Natural Foods Merchandiser

Contract: Tom's culture to stay

In an effort to preserve its quirky culture in a corporate atmosphere, natural personal care company Tom's of Maine included certain conditions in its recent sales contract with Colgate-Palmolive, and gave 120 employees a total of $1.2 million in loyalty bonuses.

According to Tom's spokeswoman Susan Dewhirst, Colgate agreed in March to not only pay about $100 million to acquire 84 percent of Tom's, but also promised that the company will stay in Maine, won't test on animals or use animal ingredients, will keep products "natural and sustainable," will continue its educational partnerships with retailers and nonprofits, will allow employees one day off a month to do volunteer work, and will continue to donate 10 percent of pretax revenues to programs benefiting the environment, the needy, arts and education.

In addition, the contract stipulated that co-founder Tom Chappell will remain chief executive of Tom's for three to five years, and all profits will be reinvested into the company for five years. Chappell's wife, Kate, will keep the title of vice president, but will work more as a consultant, Dewhirst said. The Chappells, who founded Tom's in Kennebunk, Maine, in 1970, also have the option to sell Colgate their remaining stock in the company.

Tom Chappell said the sale is necessary to help his company further expand into the mass market. According to Dewhirst, only 2.5 percent of American households currently buy Tom's products, but the penetration potential is 25 percent.

Tom's of Maine manufactures about 90 different natural personal care products, including toothpaste, mouthwash, floss, soap, deodorant and shaving cream. Dewhirst said Tom's is the No. 1 natural oral care brand in America, with a 60 percent market share.

That, along with the fact that Tom's has increased its sales 20 percent a year for the last couple years, spurred Colgate to offer $100 million for a company that had revenues of about $50 million last year.

Natural personal care products analyst Scott Van Winkle said the fact that an $11 billion company like Colgate is willing to pay that price gives "a lot more validation for the natural personal care category." According to Colgate statistics, the U.S. market for natural oral and personal care products is worth $3 billion and is growing at 15 percent a year.

Van Winkle, managing director of equity research for international investment firm Canaccord Adams, said he expects Colgate will probably impose "more of a corporate culture" on Tom's, but won't change its overall image. "Colgate has to keep [Tom's] the same for its brand integrity to remain. I can't imagine seeing the Colgate label on Tom's products anytime soon."

Natural Foods Merchandiser volume XXVII/number 5/p. 1

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