The Lamaur Corporation

5601 East River Road
Minneapolis, Minnesota 55432
U.S.A.
Telephone: (763)571-1234
Fax: (763)572-2781
Web site: http://www.lamaur.com

Public Company
Incorporated: 1936 as La Maur Inc.
Employees: 21
Sales: $24.8 million (2000)
Stock Exchanges: OTC
Ticker Symbol: LMAR
NAIC: 32562 Toilet Preparation Manufacturing

The Lamaur Corporation, headquartered in Minneapolis, is a producer and marketer of personal hair care products, including shampoos, conditioners, hair sprays, and assorted hair styling preparations. Its line includes products marketed under a variety of names, including B inlOse and Willow Lake brands, the mid-priced Salon Style, and the value-priced Style brands. Since 1998, the company has revised its production and marketing strategies. Until that year, it operated a salon division, which developed, formulated, and marketed custom hair-care products for professional salons and specialty shops; but in July 1998 it sold the division to Zotos International, Inc., a subsidiary of the large, Tokyo-based cosmetics firm, Shiseido Co., Ltd. Until the end of 1999, in its custom manufacturing division, Lamaur also developed, manufactured, and marketed hair care, personal care, and household products for third parties. Late in 2000, however, the company sold its custom manufacturing division to Tiro Industries, which, under a contractual agreement, continued making Lamaur’s products. Lamaur itself then reorganized, cutting its workforce down to just 20 core employees and refocusing its business on product development, brand management, marketing, and distribution. The company, with over 300 active customer accounts, primarily sells its products to mass merchandisers, supermarket chains, drugstores, and other retail outlets, combining a direct sales force and an independent brokerage network. In its customer base it has over 100 major retail accounts. In 2000, its biggest customer was Wal-Mart, which accounted for 27 percent of its sales. However, none of its other customers accounted for more than 10 percent. The heirs of Don Hoff, Lamaur’s former chairman and CEO, own approximately 28 percent of the company.

1930–78: Origins and Evolution into National Brand Name

In 1930, two brothers, Larry and Maurice Spiegel began manufacturing hair-care products for other companies. They dubbed their own firm La Maur, an acronym made up their first names. A graduate of the University of Minnesota Business School, Larry Spiegel took care of the production and packaging end of the business. Brother Maurice, a graduate in pharmaceutical chemistry, also from the University of Minnesota, set up the company’s first laboratory in his garage and developed the formulas for the fledgling firm’s products.

In its formative years, most of the company’s business consisted of formulating and producing products for the beauty salon trade. The Spiegels made privately-labeled hair-care items for a variety of companies. In addition to these products, they developed their own brands primarily for distribution in the upper midwestern states.

First incorporated as a private company in 1936, La Maur initially went public in 1962. It was first listed on the American Stock Exchange in 1964, but eventually would move to the New York Stock Exchange in 1984, three years before it became part of the Dow Chemical Company. The company made considerable progress in developing an industry name in the 50-odd years that it was an independent firm. In fact, the Spiegels proved themselves to be hair-care industry innovators of note.

Among other innovations, in 1950, they began marketing STYLE, the first water-soluble hair spray. Initially, they distributed it primarily to the professional beauty-salon trade. However, during the 1960s, when aerosol hair sprays gained popularity in both the consumer retail and salon hair-care industries, La Maur established its own consumer division. Initially called the House of Style, the division had a retail sales organization formed to call on retailers. The Spiegels renamed the House of Style the Consumer Division in 1978, by which time they had also renamed their company. For the next twenty years, under the new name, the Lamaur Company, the firm produced popular salon products including such brands as Vita/E, Apple Pectin, Nucleic A, and Pativa.

1979–87: Continued Growth Amidst a Hostile Takeover

Throughout the late 1970s and into the 1980s, Lamaur Inc. continued on its successful course. Between 1978 and 1983, when its revenues hit close to $82 million, its sales grew at an average annual rate of 21 percent. Still, Lamaur’s brands only commanded a minuscule share of its massive markets, encouraging the company to undertake some bold risks. One of these involved the 1983, $15 million launching of Perma Soft, a new line of shampoos and conditioners for women with permanent waves. The company, then headed by Maurice Spiegel’s son Richard, hoped to garner $30 million in annual sales, or nearly 2.5 percent of the nation’s very fragmented and highly competitive shampoo business. It was a bigger gamble than the company had ever taken but one that panned out well enough.

In 1987, Alberto-Culver Company, maker of VO5 hair care products, attempted a hostile take-over of Lamaur. Its efforts were thwarted only by the intervention of the Dow Chemical Company, which purchased Lamaur and made it part of its subsidiary, DowBrands, which already manufactured and marketed household cleaning products and plastic bags and wrappings for food protection and storage. Lamaur then became known as the DowBrands Personal Care Division.

1987–98: Another Acquisition and Some Marketing Problems

In November 1995, under the guiding hand of Don G. Hoff., Electronic Hair Styling, Inc. (EHS), a private company, purchased the DowBrands Personal Care Division from Dow. EHS, incorporated in 1993, merged with the Personal Care Division to reincorporate in Delaware as a single entity. In 1997, with Hoff as chairman and CEO, EHS changed its name to The Lamaur Corporation to take advantage of the long-established reputation and name recognition of Lamaur.

The later 1990s proved difficult, however. Between 1995 and 1997, Lamaur’s sales basically stagnated, and the company had net losses in both 1995 and 1997. Particularly discouraging was the $19.4 million loss in 1997, by far the worst in the company’s history. Company executives blamed the loss on increased marketing costs. In any case, it was clear that some draconian measures were needed to reverse the firm’s fortunes.

Lamaur’s strategic choice was to downsize. It started retrenchment in 1997, when it eliminated about 90 jobs, delayed planned product development, and reduced its leased space. Then, in July 1998, Lamaur sold its professional salon brands to Zotos International, Inc., a subsidiary of the mammoth Shiseido Co., Ltd., a manufacturer and distributor of cosmetics. The proceeds of the sale, approximately $10 million net, were basically utilized to pay off its debt under a credit agreement with Norwest Business Credit, Inc. and for ongoing operations, which, later in the year, Lamaur extensively restructured. The changes were necessitated by the selloff to Zotos of Lamaur’s professional salon brands, the decline in the company’s retail sales, and the 1997 expiration of a manufacturing agreement with former owner, DowBrands. The move did produce some stockholder disgruntlement and claims that the sale was made, not to benefit the company, but to benefit only the directors through inflating their potential severance agreement payouts.

1999–2001: Retrenching and Struggling to Regain Profitability

In July 1999, Don Hoff suddenly died. After a half-year transition period, in which Joseph F. Stiley served as acting CEO, a national search led to the election of Lawrence Pesin to the posts of CEO, CFO, and chairman. Stiley, one of the founding members of EHS in 1991, had been Lamaur’s vice-president and chief scientist. Pesin, when he assumed executive control of the company in December 1999, had behind him over 30 years of senior management in the personal care industry, including 16 years in which he had held positions on the top rung of corporate executive ladders, including a three-year stint as president of Helena Rubinstein, USA. Among other things, he had managed bottom-line turnarounds for five different enterprises. He also brought international trade experience to the job. Just prior to taking on the Lamaur positions, he had been general manager of the Americas, Concord Camera Corp.

A major realignment of Lamaur’s operations took place under Pesin. In 2000, Lamaur began re-keying its marketing efforts on its already established retail brands, using magazine advertising, nationally distributed coupons, and trade promotions. Also, early in 2000, the company sold its custom manufacturing division, including its facility in Fridley, Minnesota and to Tiro Industries, Inc. for $13.25 million in cash plus the assumption of capital leases totaling $765,000. Tiro then commenced making Lamaur’s products under a manufacturing agreement scheduled to expire at the end of 2002. Additionally, Lamaur began renting office space in Fridley from Tiro under a lease due to expire at the end of 2001.

With the sale of its manufacturing plant to Tiro completed, Lamaur underwent a complete reorganization. It reduced its personnel from 220 to a core of only 20 employees, with cutbacks made primarily in production, purchasing, administration, and research and development. Its principal focus shifted almost entirely to marketing.

Company Perspectives:

2000 is … Ground Zero. New Ideas. New Direction. New Products. New Vision for the Future. It’s The New Lamaur.

The results were disappointing, however. The 2000 sales produced by some brands declined as much as 80 percent over the previous year, and the total revenue dropped from $50.2 million to $24.8 million, over a 50 percent decline. The only bright performers were the Salon Style branded products, which, reintroduced in 1999, had a 41% increase in sales. Although $20 million of the net sales decline in 2000 was attributed to the sale of the company’s custom manufacturing division, Lamaur took steps to reduce losses by discontinuing some of its unprofitable product lines, including Perma Soft, Color Soft, and Style Natural Reflections brands.

The company also expected a further decline in sales of its Willow Lake product line, but it anticipated increasing sales for its Style and Salon Style lines. It was banking on the impact of new customer programs and new product plans introduced in 2000. In July of that year, the company aggressively positioned its Style brand in the rapidly growing dollar-store market, pricing some Style-brand hair spray products within that market’s narrow pricing range. Although producing lower than average margin on sales in that market, the Style hair sprays achieved wide distribution and major sales, and it was projected that the dollar-store customer program would grow in 2001. In the third quarter of 2000, the company also introduced new products in its Salon Style line and planned to introduce additional items in 2001.

Meanwhile, the company’s problems mounted. Because of its tepid sales in the late 1990s and the new century’s start, Lamaur was basically unable to pay its vendors at the scheduled payment dates agreed to in their contracts. In its first fiscal quarter of 2001, the company negotiated a forbearance agreement with its vendors whereby no legal action would be taken in return for assurances that Lamaur would pay all of its past due vendor debts by the end of December 2001.

Meanwhile, the company continued to work on finding the right formula for a revitalized financial health. In February 2001, Lamaur introduced B ini 10se, its newest hair care brand. The 13-piece line consisted of a daily shampoo and conditioner, plus a weekly stripper shampoo, a deep conditioner, a curl control gel, creme gelee, pomade, two waxes, and four gels. The line went into the mass merchandising market in March. The products, designed for customers in the 20-30 age bracket, were line priced at $6.99 per item and were designed to attract a larger customer base. Also in February, Lamaur brought suit against Fridley-based Big Values Inc., which conducted its retail business as The Big Dollar Store. Lamaur’s complaint was that Big Values marketed a line of hair products under the name Willow Creek, which, because of its confusing similarity to Lamaur’s Willow Lake line, infringed on that brand’s trademark. No settlement had been reached by the summer of 2001.

Principal Competitors

Alberto-Culver Company; Bristol-Myers Squibb Company; L’Oréal SA; The Procter & Gamble Company; Unilever.

Key Dates:

1930:

Larry and Maurice Spiegel form La Maur.

1936:

La Maur is incorporated in Minnesota.

1962:

La Maur goes public.

1978:

Lamaur’s House of Style is renamed Consumer Products Division.

1983:

Company introduces Perma Soft Shampoo and Conditioner.

1987:

The Dow Chemical Company purchases Lamaur, making it part of DowBrands, a Dow subsidiary, and renaming it DowBrands Personal Care Division.

1995:

Electronic Hair Styling, Inc. (EHS), a private company headed by Don Hoff, purchases Personal Care Division from Dow Chemical.

1996:

EHS goes public.

1997:

EHS changes its name to The Lamaur Corporation.

1998:

Lamaur sells its Salon Division to Zotos International, a subsidiary of Shiseido, a Japanese cosmetics corporation.

2001:

Lamaur launches new B in 10se line.

Further Reading

Anreder, Steven S., “Shampoos, Conditioners: They’re Adding Luster to Results of La Maur,” Barron’s, April 19, 1982, p. 52.

Ettore, Barbara, “’We Don’t Think We’re Foolish People,” Forbes, December 19, 1983, p. 96.

Grossman, Andrea M., “Brand Trend Shakes Up Hair Care,” WWD, August 4, 2000, p. 10.

——, “Lamaur Is Intense About Hair Care,” WWD, December 15, 2000, p.12.

Hahn, Shannon, “Lamaur Divests Facility, Operations to Tiro,” Minneapolis-St. Paul City Business, January 21, 2000, p. 4.

“Lamaur Elects Lawrence Pesin New CEO and Chairman; Personal Care Industry Leader in Profitable Turnarounds,” Business Wire, February 9, 2000.

“Lamaur Leverages Salon Experience,” Chain Drug Review, June 7, 1999, p. 319.

“Lamaur Line Positioned in Middle of Hair Care Market,” Chain Drug Review, June 23, 1997, p. 226.

Schechter, Darà, “Alberto Is Rebuffed, Lamar Inks Dow Pact,” WWD, September 25, 1987, p. 27.

Tellijohn, Andrew, “Lamaur, Big Values Clash over Products,” Minneapolis-St. Paul City Business, February 16, 2001, p. 6.

“Zotos Announces Purchase of Lamaur Professional Salon Products,” PR Newswire, July 16, 1998.

—John W. Fiero