elegant Junior Mints. This suggests that TR’s marketing is ineffective or its portfolio is getting stale or both. TR needs new products to improve flat-as-pancake revenues.
