Welcome to The Business Buying Academy with Sieva Kozinsky.

🔑 First they cleaned stoves, then they sold one of the world's favorite toys

What if I told you that a company making soap to clean coal-burning stoves became one of the most successful toy companies of all-time?

It sounds unlikely.

But that's the story of the Kutol Products Company, which started making household cleaners for stoves in 1912.

Back then, cleaning soot off of interior walls was a big problem for households.

Several chemical companies emerged to solve it.

Kutol was not successful at first.

In its second decade in business, the Great Depression loomed and Kutol was close to shutting its doors.

Until a 21-year old named Cleo McVicker stepped in.

He began working for the business that owned Kutol, called Precision Metal Works, and soon ran the failing subsidiary.

Kutol was nearly shut down.

Until McVicker made a deal that saved the company and set it on a path to become an iconic brand a century later.

You'll know it today as Play-Doh.

So how did a cleaner become a famous toy?

Cleo secured a contract with Kroger grocery stores to develop a specialized wallpaper cleaner. Working with his brother Noah, they created a soft, malleable, putty-like compound made from water, salt, and flour.

It effectively lifted soot without damaging wallpaper or staining surfaces.

This wallpaper cleaner became Kutol’s flagship product for the next two decades.

It provided steady but modest revenue until the post-WWII shift to cleaner oil and gas heating reduced demand for soot removers.

But once again, Kutol found itself struggling.

The Play-Doh Pivot

In the mid-1950s, Cleo’s nephew Joe McVicker joined the company.

His sister-in-law, nursery school teacher Kay Zufall, discovered that the wallpaper cleaner worked exceptionally well as modeling clay for children.

After successful classroom tests, Joe created Rainbow Crafts Company in 1956 as a subsidiary of Kutol to market the repurposed product as Play-Doh.

Rainbow Crafts focused exclusively on the toy, while Kutol continued its core soap/cleaner lines.

But the core product offering of soot removers was losing steam.

That's where Play-Doh came in.

Children's toys were an emerging market with huge growth.

They initially sold the product with in-store demos in supermarkets and toy stores.

Kids loved it.

And it still could be used as a light cleaner.

But Play-Doh didn't grow to a household name under the ownership of Kutol.

In 1965, Kutol sold the business for just $3 million - or about 1x revenue - to General Mills.

Play-Doh had grown to a large portion of Kutol's revenue, but it wasn't their core business.

So they divested.

The deal marked General Mills' first major move into the toy industry, kicking off a broader strategy of acquiring toy/game companies (they later bought Kenner Products in 1967 and Parker Brothers in 1968).

Play-Doh benefited from General Mills' resources, which helped scale production, lower costs, and expand distribution. Revenue from the brand reportedly tripled under their ownership in the following years before it was sold again.

But General Mills eventually divested its toy businesses starting in the 80s.

Play-Doh changed hands a couple more times:

• 1971/1972: General Mills integrated Play-Doh under its Kenner Products division (General Mills had acquired Kenner separately in 1967). Play-Doh was managed as part of Kenner.
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• 1987: Tonka Corporation acquired Kenner Parker Toys (which included Kenner and Parker Brothers) for $555 million. Play-Doh came along as part of this larger deal.
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• 1991: Hasbro acquired Tonka Corporation (including Kenner and Play-Doh) for approximately $500 million.
  • This made Hasbro the world’s largest toy company at the time. Play-Doh was shifted to Hasbro’s Playskool division.

Today, Play-Doh is still owned and manufactured by Hasbro (under the Playskool brand). It has sold billions of cans worldwide since 1956 and remains a flagship children’s product.

And Kutol Products is still around.

The company does about $50 million in annual revenue today - a fraction of what its former subsidiary now does as part of Hasbro.

Sieva

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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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