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Bad Hair Days - African American firms losing control of the ethnic haircare industry
- By naanis naturals
- Published 09/15/2008
- Hair Stylists
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Today, few ethnic haircare products are owned by black companies. Their decades-long legacy has been lost to mainstream manufacturers.
AFTER GROWING THE HAIRCARE MARKET FROM THE roots, black-owned haircare manufacturers are splitting at the ends. Close inspection of shampoo and Relaxer labels uncovers a worrisome prospect: Owner by owner, blacks are losing control of the ethnic haircare industry.
Like heavy machinery toppling buildings to leave barren inner-city lots, multinational conglomerates are demolishing one of the foundations of the African American economy. Company by company, mergers and acquisitions are dismantling black-owned haircare businesses. In 1993, majority-owned WAX, a Florida-based generic drug company, acquired Johnson Products Co. Then, in 1998, L'Oreal bought Soft Sheen. Ownership of Johnson Products changed hands that same year from IVAX to Carson Inc., a mainstream company based in Savannah, Georgia. In March 2000, Alberto-Culver, a $1.6 billion personal-care products manufacturing company in Melrose Park, Illinois, bought Pro-Line., the third largest black-owned manufacturer, for an undisclosed amount.
The moment of truth came last summer when L'Oreal acquired Carson. When the dust Settled, the top two black-owned haircare companies (Johnson Products and Soft Sheen) Were joined under the L'Oreal umbrella.(However, L'Oreal is being required by the Justice Department to divest the Johnson name and several of its products.) Based in France, L'Oreal is the world's dominant manufacturer of ethnic haircare products, with Soft Sheen/Carson brands such as Dark & Lovely and Optimum (Care as its top sellers. Soft Sheen/Carson is the name L'Oreal has given to the newly merged Soft Sheen Products and Carson Products businesses.
"What we're getting now is a Microsoft of the haircare industry with L'Oreal," says Nathaniel H. Bronner Jr., executive vice president of Bronner Bros., based in Marietta, Georgia. "That's fundamentally what: we are dealing with, a totally different scale of money." With gross sales of $33 million in 1999 Bronner Bros., maker of BB products and African Royale, ranks No. 80 on the BLACK ENTERPRISE INDUSTRIAL/SERVICE 100 list.
Sales of L'Oreals ethnic market divisions are in the $AN million range, and those of Alberto-Culver are in the $100 million range, estimates Lafayette Jones, president and CEO of Segmented Marketing Services Inc. Jones is also publisher of Urban Call, a trade magazine for urban retailers and businesses, and Shades of Beauty, a magazine for multicultural salons.
"The combination of L'Oreal's massive marketing power plus the acquired brands of Soft Sheen and Carson will work to squeeze black manufacturers from the retail shelf," says Alfred Washington, chairman of the American Health and Beauty Aids Institute (AHBAI) in Chicago, the group responsible for the Proud Lady logo on all black-owned haircare products.
AHBAI estimates L'Oreal's position will be 61.9% of the hair color market and 51.2% of the women's relaxer market, cementing its position as the world's largest manufacturer of ethnic haircare products. In mass merchandise stores alone, it will represent 71.8% of the hair color market, according to AHBAI.
L'Oreal disputes those numbers, noting that according to its calculations, it will control slightly more than one-third of the relaxer market--about 35%, according to a L'Oreal spokesperson. Yet even by its own conservative estimates, this is more than a third of the market controlled by just one company.
HOW THE HAIR WAS LOST
Whoever said never do business with family members obviously had the players in the haircare industry in mind. "Johnson Products, Soft Sheen, and Pro-Line were family corporations, as opposed to a company like Alberto-Culver or Revlon," says Washington. "And in all three cases, it was family situations that led to their sale."
Carson opened an old wound for the black community by acquiring Johnson Products from WAX in 1998. In 1971, Johnson Products became the first African A
merican-owned firm listed on the American Stock Exchange. In 1993, after George and Joan Johnson were involved in a somewhat messy divorce, Johnson Products Corp. and all of its brands, including Ultra Sheen, Gentle Treatment, and Posner, were sold for $67 million to WAX. Talk about devastating. The leaders of the Rainbow/PUSH Coalition at that time called for a boycott of IVAX. Incidentally, George and Joan remarried in 1996 (see "Where Are They Now?" August 2000).
With Soft Sheen, Washington believes internal squabbling among Gardner family members who owned the company also led to the sale of the company to L'Oreal. "Again, I think that the internal situation overrode the commitment to stay a black corporation in a black industry," says Washington.
Edward and Bettian Gardner began Soft Sheen as a black family-owned business over 30 years ago. Soft Sheen was the originator of Care Free Curl, Wave Nouveau, Optimum Care relaxer, and some 150 other haircare and cosmetic products. At its pinnacle, Soft Sheen stood as a major economic and political force in Chicago. The company grew from an obscure $500,000 haircare-products manufacturer into an industrial powerhouse, exiting the BE INDUSTRIAL/SERVICE 100 list at No. 18, with $95 million in sales for 1997, as the top haircare manufacturer.
Terri Gardner, daughter of Edward and Bettian Gardner and former president and CEO at Soft Sheen and current president of the Soft Sheen/Carson division at L'Oreal, admits that selling the company freed up other family members to explore other interests. She also claims that selling the company was a matter of growth and survival.
"We wanted to get to the next Level, and doing so on our own would have been very difficult," says Gardner, who decided to sell completely instead of compete. According to sources, at the time of the sale, Terri and her brother, Gary, who were running the company, were at odds. Instead of fighting it out with Terri, Gary relinquished control and went on to begin Namaste, producer of the Organic Root Stimulator brand of haircare products.
Under totally different circumstances, Comer Cottrell, CEO and founder of Pro-Line Corp. (No. 39 on the BE INDUSTRIAL/SERVICE 100 list with $65 million in sales for 1998), sold the company to Alberto-Culver, manufacturer of Alberto VO5 and St. Ives Swiss Formula skincare brands. In March of this year, Alberto-Culvet added Cottrell's Pro-Line brands, Soft & Beautiful and Just for Me, to its ethnic line. Industry insiders suspect Cottrell sold the company because he was just tired of fighting his competitors. In 1998, he received a $5 million growth investment from Patricof & Co. Ventures in New York, hoping to grow through acquisitions, but failed. Cottrell expressed interest in Johnson Products when it was being sold by IVAX, but Carson won the bid at $70 million.
"The companies that are buying these larger (black) companies are a hundred times larger than we are," said Bronner. "Black companies simply cannot come up with that kind of financing power."
"M&M Products was doing great--a $40 million company," AHBAI chairman Al Washington says, "but the partners, Cornell McBride Sr. and Therman McKenzie, didn't see eye-to-eye on how to operate the corporation. They got into a financial bind, and had to sell the company a decade ago." McBride and McKenzie were the originators of the Sta-Sof-Fro brand. They sold the company to Johnson Products in 1989. McBride is currently president and CEO of Atlanta-based McBride Research Laboratories, maker of Design Essentials and Wave By Design.
"As far as the others that remain in the industry--the Lusters, the J.M. Products, the Summit Labs--I see less of those kinds of internal problems and lack of commitment to the industry," says Washington, who is also CEO of AFAM Concepts in Chicago. Founded in 1978, AFAM produces Vitale products, and sells primarily in the professional market to salons.
TIME FOR A MAKEOVER
Blacks used to own 100% of the haircare retail market. Now they own perhaps 30%, estimates Washington.
"We have to look at different ways of doing business in order to compete in the marketplace. We don't have the resources, so we can't compete on the basis of resources," says McBride. "We have to compete based on ingenuity and a different way of approaching the market."
AFTER GROWING THE HAIRCARE MARKET FROM THE roots, black-owned haircare manufacturers are splitting at the ends. Close inspection of shampoo and Relaxer labels uncovers a worrisome prospect: Owner by owner, blacks are losing control of the ethnic haircare industry.
Like heavy machinery toppling buildings to leave barren inner-city lots, multinational conglomerates are demolishing one of the foundations of the African American economy. Company by company, mergers and acquisitions are dismantling black-owned haircare businesses. In 1993, majority-owned WAX, a Florida-based generic drug company, acquired Johnson Products Co. Then, in 1998, L'Oreal bought Soft Sheen. Ownership of Johnson Products changed hands that same year from IVAX to Carson Inc., a mainstream company based in Savannah, Georgia. In March 2000, Alberto-Culver, a $1.6 billion personal-care products manufacturing company in Melrose Park, Illinois, bought Pro-Line., the third largest black-owned manufacturer, for an undisclosed amount.
The moment of truth came last summer when L'Oreal acquired Carson. When the dust Settled, the top two black-owned haircare companies (Johnson Products and Soft Sheen) Were joined under the L'Oreal umbrella.(However, L'Oreal is being required by the Justice Department to divest the Johnson name and several of its products.) Based in France, L'Oreal is the world's dominant manufacturer of ethnic haircare products, with Soft Sheen/Carson brands such as Dark & Lovely and Optimum (Care as its top sellers. Soft Sheen/Carson is the name L'Oreal has given to the newly merged Soft Sheen Products and Carson Products businesses.
"What we're getting now is a Microsoft of the haircare industry with L'Oreal," says Nathaniel H. Bronner Jr., executive vice president of Bronner Bros., based in Marietta, Georgia. "That's fundamentally what: we are dealing with, a totally different scale of money." With gross sales of $33 million in 1999 Bronner Bros., maker of BB products and African Royale, ranks No. 80 on the BLACK ENTERPRISE INDUSTRIAL/SERVICE 100 list.
Sales of L'Oreals ethnic market divisions are in the $AN million range, and those of Alberto-Culver are in the $100 million range, estimates Lafayette Jones, president and CEO of Segmented Marketing Services Inc. Jones is also publisher of Urban Call, a trade magazine for urban retailers and businesses, and Shades of Beauty, a magazine for multicultural salons.
"The combination of L'Oreal's massive marketing power plus the acquired brands of Soft Sheen and Carson will work to squeeze black manufacturers from the retail shelf," says Alfred Washington, chairman of the American Health and Beauty Aids Institute (AHBAI) in Chicago, the group responsible for the Proud Lady logo on all black-owned haircare products.
AHBAI estimates L'Oreal's position will be 61.9% of the hair color market and 51.2% of the women's relaxer market, cementing its position as the world's largest manufacturer of ethnic haircare products. In mass merchandise stores alone, it will represent 71.8% of the hair color market, according to AHBAI.
L'Oreal disputes those numbers, noting that according to its calculations, it will control slightly more than one-third of the relaxer market--about 35%, according to a L'Oreal spokesperson. Yet even by its own conservative estimates, this is more than a third of the market controlled by just one company.
HOW THE HAIR WAS LOST
Whoever said never do business with family members obviously had the players in the haircare industry in mind. "Johnson Products, Soft Sheen, and Pro-Line were family corporations, as opposed to a company like Alberto-Culver or Revlon," says Washington. "And in all three cases, it was family situations that led to their sale."
Carson opened an old wound for the black community by acquiring Johnson Products from WAX in 1998. In 1971, Johnson Products became the first African A
merican-owned firm listed on the American Stock Exchange. In 1993, after George and Joan Johnson were involved in a somewhat messy divorce, Johnson Products Corp. and all of its brands, including Ultra Sheen, Gentle Treatment, and Posner, were sold for $67 million to WAX. Talk about devastating. The leaders of the Rainbow/PUSH Coalition at that time called for a boycott of IVAX. Incidentally, George and Joan remarried in 1996 (see "Where Are They Now?" August 2000).
With Soft Sheen, Washington believes internal squabbling among Gardner family members who owned the company also led to the sale of the company to L'Oreal. "Again, I think that the internal situation overrode the commitment to stay a black corporation in a black industry," says Washington.
Edward and Bettian Gardner began Soft Sheen as a black family-owned business over 30 years ago. Soft Sheen was the originator of Care Free Curl, Wave Nouveau, Optimum Care relaxer, and some 150 other haircare and cosmetic products. At its pinnacle, Soft Sheen stood as a major economic and political force in Chicago. The company grew from an obscure $500,000 haircare-products manufacturer into an industrial powerhouse, exiting the BE INDUSTRIAL/SERVICE 100 list at No. 18, with $95 million in sales for 1997, as the top haircare manufacturer.
Terri Gardner, daughter of Edward and Bettian Gardner and former president and CEO at Soft Sheen and current president of the Soft Sheen/Carson division at L'Oreal, admits that selling the company freed up other family members to explore other interests. She also claims that selling the company was a matter of growth and survival.
"We wanted to get to the next Level, and doing so on our own would have been very difficult," says Gardner, who decided to sell completely instead of compete. According to sources, at the time of the sale, Terri and her brother, Gary, who were running the company, were at odds. Instead of fighting it out with Terri, Gary relinquished control and went on to begin Namaste, producer of the Organic Root Stimulator brand of haircare products.
Under totally different circumstances, Comer Cottrell, CEO and founder of Pro-Line Corp. (No. 39 on the BE INDUSTRIAL/SERVICE 100 list with $65 million in sales for 1998), sold the company to Alberto-Culver, manufacturer of Alberto VO5 and St. Ives Swiss Formula skincare brands. In March of this year, Alberto-Culvet added Cottrell's Pro-Line brands, Soft & Beautiful and Just for Me, to its ethnic line. Industry insiders suspect Cottrell sold the company because he was just tired of fighting his competitors. In 1998, he received a $5 million growth investment from Patricof & Co. Ventures in New York, hoping to grow through acquisitions, but failed. Cottrell expressed interest in Johnson Products when it was being sold by IVAX, but Carson won the bid at $70 million.
"The companies that are buying these larger (black) companies are a hundred times larger than we are," said Bronner. "Black companies simply cannot come up with that kind of financing power."
"M&M Products was doing great--a $40 million company," AHBAI chairman Al Washington says, "but the partners, Cornell McBride Sr. and Therman McKenzie, didn't see eye-to-eye on how to operate the corporation. They got into a financial bind, and had to sell the company a decade ago." McBride and McKenzie were the originators of the Sta-Sof-Fro brand. They sold the company to Johnson Products in 1989. McBride is currently president and CEO of Atlanta-based McBride Research Laboratories, maker of Design Essentials and Wave By Design.
"As far as the others that remain in the industry--the Lusters, the J.M. Products, the Summit Labs--I see less of those kinds of internal problems and lack of commitment to the industry," says Washington, who is also CEO of AFAM Concepts in Chicago. Founded in 1978, AFAM produces Vitale products, and sells primarily in the professional market to salons.
TIME FOR A MAKEOVER
Blacks used to own 100% of the haircare retail market. Now they own perhaps 30%, estimates Washington.
"We have to look at different ways of doing business in order to compete in the marketplace. We don't have the resources, so we can't compete on the basis of resources," says McBride. "We have to compete based on ingenuity and a different way of approaching the market."
