Tom's of Maine founder paints intricate portrait of family and business values in new venture

Editor's Note: This version adds more details from the interview with Tom Chappell, which took place in late 2014 and was published in the Dec. 1 issue.

Three days after signing the papers to sell his iconic Tom’s of Maine to Colgate-Palmolive Co. in 2006, Tom Chappell and his son Matt went to Wales to hike. But two weeks of daily treks for 12 hours caused a lot of discomfort, mostly in what he wore.

“I was quite annoyed by what I had to wear,” he told Mainebiz in a recent interview at his office on Main Street in Kennebunk, where he runs his new company, Ramblers Way Farm, in a restored 1790 building that is now certified to the LEED gold standard.

Chappell noticed his choices for the layer of fabric next to his skin were Capilene, wool or polyethylene. None worked satisfactorily.

“The Capilene developed a body stench I couldn’t get rid of if I washed it. And wool is scratchy and bulky,” he says. “I came with the idea that I needed something that would dry out quickly, wick moisture from my body and be warm so I didn’t freeze to death as temperatures dropped later in the day.”

The idea for his second company emerged from that discomfort. Chappell focused on wool fiber because it is hollow and acts as an insulator to keep the cold out and the warm in.

He returned to Maine and researched sheep that produced a very fine fiber, as he also wanted his fabric to be light weight. The most available sheep in the United States whose coats could be made into fine fiber are Rambouillet. They thrive in Montana, where he sources their wool, though he has 12 of the large sheep at his farm in Maine.

But Chappell, 71, an eco-entrepreneur known for instilling sustainable and family values in his companies, took time to think about his future and how to use his abilities before finally starting Ramblers Way in October 2009.

He recently ruminated on his experiences with Tom’s of Maine and how they led to his founding the clothing company, which like Tom’s, embraces the unusual model of being environmentally friendly and for-profit. An edited transcript follows.

Mainebiz: Why start again?

Tom Chappell: It’s not as if I had to do the same thing over and over. I hear the term ‘serial entrepreneur.’ It sounds almost criminal. But the answer is Maine’s unemployment [at the time] was around 10%, and I care a lot about Maine. And I am too young to retire. I sold Tom’s in 2006 (to Colgate-Palmolive Co.). I started Ramblers Way in October of 2009. In the years between Tom’s and Ramblers, I spent a lot of time thinking about how to use my abilities. I wanted to be useful. I’m too much of an active, pioneering person just to retire, play golf and join four or five boards of directors.

MB: What did you do during your time off?

TC: I actually took time out and went to see a counselor who I knew from his days at Trinity College in religious studies. I counseled with him for five or six months about how to use this next period of my life. I thought it was an important question and I didn’t want to be cavalier about it. I also did a lot of reading. What I learned from my counseling is that I was free from any psychological or physical constraint to do what I wanted. What I really wanted to do was work with my family and start a business that would have social impact. And I had mentors, like a man in New York who is 92 named John Whitehead. He wouldn’t even discuss retirement with me. He said, ‘You’re too young.’ He’s still working. He’s a highly admired financial and political world person.

MB: Were any of these mentors from Harvard Divinity School, which you attended?

TC: Yes, I met him [John] through my combined relationship with the Harvard Divinity School and the Episcopal Church. And so — whether it was mentors or psychologists — I had people telling me why not use your energy, your passion and your money to do something that is helpful and useful. Physically I felt great, and I had money for the first time in my life.

MB: Why did you sell Tom’s of Maine?

TC: Because I got sick of it. I got sick of being a manager, running a board, running a leadership team, and not having my hands in things and living in a world that was dependent upon what Walmart and Target decided. And, I knew that as successful as we were, I didn’t have the resources or the leverage to grow the business from $50 million to $250 million. That was the next stage. I didn’t have the resources nor the interest to do that. Sales were $45 million [at the time] and we had 165 employees, 25 of whom were sales people out in the rest of the country, and 140 were here in Maine.

MB: What is the link between the Divinity School and Tom’s of Maine?

TC: I started the company in 1970, Kate [my wife] and I, with the idea that we could do something that was good for the environment and the customer and do it in a for-profit business model, not a not-for-profit model. In the 1960s, if you were interested in environmental change, you worked for a non-governmental organization or the government. But a business did not combine those same two values, for-profit and care for the environment.

MB: So you didn’t want to get a church job?

TC: I wanted to become an English professor. I was an English major at Trinity College. I graduated in 1966 and I chose to go into business instead. I worked for Aetna Life in insurance sales for two years, and then I worked for my father in his business, which was waste treatment. And then I started Tom’s of Maine in 1970. I didn’t go to the Divinity School until 1986.

MB: Why did you go to the Divinity School?

TC: I felt that Tom’s had lost its way. We had adopted what business schools would characterize as professional and strategic values. But we had built Tom’s on creativity and intuition. We’d built the business in specialty health food stores and brought the products into CVS and Hannaford Bros. and Stop & Shop and transitioned from the health-committed customer who really knew the ingredients in a health food store to a health-concerned consumer who didn’t know ingredients and shopped in supermarkets and drug stores. That transition required skills, communications, systems and packaging choices, all of which I needed help with.

We were the first natural product to go onto the supermarket or drug store shelves next to toothpaste. There was a big education process. So we started to hire people from Procter & Gamble and Gillette to help us understand the world that we were going into. I had a great board of people from Booz Allen Hamilton and from Harvard Business School. Their wisdom was what I needed to professionalize the board, the leadership team and the strategy.

I realized that was true. After five years of working with that transition, we made all the numbers we had hoped to make, improving gross margins, driving sales at high double-digit growth rates and penetrating supermarkets and drug stores across the country. But we didn’t create a single new product. We had lost our willingness to take risk. We had stopped our creative evolution. I felt myself shutting down and wondering what was next. And I scooted to Harvard Divinity School in 1986 for half the week and the rest of the week ran Tom’s here.

In the four years I got my Masters of Theological Studies, I realized that my intuition was right, that we by now had the knowledge base to retrieve the business from this professional grip and branch out and reach out once again with new products, new markets and internal thinking that was willing to be ourselves, and be very different from a Procter or a Unilever. That meant fundamentally becoming very much a relationship company interested in our people, our customers, our community, our environment and the powerless and voiceless people. So we started giving 10% of our profits away and 5% of employee paid time was dedicated to volunteerism in the community. And that whole notion of giving and serving served the culture of Tom’s of Maine.

MB: Did you have help with this?

TC: My consultants were my professors at Harvard Divinity School, and my board of directors became a willing supporter. We [the company] became what I would call integrated, which was not letting go of performance, but at the same time being performance-driven to be very relationship-driven, to be responsible.

MB: It sounds like you underwent an internal struggle, to keep your soul and do business.

TC: I did. And I wrote two books. In 1989 I wrote “The Soul of a Business” and it was all about that struggle, and in 1993 I wrote “Managing Upside Down,” which was more of a protocol about how to lead by values. So out of that success, what we found was Tom’s now really started growing again. But we were hitting a wall with the growth strategy because we couldn’t ask any more but modest growth out of companies like Whole Foods. We were doing a wonderful business with Whole Foods and Trader Joe’s and the independent health food stores, as well as Hannaford, which was a very large account for us, and CVS. But to get our products across the country was tough. We basically needed leverage to get into that world, and then we needed resources, people, R&D and capital to start to grow it again.

So I just felt I’d done my part here with this idea. We had 3% share of the toothpaste business nationally, so that’s a very large share. I’d shown you could run a company by values. We needed to find a strategic partner who would honor what we’d done, understand it and want to affirm it. My COO, Tom O’Brien, ultimately became the CEO and he was a true soulful partner in the 11 years prior to my leaving. He was my partner from Procter & Gamble.

He understood what we were all about from Day 1. And he has carried on with the Colgate management to strengthen R&D and the strategic planning. He facilitated the resources at Colgate, and they’re doing extremely well. Colgate has been a great partner to Kate and me. They’ve honored what we built and haven’t changed it very much. So Colgate is investing in Tom’s of Maine here in Maine, they’re investing in factories and so forth. Tom’s is one of the fastest-growing parts of the Colgate portfolio. So they’re very happy with it.

MB: You said you left Tom’s because you were tired of it, but looking back, how do you feel about what you built?

TC: I’m very proud. I built something that wasn’t a Ben & Jerry’s [now a division of the Anglo-Dutch Unilever conglomerate] that just got lost in the shuffle. We built something that people recognize had a good business idea and a good business management idea.  

MB: You think they [Ben & Jerry’s] got lost in the shuffle? Because there are so many ice cream brands?

Managing by values is an all-encompassing idea, that is, the destiny you pursue is all about what your values are. The people you hire are people who passionately believe in that destiny. The choices you make as management, the ingredients, markets, the way you deal with people is all about values. And the price of the stock does not enter into it. It’s all about the mission. We [were] private, but I’m saying you need to be sure when you hand it over that those values are honored and are still the driving values. The people who worked at Tom’s are still there, not to a T, but my people that I hired are still right here in Kennebunk running Tom’s of Maine.

MB: Was there a particular moment at the Divinity School that turned things around in your mind?

TC: I found that I had reached a low point, so I decided to go to the Divinity School to understand what was my purpose in life and what was I to do with the business. That was in 1986 and out of that experience, I retrieved Tom’s of Maine from the grips of this profit maximization concept to optimization of what you can do for the customer, the world, the community, the environment and the shareholder.

My studies with Richard Niebuhr really helped me understand more about a philosophy that has been around for a long time in the world of ethics. I belong on the side of the pendulum called ‘formalism,’ which is all about relationships first versus ‘utilitarianism,’ which is all about the greatest good for the greatest number, a calculation. So we honor goodness at Tom’s, because goodness is good in and of itself. Not because it sells or because you can make more. It’s not a calculation. Martin Buber, a 20^th century theologian, in his book “I And Thou” has a particularly useful description of that difference between beauty on the one hand for its own sake and calculating some higher aim, a means to an end, on the other hand. At the end of the day, running a business is about integrating the two, but not at the expense of goodness.

MB: Does the goodness that you can do come from the product income?

TC: It’s not about the income, it’s about your purpose. You’re going to dedicate a certain amount of money to give back to the community in a line-item budget. It’s all about packaging and materials that are biodegradable, recyclable, that cost more than the expedient solutions. So it’s not about the income, it’s about choices. It sets a mindset.

MB: If someone were to start a company with these values today, what advice would you give them on funding and running it?

TC: Let’s begin thinking about that answer by understanding where Tom’s came from. Tom’s came out selling at a price far greater [than the competition] because of its goodness and social responsibility and what that did to contribute to growth and profitability. In other words, the values of Tom’s of Maine made it attractive to intelligent, affluent consumers concerned about the world. So if you run into a person who is using Tom’s of Maine, you’re never surprised at what they do or what they’re like. They’re creative, resourceful, smart, fit. So by setting down the values, we connected with a certain part of the consumer population that had those same values, and they were the growth area of the economy. They contributed to a very high valuation for Tom’s of Maine.

I have peers in the health food industry that didn’t understand that the business was about more than being natural, that it was about natural and social responsibility. And they’ve sold their companies for one-tenth of the value that Tom’s sold at. So what John Whitehead would say — and he’s not alone — what members of my board would say, is good ethics bring good value. Anybody in a leadership company will tell you that’s the way life works.

So, people who are trying to make a difference in the world are creating a product or service that is more than just the transaction of brushing your teeth or wearing an undershirt or drinking coffee or tea. It’s also about the holistic part of the consumer. What do they believe, what do they care about?

If we look at our economy and particularly here in Maine, who’s driving the economy, it’s small entrepreneurs. They’re not all about innovation. They’re about a whole value set. It’s bigger than innovation or just performance.

When I say ‘Made in America’ [about my products], I’m doing nothing more than reiterating the concept of local. If I want PR to help my business, here’s the way we do it. We go to one of our retail customers and say we want to do a trunk show, and at the same time we’re there in the store talking about our products with their shoppers, we want to give a couple hundred shirts to a nonprofit in their community. That nonprofit would give to someone too poor, but very needy, to have something warm and comfortable to wear, like veterans and battered women’s shelters. We then bring garments that have an imperfection that I can’t sell to my retailer. I have some choices with those imperfections. I can sell them to a liquidator for 10% of my wholesale price, which is cheap, and they will just dump them somewhere, or I can give them away and just take the write-off. We choose to give them away to places that are legitimate. I’m trying to build a business locally and not worrying about the universe.

MB: When you say locally, your wool and cotton isn’t local. Some of the local mills are coming back. Would you consider sourcing from them?

TC: I’d consider it. Our yarn is so fine you’d think it’s a thread. Our expertise is in very light weight wool yarns and garments, Soft, non-scratchy, featherweight. These [local] people can’t handle it, so I have to go to the places in the United States that have the technology. We’re in the process of researching ways we can work with local textile firms.

But at the moment, we’re bringing our dying to Kennebunk. We’ve rented 6,000 square feet. We’ll be setting up two operations. One will be sponging, which is steam injected into a 60-inch-wide, 100-feet-long fabric on a roll. It relaxes the fabric, which has just come from the knitting equipment and it’s stiff. Then we’ll be dying. We’ll have a natural dying capacity here. We [have been working with] a dye house in Fall River, Mass., but we’re bringing all of that up here to Kennebunk. They’re closing down and we’re buying equipment, and their people will work for us as consultants. That company is Custom Apparel Processing. We also bought the sponging equipment from Woonsocket Sponging [in Rhode Island]. They closed down, but they will be helping us learn how to use their equipment.

We’ve also developed an innovation for dyeing with natural dyes at three different stages. We already know how to do the natural dyes in the garment stage. We’ve learned to dye the fabric when it’s being knitted or woven, and we’ve applied for a patent for that, which is pending. The third thing we’ve applied for a patent on is dyeing with natural dyes in the yarn stage. So all of these things give us great flexibility.

MB: What’s unique about the fabric dyeing process?

TC: Several things. First, you get the natural luster of natural dyes versus synthetic dyes. Second, you can dye in process, while it’s still in its fabric stage. The other part of the patent is the continuous consistency of the natural dye color. Natural dyes have a reputation for being inconsistent in color from one batch to another. So we have color consistency, and we worked with a local person who helped us with this named Dave Monks, who is a consulting engineer to us.

MB: Are you hiring people for the dyeing operation in Kennebunk?

TC: Yes, and the whole cutting operation is all being brought in house. The man in charge of that was senior vice president of manufacturing for Liz Claiborne, Victor Soto. He is retired from Liz Claiborne and he teaches part time at the Parsons The New School for Design in New York City. We have 24 full-time people right now at Ramblers Way. We’ll be hiring five or six more people in the next few months, either technically skilled or we will train them. We’re also growing here in the downtown Kennebunk headquarters with two buildings for pattern cutting and sewing. We have 2,500 square feet here [in one building] and 2,000 square feet next door, but it’s not all cut and sew. It’s also for offices and design and pattern cutting. Our true production at the moment takes place in Allentown, Pa. We’re contributing to the recovery there. These are families who are sewing for us on an hourly basis. They are Americans and Vietnamese. They’re legal residents making a livable wage because of our social attitudes.

The new wet finishing area will include some of our existing workers, who will be pulled over there part time, and we will probably hire two or three more. Using the skills of our existing people, we’re probably going to go from 24 full-time people to 30 within the next few months. [The plan was to install the equipment in November and be operational by Dec. 15.]

MB: What are Ramblers Way’s sales now, and what do you expect going forward?

TC: Were a $1 million company today. I thought we’d have accomplished that sooner, but there are so many complexities you have to learn in this business. We’re five years old. Our whole point-of-view is unique. We did pioneer this whole idea of sustainable apparel made in America.

MB: How does your wool vest compare to a fleece vest in terms of sustainability and longevity?

TC: These are ageless garments. The undershirt I’m wearing is something I bought for myself last week. I thought that with the holes in the undershirts that I’ve been wearing all these years, it was time for a change. You wear these favorite things forever. You wear them every day. Ours are pre-shrunk and wash-and-wear. They’re all natural fiber, so there’s nothing in them that’s going to retard biodegradation. The whole concept of sustainable is to work with all natural materials. We are a co-signee of Greenpeace’s toxic-free initiative for apparel.

MB: Why did you choose these particular materials, the Rambouillet sheep wool and pima cotton?

TC: I was hiking with my son Matt [who owns the restaurant Gather in Yarmouth] in Wales three days after signing the sale papers for Tom’s, and I was quite annoyed by what I had to wear. We were out every day hiking for 12 hours, for two weeks. I noticed my choices of what I would buy for a layering piece that was next to my skin was either Capilene, wool or polyethylene. And the Capilene developed a body stench I couldn’t get rid of if I washed it, like silk. Silk gets soaked and stays soaked and you get cold. Wool is scratchy and bulky. So I came home with the idea that I needed something that would dry out quickly, wick moisture from my body and be warm and not freeze me to death as temperatures dropped later in the day and I was hot and sweaty. The fiber of wool is hollow, so therefore you have an insulating fiber that keeps temperatures at bay. So it keeps cold temperatures out and warm temperatures in. That’s how I got the idea for the new company.

Then I researched sheep and found Merino and Rambouillet were the two breeds of sheep that produced a very fine fiber. The one most available in this country is Rambouillet. There are no Rambouillet to speak of in Maine. I have a farm and we have Rambouillet sheep. I also took spinning lessons from a woman north of Belfast. I got a hand spinner and learned how to spin. My sheep are for my education and fun. I have 12, but you need 3,000 [to make clothing]. We get the wool from Rambouillet sheep in Montana. They are very large, very amenable animals with a great fleece.

MB: Are you tempted again to go larger?

TC: At this point, I have a family-owned business, a national brand — we’re the leading pioneer in sustainable apparel, and we’re in 500 independently owned specialty stores across the county. All of our supply chain and people doing work for us are family-owned businesses. Our distribution or stores are family owned, and we’re family owned.

I’m hoping I can survive this next hump in being able to pass the business on to family. I have attracted some new investors. I’ve brought in about $5 million of investment beyond my own and that is being used to help grow the company. These [investors] are people from Tom’s of Maine who know me and want to invest in the idea. The hump is to get yourself beyond break-even, which we’re not yet and won’t be for another two years. Being vertically integrated, you’ve got a lot you have to do. You have to have a management team that knows how to deal with everything. It’s overhead.

MB: What are your sales channels?

TC: There are six sales people who work exclusively for Ramblers Way throughout the United States. We are out there calling on stores every day. Beyond that we have a website we use to sell the product and educate the consumer. The split of sales is 30% website and 7 0% wholesale. I think that will change by itself. We’re set up for the person who just wants to shop online, which is the growing trend, but we’re also committed to local distribution, and that makes us quite rare.

MB: Is there anyone else in Maine or New England doing anything similar with the product concept and beliefs behind it?

TC: For sustainable apparel made in America? I’m unaware of it if there is. There’s the craft movement, but that means they’re working with their local sources of supply, handcrafting and then selling in their own local shop or online.

MB: How did your family get to Maine?

TC: My family came to this country in 1660 from Little Snoring, near Norfolk, England, just northeast of London. There were three Chappell brothers in London. The one I’m related to moved to Little Snoring and started a farm. He was also town manager. His son immigrated and moved to Hempstead, Long Island, in N.Y., and became town clerk and school master. His son sailed across to Narragansett, R.I. Since 1722, my family has come from South Kingston, R.I., exclusively. I was born there. My mother is a Daughters of the American Revolution descendent who is from Dover-Foxcroft. I vacationed here in Maine on Drakes Island in Wells. My parents were living in Kennebunk and my wife and I moved up here in 1968.

So I talked about the family-owned business. I have a daughter who is our women’s designer. My son-in-law, who is married to my other daughter, is in charge of all the product supply and textile manufacturing. My oldest son runs the website. He’s in California. I have three involved. My other children all have businesses. My youngest has a food business in San Francisco called Luke’s Local. My other daughter has an equine therapy business here in Kennebunk helping people with disabilities. And my second son, Matt, has a restaurant in Yarmouth called Gather. So whether it’s art or business, my wife and I have passed on our values to our children. I have five children, three sons and two daughters, and nine grandchildren, eight here in Maine and one in San Francisco.

MB: Where would you like to see Ramblers Way in five years? What would you like it to be known for?

TC: We do expect to be well beyond the $10 million mark five years from now and I think we’ll be in about 1,000 stores. I think we’ll be in some of the better department stores like Nordstrom, Neiman-Marcus and Bergdorf Goodman. Our online business will be quite vigorous. I think we’ll have at least 100 employees. If we bring our cut-and-sew operation here, that will change the employment picture considerably. But without that we’ll certainly be 100 employees. We’ll be based in Kennebunk.

We’ll have one Ramblers Way retail store or more. I think we’ll have our first one within two years. We’ll start in Maine to learn and then we’ll go to the resort communities like Boulder, Colo. This is a brand that sells to an affluent consumer, in Houston, Miami, San Diego as well as Chicago. We have a very large account in Japan with the large department store, Isetan. We’re on the main floor of their men’s fashion and we’ve been for two years and that business is growing nicely. We’ll be exhibiting in Europe this January, and we hope to go there, but for now Japan is our primary export market.

The hump is to get yourself beyond break-even, which won’t be for another two years.

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