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Neutrogena Corp.'s announcement last week that it's discussing a sale to a "substantially larger" company could be bad news for Eastman Kodak Co.

If the mystery suitor, confirmed after weeks of rumors (AA, Aug. 1), doesn't strike a quick deal for Neutrogena, an expensive bidding war could ensue. Such a battle could narrow the field of marketers interested in Kodak's Lehn & Fink household products business-and lower the price.

The lists of suitors for Lehn & Fink and Neutrogena overlap, but a marketer the size of Colgate-Palmolive could go after both.

Topping the roster of suspects after Neutrogena: Unilever, Johnson & Johnson and Procter & Gamble Co. P&G is believed to have met with the personal-care company earlier this summer and is also covetous of Estee Lauder Cos. or its Aramis unit. Among the other possibles are Maybelline, Colgate, Bristol-Myers Squibb Co., L'Oreal, Kao Corp., Benckiser Group and Henkel. Neutrogena is expected to fetch up to $800 million.

"People now have to decide who they want to acquire, and the profit margins are more tempting in personal care than in household products, though Neutrogena is faced with sales and share slippage," said one consultant.

In the first half, Neutrogena sales dropped 2% to $133.7 million and last week the marketer realigned its $25 million account, moving assignments at Eisaman, Johns & Laws, Los Angeles, a P&G agency, between Carlson & Partners, New York, and Wieden & Kennedy, Portland, Ore.

Until the middle of last week, a deal between Lehn & Fink and Colgate was seen as virtually done, sparked by word Colgate Chairman Reuben Mark had canceled a trip to finalize an agreement by week's end. At that point, Colgate supposedly had beat out the competition with a bid approaching $1.7 billion, some $300 million shy of the asking price.

Instead, Kodak announced it would sell Lehn & Fink's household products-including Resolve, Mop & Glo and the much prized Lysol-separately from its do-it-yourself products, such as Formby's. Kodak announced in May plans to sell businesses unrelated to its core film and digital imaging operations.

Lehn & Fink's household/personal care products would fetch $800 milion to $900 million based on sales of about $520 million.

Lehn & Fink's agency roster includes Lintas and Warwick Baker & Fiore, both New York; and Gilbert, Whitney & Johns, Whippany, N.J., with combined billings for household, personal care and do-it-yourself of about $70 million.

A plan to sell Lehn & Fink is on schedule, but not close to completion, employees were told in a companywide internal memo later last week.

"Reuben's No. 1 concern is not to overpay for an acquisition," said Lynne Hyman, First Boston Corp. analyst, New York.

Colgate has been criticized for failing to grow its last major acquisition, Mennen Co. whose antiperspirant/deodorant business continues to decline. According to Information Resources Inc., Mennen men's sales dropped 0.7% to $113.4 million and Lady Mennen was down 10.1% to $73.7 million for the 52 weeks ended May 24.

Colgate, also flayed for insufficient new-product efforts and brand support, has made a commitment to increase U.S. ad spending in 1994 by 30%, to $115.7 million.

The company is now introducing several new products:

Murphy's Kitchen Care Liquid All Purpose Cleanser is getting a $20 million advertising and promotion budget via Genova Hartwick Juliano, Greenwich, Conn., which returns to Colgate's roster after being removed in an agency consolidation (AA, Feb. 28).

Palmolive Dishwashing Liquid & Antibacterial Hand Soap, the first two-in-one in the category, is getting $13 million in media and promotion from FCB/Leber Katz Partners, New York.

Irish Spring Waterfall Clean Antibacterial Deodorant Soap is being brought out with $9 million in media from Young & Rubicam.

"The challenge is to add some life to its strong brands and introduce new ones, shortly," wrote PaineWebber analyst Andrew Shore in a recent study. "Good news for Colgate. This is now happening."

The study underscores the grave status of Colgate's brands in the U.S. In 14 different categories, 1993 sales from 45 brands declined 7.5% to $1.3 billion compared with 41 brands in 12 categories accounting for $1.4 billion in 1992.

Now everyone is watching Lois Jubilar, named president of Colgate's U.S. operations earlier this year after Ed Fogarty became president-CEO of Tambrands.

She is expected to be more aggressive in acquisitions and new products but has exhibited a conservative side attributed by those who have worked with her to her early training at General Foods.

Three months ago, Colgate was supposed to announce a new peroxide-based toothpaste at a sales meeting.

But, one executive who knows her said, "When Lois saw the product was only 80% right, she called it off until the other 20% could be fixed."

Jennifer Lawrence contributed to this story.

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