Is New Chapter changing under Procter & Gamble ownership?

Is New Chapter changing under Procter & Gamble ownership?

It’s been almost a year since Paul and Barbi Schulick announced selling their supplement company to CPG giant P&G. Some predicted huge changes for the longtime whole food supplement brand. Were these people right? We talked to Paul Schulick and New Chapter’s new CEO, Kyle Garner, to find out and learn more about what's planned for New Chapter's future.

When Paul and Barbi Schulick told the world last March that they were selling their dietary supplement company New Chapter to Procter & Gamble, the reaction from the natural products industry was mixed. Certainly, some championed the sale for its ability to bring greater scale to New Chapter’s business of making quality whole foods supplements. Others, however, were swift to bemoan losing an independent supplement brand that had long been a favorite within the natural channel to a multinational consumer packaged goods giant.

Many predictions were made for how P&G would change New Chapter. “I see the end of a great company & it’s products,” wrote one anonymous commenter on this site in response to the news.

Now that nearly a year has passed since the Schulick’s announcement, New Hope was wondering what really has changed so far for the supplement company and what's planned for the future. We sat down with Kyle Garner, New Chapter’s new CEO, and Paul Schulick, the company’s co-founder, to find out. Below is an edited transcript of our discussion.

newhope360: The question on everyone’s mind is what change has P&G's ownership brought to New Chapter?

Kyle Garner: The big thing for us is that we’ve been committed to trying to maintain the magic of what makes New Chapter New Chapter. The biggest way we have been able to do that is through maintaining the key leaders. Aside from me coming in, the rest of our leadership team is the same. The rest of our broader team is also the same. We have added roles and that has been great. We have invested heavily in our science and innovation team and more than doubled the size of that group to give us added resources in what we think is a very important space for us. We have also invested in and added people to our quality and regulatory group. But the core of the team is the same as it has been, and having people such as Paul still playing a leadership role has been critical to guiding us through this last year. The things that people have known and loved about New Chapter are the very things we are trying to carry forward into the future.

Paul Schulick: The only piece I would add would be to all the people who were concerned in the month or two following the transaction. In the very beginning of our process, we also had those same concerns. But as soon as we started working together as a team, it became incredibly clear that what Kyle referred to as the magic of New Chapter was not only going to be preserved but it was actually going to in many ways be enhanced. When I started in this industry 30 years ago I had a dream that we would be able to reach a large group of people with a quality product that would make us all proud. That dream is becoming more and more a reality.

What do you believe is making that dream more of a possibility?

PS: As Kyle said, we are increasing the sizes of our teams responsible for bringing out the quality product. I know that there are a number of naysayers who were suggesting that our quality would be reduced by the presence of a large multinational corporation like Procter & Gamble, but as we very quickly discovered, it has been exactly the opposite. They sent in their teams of supply chain and quality experts to enhance our skills and that has been very beneficial. Before the sale, we were a relatively small company with $100 million approximately in sales, but we now have [P&G’s] resources to buoy up many areas of our business. It is giving us the opportunity to hold this vision of reaching more people with our quality products and bringing more people into the stores.

The future of New Chapter distribution

Speaking of stores, what are your distribution plans for New Chapter moving forward?

KG: Our focus right now is 100 percent on selling products in the channels where we sell them in today. So we are going to continue to keep our focus on the natural channel and our ecommerce business. No one will ever say never when it comes to expanding distribution, but right now we see that there is so much upside with our current focus that we have no immediate plans to change that. When you hear the feedback from consumers who are interested in the category but have not yet heavily engaged, you see that there is so much upside when you get them engaged and educated. That’s why we don’t have any short term plans to broaden our distribution.

We do have limited international distribution, but our core business is in the U.S. and we plan to stay focused on that right now with our existing retail channels.

I imagine that is very reassuring news to your current retail partners. How has retailer response to the acquisition evolved over the last year?

KG: Evolution is a good way to put it. The good thing is that we have had a lot of time to meet with our retailers through our incredible sales force that is out in the field. We have been talking to retailers and sharing the work we are doing and the message that we are committed to keeping New Chapter New Chapter. That has helped, as has the opportunity for me to get to know the retailers. We have done several events where we have retailers come in and talk with Paul or myself or Herb Lewis, our vice president of sales. We do this because we want to hear what the concerns are and address those head on.

I don’t want to speak on behalf of our retail partners, but the indication we are getting is that, by and large, people are seeing that actions speak louder than words. Nothing we said on March 16 of last year would have eased people’s nerves, but most of our retailers are responding well because we are living up to the standards we set for ourselves and are following through on what we said we would do. The retailers value the New Chapter partnership. It was kind of a humbling experience because the retailers’ initial concerns were driven out of their love for this brand and what it has meant for them and their consumers.  That is why we wanted to make sure we heard them out and listened to their concerns and addressed as many of those as we could.

PS: In the absence of facts or of actually being at New Chapter and seeing what is happening here day to day, the mind can create in that vacuum all kinds of fear. What was really beautiful was to actually do some traveling with Kyle. When we visited one of our key accounts in Detroit, you could see that people were looking at New Chapter particularly closely and wondering if we were really going to remain true to our values. What was amazing was that even in first 10 minutes after people started hearing the message from Kyle, they started relaxing and started knowing that this really could mean an amazing opportunity for their store. They realized they could have not only the quality product they’ve always had from New Chapter but that it could become better because we were doing even more testing than before. They also began to understand that we are now capable of doing a higher level of marketing and present to consumers in ways we could not have afforded to before.

Easing employee fears

How have New Chapter employees responded to the new ownership?

KG: When I came in last summer when the deal closed in June, I was obviously nervous about what to expect in terms of the reaction. Human nature would dictate that any change of this magnitude would leave people with a lot of questions. We’ve gone out of our way to remind people of our commitment to maintain the magic of New Chapter but also to invest in the people. One of my priorities was to not only learn from New Chapter employees and spend time getting to know our organization but to also help by providing coaching and training. As one example, we have created a leadership development program, and we are building an onsite training center—so we are setting up both internal and external training opportunities that New Chapter employees historically didn’t have the access to before. I think when the employees saw that they could grow and develop and that P&G wasn’t looking to change things or their managers and coworkers, it was very reassuring.

After those first few tense weeks, people have adjusted way quicker than I could have imagined. I think they are actually starting to see some of the benefits at a department level that come with forming new partnerships. They also see that they can continue to work autonomously and that they can work in an organization that is a stand-alone entity and can operate the way it always has. That is empowering for the people, and that is why we are hearing the positive response. It also doesn’t hurt that we didn’t come through and change benefits, pay and titles or try to merge systems. We left all of the New Chapter systems in place.

PS: Any kind of change almost always comes with some degree of trepidation or fear. In the early days there was that distrust, but what was really beautiful was to see how people over this past year have remained faithful to their commitments. Not only have there not been the damaging changes people feared, but we have actually buoyed up so many of our human resources systems and provided more training opportunities. I think people are pinching themselves a little bit to realize that New Chapter is not only as strong as it was before but now has the opportunity to become many times stronger.

You mentioned that you now have more marketing muscle to get the story of New Chapter out to more people. What are you doing to accomplish this?

KG: Even for people who are engaged in the category and want to learn more and find new supplements to take, the vast majority don’t even know our products exist let alone why we think they are different. That is why one of the things our leadership group committed to do early on is to investigate new ways to get the word out. We think this can be a win-win for us and our retailers because obviously driving awareness benefits us but it also gets people to go into these natural food stores perhaps for the first time to look for a New Chapter product. We are in the process of rolling out a program to drive education and awareness to create a win-win scenario through which we can grow the New Chapter business but also get consumers who may not have considered a product like ours in the past to walk into a natural food store, talk to the great employees in the store and learn more about the category, and hopefully pick up a New Chapter product while they are there.

Having shopped at many natural foods stores, I know that often something magical happens when you walk in and begin engaging with the employees. So it’s great to hear that you’re trying to give more people a reason to walk into a natural food store because it will benefit the store but it will also benefit the shopper in many powerful ways.

Paul: It’s interesting because my mother and sisters have almost never been in a health food store. These are my own mother and sisters! When they heard that Procter & Gamble had purchased New Chapter, it almost gave a sense of instant credibility with them. This is quite the contrary to what some of the people in our industry might have thought. My mom said to me, ‘Oh, there must really be something to this herbal stuff.’ I have been her son for 60 years, but it meant something to her that the same people who make Downy are also now interested in herbs. To me that says that maybe we have jumped over one of the biggest hurdles.

Speaking of hurdles, New Chapter supported California's Prop 37, but that proposition did not pass voters in the last election. How else is New Chapter supporting GMO labeling?

KG: Our biggest point of support is our connection with the Non-GMO Project and the ongoing partnership we have had there. We are the only company with a full line of supplements that carry the NON-GMO Project certification. We believe so much in this process that we have moved the Non-GMO Project seal to the front label of our packaging on many of our products because we know it is so important to our consumers. We want to be leaders in this space and continue to push for our connection with the Non-GMO Project and move that forward because we know our consumers demand it and we want to give them what they are looking for and give them a choice when it comes to supplements. Not all supplements can have that designation, so we are proud to be a part of that and want to continue pushing forward the non-GMO labeling movement for our consumers.

As with most things, consumers end up driving any change in the marketplace eventually. We welcome the discussion even though some of the debates may be ugly. Regardless of what the legislation ends up looking like, we think conversation is important—and we hope it will allow consumers to look at our brand in a different light.

Have you seen any personal changes, Kyle, since joining New Chapter?

PS:He has a beard now!

Kyle: Aside from the beard, there is something about breathing the air here that is special. It is something you don’t get in a lot of other places. There is something unique that Paul and Barbie have built and it has been maintained. Every time I travel with Paul, I learn something new about the company history and why he does things the way he does. Those have been great learning experiences. My supplement intake also has gone up quite dramatically.

I am bringing some different ways of thinking to New Chapter, but I also get to be a bridge back to the people I still know and talk to at P&G. I share with them cool things New Chapter is doing that they may want to reapply. I get to share good learning in both directions.

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