Toms of Maine: History
Founded in 1970 by Tom Chappell and his wife, Kate, on their farm near Kennebunk, Maine. Tom, and his wife had moved to Maine from Philadelphia in 1968 after Tom quit his job as a benefits counselor at Aetna.[i] Intent on living closer to the land and raising their children in a more natural environment, “Tom Chappell worked for his father's industrial detergent manufacturing company, until he decided to explore an idea he had had for a non-polluting detergent.”[ii] Borrowing just $5,000 from a friend to start the new venture, the husband and wife team “soon began to manufacture the first phosphate-free liquid laundry detergent in the United States, which they called Clearlake.”[iii] Consistent with their philosophy that “their products would not harm the environment,”[iv] Packages of the detergent came with “prepaid return postage so that customers could send back the containers for reuse. The new firm, known as Tom's Natural Soaps, later added other products including a shampoo, cream rinse, and lotion.”[v]
By 1975 the small company had expanded into toothpaste as well. Created in “conjunction with a chemist friend, his toothpaste was free of chemical additives or artificial sweeteners including the suspected carcinogen saccharin, and was markedly different from the products made by industry leaders Crest and Colgate.”[vi] In keeping with the philosophy of the company, the flavoring for the toothpaste was derived from herbs and spices. According to the International Directory of Company Histories[vii]. “Chappell's new product soon found acceptance within the post-1960's era anti-corporate, natural foods movement, and Tom's toothpaste became a staple item on the shelves of health food stores and food cooperatives, particularly in the New England area.”[viii]
In 1978 a line of fluoride toothpastes were developed. While potentially a risky move in the natural foods marketplace at the time, the new toothpastes, like its other products were made with natural ingredients and without animal testing. Ultimately the new toothpastes were a success and “sales of fluoride toothpaste eclipsed those of the original formula within two years, during which time Tom's toothpaste sales doubled.”[ix] In 1981 the company's name was officially changed to Tom's of Maine, Inc.[x]
Tom’s Natural Soaps continued to gain exposure and by 1983 the firm's “annual revenues were approaching $2 million. Recognizing that sustained growth would require new outlets for its goods, the company began to seek distribution to chain stores. The first one to take on Tom's products was Rhode Island-based CVS/People's, and others soon followed.”[xi]
In 1986 Tom enrolled in Harvard Divinity School, to which he would make a “twice-weekly, 90-mile commute. After five years of study, he earned a master's degree in Theology. Chappell, a frequent public speaker, went on to publish a book in 1993 called The Soul of a Business: Managing For Profit and the Public Good, which outlined his ideas on running a company with a strong set of personal ethics.”[xii] This search during the 80’s for a more values-based approach to business also led to a new look at the company's mission, which was examined over a year's time beginning in June 1989. “One unusual byproduct of the new mission was the decision to "tithe" 5 percent of Tom's of Maine's profits and donate the money to environmental, arts, and human needs causes. This figure soon became 7 percent, and then 10. In addition to public giving, the company also looked after the welfare of its employees, offering them retirement savings and profit-sharing programs, childcare benefits, and parental leave, and even free fruit to eat on the job. Factory workers rotated stations every hour to avoid fatigue and boredom, and all were encouraged to perform volunteer work in the Kennebunk community on company time.”[xiii]
In 1995, “after a seven-year effort, Tom's became the first natural toothpaste to win the approval of the American Dental Association (ADA), allowing it to put that organization's seal on its products.”[xiv] A crucial endorsement in its bid to compete against major competitors, the process “had taken far longer than usual because the ADA had no standards for natural products, and also because Tom's did not allow testing on animals, which meant new methods of testing had to be devised and certified… Sales for 1995 reached a record level of $20 million.”[xv]
In 2000 “Tom's raised $6 million for herbal product development and advertising by selling 12 percent of the company to a group of 15 outside investors, including Goldman, Sachs Chairman John Whitehead. Tom and Kate Chappell remained majority shareholders. The market for herbals was proving to be as difficult to crack as some critics had predicted. Sales for the company, which had been growing 20 to 30 percent annually, increased by only 7 percent during 2000, and a loss of $1.5 million was posted, only the second case of red ink in the previous 25 years.”[xvi] Despite this less than ideal outcome in the field of herbal products Tom’s continued to beat expectations. Indeed, the company's flagship line of toothpaste was the “dominant natural brand in the United States, and many other Tom's products were well-established with consumers who sought alternatives to chemical-laden, mass-marketed personal care goods.”
Colgate - Palmolive
In 2006 Tom’s of Maine made the controversial decision to partner with Colgate and allow them to have a 84% controlling majority in the company. According to a press release published on the Tom’s of Maine website for March 2006, “Colgate-Palmolive Company (NYSE:CL), as part of its strategy to focus on its higher-margin oral and personal care businesses, today announced that it has agreed to purchase Tom’s of Maine, the leader in the fast-growing Naturals market in the United States.”[xvii] Serving a niche market whose renown as a “socially responsible maker of natural products exceeds its market share -- is selling itself to Colgate-Palmolive Co. for about $100 million”[xviii] dollars. Concerning the acquisition, the Environmental News Network stated that, “Tom's of Maine has stronger gross profit margins than Colgate, making it an attractive prize. Colgate has narrowed its focus to highly profitable businesses such as oral care and personal care. However, with annual sales estimated at about $50 million, Tom's of Maine will be just a small addition to Colgate, which had $11.4 billion in sales in 2005.”[xix] Reuben Mark, Colgate's Chairman and CEO said, “"This strategically-important acquisition gives us access to a loyal, emerging consumer group and allows us to accelerate the growth of Tom’s of Maine by extending its reach in the U.S. and in Colgate's strong markets outside the U.S." Currently the US market for natural oral and personal care products, which is the most developed in the world, is valued at $3 billion and is growing at 15 per cent per year.”[xx] At the time, of the announcement the market responded favorably. According to Jessica Wohl “Shares of New York-based Colgate were up 61 cents, or 1.1 percent, to $57.61 on the New York Stock Exchange.”[xxi] Titled ‘an excellent fit’, the acquisition was portrayed by both sides as a win for both the consumer and the industry. Tom’s of Maine co-founders Tom and Kate Chappell said, “We chose Colgate as our partner because they have the global expertise to help take Tom’s of Maine to the next level. Just as importantly, we see Colgate as an excellent fit with our own cultural values. Colgate has a commitment to product excellence, to global efforts to promote oral health and has a 200-year history of caring for consumers and for giving back to the community. We are excited by Colgate’s desire to continue Tom’s of Maine leadership and heritage in natural care.”[xxii] Colgate President and Chief Operating Officer Ian Cook said in a statement that “Tom's of Maine has gross profit margins which are 10 percentage points higher than Colgate's margin, making it "a logical acquisition as we continue to prioritize our global oral and personal care categories." Colgate previously unveiled a target to reach gross profit margin of 60 percent by 2010. Its margin was 56 percent in the 2005 fourth quarter, excluding restructuring charges.”[xxiii]
Buying CSR
While the buying of niche companies that cater to the growing eco-conscience customer can certainly be attractive business acquisitions, some have argued that there is more than money behind the desire of MNCs to buy companies like Tom’s of Maine. Some analysts have viewed such acquisitions in recent years to be an attempt by corporations to ‘buy CSR[xxiv] These analyst’s cite other instances when major multinational corporations bought up smaller, model ethical corporations such as Unilever’s acquisition of Ben and Jerry’s, The Coca Cola Company’s buyout of Odwalla, Colgate-Palmolive Company’s takeover of Tom’s of Maine, and Dean Foods’ acquisition of Horizon Organics. Critics argued that these “model” corporations would find it difficult to continue the good work under their new parent.”[xxv] Additionally, authors Debapratim Purkayastha and Rajiv Fernando argue that, “The economic viability of an acquisition for such a reason is also a question mark, as generally, there is a public backlash after such acquisitions. As L’Oréal was not perceived to share the principles of Body Shop, Body Shop’s association with L’Oréal raised questions about the ethical standards of Body Shop itself. Its customer base was also affected.”[xxvi] Anderra, a website devoted to providing a guide to natural and organic living located in Farnham, UK compiled a list of the pros and cons of the partnership between Colgate-Palmolive and Tom’s of Maine. The pros according to Anderra are as follows:
“Pros
- Toms and Kate still have a minority ownership (16%) in Tom’s of Maine – Colgate Palmolive own 84% of the company rather than all of it
- Tom and Kate will continue to hold CEO and Vice President positions which means they still have a say in the way Tom’s of Maine is run
- Colgate-Palmolive are one of the leaders in oral care. Tom’s of Maine are the leaders in natural care, who also make oral care products. A winning combination?
- Ethical mainstreaming – Tom and Kate said that their decision to sell to Colgate was partly about broadening Tom’s of Maine’s reach,
”We chose Colgate as our partner because they have the global expertise to help take Tom’s of Maine to the next level.”
Tom’s can use Colgate’s massive marketing and distribution network to sell their products in many more stores”[xxvii] Anderra lists an additional seven cons that offer a very different perspective on the partnership. They are:
“Cons
- So far in relative terms, Tom’s of Maine products are in small demand – increased demand could call for shortcuts which could impact on the quality of the products
- It will be difficult to maintain small town values and standards in a big corporation
- Colgate are company that do not have any natural oral care lines or use natural ingredients in their oral care products
- Colgate don’t have a very good track record with animal testing. I emailed them twice to ask if they still test their products or the individual ingredients on animals and they said,
“In 1999 we adopted a voluntary moratorium on all animal testing of our adult Personal Care products and the ingredients used in these products…Currently more than 99% of our safety clearance reviews are conducted without the use of animal tests”.
- Some consumers used Tom’s of Maine products because it was small brand with big values – selling to a multinational like Colgate may alienate a loyal consumer base
- Tom’s of Main’s profit margins are 10 percentage points higher than Colgate’s – it’s a no brainer…
- According to founder Tom Chappell, maintaining ethical standards such as bio-degradability of ingredients and staying in Maine were ‘deal breakers going into the process’. However Colgate agreed to keep the business based in Maine,
“Staying here is smart from Colgate’s perspective” said Kate Chappell, who founded Tom’s with her husband in 1970. “They are respecting the fact that we have a unique approach to creating efficacy with natural ingredients and a total values approach to doing business.”[xxviii]
Ultimately, the decision is summed up in this seemingly catch 22 that niche companies of this sort have had to face many times of the years.
“If you want to change what people consume on a grand scale, you have to penetrate mass markets. ‘And you can’t do that if you’re a small, specialist brand stuck in the organic or whole-food niche, even if that means you are on supermarket shelves. It is a familiar dilemma: stay pure and have a big impact on a small scale, or compromise and have a small impact on a grand scale.” -Roger Cowe[xxix]
The Next Chapter
As the pros and cons list from Anderra exemplifies, “corporate interest in natural companies is not a clear cut case of good or bad.”[xxx] Often times the fervor about such acquisitions dies down after a while and there is always the hope by many that large corporations will stay true to their word and leave the smaller niche company as independent entities. In the years following Colgate’s purchase of Tom’s of Maine one change sparked a backlash against Colgate and raised the question whether Tom’s was the same company it had always been or, as Andrea Whitfall calls them, just another cog “in the giant corporate wheel.”[xxxi] In an April 2011 article entitled, ‘Tom’s of Maine Ditches the Aluminum Toothpaste Tube’, author Jen Boynton discusses why Tom’s of Maine changed its long time packaging container. The much loved, and apparently, much maligned aluminum tube was changed to a more mainstream plastic laminate. While Tom’s of Maine had long maintained that “aluminum was the material of choice for toothpaste tubes because of its recyclability,”[xxxii] the author insists, “I’m pleased to report that Colgate-Palmolive had nothing to do with the change in materials. Rather, the decision came after a careful review of a decade of consumer comments and a reevaluation of the assumption that aluminum was the most environmentally friendly material available.”[xxxiii]When viewed in aggregate, “25% of packaging complaints about Tom’s products were related to the aluminum tube. Customers complained of cracks and splits that caused the product to leak. Parents complained that the tube was too hard for young toothbrushers to use; older customers had the same difficulties.”[xxxiv] While the author of the article seems convinced that the decision to change the toothpaste tube was purely a product of customer feedback and not overly significant, the decision by Tom’s of Maine to change the packaging ignited another debate about the new Tom’s versus the old Tom’s. One comment to Ms. Boynton’s article reads “Since the buyout by Colgate, the new changes to the toothpaste are revenue enhancements not product enhancements. The change from aluminum to plastic [has resulted in a further] reduction of quantity from 5.5Z(155.9g) to 4.7 OZ(133g) of product.”[xxxv] Another disgruntled commenter writes “The new tube is 14.5% smaller, for the same amount of money. This is [an increase of] 14.5% more revenue for the same cost.” And adds 14.5% more unrecyclable waste to the waste stream.[xxxvi] In response to the tube change, Harold Johnson posted an ‘open letter to Tom’s of Maine’ on Facebook. Disturbed by the toothpaste tube switch, Mr. Johnson decided to write the letter after discovering a half-decomposed aluminum toothpaste tube on the beach in Maine.
This is an aluminum toothpaste tube. It wasn’t littered by a beachgoer, or tossed out a car window. That’s not what happens to toothpaste tubes. It was thrown in the trash, and somehow managed to get into the ocean. That’s what litter does. Always has, always will. But notice: This aluminum tube is already disintegrating back to nature. It is becoming aluminum oxide, the stuff of soil that the world has evolved with over billions of years. In months it will disintegrate and be gone.
Your new plastic toothpaste tubes never do this. When littered into the environment -- as they will be -- they’ll persist. Nothing in nature knows how to return plastic to its building blocks. Your new tubes will run down gulleys, then rivers, eventually the ocean. There they will remain plastic. Even as they photodegrade into small bits, they’re still plastic. They will float, collecting in one of the massive gyres of plastic soup now swirling far from land. There, they will either get ingested by a sea animal, get stuck, and starve it to death... Or accumulate toxins to ~100,000 times background levels, killing more quickly... Or be spit back onto someone’s shore, perhaps distant, perhaps somewhere on the Maine coast, fouling it….
This has happened in just a couple generations. Under our nose and on our watch. Environmental studies claiming plastic as a better alternative are fundamentally flawed. They don’t account for pollution or persistence. Or the poor recyclability. Aluminum is melted down; impurities are easily skimmed off, and the aluminum can be back on the shelf in weeks. A truly closed loop. Plastic cannot be superheated to sterilize. It must be clean to be processed, which is why major recyclers don’t accept plastic toothpaste tubes. Your take-back scheme, though laudable, only downcycles the waste. And as few consumers will spend money to return your tubes to you, most tubes you sell have a one-way trip to the landfill... or the ocean.[xxxvii]
While the toothpaste container controversy is not, by itself, indicative of malignant wrongdoing by Tom’s parent company, It does call into question claims by some niche companies that they look forward to a partnership with a larger company so they can rub some of its corporate responsibility and sustainability on to the parent company. Mr. Johnson’s letter to Tom’s is poignant and heart-felt. It reflects the lingering sense of betrayal by former loyalists to companies like Tom’s as well as skepticism that changes made in the Colgate years are consistent with the original philosophy of Tom and Kate Chappell when the company was started with five thousand dollars and a belief in better business and natural products. Ironically enough, the Chappells have started a new venture called Ramblers Way Farm. Dedicated to the manufacture and sale of light, comfortable woolen clothing in America, this entrepreneurial effort may one day be faced with the same catch 22 that Tom’s of Maine faced. Perhaps with a different outcome.
[i]http://www.tomsofmaine.com/business-practices/heritage/early-history[ii] http://www.fundinguniverse.com/company-histories/Toms-of-Maine-Inc-Company-History.html[iii] Ibid.[iv] http://www.tomsofmaine.com/business-practices/heritage/early-history[v] http://www.fundinguniverse.com/company-histories/Toms-of-Maine-Inc-Company-History.html[vi] Ibid.[vii] International Directory of Company Histories, Vol. 45. St. James Press, 2002.[viii] http://www.fundinguniverse.com/company-histories/Toms-of-Maine-Inc-Company-History.html[ix] Ibid.[x] Ibid.[xi] Ibid.[xii] Ibid.[xiii] Ibid.[xiv] Ibid.[xv] Ibid.[xvi] Ibid.[xvii] http://www.tomsofmaine.com/press/releases/detail/colgate-purchasing-toms-of-maine[xviii] http://www.boston.com/business/articles/2006/03/22/colgate_will_buy_toms_of_maine/[xix] http://www.enn.com/top_stories/article/3915[xx] http://www.cosmeticsdesign.com/Business-Financial/Colgate-finalizes-Tom-s-of-Maine-deal[xxi] http://www.enn.com/top_stories/article/3915[xxii] http://www.tomsofmaine.com/press/releases/detail/colgate-purchasing-toms-of-maine[xxiii] http://www.enn.com/top_stories/article/3915[xxiv] Leipziger, Deborah. The Corporate Responsibility Code Book. Sheffield: Greenleaf Publishing Limited, 2003. Page 535.http://docs.google.com/viewer?a=v&q=cache:KT1Ct_CJH0wJ:www.oikos-international.org/fileadmin/oikos-international/international/Case_competition/Inspection_copy_ICFAI2007.pdf+the+body+shop+social+responciability+of+sustained+greenwashing&hl=en&gl=us&pid=bl&srcid=ADGEEShyLm7S1Dj71wtLP3aLxNbrotyQ4sGmIzCn7Dh6SbqtvaLUvaDAK7Z9YpdMp-d7g_UhuoGg9uwVz9I8MkRGvNjBO_dC9w9wjCJXC2JWLfqvwHOols9m9-62YoQx_aKwdrPub5TQ&sig=AHIEtbTHYzxNGJf0yFoZXSRfQA5ifsAIyg[xxv] http://docs.google.com/viewer?a=v&q=cache:KT1Ct_CJH0wJ:www.oikos-international.org/fileadmin/oikos-international/international/Case_competition/Inspection_copy_ICFAI2007.pdf+the+body+shop+social+responciability+of+sustained+greenwashing&hl=en&gl=us&pid=bl&srcid=ADGEEShyLm7S1Dj71wtLP3aLxNbrotyQ4sGmIzCn7Dh6SbqtvaLUvaDAK7Z9YpdMp-d7g_UhuoGg9uwVz9I8MkRGvNjBO_dC9w9wjCJXC2JWLfqvwHOols9m9-62YoQx_aKwdrPub5TQ&sig=AHIEtbTHYzxNGJf0yFoZXSRfQA5ifsAIyg[xxvi] Ibid.[xxvii] http://www.anderra.co.uk/blog/natural-body-care-takeovers/[xxviii] http://www.anderra.co.uk/blog/natural-body-care-takeovers/[xxix] http://theoldspeakjournal.wordpress.com/2011/06/18/kashi-burts-bees-toms-of-maine-naked-juice-your-favorite-good-natural-socially-conscious-brands-owned-by-the-corporatocracy/[xxx] http://www.anderra.co.uk/blog/natural-body-care-takeovers/[xxxi] http://theoldspeakjournal.wordpress.com/2011/06/18/kashi-burts-bees-toms-of-maine-naked-juice-your-favorite-good-natural-socially-conscious-brands-owned-by-the-corporatocracy/[xxxii] http://www.triplepundit.com/2011/04/goodbye-toms-maines-aluminium-toothpaste-tube/[xxxiii] http://www.triplepundit.com/2011/04/goodbye-toms-maines-aluminium-toothpaste-tube/[xxxiv] Ibid.[xxxv] Ibid.[xxxvi] Ibid.[xxxvii] http://www.facebook.com/notes/the-flotsam-diaries/an-open-letter-to-toms-of-maine-re-plastic-toothpaste-tubes/230362173641131http://www.entrepreneur.com/article/219286
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