Culligan Water Technologies, Inc.

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Culligan Water Technologies, Inc.

1 Culligan Parkway
Northbrook, Illinois 60062
U.S.A.
Telephone: (847) 205-6000
Fax: (847) 205-6030
Web site: http://www.culliganman.com

Wholly Owned Subsidiary of United States Filter
Corporation Incorporated: 1936 as Culligan Zeolite Company
Employees: 4,578
Sales: $505.7 million (1998)
NAIC: 333319 Other Commercial and Service Industry Machinery Manufacturing

Culligan Water Technologies, Inc. became known across the United States as the father of the soft water industry. “Hey Culligan Man!” was an advertising mantra nationally synonymous with conditioned water. The company is a subsidiary of United States Filter Corporation (USFilter), which is itself a subsidiary of a French water treatment company, Vivendi SA. Culligan markets an array of water filtration products, including household water softeners and filtering systems, water filtering and deionizing products for commercial and industrial customers, and several brands of bottled water. The company moved into mass market retailing in the late 1990s, marketing consumer products such as faucet-mounted filter systems through nationally known merchants such as Target, Sears, and Home Depot. Culligan operates through a vast network of franchises, with Culligan dealers in more than 90 countries. Culligan owns a Canadian subsidiary, Culligan of Canada, Ltd., and has wide penetration in Latin America as well.

Early Years

Emmett J. Culligan developed a novel process for manufacturing zeolite, the man-made mineral used in water softeners, in 1936, which involved the very early use of solar drying. With a lot of confidence and a little money, Culligan approached the city council of Northbrook, Illinois, that year and offered to lease a stretch of streets. The streets had been paved, but then left unused when a real estate project went under. Several miles of empty, paved streets were just what Culligan needed for drying his zeolite in large quantities, using the sun. The council leased him the streets for $50 and a company was born: Culligan Zeolite Company.

From the start, the company was a community endeavor. Culligan’s first home was a shared blacksmith’s shop behind the Northbrook Garage on Shermer Avenue, run by “Jock” Mc-Lachlan. As the operations grew, Culligan rented a brick garage building beside the blacksmith’s shop and relocated the blacksmith’s building to face Walters Avenue. The garage became the first manufacturing plant for portable exchange units. The office and laboratory stayed in the blacksmith’s shop. Eventually, these buildings grew together, with more manufacturing space on the ground floor and offices added onto the second.

Through franchised dealers, Culligan soon launched a campaign for soft water in every home. In 1938, the first Culligan dealer started up business in Wheaton, Illinois. Growth was swift. The number of dealers bloomed to 150 by the beginning of World War II. While the war slowed growth—no new dealers were signed on during that time—Culligan’s skills were called upon for the war effort and a facility was developed in San Bernardino, California. There, Culligan manufactured silica gel, a dehydrating material that protected metals from atmospheric corrosion. Silica gel was in great demand during the war and Culligan soon became one of the largest suppliers. The company was later given an award for its contributions to the war effort.

Postwar Expansion

After the war, stateside expansion resumed. The dealer organization was growing again by 1946. Only a few years later, the Northbrook plant had become the largest producer of water softeners in the world. The San Bernardino facility had converted quickly and become—with its 34 acres of solar drying basins—the largest zeolite manufacturing plant in the world. Further plant facilities were purchased in Evanston, Illinois, not far from the Northbrook headquarters, and these also were expanding. In 1947, a two-story structure was added to the Northbrook home base.

A mere 15 years after Emmett Culligan approached the city council with $50 and an off-kilter idea, Northbrook proclaimed a “Culligan Day.” On October 13, 1951, a square dance and barbecue gathered the town’s residents together to celebrate Culligan’s new half-million dollar plant on South Shermer Road. Soft water had become such a national mainstay that the old plant had suffered from eight major expansions. With the new facility, Culligan had more than 450,000 square feet of space to accommodate its sales growth.

The Culligan Zeolite Company became Culligan Incorporated in 1952. Over the decades, Culligan grew in scope, broadening its water-quality improvement offerings and branching out over the oceans. To reflect that expansion, the company’s name was again changed in 1970 to Culligan International Company. Internationally, Culligan products were available through licensees in 85 countries.

Under Many Owners in the 1970s and 1980s

In 1978, Culligan became part of Beatrice, a food products conglomerate. Beatrice later became a privately held company as a result of a buyout, and at that time a number of brands, including Culligan, were reorganized into E-II Holdings. E-II was purchased by American Brands, Incorporated, in 1988 for $1.1 billion. American Brands, a holding company with interests in tobacco, distilled spirits, and insurance, kept five of E-IFs companies and sold the rest of E-II, including Culligan and Samsonite, to the Riklis Family Corporation. American Brands had owned Culligan for about six months before it sold E-II to Riklis. About three years later, Riklis issued junk bonds and E-II fell into bankruptcy. A struggle then ensued between financiers Carl C. Icahn, who purchased senior junk bonds, and Leon Black, who purchased junior junk bonds.

Throughout this time, Culligan remained quite profitable, keeping its recipe for success basically unchanged. It had endured the bankruptcy of E-II and was still doing business and making money. In fact, Culligan did not feel many effects after the change of ownership. While junk bonds were being swapped, Culligan quietly kept at its business. In the spring of 1993, Ametek Inc. and Icahn made a bid for E-II and Culligan, but the package ultimately went to Black. After the sale, E-II became Astrum International. Culligan remained a subsidiary of Astrum, a holding company whose core businesses included American Tourister and Samsonite luggage; McGregor, a line of men’s tailored clothing; and Global Licensing, which licensed trademarks.

In the summer of 1994, Culligan was an official sponsor of the Goodwill Games, which took place in St. Petersburg. At the same time, the company provided a water purification system for a group of townhomes in that city, the first American-style housing development in the Commonwealth of Independent States (CIS), formerly the Soviet Union. Culligan warmed up for this event by supplying water treatment systems for both visitors and athletes at the Olympic games in Barcelona in 1992.

Expansion and New Owners in the Mid-1990s and Beyond

In the mid-1990s, Culligan’s mainstay was still water treatment, and it still operated sales and distribution franchises. In fact, Culligan had changed very little over the years. From the beginning, it was one of the few water treatment companies that offered a complete water treatment line, from homes to corporations and commercial use. Most of its competitors provided either industrial or household water treatments, but not both. Culligan was able to offer that range because of its size, history, and fiscal stability. This provided Culligan with distinct advantages, because when one side of business was up, the other was often down.

In 1995, Culligan’s parent, Astrum, decided to split itself into two entities. Water purification did not have much to do with luggage, and Astrum became the Samsonite Corp., after its leading luggage brand, and spun off Culligan as Culligan Water Technologies, Inc., a public company traded on the New York Stock Exchange. Culligan immediately began to expand, acquiring smaller companies and going after new markets. Shortly after going public, Culligan bought up all or part of many small water-related companies, including Ametek, a water-filtration company; Sparkling S.A., a bottled water company located in Buenos Aires; and two different water treatment and bottled water companies in southern California. In 1998, Culligan paid approximately $132.5 million for Protean plc, a British water purification equipment maker, and then spent $4.4 million for Harmony Brook, a Minnesota-based manufacturer of consumer water purification products.

Company Perspectives:

After being in the water treatment business for nearly 65 years, we know water. Our mission is to deliver highquality water treatment products that will benefit every part of consumers’ lives. We hope to raise the quality of life by purifying its most essential element: water.

We’ve seen about every water problem imaginable and we’ve solved these problems to deliver the refreshing, clean and pure water that’s become our hallmark. Free of contaminants and minerals, water treated with Culligan softeners or filtration systems will make an impression on you and your household, and at the work place.

Culligan also moved aggressively into retail markets, designing new products that could be sold at mass merchandise outlets like Sears and at home improvement retailers like Home Depot. Culligan entered into joint ventures with several manufacturers to expand its product line. Culligan contracted with Moen, a major faucet manufacturer, on a joint project to sell faucet-mounted water filtration systems for home use. With General Electric, Culligan collaborated on a line of water filters installed in that company’s refrigerators. Culligan also worked with Signature Brands, the parent company of the Mr. Coffee brand of coffee maker, on a new line of coffee makers using water filters. These products led Culligan into many new areas of distribution. Whereas most of its products had been available only through Culligan dealers, in the late 1990s some Culligan filter products were sold in supermarkets and drugstores. The company backed its new lines with increased advertising. Culligan upped its ad budget from $2 million in its first year as a public company to about $10 million in 1997. The company capitalized on its wide brand recognition to push into retail markets. For fiscal 1997, Culligan reported sales of $371 million, reflecting an increase of more than 20 percent from the year previous. With more joint ventures planned, the company hoped to grow the retail side of its business by several hundred million dollars over the next few years.

But Culligan did not remain an independent company for long. It had busily bought up smaller companies in the United States and abroad to increase its business, and in 1998 a bigger company bought it. USFilter, based in Palm Desert, California, paid $1.5 billion to get Culligan. USFilter had paralleled Culligan’s growth strategy in recent years, acquiring smaller players in the water products and services industry throughout the 1990s. Culligan was a much bigger target for USFilter than any of its previous purchases, but it brought the company the invaluable Culligan name.

USFilter hoped to increase Culligan’s visibility, both in the United States and abroad. At the time of the acquisition, Culligan water was found in three million homes, and USFilter boasted that its target number for its new subsidiary was 300 million homes. The parent company saw itself as a global player in a world that was in growing need of filtered water. In an interview with the Business Press, of Ontario, California, on February 16, 1998, a USFilter vice-president claimed that his company’s goal was to “have a U.S. Filter or Culligan dealer … in every city in the world in five to 10 years.” USFilter became the largest U.S. water products company with its purchase of Culligan, but it had bigger competitors in Europe, such as the French companies Generale des Eaux and Lyonnaise des Eaux.

Given the rapid consolidation in the water industry by which Culligan and USFilter had grown, it was perhaps not surprising that USFilter was itself acquired in 1999. Its buyer was a French company, Vivendi SA. Vivendi was a water treatment conglomerate, and it paid $6.2 billion for USFilter. So Culligan became a subsidiary of that company, though it continued to maintain headquarters in Illinois. Its sales had grown handsomely in the late 1990s, to more than $505 million when last released in 1998. Culligan sold water or water products in more than 90 countries by the time of the sale to Vivendi, with a strong presence in the Middle East, in Latin America, and in Canada.

Principal Subsidiaries

Culligan of Canada, Ltd.; Everpure Inc.; Indiana Soft Water Service Inc.; Bruner Water Treatment Service Inc.

Principal Competitors

WTC Industries; Brita Products Co.; Generale des Eaux.

Key Dates:

1936:: Emmett J. Culligan invents water softening process with zeolite.
1938:: First Culligan franchise opens.
1951:: Culligan plant completes huge expansion.
1970:: Name is changed to Culligan International Company.
1978:: Culligan is bought by Beatrice Foods.
1988:: Culligan becomes part of Riklis Family Corporation.
1993:: Culligan becomes subsidiary of Astrum International.
1995:: Culligan goes public.
1998:: Culligan is bought by United States Filter Corporation (USFilter) for $1.5 billion.
1999:: USFilter is acquired by French firm Vivendi SA.