2. The Product Makeover
Forgive Phil Coffey if he sometimes feels nostalgic for the simplicity of his company's old sales pitch. Back in 1991, when Odor Management had just three employees, it worked like this: A salesperson would arrive at a sewage treatment plant with a few gallons of antiodor concoction. The salesperson would rig up an automatic sprayer inside the plant, march the plant manager a quarter of a mile away, and ask him or her to take a good whiff.
Then, the salesperson would throw up a flag -- a signal for someone at the plant to turn on the sprayer and send the concoction into the air. A minute later, the salesperson would ask the client to take a second whiff.
The air would smell noticeably less like the inside of a latrine. If the manager expressed concerns about putting another chemical into the air, the salesperson might spray a bit of the stuff in his or her own eyes to prove a point: It's nontoxic!
For a decade, that demonstration was enough to build a successful business. The antiodor formula, a blend of plant oils, was cheap and easy to produce. A gallon of the stuff sold for $50 and cost all of $1 to manufacture. By 2000, the Barrington, Illinois—based business, rechristened OMI Industries, had 15 employees and revenue of $6 million. Profit margins topped 80 percent.
But despite his success, Coffey couldn't shake the notion that OMI was ignoring a bigger opportunity: the chance to play in the $4.7 billion-a-year air-freshener business. Why, Coffey wondered, couldn't his industrial-strength deodorant, which had been designed to appeal to engineers and plant managers, be repackaged to appeal to the shoppers who were snapping up the perfumed sprays and plug-ins that lined the aisles of every major grocery store? A consumer odor neutralizer, Coffey figured, could bring in $50 million a year.
A New Kind of Company
Launching a consumer product is expensive. It requires advertising, catchy packaging, and a sales force capable of getting meetings with buyers. Coffey's plan was to pay for the launch using profits from the industrial business. But the company's founder, John Tsatsos, who owned 51 percent of the business to Coffey's 49 percent, was just fine with his wildly profitable company. At age 70, he was 25 years older than Coffey and none too eager to risk it all on an expensive consumer strategy that could take years to turn a profit. Coffey spent two years negotiating to buy Tsatsos out -- eventually settling on a figure of $1.3 million, paid over 10 years.
Coffey immediately hired contract manufacturers to make samples -- a spray, a gel, and a candle -- and dubbed the new product Fresh Wave. Coffey had spent most of his 30-year career selling industrial supplies, and he used a similar approach to pitch OMI to retailers. He went to trade shows and tried to sell one owner at a time. By the end of 2004, Coffey had taken small orders from nearly 1,000 independent retailers, mostly gift shops. Still, it all amounted to just $375,000 in revenue, and it was consuming most of Coffey's time and all of OMI's cash. Fresh Wave needed volume -- in the form of sales to large national chains.
Coffey recruited Bob Dunklau, a senior executive at an in-store marketing company, and the pair focused on stores in the Chicago area. In 2005, the product was available in local Whole Foods stores. In late 2006, the pair visited a dozen Ace Hardware stores in Chicago and talked to owners and handed out samples to employees. To ensure that stores that chose to carry the product would actually be able to sell it, Coffey and Dunklau designed an end-cap display. They also paid for a weekly, on-air endorsement -- at a cost of $1,350 per minute -- on a Chicago home-repair radio show hosted by Ace's national spokesman, Lou Manfredini. By March 2007, Fresh Wave had its display in 200 Ace stores, and within a year, the company had distribution deals with national buyers from Ace, Do It Best, and True Value.
The radio endorsement paid unexpected dividends. In June, Manfredini sang Fresh Wave's praises during a segment on the Today show. A wave of good press followed: mentions in national publications such as USA Today, Redbook, and Real Simple, and dozens of local newspaper articles. That helped Dunklau land distribution deals in a handful of small grocery-store chains and expand into more Whole Foods locations.
Those early successes notwithstanding, Fresh Wave still faces plenty of challenges. One issue, Coffey believes, is packaging. Last year, he hired Proteus Design, a Cambridge, Massachusetts, marketing shop, to redesign the company's logo and packaging. It hasn't been cheap -- it has cost more than $100,000 -- but Coffey thinks it will help him win business at Bed Bath & Beyond, where Fresh Wave is in testing.
Revenue in the consumer division hit $5 million in 2008, up from $3.2 million the year before, with distribution in 8,000 stores, and Coffey expects growth of 20 percent in 2009. Despite the recession, the consumer business is now profitable on its own.
Coffey's focus on the consumer side has meant that he has had less time for industrial sales calls. But he says the industrial business, which reached $5 million in sales last year, is growing again, thanks in part to innovations on the consumer side. For instance, the development of the antiodor candle led to the realization that OMI's formula could be blended with asphalt, rendering it less smelly. That opened up an entirely new market for the company. "It's the fastest-growing portion of our industrial business," Coffey says. "Before, we weren't looking at innovation. This has reinvigorated our whole company."