Master Lock Company

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Master Lock Company

2600 N. 32nd Street
Milwaukee, Wisconsin 53210
U.S.A.
Telephone: (414) 444-2800
Fax: (800) 308-9245
Web site: http://www.masterlock.com

Wholly Owned Subsidiary of Fortune Brands, Inc.
Incorporated: 1921
Employees: 1,500
Sales: $200 million (2000 est.)
NAIC: 332510 Hardware Manufacturing

Master Lock Company produces several lines of premium security lock products, Master Lock is the most recognized brand of locks, with padlocks and combination locks constituting its primary base of business. The company develops and manufactures locks for sporting goods, such as bicycles, skis, and guns; rust-proof locks for marine uses; and a variety of specialty needs as well. Master Lock produces security locks for businesses, schools, hospitals, and industrial uses.

Invention of Strongest Padlock Available Following World War I

Masterlock earned its reputation for quality locks from the inventions of Harry Soref, a Milwaukee-area locksmith. As a security consultant for the military during World War I, Soref invented a special padlock used to protect military equipment. After the war, in 1919, he designed a padlock with laminated layers of steel like those used in the production of bank vault doors and battleships. Soref anticipated that such a heavy-duty lock would outclass the durability of the hollow padlocks of that time, which were broken easily with a hammer. He hoped to sell the design to a hardware manufacturing company, but the padlock required several parts and production steps, and engineers, manufacturers, and patent attorneys found the product design too cumbersome. Supported by the financial investment of two friends, P.E. Yolles and Sam Stahl, Soref began his own company, Master Lock Company, in 1921. He patented the first laminated padlock in 1924. Master Lock marketed the padlock using a lion’s head logo for name recognition.

With only five employees, a drill press, a grinder, and a punch press in a small Milwaukee shop, Master Lock produced the best padlock available. The heavy weight of the lock added to public perception of its strength. The company grew rapidly, moving to the Pabst Brewery building, closed due to prohibition. Prohibition played an important role in the early growth of the company as federal authorities purchased large quantities of the laminated padlocks to lock down bars and clubs that sold alcoholic beverages. In February 1928 the company shipped 147,600 padlocks to New York City for that purpose. Business boomed as federal agents around the country began to order Master Lock padlocks.

Soref became a recognized authority on locks. The escape artist Harry Houdini visited Soref in Milwaukee after he failed to escape from a set of handcuffs. They were said to have discussed handcuff keys and Soref advised Houdini on how to hide them under his tongue and in between his fingers during the stage shows. In 1931 the American Association of Master Locksmiths awarded Soref a gold medal, the only one ever given, for making the greatest contribution to the development of locks in more than 50 years. A Master Lock exhibit at the 1933 Chicago World’s Fair taught the public about the construction of laminated steel locks. During World War II, Soref provided security consultant services to the military.

Sales grew along with Soref’s and Master Lock’s reputation and the company moved to a larger production facility and new offices in 1939. Soref continued to experiment with new lock designs and production methods. An improvement to a combination lock required the company to change its production assembly to the complete reverse, disrupting plant operations. The lock proved easier to assemble, however, and to be of better quality. Master Lock grew to become the largest manufacturer of padlocks in the country, with almost universal public recognition of the brand name. Although high security pin tumbler padlocks continued to comprise the largest portion of sales, Master Lock developed products for use in schools, hospitals, and offices, and on vending machines. The company’s reputation outlived Soref, who died in 1957. Sam Stahl, one of the original investors, led the company until his death in 1964, when the Soref family took over management of the company. American Brands (renamed Fortune Brands in 1997) purchased Master Lock from the Soref family in 1970.

New Ownership, High Brand Reputation, Expanding Product Line: 1970s-80s

Master Lock experienced unprecedented growth during the 1970s, as American Brands capitalized on the company’s reputation. Master Lock developed a television commercial for the 1974 Superbowl game that became notable in the public eye for its effective message and its identification with Master Lock. The “shot lock” advertisement, “Tough Under Fire,” showed a blast from a high-powered rifle aimed at a Master Lock padlock. Although the bullet pierced the center of the lock, the lock still functioned. The tagline, “If it’s worth locking, it’s worth a Master Lock,” followed. The “product as hero” strategy proved effective and Master Lock continued to use similar commercials during Superbowl games and other high-profile advertising slots.

During the 1970s Master Lock noted record sales every year. In 1978 Master Lock experienced its 13th consecutive year of growth, recording sales of $62.4 million and operating income of $22.7 million. Building on the strength of its brand name and expertise in locks, Master Lock expanded with innovative styles and applications and in new markets. In 1978 the company introduced a new line of laminated pin tumbler rekeyable padlocks, in which the cylinder could be replaced or repinned. In sporting goods the company sold locks for skis, guns, and bicycles. The energy shortage of the 1970s prompted many people to opt for bicycling as an alternative choice of transportation and sales of cable and chain bicycle locks rose accordingly. Master Lock introduced two locks designed for mopeds in late 1979. A new U-bar bicycle lock and laminated brass locks made significant contributions to sales increases in the early 1980s. To accommodate its growing production needs, in 1979 the company began the first phase of an expansion project, a 92,000-square-foot warehouse and production facility addition.

New markets included retail establishments, such as sporting goods, recreational vehicle and marine outlets, hardware stores, and locksmiths. Master Lock began to sell its products through food and drug chain stores and mass merchandisers. Built-in lockers at health clubs provided new outlets for Master Lock products and the company began to offer rekeyable padlocks to locksmiths and industrial tradespeople. Cable locks for outboard motors provided a new area of growth and in 1981 the company introduced brass padlocks for marine uses.

With a 52 percent share of a mature market and new competition from imported brands, Master Lock sought to retain its dominant position and to improve operations for lower overhead. Between 1981 and 1986 the company invested $25 million to upgrade equipment and facilities. To improve factory efficiency the company changed the organization of its assembly lines to locate the similar products close together, allowing workers to switch stations easily and for easier movement of finished goods to the warehouse. The company changed its inventory management to just-in-time accounting. Parts arrived at the assembly line as needed to reduce “work in process” costs. Order processing, previously about six weeks, was reduced to a few days, lowering inventory costs. Equipment improvements reduced production time, for instance, from six hours to six minutes to change die in a 150-ton press. These changes freed production space for new products, such as “Tough Stripes,” a high-tech style bike lock introduced in 1987.

Master Lock expanded its product base through the January 1986 acquisition of the Dexter Lock Company, adding $25 million in annual revenues. Dexter provided premium door locksets and door hardware for residential uses. Dexter added new products in 1986, such as the “Sure Thing” adjustable universal door latch. The new “Designer Series” offered premium entrance handles, knob sets, and other door hardware for the upscale market.

Although consumer studies noted 95 percent awareness of the Master Lock brand, the company did not take that position for granted. In 1986 Master Lock increased its advertising budget by 50 percent, spending $2.5 million. The new tagline, “Whatever you want to lock,” reflected the diversity of the company’s security products. Advertising involved 232 television spots and 120 radio spots, primarily during talk shows and sporting events. Master Lock’s successful “product as hero” campaign continued into the 1990s. In addition to using a shotgun to exhibit the security of the locks, commercials showed men using hammers, crowbars, and rocks, all failing to break a padlock. In one commercial a truck tried to drive through a gate locked with a Master Lock product and failed.

In 1994 Master Lock produced a new Superbowl commercial titled “Security.” The beginning of the 30-second spot showed, at a feverish pace, Master Lock products in use at Hoover Dam, at Caesar’s Palace, on a Wells Fargo armored security truck, and at Ely Maximum Security Prison. The shots were interspersed with bullets being loaded into a rifle. In the final scene, the rifle fired, but the bullet deflected off the Master Lock padlock. The tagline stated, “A Master Lock may not be the only lock between the good guys and the bad guys, or between the good stuff and the people who want it, but it’s certainly one of the locks.”

Company Perspectives:

Strength and security. Master Lock is committed to providing you with a broad selection of locks, padlocks, cables and hasps to fit any lifestyle. We also provide master keying and customized security solutions for all business, industry and school applications.

Price Competition, New Approaches to Business in the Late 1990s

During the late 1990s Master Lock experienced new competitive pressures as other American lock companies took advantage of low-cost manufacturing opportunities in Asia. In addition, Wal-Mart and Kmart persuaded Master Lock to lower prices to meet the competition. Although Master Lock held a 70 percent share of the retail market in 1994, that figure declined to 40 percent in 1996. Master Lock sought to maintain a steady level of business activity through overseas expansion and licensing its brand name, as well as through low-cost foreign manufacturing. A new product in 1996 involved a joint venture with Kensington Technology Group to produce and market a galvanized steel cable and locking device to use with Laptop computer equipment, the Master Lock Universal Notebook Security Cable. Overseas expansion involved a new sales office in Canada, where Master Lock held the top market position for locks, and a sales office and distribution facility in Hong Kong. A distribution facility in France served European customers. New products introduced in 1998 included the EX locks; a nylon shroud protected the locks, making them resistant to cutting and prying.

Master Lock lowered its advertising costs by discontinuing its participation in high-priced Superbowl advertising in 1996. A new campaign in 1998 placed the first one-second spots ever to be broadcast on national television. The low-budget commercials used the central scene from the “shot lock” advertisement, shown in one second for dramatic effect. The bold campaign relied on consumer recognition of the long-running advertisement and of the Master Lock name. More than 400 spots played on ESPN Classic Sports and FX over 45 days in June and July as precursors to 30-second spots promoting the company’s new products beginning in late June.

In response to competitive pricing Master Lock began to transfer some of its manufacturing and assembly operations overseas to reduce operating costs. The company relocated gunlock manufacturing to China, while construction on a state-of-the-art facility began in Nogales, Mexico. In 1997 Master Lock renegotiated with its labor union to allow the transfer of 700 assembly jobs from Milwaukee to Mexico. The sale of the Dexter subsidiary in 1998 provided funds for restructuring. In 1999 the company relocated 400 assembly jobs to Mexico, with the balance of 300 assembly jobs being relocated by the fall of 2000, nine months ahead of schedule. Master Lock sought lower priced, international sources for raw materials, but parts production continued in Milwaukee for shipment to the Nogales plant.

Master Lock closed the company’s original distribution center in Milwaukee in 1999 and hired another company to handle those operations from a new, 213,000-square-foot warehouse in Louisville, Kentucky. The central geographic location reduced shipping costs and Louisville had recently become a service hub for United Parcel Service. The location and state-of-the-art facility allowed for 80 percent of orders to reach their destination within 24 to 48 hours.

In the fall of 1999 Master Lock licensed its brand name to Fortres Grand for a new software security product. The software gave parents control of their children’s computer and Internet use. The filter for Internet use was based on actual content of a web site, rather than keywords. The program prevented children from giving their name, address, telephone number, and other personal information to strangers over the Internet. It also kept children from accessing their parents’ financial records on the home computer.

As an innovator in security lock products, Master Lock sought to compete through innovation, developing patented products of superior quality that could not be copied by the competition. In September 1999 Master Lock introduced a rustproof padlock with an exclusive Corrozex finish; the company included a lifetime warranty with the product. An integrated steering wheel and air bag lock for automobiles addressed new concerns about air bag theft.

In August 2000 Master Lock debuted the first titanium padlocks and combination padlocks, the DAT Titanium Tough Padlock. The patented product was rustproof, and both lighter and stronger than steel. Produced overseas, the higher priced products reestablished Master Lock as the premium lock maker and generated a higher profit margin. The titanium locks were priced at $8.99 to $11.99 retail, compared with steel locks at $2.99 to $4.99. With a sleek design and bright colors, Master Lock successfully attracted young customers and doubled the company’s back-to-school business. While consumers tended to purchase a lock about once every five years, Master Lock found that many customers replaced old locks with the new titanium locks for greater security. Master Lock included a lifetime guarantee on the locks, covering mechanical defects and corrosion.

In November the company gained free publicity when the television show Law & Order highlighted a Master Lock product. In one scene a forensics expert showed a bullet-damaged Master Lock padlock to two lead detectives investigating a murder case. He reminded the detectives of the old “shot lock” commercials, confirming that the lock must have been opened with a key. Detective Brisco responded, “Truth in advertising.” Master Lock did not initiate the product placement, but it affirmed the success of the company’s advertising.

Key Dates:

1921:: Master Lock Company is incorporated.
1924:: Founder Harry Soref patents first laminated steel padlock.
1931:: Industry recognizes Soref for the most important development in locks in more than half a century.
1957:: Soref dies.
1970:: American Brands acquires Master Lock.
1974:: Master Lock begins annual Superbowl advertising with famous “shot lock” commercial.
1978:: The company experiences its 13th consecutive year of record growth.
1994:: Master Lock retail market share peaks at 70 percent, then declines due to competition from manufacturers using low-cost, foreign labor.
1999:: Transfer of assembly jobs from Milwaukee to Mexico begins.
2001:: Master Lock restores image as premium lock maker with patented titanium locks.

Master Lock’s new products in 2001 involved improvements to its regular product line. The company introduced two resettable combination locks in brass and customized safety locks in solid aluminum. The new Xenoythermoplastic padlocks offered a tough, but lightweight alternative to heavy metal locks. The Force 6-Ton, a bike lock capable of resisting six tons of pulling force, doubled the strength of its existing bike lock. The company planned to introduce an adjustable locking cable as well. New product introductions planned for 2002 included lock products for the trailer and towing markets. Master Lock increased its marketing budget for 2002 to $15 million, including in-store promotions.