George E. Johnson unbuttoned his suit jacket and harked back to the year 1954, when he set up his black hair-care and beauty products firm in the back room of a friend`s store.
”That was where we got our start–517 E. 63d St.,” said Johnson, president of Johnson Products Co. Inc. ”I found someone who believed in me and someone who was willing to let me rent out that space. I paid $35 a month, worked a job during the day and went there every night to work.”
In the last 33 years, Johnson Products has not only become a major competitor in the ethnic hair-care field but dominated the market in the 1960s. The company, however, has had its share of financial problems.
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Like other black companies that offer products aimed at black consumers, Johnson Products has met increased competition in the last decade from larger white firms vying for a share of the black market.
Some of the white-owned firms that have entered the ethnic hair-care market in the last decade include Alberto-Culver Co., which makes the ”TCB” line; Carson Products, which offers ”Dark and Lovely”; Lustrasilk Co., which makes the ”Right On” brand; and Revlon Inc. The curl look, a loose perm style, was introduced by International Playtex Corp., which makes the ”Jheri- Kurl” brand.
The Chicago-based American Health and Beauty Aids Institute, a trade group of black hair-care manufacturers, said white businesses now control 50 percent of the ethnic hair-care market, which was dominated by black companies until the mid-1970s.
While black-owned hair-care firms appear to be the hardest hit by competition for black consumers, they are not the only black-owned firms that have been affected. Just as younger black entrepreneurs have moved into the mainstream economy, so have black consumers.
Black-owned insurance companies–which represent one of the oldest businesses started by blacks–also are trying to hold on to their consumer base and expand.
”It`s difficult to say how much of our business has been affected by competition from white insurance firms,” said Clarice Hal, executive director of the National Insurance Association, a Chicago-based trade group of black-owned firms. ”We`re not only in competition with other insurance firms but
(with) other financial institutions that sell insurance. We now have less than 5 percent of the entire insurance business.”
According to Charles Branham, a history professor at Northwestern University, ”What all of these firms have in common is a product and service that was tailor-made for black consumers at a time when it was not otherwise available to them.”
Branham said many older blacks have shown themselves to be among black companies` most loyal consumers, while the ”black baby boomer goes back and forth.”
”I think the older black consumers stick with these firms because they know the history of how some of these companies started and have developed a loyalty in staying with them,” he said.
Johnson established his base in the black community in the first five years of his business. He has had several locations on the South Side, and his headquarters are now at 8522 S. Lafayette Ave.
”Black consumers have demonstrated a much higher degree of loyalty than most consumers,” Johnson said. ”It`s hard to say why, but I think it comes out of tradition. Once a black person has decided upon anything in terms of
`This is what I want,` it`s hard to change his mind. But this is not to say that minds can`t be changed; I said it`s hard.”
Although Johnson Products is primarily known for health and beauty products geared to the black female, the company`s first product was designed for black males who fancied the look and style of singer Nat King Cole. Cole wore his hair in a straightened style called ”a process.”
”This style was the rage in the `50s,” said Johnson, who along with Cole`s barber modified a chemical-based product to be marketed to other barbers whose customers wanted ”the process.”
Johnson Products didn`t begin developing hair-styling products for women until 1958, when the company backed off from selling to barbers. Johnson said he realized there was a much bigger market in selling to women.
Johnson gained his expertise in the beauty aids field working 10 years at Fuller Products Co., whose founder, also black, served as a mentor.
”I had big plans, and I wanted to make some real moves in this industry,” he said.
Johnson said the consumer loyalty his company enjoyed in the black community was tarnished in 1975, when the Federal Trade Commission asked Johnson Products to expand its warning label to five paragraphs to tell consumers that its hair-relaxer product contained lye.
”We already had warnings on our packages but voluntarily complied with the FTC, because we were assured by them that our competitors in the hair-relaxer field would be required to do the same,” he said.
But the FTC, for unexplained reasons, ignored most of the white competitors. Johnson Products, Soft Sheen Inc., which is also black-owned and based in Chicago, and a small white-owned firm in Tennessee were the only companies ordered to comply with the FTC`s initial ruling.
”This thing went to the appeals court, and one of our largest competitors, Revlon Inc., and some others were later required to put the same warning on their packages,” he said.
”But by then the damage had been done. You couldn`t tell black beauticians back then that our product was still good. They made the choice by looking at our package, with a five-paragraph warning, and looking at those that had none. I didn`t think we`d ever recover from it.”
When the FTC order hit Johnson Products, the company`s sales were $38 million. Sales have fallen in the last 11 years and were $29.8 million in 1986, with the company posting a net loss of $1.98 million.
Johnson said criticism that black-owned companies are unable to market to white consumers is unfounded.
”Black companies can market to white consumers very well,” Johnson said. ”Marketing isn`t the problem. In all our major black companies, we have enough people who understand the marketing game and can do a real good job of reaching white consumers with products made by black-owned companies.
”The problem comes in other people`s perceptions,” he said. ”You have to convince people that black-owned companies have a right to be in the mainstream economy.”
Johnson said his firm launched a campaign in the mid-`70s to achieve the crossover by coming out with a cologne, ”Black Tie,” for men and women.
Eighty percent of the advertising for ”Black Tie” was allotted to the general market, and the ads used white models.
”But many distributors kept the product in the black community or put it on the shelf with black hair-care products, even though it was a cologne, a fragrance . . . something that appealed to everyone,” Johnson said. ”They figured if it was made by a black firm, then it has to be for blacks.”
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The company has made another attempt to enter the mainstream economy by manufacturing products under a private label, but the issue is so sensitive that Johnson declined even to name the products.
”I`d rather not name them,” Johnson said. ”We`re making some headway in this and wouldn`t want to jeopardize our progress.”
One of the most successful black entrepreneurs, with demonstrated staying power among black consumers, is John H. Johnson, head of Johnson Publishing Co. John H. Johnson and George Johnson are not related.
Sales for Chicago-based Johnson Publishing were $174.5 million in 1986, up from $154.8 million in 1985. The company has 1,828 employees. John Johnson founded the firm using $500 he received after convincing his mother to pawn her furniture.
Ranked No. 1 in the survey of black-owned companies by Black Enterprise Magazine, Johnson Publishing`s businesses include magazine publishing, cosmetics and broadcasting. The company topped the survey list of the nation`s 100 largest black-owned companies for the fourth consecutive year.
Its products and services include the publications Ebony, Ebony Man and Jet; Supreme Life Insurance Co. of America; the Ebony/Jet Showcase, a nationally syndicated television program; Supreme Beauty Products, a hair-care concern; and Fashion Fair Cosmetics. Other businesses include a mail-order catalogue company and radio stations in Chicago and Louisville, Ky.
Johnson Publishing`s Supreme Life was ranked sixth in the Black Enterprise survey of black-owned insurance firms. The company employs 35 people and had $55.1 million in assets in 1986, insurance in force of $2.3 billion, premium income of $15.4 million and net investment income of $2.2 million.
One of Chicago`s oldest black-owned insurance firms, Chicago Metropolitan Assurance Co., was ranked fifth in the Black Enterprise survey of insurance firms.
Founded in 1927, Chicago Metropolitan employs 190 and had assets in 1986 of $56.4 million, insurance in force of $2.8 billion, premium income of $16.8 million and net investment income of $2.04 million.
”Black insurance companies in 1971 decided to go the corporate re-insurance route,” said Weathers Y. Sykes, senior vice president of operations. ”This was done by asking the Fortune 500 companies for a part of their employee benefit programs. This is one way Chicago Met has managed to grow and offset losses in other areas.”
Sykes, who has also worked at Supreme Life, joined Chicago Metropolitan 12 years ago.
”Our company`s market is mostly black, 90 percent black, and blue collar. High unemployment has put a crimp in our sales efforts in the black community, but we came out of the tradition of finding ways to provide a service to this group and intend to live up to that commitment,” he said.
Chicago Metropolitan`s agents are directly employed by the company and still go to people`s homes to sell and collect insurance payments.
”It`s been expensive for us to keep this door-to-door part of our business, but we are doing a service by coming out to the home,” Sykes said. ”Many of our customers don`t even have checking accounts and need help in planning, paying bills. The agents aren`t really salesmen but counselors, or financial planners, for those with low incomes.”
The insurance trade group`s Clarice Hal said the number of black-owned insurance companies has dropped the last 15 years, from 42 in 1972 to 35.
Hal said: ”The mergers that have taken place have been with other black- owned companies. We still have a niche to fill in serving the black community.”
Consuela Williams, director of the Cosmopolitan Chamber of Commerce, a black organization, said the black businesses whose products and services were originally geared for the black consumer still have a place.
”It`s important for black consumers to make an effort to purchase products in their communities and by black firms,” Williams said, ”to support the local beauty shops, cleaners, grocery stores and other retailers. You can make your money work for you by investing it in the community in which you live.