March 15, 2004
Natural values | New manufacturing facilities in Sanford are just the start of a bold new expansion plan for Tom's of Maine
By Sean Donahue
For most of its 33 years, Kennebunk-based Tom's of Maine has epitomized a small, family-run company, with nearly all aspects of its business closely tied to founders Tom and Kate Chappell ˆ all the way down to the personal note from the Chappells that still adorns every product.
But even though CEO Tom Chappell and his personal commitment to socially responsible business practices still guide the company, in recent years he has carefully made changes intended to carry the firm beyond its family-company roots. Most notably, he says, he wants to avoid the trap that often ensnares such businesses: a relaxed, almost haphazard approach to operations that ultimately can't sustain long-term growth.
The most noticeable move came in December, when the company announced plans to buy the former Millrock building in Sanford for its manufacturing and warehousing operations. The 110,000-square-foot facility will nearly double the size of Tom's existing manufacturing space, a much needed expansion driven by growing demand for the company's natural care products. Last year, sales of Tom's flagship natural toothpaste grew nine percent in a year when most traditional toothpaste brands saw declining sales, according to ACNielsen statistics cited by Chappell, which helped drive the company's revenues to $35 million.
More importantly, the move creates a new base for an aggressive growth strategy that calls for Tom's of Maine to increase its annual sales by 20%-25% for the foreseeable future, and increase Tom's of Maine's market penetration from just one percent of households today to 11%. "Growth is very much what's going on with this company right now," says Chappell. "We've been intentional about moving from being a sort of lifestyle company to one that is a growth company."
Chappell notes that the company is about 18 months into its new growth model, which involves both operational and personnel changes, infrastructure investment, new product development and new marketing and promotion strategies. Along the way to its goals, Tom's of Maine likely will receive help from the still-growing market for all things natural and organic. Nationally, sales of natural care products, such as Tom's toothpaste and soaps, are projected to grow from $3.5 billion in 2003 to $6 billion in 2006, according to the Natural Marketing Institute, a market research and consulting firm in Harleysville, Penn. That growth stands to make natural care products the fastest growing segment of the overall natural/organic food, beverage, health and personal care market, which the NMI estimates will grow to $86 billion by 2006.
As has been the case throughout Tom's of Maine's history, the company's new growth strategy encompasses more than just financial goals. Rather than worrying about how the company can grow and still retain its social and environmental agenda ˆ Tom's of Maine practices all manner of ecologically sound manufacturing practices and donates 10% of pre-tax profits to nonprofit organizations, among other efforts ˆ Chappell says he and his executives have found a way to make those values the starting point of all new initiatives and financial growth strategies.
Taking that commitment to corporate values even further, the ultimate goal of the growth strategy itself, says company COO Tom O'Brien, is to enlist more retailers, suppliers and customers in Tom's of Maine's own quest to promulgate personal health and wellness awareness, foster community development and champion environmental and social causes ˆ in other words, to use the company's increasing market clout to change the world. "As the company gets biggerˆ you start to actually influence how business gets done in the retail environment," says O'Brien. "We're building a new model of commerce here."
Name recognition
Before Tom's of Maine could even begin to think about changing the model of commerce, Chappell says he first had to change the company itself. In the 1980s, Tom's leapt ahead of other natural products companies by securing distribution deals not only with health food or specialty stores, but with traditional retailers such as grocery stores and national drug store chains like CVS. During the 1990s, the company also began hiring professionals with consumer packaged goods experience, such as O'Brien, who spent 13 years at Procter & Gamble before coming to Tom's of Maine in 1997.
With the Sanford building purchase, Tom's is ensuring it has the physical and operational infrastructure in place to accommodate increased production of its current products as well as dozens of new items. Tom's of Maine now produces more than 75 items; new products released in the last 18 months, such as a liquid toothpaste designed to work with electric toothbrushes, already account for 25% of the company's sales.
That response, says Chappell, shows that his company is already a strong brand in the natural care marketplace. But industry analysts say that despite the rapid growth of natural product sales during the last decade, the market is only now becoming mature enough for a company like Tom's of Maine to become a truly dominant brand. "For many years, there weren't a lot of well known brands in the organic or natural market ˆ 'organic' or 'natural' was really the brand," says Laurie Demeritt, president of Hartman Group, a Bellevue, Wash.-based consulting firm specializing in health and wellness markets. "There is still a huge opportunity for manufacturers to do more branding and become a widely recognized name."
To take advantage of that opportunity, Tom's of Maine is avoiding traditional advertising in favor of new promotional activities, such as a sampling program that puts products in front of target audiences at venues ranging from bed and breakfasts and yoga centers to music concerts and dental industry conferences. The centerpiece of its promotional activities, though, is its Common Good Partnerships initiative, in which the company partners with retailers and nonprofit organizations to design a product promotion around a social or environmental cause.
For example, in January the company launched its "Dental Health for All" program, which is aimed at improving children's oral health, in partnership with public dental care clinics around the country, the American Dental Association and retailers such as Brooks pharmacies. Through the program, Tom's of Maine gives grants and free toothpaste and toothbrushes to dental clinics, while Brooks pharmacies is creating what Chappell describes as "huge" in-store displays featuring Tom's of Maine products and oral-health educational materials ˆ as well as front-page billing of the program, and Tom's products, in its newspaper coupon inserts. "We get both the promulgation of information that's important to the country, and we get a higher-impact promotion," says Chappell.
How high? The Dental Health for All program doubled the amount of business Tom's of Maine does with Brooks, from $300,000 to $600,000 a year.
Another new promotional strategy is Tom's new store-within-a-store concept ˆ standalone kiosks able to hold 60 different Tom's of Maine products, instead of the 15-20 items that might typically be on a store's shelf. Already, grocery stores such as Hannaford, Whole Foods and Wild Oats, as well as drug stores CVS, Brooks and Duane Reed, have agreed to place these kiosks in their stores, a significant coup given how ruthlessly consumer products companies fight for retail shelf space. "Obviously when a store gives up precious floor space, the product needs to be contributing significant dollars and margin to the store," says Christine Chufo, an analyst with the San Francisco-based natural products consulting firm SPINS and a former manager of natural products retail stores. "What I would read into [those deals] is that the stores say the brand is going to sell."
Riding values toward a billion-dollar goal
What Tom's of Maine executives say most observers might miss in those deals, though, is evidence of how the company's values are actually driving its growth. Chappell says the kiosk deals came out of another new company initiative called "top to top" meetings, in which Chappell and O'Brien meet directly with the CEOs of retail stores to see where their corporate and community values match up, and how to use those common beliefs to create stronger business relationships.
To help institutionalize that company culture, which started with Tom and Kate Chappell's personal beliefs ˆ including a person's responsibility to his or her community and the inherent worth of people and nature ˆ Tom's of Maine trains all its employees at the Portland-based Saltwater Institute, an educational foundation created by Tom Chappell in 2000 to teach "values-centered leadership." The program is designed to encourage people to integrate their personal values into every aspect of business, and O'Brien and Chappell say that using that approach at Tom's of Maine led directly to the company developing its Common Good Partnerships promotion strategy.
As part of the company's broader vision for its new model of commerce, Tom's of Maine hopes to recruit more businesses to the cause of social responsibility. Springing for values-based business training, though, may be questionable business moves to companies whose CEOs aren't also Harvard Divinity School graduates like Chappell. That's why Tom's of Maine says it hopes to use its own performance to prove the model works ˆ which puts the spotlight back on the company's goals for financial growth.
For all of Tom's of Maine's market strength, O'Brien notes that the company remains a niche brand, with a recent survey finding that only 13% of people in the United States had even heard the Tom's of Maine name. Company research also found that only about one percent of households in the country bought Tom's of Maine products, but has set a goal of increasing its market to 11% of households ˆ a number that Tom's of Maine research found to represent a realistic number of people who share the company's social and cultural values. With that customer base, notes O'Brien, Tom's of Maine would be a billion-dollar company.
But as the new promotion strategies and deals with retailers show, Tom's of Maine is not content to wait for those potential customers to become curious about natural products, or for retailers to find their own way to Tom's message of corporate values. Like any good evangelist, the company is preaching its gospel with all the proactive fervor it can muster. "We didn't wait for natural toothpaste to come out before selling natural toothpaste ˆ we created it," says Chappell. "We're not waiting for anything."
But even though CEO Tom Chappell and his personal commitment to socially responsible business practices still guide the company, in recent years he has carefully made changes intended to carry the firm beyond its family-company roots. Most notably, he says, he wants to avoid the trap that often ensnares such businesses: a relaxed, almost haphazard approach to operations that ultimately can't sustain long-term growth.
The most noticeable move came in December, when the company announced plans to buy the former Millrock building in Sanford for its manufacturing and warehousing operations. The 110,000-square-foot facility will nearly double the size of Tom's existing manufacturing space, a much needed expansion driven by growing demand for the company's natural care products. Last year, sales of Tom's flagship natural toothpaste grew nine percent in a year when most traditional toothpaste brands saw declining sales, according to ACNielsen statistics cited by Chappell, which helped drive the company's revenues to $35 million.
More importantly, the move creates a new base for an aggressive growth strategy that calls for Tom's of Maine to increase its annual sales by 20%-25% for the foreseeable future, and increase Tom's of Maine's market penetration from just one percent of households today to 11%. "Growth is very much what's going on with this company right now," says Chappell. "We've been intentional about moving from being a sort of lifestyle company to one that is a growth company."
Chappell notes that the company is about 18 months into its new growth model, which involves both operational and personnel changes, infrastructure investment, new product development and new marketing and promotion strategies. Along the way to its goals, Tom's of Maine likely will receive help from the still-growing market for all things natural and organic. Nationally, sales of natural care products, such as Tom's toothpaste and soaps, are projected to grow from $3.5 billion in 2003 to $6 billion in 2006, according to the Natural Marketing Institute, a market research and consulting firm in Harleysville, Penn. That growth stands to make natural care products the fastest growing segment of the overall natural/organic food, beverage, health and personal care market, which the NMI estimates will grow to $86 billion by 2006.
As has been the case throughout Tom's of Maine's history, the company's new growth strategy encompasses more than just financial goals. Rather than worrying about how the company can grow and still retain its social and environmental agenda ˆ Tom's of Maine practices all manner of ecologically sound manufacturing practices and donates 10% of pre-tax profits to nonprofit organizations, among other efforts ˆ Chappell says he and his executives have found a way to make those values the starting point of all new initiatives and financial growth strategies.
Taking that commitment to corporate values even further, the ultimate goal of the growth strategy itself, says company COO Tom O'Brien, is to enlist more retailers, suppliers and customers in Tom's of Maine's own quest to promulgate personal health and wellness awareness, foster community development and champion environmental and social causes ˆ in other words, to use the company's increasing market clout to change the world. "As the company gets biggerˆ you start to actually influence how business gets done in the retail environment," says O'Brien. "We're building a new model of commerce here."
Name recognition
Before Tom's of Maine could even begin to think about changing the model of commerce, Chappell says he first had to change the company itself. In the 1980s, Tom's leapt ahead of other natural products companies by securing distribution deals not only with health food or specialty stores, but with traditional retailers such as grocery stores and national drug store chains like CVS. During the 1990s, the company also began hiring professionals with consumer packaged goods experience, such as O'Brien, who spent 13 years at Procter & Gamble before coming to Tom's of Maine in 1997.
With the Sanford building purchase, Tom's is ensuring it has the physical and operational infrastructure in place to accommodate increased production of its current products as well as dozens of new items. Tom's of Maine now produces more than 75 items; new products released in the last 18 months, such as a liquid toothpaste designed to work with electric toothbrushes, already account for 25% of the company's sales.
That response, says Chappell, shows that his company is already a strong brand in the natural care marketplace. But industry analysts say that despite the rapid growth of natural product sales during the last decade, the market is only now becoming mature enough for a company like Tom's of Maine to become a truly dominant brand. "For many years, there weren't a lot of well known brands in the organic or natural market ˆ 'organic' or 'natural' was really the brand," says Laurie Demeritt, president of Hartman Group, a Bellevue, Wash.-based consulting firm specializing in health and wellness markets. "There is still a huge opportunity for manufacturers to do more branding and become a widely recognized name."
To take advantage of that opportunity, Tom's of Maine is avoiding traditional advertising in favor of new promotional activities, such as a sampling program that puts products in front of target audiences at venues ranging from bed and breakfasts and yoga centers to music concerts and dental industry conferences. The centerpiece of its promotional activities, though, is its Common Good Partnerships initiative, in which the company partners with retailers and nonprofit organizations to design a product promotion around a social or environmental cause.
For example, in January the company launched its "Dental Health for All" program, which is aimed at improving children's oral health, in partnership with public dental care clinics around the country, the American Dental Association and retailers such as Brooks pharmacies. Through the program, Tom's of Maine gives grants and free toothpaste and toothbrushes to dental clinics, while Brooks pharmacies is creating what Chappell describes as "huge" in-store displays featuring Tom's of Maine products and oral-health educational materials ˆ as well as front-page billing of the program, and Tom's products, in its newspaper coupon inserts. "We get both the promulgation of information that's important to the country, and we get a higher-impact promotion," says Chappell.
How high? The Dental Health for All program doubled the amount of business Tom's of Maine does with Brooks, from $300,000 to $600,000 a year.
Another new promotional strategy is Tom's new store-within-a-store concept ˆ standalone kiosks able to hold 60 different Tom's of Maine products, instead of the 15-20 items that might typically be on a store's shelf. Already, grocery stores such as Hannaford, Whole Foods and Wild Oats, as well as drug stores CVS, Brooks and Duane Reed, have agreed to place these kiosks in their stores, a significant coup given how ruthlessly consumer products companies fight for retail shelf space. "Obviously when a store gives up precious floor space, the product needs to be contributing significant dollars and margin to the store," says Christine Chufo, an analyst with the San Francisco-based natural products consulting firm SPINS and a former manager of natural products retail stores. "What I would read into [those deals] is that the stores say the brand is going to sell."
Riding values toward a billion-dollar goal
What Tom's of Maine executives say most observers might miss in those deals, though, is evidence of how the company's values are actually driving its growth. Chappell says the kiosk deals came out of another new company initiative called "top to top" meetings, in which Chappell and O'Brien meet directly with the CEOs of retail stores to see where their corporate and community values match up, and how to use those common beliefs to create stronger business relationships.
To help institutionalize that company culture, which started with Tom and Kate Chappell's personal beliefs ˆ including a person's responsibility to his or her community and the inherent worth of people and nature ˆ Tom's of Maine trains all its employees at the Portland-based Saltwater Institute, an educational foundation created by Tom Chappell in 2000 to teach "values-centered leadership." The program is designed to encourage people to integrate their personal values into every aspect of business, and O'Brien and Chappell say that using that approach at Tom's of Maine led directly to the company developing its Common Good Partnerships promotion strategy.
As part of the company's broader vision for its new model of commerce, Tom's of Maine hopes to recruit more businesses to the cause of social responsibility. Springing for values-based business training, though, may be questionable business moves to companies whose CEOs aren't also Harvard Divinity School graduates like Chappell. That's why Tom's of Maine says it hopes to use its own performance to prove the model works ˆ which puts the spotlight back on the company's goals for financial growth.
For all of Tom's of Maine's market strength, O'Brien notes that the company remains a niche brand, with a recent survey finding that only 13% of people in the United States had even heard the Tom's of Maine name. Company research also found that only about one percent of households in the country bought Tom's of Maine products, but has set a goal of increasing its market to 11% of households ˆ a number that Tom's of Maine research found to represent a realistic number of people who share the company's social and cultural values. With that customer base, notes O'Brien, Tom's of Maine would be a billion-dollar company.
But as the new promotion strategies and deals with retailers show, Tom's of Maine is not content to wait for those potential customers to become curious about natural products, or for retailers to find their own way to Tom's message of corporate values. Like any good evangelist, the company is preaching its gospel with all the proactive fervor it can muster. "We didn't wait for natural toothpaste to come out before selling natural toothpaste ˆ we created it," says Chappell. "We're not waiting for anything."
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