Elkay Manufacturing Company

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Elkay Manufacturing Company

2222 Camden Ct.
Oak Brook, Illinois 60523
U.S.A.
Telephone: (630) 574-8484
Fax: (630) 574-5012
Web site: http://www.elkay.com

Private Company
Founded: 1920
Employees: 3,900
Sales: $575 million (2003 est.)
NAIC: 332998 Enameled Iron and Metal Sanitary Ware Manufacturing; 332913 Plumbing Fixture Fitting and Trim Manufacturing; 337110 Wood Kitchen Cabinet and Counter Top Manufacturing

Elkay Manufacturing Company is best known for the residential and commercial sinks it makes under the Celebrity, Lustertone, Gourmet, and Revere labels. In addition, the Oak Brook, Illinois-based private company manufactures faucets, shower systems, associated hardware, and fixtures through Phylrich International; kitchen cabinets through subsidiaries Yorktowne, Medallion, and MasterCraft; and water coolers through Halsey Taylor. Elkay is also involved in a joint venture in Malaysia, Elkay Pacific Rim, which dispenses bottled water and coolers manufactured in Malaysia throughout the Pacific Rim. All told, Elkay is comprised of ten privately held companies employing some 3,900 people, with 14 factories and 24 distribution centers located in the United States, Canada, Mexico, and the Pacific Rim. Elkay's largest customer is Home Depot.

Formation in 1920

Elkay was founded in 1920 by Leopold Katz, his son Louis, and a tinsmith named Ellef Robarth. The company's name was coined by combining the initial sounds of Robarth's first name and Katz's last name. The trio rented 2,100 square feet of space in Chicago and set up shop to produce handmade silver butler pantry sinks, which they sold, delivered by street car, and installed in the homes of Chicago's wealthy. The one-product company quickly built a reputation for quality, so that by the end of the first year in business Elkay increased its workforce from its three founders to seven. Robarth left the company after two years, the reason long forgotten, but Elkay continued to grow without him. By the end of the 1920s Elkay's sinks were best sellers, prompting a move to larger accommodations and the hiring of more employees despite the advent of the Great Depression.

Elkay reached a key moment in its history in 1935 when it offered its first stainless steel sink, the earliest models constructed out of a light gauge of metal, encased in a wooden frame. Within three years, Elkay became the first company to mass produce stainless steel sinks in the United States. As was the case with much of American industry, during World War II Elkay devoted its energies in the first half of the 1940s to aiding the war effort. The company used its expertise to produce sinks for the U.S. Navy as well as scullery and plumbing fixtures. Elkay delivered on average about 10,000 sinks a month to the military during this period.

Following World War II, Elkay shifted its focus from serving upper-class homes to the emerging middle-class. Returning servicemen were getting married and having children at a record rate, leading to the Baby Boom generation, and because of a national housing shortage, suburbs sprouted up across the country. All of these new suburban houses needed sinks and many homeowners were attracted to stainless steel sinks because of the ease of cleanup. Elkay was already well established in the stainless steel sink business, but it further strengthened its hold with a production breakthrough in 1948, when it began to die draw stainless steel bowls. This advance allowed the company to cut in half the cost of producing a stainless steel bowl. As a result, Elkay became the leader in residential sinks.

Third Generation Joining Business in 1950s

In the 1950s a third generation of the Katz family became involved in the company, Louis's son Ron Katz, the company's current chairman and chief executive officer. During the 1950s Elkay began to build a large network of independent sales representatives, and continued to be a leader in innovation in the field. Through continued advances in automation techniques, Elkay was able to lower production costs, so that by the late 1950s it emerged as the largest maker of stainless steel residential sinks in the world and in 1960 began the construction of a new facility in Broadview, Illinois, where the company would also make its headquarters for the next 20 years. In 1979 Elkay moved the corporate offices to its present site in Oak Brook, Illinois.

Elkay began diversifying its business in 1969 by adding water coolers to the mix, then supplemented the line in 1976 with the acquisition of Cordley/Temprite. In the meantime, Elkay maintained its reputation as an industry innovator. In 1970 it introduced a three-compartment stainless steel sink that proved highly popular. Elkay also increased geographic reach and share of the residential sink market through acquisitions in the 1970s. It bought a plant in Lumberton, North Carolina, which became Elkay Southern Corporation, and the Dayton-Ogden Corporation, based in Ogden, Utah.

During the 1980s, Elkay took advantage of its name recognition to move into the retail market, which was especially attractive because of the increasing popularity of such big box retailers as Home Depot and Lowe's catering to the growing doit-yourself market. To serve these customers, Elkay introduced the Neptune brand of sinks. The company also became interested in other aspects of the kitchen market. Elkay's Gourmet Cuisine Centre, which combined a sink, garbage disposal, drain board, and cutting surface in a single unit, was a step in this direction. In the late 1980s Elkay began eyeing the cabinet industry, offering complementary product lines, since a large percentage of people in the market for a new kitchen sink were also looking for matching kitchen cabinets.

In the early 1990s Elkay hired Jack Edl to investigate the highly fragmented kitchen cabinet marketplace and recommend companies for Elkay to buy. Edl was well suited to the task, having spent five years as the president of Yorktowne Cabinets, and six years working for Elkay as vice-president of marketing. It was not especially surprising that the first cabinet maker Edl recommended that Elkay acquire was Yorktowne. Based in Red Lion, Pennsylvania, Yorktowne had been in business since 1908 making horse-drawn carriages. As automobiles replaced horses, Yorktowne turned its attention in the 1920s to midrange kitchen cabinets, while also building radio cabinets and later switching to television cabinets. In the mid-1980s Yorktowne changed its emphasis from stock kitchen cabinets to individual kitchens. But a slowing economy hurt Yorktowne in the highly competitive cabinet market, with sales falling from $48 million in 1987 to $38 million in 1991. Ownership changed hands, with a venture capital group buying the business from Wickes Inc., a Santa Monica, California-based furniture retailer. Elkay began negotiating the purchase in early 1992 but did not close on the deal until August 1993.

Just one month after bringing Yorktowne into the fold, Elkay completed a second cabinet acquisition, Medallion Kitchens of Waconia, Minnesota, a company that had four owners in the previous five years. Like Yorktowne, Medallion had endured recent struggles, experiencing a drop off in sales from $27 million in 1989 to $21 million in 1991. However, Medallion's business was starting to rebound when Elkay stepped in. Edl was named president of the newly formed Elkay Cabinet Group, which in 1995 recorded combined sales of $75 million. Elkay added further to its cabinet assets in May 1996 with the purchase of MasterCraft Cabinets. As a result, Elkay with $165 million in sales in 1996 became the seventh largest cabinet maker in the United States, as determined by Wood & Wood Products. The addition of Salem, Oregon-based Westwood Products in 1998 elevated Elkay to the number four spot. Westwood was renamed Westwood Customers Cabinetry Inc. and folded into the Medallion operation.

Steady Expansion in 1990s

Elkay grew on other fronts as well in the 1990s. Halsey Taylor was acquired in 1991, adding to Elkay's water cooler segment. The company also became international in scope during this period. With Malaysia partner Formosa Prosonic Equipment, it formed a sales and marketing operation, Elkay Pacific Rim Sdn, Bhd., to distribute coolers and bottled water to Pacific Rim countries, shipped out of Port Klang, Malaysia. In 1996 the partnership built a new water cooler manufacturing plant in Malaysia to service the venture. Elkay became involved in the Canadian sink market through the purchase of Ontario-based Wessan Plumbing Manufacturing Ltd., maker of both residential and commercial sinks. The business was renamed Elkay Canada. In addition to the manufacture and marketing of sinks, the division would also distribute water coolers, faucets, and drinking fountains made by the Elkay U.S. operation. The Wessan acquisition also brought with it a subsidiary, Revere Sink Corp. of New Bedford, Massachusetts. A year later, in May 1999, Elkay turned its attention southward, acquiring Mexico's largest sink manufacturer, E.B. Tecnica Mexicana, in business since 1962. The company had started out small, producing just four stainless steel sinks a day, but by 1990 it was in a position to pursue a growth strategy, diversifying into the production of composite sinks and opening warehouses throughout Mexico. When Elkay assumed control, E.B. Tecnica maintained 20 distribution centers in Mexico and a major manufacturing facility in San Luis Potosi.

Company Perspectives:

Quality. Dedication. Trust. Here at Elkay, these aren't just words; they represent how we do business.

Although prospering on a number of levels Elkay was not without challenges in the late 1990s. The Wessan acquisition, for one, proved problematic. The inherited facility was filled with antiquated equipment and lacking in contemporary manufacturing and quality systems. Elkay as a whole required some updating: sales were not growing while profit margins were shrinking. Moreover, it was not just the Canadian plant that was behind the times in adopting modern manufacturing methods. To help reorganize the company, to streamline production and grow profit margins, Elkay hired a new vice-president of operations, Cary B. Wood, who brought years of experience in the automotive industry to the job. The company now focused on standardizing operations and making them as efficient as possible. Elkay switched to a just-in-time approach to manufacturing, so that the plants now produced what was actually ordered, not what the company thought it might sell. This required sales, manufacturing, and distribution to work closely together, so that on a monthly basis they planned together the production and inventory needs, allowing the company to better anticipate customer demand and smooth out costly production spikes. Although it was not required, Elkay elected to become ISO certified as a way to instill further order and make sure all systems and processes were in optimal shape.

Overall, Elkay adopted five principles of what became known as the "SQDCP" strategy. The first letter of SQDCP stood for "Safety." Elkay made a concerted effort to reduce the amount of employee hours lost to accidents. During the first three years of the program, from 2000 to 2002, the company enjoyed solid success, evinced by an 80 percent decrease in workman's compensation claims. The next principle was the cost of "Quality," or the amount of money the company had to spend reworking products, scrap costs, and appraisal costs. As for the "Delivery" part of SQDCP, Elkay dramatically improved the on-time delivery of products from 75 to 94 percent. Better inventory and production planning also lowered "Costs." Inventory costs were reduced by 30 percent while at the same time productivity improved by 39 percent. The final element was "People." Employees at all levels of the organization were involved in SQDCP, and their participation was essential to the success of the program.

With the start of the new century, Elkay continued to grow its operations. In 2000 it opened a new 100,000-square-foot distribution center in Bolingbrook, Illinois, which played a major part in Elkay's efforts to improve efficiencies and bolster margins. The company also remained an innovator, becoming in 2001 the first to add sensor-operated faucets to sinks for hospitals, schools, public buildings, and industrial applications. Elkay took steps to become involved in the in-home water delivery and filtration business with the launch of the Elkay Watertech Division. The company also invested in new plants to ensure production efficiencies. The 40,000-square-foot Ogden plant was replaced by a new 106,000-square-foot plant in 2004, while plans were made to replace Yorktowne's Red Lion plant with a larger facility scheduled to open in Virginia in 2006. In addition, Elkay continued to grow by external means. In late 2004 it acquired Phylrich International, maker of decorative plumbing products, a deal that expanded Elkay's faucet collections.

In 2003 67-year-old Chairman and CEO Ron Katz celebrated his 50th anniversary with the company his father and grandfather had founded more than 80 years earlier. Although he received periodic offers for the company, Katz showed no inclination to either sell the business or retire any time soon.

Principal Divisions

Plumbing Products; Cabinetry; Water Dispensing.

Principal Competitors

Fortune Brands, Inc.; Kohler Co.; Masco Corporation.

Key Dates:

1920:: Company is founded.
1935:: Elkay produces first stainless steel sink.
1948:: First die draw stainless steel bowls are produced.
1957:: Elkay becomes world's largest stainless steel residential sink manufacturer.
1969:: Elkay becomes involved in water cooler business.
1979:: Oak Brook headquarters opens.
1993:: Elkay begins acquiring kitchen cabinet companies.
1999:: E.B. Tecnica Mexicana is acquired.
2004:: Phylrich International is acquired.