CCA Industries, Inc.

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CCA Industries, Inc.

200 Murray Hill Parkway
East Rutherford, New Jersey 07073
U.S.A.
Telephone: (201) 330-1400
Fax: (201) 842-6042
Web site: http://www.ccaindustries.com

Public Company
Incorporated: 1983
Employees: 134
Sales: $42 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: CCAM
NAIC: 325620 Toilet Preparation Manufacturing

CCA Industries, Inc. has only a small percentage of the total health and beauty aids market, yet it has several leading products and for much of its history has had an enviable profit margin. CCA distributes and markets almost 200 products altogether, selling principally to mass marketers and health and beauty aid wholesalers. Giant merchandiser Wal-Mart is a key customer, accounting for almost 30 percent of CCA’s sales. CCA’s products are found in many leading drugstore chains such as Walgreens and Eckerd, for a total of some 40,000 stores nationwide. The company does none of its own manufacturing and often picks up innovative product ideas from inventors who bring them to CCA. Its product range includes a slew of niche items from all different segments of the health and beauty aids spectrum. One of CCA’s best known products is its Plus + White brand of tooth whiteners and tooth pastes. Other top brands include the Sudden Change line of skin care products, Nutra Nail nail polishes and treatments, Hair Off depilatories, Bikini Zone skin crème, sun care products marketed under the Solar Sense brand, and the fragrances Cherry Vanilla and Cloud Dance. Many of CCA’s products are unique or unusual. Its Cloud Dance perfume, for example, is made by a special formula that contains two differently colored liquids in suspension. The product sets itself apart by being visually distinctive. CCA advertises its brands through television ads and infomercials, as well as in print media.

Getting Started in the 1980s

CCA Industries was founded in 1983 by Ira W. Berman and David Edell. Berman, the company’s chairman, had a law degree from Cornell University and had been practicing law since 1955. Edell, who still serves as president and chief executive officer of the company, had extensive experience in the health and beauty business before forming his own company. He was formerly the executive director of Hazel Bishop Industries, Inc., a New Jersey-based cosmetics company with a venerable history. The company was named for its founder, Hazel Bishop, a chemist who invented what was known as the world’s first “kissproof” lipstick—a special long-lasting, nondrying formula. Hazel Bishop, Inc. had a 25 percent share of the U.S. lipstick market in the 1950s. Bishop sold the company in 1954. By the early 1980s, the company was known as a maker of low-priced cosmetics, as well as hair and skin products it had acquired when it bought Lanolin Plus in 1981. Hazel Bishop Industries did not make its own products by the 1980s but contracted that function out to six different manufacturers. CCA Industries was formed on much the same model. It aimed to sell health and beauty aids through mass marketers and chain stores, looking to capture only a small share of what was a huge market. CCA, however, did not look only to the low-price end of the market. Instead, it debuted products which often sold for much more than the competition but which offered consumers unique characteristics that seemed worth the extra dollars. Because it contracted its manufacturing, CCA was able to move nimbly, bringing out new products and dropping unsuccessful ones with less financial risk than a company that was heavily invested in factories and equipment. And CCA could concentrate on marketing, which was its forte.

Edell’s two sons joined the company, Drew in 1983 and Dunnan in 1984. Drew Edell had a degree in industrial design from the Pratt Institute in New York; he became vice-president for manufacturing. Dunnan Edell’s background included working at Hazel Bishop for five years. He became vice-president for sales. By the mid-1980s, CCA already had nationwide distribution of several products in different categories. It was selling Nutra Nail, a nail treatment, the hair conditioner Pro Perm, and the depilatory Hair Off, among other products. By 1987, CCA was ready for nationwide television advertising. The company went to Chestnut Communications to devise a campaign for a new diet aid called Eat ‘n Lose. Eat ‘n Lose was one of several CCA products developed outside the company, this one by Dr. Gio B. Gori, who had worked with the diet and nutrition program of the National Cancer Institute. It was a fiber that the consumer sprinkled on food. According to Dr. Gori, the product diluted calories and moved them through the digestive system faster. CCA invested about $1.5 million on Eat ‘n Lose commercials, and spent a total of some $5 million on advertising for all its products combined that year. The company continued to advertise, and by the early 1990s it was known for the light-hearted tone of its television commercials.

In 1991, CCA made a major push for two of its products, with national advertising appearing on prime time television and during popular daytime talk shows such as Donahue, Sally Jesse Raphael, and Geraldo. These two products both sold in low-end mass merchandisers, yet they were relatively expensive products. Sudden Change was a skin cream that was touted as being able to smooth out lines and wrinkles within minutes. Sudden Change stood out from competitors because it was not marketed as moisturizer or make up. It was something more, as it claimed to be able to make wrinkles vanish immediately and stay away for up to eight hours. A half-ounce bottle retailed for $15.99. CCA also made a big effort to promote Plus + White, a tooth whitening system that became a market leader and a big profit maker for drugstores.

Riding High on Tooth Whiteners in the Early 1990s

CCA’s success came from promoting unusual products that were able to grab a small share of the huge health and beauty market. Its Plus + White brand was one of its best products, becoming a prominent name in a neglected corner of the oral care industry. Tooth whiteners became hot sellers in the early 1990s, when several brands, including Plus + White, received heavy promotion. The total market in whiteners was estimated at $36.6 million in 1990, according to research published in Drug Topics (March 23, 1992), and by 1991 sales had grown over 70 percent, to $63 million. Consumers paid between $7 and $10 for Plus + White, leading to a very high profit margin for both CCA and the retailer. By 1992, sales at CCA had climbed to over $27 million. The next year, the company brought out another oral care product, a toothpaste called Triplex, which combined baking soda, hydrogen peroxide, and fluoride in one formula. Competitors had tried to present a similar product, but because the hydrogen peroxide and baking soda chemically reacted the ingredients had to be packaged separately, leading to a rather complicated and cumbersome toothpaste. A dentist approached CCA with a patented formula that encapsulated the hydrogen peroxide, so that for the first time, these three ingredients could co-exist in one tube. Triplex was soon a top seller at chain stores like Walgreens. The product again had a high profit margin, retailing for around $6, compared to $2 for most regular toothpastes.

The Food and Drug Administration (FDA) took notice of the leap in sales of tooth whiteners. The government agency thought initially that whiteners should be classified as a drug and be subject to long-term clinical studies. CCA marketed Plus + White as a cosmetic and was sure that its use of 3 percent hydrogen peroxide had already been declared safe for oral use by the FDA in 1988. CCA and another dental marketer formed the National Tooth Whitener Coalition in 1992 to argue for the safety of their products. CCA estimated it lost some $13 million in potential sales of Plus + White due to the FDA’s stance, yet the company nevertheless had record sales and earnings for the year. The FDA changed its position on tooth whiteners in July 1992, and CCA resumed heavy marketing of its dental care line. The company began a joint venture with Media Dynamics in 1993 to produce infomercials for CCA’s products. Infomercials are a hybrid between advertising and content, devoting usually a half hour to promoting a product and in most cases offering the item directly to consumers by telephone. The infomercial industry was growing quickly, and it offered a new outlet for CCA. The company hoped to attract first-time buyers through the television spots, which would then build to more sales through its traditional chain-store outlets. By 1993, CCA’s biggest customers were Wal-Mart, Walgreens, and Kmart. “Wal-Mart can’t get enough of CCA’s unique products,” claimed an industry analyst quoted in Business Week (April 19, 1993), and the company’s stock took off as news of its dramatic rise in sales and profits spread. CCA brought in $44.3 million in 1993, up steeply from its $27 million a year previous.

Company Perspectives:

CCA Industries, Inc., is … engaged in the manufacturing and marketing of its own brand of health and beauty aid products. The Company markets directly to major mass merchandisers and drug and food retail chains throughout the United States and internationally. All of the company’s products are sold under their individual brand names. The Company’s brand name products are Plus + White in the oral health care field, Sudden Change skin treatments, Hair Off depilatories, Nutra Nail nail treatments, Bikini Zone medicated creme and gel, Wash W Curl and Wash’N Straight shampoos, IPR 3 foot products, Cherry Vanilla, Cloud Dance, and Vision fragrances, Solar Sense sun care products, and Mega 16 and Progress diets aids.

The firm was canny in its marketing, spending some $10 to $12 million on advertising in 1993. When the new cop show NYPD Blue premiered in 1993, many advertisers shied away from it, afraid of the controversial level of violence and nudity the drama promised. CCA, however, leapt at prime advertising spots during the show. The gamble paid off when the show became a hit. Tooth whiteners and toothpastes were not all CCA had going for it. Its wrinkle reliever Sudden Change did an estimated $10 million in wholesale volume by 1993, and its Nutra Nail 60 Second, a quick-drying nail polish, brought in about $6 million wholesale. An even bigger seller was the Wash ‘n Curl hair care line. After two years on the market, Wash ‘n Curl had captured about 1 percent of the total North American shampoo market. This was just a small sliver, but worth over $11 million. Wash ‘n Curl was a shampoo that tended to make hair curlier. CCA followed it with Wash ‘n Moist, a shampoo that protected hair from the heat damage of blow drying, and Wash ‘n Tint, which brought out natural highlights in hair.

CCA Industries filed suit against the American Dental Association (ADA) in 1995 over a video the association produced alleging dangers that may result from using over-the-counter tooth whiteners. The video showed two Plus + White products, among others. CCA demanded a retraction of the video, which had been distributed to 700 broadcast journalists, but apparently the spot had already been run by some stations. CCA filed suit for damages relating to the video, and the ADA settled several months later. By that time, tooth whiteners had become unquestionably the most profitable segment of the oral care market. Despite having prime products in that segment, CCA stumbled in 1995, with sales dropping to $36 million, from $47 in 1994, and registering a loss of $1.5 million. Apparently, the company had overspent on advertising for products that did not go over well.

New Lines in the Late 1990s

The young company had spurted enormously in the early 1990s, followed by one bad year in the middle of the decade. But CCA seemed to have a good take on the health and beauty market, with effective advertising for an array of interesting products. Though its sales and profits went up and down through the late 1990s into the 2000s, CCA held to its original business formula, and at times did very well. The company began to try to rein in its advertising costs in the late 1990s, running spots which combined several of its products. And it always had more new products coming out. According to an interview with WWD (April 22, 1994), CCA president David Edell said the company always had 10 to 12 products in development. Some of them were line extensions, working on the Plus + White or Sudden Change name. But the company was also able to shift gears and bring out new products where it did not already have an established brand. In 1997, CCA began selling an analgesic skin cream called Bikini Zone, which was intended for women to use after shaving. It also came out with Shape ‘a Soap, a children’s soap that could be molded by hand, and a children’s nail polish called Young ‘n Lovely that washed off with soap and water. With these new products in its line-up, CCA’s revenue rose to $56 million that year. The company’s gross profit margins were an astonishing 65 percent, and CCA had no debt.

In 1998, the company introduced several extensions to its popular Sudden Change line, bringing out three versions of a Sudden Change patch. CCA also came out with a related product called Magic Beauty Potion. Magic Beauty Potion claimed to revitalize skin with a vitamin-rich formula that also reduced the appearance of wrinkles. Like Sudden Change, it carried a relatively high price tag—$14.95—and this gave retailers $6 profit for every jar sold. The company spent $10 million advertising these new skin care products in 1998. That year, CCA Industries also entered the fragrance market for the first time. The company acquired the manufacturing and distribution rights to the scents of Shiara Holdings, Inc., which sold Cherry Vanilla, Mandarin Vanilla, Amber Musk, and a men’s cologne called Vision. CCA formed a new division, 20 percent owned by Shiara’s founders, to market the new scents. It also bought the rights to a perfume that had been developed in Europe, Cloud Dance. The overall perfume market had not been particularly strong at the time, and for that reason CCA’s entry into the category seemed surprising. But the new division had extensive marketing expertise in the Shiara executives, one of whom had developed the well-known Jovan Musk brand. And Cloud Dance was the kind of unique product that seemed typical for CCA. A chemist had created the scent with a new process that bottled two separate fragrance oils of different colors in the same package. One version was orange and pink, and the other was turquoise and lavender. Marketers hoped women would buy Cloud Dance to display the bottle as much as to wear the scent.

CCA received an offer to sell the company in 1999, but it refused. Sales for 2000 were just over $37 million, down substantially from several years earlier, and it took another loss of around $650,000. By 2001, CCA was bringing out more line extensions of Plus + White and had a new crop of wrinkle creams. It had several products that were in the top ten of their particular categories, including Bikini Zone, the depilatory Hair Off Mitten, and Sudden Change. Plus + White was ranked number four out of 19 top sellers in the whitener category in terms of sales growth, and the year finished better for CCA, with revenue up 12 percent to $41.7 million and net income of just over $2 million. One of its largest customers, Kmart, filed for bankruptcy in January, 2002. The chain kept operating but closed many locations, and CCA acknowledged that Kmart’s status might have an impact on the company. Yet 2001 was a good year for CCA, while much of the rest of the U.S. economy suffered. It seemed possible that with CCA’s eclectic mix of products, the recession and economic uncertainty of the early 2000s would not hamper the company’s sales unduly.

Principal Divisions

Fragrance Corporation of America, Ltd.

Principal Competitors

Chesebrough-Pond, Inc.; The Proctor & Gamble Co.; Revlon, Inc.

Key Dates:

1983:: The company is founded by a former Hazel Bishop executive and others.
1987:: The company launches its first national advertising campaign.
1991:: CCA brings out Plus + White and Sudden Change.
1998:: The company enters the fragrance market.