New Chapter Founders Describe Profit Pressures Under P&G

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Paul and Barbi Schulick
Paul and Barbi Schulick

Brattleboro, VT — The story of why Paul and Barbi Schulick left Procter & Gamble and their baby New Chapter behind after a six-year relationship is a classic: Can entrepreneurial innovation remain alive inside a public company pressured to produce financial returns for shareholders?

In a conversation with WholeFoods Magazine the couple talked about why they decided not to sign a fourth two-year contract with P&G and parted ways on July 1.

“In short, there was a difference of strategies that started to manifest as our relationship evolved,” said Paul Schulick. “There was a shift in emphasis more than a shift in strategies. We learned over time that the way a large consumer goods organization like P&G operates, they would track trends that would be existing and create really high quality products that would fit those trends.

“When I founded New Chapter and first started creating products in 1982, from that period until the acquisition [in 2012] I always created products that in my judgment were trendsetters and disruptive. We created a new trend, which was whole foods and whole foods fermentation. I was interested in bringing our herbal remedies to the overall marketplace. I was really focused on raising consciousness.”

“We were excited about the opportunity for the turbocharge they were to the mission and we felt good about the people who were managing the acquisition from their side,” added Barbi Schulick.. “We now think we can do more for the industry from the outside.”

A P&G spokesperson said the company remains committed to New Chapter, which has about 60 products and employs about 225, most at the Brattleboro headquarters..

“While I can’t comment on our strategic plans, I can confirm that New Chapter remains an important part of the P&G Personal Health Care portfolio. We will continue our mission of delivering the wisdom of nature through quality products our consumers expect and enjoy,” said Heather Huff, P&G Global Health Care communications.

In the face of a declining stock price and pressure from activist investor Nelson Peltz who was given a board seat, P&G in April announced it was buying Merck KGaA’s Consumer Health Business in a $4.2 billion deal. The company’s vitamin and food supplements recorded close to $1 billion in annual sales and include Febimion women’s supplements and Seven Seas cod liver oil.

Seeing the writing on the wall, the Schulicks said they felt they could no longer continue to support the company and had no interest in migrating to redundant products. New Chapter has been supported by retailers and is a repeat Natural Choice Award winner.

“We were aware of the direction they wanted to go in and it was clear to us that we couldn’t authentically represent it,” Barbi added. “It was just too far askew from the mission we originally presented to them at the time of the acquisition and they had supported for some time. It remains to be seen. We hope they prove us wrong. For us, it didn’t seem like it was the right place for us anymore.”

Herbal remedies

“In 1994 when DSHEA was passed, it was essential but a double-edged sword,” Paul said. “It allowed us to continue to sell herbs, but also limited how we could actually promote the herbs. The more I worked in a large consumer goods company format, it became more challenging.

“I was interested in helping men with prostate cancer or as a preventative in that vein. That kind of language is just not allowed in our industry,” he noted. “I did the best I could to work within the guardrails, but the guardrails were even more conservative under P&G.

“They did some amazing work with quality control and efficacy, which is why we lasted as long as we did,” Schulick added, “Investing in the science to show Zyflamend could work on the same mechanisms of actions as best-selling prescription drugs or our Lion’s Mane could play a potential role in a preventive protocol for Alzheimer’s Disease. They were also willing to research and create products like Golden Black Seed, which could be part of a crucial answer for metabolic syndrome.”

But things started to change and pressure to make more profit caused Schulick to become concerned about the ability to create effective products and keep the product formulation intact.

“In Zyflamend (New Chapter’s 10-herb blend), we chose an extract of green tea that cost $20 to $25 per kilo, certified organic with high levels of polyphenols, although we could buy one for $7.”

Word to retailers

The Schulicks’ message to retailers: “Be open. We have a lot of wonderful sales representatives still in the field. They are true mission people. The kinds of pressures P&G is under we understand. I would just hold them to task that the existing products in the formulas be kept whole, that those formulas be protected and as they look at new products they be worthy of the New Chapter label.”

“We’ll be watching like everyone else,” Paul said. “We have many dear friends there. We want them to stay in good shape. We met many inspired leaders. We have no way of knowing if they’ll centralize. We know there are some really thoughtful and careful leaders at P&G who care about New Chapter.

“We worked to keep the company in Vermont,” said Barbi. “Vermont is a big part of the brand. Part of my role was to create a really vibrant culture and to me the culture was an outgrowth of what’s in the bottle. Purity. Sustainability. Collective nature. Healing. It’s a beautiful culture.”

“I have been in literally thousands of health food stores and talked to thousands of consumers,” Paul added. “Recently they told me, ‘Please don’t make any more protein powders. Please don’t make any more probiotics.’ I think we really need to focus in our industry on those core issues. P&G was doing some amazing research on new innovations but the winds of change were there. You know how corporate America can shift.”

“We look back and realize there was a certain naivete on our part, and idealism on P&G’s part as well,” says Barbi, “We had a lot to be grateful for. You can always look back and say, ‘Oh I wouldn’t do it again,’ But it was tremendous growth for us … great relationship- building and opportunity.”

“The entrepreneurial vision does not have the Wall Street directives to hit,” her husband the formulator added. “Making money was never my #1 priority. I’ll kick myself for this but I’ll probably be at all the trade shows going forward. I continue to want to be in the industry,” he said, and at age 65, said he’s as spry as he was when he first entered the industry. “I’m not retiring. That is absolutely not in my DNA.”

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