New Chapter, Inc., a vitamin and supplement company based in Brattleboro, Vermont, announced in mid-March its purchase by Procter & Gamble, the world’s largest consumer goods company, for an undisclosed price. New Chapter founders Paul and Barbi Schulick assured employees that the corporation plans to operate New Chapter as a wholly owned subsidiary with headquarters remaining in Brattleboro, and that no significant changes in jobs, compensation, benefits, or business practices will take place.

“Our shared mantra is acquisition, not assimilation,” wrote the Schulicks in a company memo to New Chapter employees (e-mail to M. Blumenthal, March 16, 2012). “Our culture, guiding principles, and credo will not change and will only be buoyed by the superlative values gleaned from Procter & Gamble’s resources and experience.”

New Chapter embarked on its mission to harness the healing power of herbs in 1982. At the time, its liquid herbal extracts (originally sold under the name New Moon) were being pressed in a makeshift garage factory. Thirty years later, its purchase by Procter & Gamble signifies a new era in the company’s history.

“There’s probably no better evidence of mainstream consumer acceptance of the benefits of herbal dietary supplements than P&G’s acquisition of New Chapter,” said ABC Founder and Executive Director Mark Blumenthal in a Member Advisory sent to ABC members.¹ “Obviously, Procter & Gamble has done a significant amount of due diligence in researching not only New Chapter’s history and product quality but also in determining the future growth potential for New Chapter’s herbal and other dietary supplement products. A company like P&G doesn’t make such a strategic move into a new area like dietary supplements without a considerable level of research.”

The “Stonyfield Model”

Reminding consumers of past changes in the natural products industry, New Chapter Chairwoman Elizabeth Bankowski has said the company sees the transition “running along a Stonyfield model.”² Stonyfield Farm, an organic yogurt company, was acquired by the French consumer products corporation Group Danone—owner of brands such as Evian^® and Activia^®—between 2001 and 2003.

“Typically, when a big conglomerate buys a smaller organic or natural-food company, the smaller company undergoes management changes,” Stonyfield’s website states in a section called “Our Extended Family.”³ “But Groupe Danone has allowed us to continue managing our company autonomously, and we’ve remained true to our mission.”

Procter & Gamble’s acquisition of New Chapter is the latest example of a large corporation purchasing a small, natural products company. In 1997, the natural, plant-based beauty care line Aveda was purchased by the global cosmetics manufacturer Estée Lauder. After more than a decade, “the smaller, environmental-focused personal care company has benefitted from the larger scale of its owner while also influencing Estée Lauder’s sustainability efforts,” GreenBiz.com reported in 2010.⁴

In a similar deal, the global consumer products giant Colgate-Palmolive purchased the natural personal care line Tom’s of Maine^® for $100 million in March 2006—less than a week after the international cosmetics and beauty company L’Oreal’s acquired beauty products seller The Body Shop^® for $1.1 billion.⁵

“We chose Colgate as our partner because they have the global expertise to help take Tom’s of Maine to the next level,” said Tom and Kate Chappell, co-founders of Tom’s, in a company press release.⁶ “Colgate has a commitment to product excellence, to global efforts to promote oral health and had a 200-year history of caring for consumers and for giving back to the community.”

More recently, the Clorox Company—a business synonymous with its bleach products—purchased the natural personal care products line, Burt’s Bees, for $913 million in 2007.⁷ The Nutrition Business Journal (NBJ) noted that Clorox “wrote down the value of Burt’s Bees by $250 million” after low sales numbers in 2011. However, the company’s lifestyle division saw sales growth of 6% in the second fiscal quarter of 2012. Even with recent price increases throughout their product lines, Burt’s Bees is still performing well, according to NBJ.⁸

Despite generally positive outcomes of past mergers, the Schulicks of New Chapter took measures to reassure customers after the announcement. On March 19, they posted an explanatory message to the company’s Facebook page.

“Like many of you, at first this was hard to imagine but through many conversations about how they would manage our business, we reached the conclusion that their desire to ‘do no harm’ to New Chapter is real,” they wrote.⁹ “We hope you will not jump to conclusions and will instead give this venture the time it needs to prove itself. We have a high degree of confidence and we, and our diligent staff, will be vigilant to assure New Chapter remains faithful to its founding principles.”

Two days later, after hundreds of continued comments, the Schulicks appeared in a YouTube video “to address customers who are concerned, skeptical, and angry—sometimes very angry—about what has occurred,” Paul said in the video.¹⁰ On New Chapter’s Facebook page, most comments were pointedly negative, with many users vowing to stop purchasing New Chapter products after “selling out” to P&G. While many wrote that they were “stunned,” “disappointed,” and “disturbed” by the decision, others offered their support of the company’s new direction.

The Schulicks have admitted that, on the surface, merging with one of the world’s largest companies seems like an odd move for a “progressive, innovative, entrepreneurial company like New Chapter,” which employs roughly 175 people in its Brattleboro facilities. However, they say it is rare to find a corporation that carries “the unparalleled commitment to quality, trust, and excellence that is foundational to Procter & Gamble.”

“For us it’s always been about healing, it’s never been about the more business aspects,” Barbi said in the video. “We needed other people to come in and help us with that part.”

New Opportunities

The Schulicks will remain with New Chapter, but in different roles. Paul will serve as the executive vice-president of science and innovation and Barbi will become vice-president of organization and culture. Procter & Gamble’s director of consumer and market knowledge, Kyle Garner, will join New Chapter as the new chief executive.²

In their memo to staff, the Schulicks wrote that Procter & Gamble has “the ability to turbocharge our mission while sustainably delivering the wisdom of nature to people and planet in ways we never even imagined.” Additionally, the founders believe that harnessing the expertise of the 175-year-old company will allow New Chapter to better navigate complex regulatory process, strengthen “quality, supply chain, and science platforms,” and enrich philanthropic and sustainability efforts.

New Chapter was awarded ABC’s Varro E. Tyler Commercial Investment in Phytomedicinal Research Award in 2011.¹¹ It was the first American company to be honored with the award. New Chapter has sponsored research arrangements with institutions such as Columbia University, Cornell University, and the University of Texas M.D. Anderson Cancer Center in order to scientifically assess the beneficial qualities of some of its products, particularly the prostate health formula Zyflamend®, made with supercritical carbon dioxide extracts of various herbs.

Procter & Gamble, a Fortune 500 company based in Cincinnati, Ohio, markets a wide variety of products around the world from shampoo and razors to diapers and detergents, including such brands as Puffs®, Prilosec®, and Tide®. In 2011, Procter & Gamble reported more than $80 billion in sales. The purchase of New Chapter is the company’s first venture into the vitamin and supplement markets, according to an article from The Brattleboro Reformer.¹²

However, Blumenthal added that “Procter & Gamble is no stranger to the herbal ingredients arena. They research and develop many botanical ingredients for a variety of consumer products that they sell in many parts of the world.”¹

The Schulicks say they are energized and inspired by Procter & Gamble’s commitment to honoring the integrity of the company, while continuing to further their mission. “Procter & Gamble’s investment in New Chapter is testament to the fact that the largest consumer goods company in the world now recognizes the power of nature’s healing and believes in its promise to transform global health and wellness.”

In New Chapter’s recent YouTube video, Paul summarized his hopes for consumers. “The one thing I would ask you is to … take a deep breath with us and give us a little bit of time to prove ourselves.”¹⁰

Both New Chapter and Procter & Gamble are long-time Sponsor Members of ABC.

—Tyler Smith

References

1. Proctor & Gamble Buys New Chapter, Inc. [member advisory]. Austin, TX: American Botanical Council, March 19, 2012.
2. Watson E. New Chapter: ‘Countless opportunities await’ under new owner, P&G. NutraIngredients-USA website. Available at: www.nutraingredients-usa.com/Industry/New-Chapter-Countless-opportunities-await-under-new-owner-P-G. Accessed March 19, 2012.
3. Our extended family. Stonyfield Farm website. Available at: www.stonyfield.com/about-us/our-story-nutshell/our-extended-family. Accessed March 24, 2012.
4. Aveda and Estee Lauder find common ground on sustainability. GreenBiz website. Avaialble at: www.greenbiz.com/news/2010/11/04/aveda-estee-lauder-find-common-ground-sustainability. Accessed March 24, 2012.
5. Howard T. Big companies by small brands with big values. USA Today. March 26, 2006. Available at: www.usatoday.com/money/companies/2006-03-21-natural-usat_x.htm. Accessed March 26, 2012.
6. Colgate purchasing Tom’s of Maine: Enters fast-growing natural products segment. [press release]. New York, NY: Tom’s of Maine; March 21, 2006.
7. Story L. Can Burt’s Bees turn Clorox green? New York Times. January 6, 2008. Available at: www.nytimes.com/2008/01/06/business/06bees.html?pagewanted=all. Accessed March 25, 2012.
8. Burt’s Bees and Gud to drive growth for Clorox. Nutrition Business Journal. February 8, 2012. Available at: http://newhope360.com/finance-and-investment/burts-bees-and-g-d-drive-growth-clorox. Accessed March 25, 2012.
9. A personal note from the founders of New Chapter. Facebook website. Available at: www.facebook.com/notes/new-chapter/a-personal-note-from-the-founders-of-new-chapter/10151409021285500. Accessed March 20, 2012.
10. A message from our founders. YouTube. March 22, 2012. Available at: www.youtube.com/watch?v=i-cgPvegoSQ. Accessed March 25, 2012.
11. American Botanical Council Announces Recipients of Botanical Excellence Awards. [press release]. Austin, TX: HerbalGram; March 11, 2011.
12. Weiss-Tisman H. P&G Buys New Chapter. The Brattleboro Reformer. March 17, 2012. Available at: www.reformer.com/localnews/ci_20194274/p-g-buys-new-chapter. Accessed March 19, 2012.