The Yankee Candle Company, Inc.

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The Yankee Candle Company, Inc.

102 Christian Lane
Whately, Massachusetts 01093
U.S.A.
Telephone: (413) 665-8306
Toll Free: (800) 243-1776
Fax: (413) 665-4815
Web site: http://www.yankeecandle.com

Public Company
Incorporated: 1973
Employees: 3,300
Sales: $256.57 million (1999)
Stock Exchanges: New York
Ticker Symbol: YCC
NAIC : 339999 All Other Miscellaneous Manufacturing; 442299 All Other Home Furnishings Stores

The Yankee Candle Company Inc. is the leading maker of scented candles. Yankee Candle sells its candles through approximately 130 company-owned retail stores and through wholesale gift store customers who operate approximately 12,500 stores nationwide. The company’s products are available in more than 160 fragrances and are marketed as Yankee Candle branded products bearing the trade names House-warmer, Country Kitchen, Aroma Formula, Flickers, and Frosted Favorites. Yankee Candle’s main store is located in South Deerfield, Massachusetts, where the company also operates Chandler’s Restaurant and the Yankee Candle Car Museum, both of which are adjacent to the store. In addition to its retail and wholesale sales, the company also sells its candles through direct mail catalogues and its Internet web site. Manufacturing operations are in Whately, Massachusetts, where the company maintains a 300,000-square-foot production facility. Internationally, Yankee Candle sells candles through overseas distributors, and it operates a distribution center in Bristol, England. The investment group Forstmann Little & Co. controls Yankee Candle. Together with Yankee Candle management, the investment firm owns 74 percent of the company’s stock.

Yankee Candle’s Origins

Growing up in western Massachusetts, Michael J. Kittredge led the life of a typical teenager. In the mid-1960s, when he was 12 years old, he formed his own rock band. For the next several years, Kittredge divided his time between school and playing guitar in front of a loyal local audience. By the end of the 1960s, Kittredge, like most teenage musicians, saw his dream of rock stardom evaporate. His band broke up in late 1969, dashing any hope of Kittredge’s music career extending beyond the confines of his native South Hadley. Worse still, Christmas was near, and Kittredge was strapped for cash. “I was a 16-year-old kid,” Kittredge reflected in an April 1997 interview with Gifts & Decorative Accessories magazine. “My rock band had just broken up, I had no money, and I needed a gift for my mother.” Kittredge’s solution to the problem unexpectedly launched his career as an entrepreneur, marking the beginning of Yankee Candle’s existence.

Lacking the money to buy his mother a gift, Kittredge relied instead on his resourcefulness. He looked around his family’s house and grabbed some used milk containers, old metal bowls, and used crayons. Kittredge melted the crayons and experimented with various fragrances, eventually producing his first candle. Kittredge’s gift dilemma was solved in time for Christmas, but his mother never received the candle. The entrepreneur in Kittredge prevailed over the anxiety of a teenage son unable to offer his mother a gift for Christmas. Kittredge sold the candle to a neighbor for $2, and from that moment forward, his life would be devoted to selling candles.

After selling his first creation, Kittredge made another candle for his mother’s gift, but turning a profit was already on his mind. He began devoting his spare time to his new business, a venture that had all the trappings of sidewalk lemonade stand. Kittredge hired his cousin Ken, paying him $1 an hour to help make candles in the Kittredges’ South Hadley garage. The pair made their candles for friends and family, with each making an extra effort to drink as much milk as possible so they could replenish their supply of empty milk cartons. Initially, Kittredge used the name Candles by Michael Kittredge for his enterprise, but he eventually settled on The Yankee Candle Company because he believed “a stodgier-sounding name would be better,” as he explained in his April 1997 interview with Gifts & Decorative Accessories.

1973: Yankee Candle Stands on Its Own

As Kittredge matured, so did his burgeoning candle-making business. After finishing high school, Kittredge enrolled at the University of Massachusetts, but he continued making candles in his parents’ home. By 1973, it was hard to discern whether the Kittredges’ house was a home or a candle factory. The family furniture was lost amid piles of finished and unfinished candles, and the Kittredges had had enough. They asked their son to move his bustling candle-making business elsewhere, prompting Kittredge to move his manufacturing and warehousing operations to Holyoke, Massachusetts. The relocation marked the promotion of Kittredge’s candle-making pursuits from hobby to legitimate business. The site of the company’s new home strained the meager resources supporting the former garage-based business. Kittredge could only afford a run-down, abandoned mill. The facility had no electricity and no running water, yet “the business expanded slowly but steadily from there,” Kittredge remembered in a December 1996 interview with Chain Store Age Executive magazine.

With no clear idea of how to run a manufacturing operation, Kittredge learned by his mistakes. He performed a full range of tasks at the Holyoke plant, leading the candle-making efforts, acting as the company’s marketing chief, and sweeping and mopping the factory’s floors at the end of the day. Yankee Candle subsisted largely by word-of-mouth advertising, as one Holyoke neighbor told another Holyoke neighbor about the fragrant, long-burning candles being made at the dilapidated mill. The news filtered beyond Holyoke, and within months, lines of customers were waiting outside Yankee Candle’s manufacturing plant. A few short years after occupying the old mill, Kittredge had completed the transformation from a home-based sidelight venture into a full-time, genuine business. By the mid-1970s, Yankee Candle had 30 employees, and its manufacturing space had doubled from the area first occupied in 1973.

Having gained his business footing, Kittredge followed his initial burst of expansion by slowly nurturing his company’s growth. The production and retail aspects of the company’s operation were intertwined at the Holyoke site, an arrangement that existed until Yankee Candle reached its first financial milestone. In 1983, after a decade of production at the Holyoke site, Kittredge’s company recorded $1 million in sales. By this point in the company’s development, the old mill in Holyoke, like the South Hadley house before it, could no longer adequately accommodate Kittredge’s booming business. Another move was needed, precipitating Yankee Candle’s relocation to South Deerfield, Massachusetts, where, for the first time, the company’s production and retail operations were separated. Near the company’s new production facility, a 2,000-square-foot store was established, an addition that Kittredge credited for greatly increasing the pace of Yankee Candle’s growth in subsequent years.

A year before the move to South Deerfield, an important new member of the Yankee Candle’s management joined the fold. Michael D. Parry was hired by Kittredge to serve as the company’s general manager. As Yankee Candle evolved from regional concern into a national force, Parry would serve as Kittredge’s most influential advisor.

Once settled in South Deerfield, the 14-year-old company prospered, generating sufficient profits to fuel more ambitious expansion. Yankee Candle’s flagship store flourished during its first several years in business, encouraging Kittredge to add a second retail unit in 1986, when he opened a store in Sturbridge, Massachusetts. Shortly thereafter, a small chain of Yankee Candle retail outlets made its debut, beginning with a third store in Lenox, Massachusetts, and followed by a spree of store openings scattered throughout the New England area. As the scope of Yankee Candle’s operations widened, Parry’s responsibilities increased, culminating in his promotion to vice president in 1989. The company exited the 1980s with Parry in charge of all the wholesale and retail functions, as well as the company’s manufacturing and distribution activities.

1990s: The Rise of the Nation’s Premier Candle Maker

Yankee Candle’s third decade of existence proved to be a decisive era in the company’s history. The company branched out into new areas, exploring different ways to display its candle-making talents, and it expanded its retail arm aggressively, particularly late in the decade. Yankee Candle’s accelerated growth mirrored that of its industry, as the scented candle segment of the giftware industry recorded lively revenue growth in the 1990s. Driven by annual revenue increases of between 10 percent and 15 percent during the decade, the domestic market for scented candles blossomed into a $2.1-billion-a-year business by the end of the 1990s.

Company Perspectives:

Since 1969, Yankee Candle Company has produced scented candles … NOT jeans, shampoo or bath soaps. We are candlemaking experts, the same candlemakers who have been making Yankee Candles for decades. And, incidentally, we are not affiliated with any of our imitators!

Kittredge seized the opportunities made available in the fertile business climate, assuming an aggressive posture that dramatically increased the size of his company. In the early 1990s, he moved his production site again, relocating to nearby Whately, Massachusetts, where Yankee Candle’s manufacturing operations occupied a sprawling 300,000-square-foot facility. The South Deerfield store remained in place, although it too was increasing its square footage year by year. At roughly the same time, the company opened its first store tailored exclusively for the Christmas season, a theme that would be expanded upon in 1993 when Yankee Candle opened a Bavarian Christmas Village. Kittredge then applied the company’s resources in two entirely new directions, establishing Chandler’s Restaurant and the Yankee Candle Car Museum, which housed a collection of antique and classic automobiles and motorcycles. Both the restaurant and the museum were adjacent to the company’s South Deerfield store, adding to the drawing power of the Yankee Candle complex. By the end of the decade, the company estimated that it received more than 2.5 million visitors each year at its South Deerfield site, ranking the store as the second-largest tourist destination in Massachusetts.

By the mid-1990s, shortly after the restaurant and the museum began operating, Yankee Candle had long distanced itself from its modest beginnings. The company eclipsed $100 million in sales in 1996, collecting $112 million, a total generated by the company’s 32 freestanding stores and 15,000 wholesale accounts nationwide. Since moving production from the old mill 13 years earlier, sales had increased robustly, swelling nearly 30 percent each year. The company’s flagship South Deerfield store, originally a 2,000-square-foot shop, occupied 60,000 square feet by 1996, serving as the anchor of a retail chain on the verge of exponential growth. Kittredge planned to open between 10 and 17 new stores in 1997, but, as he plotted the company’s strategic development, he began to delegate greater responsibilities to Parry. Kittredge ceded day-to-day control over Yankee Candle’s operations to Parry in July 1996, naming him president. Kittredge remained chief executive officer and chairman, but he would soon relinquish further control as Yankee Candle entered the most ambitious expansion period in its history.

Yankee Candle’s expansion during the late 1990s more than doubled its size, far outdoing the achievements of the previous 25 years. After launching www.yankeecandle.com on the Internet in 1996 for informational purposes, the company enhanced the web site in 1997 to accommodate online purchases. The primary focus, however, was on greatly expanding the company’s chain of retail stores, an objective that could only be fulfilled with far greater capital than the company had at its disposal. Consequently, Yankee Candle entered into a recapitalization agreement with Forstmann Little & Co., a New York investment firm that acquired a 90 percent equity interest in Kittredge’s company for approximately $500 million. The agreement, brokered in March 1998, was a tremendous boon to Yankee Candle’s ability to accelerate the expansion of its retail chain, an infusion of capital that added “fuel to the ship and captain and crew of Yankee Candle in order to reach the destination sooner,” according to a company executive quoted in the July 5, 1999 issue of Investment Dealers’ Digest.

As Yankee Candle set its sights on expanding aggressively, control over the company shifted hands. After its sizable investment, Forstmann Little gained the power to elect Yankee Candle’s entire board of directors and to control the company’s management, policies, and strategic direction. Further, Parry’s ascension within the company’s executive ranks continued as Kittredge’s influence waned. Parry was named chief executive officer in November 1998, gaining control of Yankee Candle at a decisive juncture in the company’s history. The objective was to blanket much of the country with Yankee Candle shops, focusing primarily on establishing a greater retail presence in shopping malls, as opposed to the freestanding stores that constituted the majority of the existing Yankee Candle chain.

Yankee Candle concluded the 1990s with a flourish of activity, setting the tone for the company’s further expansion in the 21st century. On the wholesale side, the company bolstered its overseas business by establishing a 27,000-square-foot distribution center in Bristol, England, which began operating in January 1999. By the end of the year, the company had forged business relationships with more than 500 United Kingdom-based accounts and roughly 30 accounts on the European continent. In pursuit of a European candle market estimated at $1 billion, Yankee Candle also had agreements with 14 distributors whose territory of service covered 17 countries. Yankee Candle’s retail chain drew considerably more attention from industry observers, as the company used the capital from the Forst-mann Little investment and from its debut on the New York Stock Exchange in July 1999, which yielded $97 million in proceeds. The company entered ten new states in 1999, opening 40 stores primarily in shopping malls. By the end of the year, the Yankee Candle chain comprised 102 retail outlets in 30 states, helping the company collect $256 million in sales three years after passing the $100 million in sales mark.

Yankee Candle’s expansion in 1999 represented the model of growth for the company’s immediate future. Parry announced plans for opening 40 additional stores in 2000, a target number the company anticipated reaching each year for the next several years. If Yankee Candle’s expansion efforts unfolded as planned, exponential sales growth appeared likely, ensuring that Kittredge’s creation would continue to hold sway in the fastgrowihg scented candle market in the decade ahead.

Principal Subsidiaries

Yankee Candle Holdings Corp.; Yankee Candle Company (Europe), Ltd. (England); Chandler’s Tavern, Inc.; Yankee Candle Car Museum, Inc.

Key Dates:

1969:: Using melted crayons, 16-year-old Michael Kittredge makes his first candle.
1973:: Upon outgrowing the space available in his parents’ house, Kittredge moves his candle-making operations to an old mill in Holyoke, Massachusetts.
1983:: Manufacturing and retail operations are relocated to South Deerfield, Massachusetts; sales reach $1 million.
1986:: A second store is opened in Sturbridge, Massachusetts.
1993:: The opening of Yankee Candle’s Bavarian Christmas Village leads to the development of the Yankee Candle Car Museum and the opening of Chandler’s Restaurant in South Deerfield.
1996:: Annual sales pass $100 million.
1998:: Yankee Candle enters into a partnership agreement with investment firm Forstmann Little & Co.
1999:: Yankee Candle completes its initial public offering of stock.