Brown, Carson’s vice president of strategic planning, there was a substantial amount of cash on the balance sheet. With a 20% share (the largest) of the nonprofessional relaxer market, an 82% share of the ethnic hair color market and the Dark & Lovely brand having name recognition among 97% of African American women, Keith and Wasik felt Carson was ripe for development and public offering.
A COMPANY TOO SWEET TO PASS UP
In 1995, the U.S. ethnic hair care market generated $1.2 billion and is estimated to be growing at an annual clip of 5%. In addition, African Americans spend up to three times as much of their disposable income on health and beauty products as whites.
Keith and his investors saw a great opportunity to capitalize on the projected domestic growth. And with more than 900 million people of African descent across the globe, they also recognized the opportunity for global expansion and brand consolidation of the ethnic personal care market.
Keith and the Morningside Capital investment group understood the value of Carson being extremely liquid and its strong brand identity, but there were other assets that made the company attractive. During the 1970s, Carson invested a significant amount of time and money in research and development. In 1972, it introduced the first line of hair color made specifically for black women, and in 1978, pioneered Dark & Lovely’s “no-lye” relaxer formula, which significantly reduced skin injury and hair loss.
Changes in management philosophy were also seen as key. Just months prior to the company’s purchase, Carson moved from using commissioned sales brokers–who also represented competing products–to a full-time domestic and international sales staff, which provides dedicated support to brand marketing strategies. “A full-time staff makes us more competitive, especially as we focus on bringing new products into the market,” explains Dennis Smith, Carson’s executive vice president of sales. “The possible disadvantage is that if our sales dip, we still have the fixed cost of paying the salaries of our staff. The advantage, however, is that we have a staff that is totally dedicated to our brands. We can educate them and when they go into retail, they talk only about our brands. They are able to leverage the success of existing products to get shelf space for newer ones.”
While Carson was an attractive company, the acquisition process was not without its challenges. To begin with, Keith and Wasik had to compete with a number of large companies that were also vying to acquire Carson. One such company was Alberto-Culver, makers of Alberto V05, St. Ives Swiss Formula personal care products and owners of Sally’s Beauty Supply. Added to the delicacy of the negotiations were specific concerns of the Minises, a prominent Savannah family that insisted the company maintain economic ties to their community. “In the end, I believe we made them a very good offer, which included maintaining the Savannah plant for the next 10 years,” says Keith.
Financing the deal took all the creativity and diligence Keith and Morningside Capital could