“It’s THE CANDYMANNN!” David Klein exclaims as I answer my office phone. I’m nearly knocked off my chair by his unusual greeting – he’s not the typical PR person calling to request a meeting.
Immediately I think, this man is either a lunatic, or he has one hell of a story to tell.
But if you search the Jelly Belly site, you’ll find no mention of his name. Klein’s claim to fame is summed up in one puny line in the company’s history that states, “Back in 1976, a Los Angeles candy distributor had an idea for a jelly bean made with natural flavorings. So he called up Herm at Jelly Belly (formerly known as Herman Goelitz Candy Co.) and an historic collaboration began between candy maker and marketing guru.”
The line doesn’t do him justice; Klein’s story is much crazier than that. From blackmails, to staged press events, to forcibly selling his trademark and getting robbed of $200 million, Klein’s little beans stirred up lives and the candy industry.
We spoke with him about his roller coaster of a life and how Jelly Bellies came to be.
War Room: How did you start this great worldwide brand? I don’t even know how jellybeans are manufactured…
David Klein: You know…neither do I, I know nothing about making candy (laughs). I tell that to people and they say, “Oh come on, you created Jelly Bellies.” I didn’t really know anything about making candy. I had $800 when I started and it’s kind of hard to open up a candy factory with $800. You’re looking at at least $1-1.5 million just for the equipment.
There’s a mogul that makes the centre [of the Jelly Bellies], and that’s over $500,000 just for that one piece of equipment, so I had to go to an existing company and I hired them as my contract manufacturer.
WR: How did you come up with the idea?
DK: It was 1976. I was in the wholesale nut business back then, and I was selling pecans to Famous Amos — he had a store on Sunset and Formosa in Hollywood. I said to myself, this man has made a tremendous success out of chocolate chip cookies, what if I were to open a store that just sold jelly beans? And that’s basically how the idea started. I knew if I were to open up a store just selling beans it would have to be a really great jellybean. You could not open them with mediocre, generic-type jellybeans.
WR: What were jellybeans like before you created Jelly Belly?
DK: They were a lot bigger. Every flavour was pretty much the same except for the black licorice ones. And they were not flavored on the inside as well as the outside. So my concept was to make them smaller — 400 to the pound. Make them so they have fewer calories. Obviously because they’re smaller they have fewer calories — 4 calories per piece. And do them where you flavour the outside shell as well as the inside. And to do them in flavours that really had never been done before. Have just crazy flavours. We had eight flavours in the beginning [Very Cherry, Lemon, Cream Soda, Tangerine, Green Apple, Root Beer, Grape and Licorice – still some of the most popular flavours produced].
WR: How did you begin producing your candies?
DK: I called up an existing manufacturer of jelly beans and I told them my idea. We never had a contract. They said, “This sounds real good, what flavours do you want and when do you want them?”
In the beginning they were charging me 59 cents a pound. They were retailing at $2 a pound. I was selling them to store at $1 a pound because stores need to double on candy. When it became very successful, I called up the manufacturer and I said something that’s probably never been done before.
I said, “It’s time for you to go up in price to me.” They said, would say that a little bit slower? I said, “It’s Tiiime Too Goo Upp Inn Pricce. Give me a 10 cent price increase.” They said, are you joking? I said no, I’m serious, go up a dime a pound. I can handle it. And they did. I don’t think that’s ever been done in business before.
WR: Why did you do that?
DK: I wanted them to be happy. I was making plenty of money on it, I wanted them to make money too.
WR: How did your product take off?
DK: In the beginning it was almost impossible to get the item off the ground. I was battling several brands that were selling at 69, 79, 89 cents per pound. Our bean was selling at $2 per pound — this was back in 1979.
I wont say I was ready to give up on it, because I don’t give up on anything, but I was discouraged and I said, “I need one big break.”
I called up the Associated Press and I talked to the editor of the business section, a young man by the name of Steve Fox. And I said, “I have an interesting article for you — I have the only jelly bean store in the world.” It wasn’t really a store — it was like a store within a store. He said, “How’s it doing?”
And it was doing at the time about $20 a day in business. I don’t think anybody really wants to write up something that’s failing. So I lied to him. I said, “We’re doing a tremendous amount of business (laughs). Women are sending their chauffeurs from Beverly Hills. Some days we do $500, $600. We’ve had some days where we’ve done $1,000.” When really, our highest day had been $34 at that point. He said, “That sounds so good, I’m going to come out there.”
I had phony customers lined up to buy the product when he came out. I had my friends here with money in their hand throwing it at me. Each one had a different story like, “My dad loves the licorice one, I want to buy 3 pounds of that.” I had these people actually lined up at about 10:30 in the morning.
[The reporter] said, “Is his store always this busy?” I said, “This is really a slow day.”
In 1976, the article hit the Associated Press. For some reason, it was picked up by just about every newspaper in the United States. I never had to do any selling after that. Stores were calling me saying they read about this new jelly bean.
WR: I read that your beans were so successful, you were actually blackmailed.
DK: It’s interesting. I owned the company from 1976 to 1980. The man that I [split retail space with] called me up about two years into it and he said, “Dave, I’m your third partner.” I said, “Bob, how to do figure that?” He said, “Well, I own the California trademark for Jelly Belly.” We had gone to a trademark lawyer who had advised us to take out a federal trademark, which at that time was taking about a year to get. We asked him if we should take out the California trademark, too and he told us not to waste our time.
In those days any one could send in $10 or $20 to the Secretary of State and sign under penalty of perjury that you are above any one else entitled to the use of that trademark. And this man did that. I
Bob said, “Here’s what I want: I want to be guaranteed $64,000 a year for the rest of my life.” I said, “What if I don’t go along with your plan? He said, “I’ll call your manufacturer and they’ll have to deal with me because I owns the California trademark.”
Anyway, we went along with his plan. We didn’t want to disturb the court at the time. We wrote up the contract and put so much words in there. And then put, “This will be good until the sum of $64,000 is reached.” We didn’t put per year in there.
We were making quarterly payments to him. When he received the last check we put on the back this check constitutes payment in full for contract. He asked my partner, “What does this mean, the last check?” My partner said, “We reached the $64,000 level.” The funniest thing [Bob] said was, “You guys are trying to screw me.”
WR: So what happened after 1976?
DK: We sold out in 1980 to the owner of the company that was making the product for me. My manufacturer called me on the phone said, “Dave we’re coming to tomorrow. We’re coming to town to buy you out and we’re not leaving until we do.” You have to remember I never had a contract with them. [Has I not sold them my trademark], he said they would have made the same product under a different name. “You would have ending up suing us and by the time it got to court you would have been broke,” he told me.
WR: So the company you told to increase your costs, your original manufacturer, ended up buying you out?
DK: Yes. A few years ago they came out with a book called The 30 Year History of the Jelly Belly and they didn’t even bother to mention me at all. They really hurt me. When I was helping my daughter out with Sandy Candy, I used to do street fairs and tell people “I was the guy that created the Jelly Belly.” One man said to me, “If you created the Jelly Belly jellybean you would not be here this early in the morning.” And I never got any recognition from the candy industry. It was almost like I never existed. That product was so hard to get off the ground. I was on the Mike Douglas show a couple times. I had to fly to New York to do AM New York. I was in People magazine in a bathtub full of Jelly Bellies. I used to do all kinds of radio shows. I married Ms. Cherry and Mr. Coconut on Valentine’s Day. We inaugurated the peanut bean when Jimmy Carter was in office.
WR: How come you didn’t find another Jelly Belly producer?
DK: It’s funny you say that because I had a meeting with Eddie Mandell, he owned California Peanut in Richmond, California. He invited me and my partner to his place in Santa Monica and he said I would like to be another source for you for your product. We told him no. For some reason I had loyalty to these people. Their whole company was based upon it. I was afraid if I went to someone else their whole company would explode.
WR: You can’t get a patent on a Jelly belly?
DK: You can get a trademark on the name; you can’t get a patent unless it’s a technological advance.
WR: How much did they offer you for the trademark?
DK: We signed over the rights for $1,000. They paid us 17 cents a pound on a maximum of 120,000 pounds per month. To their credit, they never missed a payment. They always reached 120,000 pounds per month. It was a 20-year period ending in the year 2000. We received $20,000 a month for a 20-year period. I had to share that with my partner, and by the time I paid taxes on that it boiled down to about $5,600 a month that I received between the years 1980 and 2000. Prior to 1980 we controlled the product. We made some good money on it, but they could never give us enough production during that time. They were a very small company. I never knew how small they were when I talked them on the phone. I wish I had flown there to see. I would have known they weren’t capable of producing millions and millions of pounds.
I would have received an additional 200 million dollars [if I hadn’t been forced to sell], but that wouldn’t have changed my life at all because I wear a $20 dollar outfit. But can you imagine how many lives I could have helped [with that money]?
WR: If you could do anything over what would it be? And what advice would you give to other entrepreneurs in rough patches like you were in?
DK: Most important, when you go to a meeting where your life is on the line, hire an attorney. Have someone who knows more than you do. They brought down an accountant and everybody and it was just me and my partner and by the way, he was at retirement age by then. Number two: if you have a product you want to take out a trademark, take it out in the state you’re in as well as federal.
WR: What have you done since selling the company?
DK: I created cellar licorice, cellar gumball, I created a snot candy in a plastic nose that squirted out of the nostril, chocolate looking dog doo called crape, I created a whole line of yogurt toppings. For the past 15 years I’ve been helping my daughter, Roxanne with her Sandy Candy.
WR: So you really dedicated your life to being an entrepreneur of candy.
DK: I love candy. It’s in my genes.
Klein is 64 years old and is writing a book with his son, A Man and His Beans. A documentary directed by directed by Costa Botes and produced by Eddie Schmidt, Doug Blush, Bert and Jennifer Klein about Klein’s life will air on November 27 at 8:00 PM, EST on the Documentary Channel. He now owns candy company, Can You Imagine That!
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