Blyth Industries, Inc.

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Blyth Industries, Inc.

100 Field Point Road
Greenwich, Connecticut 06830
U.S.A.
(203) 661-1926
Fax: (203) 661-1969
Web site: http://www.blythindustries.com

Public Company
Incorporated: 1977
Employees: 2,000
Sales: $331.34 million (1996)
Stock Exchanges: New York
SICs: 3999 Manufacturing Industries, Not Elsewhere Classified; 5199 Nondurable Goods, Not Elsewhere Classified; 5999 Miscellaneous Retail Stores, Not Elsewhere Classified

Blyth Industries, Inc. lights the way through the highly fragmented, and traditionally private, candle industry. With its Candle Corporation of America and other subsidiaries, Blyth designs, manufactures, and markets candles for nearly every market segment, as well as related items such as outdoor citronella products, potpourri and other fragrance products, candle accessories, and gift wrapping and gift bags. From a $3 million maker of religious and institutional candles, Blyth has grown into an industry powerhouse, with sales expected to near $500 million by 1997. Blyth’s products are sold under a variety of brand names targeting the entire spectrum of candle sales, from food service/institutional and religious markets, to mass merchandise and retail candles, to high-end specialty markets. Candle and home fragrance sales are generally grouped under Blyth’s Candle Corporation of America subsidiary and feature brand names such as Colonial Candle of Cape Cod, Mrs. Baker’s Original Recipe, Carolina Designs Ltd., Ambria, L’Aroma, Old Harbor, Aromatics, and Eternalux. Another subsidiary, Tulsa, Oklahoma-based Jeanmarie Creations, Inc., acquired in 1995, designs and produces decorative gift bags and “convenience” gift wrap products such as gift sacks, poly-gift bags, bike bags, and metallized tissue sheets and shreds. A fast-growing subsidiary of Blyth is its direct-selling arm, PartyLite Gifts, Inc., which, like Mary Kay, Amway, Tupperware, and others, operates through independent representatives, who host PartyLite Shows to sell Colonial Candle of Cape Cod brand candles and such decorative candle accessories as candle holders, silk floral arrangements, and wall sconces.

Domestic sales account for approximately 90 percent of Blyth’s revenues, with each brand segment represented by its own sales group. Blyth candles are sold through more than 20,000 department, gift, and specialty stores and more than 2,000 mass merchandisers. Major sellers of Blyth products include Wal-Mart, Mervyn’s, Bloomingdale’s, Nordstrom, Home Depot, J.C. Penney, and Target. In addition, the company supplies more than 1,000 food service and religious market distributors, including Kraft General Foods and Sysco Corporation. With its domestic business solidly in place, Blyth is seeing its fastest growth in the international market, with sales (including PartyLite Gift representatives) in more than 50 countries on six continents. Blyth has been particularly successful in bringing its consumer candles to Europe, a relatively untapped market. The company holds 25 percent equity positions in two United Kingdom companies, Colony Gift Corporation, Ltd. and Eclipse Candles, Ltd., with options to acquire full ownership positions.

Headquartered in Greenwich, Connecticut, Blyth’s manufacturing operations are located in Chicago, North Carolina, Florida, and Massachusetts. Between 1995 and 1996, the company’s employees grew from 1,400 to more than 2,000. Blyth’s growth can be expected to continue: In 1996, the company reached agreement with Hallmark Cards, Inc. for a joint marketing and distribution partnership. Under the agreement, Blyth will purchase Hallmark’s candlemaking production facilities, replacing Hallmark’s Canterbury brand of candles with Blyth’s Colonial and Mrs. Baker brands in the more than 5,000 Hallmark Gold Crown retail stores. Blyth is led by Chairman, President, and CEO Robert Goergen, who has also headed a venture capital firm, the Ropert Group, since 1978 and has been chairman of XTRA Corp., a trailer leasing company, since 1990.

Marketing 101 in the 1960s and 1970s

As late as the 1970s, it was barely possible to speak of a candlemaking “industry.” The candle market was highly fragmented among many small, privately held companies, each of which tended to be limited to producing for a specific market segment. Since the introduction of gas and then electric lighting, candle use had become increasingly marginalized, limited primarily to religious ceremonies or candlelight dinners. Despite an upsurge in candle use during the 1960s, driven by the hippie and “flower power” cultures, estimates suggested that the candle industry was worth barely more than $60 million per year. The majority of candle sales were in religious and food service/institutional products; the consumer market was largely untapped.

Enter Robert Goergen. When Goergen took over a small candle maker in 1977, he was just 37 years old and already had a varied career behind him. Goergen originally studied to become a nuclear physicist, but after taking a degree in physics from the University of Rochester, he decided he did not like that field. Instead, in-1960, Goergen enrolled in the Wharton School at the University of Pennsylvania, where he earned a master’s degree in business, with honors, in only one year. While in school, Goergen had worked for Procter & Gamble, and upon receiving his degree, Procter & Gamble made him a supervisor over a 16-member crew in its manufacturing operations. But Goergen’s career goals sought a more rapid rise than would have been available to him at Procter & Gamble. He entered the army, and then left military service after six months to join the McCann-Erickson advertising agency. Toward the middle of the 1960s, Goergen had risen to become a senior account executive, in charge of the Coca-Cola account.

Goergen had long set his ambitions, however, on the business side, and in 1966 he left McCann-Erickson for a position with the McKinsey & Co. consulting firm. With McKinsey, Goergen gained the experience in retail marketing strategy and in mergers and acquisitions of consumer goods industries that would prove crucial to his later success. Yet, after rising to principal partner in less than four years, Goergen made a new career move. As he told Forbes, “When I finished my reports for management I was out of the picture and had to start all over again. I got a good salary but I wasn’t staying around long enough to reap the big rewards. That’s when I decided to get into venture capital.”

Goergen was hired by Donaldson, Lufkin & Jenrette in 1973 and named administrative manager of DLJ’s Sprout venture capital investment group. Goergen found early success when he convinced his partners to invest $500,000 in start-up Royce Electronics, formed to distribute Japanese-made citizens’ band (CB) radios. As the CB craze built in the mid-1970s, Royce’s revenues jumped to $40 million per year. In 1975, just before the CB market became overcrowded, and then bust, Royce was merged into Masco Corp., netting the Sprout partners $7.5 million on their two-year-old investment. Meanwhile, Goergen’s success with DLJ led him to make personal, “hobby” investments in companies too small to capture DLJ’s interest. One of these investments, made in 1976, was in Candle Corporation of America, a small, family-owned Brooklyn, New York company with about $3 million in sales, primarily to the religious candle market. But when that company started losing money, Goergen and three partners each put up $25,000 and bought the company. Goergen was made chairman.

Building a Better Candle in the 1980s

Goergen explained the leap from investment to management to the Fairfield County Business Journal this way: “I had to personally guarantee company loans, so that really focused my attention.” Goergen’s first step was to change the name of the company, to Blyth Industries, an existing unit of Candle Corporation of America, telling Investor’s Business Daily, “We didn’t want to say ‘candle’ or ‘America’ in the name, because we wanted to move toward a broader product line.” Blyth’s first move was to expand the company into consumer sales. To accomplish this, the company acquired four small candle makers between 1977 and 1981, adding $16 million in revenues and adding the gift market to Blyth’s food service and religious market base. Each acquisition followed a similar pattern: The company would tighten the newly acquired company’s manufacturing process, strengthen management, develop new distribution channels, and step up new product development. With the increased revenues, Blyth next turned to a new acquisition.

By 1982, these acquisitions had helped raise Blyth’s sales to $26 million. But Goergen was also learning how to market candles, explaining to Forbes, “This is not a demand product—you have to push it.” The company’s marketing push was to create candles as an “affordable luxury” product. Toward this end, the company began expanding its product line as well as the nature of the consumer candle market itself.

Apart from candles made by the tiny artisan shops, candle manufacturers still produced almost exclusively white, unscented candles. As a consumer product, candles were most likely to be found on the dining room table. But Blyth set out to change the market. Between 1982 and 1985, the company focused on developing new products, introducing colors (to match the colors in a consumer’s home) and then fragrances to its candles. The company also introduced its own line of outdoor citronella-scented candles, replacing the standard glass holder with pails and colorful ceramic pots.

Company Perspectives:

While we have grown from a small regional operation to a leader in all significant market segments, we have not lost sight of the principles that brought us to where we are today —a commitment to quality for every market segment, entrepreneurial enthusiasm, tenacious examination of every detail, fiscal responsibility, and patience. We continually challenge ourselves to maintain high levels of performance in our existing businesses, while exploring new avenues for potential expansion.

By the mid-1980s, Blyth had achieved strong internal growth. But, to step up production, the company began to look outside the company to fuel its expansion. Goergen next directed Blyth’s energies toward consolidating the candle industry, creating a critical mass of products and retailers. In 1986 Blyth made its first major acquisition, of Old Harbor Candles, then a subsidiary of Towle Manufacturing. The following year, Blyth acquired the Lenox Candle assets, including its Carolina brand, from Brown-Forman subsidiary Lenox Inc., strengthening Blyth’s distribution to the retail and specialty store channels. The Lenox acquisition also placed Blyth in the lead among major candle manufacturers, ahead of Hallmark and Colonial Candle of Cape Cod. Both of the new subsidiaries kept their former management, operating as independent business units. In 1988, the company introduced a new subsidiary, Atmospherix Ltd., as it expanded its line of fragrance products.

Blyth’s next major acquisition came in 1990, with the purchase of former rival Colonial Candle of Cape Cod from General Housewares Corp. Colonial brought Blyth deeper penetration into the department store channel. The purchase also included Colonial’s direct-selling PartyLite Gifts unit. By then, Goergen had crafted the company’s unique industry position as a single-source supplier of candles, fragrances, and accessories across the full range of industry distribution channels. Two years later, Blyth made its next acquisition, of Aromatic Industries, a subsidiary of The Mennen Company. Aromatic, which was based in California, was one of the country’s leading producers of potpourri and other home fragrance products, which further complemented the Blyth line of products. By then Blyth’s revenues had reached $87.3 million. Net income for the year was $3.9 million, continuing the company’s unbroken record of profitability since Goergen assumed its leadership.

Burning Brighter in the 1990s

With the company’s wide assortment of candle designs, colors, and fragrances, and with its variety of accessories ranging from candle holders to potpourri, Blyth helped move candles beyond the living and dining room into the bedroom, bathroom, and throughout the consumer’s home. Aided by its insect-repelling citronella candles, Blyth was also able to extend sales from the typical candle buying seasons, Christmas and Easter, to more year-round revenues. The company also matched its segmented approach—from the high-end Colonial brand, to the mid-market Carolina brand, and the low-end Old Harbor brand—with a commitment to quality, describing the range of its products, in its first annual report, as “good, better, best.” And the company profited as well from the disposable nature of its products. As Goergen told Forbes: “We are in the razor business, except our razor blades burn.”

Having consolidated its position as the leader of the candle industry, Blyth entered the next phase of the company’s development, stepping up the introduction of new products, expanding its distribution channels, and improving its customer service and production efficiency. The company’s sales built quickly, to $116 million by January 1993 and to $157.5 million by January 1994, producing net incomes of nearly $6 million and more than $9 million, respectively. To fuel continued growth and to expand production capacity to meet the growing demand for its products, Blyth went public in 1994, raising more than $50 million. Goergen retained 42 percent of the company.

By then, the candle industry itself was growing by about 15 percent per year, aided by increases in the home decorating market. With cash raised from its public offering, Blyth added production capacity, building a new plant in Chicago, another in North Carolina, and buying a third in Massachusetts. The company next turned its focus on its international sales, which accounted for only five percent of total sales in 1994. To Goergen, the European market was especially promising, since, as he told Investor’s Business Daily, candles there were “still white and unscented.” In 1995, Blyth purchased 25 percent equity investments in two British candle companies, Colony Gift Corporation, Ltd. and Eclipse Candles, Ltd., whose product lines complemented Blyth’s domestic product base. On the domestic front, Blyth expanded its product lineup again, buying an 80 percent stake in Tulsa, Oklahoma-based Jeanmarie Creations, a maker of decorative wrapping paper, gift bags, and other accessories.

Through 1995, the company’s revenues rose again, from $215 million for the year ending January 1995, to $331 million for the year ending January 1996. Net income also continued to grow, to $13.3 million and to $24 million. By then, the company had made a secondary offering, of 1.5 million shares in October 1995. One month later, Blyth announced a two-for-one stock split. Proceeds from the new offering were earmarked for new capital investments and to make some $150 million in intended new acquisitions over the next several years. Goergen’s $25,000 investment was now worth more than $380 million.

In 1996, the company took two new steps to increase its share of the candle market. The first was its introduction of a new line of coordinated candles, potpourri, and home fragrances. Sold under the Ambria brand name, the new line was targeted especially at mass merchandisers such as Wal-Mart, extending the square footage given to Blyth products in such stores. The next step came with the announcement of the company’s partnership agreement with Hallmark, with the first shipment of Blyth products to Hallmark stores begun in June 1996. The Hallmark partnership was not yet expected to add greatly to Blyth’s revenues, predicted to reach $470 million for the year, for 1996. The full impact of the partnership, which offered the potential of adding Blyth products to more than 5,000 Hallmark Gold Crown stores, would not be known until the end of its 1997 fiscal year.

Principal Subsidiaries

Candle Corporation of America; Jeanmarie Creations, Inc. (80%); PartyLite Gifts, Inc.; Colony Gift Corporation, Ltd. (United Kingdom; 25%); Eclipse Candles, Ltd. (United Kingdom; 25%).