How I Built This with Guy Raz - Tom's Of Maine: Tom Chappell

Episode Date: December 11, 2017

In 1970, Tom Chappell took out a $5000 loan to launch a natural products company called Tom's of Maine. Working out of a warehouse in Kennebunk, Maine, he created soaps, shampoos, and toothpaste free from added chemicals, and sustainable for the environment. When he sold the company three decades later, Tom's of Maine had become one of the largest natural products brands in the world. PLUS for our postscript "How You Built That", we check back with Paul Kaster, who two years ago started a company that makes wooden bowties, and is now starting Carbon Cravat — which makes bowties out of carbon fiber. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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So that's an enormous amount of product that you couldn't sell. $450,000 worth. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Tom Chappell turned a $5,000 loan into a soap and toothpaste business called Thoms of Maine, now one of the biggest brands in the natural products industry.

So if you've heard a previous episode of this show with John Mackey, the guy who founded Whole Foods, he explained how when he started that company in the late 1970s, natural and organic foods were part of the counterculture, the kind of stores that sold organic foods and soaps, also sold crystals and new age pamphlets and wind chimes. And it's not like there's anything really wrong with those things. It's just that now organic has gone mainstream. It's big business, a multi-billion dollar industry.

But chasing money isn't why Tom Chappell and his wife, Kate, started making soap and shampoo and then toothpaste in an old warehouse in Maine. They started making this stuff because they were part of a movement, a movement that took off in the late 60s and early 70s of

people who were worried about toxins and artificial ingredients in the things we use every day. But unlike Ben Cohen and Jerry Greenfield of Ben and Jerry's or Gary Hirshberg of Stony Field who've also been on the show, Tom Chappell wasn't and isn't a lefty, countercultural type of guy. He's actually an old school New England Yankee. His dad ran a textile mill and he grew up in a traditional family of quiet, stoic, Episcopal Republicans. And literally, yes, I mean literally, his life was a Norman Rockwell painting.

That's right. Matter of fact, Norman Rockwell found me at a choir practice in Pittsfield, Massachusetts at St. Stephen's Church, pulled me out and asked if I wanted to be on the cover of the Saturday Evening Post. And I was 10 years old. I had never heard of the Saturday Evening Post. I'd never heard of Norman Rockwell. So I just looked at him and I said, I don't know. I'll have to call my mother and see. And so Tom did call his mother. And he did actually end up on the cover of the Saturday Evening Post in the spring of 1954. Tom eventually went to Trinity College in Hartford where he studied English. He met his wife Kate and they got married when he was 22. And then he got his first job working for Aetna selling insurance.

And he was a great salesman, but it didn't last too long. Well, I was the number one salesman in my class of 65 people. But I was then given my raise. The raise was $600. and then I found out the lowest raise was $300. So you were making, you got a $600 raise for being the number one sales rep, and the worst sales rep got a $300 raise. Correct.

That didn't compute for me. The truth for me was that working in a large corporate structure was something I could see required a great deal of order, discipline, get in line, wait. and I realized that I was not made for that kind of a culture. And were you competitive? Did you want to be the top-selling insurance agent in that office? Was that important to you? I think it's always been important to me.

In a matter of fact, I've had people say to me about their work. I've never aspired to be the boss. And I think to myself, good Lord. I can't imagine that. They want to be at least one or two steps down so that they don't have the responsibility. But I love competing. I see nothing wrong with it. It motivates me.

It motivates my team. So, sure. Yeah. But still, it sounds like pretty quickly you realized that you didn't want to like climb the corporate ladder at Edna, that it just wasn't what you wanted for your life. Well, you're right that I saw my life as being full of possibilities. I certainly had the intellectual wherewithal to question whether or not a refined life in corporate America was going to make me happy. And I decided that it was not. And I went in to tell my boss and he said, well, maybe we should get you a psychologist.

to talk to before you take this extreme position. So you left? I left. And you and Kate moved to Maine at this point? We did. And this was like 68? It is 68. April of 68.

And I guess at first your plan was to work with your dad in like a new business that he had started? Yes. Yeah. I worked for a couple of years with him. And what was that? What was he doing? He had been in the textile business in Massachusetts, and like all of the businesses in Oxbridge, Massachusetts, they all failed. And so he had to reboot, restart his life, and he did it with his new business, which was pollution abatement for textiles, industries, and Maine.

and he was inventing things that could do the job without nitrates and phosphates, which was a new idea. And what was it about his business that, I don't know, seemed interesting to you? Well, I was doing this. For me, it was about combining business and the environment. In the mid-60s, you didn't work for a business and be concerned about the environment. It was either or you work for a nonprofit on behalf of the environment or you worked in business. And I knew that you could integrate the two. And so what?

That makes you start to think about starting your own company and whether you could do both these things too? Yes, right. And as of course we're going to learn, you went into the cleaning products business as well, personal products like soaps and shampoos, right? Yes. So I was certainly familiar with the nuts and bolts of the chemistry of cleaning. So the idea of cleaning the body with soaps and so forth with ingredients that were not harmful to the environment. And I certainly had my father's example. And the thing about business that I loved so much that it wasn't business that was in itself.

harmful. It was the agents that ran the business that could be sinister. And one just needed to use the tools of free enterprise in a way that was more ethically constructive to society as well as to those that are taking the risk. How did you have the money to even start the company? Well, I didn't. I asked a friend who put up $5,000. He and his wife were involved in the creation of this new alternative school in Kenny Bunk called the school around us. We became good friends, and I told him of my idea. And he had some IBM stock and took it to the bank as collateral to loan me $5,000. And that's what the company was started on. And obviously that did. didn't last very long. He put another 2,500 and then after that it was the second mortgage on the home and then the SBA loans and so on and so forth. So in those early years, I mean, it's just you and Kate like making this stuff, making

the soap and the shampoos? Or did you, presumably, to hire people to help you out, right? Well, Kate was actually very much involved in raising the three children that we had at the time. she was probably our best consumer advocate within the system to help guide my thinking on product design and packaging and so forth. And she's an artist. So she helped with the graphics and the art. Otherwise, I hired a chemist who was just perfect for us. He was brilliant. He helped us with product formulations that were authentically grounded in natural ingredients. We had a warehouse in Kenny Bunk. We bought used stainless steel dairy equipment around the neighborhood. I knew where to get a hold of stainless steel equipment for a hundred bucks here and a hundred bucks there. And then you get your first filling machine and so on. You just go.

So all of this equipment was actually designed for the dairy industry, but you were using it to make soap and shampoos. Yes. Were other people making this type of stuff in the mid-70? Was there lots of competition? Were there natural health companies making soaps and shampoos and toothpaste? Not really. We did have a pioneer named Dr. Brunner. Of course, yes.

Who from Chicago was making his peppermint oil soap. But other than that, there was a shampoo made called Orgene shampoo on Long Island. But after that, no, we were the first person to put a toothpaste together, a deodorant together. a mouthwash, all of that was we were first-time providers of that. What was in the toothpaste? What was the formula? Well, that, of course, it's a wonderful question. It's got a calcium carbonate that is a natural mineral that is a mild abrasive to do the cleaning of the teeth. We've got humectant, i.e. glycerin that is a byproduct of a natural soap-making process. But I have a

a chemist that helped me with all that. I could only talk about the ideal. I would give him my sense of the ideal, and he would try to turn that ideal into an efficacious formula. It seems like when you launched the toothpaste in the mid-70s, that's really when the company started to take off. Were you surprised that it was toothpaste, or did you anticipate that happening? I had a hunch that it would be successful because there was no natural toothpaste. people didn't know what a natural toothpaste was, and I felt that the motivation for my customer was to avoid additives. But, yes, the turning point came with the launch of the toothpaste.

Did anybody say to you, what are you thinking making toothpaste? I mean, everyone uses Colgate and Crest. Like, why are you even wasting your time? We had plenty of people advising me that it was a crazy, idea to compete with Procter & Campbell and Coeat. Yeah. But I mean, they had a point, right? I mean, why would you even get into a market that was, I have to assume, totally dominated

by those companies? Well, I think that comes purely and simply down to who you're serving. And in our case, we knew very well that we were serving a consumer that was discerning about what they would put in their bodies and why. They wanted facts, knowledge. We thought, well, why not serve these people? This is a great idea. The more people learned about what was in their shampoo or their soap or their toothpaste,

they would question. And Ralph Nader, in the mid-70s, was successful in facilitating legislation that required that ingredients in personal care products had to be on the label. that happened, that disclosure and transparency raised lots of questions in people's minds for the first time. Because they saw these things they couldn't pronounce on the label. Couldn't pronounce. And so our package, our toothpaste box, like any toothpaste box, has four sides, and one

side was committed to the brand name and the other three sides were committed to information. And we did have a moment of courage in all of this when the federal government's said that any kind of fluoride toothpaste would have to be registered as having tested successfully for efficacy and safety on rats. And we said we don't subject animals to studies. We've used human trials. And they said, well, the protocol is rat studies. And by testing on rats, it's not like taking rats and brushing their teeth.

Because then they would just have nice, shiny teeth. It was like it's actually quite cruel, right? Yeah, I mean, you've got to do, it's cruel. Yeah. There's no pretty way. And so we refused, and we went to Washington and met with the FDA and said, we've got human trials, and they eventually acceded. And then we went on to get the American Dental Association seal of acceptance as well. So we kept to our values, and the change happened after that.

All the other companies stopped testing on animals. So we had a big influence. What was the culture of Tom's like? Because, you know, we know that Ben and Jerry's was a, you know, sort of an unapologetically liberal place and various sort of hippies. And what was the culture like at Tom's? Was it similar to those other companies? I don't think so. I think we were more straight-laced.

And the reason I say that is I wasn't an activist. I wasn't a hippie. I wanted to appeal on the merits. of the product. But I have to assume, Tom, that at the beginning, like the people buying your toothpaste in Ann Arbor, Michigan, or San Francisco were not, you know, not Country Club Republicans. These were sort of countercultural people buying your stuff, at least at the beginning. Well, that's absolutely true.

And mind you, we were countercultural too. We just didn't look the part and play the part. I don't think you would have found me in Berkeley. You wouldn't have found me in Cambridge demonstrating, but I had the same indignation deep down inside about the way the country was being run. I just had a different way of handling it. Did you have massive ambitions for your company by the time you reached profitability in the mid-70s with the launch of toothpaste?

Were you thinking to yourself, this is going to be huge? This is going to be a massive company, and that's what I want to do. No, I didn't think that. I don't think I had the self-confidence to think that. I think my aim was to bring it to a certain sales level and to stay within the natural food community. Because within the natural food store community or distribution system, we were the proctor and gamble of that class of trade. When that particular opportunity started to wane in terms of growth rates, then we looked at the, traditional supermarkets and chain drugstores and ask the question, what would it be like for us to be

on those shelves to expand into the traditional market? Tom, you did not, and you studied English in college. You didn't go to business school. And I gather in the early 80s, you brought on a bunch of folks from Harvard who had done MBAs and other people with the credentials. And did you bring them to execute that strategy to grow times of man like you said into, you know, to bring it into more traditional markets? Totally. I had a fellow joined the company as a director named John Rockwell, who from Booz Allen in New York became a great mentor to me.

And I remember his saying, we've got to help transition this company from serving the health committed to expanding it to the people that are health concerned. So if we were going to go into supermarkets and drugstores, that was going to be a different business proposition. We brought on people from Booz Allen Hamilton, McKinsey and Company. And so from 1981 to 1986, we were executing a strategic plan that had a lot to do with changing your message so that you could appeal. to that new consumer, finding the right people to help on the team, to build the team. In our case, we needed to increase our prices and figure out ways to make the product more efficiently. And I guess the strategy was working because it was in the early 80s where when you guys really started to explode in growth, like 25% growth year over year.

And then in 1986, you have this kind of personal crisis, I guess. You sort of something is going on and you just feel like there's an emptiness. What was that about? What was going on? The crisis was that we had achieved our strategic benchmarks. And I was feeling quite empty because we hadn't created a new product in four years. And I said, I just don't feel the meaning of this enterprise in just improving the business in terms of size and profitability. And we were not creating new products and making a difference in areas that I thought we should because we had become overcome with the numbers and the leadership had become, you know, the MBAs.

So it sounds to me like you were just, you weren't fulfilled. I was not. I was not. In just a moment, how Tom Chappell found answers to his crisis in a place you probably wouldn't expect. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR. Hey, welcome back to How I Built This from NPR. I'm Guy Raz.

So it's 1986. Tom Chappell is the CEO of a very successful company. Tom Zameen is hitting double-digit growth and all of its strategic goals. But for Tom, he was feeling like he had strayed from why he had founded the company in the first place. And he was looking for the kind of answers that you don't find at Harvard Business School. So instead, he enrolled part-time at Harvard Divinity School. I got up at 4.4.30 in the morning to study. I worked very hard.

It was an extremely difficult educational experience. But it was so motivating because I was learning things from philosophers like Martin Buber, who had some fantastic things to offer in his book, I and Thou. And I would say to myself, wow, why don't more people know this stuff? This is important. It wasn't just Martin Buber. It was Jonathan Edwards and a whole bunch of 19th, 20th century philosophers. So, Tom, this is like super admirable.

Like there's no question about it, but it's also a little eccentric. I mean, did you just say to your staff? Like, I'm going to Harvard Divinity School and everyone was like, great, go do it. That's right. I mean, obviously the benefit of having your own company. Owning the company. Yeah. And how did that experience start to change the way you operated as the owner?

and CEO of your company? Well, it changed my life, first of all, because I was getting answers to questions in the readings of these philosophers that were solutions for me. It gave me a spiritual orientation, and I actually began to see a new reality. There is a force of goodness that is available to any one of us, call it whatever you want to call. that force of goodness becomes a medium by which we begin to do work differently together, one of respect and mutuality, collaboratively, towards ends that have more constructive value than just for the sake of piling up a lot of profits.

I think Harvard Divinity School gave me the knowledge, and I was able to return to Tom's of Maine on a full-time basis and say, here are the things that we're going to do now that are in the name of goodness and performance. So as an example, I mean, you push this idea of 5% of your time for people who work for the company, like take 5% of your time and just do some charity work. Yeah, but we would organize that charity work, or they would elect to do what they wanted to do in the community. It might be literacy work. It could be helping on the Appalachian Trail.

It was generally community-based, environmental-based needs. Then they loved it. I mean, they would come back to work excited about what they had been able to do for their community. I guess it was one of the sort of big crises of Tom's of Maine happened in 92 with your deodorant, right? You're laughing about it, I guess, but I'm assuming you weren't laughing about it then because from what I read, it took you like a few years to get back to profitability after that. What happened? What was the crisis? The crisis is we were trying to find a source of humectant. And because we were all about natural and renewable materials, we did not want to use petroleum-based ingredients.

So we thought that we had found a substitute in coconut derived glycerin, and we reformulated the deodorant, using that as the humectin rather than the petroleum derived. And we found after getting it into the stores that we hadn't really thought this through carefully enough. It wasn't an effective deodorant. Was the problem that it didn't smell good or that it didn't last long enough or what? It did not last. And it was clear that we had made a mistake. We had a responsibility to call that person.

product back and to figure out what to do in the meantime. So we did a product recall. What percentage of your business did Deodorant account for at that time? About 22%. So that's an enormous amount of product that you couldn't sell. $450,000 worth. And that meant that you guys were in the red, I guess, as a company, right? Yeah. It created a loss for that operating year. And we were able to do. to recover the next year. But certainly, I don't mean to suggest that it wasn't disruptive. It was

extremely disruptive and difficult, but we weathered through it. And would I have been fired in another setting? I don't know, probably. Did you fire anybody? Did somebody take the hit for that? No, I think I took the hit for that. No, we didn't fire anybody. Okay, let's fast forward a few years. It's 2006. You're 62. You and Kate have built Times of Maine from nothing. You're doing well.

You're the boss. And then you sold almost all of the company to Colgate for, it was reported for about $100 million. Yeah. And I guess, you know, what, I would expect that you would retire and just kind of like enjoy life with your grandkids. Is that what you wanted to do? Well, I spent time thinking about what I was going to do with the next part of my life. And one of my mentors in New York, a fellow named John Whitehead, he said, you're a young man. You have plenty of time left.

This is not the time for you to retire. I didn't feel like retiring. I felt I had a lot of energy. I had a lot of desire to do something. and I wanted to once again create impact. But I also understood that the reason I was successful at Tom's of Maine is because I took market share away from Colgate, Procter & Gamble, and Unilever. So when you can take market share away from the commodities

by an alternative approach to that product development and that product and service, that's what I'm good at. So, okay, so you wound up taking those ideas. and those skills and turning them into another business, right? That's right, exactly. And I thought about a business that could once again benefit from a change in the way it operated, operating with the principles of sustainability, which have been so important to me at Tom's of Maine. And that's what I decided to do in the textile and the garment industry

because it is the second largest polluter on this earth. It exploits sewing and seamstresses around the world. So we set out to figure out what we could do of an American-based product, i.e. wool. So we make coats, we make shirts, we make pants, polo shirts, everything. And we should just clarify, this company is called Rambler's Way. Correct. It's an exciting, exciting business. Tom, here's what I'm wondering about.

I mean, how important is it for you that this? company becomes profitable like Tom's of Maine. How important is it for you that this company really does take away market share? And how hungry are you? I mean, you've proven yourself. You started a company. You made lots of money. Everybody knows Tom's of Maine. You have nothing to prove in the business world. How hungry are you? What's the answer? For me, it's important to demonstrate that this is a different business model in which you are using Boober's concept, that the mind is too full. that you can, on the one hand, consider the goodness, inherent worthiness of something, and on the other hand, the utility of it.

And as long as greed and domination are the motivations, then that's where we get into our trouble. That's my life legacy, that this is something that needs to be taken up by business schools and larger corporations to understand that. But there are vulnerable as long as they operate with the sole principle of maximizing profitability. So if Rambler's Way never becomes profitable, that's fine. No, that's not fine. It's not going to be. No, no, absolutely.

I'm a businessman. And to be a businessman, profitability is part of the responsibility to yourself and to others. I'm curious, how are you able to sort of reconcile your deep philosophical connection to your faith? And then these years spent studying philosophy and really thinking about the world in a different way with the fact that you were actually at least on paper becoming rich, that money was becoming a part of your life. Well, I never considered myself becoming rich. and let me explain that. I read a book called The Gift, and it's really about how to use money.

And the purpose of money is to keep it in circulation, not to stow it away. And so we certainly traveled, and we were able to buy properties that we otherwise would not have, but aside from that, I needed to find something constructive to do and to use my money.

There's something I ask everybody who comes in the show. Tom, when you look back at Tom's a Maine and your career in Rambler's Way and, you know, how much of what happened to you is because of your business acumen and your intelligence and how much of it was because of luck? Well, I think having forces come together in a serendipity way is indeed an important part of the process. but I think it's both. You can't do it without skill. But I do think you, for me, because I live in the spiritual world, it's not luck.

It's the work of grace, paying attention to what I'm doing and nourishing it. By the way, do you get any residuals from that Norman Rockwell painting, you know? I got a call from the family. Oh, this was probably 10 years ago, saying that the painting had been in their home in Milan for years, and that the children in inheriting it had decided to put it on the market with Sotheby's. Yeah. So they said it's been valued at $750,000, and they wanted me to have the first chance to buy it. And you did, right, because you said, sure, no problem.

And I went home and told Kate, and she said, well, we'd have to give it to a museum. We wouldn't want that in the house. So I'm afraid I had to pass on it. Tom Chapel, founder of Tom's of Maine, and the clothing company, Rambler's Way. And by the way, you can see that painting featuring the 10-year-old Tom as a red-headed choir boy. Check it out on our Facebook page. And stick around because in just a moment we're going to hear from you about the things you're building. Hey, thanks for sticking around because it's time now for how you built that.

And today we have an update for you. When we first met Paul Castor a year ago, he was a high school senior launching a business that makes wooden bow ties, which are kind of a thing. So wooden bowtie is just like a pre-tied fabric bowtie, except for, well, it's made out of wood. It's a common gift if you're a woodworker and you're a preppy guy in high school. But as a woodworker, I kind of saw all the flaws in the design. So Paul decided, hey, you know, I can make a better wooden bow tie, one that actually looks less flat and more like real fabric. So he set up a shop in his basement at home, and then he started selling the ties on Etsy. The greatest compliment that I ever get is I didn't know that was a wooden bow tie.

And I get that one a lot. They're like, that's made of wood? I couldn't even tell. Paul has an entire line of bow ties now, and he figured out how to get wood from all over the world. I have Paduke, maple, cherry, walnut, coat. Cocoa, Cobra Wood is one of my best others. Okay, so all of this was happening last year. And Paul says business was pretty good.

He made about 20,000 bucks and profit, and he's doing about the same amount this year. We're still selling online all over the world. And actually, it's run out of my mom's sewing room. Right. So Paul has his mom fulfilling all the orders out of their home in Kansas City because he isn't even there anymore. He's in California.

He's a freshman in college. And a few months ago, he actually started a spin-off business. I was at USC for orientation, and I met a guy in the Entrepreneurship Center here, and he is an idea machine. And so he came to me and he was like, Paul, I have like a thousand other things that I think you could make bow ties out of. And one of the things this guy talked about was carbon fiber, that tough, lightweight, woven material that they use in things like race cars and rockets.

He said, there's this company that takes, the carbon fiber from the aerospace companies here in California and remakes it into carbon fiber skateboards. And he said, I should link you up and you guys should make a carbon fiber bow tie. So Paul went to check it out and it was also a startup run as it happens by a recent USC alum. So the two of them worked on a prototype and voila, the carbon fiber bow tie was born. The wooden bow ties are a very classic look and the carbon fiber bow ties are a space age look.

And so I think there's a certain wonder in getting something that you can wear made out of the same material that these incredible rockets are made out of. Paul is calling his new bow tie brand Carbon Cravat. And just last month, he raised $8,000 on Kickstarter and has about 200 bow ties ready to go for Christmas. And he is, of course, doing a lot of this out of his dorm room. It was actually, I was up last night at 1 a.m. And my room was like, Paul, you need to go to sleep or start studying for final. And I was like, no, I'm in the middle of designing the website still. That's Paul Castor, who has two bowtie brands, carbon cravat and Crooked Branch Studio.

You can learn more about Paul's bow ties on our Facebook page. And of course, if you want to tell us your story, go to build.npr.org. And thanks for listening to our show this week. If you want to find out more or hear previous episodes, you can go to how I built this.npr.org. Please also subscribe to our podcast. at Apple Podcasts or however you get your podcasts. You can also write us, that's HIVT at npr.org. You can tweet us at How I Built This.

Our show is produced this week by Casey Herman with music composed by Rumtin Arablui. Thanks also to Neva Grant, Sanazmeshkampur, Claire Breen, and Jeff Rogers. Our intern is Diana Mustak. I'm Guy Raz, and you've been listening to How I Built This from NPR.