November 8, 2007 in Business

Sandpoint firm sells to Illinois company

By The Spokesman-Review
 

About 15 years ago, Kevin and Annie Shaha traded lucrative marketing jobs and life in Chicago’s fast lane for the tranquility of Sandpoint. They bought a small company and moved it with them.

Racor Inc. sold storage racks. From less than $500,000 in annual sales, the couple built Racor into a firm with annual revenues exceeding $10 million. Racor’s product line evolved into garage storage organization units for tools and sporting goods. Its products appear on the shelves of Target, Home Depot, Fred Meyer, Shopko and Lowe’s.

Last week, Racor was purchased by Illinois Tool Works Inc., a $14 billion firm that owns 750 business entities in 49 countries. The Shahas will stay on during a two-year transition.

“We’ve ridden some very nice business cycles,” said Kevin Shaha, Racor’s president, noting correlations between the company’s growth and America’s obsession with real estate and remodeling.

Racor’s sales grew 40 percent in the 12 months following the Sept. 11 terrorist attacks. People were focused on home and family, and that translated into cleaning up cluttered garages and organizing closets, Shaha said.

The real estate boom that peaked in 2005 also drove Racor’s growth. People were “either feathering their nest or moving and feathering their new nest,” he said. But the company continues to have strong sales during the real estate slowdown, as homeowners focus on sprucing up their existing homes, Shaha added.

Racor sells nearly 60 products, including bike hangers, ski racks, fishing rod organizers, and wheelbarrow and ladder hooks. The $200 “heavy lift” is one of its best sellers. The 4-by-4-foot platform is suspended from a ceiling and raised and lowered with a hand crank. It can support up to 250 pounds, “for your lawn mower or your kayak,” Shaha said.

The heavy lift is the firm’s most expensive item. When the Shahas took over Racor, they worked to lower prices. Many of the items were selling in the $40 to $50 range. The couple, with their marketing backgrounds, knew that was too high to get Racor’s products into big box retailers.

“The research shows that people want to spend less than $300 to organize their garage,” said Shaha, citing figures from the Peachtree Consulting Group in Atlanta.

Outsourcing Racor’s product manufacturing to China was part of the solution. The company also stopped shipping containers of product from the Port of Seattle to a Sandpoint warehouse, which was extremely expensive, Shaha said. Instead, the containers are sent to a port in Oakland, Calif., and shipped to rented warehouse space in Sparks, Nev.

Now, many of Racor’s products retail for $19.95. The firm employs five people in Sandpoint who are focused on sales and marketing.

Target was the firm’s first big account. A sales representative at a trade show stopped at the Shahas’ booth. “I think this is something Target might be interested in,” he told the couple.

About three years passed before Target agreed to a test run of the product line in 200 stores. It was successful enough to warrant a national test in Target stores, which landed Racor a contract.

“Target as a corporation saw that garage storage was really an emerging category,” Shaha said.

Other large retailers followed.

Illinois Tool Works approached Racor about purchasing the company. The firm was a good fit because it already sells other products to most of Racor’s customers, including screws and fasteners, Shaha said.

Racor will continue to manufacture products under its brand name.

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