Energizer Holdings, Inc.

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Energizer Holdings, Inc.

800 Chouteau Avenue
St. Louis, Missouri 63164
U.S.A.
Telephone: (314) 982-2970
Toll Free: (800) 383-7323
Fax: (314) 982-2752
Web site: http://www.energizer.com

Public Company
Incorporated: 1986 as Eveready Battery Company, Inc.
Employees: 17,400
Sales: $2.07 billion (1998)
Stock Exchanges: New York
Ticker Symbol: (pending)
NAIC: 335912 Primary Battery Manufacturing

Energizer Holdings, Inc., formerly known as Eveready Battery Company, Inc., is one of the world’s foremost manufacturers of dry cell batteries and flashlights. In the United States, it battles intensely for market share with the category leader, Duracell. Its share of the domestic market in the late 1990s was estimated at just over 30 percent, trailing Duracell’s almost 40 percent. Energizer makes two mainstay brands, Energizer and Eveready. Its principal products are alkaline batteries, as well as other varieties including carbon zinc and lithium. The company also sells flashlights and other lighting products. Energizer makes and markets its products around the world, with over 40 production facilities overseas and distribution in over 160 countries.

Early History

Energizer Holdings was originally a battery and electric lighting firm known as American Ever Ready Company, with offices in New York and San Francisco. In the 1890s, this company was marketing a so-called electric hand torch—what we today call a flashlight. In 1913 this company was acquired by the National Carbon Company, Inc., a unit of Union Carbide & Carbon Corporation, later known simply as Union Carbide. National Carbon was already making batteries, advertising its Columbia brand dry cells with an eagle motif and the slogan “Columbia Batteries Circle the Globe.” After the acquisition, National Carbon began using the Eveready name for its batteries. Later the battery business of National Carbon folded into the parent company, and Eveready batteries were made by the Battery Products Division of Union Carbide. Union Carbide was a leader in the United States battery market from early on, along with such other companies as General Electric, Electric Storage Battery, and Gulton Industries. Sales of its Eveready Layerbilt batteries grew rapidly in the 1920s, rising from 12.5 million batteries sold in 1922 to 303 million in 1926. The rise in sales was attributable to the new craze for the radio, which at first was battery operated. By the late 1920s, however, plug-in radios became the norm, and the market for batteries contracted.

During World War II the Germans developed a new battery made of sealed nickel cadmium plates, and Union Carbide brought this technology to the United States after the war, as did General Electric and Gulton. In 1947 Union Carbide came out with the first hearing aid batteries, and followed this with other advances in the next decade. The company developed watch cells in the late 1950s, as well as 9-volt transistor batteries. At this time Union Carbide’s battery division also created the first alkaline batteries, the type which is so common in consumer products today. Although aware of its importance, Union Carbide did not press the alkaline battery as much as it might have, and continued to lead the market with its carbon zinc Eveready brand battery through the 1970s. It also made rechargeable batteries, which had military and space program uses, car batteries, and a variety of industrial batteries.

In the mid-1960s, Union Carbide’s Eveready brand was estimated to have about half the market share in dry cell batteries, a total market said to be worth around $250 million annually. The industry as a whole was expanding rapidly in that era, as battery technology got better and more uses were found for battery power. In 1966, Union Carbide produced a battery made with hydrazine, a newly developed rocket fuel, and placed it in an electric motorcycle that could reach speeds of 25 miles per hour. This was a spectacularly useless development, as a slow, quiet motorcycle had very little consumer appeal. But it demonstrated the innovative strength of the battery industry at that time, where the possibilities for new applications seemed endless. Union Carbide worked with the Defense Department to develop its hydrazine battery, and in the same era industrial demand for batteries was growing enormously. Sales of industrial batteries grew by nearly 100 percent in the first half of the 1960s. This was the dawn of the era of portable, battery-operated toys and gadgets, too. A December 5, 1966 article in Barron’s laid out a host of possible new uses for dry cell batteries, where Eveready was the leading brand. The article spoke wonderingly of the new fad for lighted beer steins and electric spaghetti forks. Gizmos like this prompted a rapid upswing in battery sales. Perhaps the most important battery-powered invention though was the portable transistor radio, which was being sold around the world. In 1959 Union Carbide formed a Consumer Products Division in order to capitalize on the trend toward portable radios and other battery-operated gadgets.

Entering the Alkaline Market in the 1980s

Perhaps because the battery business grew so easily, with rising consumer demand for battery-powered products naturally bringing in increasing sales, Union Carbide did not market its products aggressively. Although it had developed the first alkaline batteries in the 1950s, it continued to sell carbon zinc batteries, which did not last as long as alkaline. Meanwhile a competing brand, Duracell, owned by P.R. Mallory & Company, began attracting consumers. By the late 1970s, the percentage of the overall battery market made up of alkaline sales was growing swiftly, and Duracell had become a powerful competitor. The carbon zinc Eveready still had a strong following, but as alkaline batteries were demonstrably better, providing power longer, Union Carbide’s brand was in danger of growing obsolete. However, it was not until 1980 that the company launched its first consumer-oriented alkaline battery. Named the Energizer, this battery quickly caught up with Dura-cell. Union Carbide lavished advertising on its new brand. Its spokesperson was the Olympic gymnast Mary Lou Retton, a powerful, energetic young woman. She continued with the brand until 1987.

Shortly after the Energizer’s introduction, Union Carbide’s brand claimed just over 40 percent of the alkaline battery market, while Duracell held just under 50 percent. The battery market continued to expand, driven by demand for things like the portable cassette player, which became ubiquitous in the mid-1980s. Overall, the battery industry grew at around seven percent a year in the early 1980s, and the alkaline segment of the market grew at close to double that. It was a highly profitable market, too, with margins as high as ten percent. Union Carbide’s two brands and Duracell made up more than 90 percent of the total market, and battery sales in the United States surpassed $2 billion annually in the mid-1980s. Overseas, Union Carbide’s brands held a 30 percent share of the market. It was a formidable business.

Eveready Sale to Ralston Purina in 1986

Union Carbide had great success with its Battery Products Division. Although it had reacted belatedly to competitive pressure to launch an alkaline battery, the company had come in powerfully at last with Energizer, and swept up an admirable chunk of the market. Sales rose worldwide as demand expanded, and the product was lucrative to manufacture. Yet in 1986 Union Carbide was forced to unload its productive battery unit. Union Carbide restructured in an effort to fend off a hostile takeover, and to make itself less attractive it decided to sell off what was considered perhaps the best part of its business. The buyer was Ralston Purina Company, the pet food giant. Ralston was also wary of a takeover. Because the company was rich in cash, it was a likely target for takeover artists. It paid $1.4 billion to get Union Carbide’s battery division, thereby loading itself with unflattering debt. Both companies gained protection from takeover through the deal. Moreover, though Ralston was known for its Purina brand pet foods, it saw itself as a good marketer of consumer products in general, and so batteries were not such an odd fit with its core business. The former Battery Products Division became a wholly owned subsidiary, with the new name Eveready Battery Company.

By the late 1980s, the consumer battery market was still growing, thanks to the proliferation of portable electronics and walking, talking toys. Consumer battery sales overall stood at $2.5 billion annually in the late 1990s, and this figure was expected to grow to $3.5 billion over the next several years. Consequently, more companies entered the field, with Kodak introducing its battery brand in 1987, vying for the third place spot in the market held by Rayovac. The alkaline battery market was growing the fastest, and competition between brands was somewhat vicious. Each maker claimed its batteries lasted longer than the competitors, though Consumer Reports and people inside the industry agreed that there really was not much objective difference between Duracell, Energizer, and the others. Meanwhile under Ralston Purina, Eveready actually lost market share. Its two brands, Eveready and Energizer, had held 52 percent of the market in 1986, and by 1988 that figure had slipped slightly to 47 percent. In the alkaline market, Energizer fell from roughly 45 percent to 40 percent in the late 1980s.

Company Perspectives:

Energizer Holdings, Inc. is the largest manufacturer of dry cell batteries and flashlights and a global leader in the dynamic business of providing portable power. Energizer offers a full line of products in five major categories: alkaline, carbon zinc, miniature and rechargeable batteries; and lighting products. Our Energizer and Eveready brands are recognized around the world and are marketed and sold in more than 160 countries. Energizer’s worldwide workforce of approximately 17,400 produce more than 6 billion battery cells annually.

Memorable Bunny Ads: A 1990s Sensation

As a unit of a food and pet food conglomerate, Eveready’s marketing had not been that different from the way other grocery items were presented. Eveready came up with brand extensions, such as the Eveready Classic and the Eveready Super Heavy-Duty. New packaging to coordinate with wrapping paper came out as GiftMate Energizers around Christmas, and a brand aimed at audio equipment users came out, the Conductor. This strategy was tried and true for many food items, but it was not working for batteries. In 1989 Eveready finally decided to try an advertising campaign that went head-to-head with its rival Duracell. Duracell had developed ads showing hordes of wind-up bunnies running on its batteries. Eveready’s advertising agency, Chiat/Day, came up with a spoof on those bunnies, with a giant Energizer bunny breaking in on the Duracell gang, rudely banging a drum. The Energizer bunny campaign went on from there, with a unique series of fake advertisements that would be interrupted by the banging rabbit. The commercials began as what looked like straightforward ads for coffee or nasal spray, and suddenly the rabbit burst onto the screen, with the slogan “Still going. ...” The campaign was extremely innovative, though it did not immediately affect Eveready’s sales. It engendered its own spoofs, too. In 1991 the Adolph Coors Company aired an ad with a well-known comedic actor dressed in a bunny suit banging a drum with the words “Coors Light” on it. Eveready filed suit against Coors, claiming it had spent more than $55 million over two years developing its bunny ads, and it did not enjoy the parody. The Energizer ads continued to be popular throughout the 1990s, and the company attributed its seven percent rise in revenues in 1992 to the success of its bunny campaign.

Other Developments in the 1990s

Eveready increased its worldwide presence in the late 1980s and 1990s. In 1989 it acquired Cofinea, a French battery company, to bolster its position in Europe. Eveready also made acquisitions in the United Kingdom and Spain, and it beefed up its manufacturing and marketing in Turkey, China, and Czechoslovakia. The domestic battery market continued to grow, adding another billion dollars every five years or so. The proliferation of pagers and cellular phones spurred growth in the mid-1990s, and total battery sales were close to $4 billion by 1995. Alkaline batteries made up over 90 percent of the total consumer battery market. A small but growing segment, however, was rechargeable batteries. Rayovac’s rechargeable brand held almost 60 percent of the category. Eveready made a strategic acquisition in 1993, buying rechargeable battery maker Gates Energy Products, Inc., in order to give itself a place in the rechargeable field. Eveready renamed the company Energizer Power Systems in 1994, and changed Gates’s brand name from Millennium to Energizer. Another new product for Eveready in the mid-1990s was the lithium battery, which was both lightweight and long-lasting. Lithium batteries were used primarily in cameras. Eveready made three different styles of them and claimed to have very high sales volume by 1995.

In 1996 Eveready introduced batteries with testers on them. Consumers could press a test strip on the battery to see how much power it had. Duracell also introduced a virtually identical product. Both companies were said to have spent millions developing the testing systems, and they were still jockeying for market share. Figures for 1996 put Duracell in the number one spot, with 48 percent of the domestic battery market, and Eveready followed with 35 percent. Battery sales continued to increase, growing at six percent in 1996, a typical rate. An article in Supermarket News from February 10, 1997 noted that both leading brands were vying to add value to their products to gain a competitive edge. The testing strip was supposed to do just that. But the overall increase in sales seemed to have nothing to do with the manufacturers’ efforts to provide better products. Analysts interviewed in Supermarket News noted that sales were going up for the same reason they always had—people had more gadgets to put batteries in.

Independent Company in 2000

Ultimately, the battery business seemed to have frustrated Eveready’s parent, Ralston Purina. Despite innovative marketing, strategic acquisitions, and millions spent on developing new and better products, Eveready’s brands could not catch up with market leader Duracell. Perhaps signifying the company’s desperation, the Energizer bunny ads for 1999 showed the rabbit crushing, torching, and pummeling competitors’ batteries. These ads were stopped by a judge’s order. Eveready had sales of $2.07 billion in 1998, but it was adversely affected by the economic crisis in Asia that year, and its domestic marketing was not going well. Ralston decided that batteries were not a good fit with its core business, and in 1999 the parent company announced that it would spin off the subsidiary. Eveready Battery Company changed its name to Energizer Holdings Inc. and was to become a public company listed on the New York Stock Exchange in April 2000.