Hanna’s Burning Desire

MediSphere delivers investors Fayetteville candle maker hopes to lure tourists, Internet shoppers to a new store, Web page

Since its inception in 1987, Hanna’s Candle Co. has grown from a backyard bag of leaves and twigs to a business that makes millions of candles and $38 million per year in sales.

And the Fayetteville company continues to grow by about 27 percent per year in annual sales, says Burt Hanna, who founded the company as Hanna’s Potpourri Specialities along with his wife, Donna.

Hanna changed the name in June to reflect the nature of the company’s business. Candles now account for 90 percent of Hanna’s manufacturing and sales.

Hanna’s Candle Co. currently has 204 employees. If the growth continues as Hanna predicts, the candle and potpourri company will have about 1,000 employees and $200 million in annual sales a decade from now.

About half of Hanna’s sales revenue comes from six major retailers: Wal-Mart Stores Inc.; J.C. Penney Co.; Sears, Roebuck and Co.; Kroger Co.; Kmart Corp.; and Dayton Hudson Corp. The rest is from “mom-and-pop businesses,” Hanna says.

The sales boom has prompted Hanna to begin construction of his second outlet store, an 88,000-SF retail barn in Tontitown that he says will be “a combination of the Bass Pro Shop and Old Navy of candles,” complete with candle-making exhibits and a coffee shop. (The Bass Pro Shop in Springfield, Mo., is that state’s leading tourist attraction. Old Navy is a store owned by Gap Inc.)

And Hanna’s Candle Co. is also taking advantage of the Internet. The company recently launched Candlemart.com, which it bills as the “world’s largest candle store on the Web.”

One man’s twigs …

To many people, it would seem that Burt Hanna, 36, has had a charmed life. He went from professional water skier to entrepreneur and made Hanna’s Candle Co. the robust business it is today.

In 1987, Hanna’s wife, Donna, made potpourri from leaves, twigs and pine needles she found in their yard. She added a little perfume her and gave the fragrant sachet away as a gift. That was the first batch of Hanna’s potpourri.

For the next two months, the Hannas drove from Eureka Springs to Tulsa to Dallas, selling potpourri out of the trunk of their 1982 Honda Accord. The orders began to come in and warehouses were soon needed.

Hanna borrowed $2,500 from McIlroy Bank & Trust to start his business.

“That’s all I could borrow unsecured,” he says.

Since then, Hanna has acquired two other potpourri businesses, Agape Products of Memphis in 1991 and Aromance of Dallas in 1997, but Hanna says neither of those was a major acquisition.

Core business

Although he sells to some of the world’s largest retailers, Hanna says independent stores are his core business.

In 1989, Hanna got his first order from Wal-Mart. The world’s largest retailer wanted 360,000 bags of potpourri to sell for the approaching Mother’s Day.

At the time, Hanna’s Potpourri had just 11,500-SF of manufacturing and warehouse space and 45 days to crank out the potpourri.

“It was a huge challenge,” Hanna says. “The most challenging thing in doing business with Wal-Mart is the scale you have to do it in.”

“Everything has to be done on such a large scale,” says John Scott, chief financial officer of Hanna’s Candle Co. “If you goof up, it’s a big goof-up.”

“They’re not so overly picky that they’d drive you crazy,” Hanna says. “There are some [retailers] out there that are just nightmares to deal with. Wal-Mart really tries to make that vendor-partner thing work.”

The opportunity to work for Wal-Mart came around again in 1997.

“They gave us the chance to make a certain candle for them,” Hanna says.

Within a year of landing that contract, Hanna’s Potpourri tripled its output of scented candles, doubled the number of employees and spent millions on plant improvements to handle the Wal-Mart orders.

“I never dreamed we’d be selling this many candles,” Hanna said in 1997.

Hanna declined to give specific sales figures for Wal-Mart orders, saying only, “It’s important to us, that s for sure.”

Hanna says Wal-Mart buyers had seen a candle they liked at another store and asked Hanna if he could make a similar one for a particular price. After some researching and calculating, Hanna came up with an acceptable proposal. The deal was signed in May 1997, and Hanna’s Potpourri began shipping Radiant Accents candles to Wal-Mart in October 1997. Now, the candles Hanna’s company makes for Wal-Mart are labeled “Evergreen & Ivy” or “Botanische.”

The Wal-Mart contract gave Hanna’s workers more job security. Before the Wal-Mart deal, 60 percent of Hanna’s candle sales were in the fourth quarter of the year as Christmas approached. With Wal-Mart as a buyer, Hanna could sell candles steadily year-round. The other five major retailers became Hanna’s Potpourri customers after Wal-Mart.

“It’s really been kind of eye-opening,” Hanna says of the Wal-Mart contract. “It’s helped me see the big picture, what I need to focus on.”

Expansion

Hanna says his estimate of 27 percent annual sales growth since 1987 is for all of those years except for three. He threw those three numbers out of the average because two were excessive growth years and one was for a year in which growth was off from its usual rate.

Hanna’s Candle Co. now has 300,000 SF of space in three buildings in Fayetteville’s South Industrial Park. Hanna is currently constructing a one-story, 661,500-SF plant and distribution center on land he purchased from the city in the industrial park. The new plant, the largest one-story building in Washington County, will operate in addition to the current factory.

In November, Hanna opened a 10,000-SF factory outlet store on 15th Street in Fayetteville, near his plant. In addition to candles and potpourri made by Hanna’s Candle Co., home decor items such as candle holders are sold at the store.

Hanna says the store’s success spurred him to begin construction of a second store, which will be located on U.S. Highway 412 in Tontitown. The new store will be 88,000 SF in size (the size of an average Wal-Mart Discount City) and have a 24,000-SF open-air pavilion to one side.

Hanna hopes the new store, which should be completed by the end of October, will serve as a tourist attraction.

The second-largest tourist attraction in Massachusetts is Yankee Candle Co. in South Deerfield, Hanna says.

Hanna plans to pattern the new store after Yankee Candle. He hopes the store will become a tour bus stop for folks on the way to Eureka Springs and Branson. At the store, he’ll have a candle-making video tour and customers will be able to make their own candles there.

With the outlet stores, Hanna says, he won’t undercut the retailers he sells to, but he will sell overruns and factory-second items there at a discount.

First on the Web

Scott says Hanna’s Candle Co. recently established a page on the World Wide Web because the Internet could be a primary “delivery channel” in the near future.

Currently, however, Hanna says he only sells only $3,000 to $4,000 worth of candles per year via the Internet.

“It’s more of an experiment for us right now,” Scott says. “We just want to be prepared.”

Hanna says being on the Internet early could mean a huge difference in sales.

“The first one [on the Internet] usually wins,” Hanna says of Candlemart.com. “And it’ll be just another subsidiary of Hanna’s Candle Co.”

Hanna says it could be three years before his Internet sales top $1 million.

“We don’t want to miss an opportunity,” Hanna says, “and it’s still cheap to get into it.”

“You’d hate to ignore a delivery channel and find out later it’s become big,” Scott says.

One man’s perfume …

Although many people like the smell of scented candles, some Fayetteville residents don’t care for the odor they say Hanna’s factory emits.

Dan Coody, a real estate developer, and Sharon Hoover, a city planning commissioner, filed several complaints with the Arkansas Department of Environmental Quality saying Hanna’s Candle Co. was coating much of Fayetteville with an “artificial” sweet smell. Hanna’s was fined $5,000 but paid $1,000 in a negotiated settlement.

Coody is a former Fayetteville alderman who lost a mayoral bid in 1992 to Fred Hanna, Burt Hanna’s father. Coody lives about half a mile from Hanna’s factory, which is in the southern part of the city. He filed his first complaint against Hanna’s business in 1996.

Hoover lives about three miles from Hanna’s plant and says she can smell it at her house in central Fayetteville.

Coody says whatever changes Hanna’s has implemented have apparently worked. Coody says he thought Hanna must have installed carbon filters or an air treatment system.

“In the last couple of months, whatever they have been doing has been helping considerably,” Coody says. “It’s not the problem it was before. We hate that we had to hound them like we did, but it worked. We appreciate that they solved the problem for us.”

What did Hanna do to clean up the air?

“Nothing,” he says. “The honeysuckle is out of bloom, and the gladiolas are out of bloom. Now nobody is complaining. Everybody’s quit blaming it on me.”

That was news to Coody, who says this controversy didn’t erupt because he was sniffing honeysuckle.

“I bet if it was just the honeysuckle blooming the DEQ wouldn’t have fined him,” Coody says.