Colgate Buys Out Tom's of Maine Body Care Company

http://www.boston.com/business/articles/2006/03/22/colgate_will_buy_toms_of_maine/

Colgate will buy Tom's of Maine
$100m deal may help boost sales of leader in natural products niche
By Chris Reidy, Globe Staff | March 22, 2006

Tom's of Maine -- a niche brand 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, the company said yesterday.

Best known for toothpaste, Tom's of Maine got its start in 1970 by making a phosphate-free laundry detergent. Over the years, cofounder Tom Chappell, 63, poked fun at major brands like Colgate, saying they put artificial additives in their toothpastes while Tom's of Maine used natural ingredients.

Chappell said he will continue to run the brand from its Kennebunk headquarters. None of the privately held firm's approximately 170
jobs will be lost, he said.

''We'll be a stand-alone subsidiary," said Chappell. ''And we have a commitment from Colgate that our formulas will not be tampered with.

Colgate-Palmolive of New York plans to keep the Tom's of Maine brand name and hopes to use its significant distribution network and
marketing muscle to boost sales. With annual revenue of nearly $50 million, Tom's of Maine said it can grow faster with Colgate in what Colgate estimates is a fast-growing $3 billion US market for natural oral-care and personal products.

''People are more and more concerned about what's going in and on their bodies," said Bruce Cohen, a strategist in the San Francisco
office of the consulting firm Kurt Salmon Associates.

''Tom's has been around for a long time and they have very passionate employees and very passionate consumers. People who use Tom's
products use all of Tom's products -- the toothpaste, the deodorant, and facial products. And they're evangelical about it. You can't say that about Colgate toothpaste."

Other New England companies that focus on natural ingredients have also sold to bigger players in recent years. The list includes ice
cream's Ben & Jerry's (Unilever PLC); Nantucket Nectars of Juice Guys fame (ultimately bought by Cadbury Schweppes); and Stonyfield Farm yogurt (Groupe Danone, a French company known for its Dannon brand yogurt).

While entrepreneurs at these kinds of companies do financially well for themselves while running them, they can reap bigger returns by selling their firms.

''At some point, some of these guys just might want to buy a small island off the coast of Belize," said Tobe Berkovitz, an associate
dean at Boston University's School of Communication.

Cofounders Tom and Kate Chappell said the 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," they said
in a statement. ''We see Colgate as an excellent fit with our cultural values." Those values include a policy of giving 10 percent of pretax profits to community groups that benefit the environment and other causes.

During a telephone interview, Kate Chappell, 60, offered another reason to sell:

''We're not going to be here forever, and we needed to find a good home for the company."

The combination of Colgate, the global leader in oral care, and Tom's of Maine, the leader in the natural oral-care category, represents ''growth opportunities for both companies," Colgate chief executive Reuben Mark said in a statement.

Natural toothpaste currently makes up only a small fraction of what US consumers spend on toothpaste each year.

Still, it's important for Colgate to preserve the distinctiveness of a brand that found favor with local consumers, said chief executive
Fran Kelly of the Boston advertising agency Arnold US.

''Tom's has a northern New England, down-to-earth sensibility, and people like things that are unique and genuine," Kelly said. ''The
challenge for Colgate is to keep Tom's uniqueness and quirkiness alive."

Colgate won't put its name on Tom's of Maine products, Tom Chappell said. And that strikes Berkovitz as a smart move. ''You try to keep it stealthy," Berkovitz said of a buyer's strategy after buying a beloved regional company. ''I think the average person in a store thinks that Ben & Jerry's ice cream is still being mixed by two guys in a Vermont barn."

Colgate plans to buy 84 percent of Tom's of Maine. The Chappell family will retain the rest. The sale is expected to close in the
second quarter.

Chris Reidy can be reached at reidy@globe.com. Globe staff writer Jenn Abelson contributed to this report.