by Linda Moss Costar News
Scrub Daddy, touted as a major success story emerging from the “Shark Tank” TV show, is packing up its smiley-faced sponges and relocating to New Jersey from Pennsylvania. It's a property switch that shows what can happen when a high corporate profile and unexpected demand combine.
The growing cleaning-goods company bought a 116,284-square-foot industrial building at 1700 Suckle Highway in Pennsauken, for $10.7 million from Seyon Group of Boston.
Scrub Daddy will be relocating its headquarters to that Garden State property from two buildings in Folcroft, 6 Horne Drive and 4 Horne Drive, which total roughly 52,400 square feet in the neighboring state. The company sold those properties and bought the Pennsauken location as part of a 1031 exchange that lets a taxpayer defer recognition of capital gains and related federal income tax liability. The relocation is expected to be complete by Sept. 1.
Scrub Daddy saw its growth, already strong, surge during the pandemic and it needed more space, according to Aaron Krause, the company’s president, CEO and self-proclaimed “Daddy of Scrub Daddy.” The firm will be consolidating operations from the two buildings it owned in Pennsylvania and another one that it leases, with all its 65 employees to be located at one site.
“It just made the business really rangy and difficult for me to manage everything going on in all three buildings,” Krause said. “What I really wanted was everybody back under the same roof.”
Scrub Daddy’s South Jersey location will include space for light manufacturing, offices, a 1,500-square-foot TV studio, a retail Smile Shop store and a small museum outlining the company’s history and rise to fame via ABC’s “Shark Tank” and QVC, the home shopping network based in West Chester, Pennsylvania.
Scrub Daddy will spend $2.5 million to $3 million to renovate its new headquarters, Krause said.
‘Shark’ Greiner Buys In
In 2012, he started selling his Scrub Daddy scouring pads, with the original version shaped like a yellow smiley face, on QVC. But his product gained national notoriety, and financial backing and double-digit sales growth, later that year when he appeared on “Shark Tank,” where budding entrepreneurs pitch their inventions to a panel of potential investors. These “Sharks” then vie to offer funding, and secure ownership stakes, in the fledgling businesses.
In Krause’s case, “Shark” Lori Greiner, an inventor who had been selling her own merchandise on QVC for years, became his investor and business partner.
While some companies struggled financially during the coronavirus outbreak last year, Scrub Daddy’s fortunes soared. Its sales had been on pace for 20% annual growth, but it saw a nearly 30% gain in 2020, according to Krause.
“Last year with COVID we got classified as an essential business because we’re in the cleaning category and we’re in the manufacturing category,” he said. “We got letters from Walmart and Target saying, ‘You are not to close. We’re selling out of cleaning products. We can’t keep them in stock.’ And cleaning has changed forever.”
With the surge in orders, Scrub Daddy needed more space. With the new location it will also now have the opportunity to create a fully equipped studio facility to remotely broadcast live appearances on QVC and to create content for social-media platforms such as YouTube, TikTok and Instagram, Krause said.
Krause had been doing several appearances a week for Scrub Daddy on QVC, but with the coronavirus the home shopping channel told guests they could not come into the studio but instead would have to appear remotely to pitch their wares. So Krause set up a kitchen studio set in Scrub Daddy’s headquarters to demonstrate his products. He added equipment such as three digital high-definition cameras to do his appearances.
Of course, there are still potential risks. Demand for its cleaning products could slow as public health authorities say the rollout of coronavirus vaccines may ease the threat. And businesses can often face financial risks when they expand and their overhead rises, while competition from rivals also poses a threat.
Scrub Daddy faces formidable competitors owned by conglomerates with deep pockets. They include Mr. Clean, a unit of Procter & Gamble that has a product line that includes the Magic Eraser sponge, and Scotch-Brite, which manufactures sponges and other cleaning supplies and is owned by 3M.
But Scrub Daddy sees added potential in boosting its reach to overseas markets. In New Jersey, Scrub Daddy will create a well-equipped studio area where the company can not only do shows for domestic QVC but its international networks in places such as Germany and England, according to Krause.
“We’re going to do the full studio,” he said. “We’re going to hang the QVC-style lights from the ceiling. We’re going to set up a kitchen set, a bathroom set, a living room set and an outdoor set. ... So I’ll just walk out of my office and be doing live shows all over the world.”
Scrub Daddy will also use those studio facilities to demonstrate new products for buyers and retailers such as Walmart, he said.
Jersey Solar
The company is also beefing up its social-media presence, and will use the studios to set up a cleaning-TV channel that will offer tips on how to remove different kinds of stains — using Scrub Daddy products — that will be available on various platforms, according to Krause.
There were a couple of reasons why Krause decided to move his headquarters to New Jersey. The main one was the state’s generous intermediate transition solar incentive program, known as TRECs, which will be expiring in a few months, according to Krause. The Pennsauken building has a new roof that offers “120,000 square feet of flat, unencumbered, unrestricted” space, he said.
“We’re going to be putting about $1 million of solar on the roof, powering,” Krause said. “We’re going to be completely off the grid. Scrub Daddy will be running the entire company on its own solar.”
He also wanted a new headquarters site within 15 miles of the old one, so Scrub Daddy wouldn’t lose any employees. The New Jersey location is 14 miles from the Pennsylvania headquarters. Krause added that he and several of his workers live in the Garden State, as well.
Scrub Daddy’s physical expansion will also help it accommodate its pipeline of new products, which includes mops, microfiber towels, soap dispensers and dish wands, according to Krause.
“Just like you talk about Mr. Clean, you’ll be taking about Scrub Daddy,” he said.
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