Tom’s of Maine Is Now Tom’s of Colgate?

When Tom’s of Maine dealt itself to Colgate-Palmolive last week, it was literally a sell-out. But was it a sell-out in the figurative sense? Can Tom’s still be Tom’s under the $11 billion Colgate umbrella?For Colgate, the $100 million purchase of Tom’s of Maine would seem to make perfect sense. Colgate pegs the American market for natural oral and personal care products at $3 billion and says it’s growing at 15% annually.While Tom’s annual sales of roughly $50 million are less than a rounding error for Colgate, the deal does give the consumer products giant an entree into the fast growing health and specialty trade channel where Tom’s toothpaste, Colgate says, is the clear market leader with a 60% share of that niche. It also gains Tom’s expertise and cachet.In announcing the deal, the president of Colgate, Ian Cook, said the Tom’s acquisition “bodes well for additional opportunities in other high-margin categories such as personal care.” With Colgate’s international marketing muscle behind the Tom’s brand, it seems likely that Tom’s, which will function as a stand-alone subsidiary, will grow much faster than it could on its own.Still, the question remains whether Tom’s can be true to what it calls its “reason for being,” including its desire “to inspire all those we serve with a mission of responsibility and goodness” and “to empower others by sharing our knowledge, time, talents, and profits.”The founders of Tom’s,Tom and Kate Chappell, say their mission will not suffer since Colgate is a company that will “honor our values” and will be “unwavering in our commitment to stay intact in Maine as Tom’s of Maine.” But the Chappells also spoke about the marketing angle, saying, “We chose Colgate as our partner because they have the global expertise to help take Tom’s of Maine to the next level.”Currently, Tom’s of Maine, based in Kennebunk, Maine, sells 90 natural products, including toothpaste, mouthwash, and deodorant, and has a work force of about 170.The Chappells will maintain a 16% share of the company, they say.“It’s not surprising at all,” the principal of Natural Products Consulting, Bob Burke, said. “Every large consumer products company is looking for growth” and natural or organic products are a growth sector.For that reason, deals like the one between Tom’s and Colgate are not rare. Small businessmen and women like the Chappells want to get rich, and the way to do that could be an IPO. But more commonly, small businesses cash in by selling to big companies. Anytime a small company accepts financing from a venture capital firm, the venture capitalist will insist that there be some exit strategy or “liquidity event.”That’s true even when the small company maintains an earthy and moralistic tone, as does Tom’s of Maine.In 2000, for instance, the cofounders of Ben & Jerry’s, Ben Cohen and Jerry Greenfield, sold their iconic ice cream company to Netherlands-based Unilever, one of the world’s largest consumer products companies with sales at the time exceeding $45 billion. Ben & Jerry’s was already a public company with sales of $237 million. The sale price was $326 million. The idea was the same. Mr. Cohen and Mr. Greenfield expressed surprise that a major multinational would “sign on, enthusiastically, to pursue and expand the social mission that continues to be an essential part of Ben & Jerry’s.” Unilever, meanwhile, obtained a foothold in the highgrowth super premium segment of the ice cream market.Within a year, Coca-Cola and Pepsi both got into the act. In late 2000, Pepsi bought South Beach Beverage Company, maker of SoBe-brand fruit drinks and iced teas for a reported $370 million. SoBe was only four years old at the time, and its sales were still just $21 million, so the purchase price reflected a fervent desire to diversify as well as the frenzy of the dot-com era.Coca-Cola responded by buying the much smaller Mad River Traders, a Greenwich, Conn.-based maker of teas, juices, and premium carbonated soft drinks sold primarily in the Northeast, mid-Atlantic, and Northwest.Though neither acquisition would mean more than a blip in the sales figures of the soda giants, the feeling was that quirky soft drinks were the future and it was important to buy in.In 2001, Mr. Burke’s own former company, Stonyfield Farm, a New Hampshire-based manufacturer of natural and organic yogurts and ice cream, entered into a strategic partnership with French giant Groupe Danone, which eventually bought control of the company.While Coca-Cola, Pepsi, or Colgate could start their own niche brands (and sometimes do), that can be “an expensive and sometimes risky undertaking,” Mr. Burke said. The Tom’s deal gives it a “platform for growth.” Adding marketing and financial muscle, it can expect to raise that platform higher.

Tom’s of Maine Is Now Tom’s of Colgate?

Tom’s of Maine Is Now Tom’s of Colgate?

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