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Mr. Clean: North Little Rock's Harvey Cobb tries to clean up with his secret stain-removal formula.

No one realized it at the time, but a nuclear warhead wasn't the only thing that accidentally was launched, during a 1980 explosion at a Titan II missile silo, near Damascus in Van Buren County.

The incident grabbed worldwide attention when a warhead ended up in a nearby ditch. It also inadvertently launched a business enterprise called Harvey Gene Inc. and a secret stain-removal formula.

The all-purpose cleaner has won over hundreds of satisfied customers through exposure in Wal-Mart stores.

The performance of Harvey Gene's Carpet Clean has led to other sales opportunities.

Will this North Little Rock venture be the next great Arkansas success story?

Will there be a multimillion-dollar payday at the end of the line?

Is the sky the limit for the 48-year-old man behind the product, Harvey Gene Cobb, a retired Air Force officer.

Or will his dream go bust?

Cobb says he received a third-party offer to sell about 40 percent of his company for $3 million following a May 28 article in the Arkansas Gazette. He claims he didn't blink twice before rejecting the offer as too low.

JM Products Inc.'s North Little Rock plant is geared up to handle 100,000 cases of production for Cobb, although annual sales have a long way to go before that production level is required.

The Damascus explosion propelled Cobb into this whirlwind of manufacturing and marketing.

Cobb was stationed at the Air Force's Strategic Air Command headquarters in Omaha, Neb., at the time. The military tapped him to head a program to improve safety at aging missile silos. Later, he helped deactivate the entire missile wing.

During the assignment, Cobb gained some chemical expertise. His creative light bulb clicked on.

The end result was Harvey Gene's Carpet Clean, the stain remover Cobb invented following hours of experimentation as a garage chemist.

"You might say I had a charmed career in the Air Force," says Cobb, who retired in February 1987 as a lieutenant colonel. "Everybody has a dream, but they are reluctant to take that first step."

Cobb's first step came in April 1990 when he decided to close his contracting firm, that built custom homes, and devote his attention to marketing the cleaning product.

"We didn't want him to look back and say, 'I wish I had tried that,'" says his wife, Kathryn, who operates Trends And Traditions, an upscale North Little Rock accessory store for homes and offices.

Encouraged by friends and family, Cobb took the entrepreneurial plunge armed with a business management degree from Louisiana Tech University at Ruston and a master's of business administration from Webster University at St. Louis.

The Wal-Mart Way

Wal-Mart Stores Inc. has designated Harvey Gene's Carpet Clean as a local purchase opportunity.

Cobb ships the product directly to about 80 Wal-Mart stores in Arkansas, Oklahoma, Missouri and Kansas, according to North Little Rock attorney Tom Donovan.

Does Wal-Mart plan to distribute Cobb's product throughout its growing retail empire?

Donovan, Cobb's corporate lawyer, says, "We've sent in our application for national distribution, and I assume we will get it."

"We're selling 2,000 cases per month right now and looking at a substantial increase in distribution with Wal-Mart," Cobb says.

The enthusiastic pronouncements are tempered by the observations of a buyer at Wal-Mart's Bentonville headquarters.

Is the product on the brink of mass distribution through Wal-Mart and Sam's Clubs?

"Not at present," the buyer answers. "We have limited shelf space in the household department. |Harvey Gene's Carpet Clean~ doesn't have enough sales to knock someone out of their regular shelf space."

Resolve and Woolite are the leading brand names. They have a combined 65 percent share of the Wal-Mart market.

So far, Harvey Gene's Carpet Clean has had a mixed degree of success with Wal-Mart shoppers.

"Stores that have put it out on display and demonstrated the product have been rewarded with higher sales," the Wal-Mart buyer says. "But store sales have been disappointing without the demonstration.

"In household chemicals, name |brand recognition~ is everything. Either that or you have a real sharp price. Obviously, this product does not have that going for it.

"The product has done OK, but I wouldn't categorize its overall sales as phenomenal."

The cleaner usually retails at $2.37 for an 8-ounce bottle, $7.37 for a 32-ounce bottle and $18.50 for a gallon bottle.

Cobb hopes to gain additional exposure with product lines such as Auto Clean, Pet Clean, Upholstery Clean, Dry Clean and Jewelry Clean.

The products are essentially repackaged Carpet Clean since it is a general-purpose cleaner. The various names are designed to attract consumers who want a product geared to their specific needs.

The cleaner smells of ammonia, but the chemical and its scent are used only for psychological effect. The active ingredients are odorless, according to Cobb.

Harvey Gene's Carpet Clean first found its way to a Wal-Mart sales floor at Benton. That breakthrough is a testament to Cobb's persistence and resourcefulness.

He tried repeatedly to gain an audience with Wal-Mart buyers at Bentonville. Product samples were sent to the corporate offices for testing and subsequently lost.

As a single-product vendor, Cobb didn't carry the weight of a Procter & Gamble Co. or a Beatrice. His product was lost in the shuffle of a vast retailing machine.

A frustrated Cobb finally decided to make a direct pitch to a Wal-Mart store in the Indian Hills area of North Little Rock. He convinced employees there to let their cleaning crew try his product on the store's well-traveled carpet. Harvey Gene's wowed them and gained a new customer.

But without approval from Bentonville, the store manager would not consent to sell the product.

The experience was not without its rewards, though.

Cobb was given the name of a contact, Don Henry, manager of the Benton Wal-Mart. Cobb was told that Henry, a longtime Wal-Mart employee and friend of Sam Walton, might have enough autonomy to give the product a shot.

Cobb won Henry and his staff over with a personal demonstration and samples. The Benton Wal-Mart made an initial order of 36 cases in March, and Cobb was in business. He and his wife also held an in-store demonstration to promote the product.

"We've done real well with it," Henry says. "The product does what it says. We haven't done much advertising, but if you ever get it in a consumer's hand, they keep coming back.

"This is the kind of product that is going to slip up on the big boys before they know what hit them."

More Connections

Frank Fletcher heard about Cobb's product through a mutual friend and gave the cleaner a shot at North Little Rock's Riverfront Hilton.

"From what we can tell, other carpet cleaners will remove the stain but leave an oily residue that causes the stain to reappear," say a Riverfront Hilton employee. "Harvey Gene's doesn't leave a residue. We haven't come across anything yet it won't remove."

Fletcher told a friend about the product. That friend happened to be an independent manufacturer's sales representative.

Dick Jefferson, based in Wexford, Pa., contacted Cobb in August and struck a deal to market the product in the Northeast.

"The response we've seen ... has been very encouraging," Jefferson says.

He expects Harvey Gene's Carpet Clean to become a major source of his income during the next two years.

"That's how enthusiastic I am about the product," Jefferson says.

Jefferson landed Stop & Shop, the No. 1 grocery chain in the Boston area. It operates 80 supermarkets. The parent company, Bradlees New England, operates 130 discount stores.

The Stop & Shop buyer grabbed a black magic marker, purposely smeared a stain on his mauve carpet and told Jefferson to get it out.

"I thought to myself, 'Harvey, you told me it would take out magic-marker stains, and I sure hope you weren't lying,'" Jefferson recalls. "It took out the stain, and you couldn't even tell where it had been.

"The most amazing thing about Harvey's product is how quickly people become believers. The last thing a buyer wants to see is another household product. But once they see it in action, that changes."

Stock Talk

Cobb's company, however, may have violated Arkansas securities laws while raising working capital.

Harvey Gene Inc. has sold 55,000 shares of stock through private placement to about 20 investors. The corporation is authorized to issue 1 million shares of stock, of which Cobb plans to retain at least 700,000 shares.

Cobb is contemplating the company's largest private placement to date.

"I'm leaning toward issuing $1 million worth of stock," Cobb says.

Proceeds from the offering will be used to bankroll the purchase of materials needed to fulfill future contracts, according to Cobb.

It all adds up to 66,666 shares at the proposed price of $15 per share.

Why hasn't Cobb or his attorney filed any paperwork with the state Securities Department?

"We didn't make a securities filing or exemption because the investors contacted us directly," Donovan says.

"There were no third-party sales |through broker dealers~," Cobb says.

Security industry observers say the company may still need to make a formal exemption filing.

The possible violation could be nothing more than an oversight. None of the investors have filed complaints.

Company pro formas were floating around Arkansas earlier this summer. It is unclear whether the material came solicited or unsolicited.

"I'm not familiar with that," Donovan says.

The material notes that Cobb was the head of a $150 million chemical program. It's a reference to the annual budget of the Titan II project he worked on, Cobb claims.

The stock price has gone up since the first private placements last year. Harvey Gene Inc. stock has carried values of $4, $6, $10 and $12 per share in relation to company sales.

That steady increase has raised eyebrows in the financial community given the company's lack of a track record and its small asset base.

"The different stock prices reflect the progress we've made," Cobb says. "We've removed more risk and increased the value. It's growing so fast it's hard to keep up with."

According to Cobb, a determining factor in the stock price is the price-earnings ratio based on current sales. Major chemical companies have ratios between 30 and 50, Cobb says.

"If we were to use that kind of multiple, our stock should be selling for $150 per share," he adds.

No one will argue that Cobb is high on his venture. Apparently, so are his investors.

Among the investors is John Delich, chief executive officer of Mutual of Omaha Fund Management Co., a division of the Mutual of Omaha Insurance Cos. The fund management company oversees a $1 billion mutual fund.

"We met when he was based here, and our wives are friends," Delich says. "He and his wife are unique, creative people ... Harvey told me about his idea when he was based here. He seems to be having tremendous success so far."

Delich bought his piece of the action as a personal investment last year.

"I look for it to have a big, big future," he says. "I've given product samples to friends and acquaintances, and they just can't believe how magical it is."

Cobb says annual sales would be $14.4 million if the company had full distribution through the Wal-Mart chain alone. With those kinds of numbers, profits could be magical as well.

At this point, the operative term is "could be."

"I don't want to come across as a holy roller or anything, but the power of prayer has been tremendous in this project," Cobb says.

Getting a Wal-Mart football is certainly nothing short of miraculous.
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Title Annotation:all-purpose Harvey Gene's Carpet Cleaner
Author:Waldon, George
Publication:Arkansas Business
Article Type:Company Profile
Date:Nov 4, 1991
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