Seventh Generation, Inc. Business Information, Profile, and History

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History of Seventh Generation, Inc.

Seventh Generation, Inc. is a leading wholesaler of environmentally conscious household products. Originally a catalog marketer, the company shifted to a focus on wholesale in the early 1990s and within a few years had entered the mass retail market with its nontoxic cleaning products, including dishwasher and laundry detergent and chlorine-free bleach. The company also supplies toilet paper and paper towels with a high recycled fiber content, recycled plastic trash bags, baby wipes and diapers, and other household products. The company develops and markets the products; manufacturing is contracted out to about eight factories. Even though it has won numerous environmental awards, Seventh Generation has begun publishing an annual Corporate Responsibility Report describing how it could do a still better job of minimizing harm to the environment.

Eco-Origins

Seventh Generation, Inc. started as the mail-order catalog of Renew America, a nonprofit in Washington, D.C., that marketed energy- and water-conserving products such as fluorescent light bulbs and low-flow showerheads. In 1988, Renew America handed off the catalog to Alan Newman of Burlington, Vermont. Newman, a transplant from Oregon, had set out to make the world a better place through enterprise. According to Inc. magazine, he learned entrepreneurship through experience, first in 1983 by cofounding Gardener's Supply. This was followed in 1986 with Niche Marketing, a distributor of progressive-oriented products.

The company was dubbed Seventh Generation, Inc. The name, suggested by one of Newman's Native American employees, came from the Great Law of Peace of the Six Nations Iroquois Confederacy: "In our every deliberation we must consider the impact of our decisions on the next seven generations."

First year sales were around $1 million. According to an early profile in People magazine, one bestseller was a European-style reusable shopping bag, while another imported idea, reusable sanitary napkins, failed to catch on.

Vermont has quite a tradition of socially and environmentally conscious entrepreneurs (for example, Ben Cohen and Jerry Greenfield of ice cream fame). This prompted Jeffrey A. Hollender, the company's future CEO, to visit the Green Mountain state, where he met Newman while researching a book called How to Make the World a Better Place.

Hollender had previously established adult education programs in Toronto and New York City. The latter site eventually developed a library of instructional audiotapes, and was sold to Warner Communications. Hollender then served as president of Warner Audio Publishing.

Hollender came aboard the Seventh Generation team, raising money and becoming president and CEO. Seventh Generation headquarters was relocated to nearby Colchester, Vermont (Hollender maintained an office in Manhattan).

According to Inc., a March 1989 New York Times mention of Seventh Generation generated huge publicity, increasing orders several-fold within a year. The 20th anniversary of Earth Day on April 22, 1990, also brought media attention to the green products business. Catalog sales increased from $1 million in 1989 to $7 million in 1990, according to Inc. By this time, the company had 120 employees.

The catalog was redeveloped to focus on benefits to the environment beyond energy conservation, such as vegetable-based laundry detergent. The goal was to sell "Products for a Healthy Planet." The product line included a plethora of consumable products intended to be less harmful to the environment, including recycled paper products, cleaning supplies, organic foods, and skin care supplies. There were plenty of items made of alternate, more ecologically sound materials, such as a milkweed floss comforter. Cloth and biodegradable diapers also were offered.

Recession and Retooling in the 1990s

Sales were hit hard during the recession of the early 1990s. About half the workforce of 125 employees was laid off in 1991. The company, however, was still earning environmental kudos. It won the Direct Marketing Association's first ever environmental award, sponsored by Rodale Press, Inc., in 1991.

Newman left Seventh Generation in 1992. He later went on to start a Burlington microbrewery, the "Magic Hat Brewing Co. and Performing Arts Center," with a former Seventh Generation employee. According to Inc., proceeds from the stock sale helped to fund the beer venture.

Around 1992, the company began wholesaling its products to retailers, beginning with natural food stores such as Cambridge Natural Foods, Harvest Co-ops, and Bread & Circus. This became the focus of Seventh Generation's business. Sales reached $6.5 million in 1992 after several years at just $100,000.

Interestingly, the cover of the controversial fall 1992 catalog, mailed to 500,000 homes, featured an attack on President George H.W. Bush, as elections approached. Conservation-minded liberals were generally critical of the GOP's stance on environmental issues. "We have serious questions of whether a business like ours can flourish under President Bush," Hollender told the Boston Globe.

Bush lost the election to Clinton and Gore, and Seventh Generation seemed to be ready to flourish, despite losing $3 million in the previous two years. The company went public on November 8, 1993, raising $7 million. It lost another $2.4 million in 1993, however, on sales of $7.2 million. About 500 natural food stores on the East and West Coasts carried Seventh Generation products by the end of 1993. This number would eventually increase to 1,000.

Between 1993 and 1994 the catalog was retooled to appeal to more value-conscious consumers. Half the products were replaced, either for price or performance reasons. The product line expanded to include vegetable-dyed linens and dinnerware manufactured without heavy metals. The revamped catalog was printed on glossy, rather than uncoated paper, a concession to allow the photographs to reproduce (and sell) better.

Employment peaked at 140 people in 1994, when revenues exceeded $8 million. Catalog sales accounted for 80 percent of the total. During the summer, the company had entered the mass retail market with three products: dishwasher detergent, nonchlorine bleach, and liquid laundry detergent.

Boston's Star Market Co. became Seventh Generation's first mainstream supermarket retailer when it agreed to carry the products at its 33 stores. The metro New York area Food Emporium chain soon followed.

In May 1995, the mail-order catalog business was sold to Gaiam, Inc. of Boulder, Colorado, a subsidiary of Transecon. Renamed Harmony two years later, the catalog continued to offer Seventh Generation products. Another catalog, Home Trends, soon added them as well.

With the catalog in other hands, Seventh Generation had sales of $1.7 million in the 12 months ended March 1995. Sales more than doubled the next year, approaching $4 million.

The next couple of years were difficult ones. The company cut its workforce as its share price crashed. Seventh Generation reported just eight full-time employees at the end of 1998. Sales were nearly $9 million for the year, with a net loss of about $400,000. Seventh Generation was making progress, however, not only with natural food chains such as Wild Oats but also mainstream supermarkets such as Kroger's.

The company was developing new environmentally responsible products suited for supermarket sales. Gaining national supermarket distribution also typically required spending millions of dollars on slotting fees and other expenses, a marketing executive told Inc. The company could leverage the uniqueness of its products to the supermarket chains, however, which liked to stock products that warehouse clubs did not carry.

Private Again in 1999

Hollender led a buyout of the company in 1999, making it a private company again. The cost of complying with SEC regulations and analyst indifference for smaller companies were two reasons for the move. Sales were growing rapidly, reaching $11 million in 1999.

A new marketing strategy emphasized the health benefits of using products free of harsh, artificial chemicals: The new tagline was "Healthier for You and the Planet." Seventh Generation invested a fair amount of energy into consumer education, warning of the dangers of toxic chemicals in many cleaning products. The web site was one means for getting information into the hands of customers. Unbleached toilet paper printed with alarming facts about dioxin was another; such rolls were dispensed to distributors and retailers in a 2000 promotion. Company CEO Jeffrey Hollender continued to publish books on environmental issues.

New products included disposable diapers, introduced in April 2003. Seventh Generation, which subcontracted manufacturing to about eight plants, had about 30 employees of its own in 2004. Sales were about $25 million and reportedly growing between 20 and 40 percent a year.

According to OnEarth, the natural household product market was worth perhaps $100 million a year, a mere blip compared with the $18 billion in household products mainstream supermarkets sold. Supermarkets accounted for 30 percent of Seventh Generation's sales, according to the publication.

Environmental accountability was becoming more mainstream among corporations. Few were as forthcoming as Seventh Generation, however, which began producing an annual Corporate Responsibility Report describing how it could do a better job of minimizing harm to the environment. In 2004, Seventh Generation garnered the U.S. Chamber of Commerce's Corporate Stewardship Award for Small Business.

Principal Competitors: Earth Friendly Products, Inc.; Sun & Earth, Inc.

Chronology

• Key Dates:
• 1988: Seventh Generation, Inc. is launched from the former Renew America catalog business.
• 1992: The company begins wholesaling to natural food stores.
• 1993: An initial public offering is made.
• 1994: The company enters the mass retail market.
• 1995: The mail-order catalog business is sold to Gaiam, Inc.
• 1999: The company is taken private.
• 2004: The company publishes its first Corporate Responsibility Report.