Tom’s of Maine, Inc.

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Tom’s of Maine, Inc.

302 Lafayette Center
Kennebunk, Maine 04043
U.S.A.
Telephone: (207) 985-2944
Toll Free: (800) 367-8667
Fax: (207) 985-2196
Web site: http://www.tomsofmaine.com

Private Company
Incorporated: 1970 as Tom’s Natural Soaps
Employees: 150
Sales: $36 million (2000 est.)
NAIC: 325611 Soap and Other Detergent Manufacturing; 325620 Toilet Preparation Manufacturing; 325412 Pharmaceutical Preparation Manufacturing

Tom’s of Maine, Inc. is a leading manufacturer of natural toothpaste and personal care products. The firm is run and mostly owned by its founder, Tom Chappell, whose deep concern for the environment and his employees’ well-being have been key factors in determining the company’s path. Tom’s products contain no artificial ingredients, are not tested on animals, and are packaged in recycled materials. They are sold in health food stores as well as in many mass-market outlets such as CVS. Though the company’s goods cost more than those of its larger mainstream competitors, Tom’s sales have grown steadily over the years, due in part to strong customer loyalty as well as a widespread public interest in natural products. The majority of Tom’s revenues come from sales of the company’s flagship toothpaste line, which is certified for effectiveness by the American Dental Association. Other products include mouthwash, deodorant, dental floss, shampoo, soap, shaving cream, and a line of herbal health aids and extracts.

Early Years

Tom’s was founded in 1970 by Tom Chappell and his wife, Kate, on their farm near Kennebunk, Maine. Tom, a 1966 graduate of Trinity College in Connecticut, and Kate, an artist and poet, had moved to Maine from Philadelphia in 1968 after Tom quit his job as a benefits counselor at Aetna. Both were intent on living closer to the land and raising their children in a more natural environment. For several years 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.

Borrowing $5,000 from a friend for seed money, the Chappells soon began to manufacture the first phosphate-free liquid laundry detergent in the United States, which they called Clearlake. Packages 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.

In 1975 Tom Chappell had another idea he wanted to try—toothpaste. 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. The flavor was derived from herbs and spices. 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.

Following the successful introduction of its toothpaste, the company began to add other personal care products, including deodorant, mouthwash, and shaving cream, all made with natural ingredients and without testing on animals. In 1978 the Chappells decided to develop a line of fluoride toothpaste—a controversial idea in the natural foods marketplace. The move was a success, however, and sales of fluoride toothpaste eclipsed those of the original formula within two years, during which time Tom’s toothpaste sales doubled. In 1981 the company’s name was changed to Tom’s of Maine, Inc.

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. The company was now starting to view its toothpaste as a legitimate competitor of major brands like Crest and Colgate, rather than as simply a niche-market item. In 1986, a baking soda formula was introduced, and in 1988 Tom’s added a special version for children.

The company’s distribution by the late 1980s was still somewhat limited, with good coverage in New England and on the East and West Coasts, but little penetration in the South and Midwest. Tom’s advertising budget, which until then had been minimal, was increased in 1989 to $1.3 million, and the first national ad campaign was introduced the following year, which included folksy radio spots that featured the voices of Tom and his mother, Virginia. To prepare for an anticipated increase in sales, equipment at the company’s plant in an old train station in Kennebunk was upgraded, increasing toothpaste output from 50 to 90 tubes per minute.

Seeking a Higher Purpose: 1980s

Tom Chappell’s focus on growing his company had again placed him front and center in the bottom line-oriented world of capitalism, the distaste for which had once driven him to move from Philadelphia to Maine. Still questioning whether such a life was truly meaningful, he enrolled in Harvard Divinity School in 1986, 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.

His search 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. Input was sought from the entire workforce, and a multifaceted set of goals was finally agreed upon, which defined the company’s purpose as making a profit while working toward the common good. Tom’s would now place a much stronger emphasis on adhering to its core values, which had begun to recede into the background during the early 1980s, when a number of “M.B.A.s” were hired to “professionalize” the company. Though it took some time for the new mission statement to take hold, the company was ultimately revitalized by the process of implementing it.

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.

The firm’s corporate values were tested in 1992 after the company reformulated its popular natural deodorant. The new version, which eliminated petroleum products and added glycerin and lichen, proved to be ineffective for about half of users, who complained to Tom’s. In October of that year the company recalled the product at a cost of $375,000. The old formula was restored, and customers who had written to complain were given replacements and coupons for money back on their next purchase. The recalled deodorant, less effective but not useless, was donated to an organization that distributed it to the homeless.

Receiving the American Dental Association Seal: 1995

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. This was a crucial endorsement, as all of the company’s major competitors had long sported the ADA seal, which served to assure consumers that their products were effective. 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. The three most popular flavors, spearmint, cinnamon and fennel, were approved first, and the company continued to seek ADA certification for the rest of its fluoride line, which was granted six years later. Sales for 1995 reached a record level of $20 million.

Company Perspectives:

The Tom’s of Maine Mission: To serve our customers by providing safe, effective, innovative, natural products of high quality. To build relationships with our customers that extend beyond product usage to include full and honest dialogue, responsiveness to feedback, and the exchange of information about products and issues. To respect, value, and serve not only our customers, but also our co-workers, owners, agents, suppliers, and our community; to be concerned about and contribute to their well-being, and to operate with integrity so as to be deserving of their trust. To provide meaningful work, fair compensation, and a safe, healthy work environment that encourages openness, creativity, self-discipline, and growth. To contribute to and affirm a high level of commitment, skill, and effectiveness in the work community. To recognize, encourage, and seek a diversity of gifts and perspectives in our worklife. To acknowledge the value of each person’s contribution to our goals and to foster teamwork in our tasks. To be distinctive in products and policies which honor and sustain our natural world. To address community concerns in Maine and around the globe, by devoting a portion of our time, talents, and resources to the environment, human needs, the arts, and education. To work together to contribute to the longterm value and sustainability of our company. To be a profitable and successful company while acting in a socially and environmentally responsible manner.

In the fall of 1999 Tom’s introduced a new line of cough, cold, and other natural wellness products and liquid herbal extracts—more than doubling the total number of items the company offered. These were developed in conjunction with researchers at the University of Illinois at Chicago, which would provide third-party information on the products via a toll-free telephone number. Approximately $4 million was earmarked for marketing, the largest amount in company history. Some observers questioned the long-term prospects of the new line, noting that several major players, including Warner-Lambert and tea maker Celestial Seasonings, had already tried to branch out into herbal remedies with little success. Tom Chappell discounted the criticism, noting that his company had frequently succeeded despite negative predictions from outsiders. To facilitate production, the company purchased Green Mountain Herbs of Vermont to make most of the herbal extracts, while others were obtained from regionally based organic farmers. The year 1999 also saw the publication of Chappell’s second book, Managing Upside Down, which contained further thoughts on the ethics of corporate management.

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. Chappell himself admitted the company had been over-ambitious, telling Forbes, “We tried to do too much.” But Tom’s 58-year-old founder had confounded the critics before, and vowed to press on, hiring a New York consultant to redesign the company’s packaging, among other initiatives.

Thirty years down the line, Tom’s of Maine continued to make natural personal care products with a strong underpinning of corporate ethics. 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. The new move into herbal tonics and extracts was a big leap of faith that had yet to pay off, but under the experienced, creative guidance of Tom and Kate Chappell, Tom’s of Maine was sure to endure, whatever the public’s acceptance of the herbal line.

Principal Competitors

Procter & Gamble Company; Unilever; Colgate-Palmolive Company; Levlad, Inc.

Key Dates:

1970:: Tom and Kate Chappell begin making phosphate-free laundry soap in Maine; shampoo and other personal care products are introduced during the decade.
1975:: Company develops natural toothpaste, which quickly becomes its biggest seller.
1978:: Fluoride toothpaste debuts.
1981:: Company’s name becomes Tom’s of Maine, Inc.
1983:: Tom’s begins distributing its products to mass-market chains, starting with CVS.
1989:: Firm begins writing a new ethics-based mission statement.
1992:: New deodorant formula proves ineffective and is recalled; old formula is restored.
1995:: Tom’s Toothpaste is certified as effective by the American Dental Association.
1999:: Green Mountain Herbs is acquired; herbal remedies and extracts are introduced.
2000:: Sale of 12 percent of company to investors helps finance herbal marketing.