The Scott brothers saw opportunity when the ‘Crapper’ started to become a household name. Thank you
Dave Young:
Welcome to the Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.
[Kooler Garage Door Ad]
Dave Young:
Welcome back to the Empire Builders Podcast. Dave Young here with Stephen Semple and Steve just whispered the name of the next episode and we were chatting about it just as the recording started. But the theme is Scott Paper.
Stephen Semple:
Yes.
Dave Young:
And immediately I went to the office for some reason, like Dunder Mifflin.
Stephen Semple:
I guess because they sell paper, but yeah.
Dave Young:
Yeah. Well, and Michael Scott. It’s like, okay, but Scott, so this is toilet paper.
Stephen Semple:
Correct.
Dave Young:
Yeah. And probably some other things, but toilet paper primarily.
Stephen Semple:
Well, toilet paper and paper towel.
Dave Young:
Paper towels. Yeah, Scott.
Stephen Semple:
Yeah.
Dave Young:
Okay.
Stephen Semple:
Yeah.
Dave Young:
I’m guessing some of the things we’re going to be talking about, trees and bathroom kind of stuff.
Stephen Semple:
Mainly bathroom kind of stuff. Yeah.
Dave Young:
Okay.
Stephen Semple:
They became a big business in 1995, they were acquired by Kimberly Clark for $9.4 billion. And at the time that they were acquired, they were doing 3.6 billion in sales and basically they’re the inventor of basically toilet paper and paper towel as we know it today.
Dave Young:
Okay.
Stephen Semple:
They kind of got the whole thing going. They were founded in Philadelphia, two brothers, Clarence and Irwin Scott in 1879. And to really understand the birth of this company, we need to understand the world in the late 1800s.
Dave Young:
Well, yeah. I mean, corn cobs and I guess a handful of poison ivy leaves.
Stephen Semple:
Moss, grass, hay.
Dave Young:
Yeah, all of those things.
Stephen Semple:
Yeah. And this is the time that’s actually considered America’s second industrial revolution. So while things are modernizing and the country’s changing with electricity, factories and roads and stuff along that lines, modern plumbing, especially in homes, was definitely not there yet. And hygiene was like primitive, man. Cities were bad smelling and full of animal and human waste because if you think about it, animal was still the primary mode of transportation, right?
Dave Young:
But yeah, the streets are full of it.
Stephen Semple:
Yeah. Most homes lacked indoor plumbing. It was chamber pots and things along that lines. And like you were talking about, in terms of personal cleaning, it was grass. The one that got me the most was corn cobs.
Dave Young:
Yeah.
Stephen Semple:
Yeah. And really things had not changed much from the times of early Rome really. I mean, it was pretty primitive.
Dave Young:
The only way to get rid of it is get rid of it.
Stephen Semple:
Now there was the introduction of the flush toilet, which was starting to be popularized by an English plumber by the name of Thomas Crapper.
Dave Young:
Crapper, right.
Stephen Semple:
Yeah. Yeah. Which I always find sort of funny because when people say, “I’m going to go use the crapper,” it’s not an insult. You’re actually talking with the guy who made it… He didn’t invent it, but he popularized it.
Dave Young:
I wonder, without being vulgar, I wonder if the phrase “take a crap” is shortened for… It was crapper before anybody called it crap.
Stephen Semple:
Yes, it was.
Dave Young:
Yeah.
Stephen Semple:
I think there’s pretty good etymology for that.
Dave Young:
Yeah. Heading to the crapper. Yeah. Okay.
Stephen Semple:
Yep.
Dave Young:
It just occurred to me. I’m slow on the uptake.
Stephen Semple:
Yeah, no, absolutely. I expected us to go there. So the toilet was starting to come into homes of wealthy Americans, but this created a need for a new type of product because they need something that was good for cleaning but was also flushable. These old methods would clog these expensive new systems.
Dave Young:
Sure. Yeah. You don’t want to throw a corn cob down crapper.
Stephen Semple:
Right. So here’s this whole idea of an emerging new technology that’s changing the world and how often in this podcast have these empires been developed right at these times where there’s a new technology coming and that new technology presents new opportunities. And the reason why I’m harping on this is we’re there today. There’s a new technology emerging and there’s all this debate about is it going to be good? Is it going to be bad? Let’s think about what are the opportunities it presents.
Dave Young:
Sure.
Stephen Semple:
Because we’ve seen over and over again in this podcast emergence of unimagined companies because of these issues. It’s a time of change. So in Philadelphia, there’s the two brothers, Clarence and Irwin. The paper company is actually struggling. It’s a paper converting business. Basically what they’re doing is they’re bringing in large industrial rolls of paper and cutting it down to sizes for clients. Now their business is struggling, but they see this new opportunity because of the rise of indoor toilets. So they create a bold idea of selling paper specifically for bathroom use. And let’s face it, it’s a significant upgrade from the course alternatives.
Dave Young:
Absolutely.
Stephen Semple:
One of the things that amazed me is that even magazines were being used and it was so well known that the Farmer’s Almanac even put a little hole in the corner-
Dave Young:
So you could hang it in the outhouse.
Stephen Semple:
… so you can hang it in the outhouse.
Dave Young:
Sure. You don’t want to go forward. You used yesterday’s pages, not next week’s.
Stephen Semple:
Yeah.
Dave Young:
Yeah. Sears, Roebuck catalogs, all of those things.
Stephen Semple:
So well recognized that when they were printing them, they were like, “Okay, we need to print this so that it gets used for this.”
Dave Young:
Yeah.
Stephen Semple:
Anyway, sorry to go backwards, but it’s just something that just jumped out at me. So they decided that they were going to create a paper specifically for bathroom use, which was way better than the alternative. So they initially cut the paper in the small stacked squares. That was how they did it. Now there was a challenge because of the prudishness of the Victorian era made it taboo to even discuss bathroom related products. So if you can’t discuss it-
Dave Young:
And you still feel that echo today.
Stephen Semple:
Yeah. If you can’t discuss it, how do you promote it? So what the brothers did, they pioneered this idea of a private labeling strategy because again, that was new. It wasn’t really being done in that day. So instead of putting their own name on the product, they branded the toilet paper with the names of the local drugstores and merchants. This allowed a customer to purchase the product discreetly. They could just put it on a list to a clerk and the trusted store name basically provided the stamp of approval.
Dave Young:
Gotcha. You could get someone to prescribe it.
Stephen Semple:
Basically. And somehow, even though they didn’t promote it, the word of mouth got out there and the strategy was a success and the business boomed, but they had another problem.
Dave Young:
Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.
[Using Stories To Sell]
Dave Young:
Let’s pick up our story where we left off and trust me you haven’t missed a thing.
Stephen Semple:
And somehow, even though they didn’t promote it, the word of mouth got out there and the strategy was to success and the business boomed, but they had another problem. They had a bottleneck because this cutting of the sheets was really time and labor-intensive. So they need a better way to produce the product. And what they saw was an innovation that was done by the post office. In the 1850s, the post office started to use perforated stamps.
Dave Young:
Okay. So you buy a roll-
Stephen Semple:
You’d get a roll of stamps and it was perforated, right?
Dave Young:
Yeah.
Stephen Semple:
So Irwin Scott took this idea and applied it to paper, put the paper on a roll with perforations allowing the customer to tear off sheets.
Dave Young:
Beautiful.
Stephen Semple:
Basically the modern day toilet roll.
Dave Young:
Yeah, love it.
Stephen Semple:
So this was the 1890s that invention basically was brilliant in terms of saving time, cutting costs. By the turn of the century, the company had about 100,000 in capital, which is like three million today. The stigma around toilet paper faded and they began marketing it under their own name and transforming the company into this mass market enterprise.
Dave Young:
This answers the age-old question to me of which came first? The toilet roll holder or the toilet roll.
Stephen Semple:
The toilet roll came first.
Dave Young:
So roll came first.
Stephen Semple:
Yeah, because basically sales pretty quickly got to about $500,000 a year, which is like 16 million today. So it’s 1907 and they have a fortuitous accident happens. A train car load of paper arrives that’s too thick to be used for toilet paper.
Dave Young:
Oh, no.
Stephen Semple:
So what do you do with the product? Here’s what they observed. Around the same time there’s a Philadelphia school teacher who’s cutting up paper for students to use to dry their hands instead of a shared cloth to help spread germs during a flu outbreak. So there’s an influenza outbreak going on. So the Scotts realized they could use this thick paper for this purpose. They already knew how to do the perforations. They already knew how to put the stuff on a roll.
Dave Young:
And the paper towel. Just make it wider. Yeah.
Stephen Semple:
The paper towel was born. By 1910s they were doing over a million dollars in sales and the further boost adaption, they started giving away paper towel holders. So the first thing they did was paper towel holders and then the toilet roll came holder came later.
Dave Young:
So let me write this down. The correct chronology is the toilet paper roll, then the paper towel roll, then the paper towel roll holder and we haven’t even got to the toilet roll holder yet. Who would’ve guessed?
Stephen Semple:
Right.
Dave Young:
Okay.
Stephen Semple:
But now-
Dave Young:
Keep going.
Stephen Semple:
You know the answer to that. You could sleep well tonight, Dave, if you’ve got that answer.
Dave Young:
Absolutely. Like a baby.
Stephen Semple:
So within two decades, Scott Paper is basically doing like 83 million rolls of toilet paper and 200 million rolls of paper towels in America every day.
Dave Young:
Oh, wow.
Stephen Semple:
Just grew like crazy. And for 70 years they were the leader in the toilet paper industry. Eventually they were surpassed by Procter & Gamble’s Charmin, who overtook it as the leading brand. Don’t squeeze the Charmin.
Dave Young:
Well, that’s probably just good marketing on Procter & Gamble’s part.
Stephen Semple:
Yes. Yeah.
Dave Young:
Right?
Stephen Semple:
Yeah. And then again, in 1995, Kimberly Clark buys them for $9 billion.
Dave Young:
Were they private or were they still-
Stephen Semple:
They were private up until that point.
Dave Young:
No kidding.
Stephen Semple:
Yeah.
Dave Young:
Wow. And been around a long time. So there’s a lot of Scott multimultimillionaires out there.
Stephen Semple:
I’m sure there are. But the thing I found that was interesting, again, it’s this whole idea that we talked about this emergence of a new technology creating gaps. And every time there’s emergence of new technology, it creates these gaps and they saw the gap and filled it. And then the next thing is when they ran into a production problem, they didn’t look around the paper industry for the solution. They saw the solution with the US Post Office.
Dave Young:
Yes. The application of business topology.
Stephen Semple:
Yes.
Dave Young:
Somebody solved this problem already in a different form of paper, so let’s apply that.
Stephen Semple:
Yes. But again, this is what we see over and over again. And then when they had the mistake happen with the paper, what do we do with this paper? They saw what the school teacher was doing, which tells me they didn’t start looking in that moment. These were two guys that were constantly looking out at the world and seeing what was going on before.
Dave Young:
Being aware. I think especially being aware of somebody using your product or something like it in a different way.
Stephen Semple:
Yes.
Dave Young:
So a good reason to not just focus inward when you’re in business, right?
Stephen Semple:
Correct.
Dave Young:
Look what you can learn elsewhere. Look at the post office, look at the school teachers, look at anybody that’s doing something different with something related to what you’re doing.
Stephen Semple:
Right. And it’s that looking outside of the industry. I find so many people, it’s just like all they do is go to industry events. So the only time they turn their brain on is when they’re at an industry event rather than constantly being curious about everything in the world around them.
Dave Young:
Yeah. Very cool. Very cool.
Stephen Semple:
It was interesting because when you don’t think about something as dull as the toilet paper industry actually being born because of the advent of a new technology.
Dave Young:
No, and it was definitely a problem that needed solving.
Stephen Semple:
Absolutely.
Dave Young:
There’s only so much corn you can grow.
Stephen Semple:
And it wasn’t going to work in the new toilet.
Dave Young:
No, no, you can’t. The new flushable corn cob. That’s not a good idea. I’m full of not good ideas. Anything else about Scott?
Stephen Semple:
That’s it. That’s it.
Dave Young:
All right. Well, I got to go. Not there. Thank you for bringing the toilet paper saga to the Empire Builders Podcast.
Stephen Semple:
And answering your question about holders. There you go.
Dave Young:
Yeah. All right. Yeah. We’ve solved that one for the ages. The question of the ages has been solved. Thank you, Stephen.
Stephen Semple:
All right. Thanks, David.
Dave Young:
Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big, fat, juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.
