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VOL. 132 | NO. 213 | Thursday, October 26, 2017

Whitmor, Neat Method Merger Could Create Industry Giant

K. Denise Jennings

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While the home organization product industry is booming internationally, Whitmor Inc., a fourth-generation family owned company in Southaven, Mississippi, that has led in the industry for decades is getting ahead in the game again with the strategic purchase of a service provider.

Last month, Whitmor announced the acquisition of Neat Method, an organization service provider with an established network in 25 markets.

Originally a manufacturer of soft-sided garment bags, Whitmor was considered a pioneer in the home organization industry when it was founded in New York in the mid-20th century, said Scott Felsenthal, executive vice president and great-grandson of the founder, Charles Whitman. The company remained in New York for several years before migrating south to Earle, Arkansas, in the 1960s to take advantage of tax incentives for manufacturing companies, he said.

Whitmor Inc. moved into this facility in Southaven, Mississippi, after a tornado destroyed its headquarters in Earle, Arkansas, in 2008. Whitmor’s merger with Neat Method could take the business to a new level. (Submitted) 

“The company remained in Earle for 40 years and eventually began importing products to remain competitive,” Felsenthal said.

By the late 1990s, Whitmor was importing 100 percent of its products and had morphed from a manufacturing company to wholesaling. In 2008, a tornado destroyed Whitmor’s Arkansas facility, and the company moved its 400,000-square-foot combined headquarters and distribution facility to Southaven.

“It’s unique that we have a headquarters and warehouse under one roof,” Felsenthal said. “All of the office staff and a majority of our (110) employees are based here.”

Whitmor is a mass-market organizational products company with its goods sold through most retailers worldwide, but for the past several years Whitmor has been exploring different ways to diversify its revenue. A couple of years ago, the company focused its interest on acquiring a service provider to complement the company’s product offerings, but one with shared values and a compatible company culture, Felsenthal said.

Enter Neat Method, a streamlined home organization service which is established in 25 markets nationwide.

“They just contacted us at the perfect time,” co-founder Molly Graves said. “We were at a place in our business where we were becoming an industry leader. We’re always looking for what’s next, and people said we should get into the product space, which was, frankly, really hard. (Whitmor) had created a successful business around that, and the stars kind of aligned.”

Neat Method was founded by Graves and her partner, Ashley Murphy, in San Francisco in 2011. Murphy moved back to her hometown of Chicago and launched the company’s second market there in 2013, and in four years the company has entered 23 additional markets with plans to be in nine more markets by the end of this year.

“We’re in the process of creating a franchise model for new individual organization professionals,” Graves said. “They will own the business and license the brand from us.

“While the markets are all different, people’s needs are the same,” she said. “They want to get organized and have it styled and look nice and they don’t want to do it themselves. A suburban Atlanta home looks very different than a home in Manhattan, but the products are often very similar, they are just used differently.”

Whitmor Inc. moved into this facility in Southaven, Mississippi, after a tornado destroyed its headquarters in Earle, Arkansas, in 2008. Whitmor’s merger with Neat Method could take the business to a new level. (Submitted)

Neat Method is the first acquisition in Whitmor’s history, and it’s believed to be the first business merger within the organization and storage sector of the housewares industry that marries a product supplier with a service provider, Felsenthal said.

Neat Method comes into the marriage with a 40 percent yearly growth trajectory in its established markets, and Whitmor describes itself as having yearly revenue in the $80 million to $110 million range. Whitmor expects to see year-to-year growth of around 30 percent. Together, the companies are poised to take advantage of a growing industry that is predicted to generate $19.5 billion worldwide in 2021, up from $10.93 billion in 2013, according to retail and consumer analyst Packaged Facts and manufacturing and materials analyst The Freedonia Group.

The acquisition won’t change Neat Method’s business model, Felsenthal said.

“We will not get in the way of Ashley and Molly running the business,” he said. “We’re going to offer strategic support and integrate some of the administrative network to give them more time to focus on growth as they scale theirbusiness, and we’ll be looking at how we can get our products involved in Neat Method.”

Whitmor will be looking to develop new products for Neat Method clients that aren’t readily available.

“We’re hoping to fit the product piece in and bring value to the (Neat Method) franchisees,” Felsenthal said. “It’s also a nice product development funnel for Whitmor.”

One thing that originally attracted Whitmor to Neat Method was the fact that in the highly fragmented home organization market, which boasts 20-30 different professionals in Memphis alone, Graves and Murphy were developing a successful brand around a network of like-minded individuals nationwide.

“They’re building something no one else has ever built, and we’re excited to be a part of it,” Felsenthal said. “It’s not farfetched to say that Neat Method could be in 50 markets by the end of 2018. We want to allow them to focus on the growth piece while we look ahead to new product evolutions that aren’t currently available in home storage today.

“Evolution, since the beginning of the company, is what has kept Whitmor competitive,” Felsenthal added. “We’re in the business of creating opportunities out of challenges to maintain our status as an industry leader within our product category.”

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