How the Founder of Dylan's Candy Bar Built an Irresistible Brand
Oh my God, that’s terrible!” Dylan Lauren has just taken a bite out of an organic peanut butter cup, let out a sound almost identical to Lucille Ball’s signature “uugh,” and promptly spat out the barely masticated substance into a napkin. She then slides one across the table and suggests that I try it for myself. So I do, and she’s right -- it’s terrible, and tastes every bit as you’d expect a sugar-free, dairy-free, gluten-free Reese’s-cup facsimile would.
I’m sitting in on a biweekly licensing meeting at the Upper East Side headquarters of Dylan’s Candy Bar, where buyers Lauren Ulstad and Michele Polito present Lauren, who is the co-founder and CEO of the eponymous confectionery empire (and is intent on tasting and testing every single thing her company sells), with samples of products from manufacturers around the world that could sit alongside signature items such as the Whirly Pop lollipop and chocolate-covered Swedish fish. There have been some winners today -- from a bar of strawberry-almond nougat to a candy glow stick for the upcoming Halloween season -- but one thing’s for sure: The “peanut double chocolate honey patties” ain’t happening.
After all, Lauren didn’t build her candy queendom by selling yucky product. Founded in 2001, Dylan’s Candy Bar now boasts 21 store locations across the U.S. -- including eight “minicandybars” at major airports, such as JFK and Houston George Bush -- which carry more than 7,000 different types of treats and see more than six million visitors a year. Sales have grown 20 percent year over year for the past three years, executives tell me. Fans of Lauren’s emporium include Michelle Obama, Oprah Winfrey, Hugh Jackman and Suri Cruise, while properties from Wonder Woman to Despicable Me and Hello Kitty clamor to partner with the company for cobranded treats, toys, trinkets, and other commemorative items. Lauren herself has been immortalized as a collector’s Barbie doll, and appeared as a mentor on ABC’s Shark Tank for tykes, The Toy Box.
Despite consumers’ shifting toward healthier foods and away from certain sugary indulgences (see: chocolate honey patties), the confectionery industry is surprisingly robust and thriving. Americans spent $21.5 billion on candy last year, according to Nielsen, with annual candy sales growing 2 percent to 4 percent over the past five. But that doesn’t mean entering the market was easy. It’s extremely crowded and full of major players with a bazillion products -- from Mars and Hershey’s to raspberry sour Warheads and buttered-popcorn-flavored Jelly Bellys. Even a savvy candy fan like Lauren could get lost in the noise.
But there was an opening. “Some of the standard, conventional candy that has been on the market for years hasn’t innovated,” says Marcia Mogelonsky, a confectionery analyst at Mintel. “When you go into a supermarket and go to the candy aisle, there’s nothing that jumps out at you.”
This left an opportunity to make the kind of candy people talk about. But Lauren had a hunch, based on her own saccharine obsession: The candy itself -- even the best candy she could find -- would take her only so far. She had to make the experience of buying candy just as sweet.
When Lauren flings open the door to her 15,000-square-foot flagship store, a mere three blocks from her corporate offices, it’s like walking into Willy Wonka’s factory -- and I imagine the 100 or so visitors and tourists who are scurrying about the place at 2 p.m. on a Tuesday must feel the same.
Part of the wonderment of a Dylan’s store is the sheer volume and assortment of candy that enraptures visitors as they enter. Here, at the front of the store, Lauren has personally plucked what she believes are the best treats from around the world -- some of which she white-labels and brings under the Dylan’s brand umbrella, such as the Whirly Pops and Dylan’s Candy Bar chocolate bars, while some brands stand on their own, either for nostalgia’s sake (there’s actually a “nostalgia corner,” featuring Life Savers, Charleston Chews, and artwork from vintage ads) or because they convey a slightly different message than the signature Dylan’s whimsy.
Then there’s the sheer scale and proportion of the place that unfolds before them. There’s the giant lollipop tree, with its translucent, Technicolored sucker branches stretching over their heads; the 10-foot-wide tackle box of gum balls, gummy bears and Runts hanging behind the cash register; and the glowing staircase, constructed with actual gummy snacks and candy necklaces, stretching upward across the building’s three floors, literally enticing customers with each step they take. As I marvel over the space, Lauren -- who I am realizing is equally hilarious and meticulous -- somehow zeroes in on what isn’t excessive enough. “I have to tell Lauren [Ulstad] that we don’t have enough bunnies here!” she yells over the Counting Crows hit “Hard Candy,” standing in front of a Shaq-size chocolate bunny, which is flanked by a shelf of candied hares, eggs, and other confections. (We’re here just before Easter.)
It makes sense that Lauren would be the most obsessive about this location: Aside from its flagship status and the proximity to her office, it was also her first. While she’s always had a bit of a candy fixation -- she compared herself to an Everlasting Gobstopper in one of her college application essays (“I’m very well-rounded, and have a colorful personality…”) -- it wasn’t until she was an art history major at Duke University that she got the idea for a pop-art candy store that boasted the trappings of a modern museum and the ultrasensory details that would make people want to buy stuff. “Because of my passion for design and sort of seeing what my dad did with fashion, I knew I wanted to create a lifestyle brand,” she says -- her dad being clothing magnate Ralph Lauren. “So it was never intended to be just a candy store.”
She had the concept and the cash -- having a father worth $5.6 billion certainly had its perks -- but she needed the right partner. “I definitely am a creative type. I’m very heavy in the details on strategy but don’t enjoy looking at spreadsheets and numbers.” In 2000, she was introduced through a mutual friend to Jeff Rubin, a merchandising expert who had set up a candy department in FAO Schwarz, the famed New York City toy store, called “FAO Schweetz.” The duo entered into a 50-50 partnership, spent about a year and a half planning, contacting nearly 200 candy vendors and hit the industry trade shows to find the best goods to stock. The flagship opened its doors on October 11, 2001 -- exactly one month after the terrorist attack on the World Trade Center. “I think New York needed a happy place,” Lauren says.
There are several factors responsible for Dylan’s success over the years. First, the company knew its target customers. With its first store situated on 60th Street and Third Avenue -- across the street from luxury retailer Bloomingdale’s, and only a couple of avenues from midtown proper -- Dylan’s has always sat in a comfortable median between upscale and lowbrow, the perfect trap for both its well-to-do neighbors and New York City tourists. (The store, which sees around two million visitors per year, is frequently cited on “top 10” destination lists.) “Dylan’s isn’t just for kids,” Lauren makes a point to tell me, more than once. “It’s for the kid in the adult.”
Next, it grew smart and strategically, in a way that allowed it the space to cultivate a following and strong brand identity. The two-story shop opened with candy, some T-shirts and candy jewelry for sale, plus a party room. It wasn’t until 2005 that Lauren expanded to the third floor and launched a “celebrations” business that included corporate events and off-site parties -- and continued to expand into private-label candy and merchandise, which today makes up 40 percent of annual sales. Dylan’s didn’t embark on its U.S. expansion until years later, launching its Los Angeles outpost in 2012. “I didn’t want to dilute the brand by opening stores in every city and every mall,” says Lauren, who also rebuffed an offer to sell her
products in Target stores. “My goal is to open more flagship stores in major cities -- the right corner and location, which takes a long time.”
That could be taken as a bit of casual shade thrown toward another event that occurred in 2005: the departure of Rubin, who wanted to take Dylan’s mass-market. Rubin went on to launch It’Sugar, based in Florida, another candy chain with a decidedly more aggressive -- and raunchier -- approach to the business: It has 95 locations in the U.S. and abroad and is known for such products as Dingle Bearies (chocolate-covered gummy bears) and Schweddy Balls (salty chocolate balls named for the SNL skit).
But Dylan’s has cultivated an outsize image that belies its 21 locations. Its strategic licensing partnerships, from becoming the official “curator of treats” for the Broadway version of Charlie and the Chocolate Factory to exclusive collaborations with Claire’s and Havaianas flip-flops, put its iconic rainbow logo in front of consumers of all ages. Meanwhile, Dylan’s celebrity clientele conveys to its followers that they, too, should be Dylan’s clientele.
“This is exactly what I wanted to do,” Lauren says. “You can buy candy anywhere, but I was trying to break the mold of the candy world and make it sort of a lifestyle gift store for a high-end customer. That’s aspirational to anyone.”
Today, Dylan’s Candy Bar is at what Lauren and her executive team call an “inflection point.” In October, it will celebrate its “sweet 16,” and Lauren believes she’s accomplished what she originally set out to do: She’s built a brand that people love, and that still feels special and a little exclusive. Now it’s begun restructuring for a bigger, bolder future -- one with many more Dylan’s stores across the world, where the strength of the brand can really be put to the test.
Within the past several years, the company has made significant changes to its management team, which included hiring Tushar Adya, a former McKinsey consultant, as president and chief operating officer. “I think we’ve finally gotten to the point of being able to execute on the vision at a much faster pace,” Adya says. “We’re in a fast, aggressive expansion mode, both globally and across markets.”
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The beginning of this plan has been to expand its licensed-shop model in airports, the first of which launched nearly four years ago. (There are eight in all, the most recent being at Tampa International Airport.) Run by travel retail giant Paradies Lagardère, the shops typically run between 600 and 1,000 square feet and offer the chain an opportunity to capture new fans who might not be familiar with the Dylan’s brand. “It’s a captive audience,” Adya says. “It’s great from a brand-building perspective, because you have millions of eyeballs on the brand and people really enjoy being able to get a little treat or a last-minute gift before getting on a plane.”
The company has also taken full control of its own Long Island-based warehouse -- allowing for more control and visibility into its inventory -- and has been focused on accelerating its merchandising business. Last year, it brought on the renowned management agency IMG to negotiate new licensing partnerships and take the brand into new markets, such as stationery, bakeware and housewares. Among more recent additions to the product portfolio is a six-foot-wide pool float that looks like a giant, multi-colored Life Saver, intended to tap into an apparent “pool float craze.” (Who knew?)
Soon Dylan’s will embark on its biggest initiative yet: propagating its brand across international waters. In early 2018, it will open a stand-alone, 8,500-square-foot store in Dubai, which represents a larger expansion across the Middle East, according to Adya. Over the next four years, Dylan’s plans to open six to eight stores in Abu Dhabi, Kuwait and Qatar. Setting up shop in the region has presented a new set of challenges, such as having to adhere to stricter food regulations, which means finding new locally based vendors and limiting its product assortment in some stores. To navigate all that, Dylan’s hired a local operator, Chalhoub Group, which also oversees several Ralph Lauren stores.
The move represents a major growth opportunity, considering the backdrop of the booming travel and tourism scene of the United Arab Emirates. Dubai International Airport is currently the third busiest airport in the world, having served more than 83 million passengers last year -- a 7 percent increase from 2015 -- and is expected to overtake Beijing and Atlanta for the top title in the next 10 years. Meanwhile, Lauren is actively looking for partners to help take Dylan’s into Japan and the U.K.
It might seem to be a surprising strategy for Lauren, who spent so long worrying about diluting her brand by putting a store in “every city and every mall.” But it’s all part of a natural evolution. “I think some brands don’t have the stable roots in the ground to grow,” Lauren says. “We’re still a lean organization, but I just feel like I have more people [who can help me] control the outcome internally. We want everyone to feel like, ‘Wow, can we get a Dylan’s Candy Bar in our city?’”
For all of her fascination with and focus on the physical retail experience, Lauren seems to harbor an equal amount of antipathy toward e-commerce. “Social media and the internet…that’s not my favorite,” she confesses on our walk from the store back to her office, during which I’m finding it increasingly difficult to keep up with her brisk pace. (She works out five times a week, I later learn.) “I really hope that the art of retail is not dead, because I think there’s nothing as fun as going into a place and getting inspired, spending 45 minutes [in a store] as a tourist coming into the city, or even for me to window-shop in New York. I mean online is great, but it’s a little lazy.”
Lauren’s neo-Luddism is sort of endearing, but if Dylan’s truly wants to take its brand to global heights, the internet will be key. According to Mintel, people in other countries buy candy online at increasingly greater rates than Americans do. For example, a whopping 37 percent of Chinese consumers purchase sweets online, versus 12 percent of Americans. “What’s interesting about that is, they’re not just buying what they know,” Mogelonsky emphasizes. “They actually go online and look for candy, and they buy candy they’ve never tasted before. We’re way behind.”
Plus, up-and-coming competitors are taking advantage of digital innovation to create fun new experiences around candy. Last year, Sugarfina, an artisan candy emporium that started as an e-commerce-only outfit, generated so much excitement online with its rosé-infused gummy bear presale that nearly 18,000 customers flocked to its website -- and crashed it. Meanwhile, subscription boxes geared toward curating the best sweets from around the world, in much the same way Lauren does for Dylan’s, have grown in popularity as well. There’s MunchPak, for example, which prides itself on offering customers the hardest-to-find candies around, while both Mouth and Graze offer craft treats with healthier options for those who are indeed trying to reduce their sugar intake.
Lauren is aware of the stakes in this changing retail landscape, and so, like many entrepreneurs, she’s accepted a hard truth: Sometimes the customer doesn’t share your full vision. “Unfortunately, with the state of the way people shop these days, I have to keep up with that,” she says. “A lot of people don’t have a Dylan’s Candy Bar in their neck of the woods, and they want to be able to buy stuff from us at all parts of the evening. I have to reach those people, too.”
As such, Lauren’s operations team has taken some recent steps to become more competitive online. A little more than a year ago, the company switched over from a rather old-school, on-premises inventory and sales management system to a cloud-based one developed by the Oracle-owned NetSuite. The move resulted in a reported 66 percent decrease in e-commerce processing times, a 32 percent increase in order volume and double-digit revenue growth -- a great start for more ambitious initiatives down the line. “These investments [in systems] make the infrastructure a lot stronger and stable so we can be able to execute bigger opportunities,” says Adya. Currently, e-commerce makes up less than 10 percent of the company’s sales. Within the next two years, he plans to double that.
In the meantime, Lauren, the visionary, will stay focused on what she loves most: the experience. Back in the buying meeting, she’s scrupulously poring over new goodies and merchandise to be ready for the upcoming and all-too-important Halloween and Christmas holidays. “That looks demonic!” she exclaims after being presented with a clear, plastic gummy-bear-shaped container with red antlers, which will be filled later with red (or green) gummies. Then, sea-salt caramel milk chocolate squares, which she (understandably) deems “a bad flavor for a kid,” their intended buyer. She’ll let them slide under one condition -- that they’re named Green Booger Caramel, which of course screams trick-or-treat. (They ended up naming them Eat Me If You Dare.)
“Nothing goes without me checking everything. My name’s on the door,” she later tells me. “Maybe one day we’ll open a candy hotel or a candy theme park. I wanna take over the world with candy, you know?”