Last updated on January 14th, 2020 at 03:09 pm
Franklin-based Carma Laboratories Inc. continues to use formulas based on the same concepts Alfred Woelbing developed when he began selling Carmex lip balm as a way to support his family 80 years ago.
But the company is now facing choices about where to take the brand as it has reached new heights in recent years.
Growth began to pick up in the late 1980s when the company expanded beyond its classic jar to tubes, and then in the late ’90s, it added lip balm sticks. Carma reached another level altogether when the company began closing gaps in its distribution and increased its focus on innovation.
It was a few years into the latest wave of growth when Carma Laboratories president and co-owner Paul Woelbing realized he was reaching the limits of what his business skills could do for the company.
“I’m good for a company up to a certain number of million dollars and that sort of instinct and ideas will get you there, but when you get to be big, you start to need systems and more thick skin, there’s a variety of skills that I didn’t have,” Woelbing said. “For me personally, it started going off the rails, I just was not enjoying myself and I’d come to work feeling overwhelmed.”
He turned to the company’s lawyer and his brother Eric, a co-owner. “I’m doing a disservice to the company,” he told them. “I need help.”
Woelbing suggested turning over much of the day-to-day decision-making to Rich Simonson, now the company’s chief operating officer. He felt Simonson had always been organized, honest, straightforward and understanding of the importance of recognizing people for good work.
“For some odd reason, he looked in my direction and said, ‘We’d like an automotive engineer to lead our (Consumer Packaged Goods) company,’” said Simonson, who joined the company in 2011, adding there were some comical and frank conversations about where he felt his strengths lay as he stepped into his new role.
Many family business owners may find it difficult to look to the outside world for help, but Woelbing said going beyond the family tree is what has spurred Carmex to new heights and allowed a company with 160 employees in Franklin, Wisconsin to produce 80 million units a year and take on some of the largest consumer product companies in the world.
“To be perfectly honest, it’s a process; you don’t just one day sort of turn it over,” Woelbing said of learning to trust other people to run the business. “We are still working through a little of that. I would say we’re well along the path.”
An 80-year journey
Paul Woelbing’s grandfather, Alfred, did things by himself for years until his son Don, Paul and Eric’s father, joined him in the 1970s. Alfred had worked as a cosmetics buyer in Milwaukee until losing his job in the Great Depression. He eventually decided to begin selling a lip balm he was already making for personal use, taking it to pharmacies within a day’s drive of Milwaukee.
The name Carmex didn’t really have any particular meaning to it, Woelbing said, adding his grandfather chose yellow as a company color because he liked it and thought it would stand out on store shelves.
Alfred Woelbing went from store to store trying to find interested buyers. If he made a sale, great; if not, he left some Carmex with the pharmacy anyway. If it didn’t sell, they could just throw it away. If it did, he included a postcard with his address to make it easy for them to order more.
When Don joined the company, he used his mechanical inclination to help improve production, while Alfred focused on sales and the business.
“It was a good blend of skills,” Paul Woelbing said.
When the business was located at North 68th and West State streets in Wauwatosa, the Woelbings were making 12-quart batches. Today, the company makes 1,000-gallon batches.
Eric Woelbing joined the company right after high school, but Paul took a different journey. His interest in art led him to be an art teacher in Philadelphia and New York City. He eventually felt drawn back to Milwaukee and took a job teaching in Whitefish Bay.
“My brother came in, it was just the next logical step for him,” Paul said. “I loved going to school and I loved art, so I did that for 10 years, got it out of my system and learned a different view of the world.”
In 1991, as the company was beginning to grow, Alfred asked Paul to help him with some of Carma’s paperwork. Checks were still written by hand, invoices were on triplicates and the company had no computer at that point, so Paul would teach in the mornings and help at Carma in the afternoon.
“It just kind of grew from there,” he said.
Today, Eric is retired from daily operations but remains actively involved as a member of the company’s board. Alfred passed away in 2001 after working well into his 90s and Don’s death in 2009 left the company in the hands of Paul, 61, and Eric, 55.
Unlike some third-generation companies, Carma Laboratories doesn’t have a sprawling family tree with multiple stakes in the business. Don was an only child and Paul has no children of his own, leaving the next generation to Eric’s two children. His son, Jayme, has a degree from Milwaukee Institute of Art and Design and works for the company in packaging and displays. His daughter, Ashley, is pursuing a business degree from Alverno College and works part-time in the Carma offices.
Trusting smart people
About 10 years ago, a salesman approached Paul about helping Carma grow. Paul was skeptical and said the company was doing fine. The man tried again, telling Paul that Carma needed his help. Paul pointed out the company had been growing reliably at 8 percent per year and was comfortable. The man responded that the market had grown at 17 percent the previous year.
“I said, ‘That’s interesting,’” Paul recalled.
He took the idea to his brother and dad. The issue was Carmex was sold to retailers like Walmart through wholesalers, leaving gaps in distribution. The solution was to sell direct to the retailers to fill in the holes.
“Honestly, it was very scary for the family, who had done everything themselves, to invite a stranger in to come and look into your personal life, your business,” Paul said.
Closing gaps helped boost sales, but there are only so many holes you can fill before things begin to plateau. Woelbing said the company had to begin transitioning from thinking of itself as a manufacturer to thinking of Carmex as a brand.
“And if I’m a brand, you have much deeper philosophical questions than, ‘What kind of machinery do I have?’” Woelbing said. “That’s when you have to bring in, to be blunt, people smarter than you and more talented than you who can take you in that direction.”
The last several years have been marked by bringing on professional management staff, including people like Simonson; Jona Mancuso, vice president of marketing; and Keith Edgett, vice president of research and development.
Simonson said through the recruitment process and knowing a Carma employee, he felt he could trust the company and enjoy working with its leadership. He was also looking forward to joining a company with a global brand.
“There’s something kind of exciting and cool and to some degree sexy about working for a company the world knows,” he said.
When Woelbing turned things over to Simonson a few years later, the task was to implement structure and improvements around the company’s products, people and processes.
Woelbing said he is still in the office every day and is acutely aware of the shadow his presence can cast.
“I have to be careful because sometimes I’ll enter the room … sometimes people will have one eye looking at me and one eye looking at Rich and really, Rich is in charge of the company,” Woelbing said, noting that while he’ll take small ideas to individual team members, anything of significance goes through Simonson first.
But Mancuso was quick to give Woelbing credit for the overall tone he sets for the company.
“For the record, Paul still passes out our paychecks,” she said.
Simonson said Woelbing has a tendency to be humble. Paul and Eric’s values, which he described as integrity, family, community and appreciating customers, flow throughout the company.
“It’s refreshing to work in an organization that doesn’t just have those posted on the wall. Our ownership team lives those,” Simonson said.
Simonson said he was surprised when he joined Carma and found out the phone directory was organized by first name, a small example of the family atmosphere.
“There’s a sense of stewardship here,” Woelbing said. “Honestly, my brother and I own the company and we could sell the company and we could get enough money to probably retire for the rest of our lives, but this is sort of who we are; this business is our legacy, my grandfather, my dad. There’s a sense of stewardship over the brand; the people who work here, the employees, they care a lot. For us to just walk away from it, that’s not fair.”
Mancuso also said Woelbing hires entrepreneurial people who have allowed the company to dream big.
“Anybody who walks in the door is expected to run this like it’s your little piece of the business,” she said. “When you hire someone who is an entrepreneur, the sky is the limit.”
Having big dreams is important for Carma, especially considering the competition Carmex is up against. Market leading products like Burt’s Bees and ChapStick are just individual parts of multibillion-dollar companies The Clorox Co. and Pfizer Inc., respectively, while newer entrants like Eos have had the backing of celebrities like Kim Kardashian.
“I think we’re a small brand with really big aspirations,” Mancuso said.
Small, of course, is a relative term. Carmex is sold in 36 countries around the world. It’s one of the top lip balm brands in the United Kingdom and is among the fastest-growing in South Korea.
But the company just does not have the same resources as the competition. Increased shipments of Burt’s Bees helped push the Clorox segment that includes the brand’s U.S. sales to $990 million last year. That segment also includes brands like Hidden Valley, K.C. Masterpiece and Brita.
As a whole, Clorox spent $141 million on research and development and $587 million on advertising in 2016. Drug maker Pfizer had $52.8 billion in revenue last year, and spent $7.9 billion on R&D and $3.2 billion on advertising.
While it would not disclose its revenue figures, Carma said it sells 80 million units of
Carmex products annually.
“We drink a lot of coffee,” Mancuso joked. “I think that everyone here works really hard because we are the challenger brand, but we do aspire to keep up with those bigger competitors.”
She said there are advantages to being smaller, pointing out Carmex can be more nimble and responsive to retailers and customers. The company is also extremely focused on lip care, unlike the competitor companies, which have consumer products spread across many categories.
“The challenge is we have to do more with less in terms of resources,” Woelbing said. “But that forces us to be more creative.”
Carma has evolved over the past decade to become a completely different company, adding more data, resources and people than the Woelbings even recognized they needed 10 years ago.
“When it was just me, my dad, my brother and my grandfather we came in, there were orders, we made Carmex, we pushed it out the door and 30 days later, their money showed up,” Woelbing said.
But even after all of the changes, resources are still limited.
“If you have boatloads of money, it’s easy to buy advertising and it’s easy to try new things,” Woelbing said. “We have to think really hard about how we allocate our resources.”
That doesn’t mean the company has to shy away from big platforms. Football fans may have noticed Carmex was a presenting sponsor of last year’s Wisconsin-Louisiana State University game at Lambeau Field. Mancuso pointed out the game coincided with the launch of a new brand logo.
“It also felt like an organic opportunity for us to really elevate our brand profile in the state of Wisconsin,” she said. “We’re a small, family-owned local manufacturer and a lot of people don’t know that we’re in Franklin, Wisconsin.”
An eye on the future
With limited resources and big competitors, the stakes can be very high. Woelbing is committed to not rushing into new product lines just because they are trendy. He pointed out that when Burt’s Bees began to grow in popularity, the rush was to claim products were natural. Carmex took a slower course, searching out natural products that in the end were more moisturizing and had a luxurious feel.
“We have to be very thoughtful,” he said.
The company is working to expand into categories beyond lip care, but Mancuso said it is yet to be determined exactly what those products will be. She said the recent introduction of a cold sore treatment is an example of an adjacent category where Carma may have opportunities.
“Those are the types of things we’re exploring right now,” she said. “You don’t want to disappoint the end user; the brand is too valuable.”
Production and distribution have followed a similar path to the development of the Carmex brand, highlighted by the addition of professional staff and thoughtful decision making.
“We’re really good at making lip balm, but we have to be smart,” Woelbing said, noting that every different form, flavor and country come with slightly different requirements and it is easy to have a proliferation of products.
Mancuso praised Simonson for helping Carma improve its efficiency.
“As a business leader, he really understands manufacturing and is really focused on finding efficiencies in every single department,” she said.
There are still some larger inefficiencies that remain. Carma’s main production facility is around 44,000 square feet and is the product of several additions over the years, making it difficult to flow product in a smooth path through the facility.
The company’s distribution facility is located about a half-mile away, meaning the product has to be trucked over for additional processing before it is distributed. Woelbing acknowledged the current system can be a little disjointed.
The Woelbings do own a vacant parcel just east of the distribution center that could be the site of a future facility.
“Ultimately, we’d like to do a flow-through factory,” Woelbing said. “If we had unlimited cash, I’d say let’s do it right now, but since we don’t, let’s do a meaningful thing; let’s really think about what we want (and) where we want to go.”
Simonson said Carmex has the luxury of investments previously made in production, which help make his job in operations easier. Addressing issues like increasing complexity in production or distribution are easier and the challenge for the company is to think bigger than just making internal improvements.
“Now we’re starting to get into some more interesting brand evolution work,” he said. “The strength of the company is our brand, not our manufacturing capability.”