The progression for most direct-to-consumer entrepreneurs is to conceive a product idea and then locate a manufacturer to produce it. But Jaime Schmidt took the opposite approach when she launched Schmidt’s natural deodorant in 2010.
“I started in our kitchen with batch sizes of maybe 20 deodorants on the stove,” she told me. “The product turned into a business idea. So I kept the manufacturing in-house. I liked the control, which was born out of my love for making.”
Fast forward to 2020. Schmidt’s Naturals includes deodorants, soaps, and oral hygiene, among other items. Revenue is tens of millions of dollars. Unilever, the multinational consumer goods conglomerate, purchased the company in 2017.
I spoke with Jaime Schmidt about launching, scaling, and selling the business. What follows is our entire audio conversation and a transcript, which has been edited for length and clarity.
Eric Bandholz: What you’ve accomplished is so impressive. Give us a quick rundown.
Jaime Schmidt: Schmidt’s lead the charge in the shift towards natural products, particularly in the deodorant space when we first came to market back in 2010. There were only a few natural brands then — Tom’s of Maine, JASON, Nature’s Gate. But indie brands didn’t really exist. It was beautiful timing when I brought Schmidt’s to market.
Part of that was intentional. I saw the opportunity that there was a need to shake up the space with new offerings. But a part of it, too, was a bit of luck. I had been on a quest to find satisfaction in my work. I had tried all sorts of different career paths and side hustles and hobbies. Nothing spoke to me until I landed on formulating natural products.
In Portland, Oregon, there was no shortage of opportunity to take your products to market and get in front of consumers. It’s an opportune city for that. That’s what kickstarted Schmidt’s: face-to-face interactions with customers at farmers’ markets.
Bandholz: How long were you in farmers’ markets?
Schmidt: For about a year. Then I started treading into stores and taking on some online, as well.
Things happened fast. When I first started selling, I didn’t have much of a plan for the business. I knew I enjoyed what I was doing. I knew that customers loved the product. They were telling me at the markets how much the product had changed their lives. But I didn’t see the potential right away. Once I was in retail, it became clear that there was a big demand for a new, natural deodorant that worked.
One of the frustrations around deodorants at the time was the ingredients. We were on a path towards more clean, healthy products, but deodorant was not quite there yet. Most deodorants were still full of chemicals. A lot of them were using aluminum as antiperspirants. There was an opportunity to do more.
Also, the branding options on the shelves were cliché. The few naturals that did exist looked the same, more or less. The fragrances were predictable with lavender. Overall, a bland aesthetic.
I recognized the opportunity not just to offer something that worked and was healthy, but also that looked different and was a little more modern and forward-looking. I wanted naturals to be available to the masses.
Bandholz: How did you get your foot in the door for the first retailer?
Schmidt: I had retailers approach me at my booth at the farmers’ markets and say that customers had been looking for the brand in the stores. I was fortunate. A lot of these retail accounts fell into my lap.
But once I saw the potential, I quickly made retail part of my daily work, to reach out. I started going into local stores. I was a new mom. My son was a few months old. I’d take him into the stores with me and pitch my product.
There’s a lot of opportunity in Portland with co-ops and natural grocery stores. Once I had saturated the market here, I made my way up to Seattle. The West Coast, the Pacific Northwest in general, was welcoming to this type of product.
Then, within a year or two, I had a national distribution that played out organically. A lot of it was word of mouth. I had connected with some bloggers early on who had heard about Schmidt’s, wanted to try it, and then they talked about it.
This was when YouTube’s influence was strong. It was an effective way to spread the word about Schmidt’s that didn’t cost anything.
Bandholz: Was all of this self-funded?
Schmidt: Schmidt’s was funded out of my husband’s and my personal bank account, which was small and humble. We had both been social workers before I started the company. He continued as a social worker for the first couple of years. We were mostly living off of his salary.
I also had a couple of side hustles, too, which was the seed money for the business. I was making private label products for local spas. I made do-it-yourself lotion kits for a local retailer. It was all relevant to Schmidt’s and a nice way to get a bit of extra money that I could put back into the business.
Bandholz: Did you manufacture your product as well?
Schmidt: Yes. That started in our kitchen in our very small house here in southeast Portland. I was starting with batch sizes of maybe 20 deodorants on the stove. That grew as demand increased.
My first warehouse was roughly two-and-a-half or three years after I had made my first deodorant. It was around the corner from my house. I found a landlord who was willing to work with me on flexible terms. We converted this old, beat up space into a facility where I could hire a few people, increase my batch sizes, and have daily USPS and UPS pickups.
Within four years, we had three warehouse moves. The growth was just absurd. And it difficult to predict and know much space we needed.
Plus, we had equipment needs — mixing machines in the melting pots and the labeling lines — and the need for more assembly lines and shipping departments. Next thing you know, we had 150 employees working across two shifts.
Bandholz: Why make it in-house versus working with contract manufacturers?
Schmidt: A lot of brands start with an idea, and then the first step is to find a contract manufacturer to produce it. But I started with the product, which turned into a business idea. So I kept manufacturing in-house. I liked the control, which was born out of my love for making.
I enjoyed it. I liked being close to the product, but it caused a lot of stress. There’s so much that can go wrong. It’s incredible to look back and think that I was running this full manufacturing facility with zero experience or knowledge going into it.
One thing I loved about in-house manufacturing is you have so much control over things like limited-edition offerings. When you’re working with contract manufacturers, the lead times are so significant, and there’s so much planning involved. Whereas, if you’re making in-house, you can just pull something off so quickly. There are huge benefits to both.
Bandholz: Were the limited editions for your retailers or your direct-to-consumer channels?
Schmidt: Mostly DTC. It was a great opportunity to keep strong traction coming to our website once we had widespread retail distribution. Once we had launched in places like Target, there’s the concern that it’s going to die off completely. Having the limited edition scents was a great way to keep people coming to the site.
That was one part of our strategy. We had to consider free shipping options and regular promotions to keep those steady online sales, too. But one thing about the limited edition scents that worked out well for us was selling overstock at the end of the season. We had retailers such as TJ Maxx that would buy out all that extra inventory. It was the perfect way to transition out of the seasonal scents.
Bandholz: With these retailers, did you work through brokers or distributors or directly with the company?
Schmidt: A little bit of both. Some of the earlier retailers we managed directly. As we grew, bringing on brokers helped in navigating some of these relationships and opening up new doors. And distributors, too. Some retailers required that we work with a distributor. But partnering with a distributor had other advantages, too, that opened doors that we otherwise wouldn’t have access to.
Our biggest struggle was Amazon. I fought that for the first few years. I didn’t want to sell there. But we lost control. People started selling Schmidt’s there, so I thought, “Well, if they’re going to do it, I have to do it, too.”
We had huge revenues on Amazon. But it was so tricky to manage the pricing and the quality of the posts and photos people were using — as well as the packaging that they were shipping our products in.
Our turning point on Amazon was when I had a feature on Fox News, of all places. Once I was on TV, the Amazon sales exploded.
One of our ecommerce retailers that had been selling Schmidt’s on her website started selling on Amazon after this Fox News feature. Then her sales exploded. I wanted to keep up with it. I thought, “Dang, she’s making bank just selling my brand on Amazon because of this one TV feature. So I need to compete with that and have some guidelines around it.”
Bandholz: How is your revenue divided between direct-to-consumer and retail?
Schmidt: We were probably about 70-percent retail and 30-percent ecommerce around the acquisition time with Unilever.
Bandholz: You brought a partner into the business in 2015.
Schmidt: Yes. Michael Cammarata.
We were growing very fast. I wasn’t looking for any sort of outside partnerships, but I was approached by Michael and his business partner, Kevin Schmidt. (No relation.) Kevin had heard about Schmidt’s because of his last name. The two of them approached me and said they were interested in some kind of collaboration.
We looked at a few different ways to structure it. We landed on a partnership. Then we worked together for a couple of years leading up to the acquisition.
Bandholz: Why bring in a partner?
Schmidt: They convinced me. I wasn’t searching. I had other people approach me, but I was not looking for investment. The partnership opportunity was more attractive to me because I wanted more than capital.
What Kevin and Michael presented was access to retailers that I hadn’t yet explored. They had some strategies around marketing that I was interested in. It worked well. We had different skill sets, and together, we were able to continue growing.
Bandholz: Your company’s revenue was in the mid-eight figures when Unilever acquired it.
Schmidt: It was a nine-figure acquisition.
Bandholz: Wow. Let’s talk about the transition. You built and sold a company that shares your last name. Do you fear the actions of the acquirer will tarnish the name?
Schmidt: Yes. But at the same time, I found security in knowing that my name was on the brand because it would be forever mine. The legacy could live on.
I trusted the team that was at Schmidt’s when the acquisition happened. I got to know Unilever well during our conversations. I knew for sure that they were the right partner for us, and I felt comfortable moving forward. But, sure, it’s different when you’re no longer responsible for the day-to-day operations. You hope that everybody’s going to make decisions that fit your overall long-term goals and vision.
I’ve been happy with the way things have gone. I’m still involved. I am working as the brand spokesperson and will always be the founder and have a nice, healthy relationship with the team.
Bandholz: Let’s dig into the sales process. How did you end up with Unilever?
Schmidt: We had several companies at the table. We brought on Goldman Sachs to help broker the deal. They were great for soliciting other potential buyers. We had four large companies that were interested. We were having conversations and meeting with them. We narrowed it down to a couple.
Unilever was a clear winner for me. Again, I understood their values, their mission, and their vision for the brand. They had no intention of shaking up the team or doing things differently. They knew the value that Schmidt’s had built and the brand equity that we were bringing.
Bandholz: What were the companies interested in? Profitability? Distribution channels?
Schmidt: First off, they saw our sales, what we had accomplished, and what we were on track to do. They wanted a piece of it. The biggest attraction was that Schmidt’s was a natural brand that they didn’t have in their portfolio. They had several deodorant brands and personal care products, but not a natural one, with high-performance and a cult customer following.
We had a product roadmap, too. We had just launched toothpastes and bar soaps and body washes, among other products. All of it was attractive to Unilever.
Bandholz: Was selling the business your vision when you started in 2010?
Schmidt: No. I never envisioned the company growing as large as it did, and also selling it. It was never my thinking. But later on, as we continued to grow and the company took on a whole life outside of me, I understood there was real potential in partnering with a company like Unilever, to continue to drive us forward, to expand globally.
There was a huge load off my shoulders when the acquisition happened. I didn’t have to carry the weight of leading a company with 150 employees and being responsible for their livelihood and all the challenges and risks that come along with that.
I also looked forward to this next phase of my life. I didn’t know what that looked like exactly, but I’ve since taken on new projects that I’m excited about. I’m able to implement the knowledge that I learned from Schmidt’s and share it with others.
I’m most excited about our investment fund, Color, that my husband Chris and I started. The focus is on consumer goods. One thing that makes us unique is we can offer hands-on experience in addition to capital. We also focus on underrepresented entrepreneurs. We see a need for change and a great opportunity. So most of our investments are in women and people of color.
I’ve also written a book. It’s all about my journey of starting and growing Schmidt’s, with a lot of tangible takeaways for entrepreneurs. It’s called “Supermaker: Crafting Business on Your Own Terms.” It releases on September 8, 2020.
Bandholz: How can our listeners follow you and learn more about you?
Schmidt: I would love for people to check out my book. I’ve been working on it for a while. The release date was delayed due to Covid-19, so I’m eager to get it out into the world.
I also have a personal website. Then on social, it’s just @jaimeschmidt for Twitter and Instagram.
August 21, 2020 at 07:31AM
via https//www.brucedayne.com/
Eric Bandholz, Khareem Sudlow
