Hanna?s Heats Up Global Competition

Burt Hanna fumes when he talks about cheap Chinese candles.

The president of Hanna’s Candle Co. of Fayetteville said he has increased production by 700 percent since he began supplying candles to Wal-Mart Stores Inc. in 1997, but heated worldwide competition has kept profits at a flicker.

“We had to drop our prices to meet the Chinese competitors,” said Hanna, a professional water skier turned entrepreneur. “It’s tough. This has turned into a real business.”

Cranking out about 20 million candles a year in its 1 million SF of factory space, Hanna’s may be the largest candle maker in the world. But Hanna said it can be tough for an Arkansas company to compete on a global scale, even if its main buyer is just 30 miles away in Bentonville.

Hanna said his Chinese competitors pay $2 per day for labor. Hanna pays about 50 times more than that, including $2 per hour just for each employee’s health insurance coverage.

In addition to lighting a fire under his business, Hanna said being a Wal-Mart vendor has opened his eyes to international competition.

“That’s why I love Wal-Mart,” he said. “They’ve let me see how big the world could be. It’s unbelievable … We’re the biggest consumer nation in the world, and Wal-Mart has increased everybody’s standard of living nationwide.”

According to the National Candle Association, U.S. retail sales of candles amounts to about $2 billion per year. About 96 percent of all candle purchases are made by women.

Hanna won’t reveal his revenue numbers, but in 1999, he told the Northwest Arkansas Business Journal he brought in $38 million the previous year and hoped to be doing $200 million a year in a decade.

Now, six years later, Hanna said he is “nowhere near” that $200 million figure. Revenue increased dramatically from 1997 to 2000, but it’s been tough since then, he said.

“Since 2000, it’s put hair on our chest,” Hanna said.

The 10 Percenter

Speaking at the Rogers-Lowell Chamber of Commerce annual banquet held in February, Wal-Mart CEO Lee Scott said the world’s largest retailer lost $18 million last year because Wal-Mart chose to buy from one U.S. manufacturer instead of a foreign competitor.

Scott said U.S. consumers will spend an extra 10 percent to buy domestically made goods, but if the American products are 30 percent more, U.S. shoppers will turn to imports instead.

So, Wal-Mart apparently follows a similar plan when it comes to its vendors. Scott didn’t say what Wal-Mart does if a U.S. manufacturer’s prices are 20 percent more than that of a foreign competitor.

Hanna said Scott wasn’t referring to his candle company with the $18 million figure. But Hanna believes his company falls within that 10 percent range Scott mentioned.

“All I want to do is compete on common ground,” Hanna said. “I think they give us that 10 percent grace. People can come in from China and make [candles] for 10 percent less.”

The 10 percent grace makes sense because there’s more inventory risk from buying overseas, Hanna said. When candles are aboard a ship for a long voyage, they can suffer from heat or water damage. A shipment could arrive melted, he said.

“You see that at some of these stores,” Hanna said. “Cheap Chinese candles will slump. American candles will slump, too, if you put them in a hot truck in the middle of summer …

“Our job is to keep the jobs in the United States. And the only way to do that is to be disciplined both in manufacturing and administration.”

From a Bag of Twigs

Since its inception in 1987 as Hanna’s Potpourri Specialties, the company has grown from a backyard bag of leaves and twigs to be one of the largest, candle manufacturers in the world.

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

“If it wasn’t for Donna, I’d probably be driving a truck,” Burt Hanna said.

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 of Fayetteville and added that to his $4,000 in savings to start his business.

By the end of that first year, they had sold $125,000 worth of potpourri.

In 1989, Hanna made his first sell to Wal-Mart, which bought 360,000 bags of potpourri to sell for Mother’s Day.

In 1992, Hanna’s was doing about $3 million in potpourri sales when Hanna bought 10 pounds of canning wax at a Food-4-Less supermarket and began experimenting with candle making.

In 1997, Wal-Mart asked Hanna’s to produce a particular candle similar to one buyers had seen at another store. Hanna wrote up a proposal, Wal-Mart accepted and Hanna’s began shipping 6×6-inch “Radiant Accents” candles to the Bentonville company in October 1997. Now, the candles Hanna’s makes for Wal-Mart have a variety of different brand names, including “Mainstays,” although Hanna’s doesn’t make all Mainstays candles. None of the candles made by Hanna’s is branded with Hanna’s name.

The Wal-Mart candle deal meant Hanna’s had shifted its focus from potpourri to candles. So in 1999, with 90 percent of its business in candle making, Hanna changed the name from Hanna’s Potpourri Specialties to Hanna’s Candle Co. Now, Hanna said, potpourri makes up only about 1 percent of his production.

Since entering the candle business, Hanna’s has experimented with 100 different fragrances, 42 different wick sizes, five different waxes and four different additives.

“You multiply all those together,” Hanna said, “and you get a hundred million variations. A change of 1 or 2 percent in a blend can make a huge different in all the characteristics.”

Wal-Mart Effect

Hanna’s now provides candles to Wal-Mart stores in the United States, Puerto Rico and Brazil as well as to other national retailers such as Eckerd Drug Stores and Albertsons supermarkets.

“Our goal is to sell to the top 250 retailers in the country,” Hanna said.

Hanna’s had 100 employees when it landed the Wal-Mart business. Now, Hanna’s has 250 full-time employees and about 125 temporary employees in the fall.

Hanna won’t talk about dollar figures when it comes to his Wal-Mart business. But he will wax wonkish about wax.

“My job is not about the money,” Hanna said. “It’s fun to make stuff.”

When he began providing candles to Wal-Mart in October 1997, the amount of wax he was using jumped by more than 13 fold from three truckloads in September to 41 in November. Each truckload contains 4,200 pounds of wax, so the amount went from 126,000 pounds to 1.7 million pounds in two months.

“That’s almost 14 times more,” Hanna said. “We took 38 more truckloads of molten wax … I believe we are in the top five candle-wax users in the United States. This is probably the first or second biggest candle factory in the world.”

Now, Hanna’s uses about 30 train-car loads of wax per month. A train car holds about 160,000 pounds of wax, which translates to an average of 4.8 million pounds of wax per month.

In the company’s busiest month, Hanna’s used 18 truckloads, or 7.9 million pounds of wax. That’s enough wax to cover a football field to a depth of four feet or to fill two Olympic-sized swimming pools.

Hanna’s wax comes primarily from Shell and Citgo refineries in Texas, Louisiana and Pennsylvania.

Hanna said he sold so many of his top-selling candle to Wal-Mart last year that if the five-inch-tall candles were laid end to end, they would stretch 475 miles — past Memphis to the east or to Des Moines, Iowa, to the north.

If every one of the company’s production lines were running, Hanna said he could produce 20 percent of the world’s candle supply.

Hanna’s has three factories in Fayetteville and one in Greenland with a total of about 1 million SF. The company also has factory outlet stores in Fayetteville and Tontitown.

Hanna’s also brings in about $1 million a year in sales from its Internet site www.candlemart.com.

Hanna’s Future

Hanna’s has begun making other consumer products, including candle holders, air fresheners and AromaFire scented fireplace logs.

“They’ve got a little pine scent to them,” Hanna said.

Hanna said the business of being a manufacturer shifts about every six months, so he’s never sure what the future will bring.

“My goal is to live to 94 and die in a motorcycle wreck,” he said. Hanna owns three motorcycles, a Yamaha V Max, Honda V65 Magna and Kawasaki KX250.

As far as the company goes, Hanna said, “In 100 years, if we grow by 5 percent per year, we’ll be bigger than Procter & Gamble is today.”