New Chapter will continue to run as a standalone business under new owner Procter & Gamble, but will get a "turbocharge" to its mission, according to bosses at the Vermont-based supplement firm.
New Chapter's chairman Elizabeth Bankowski was talking to NutraIngredients-USA after the firm announced it is being acquired by consumer products giant Procter & Gamble (P&G) for an undisclosed sum.
The deal would provide new opportunities for staff, extend New Chapter's international reach and add marketing muscle and scale, said Bankowski.
She added: "This started several months ago when we were looking to raise capital to grow the business, and it emerged that there were companies out there including P&G that had an interest in taking a majority share. We assessed all of the interest out there from a strategic and financial perspective, but P&G offered a premium bid.
"We see it as running along a Stonyfield model [organic yogurt maker acquired by dairy giant Danone but run as a standalone business] so we will operate as a standalone wholly owned subsidiary. We've signed the purchase agreement and the deal is expected to go through in early May."
At this point, New Chapter chief executive Larry Allgaier will leave the firm to be replaced by P&G’s director of consumer and market knowledge Kyle Garner.
However, P&G will retain the services of New Chapter founders Paul and Barbi Schulick, who will assume new roles as executive vice president of science and innovation and vice president of organization and culture respectively. Executive vice president, sales, Herb Lewis will stay on in the same role while vice chairman Tom Newmark will serve the company part time on a consultancy basis.
ABC: Strategic move for P&G
While the deal marks P&G’s first foray into the supplement market, the Cincinnati-based consumer products giant was “no stranger to the herbal ingredients arena”, said American Botanical Council (ABC) executive director Mark Blumenthal.
“They research and develop many botanical ingredients for a variety of consumer products that they sell in many parts of the world."
He added: "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.
"Obviously, P&G 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."
P&G deal will ‘turbocharge’ New Chapter mission
The headquarters of the business - which was set up by the Schulicks in the early 1980s and now employs about 175 staff at sites in Brattleboro and Newfane - will remain at Brattleboro, Vermont.
In a letter to New Chapter employees sent last week, the Schulicks said P&G has assured them that "no significant changes in jobs, compensation, benefits or business processes" were planned.
The deal would also create new career opportunities for staff, they said: "Countless opportunities await us. 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.
“We will be frank with you. When we were first approached by Procter & Gamble, we had our own host of fairly entrenched stereotypical attitudes about giant corporations. Attitudes, I’m sure many of you share.
"It would seem on the outside that merging with a large entity like Procter & Gamble would not be ideal for a progressive, innovative, entrepreneurial company like New Chapter."
P&G evaluated close to 20 companies... and picked New Chapter
But he added: "But what we have come to realize in this process is that in the same way there are few companies that carry the values and commitment of New Chapter, there are even fewer corporations that carry the unparalleled commitment to quality, trust and excellence that is foundational to Procter & Gamble.
"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.
"They have shared with us that they have evaluated close to 20 companies in our industry and none have met their standards, until now."
P&G: New Chapter perfect entry point to premium supplements market
Asked what attracted P&G to New Chapter, a P&G spokeswoman told NutraIngredients-USA: "New Chapter is a leading brand in the vitamin and mineral supplement (VMS) category within the specialty, whole foods and natural channels. It has strong brand equity and a very broad portfolio of premium products that have achieved strong consumer ratings.
"Additionally, this acquisition enables P&G to enter the premium, specialty segment of the VMS category with a meaningful $100m business on day one."
She declined to comment on whether this was the first of many acquisitions for P&G in the supplements space, adding: "As a matter of company policy, we don’t speculate on future acquisitions."
New Chapter will be a part of P&G’s Heath Care division and report into its North America Personal Health Care business, she added. "Our base business plan and primary priority is to preserve and grow what’s working at New Chapter in their current retail channels. Our intention is to maintain the New Chapter business as it is run today, and how it’s been run historically.
"Any plans for the future would be speculative at this point."
Gerald Abelson, president of Canadian corporate finance expert MNC Multinational Consultants, told NutraIngredients-USA that the move could be good for the sector as a whole if P&G commits to investing in research to substantiate product claims in the nutritional supplements arena and raises the credibility of a sector in which responsible players are constantly undermined by snake oil merchants.
David and Goliath
P&G, which chalked up sales of more than $82bn in 2011, has a stable of brands including Pampers, Tide, Ariel, Always, Pantene, Bounty, Charmin, Downy, Iams, Crest, and Olay.
New Chapter specializes in organic and 'whole food' supplements and does not use synthetic vitamins or other ingredients. It also grows organic turmeric, ginger and other plants at a farm in Luna Nueva, Costa Rica.
Click here to read out interview with New Chapter marketing boss Graham Rigby from last year.