1000 East 87th Street
Soft Sheen Products Inc. is the top U.S. producer of ethnic hair care products. Its 200-plus products include shampoos, conditioners, relaxers, perms, and gels. They are marketed under various brand names, including Alternatives, Baby Love, Care Free Curl, Frizz Free, as well as Sportin' Waves, Wave Nouveau, and Optimum Care. The company sells its products to salons, beauty supply houses, and such retailers as drug stores and department stores. In fact, retailers account for approximately 75 percent of its sales, and salons for 20 percent. Soft Sheen markets its products in several countries, including Africa, Brazil, and the Caribbean, as well as in the United States.
1964--85: Tapping an Untapped Market
Soft Sheen was founded in 1964, in the basement of a home on the south side of Chicago. Its founders, Edward and Bettiann Gardner, began the business when they became aware that there was a decided lack of hair care products formulated for people of color. Hair care companies of that time catered almost exclusively to the Caucasian market, and non-Caucasians essentially had to make do with products that were not chemically designed for their hair. The pioneering Gardners saw the opportunity to offer better products to people of color and, taking matters into their own hands, began experimenting with shampoo and pomade 'recipes.'
Testing various mixtures on their children, the Gardners developed several products that were specifically formulated to address the needs of African Americans. Two of the company's early products were Soft Sheen Hair & Scalp Conditioner and Miss Cool Five Minute Fast Set, a quick-setting lotion that eliminated the need for sleeping in rollers. Consumer interest in the products was not overwhelming but was enough to keep the Gardners plugging away at their slowly growing business.
Everything changed in 1979, however, when Soft Sheen introduced a new product called Care Free Curl. Care Free Curl was a solution that dramatically reduced the amount of time it took to relax hair--from almost eight hours to only two. The innovative product was a phenomenal success. Soft Sheen built on that success by launching a full line of Care Free Curl products, including shampoos, conditioners, gels, and sprays, that were sold both in salons and in drugstores. The company also began selling its products in foreign markets. The popularity of Care Free Curl drove revenues up at an almost unbelievable pace, from $500,000 in 1979 to $55 million by 1982.
Soft Sheen scored another success in the late 1980s, when it introduced Optimum Care, a relaxer kit that allowed salon stylists to straighten and condition hair at the same time. Conditioning was particularly important to preserve the health of black hair, which tended to dry out under the stress of styling and chemical processing. The gentle, conditioning Optimum Care quickly became the industry's best-selling relaxer.
Soft Sheen's already exponential sales growth got a further boost in the 1980s from the widespread vogue of the 'Jheri-curl' hairstyle. Popularized by recording artist Michael Jackson, the wet-looking, loosely curled style required a whole host of hair care products to achieve and maintain. The increased consumer use of gels, sprays, and moisturizers, in tandem with the continued sales growth of the Care Free Curl and Optimum Care lines, elevated Soft Sheen's sales to $87.2 million in 1989.
Mid-1980s-90s: Second-Generation Gardner Leadership
In the middle of Soft Sheen's astonishing growth spurt, Edward and Bettiann Gardner turned the company's presidency over to their oldest son, Gary. The 27-year-old Gary Gardner had been involved with Soft Sheen since its earliest days, when he and his siblings helped their parents by filling shampoo bottles. What he faced as the newly appointed president, however, was less a matter of getting a fledgling company off the ground and more a matter of controlling a business that was growing too fast. 'We grew so fast, we were afraid the franchise would be taken away from us,' Gardner said in a February 1991 interview with USA Today.
To ensure that the company did not outgrow its capabilities, Gardner deliberately decelerated. He reduced employment 27 percent, to 620 employees, between 1984 and 1988 by not replacing workers who left. He also cut operational costs, in an effort to boost profits. As it turned out, Gardner's slowing-down tactics were timely. In the late 1980s, the ethnic hair care market began to soften, with overall industry growth slowing to around three percent a year. The slowdown was largely due to a consumer trend toward shorter and drier hairstyles, which required fewer styling products.
In 1987, Soft Sheen moved to compensate for diminishing domestic sales by expanding its presence in overseas markets. It acquired 66 percent of Dyke and Dryden, Ltd., a London-based manufacturer of ethnic hair care products and the largest black-owned business in Europe. Dyke and Dryden distributed its products in the United Kingdom and in Africa, giving Soft Sheen solid entry into a market of approximately 440 million potential customers. The company expected its global expansion to drive sales up to $150 million by the middle of the 1990s.
Despite such optimistic predictions, Soft Sheen did not have great success in penetrating foreign markets, and domestic sales continued to make up the great bulk of its revenues. Unfortunately, the domestic market for ethnic hair care products remained in its slump, with hairstyles still tending toward a more natural, less time-intensive look. The overall slowdown in sales was compounded by increased competition within the industry. More and more, large cosmetics firms were looking for a share of the ethnic market by adding their own ethnic product lines or acquiring smaller black hair-care companies. These industry giants, with their vast distribution networks and their huge marketing budgets, were formidable competitors.
In addition to battling the soft market and growing competition, Soft Sheen was also struggling with internal problems. Its distribution system was inefficient and slow, with orders taking ten days to be filled. The company had also lagged in product development, not introducing a major new product for more than two years. These operational shortcomings, along with adverse market conditions, put the brakes on Soft Sheen's sales growth. In 1994, the company posted only a .6 percent increase over 1993 sales. 1995 sales were about $94 million, considerably short of Gardner's expectations.
Mid-1990s: Leadership Shakeup
By the middle of 1995, Soft Sheen's stalled growth led the Gardners to begin questioning the wisest course of action for the company's future. In May, the family hired a financial advisory firm to review Soft Sheen's options, prompting a flurry of rumors that the company was for sale. Although there was no change in ownership, the company's decision-making process did result in a change in leadership.
In early 1996, Gary Gardner resigned from his post as Soft Sheen president. Simultaneously, his wife Denise resigned from her position as vice-president of marketing. Although the company gave no official reason for the resignations, industry insiders speculated that they were due to disagreement over Soft Sheen's future course. Disagreement or no, Gary Gardner retained his seat on the board of directors, while the company installed his sister, Terri Gardner, as interim president and CEO. Terri had previously served as Soft Sheen's executive vice-president of advertising, as well as president of Brainstorm Communications, the company's ad agency.
Soft Sheen's plan was to conduct a search for a new president from outside the family and thereby begin transitioning the Gardners into a purely ownership role. Their interim leader Terri Gardner, however, was no mere figurehead. Upon assuming her position, she almost immediately began making significant changes in the company's operations. One of her first moves was to purge Soft Sheen's product line of unprofitable products and package sizes, eliminating 40 of the company's 250 SKUs. Another of her initiatives involved restructuring and consolidating the company's warehouse operations, a move that increased on-time shipments and improved service levels. Impressed with Terri Gardner's leadership abilities, the Soft Sheen board of directors asked her to fill the president and CEO positions on a permanent basis. She agreed in March 1996.
Meanwhile, Gardner continued giving Soft Sheen a makeover, with many of her efforts focused on improving customer relations. She developed new packaging options that helped retailers better manage their inventories, and upgraded the company's computer system to facilitate electronic customer communication. She also hired a third-party company to maintain inventory and positioning of Soft Sheen's products in retail stores. To boost sales, she doubled the company's advertising budget, and began developing new television commercials.
Gardner also took steps to revive the company's languishing product development department, hiring a new vice-president of science and technology. In a November 1996 interview with Drug Store News, she promised that consumers would see new Soft Sheen products in the stores in the first quarter of 1997. 'This past year, we took some time to tend to our operations and our physical plant to make sure that we were efficient,' she said, adding, 'For 1997, we will have some major new product introductions. We will introduce items that will grow every category we compete in, from hair color through relaxers, styling aids, conditioners, and wave products.'
She made good on her promise. By May 1997, Soft Sheen had released two new lines, Mizani and Hair Werks, that were designed exclusively for use in salons. Another major product introduction soon followed. In the fall of 1997, the company launched Alternatives, a line of relaxers and styling products designed for younger women who varied their hairstyles from day to day. Targeting these 'Generation Y' consumers--which research showed to be an underserved segment of the market--Soft Sheen went for an innovative, fresh look and feel in its product packaging and ad copy. The product itself offered styling flexibility and a unique 'moisture retention complex' that conditioned the hair and protected it from heat styling and chemical processing applications.
1998--99: Acquisition by L'Oreal
Soft Sheen finished 1997 with sales of $94.5 million. only a slight increase over 1996, despite new product introductions and improvements in operational efficiency. Once again, the Gardners started thinking about selling their 33-year-old business. Early in 1998, they began talks with French-owned cosmetics company, L'Oreal S.A. L'Oreal--which operated in 150 countries and had a collection of brands that included Maybelline, Redkin, and Lancôme--needed a portal to the ethnic market.
In early July 1998, Soft Sheen announced that it had agreed to be acquired by L'Oreal's New York-based U.S. subsidiary, Cosmair Inc. Although the company refused to release the price of the acquisition, industry analysts estimated it at more than $160 million. Under the terms of the agreement, Terri Gardner remained on as president of the Soft Sheen division and also became a member of Cosmair's executive committee. In a September 1998 interview with Black Enterprise, Gardner explained the company's decision to join L'Oreal. 'We saw a strategic partner with muscle through which we could fulfill our vision for the company,' she said. 'Going forward, this opportunity will magnify Soft Sheen's success on multiple levels,' she observed.
Once the Soft Sheen acquisition was complete, L'Oreal began strategizing how to best grow its new subsidiary and expand its beachhead in the ethnic market. The answer seemed to lie, first, in research and development. In July 1998, L'Oreal announced that it planned to open a specialized research and development center in Chicago dedicated to ethnic products, the only such R & D center in the world. Soft Sheen's research and development staff were to be included as part of the new facility. L'Oreal, which had a reputation for heavy investment in research and development, expected its new Chicago center to be operational by the year 2001.
Meanwhile, Soft Sheen continued to introduce new products. In early 1999, the company unveiled Frizz Free, an anti-frizzing product that contained conditioners and oils to combat dryness and damage. Frizz Free was the first frizz control product made specifically for ethnic women by an ethnic hair-care products company.
Looking to the Future
With the backing of L'Oreal, it was expected that Soft Sheen would grow rapidly in the coming years. The planned research and development center was almost certain to result in substantial innovations in ethnic hair care products and a steady flow of new product introductions. The company's presence in overseas markets was also likely to increase, supported by L'Oreal's vast global reach.
Principal Subsidiaries: Dyke & Dryden, Ltd. (U.K.; 66%); Soft Sheen Products, Ltd. (Jamaica); Soft Sheen International.
Principal Competitors: Alberto-Culver Company; Carson Inc.; Massimo Enterprises Inc.; Revlon, Inc.
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