CandyWarehouse.com : Featured In Los Angeles Business Journal

Candy Man
By MAYA MEINERT – 12/15/2008
Los Angeles Business Journal Staff

Christopher Pratt came to California to help build a hybrid gas-electric car. Instead, he found success selling candy online. Pratt, whose background i

n electrical engineering led him to work on the design of General Motors’ first hybrid car, started CandyWarehouse.com Inc. 10 years ago, after the automaker pulled the plug on the vehicle. Disappointed in not being able to create a greener planet through engineering, Pratt turned to sweets. He sells candy over the Internet. His product lines range from the licorice sticks that you can buy at a grocery store to exclusive products specially produced for his company, plus vintage treats that people remember from childhood.“I thought, ‘I’m going to try something new and learn how the Internet works, and see if someone is willing to give me their credit card for some gumballs,’” said the Massachusetts native. Pratt, 40, now has the keys to a candy store that is on track to make $7.5 million in sales this year.

Candy Man

“The biggest challenge was learning how to run a business,” he said. “The first few years was me getting a real-world M.B.A. – learning how to price things and manage people. Most engineers are not people-oriented, you know.” Now that he has figured out how to make his company profitable, Pratt said managing the fast growth is his biggest issue. Revenue rose to $5.8 million in 2007, an increase of 122 percent compared with 2005.

The company has outgrown all of its software systems; warehouse and office space; staff; and even its Web site, which is in the midst of a redesign. Pratt is also looking to lease more space in Irwindale, where the company is based, and on the East Coast.

“A building on the East Coast would double the size of the business pretty quickly,” he said. “I’m sure I’m losing sales on the East Coast.”

One of the key elements of CandyWarehouse is its exclusive deals with candy manufacturers. Pratt’s company is the only seller of specific types of confections, including marshmallow-flavored black-and-white swirl lollipops and Jelly Belly’s Pink Chocolate Dutch Mint Balls. CandyWarehouse sells about 100 exclusive candies, and people who fall in love with them are a captive audience.

Sucharita Mulpuru, an e-commerce analyst with Forrester Research Inc. in Cambridge, Mass., said that the following a candy retailer can create is important.

“One of the things to remember about the candy space is there are people who have brand loyalty, and if you can cater to that selection that you can’t find elsewhere, that’s a huge opportunity,” she said.

Delectable sweets

CandyWarehouse buyers have to buy a quantity, such as a box of Hershey bars. The average order is for about $100. The company’s most popular product is the hard candy stick: More than 255,000 were sold last year.

Forty percent of the company’s inventory is dedicated to chocolate, including harder-to-find variations such as chocolate poker chips, sunflower seeds and “rocks.”

The Web site offers buyers the opportunity to choose their candies by color, which is helpful for people who want to use it as part of a décor for weddings, corporate events or retail promotions. The latter makes up about one-third of the business.

Retailers, including high-end Los Angeles clothing brand Juicy Couture, have purchased candy to include in window displays. J.Crew bought oversize swirl lollipops to promote its Crewcuts children’s line.

“CandyWarehouse is definitely a good resource,” said Heather McAuliffe, senior director of public relations for J.Crew. “They have a very wide selection of candies, lots of nostalgia and hard-to-find items, and reliable and efficient customer service.”

Other candy sites, including CandyFavorites.com, GroovyCandies.com and CandyDirect.com, also offer candy sales by color, and some sites also carry nostalgic candy brands. Pratt said that he believes he has an advantage due to his large inventory, exclusive deals and quick turnaround.

Earlier this year, the company supplied 43,000 pounds of candy for a special-edition CD gift set of Madonna’s “Hard Candy” album in two weeks, which included time to put the packaging together.

Going it alone

Pratt’s move to California was prompted by his passion for creating an environmentally friendly car. He worked for Monrovia-based AeroVironment Inc. on a hybrid version of GM’s EV1 electric car.

When GM canceled the project, Pratt got inspiration from a candy store across the street from where he ate lunch every day.

With $500, he began selling candy online. He printed labels from his home computer, drove the orders to UPS and answered the phone himself, changing his voice every time he picked up the phone to create the illusion of more employees.

By the end of the first year, he had made $10,000. By the following year, he was making enough to support himself and quit his engineering job.

In late 1999, eCandy.com came on the scene with millions of dollars in venture capital, but the company went under a year later, and Pratt bought its assets for pennies on the dollar. He brought in his own investors, but their dreams of going public and becoming dot-com tycoons quickly died, too. He bought out his investors last year and became the sole owner.

He’s enjoying the candy game despite its challenges.

“I picked something fun,” Pratt said. “It’s not the best business idea because shipping costs are so high for candy due to the weight. I should have picked jewelry. But I’m glad I did it.”

CandyWarehouse.com Inc.
Headquarters: El Segundo
Year Founded: 1998
Core Business: Selling bulk candy online
Employees: 18 (up from 15 in 2007)
Goals: To become a $100 million business with better worldwide distribution
Driving Force: Online consumer demand for specialty candy

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