Tambrands Inc. History

Address:

777 Westchester Avenue
White Plains, New York 10604
U.S.A.

Telephone: (914) 696-6000
Fax: (914) 696-6161

Public Company
Incorporated: 1936 as Tampax Inc.
Employees: 3,800
Sales: $684.11 million
Stock Exchanges: New York Pacific
SICs: 2676 Sanitary Paper Products

Company History:

Tambrands Inc. is the world's leading supplier of tampons, with manufacturing facilities in ten countries and sales to women in more than 150 countries. With its Tampax brand tampons on the market since 1936, the company was the first commercial producer of internal menstrual protection. Tambrands' market share in the United States was consistently around the 60 percent mark for many years. Tampax was also the third highest selling health-and-beauty-care brand in the United States behind Tylenol and Crest, according to a company report.

In the mid-1930s disposable sanitary napkins were still new, having been on the market for less than 20 years. Most women probably used external menstrual protection, and many women still made their own reusable pads from cotton rags that were boiled so as to be used again. A small segment of American women probably made their own tampons from cotton strips rolled tight for insertion, but for the most part, internal protection was unheard of.

In 1933 Dr. Earle Haas obtained a patent for a tampon he had devised from compressed surgical cotton. He had sewed a waterproof cord down the length of the absorbent material, and put it in a two-part cardboard tube for insertion. Drugstores and department stores began selling the tampons, but in 1936 Ellery Mann formed Tampax Inc. and bought the rights to produce and market the tampons.

Competitors soon sprang up with their own tampon products. By 1942, there were nine major brands on the market. The arrival of disposable, commercially available tampons stirred discussion about the propriety of using internal protection, and raised medical questions about the safety of tampons. Some articles in medical journals warned of the risks of infections or irritation from tampons, while other articles declared tampons to be safe and hygienic. By the end of the 1950s, medical testing had diminished, and the few studies still being conducted concluded that tampons were safe.

During the 1950s Tampax solidly established itself as the number one tampon manufacturer. The company launched an education campaign aimed at young girls, potential customers. The educational program provided instruction on menstruation, tips on general health habits, a history of menstrual products, the advantages of Tampax tampons, and instruction on the use of Tampax tampons. The company later printed and marketed a booklet called "Accent on You," dealing with menstruation for young girls. In the early 1980s the company began selling a video version of the booklet. The education program remained an important aspect of Tambrands's marketing strategy into the 1990s.

The 1960s brought a new competitor to the tampon marketplace--Carefree, a non-applicator tampon, made by Personal Products Company. It was not, though, the first tampon without an applicator; Johnson & Johnson, the parent company of Personal Products Company, had been marketing just such a product, called o.b., in Europe since the 1950s. Tampax held onto its sales lead, but Carefree became very popular.

Other competitors entered the market, including Playtex tampons, which came in plastic applicators and, a few years later, in a deodorized version. Competition among tampon makers was intense, but Tampax remained the strong leader. During the 1960s and early 1970s Tampax became one of the most profitable companies on the stock market. It was spending only $8 million to advertise its one product, which had profits of $29 million on sales of less than $120 million.

In 1972 the National Association of Broadcasters lifted a ban on television advertising of tampons, sanitary napkins, and douche products. Tampax refused to advertise on television until 1978. With heavy advertising by other competitors, though, Tampax's market share fell while sales of tampons climbed 244 percent. Playtex and the Procter & Gamble Company took a big share of Tampax's market. Tampax fell from a 70 percent share of the market in the 1960s to a 42 percent share in mid-1980.

Entering the tampon arena with its Rely tampons, Procter & Gamble introduced an innovative design with a tampon made of a new superabsorbent modified cellulose. Rely tampons took 17 percent of the market and shot to number three. Tampax still held the lead, but now owned only a 42 percent share of the market.

Most of the other tampon companies were also using some type of superabsorbent modified cellulose like that found in Rely. And during 1980 hundreds of cases of toxic shock syndrome (TSS) were reported around the country. Many researchers agreed that the risk of contracting this mysterious, often fatal, disease among young women under the age of 30 was related to the use of superabsorbent tampons.

Although the majority of cases occurred among Rely users, the entire tampon industry experienced a drop in sales. Tampax officials said that their company had only five percent of the cases. Since October of 1980, Tampax began including a warning about toxic shock syndrome in every package. Although the company denied that TSS had anything to do with the decision, in 1981, Tampax introduced its "Original Regular" tampon, made from cotton.

Tampax Inc. remained a one-product company, selling only tampons of various absorbencies and sizes, until 1982 when Edwin H. Shutt, Jr., assumed the leadership role from E. Russell Sprague, chief executive since 1976. Tampax Inc. became Tambrands Inc. in 1984, and the change in name seemed to signal a change of direction for the company--diversification. Tambrands had seen how quickly the market could turn: six years earlier, when Procter & Gamble introduced Rely, Tampax's market share dropped substantially. Just as quickly, Procter & Gamble lost its momentum and its market when TSS hit the newsstands. Tambrands also saw that the U.S. market was growing by only one to two percent a year. The only way for the company to expand revenues seemed to be to diversify into other product lines.

The natural move appeared to be the manufacture of external protection products. Tambrands entered the sanitary napkin market with its own brand, Maxithins. But Procter & Gamble was also entering that market. By the end of 1985, Tambrands' Maxithins brand had lost $25 million, and the company did not expect it to begin to make a profit until 1986. Shutt looked for other products that were consistent with the company's profile, and the firm considered a wide range of products--over-the-counter medicines, beauty care, and diapers. It added a hypo-allergenic cosmetics line and also went shopping for over-the-counter diagnostic tools.

The home diagnostic market was worth $300 million and growing rapidly. Tambrands officials figured their company already had a built-in market through its Tampax tampons. Tambrands was impressed by Hygeia Sciences, a company in Cambridge, Massachusetts, that had been developing two enzyme tests. Its pregnancy test was believed to be three times more accurate than any currently on the market. And with its ovulation test, a woman trying to conceive could tell within 12 to 14 hours when she would ovulate. Tambrands bought Hygeia, and together they simplified the tests, making them more "user-friendly." Tambrands projected that with three to five million U.S. women trying for at least a year to get pregnant, First Response would easily earn $50 million to $100 million annually.

Tambrands possessed diversified holdings, as well as tampon manufacturing and distribution operations in foreign countries. In a joint venture with Turkey, Tambrands manufactured sanitary napkins and disposable diapers. In a joint venture with Spain, the company produced sanitary pads, disposable diapers, and other personal care products, as well as tampons. Tambrands' Mexican subsidiary produced tampons, sanitary pads, and pre-moistened baby tissues. A facility in Brazil produced tampons and sanitary napkins.

Unfortunately, Tambrands' diversification efforts did not pay off. Martin Emmett, the new chairman and CEO appointed in April of 1989 after Shutt resigned, reversed the company's direction for the past five years and announced that Tambrands would once again focus on tampons, the business it knew best. Emmett told Advertising Age that Tambrands' entrance into the sanitary napkins and hypo-allergenic cosmetics line "was less successful than we had hoped." He restated that the company would concentrate on developing new tampon products. Emmett pushed Maxithins to a backseat position, with the possibility of selling or discontinuing the line. He cut its advertising budget in half in order to devote more money to marketing the Tampax line.

Emmett announced in December of 1989 that Tambrands would restructure its program plan in order to boost performance and lower costs. He wrote a new mission statement that began, "Our core business is the manufacture and sale of tampons." As part of the plan, Emmett announced he would sell its diagnostics and cosmetic concerns, reduce the work force, and consolidate some facilities and functions in Europe, Canada, and the United States. Emmett sold Physicians Formula Cosmetics, which Tambrands had purchased in 1985 for $8 million, and the First Response pregnancy and ovulation tests, for which Tambrands had paid $47.8 million in early 1987. In 1992 Tambrands sold its Maxithins business to Tranzonic Companies for an undisclosed amount. By the beginning of 1993, Tambrands had divested itself of all non-tampon businesses in the United States and abroad. Emmett also consolidated the company's advertising, giving the entire account to one ad agency, rather having it divided between three agencies as before.

Emmett's restructuring seemed to pay off: in 1992 sales rose. As a result of staff reductions and elimination of two levels of management, Tambrands sold its large headquarters in Lake Success, New York, and moved to smaller offices in White Plains, New York.

Emmett made a company goal of increasing its share of the U.S. market from 60 percent to 65 percent by 1994. To help realize that goal, he instituted a compensation policy for the top 135 managers of the company, which called for them to take much of their pay in the form of bonuses, stock options, and restricted stock. Their earnings for the year were tied to the company's success. This strategy forced managers to look at the whole company rather than only their own department needs. As part of its consolidation plan, Tambrands also announced in 1992 that it would shut down its plant in Canada and consolidate manufacturing in three plants in Maine, New Hampshire, and Vermont. It planned to convert another New England plant into a facility for testing new equipment and developing new products.

Emmett also was able to take advantage of new international opportunities as U.S. trade opened up with China, the Commonwealth of Independent States (formerly the Soviet Union), and other eastern bloc nations. Tambrands and Johnson & Johnson battled over who would be the first to market tampons in the former Soviet Union, a country where even sanitary napkins were scarce. The market there was vast and untapped, and it was estimated that demand would be as high as nine billion units annually for 70 million of the 150 million Soviet women.

Tambrands won the competition with Johnson & Johnson, but dealing with the Soviets was tricky, with miles of red tape to contend with first. Tambrands had started negotiating with the Soviet Union before the country had disbanded. After the breakup of the Soviet Union, dealing with local partners was still complicated and often frustrating. But the negotiation was worth the effort because of the vast opportunity to reach women who for the most part had been making their own sanitary napkins out of bleached cotton and gauze.

Tambrands' joint venture with the former Soviet Union was called Femtech. It employed local labor and suppliers, keeping costs far below those in the United States. In order to do business, however, Tambrands and other U.S. companies had to add some extras at times. For example, Femtech had to supply forklifts to some of its suppliers. And when Femtech registered a fleet of cars, it had to allow the local police to use the cars every three or four weeks, according to an article in the Wall Street Journal.

With the breakup of the Soviet Union, there were also worries that hostilities between republics would lead to trade barriers. Bureaucrats imposed other barriers by requiring signatures from hundreds of officials before approving plant expansion. Most exasperating of all, however, was the confusion over who was in charge of various functions and what agencies to contact for information or negotiations. With shortages of currency, Tambrands created a barter agreement that would have been impossible before the break up. It traded ruble profits from its Tampax plant in the Ukraine to buy a cotton bleachery in St. Petersburg. In 1991 Tambrands' share of Femtech increased from 49 percent to 80 percent, and in 1992 the Ukrainian facility became a wholly owned subsidiary of Tambrands. Tambrands officials considered the operation in the Ukraine to be a solid base from which to reach other Eastern European markets.

Tambrands entered into a joint venture with the People's Republic of China in 1988. In 1992 it increased its share of the joint venture from 60 percent to 80 percent, and established sales offices in four cities to market tampons produced in Shen-yang. Like the women of the Soviet Union, Chinese women had rarely purchased commercial menstrual protection products; consequently, Tambrands had to educate its market about tampons in order to sell Tampax. Tambrands estimated that China's population of women of child-bearing age was 335 million, representing a promising market for Tampax tampons.

Tambrands also planned to capture more of the European and Latin American market in the 1990s. It marketed aggressively in Europe, introducing a non-applicator tampon that European women seemed to favor over tampons with an applicator. It also launched a pan-European marketing campaign, eliminating its former country-by-country marketing. It established a European trademark, package design, selling price, and marketing design. In Latin America, tampons represented only a small share of the feminine protection market, but Tambrands saw potential there with its market of 300 million women.

Less than ten years after the toxic shock syndrome outbreak, another health concern flared up--concern about dioxin in tampons. Dioxin is a toxic substance believed to be carcinogenic and is sometimes a by-product resulting from the process of bleaching pulp for paper. The dioxin issue, however, had little impact on tampon sales, and Tambrands claimed that Tampax tampons were safe and had no significant levels of dioxin.

Tambrands continued to dominate the tampon market in the 1990s, devoting resources to education and developing and maintaining brand loyalty. Its domination allowed it to raise prices even when inflation was low. This was an important strategy since unit sales in the United States were rising only about one percent a year. When it was not feasible to raise prices again, the company offered new package sizes. In 1993 the company introduced a 20-tampon package with a higher unit price than the 32-tampon package, but that put the package in the most popular price range of $2.99 to $3.29.

Tambrands plan for the 1990s called for growth primarily in the North American markets during the first third of the decade, in the European market during the second third, and from emerging markets such as China and the former Soviet Union in the last third. CEO Emmett's goal was to reach a 50 percent share of a $3 billion tampon market by the year 2000. To achieve this goal, Tambrands put a great deal of emphasis on education, just as it had since 1936 when founder Ellery Mann traveled to drug stores to tell owners about Tampax tampons and persuaded them to carry the new product in their stores.

Principal Subsidiaries:Tambrands Canada Inc.; Tambrands Ltd. (U.K.); Tambrands Ireland Ltd.; Tambrands France S.A.; Tambrands AG (Switzerland); Industria Corporativa Sanitaria (Mexico); Tambrands GmbH (Germany); Tambrands St. Petersburg (Russia); Tambrands--Ukraine.

Tambrands Inc. History

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