Rain Brings Brothers a Deluge of Business : Cosmetics: Emigres find a profitable niche in a $300-million industry by manufacturing a line of natural hair- and body-care products.

Leo and Vladimir Weinstein never thought they could turn rain into gold. But the two brothers did.

In 1972 Vladimir ran a small herb shop in Venice and was studying ancient medical treatments from a Chinese master who asked his apprentices to formulate various ointments and shampoos. So Vladimir collected some rainwater, figuring there was nothing softer than rain, and using that he heated up some ingredients on a small stove in the garage attached to his shop.

He called the shampoo Rainwater, and through word of mouth people started coming in with empty cola bottles and paying him 25 cents to fill up with the homemade mixture. His brother Leo, a Cal State Northridge business graduate, joined the business. One day the owner of a local health-food store asked for three bottles of the shampoo. The next day Leo Weinstein was asked to deliver a dozen more.

“I thought, Jesus, I’ve got to write all those labels by hand. We didn’t know what we were doing, but something clicked. I saw we could develop a cash business out of that,” Leo Weinstein recalled.

It took the two Russian emigres a couple years to realize they were on to a real business. They happened to catch the popularity wave of natural, organic products at its beginning and placidly rode it to success.

Today, Leo, 50 and Vladimir, 46, own Levlad Laboratories, a Chatsworth firm that produces cosmetics under three brand names: Nature’s Gate, Petal Fresh and Aloegen. They still sell Rainwater shampoo, though, of course, it isn’t made from rainwater anymore; they use distilled water now.

In the $15-billion-a-year U.S. cosmetics industry, which is dominated by Revlon, Estee Lauder and L’Oreal, there is also a “so-called natural cosmetics business that represents a tiny share of that market, less than 2%,” said Suzanne Grayson, a cosmetics consultant in Santa Barbara.

But within this modest $300-million natural cosmetics niche, which caters to health-food stores, Levlad is one of the top half a dozen firms, said Rebecca James, a Los Angeles cosmetic industry consultant: “They are definitely one of the best and they are trendsetters too because they use up-to-date chemical information and good herbal ingredients.”

Leo, who is Levlad’s president, said their company now has 120 employees and last year its sales topped $10 million. Vladimir, Levlad’s vice president, is in charge of concocting their products.

In total, more than 100 different Levlad products, from shampoos to facial cosmetics and body lotions, and which cost from $4 to $10, are now on the market.

They include tea-tree-oil shampoo, cherry-flavored toothpaste and tea-extract deodorant. They are sold nationwide in health food stores such as Mrs. Gooch’s Food Markets, Follow Your Heart and Whole Foods Market, the Texas-based grocery chain that is buying Mrs. Gooch’s.

A lower profile side of Levlad’s business is contract manufacturing for other cosmetics companies and well-known store chains who market the products under their own name. Whether clients hire Levlad to come up with formulas in its lab for a fee, or just mass produce an existing recipe, those activities account for 40% of Levlad’s business.

Delia Abadiano, the chief chemist in Levlad’s research lab, prepares and tests sample formulas and juggles hundreds of ingredients, always looking for something new. “There are fashions, just like for clothes. There was elastin, collagen and liposomes in the ‘80s. In the ‘90s it’s alpha hydroxy acids,” Abadiano said.

The creams, lotions, conditioners begin as soupy emulsions in 2,000 gallon vats lined up against a wall of the lab facility. These tanks are steam-heated so ingredients such as vegetable wax will melt and blend with other ingredients, plant extracts and oils effusing a fragrance so strong the whole building smells like a giant bag of herbal tea.

The warehouse-sized lab room has shelf after shelf of extracts of geranium, coffee, wild pansy, chamomile, rosemary, sage, orange flowers, Hawaiian white ginger. On the cement floor are drums of aloe vera gel, a ubiquitous ingredient of many Levlad products. In shampoo recipes, those botanical ingredients will be laced with doses of sodium laureth sulfate, a foaming cleanser commonly used in natural cosmetics and innocuously labeled “derivative of coconut oil.”

In fact, reading labels, and trying to gloss over what’s in the cosmetics is an important part of the organic cosmetics business, especially for consumers who don’t want anything improper in their cosmetics. When there are preservatives like methyl or propyl paraben, or a sporadic dose of diazolidinyl urea, Levlad’s sales literature brands it as mild, organic and biodegradable.

To the picky and well-informed consumer who frequents health food stores this is no piffling detail. Kathleen Bransford, a Santa Barbara resident who is a strict vegetarian and opposes the use of animal by-products and chemicals in cosmetics, said she uses a Nature’s Gate hair conditioner regularly because of the good herbal ingredients. “However, I am not thrilled about the use of parabens and I won’t use the product on my hair, I use it to shave my legs,” Bransford said.

Ursula Jordan, cosmetics buyer at the Canoga Park Follow Your Heart store said Levlad’s products are among the fastest to move off the shelves.

“The best seller is the Nature’s Gate hair-care line because they are clean, pure and work well for the price,” Jordan said.

Robin Rogosin, nutritional and body care buyer for Mrs. Gooch’s, said of the couple dozen natural cosmetics brands the chain carries, Levlad’s cosmetics are a best seller along with a few competitors such as Jason Natural Cosmetics, Naturade Products, Kiss My Face and Aubrey Organics.

According cosmetic consultant Grayson, one of the problems in the natural cosmetics business is that the “business is not growing because the number of health food stores is not increasing.” And besides sharing space with dozens of similar competitors, these companies also face the growth of salon products and professional retail outlets.

But who says it’s uncomfortable being a big fish in a small pond? Certainly not the Weinstein siblings, who arrived with their family in Los Angeles one hot day in 1961 from the former Soviet republic of Uzbekhistan.

While Leo studied business at CSUN, Vladimir went to UCLA and earned a bachelor of arts degree in biochemistry. On the side Vladimir also developed a keen interest for Chinese healing arts and ancient pharmacopoeias. After graduating, he borrowed $1,000 from his mother, and opened a small herb shop in Venice.

Vladimir remembers dabbling with a shampoo formula for three or four months and being baffled by its success. “I had no idea about business, I might have just given the stuff away. In fact the day we got the order for 12 bottles I felt put off because I had planned a day at the beach.”

After a few years Leo realized there was enough demand for natural cosmetics, so Vladimir started concocting more products and Leo started looking for new customers.

Leo went to health food stores to build up their customer base, he also went to an industry trade show in Las Vegas. Levlad’s cash flow helped finance steady growth and then Leo got a cosmetics distributor, who was already familiar with their brand, to carry their products nationally. By 1976 their sales had reached $500,000, and Levlad was on its way.

“We started with no capital whatsoever, and in the last 20 years we have been through all the transformations of this industry, which has grown from mom-and-pop to a sophisticated industry,” Leo Weinstein said.

Buoyed by steady growth, Leo Weinstein has many ideas in mind these days. He talks of creating new product lines. Or maybe opening a chain of retail stores that would only carry Levlad’s products, much like the successful British-based Body Shop cosmetics chain. He also hints that taking the company public is another possibility, or taking a role in the ongoing consolidation of the health food industry.

No matter what happens, though, he and his brother’s fortune has already fallen from the sky.