In the week following Procter & Gamble's announcement about acquiring New Chapter, there are still many questions left unanswered about New Chapter's future. But one thing is clear: The natural products industry is inflamed by the news.
In social media and on newhope360, comments ranged from "I see the end of a great company & its products," to "I can no longer recommend New Chapter to my patients." Many are likening the purchase to Clorox and Burt's Bees.
While this type of acquisition is very unusual for P&G, Elizabeth Bankowski, chair of the New Chapter board, told newhope360 that the New Chapter team is convinced that P&G has good intentions for the future of the company. But does the good will end between the acquirer and the acquired?
In an article titled, "New Chapter sells out to Procter & Gamble, part of the global corporate elite," NaturalNews.com takes a strong stance against potential good coming from the acquisition, calling P&G the "Monsanto of the personal care products industry." Editor Mike Adams writes, "these stories always have the same ending: The products get watered down, consumers shift their demand to a smaller, trusted company, and the financials of the once-great small company collapse."
On the flip side of the argument, an anonymous supporter on newhope360 points to P&G as a "phenomenal company that will learn the business slowly and determine the leverage points to have the brand New Chapter really succeed in the marketplace. I wouldn't be afraid or dismiss the future with New Chapter."
Regardless of which side is taken, one central theme dominates the conversation: Do acquisitions kill a brand's authenticity?
Do acquisitions kill authenticity?
In a NEXT Forecast email yesterday, we posed this very question about authenticity, writing: "The struggle between fueling growth and maintaining a company's authenticity is perhaps the most significant source of consternation for the natural, organic and healthy products market. At no time is this friction greater than during an acquisition." (You can join the conversation on Twitter using #next4cast.)
Consider the lemonade stand metaphor. A child running a little lemonade operation is encouraged by a neighbor to work hard and succeed. The child turns into an adult and expands his business until he owns his own high-rise office building. The now middle-aged man sells his lemonade business and the former neighbor victimizes him for his success and calls him a "sell out."
This scenario is more acceptable in businesses outside the natural industry, where consumers don't feel that they've been integral to the success of the brand. The New Chapter acquisition is so heartbreaking for independent natural retailers because much of "the brand equity in our industry is with the retailer and not the merchandise," said Bill Crawford, director of retail programs at New Hope Natural Media.
For example, if someone buys Tide or Bounty, they often don't recall where they purchase it. But New Chapter stuck by the natural retailer and primarily built its business in the natural channel. It's not uncommon to find well-known natural brands such as Silk or Amy's in conventional grocers. But well-known supplement brands?
"While the food part of our business has ended up everywhere, the supplement part of our business has stayed pretty close to home," said Crawford. "In recent years so many grocery brands have been bought by Coke, Pepsi, General Mills, Kellogg's, Kraft, and ConAgra that a purchase of a food brand doesn't create much of a stir anymore."
Past acquisitions point to the future?
As in the food business, mergers have and will continue within the supplement space. So should retailers start minimizing the New Chapter line now, because they fear P&G will diminish the company's importance on their shelves? Or, should they wait until the SKUs start disappearing?
That's what happened when Nature's Way, a subsidiary of Dr. Willmar Schwabe Pharmaceuticals, acquired Enzymatic Therapy in 2009. Enzymatic Therapy went from several SKUs in natural stores to about six, recalls Crawford.
The power of the natural retailer
What natural retailers do, and how they think about acquisitions, has the potential to shape the future of what natural consumers think about New Chapter. New Hope Natural Media's Future of Wellness research shows that consumers still trust their local natural retailers and look to them more than conventional retailers for guidance on health and wellness.
If natural retailers lose faith and trust in New Chapter, and consequently remove the brand from their shelves, they may lose customers who will likely go to a conventional store to purchase it. But they also may be setting a precedent for core consumers about which brands are really best to buy. If P&G changes nothing but distribution of New Chapter supplements, this judgment could be disastrous to the brand that owes its success to these very same retailers.
Ultimately, time will tell what happens with formulation, distribution and marketing of New Chapter by P&G. In the meantime, New Chapter Co-founder Paul Schulick has expressed his excitement at "delivering the wisdom of nature to people and the planet in ways we never even imagined." This sentiment is not uncommon in the natural industry, and is an admirable anchor which should give dissenters hope in the future of the company.
After all, many brands and stores are in existence not to fatten their owners' wallets, but to bring health and wellness to those who use their products.
What do you think? Do acquisitions kill authenticity? Leave a comment or tweet with #next4cast.