Brown and Cottrell-Brown are helping take back ethnic haircare

Husband and wife team Eric Brown and Renee Cottrell-Brown seek to make history and profits in ethnic haircare.

Last year, they became the new owners of Johnson Products Company, the manufacturer of haircare products Afro Sheen, Ultra Sheen, and Gentle Treatment when the Procter & Gamble unit was acquired by RCJP Acquisition Inc., a partnership formed by the Browns and private equity firms Rustic Canyon/Fontis Partners LP and St. Cloud Capital. The transaction was valued at more than $30 million.

What made that deal significant was JPC’s rich history. Founded by entrepreneur and one of BLACK ENTERPISE’s 40 Most Powerful African Americans in Business, George Johnson, the Chicago-based company grew to become a mainstay among the BE 100s for roughly 20 years as well as the first black-owned company with shares traded on the American Stock Exchange.

In fact, JPC supported a number of black institutions, including syndicated television show, Soul Train. By 1993, JPC, after years of internal management turmoil, was sold to IVAX Corp in a deal valued at $67 million, making it the first BE 100s haircare manufacturer bought by a majority-owned company. P&G acquired JPC in 2003.

Today, the company, which is now based in Dallas and grossed $23 million in revenues for fiscal 2009, is once again minority-owned. Brown and Cottrell-Brown serve as CEO and executive vice president, respectively.

The ethnic haircare veterans both held senior management positions at Pro-Line International Inc., a subsidiary of Alberto-Culver and another former BE 100s company. In fact, Cottrell-Brown is the daughter of Pro-Line founder Comer Cottrell, who is also listed among BLACK ENTERPRISE’s 40 Most Powerful Blacks in Business. Gabrielle Greene, an African American financier and partner of RC/Fontis Partners, is JPC’s chairman.

In an exclusive interview with Editor-In-Chief Derek T. Dingle, the Browns detailed their strategy to remake JPC for today’s consumers.

BLACK ENTERPRISE:  Share with me the ownership structure of JPC.

Eric Brown: The majority of the company is under minority ownership. There’s a Hispanic investor out of Los Angles, RC/Fontis.  Between RC/Fontis and ourselves, we represent about 60%. Renee and I have about 20% and the ability, over time, to take on as many shares as we like.  At some point in time, hopefully, we will be able to come back to you and say, “We’re 100% African American-owned.”

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BE: What is your growth strategy that’s going to distinguish JPC in the ethnic haircare market?

Brown: Our vision is very simply to be the number one ethnic haircare manufacturer in the world of ethnic beauty care products.  We’re not going to limit ourselves just to hair.  But right now, that’s the area that we operate in.

Now what is going to get us there?  We look at innovation a lot differently than just products and formulas that go into those bottles and jars that we sell.  We look at innovation in terms of process.  We look at innovation in terms of how we communicate to our consumer.

BE: In terms of communication with the consumer, how has it changed from the way JPC used to reach them, whether it was through Soul Train or other marketing strategies?

Brown: We’re evolving in a sense that I think a lot of companies have gotten away from that.  Multinational companies like P&G, in general, like to do things as broad as possible.  They’ll spend a million dollars on a commercial and hopefully catch everybody in that net.

When Johnson was being built, it was almost a consumer-at-a-time approach where it was involved with setting up things at churches and parks. I think the reason everybody knows Johnson is because they got involved with people and their lifestyle. We want to have an emotional involvement and responsibility with our consumer and the community that our consumer lives in.

We did a model search, and you don’t know how many times I’ve had people come up to me and say, “I remember Johnson Products because of some scholarship that they did.”  Or, “I remember Johnson Products because they had a beauty school.”

Cottrell-Brown: I don’t believe that one medium can deliver the message.  I truly believe that it takes a well-rounded marketing mix.  You need the PR piece to touch the community.  You need to be in radio.  You need to be outdoors.  Today, I just think [technology is] great because with social media you really can engage the consumer and live with them day in and day out with Facebook and Twitter.

BE:  Share your strategies in digital media and social networks.  How have you connected with the consumers?

Cottrell-Brown: We just mentioned the model search; that is a legacy promotion.  It was basically communicated in the past to the consumer via print.  For the first time, we used Facebook.

Once we had them involved in the contest, we began to communicate back to them.  We actually started a little sorority of these different models.  We had over 1,200 girls and we were talking to them all the time.  Guess what?  On Facebook, they started talking to each other.

So, it really created the awareness of what we were doing [and] the awareness of the brand.  They became these little ambassadors for us. We had over 40,000 registered unique voters [and] 250,000 hits over that 90-day period.  So it was pretty incredible.

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BE: What are some other consumer outreach efforts?

Cottrell-Brown: Our first initiative was a giving promotion.  We actually raised proceeds by collaborating with a retailer such as Sally Beauty Supply.  We leveraged our General Treatment brand as a form of brand recognition to raise awareness for domestic abuse. What brand name better speaks to domestic abuse than General Treatment?

We committed about $50,000. On the Southside of Chicago, we basically gutted a kitchen and put in a salon inside. We call it the General Treatment Beauty Center.  We actually hooked up with some of the beauty schools there in the market place.

BE:  Do you have a special focus for male consumers? How has research helped you approach that market?

Cottrell-Brown: When we conducted focus groups, we took in a name we thought was hip. We chose Urbane because [it] means handsome, sophisticated.  We took it into the focus group and those guys were like, “They must think we can’t spell.  This must be Ebonics.”  Because they thought it was Urban.

They saw Ultra Sheen [and] they were like, “That’s for me.  Now, I get that.  That’s what we want.”  So, that’s how we came up with the new brand Ultra Sheen Men.  It came right out of their mouths, something they could resonate with.  We’re looking forward to getting that in the marketplace in the next month.

BE: What’s your approach to the international market?

Brown: We take a little bit of a different approach when we talk about international because it is more about hair texture than skin color.  So our marketing approach and out-of-the-box tactics take on a little bit of a different light.

Hair texture allows you to speak to a much broader audience. Certainly, when you’re talking about West Africa, there are people who look like us.  When we talk about places like Latin America or the Caribbean, you get a much broader range of hair texture as well as skin color.

But we know that people of African descent require certain products to be able to maintain their hair. We think we can really make some significant gain because we have relatively very little international distribution.

BE:  So what will JPC look like in the next five years?

Brown: Five years from now, I’d like to be sitting across from this table and have you, “Eric, did you ever envision that you’d be talking about an IPO [initial public offering]?”  Wouldn’t that be great to be able to say that Johnson Products, which was one of the first publicly-held African American companies, would be public again?

Charles Weems

Charles Weems, 27, Decatur, GA
Tip for Beginners: The best advice from my boss: “start early,” find a mentor who is investing and exchange ideas. Hang around and listen to those who are where you want to be in life.

My Favorite Holdings: Fannie Mae (FNM) and Freddie Mac (FRE)

Why I like these stocks: I still believe these two are going to be good holdings for the long term. The government is not going to let those two companies fold because of their important standing with the housing market, investors, and the economy as a whole. I believe with the new stimulus package beginning to take effect, we should start seeing the housing market turn around over the next five years.

The Professional Opinion

Analysts Consensus on Freddie Mac:
Hold: 1
Sell: 2
Analysts Consensus on Fannie Mae:
Hold: 1
Sell: 2

Matthew Warren of Morningstar:
“We recommend against speculating in Fannie shares. Fannie Mae posted another enormous loss in the fourth quarter ending in December. Severity of loss has increased as steady home price declines chew through homeowners’ equity and inadequate credit enhancement on Fannie Mae loans. Increased severity combined with an acceleration and broadening of credit problems suggests that things will get worse before they get better. With Fannie slowing foreclosures, stepping up modification efforts, refinancing (high-risk) high loan/value loans to lower rates, and reversing some recently implemented guarantee fees, it is clear that Fannie Mae is working toward policy goals rather than shareholders’ benefit. Freddie Mac posted a fourth-quarter loss of $25 billion, contributing to a $50 billion loss for the year ending in December, which wiped out decades’ worth of profitability. With net worth again in the red, Freddie’s conservator has submitted a request for another $30.8 billion in funding from the U.S. Treasury. With this new senior preferred investment from Uncle Sam, the total amount of these securities will rise to $45.6 billion. We would avoid speculating in this firm’s shares.”

Ted Parrish of Henssler Financial Group:
“Fannie Mae and Freddie Mac have basically been taken over by the federal government. The government infused a lot of cash and that’s why most stock analysts don’t cover the companies anymore. Once a company gets below a certain price level per share, they loose coverage from a lot of the major research firms. That particular price can be anywhere between $5 and $10. The chances of those companies being major forces as independent organizations are not going to happen. Fannie and Freddie are not good for long-term growth. Their existence as a “going concern,” [or a business entity] is in question at this point. Shareholders will be the first in line to take a hit if there is any more trouble in their business.”

Kevin Njeru

Kevin Njeru, 18, Gainesville, FL
Tip for beginners: Join an investment club. Collaborating with others allows you to pool resources and financial sources. It also allows for feedback and additional research on companies.

My favorite holding: Procter & Gamble Co. (PG)

Why I like the stock: It’s an easy to understand company for young investors because it manufactures products such as Tide laundry detergent, Pampers diapers, and Crest toothpaste. Procter & Gamble’s products are daily essentials and as a company, it’s trustworthy. They’ve recently increased prices on products, which has helped generate a profit in the sagging economy. The stocks value has taken a hit, falling more then one-third since last September. Long term, I see them performing well because of brand equity and the fact that consumer goods will always be a profitable industry.

The Professional Opinion

Analysts Consensus:
Strong Buy: 1
Buy: 3
Hold: 12

Wendy Nicholson of Citigroup Inc.:
“We rate the shares of Procter & Gamble hold/low risk. Our hold rating primarily reflects the stock’s valuation, which we find to be full. Indeed, while we view the acquisition of Gillette to be a positive for Procter & Gamble and its shareholders over the long term, we believe that it will become increasingly difficult to generate accelerating sales growth given Procter & Gamble’s size. While we believe Procter & Gamble has impressive long term growth momentum, we also worry that various pressures on Procter’s business may eat into any potential upside to earnings per share estimates; especially given that we think some of the company’s higher-margin businesses (e.g., pharmaceuticals) are currently decelerating.

Overall, though, with Procter & Gamble’s excellent track record in integrating acquisitions, continued success at launching higher-priced, higher-margin new products, and management’s proven ability to manage exceptionally well its increasingly large and diverse business, we are hopeful the company will continue to meet, if not exceed, our earnings expectations.”

Michelle RhodesBrown, of Profit Investment Management:
“Procter & Gamble is a well-run, large, global consumer staples company. In any dogfight you want this company on your side, for the most part. They have huge mega brand large advertising budgets they use to gain market share.

It’s not a “buy” because they’re so large that growing is difficult. If you look at their sales growth, it’s more driven by price increases than by volume increases. That makes people nervous. Procter & Gamble attributes its volume declines to customer (retailer) destocking. Because energy and commodity prices have come back, they worry about whether they can keep their prices.”

Andrew Simon

Andrew Simon, 23, San Francisco
Tip for Beginners: Do your research. Find companies that have valuable assets, aren’t loaded with debt, and have a competent management team that can take them through the economic downturn.

My favorite holding: Intel Corp. (INTC)

Why I like the stock: With a large portion of the corporate and consumer market corned, coupled with the fact that the tech industry is growing, not shrinking, Intel will soon be back on the rise. Intel’s top competitor, AMD Inc. (AMD) recently announced its plans to restructure the company to reduce expenses. These plans primarily involve the termination of employees, contract or program terminations, and facility closures. Meanwhile, Intel has plans to build a new factory to begin mass production of their newest chips. While AMD plans to reduce manufacturing output, Intel is receiving rave reviews on its two newest processors.

The Professional Opinion

Analysts Consensus
Strong Buy: 13
Buy: 13
Hold: 14
Underperform: 1
Sell: 1

JoAnne Feeney of FTN Equity Capital Markets Corp.:
“We remain cautious regarding the second half of 2009 because signals of a seasonal increase in end-market demand have yet to materialize. Longer term, we view Intel as likely to deliver results outpacing the broader economic recovery. The company released its next-generation mainstream server CPU (central processing unit) at the end of March, code-named Nehalem EP. This product closes the architectural gap with AMD by adding an on-board memory controller (AMD did this in 2003). Experts are enthusiastic about this new CPU, and anticipate higher sales of servers as a consequence. Intel’s high-end version of Nehalem is not due until the first quarter of 2010, although it was originally expected by year-end. It looks like Intel has worked out the bugs. We remain positive on the shares.”

Eugene Profit, Profit Investment Management:

“Intel’s last quarter earnings came in eight cents better than Wall Street estimates, even though revenue fell 26% year-over-year. The problem with that is basically people like to see revenue going up. By cutting expenses Intel’s growth margins were a little bit better and we know that demand is down because of the economy. You’re starting to see computer inventory bottoming out. Because you’re going to have computer upgrade cycle starting even though you have a weakened economic environment, Intel will benefit because the inventory of semiconductor chips are very low. There’s going to be and increase in the demand for Intel chips. It’s rated a hold, because with revenues down, that’s a concern. But the reason they were down has as much to do with the weak economy as anything else.”

Erika Smith

Erika Smith, 25, Atlanta
Tip for Beginners: Understand what type of investor you are. Use investment questionnaires to develop a mix that is suitable for your financial goals based on your time horizon and risk tolerance.

My favorite holding: Oracle Corp. (ORCL)

Why I like the stock: My interest began in 2005 when Oracle acquired Siebel Systems Inc. This signaled the company was making a serious effort to increase market share and challenge the dominance of German enterprise software maker SAP (SAP). Oracle’s products will be increasingly relevant as the world continues to look for information technology solutions to reduce costs and innovate how we do business. For example, reduction of administrative costs will be important to U.S. healthcare reform. Oracle should be able to provide solutions that will streamline healthcare processes and reduce costs to gathering and use patient data.

The Professional Opinion

Analysts Consensus
Strong buy: 10
Buy: 10
Hold: 7

John DiFucci of JP Morgan Chase:
“We believe that Oracle Corp. is better equipped than most software companies to weather a soft economic environment given its ability to rationalize its cost structure that has been temporarily burdened by a myriad of acquisitions. Our analysis indicates that Oracle shares are attractively valued at current levels. Oracle is running its business assuming a prolonged economic downturn persists for the foreseeable future, resulting in an environment of declining corporate IT budgets. Oracle will look to gain share in this environment through up-selling and cross-selling into its 320,000 strong customer base of primarily large corporations (versus small businesses). Management expects to grow margins by growing revenue by greater than the rate of expense growth. While Oracle’s strategic relationship with its customers may position it better than most software companies, its top line is not immune to a macro slowdown.”

Ted Parrish of the Henssler Financial Group:
“Oracle has a solid base of customers and a lot of their revenue is “recurring revenue,” which means it’s stable and predictable since they lock their customers into multi-year contracts. The reason to buy right now is because the stock is very cheap on any relative measure, price to earnings, price to sales, price to cashflow. It’s trading for a multiple that’s lower than the market (technology sector) and for a company of its quality, that’s hard to believe. But its expected growth in earnings is above average and right in line with its price/earnings ratio.”

* When investing or making any type of financial decision, it is important to do your own research before making any decisions.
** Analysts consensus taken from Yahoo Finance

It’s a question blacks and even Americans of other races have been grappling with since Obama first gained momentum on the campaign trail. Black advertising professionals addressed what it means for their industry and black media outlets at a panel discussion Tuesday.

The forum, “Urban Legends: What Corporate America Still Misunderstands about Black People,” explored the challenges of conveying to advertisers the monetary value of marketing to African Americans and spending advertising dollars in black-owned media outlets.

“Data always wins,” says Najoh Tita-Reid, former director of multicultural and African American marketing at Procter & Gamble. “The statistics are there and the data should rule our decisions, but many times it doesn’t,” she says about the $892 billion buying power of blacks.

For some companies, a seemingly lack of advertising dollars means smaller and niche demographics get overlooked, including African Americans.

“If you’re not going to view [the African American market] as being a business imperative then black media loses,” Tita-Reid says.

Though some of the panelists, including Alfred C. Liggins, president and CEO of Radio One Inc., acknowledged that advertisers have at least taken a greater interest in African Americans as Obama heads to the White House, the reality remains stark for others.

“African Americans spend money on things that are not marketed toward them,” says Steve Stoute, CEO of Translation Consultation & Brand Imaging, an advertising agency. This can hinder black-owned media outlets from generating advertising revenue.

Also, a push by many Fortune 500 companies for large market penetration has made it even more difficult for black-owned media outlets. Because of their smaller audiences compared with mainstream outlets, corporations may not perceive a return on their investment, and advertising agencies devote fewer resources toward penetrating that market, Stoute says.

The panel also brought attention to the Radio One Black America Study, released in June, that Liggins says debunks some of the advertising industry’s myths about marketing toward blacks. The most important misperception overturned is that the black community is a monolithic community, Liggins says.

“We commissioned a study so people could understand the revenue depth of the African American community across all age demographics…and we’re sharing with folks that have similar interest in this particular demographic as we do,” he adds.

The study, which surveyed 3,400 blacks between the ages of 13 and 74, found 11 segments of African Americans. The group types range from “connected black teens,” a tech-savvy group that believes too much focus is put on the oppression of blacks, to “boomer blacks,” also a tech-savvy group, about 52 years old, that seeks to take advantage of opportunities won by previous generations.

The bottom line: Conveying the need to target African Americans starts at the top, Liggings says. “There’s nobody at the top of the organization that gets emotional about attacking the African American market.”

As for the Obama factor, media outlets and black advertising professionals say it’s too early to tell whether marketers are changing their strategy and looking to reach more blacks.

“I’ve definitely seen a heightened interest in the African American community,” Liggins says. “It’s definitely pushing to dialog to the forefront.”

According to global business outlook research firm Global Industry Analysts, Inc., worldwide deodorant sales are expected to top $10.5 billion by 2010. “TAG Records is a part of the TAG brand’s new initiative to build relevance with the urban market,” says Jay Gooch, external relations manager for TAG. “Via TAG Records, we are able to resonate with its audience beyond their passion for music and further integrate into the lifestyle choices by combining personal brand marketing with music insight.”

The TAG and Island Def Jam Music Group partnership was forged and managed by New York-based ACME Brand Content Co., according to Gooch. “In an industry that is constantly evolving, we were looking for non-traditional partners and innovative strategies to redefine how we reach our audience.” The cross-branding will be developed through advertisements, not music, he adds.

Artists from TAG Records will potentially be used in commercials and print advertisements for the products. According to Ramona Wright, principal in L.A.-based Mozaic Media + Communications, this will further solidify the company relationship with its prime consumer. “Procter & Gamble’s launch of a hip-hop music label elevates product placement to the next plateau, which is a synergetic branded entertainment opportunity for TAG Body Spray and Island Def Jam Music Group,” she says. “Declining viewership of network television and music sales makes such partnerships ideal for record labels and lifestyle brands seeking more innovative ways to sell artists and products to consumers.”

Further, this audience is “acculturated to the consumerism promoted in most hip-hop music videos. The objectives for an effective branded entertainment campaign are to be cool, integrated, and seamless,” Wright says.

Media strategist and branding expert Karen Bass Taylor, of New York-based TaylorMade Media L.L.C., says the partnership could help boost sagging records sales, especially if P&G makes a long-term commitment to the music industry. “P&G is promising a huge marketing budget for the artists…and if [the concept] is packaged smartly this deal will be lucrative for P&G,” she says. “But getting into the music industry (long term), especially, the hip-hop game is an ambitious goal given the (present) climate of the music industry and declining sales of hip-hop artists.” She says the real question is how committed is P&G to the respective signed artists and cultivating long term careers?

For Dupri, the concept of combining two unrelated products was attractive to him. “This is two companies from two different worlds,” he says. “[But] it brings a lot of excitement back to the music industry, especially on the business side, because I find that people who run other big money industries look at ours like it’s a joke. [P&G] is putting an incredible amount of money behind this endeavor.”

Dupri, who recently released his autobiography Young, Rich and Dangerous: The Making of a Music Mogul, believes the partnership will expose urban music artists to a whole new arena. “I’m selling music as always–I just have a bigger platform,” explains Dupri, who has begun searching for talent for the TAG roster. “The artists get the luxury of being in the commercials like any other endorsement deal.”