Business Buzzing At Burt's Bees
Story from Los Angeles Times

Reporting from Durham, N.C. -- Logic suggests that boutique lip balms, hand creams and shampoos that cost double competitors' brands would be among the first luxuries jettisoned by strapped shoppers these days.

But low-tech Burt's Bees is making money and advertising for more workers even here among the pines in North Carolina, a state with the nation's fifth-highest jobless rate.

Burt's Bees, which says it uses only natural ingredients, has averaged 25% compounded growth each year since its founding 25 years ago, according to CEO John Replogle. He says sales have doubled in the last three years. With 400 employees, the company has hired 30 people this year and intends to hire 30 more by December.

"We've been pretty much like a Swiss train here," Replogle said in the company's modern offices next to Research Triangle Park, the state's sprawling corporate technology center, where layoffs are rampant.

How does a quirky company founded by a reclusive beekeeper and a single mother -- rooted in a 1970s anti-corporate, granola ethos -- succeed when corporate titans nearby are struggling to survive?

Burt's Bees hit on its recession-proof formula years ago. It went natural before natural was cool. And it made specialty personal-care products before such items went mainstream. More recently such items and services as natural lawn care, additive-free quilting fabrics, and even organic baby clothing, have become all the rage.

No matter how bad the economy gets, "it's the small luxuries, the small indulgences, that people are reluctant to trade off," Replogle said.

The company touts itself as the nation's leading maker of natural personal-care products. Once limited to natural food stores in fringe markets, Burt's Bees is now sold in big-box stores nationwide (Wal-Mart, Target, etc.) and in 12 countries. The company moved last weekend to a new corporate headquarters in downtown Durham three times the size of its former space.

Replogle says Burt's Bees is riding a dual wave: More and more consumers want products they think are good for them -- and for the environment."We play in both those spaces," he said.

Replogle says internal company estimates show the household penetration rate for natural personal-care products was 6% five years ago. Today it's 12% and is projected to hit 25% in a few years.

So in an economically hard-hit area, with Durham and Raleigh real estate sales dropping, and the Triangle Research Park experiencing layoffs, this little engine-that-could keeps on chugging.

More than 40% of Burt's Bees products contain 100% natural ingredients, the company says. For its entire line of 150 products, the figure is 99%, with a goal of 100% by 2011. Burt's Bees says it has never used harmful additives and embraces green technology.

Waste oils are converted to biodiesel, and plant residue is converted to compost at the company's 100,000-square-foot processing plant in Durham, said manufacturing manager Keith Kochersperger. The plant has energy-efficient lights and waterless urinals.

But a primary ingredient -- pelletized beeswax -- is shipped from Ethiopia and other African nations, expanding the carbon footprint of a company that pledges to be entirely carbon-neutral by 2020.

According to Burt's Bees lore, the company began after Burt Shavitz, then 49, a reclusive beekeeper who lived in a converted turkey coop and sold honey in pickle jars from the back of a truck, picked up a hitchhiker, Roxanne Quimby, 34, a divorced mother of two, on a Maine roadside in 1984.

The two moved in together and began selling Quimby's hand-cut candles and Shavitz's honey at New England craft fairs. In 1988, Quimby began selling lip balm made from warm beeswax and clove oil. Burt's Bees incorporated in 1989, with Quimby holding a 70% stake and Shavitz 30%.

The new company's first factory was in an abandoned Maine schoolhouse. Burt's Bees moved to North Carolina in 1993. There, the couple had a falling out, and Shavitz moved back to Maine.

In 1999, according to news reports, Quimby bought out Shavitz for a fraction of what his stake would soon be worth. In 2003, Quimby sold 80% of the company to AEA Investors for a reported $146 million. She has since been quoted as saying she paid Shavitz $4 million from that sale. She sold her remaining 20% share when Clorox bought the company in 2007 for a reported $925 million.

Shavitz (that's his bearded face on many Burt's Bees products) is still living in a converted turkey coop with no phone and minimal plumbing and electricity -- "a pretty carbon-free lifestyle," according to Replogle, who has visited him. Shavitz is an advisor to the company and makes promotional appearances, he said.

During a visit to Burt's Bees offices and plant, a strong aroma rose from stainless-steel tanks of swirling peppermint oil. Containers held ingredients derived from sunflowers, almonds, pomegranates and other plants. Milk and honey mixed in a 1,000-gallon tank.

The company prides itself on its recycled and biodegradable packaging and on its simple processing -- "basically mixers and heat and blenders," Replogle said.

Burt's Bees products cost more than competitors' because making natural products costs more, according to Replogle. A tube of Burt's Bees lip balm sells for $2.99 at a Durham Target store, versus 99 cents for a tube of ChapStick.

"We've never attracted our consumers on price," said Peter Alberse, who's in charge of Burt's Bees' customer development. "It's always about what's in the product, and what's not in the product."