Growth discipline

Executive Summary
Company. Naples Soap Co. Industry. Retail Key. Manage growth slowly to keep control.

When the recession hit, Deanna Renda returned to where it all began: the farmers market.

Renda, the founder and CEO of Naples Soap Co., had built the retail chain from scratch. She started selling homemade soaps at farmers markets, which drove traffic to the first store in Tin City in Naples in 2009.

But after building the chain to five stores by 2011, Southwest Florida remained gripped in recession. “At one point we were doing five farmers markets a week in addition to five stores,” Renda says. “It was harrowing.”

Renda blocked out negative media reports as the recession dragged on and she dug in. “A lot of it is staying positive,” she says. “I had to put blinders on.”

That relentless drive helps explain how Renda has remained focused on her retail goal of opening 20 stores in the next five years. When large hotel chains came calling to propose a deal to buy soap products for their guests, she declined because the margins were so thin.

Renda maintains that same kind of discipline today, preferring to be conservative and open two stores a year rather than many more. In recent years, Naples Soap has opened locations in Lakewood Ranch, Key West and Sanibel at the rate of a store a year. A store on Marco Island is about to open, marking the second one this year. “I've seen a lot of companies implode and get crushed under the weight of their own success,” says Renda.

But there's no time for rest. The company is moving its headquarters to larger space in Fort Myers later this month to accommodate future growth. “I haven't had a vacation in four years,” Renda laughs.

Those who know Renda understand her drive. “What I've observed in her is an ability to constantly think new, almost sometimes reinvent,” says Julie Schmelzle, senior vice president with Bank of America Merrill Lynch in Naples.

Years ago, Schmelzle was surprised to find Renda at the farmers market. Both knew each other because they had children at the same Naples school. “It was a Saturday morning,” Schmelzle recalls. “What are you doing? You're peddling soap at the farmers market?”

But Schmelzle quickly realized Renda had found a great niche selling natural soaps without the chemical ingredients that tend to aggravate people with skin conditions such eczema. In fact, the company's best-selling soaps are those with no scent. “She has a great product and can apply a great business sense to it,” Schmelzle says.

Managing growth
Renda has been very careful about managing growth, preferring to maintain control of the company than to sell stakes to venture investors or franchising the stores. Her goal is to open two stores a year for the next five years, eventually reaching 20 stores.

“A lot of companies feel a pressing need to grow fast,” says Patrick Renda, a former tech-fund manager who is now Naples Soap's chief operating officer and Deanna's husband. “One of our core foundations is to grow conservatively, not to grow yourself out of business.”

For example, several large hotel chains proposed that Naples Soap manufacture products for guest bathrooms. Renda says she was flattered by the fact that these chains wanted her products, but she says the margins were razor thin. “They wanted to buy bars for 19 cents,” she says, while her soaps retail for $8.50 in stores.

“You can get stars in your eyes,” Renda says. “But at the end of the day, the numbers don't lie.”

Instead, the company is focused on opening stores in resort areas in Florida with bank financing from Synovus Bank and Fifth Third Bank. “We have it down to a science now,” says Renda, who has developed her own training program for new and current employees. (The company does not disclose sales or other financial information.)

Recently, for example, Naples Soap opened a store on Sanibel, the island in Lee County that's popular with vacationers who rent by the week or month. “The ladies have time to go shopping,” Renda says.

Naples Soap is working on a loyalty program to reward frequent customers. For example, Renda is working with a company called Flok that sends customers a discount message to their phone whenever they're close to the store.

Target: 20 stores
On Aug. 27, Naples Soap will move its headquarters to Fort Myers in 11,000 square feet of warehouse and office space off Alico Road. That's nearly triple the amount of space the company operates from today in cramped space off Pine Ridge Road in Naples.

Industrial space has become a rarity in Naples as the recovery takes hold. “We looked for over a year and a half in Collier,” says Deanna Renda, who notes that real estate costs are 20% less in neighboring Lee County. “There isn't enough industrial space. We exhausted all of our avenues.”

Still, Renda says she's moving the company out of Collier County reluctantly. “It's very bittersweet for me,” she says. “I've raised my kids here.”

The move to Lee County, financed with a Small Business Administration-backed loan, will give Naples Soap better access to stores both north and south. Renda is also scouting sites for new stores on the east coast in places such as Palm Beach, Jupiter and Stuart as well as North Florida towns such as Destin, Panama City and Jacksonville.

At a time when many retailers are reported lower year-over-year sales at stores open longer than one year (“same store sales,” in retail lingo), Naples Soap's have grown 6% for the first half of the year through July, Renda says.

Naples Soap used to manufacture the soaps it sells, but the volume has grown to the point where Renda had to contract that part of the business to other U.S.-based manufacturers. That combined with the added distribution space in Lee County will allow her to focus exclusively on future sales growth.

For example, Naples Soap has developed new products such as its first homeopathic cleansing bar for people with eczema approved by the Food and Drug Administration. Renda estimates that about 40% of her customers are people with a skin condition.

Renda also says the company plans to boost its e-commerce in 2016, which has already seen sales double year over year with little promotion. Because so many of Naples Soap's customers are tourists, Renda says there's little risk that online sales will come at the expense of store sales.

The wholesale business could get a boost, too, if a deal to license Naples Soap products in the United Kingdom comes together. The company already has a similar deal in Japan.
Renda doesn't rule out distribution through other channels, too, such as upscale grocery stores. “There's a future for us in mass market,” she says.