by Maureen Flanagan
Caswell-Massey, a company formed in 1752 and with a brand identity steeped in American lore, has begun a new chapter in its long, storied history. For more than two centuries, the well-known seller of soaps and toiletries has been on the vanguard of retailing in the United States. Established before the Revolutionary War, Caswell-Massey is one of the oldest companies in the United States and was one of the first pioneers of the mail order catalogue. Today, the company continues to cater to its traditional, high-end market, while embracing new cutting-edge marketing strategies in e-commerce and direct response television. In September 1999, Anne Robinson, the company's Executive Vice President, who was responsible for implementing these new strategies - and turning Caswell-Massey around after misguided marketing ventures threatened its survival - purchased the company in a management buyout transaction. To accomplish the buyout, American Capital Strategies, Ltd. (NASDAQ: ACAS) provided $4.2 million in senior term debt and subordinated debt, enabling Caswell-Massey to carry on its long tradition in the soap and toiletries market under promising new ownership.
"With this change of ownership, Caswell-Massey will have a strong new capital foundation on which to grow and build this famous American brand. We are looking forward to expanding the company's retail and direct-to-the-consumer channels and bring Caswell-Massey's products to new generations of American shoppers," said Robinson, who became the company's CEO.
Caswell-Massey has roots that go deep into America's past. George Washington bought toilet water from the original store as a gift to the Marquis de Lafayette for financing munitions for the Revolutionary War. The company's products were a favorite of Dolly Madison and have been the toiletries of choice in the White House since the 1940s when the Eisenhowers brought Caswell-Massey soap to Washington. Luminaries such as Edgar Allen Poe, Sarah Bernhardt, John Barrymore, Cole Porter, Errol Flynn and others have used Caswell-Massey products.
Over the years, Caswell-Massey has adhered to its traditional market of soaps and toiletries for women and men, using some of the age-old formulas that established the company's reputation. Its product lines include soap, lotion, shampoo, talc, and fragrance in a bouquet of flavors and aromas such as English Lavender, Freesia, Lily of the Valley, Cucumber and Elder Flower, Goat's Milk and Honey, and Elixir of Love. The company operates 11 retail stores in the United States and sells wholesale to numerous major retailers and to some 2,000 specialty gift retailers. It has also developed a highly successful direct mail consumer catalogue sales business, the third oldest in the country after Sears Roebuck and Montgomery Ward. In addition, the company has partnered with international and domestic retailers, implementing licensing agreements with stores in 17 countries and 2 stores in the United States. Several new distribution channels have kept Caswell-Massey in the mainstream of new developing technologies for retailing, including the Internet and direct response television through QVC.
Owned by the same family from 1936 until 1989, Caswell-Massey began to lose ground in the 1970s when one of its customers formed a new company that later became a main competitor. Then, shifting gears in the 1980s, Caswell-Massey's management began building high-end stores in new malls, which strangled the company with high rents and eventually led to insolvency. In 1989, the company was bought by private investors in Hong Kong who were drawn to the business as a quintessentially American asset. They ventured into a mass retail strategy that proved unsuccessful and the company languished. Reeling from escalating retail rents and the company's ill-fated mass retail strategy, the owners contemplated liquidating the company in 1996. Instead, they drew on the company's assets - its reputation, solid relationships with its vendors and unique place in American history - and installed Robinson as Executive Vice President.
Robinson came on board with 25 years of retail and marketing experience. She is a graduate of Radcliffe College and Harvard Business School and a member of the 1973 United States Rowing Team. After business school, she eschewed a more traditional career in banking or consulting and took a job as a buyer at Filene's Department store. She rose through the retail ranks to become a store manager for Lord & Taylor, left to lead the marketing effort at a manufacturer of home furnishing products, then became marketing director for Aphrodisia, one of Caswell-Massey's contract suppliers. At Aphrodisia, she was credited with focusing the company's marketing program and growing its line of botanical products to represent a substantial majority of revenues.
Robinson took the helm at Caswell-Massey in 1996 and has reduced costs and improved sales quality while diversifying distribution channels in the three years she has been running the business. Leading a strong management team with a hands-on style, she has identified new markets, implemented strategies to increase traffic in company-owned stores, and developed opportunities for further expansion of the distribution network. She also enhanced the Caswell-Massey catalogue and changed the mailing schedule to reach more customers, a strategy that increased the response rate to nearly double the industry standard.
After implementing this turnaround, Robinson sought a way to acquire the company she had helped restore and rebuild. She teamed with American Capital, an ideal partner for entrepreneurs of middle market companies seeking buyout financing. American Capital has helped many management teams buy their companies and has also assisted individual entrepreneurs purchase companies in industries they are intimately familiar with. In September 1999, for example, American Capital provided financing for a trucking industry veteran to purchase Dixie Trucking, a leading provider of next-day delivery service in the Southeast. Also in September, American Capital helped finance the management buyout of TransCore, a subsidiary of Science Applications International Corporation, which is one of the country's largest employee-owned firms. With capital resources exceeding $360 million, American Capital also provides financing for employee buyouts, acquisitions, growth, liquidity and restructurings and can support its portfolio companies' ongoing financing needs through long-term partnerships.
"American Capital's flexibility - its ability to provide both senior and subordinated debt financing -- and its ability to meet our financing needs efficiently and expeditiously enabled us to confidently go forward with the acquisition, " Robinson said. American Capital provided the Company with $2 million of senior term debt and $2.2 million of senior subordinated debt. A revolving credit facility was provided by CIT Group, and equity came from outside investors and Robinson herself. The new board of directors will consist of John H. Jerome, a leading New York City attorney; Benson P. Shapiro, Malcolm P. McNair Professor of Marketing, retired, Harvard Business School; Victoria Hamilton, a principal with the Washington Advisory Group; Robinson; and David Ehrenfest Steinglass, American Capital Associate.
"We are excited about this investment," said Ehrenfest Steinglass. "The company represents a piece of American history that continues to find new life in the challenges of today's fast-moving and fast-changing marketplace. With the new ownership and strong management team, we are confident Caswell-Massey will march into the new millennium with its unique combination of age-old recipes and contemporary consciousness."
In the United States, the cosmetic and personal toiletries industry is growing steadily. It expanded 3.5% in 1998 to $35.8 billion, serving the needs of the country's growing population base. Growth is expected to continue to more than $41 billion during the next five years. In addition to its unique brand identity, Caswell-Massey enjoys several advantages over its competitors. Unlike many other soap and toiletry retailers, the company targets a specific demographic that is older, wealthier and more established than that of its competitors. Its products blend a commitment to quality, using only the finest ingredients and traditional recipes in contrast to lines that cater to popular fashion or cultural trends.
Under Robinson's leadership, Caswell-Massey has a wealth of opportunities to expand distribution of its products. During the next several years, Robinson plans to upgrade and relocate a number of retail stores as well as open more stores in high-end retail locations. The Internet is also a prime area for growth. The company has developed a website, to be launched in early October 1999. Using the latest e-commerce technology and providing access to retail store shopping coupons, the website will draw upon the company's long history, incorporating interesting tidbits from American history and offering cyber visits to meet the company's famous customers. Caswell-Massey will also expand distribution through QVC's direct response television programming, a venture that has already produced successful results.
"Caswell-Massey products will always retain the quality that has made its soaps and toiletries popular with America's Presidents and luminaries throughout more than 200 years of the country's history," Robinson said. "Our mission is to keep Caswell-Massey at the forefront, taking advantage of television, the Internet, and other distribution channels so that new generations of Americans will continue to enjoy our high quality products."
This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements regarding expected results of American Capital Strategies are subject to various factors and uncertainties, including the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional or national economic conditions, or changes in the conditions of the industries in which American Capital has made investments.
