Premark International, Inc.

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Premark International, Inc.

1717 Deerfield Road
Deerfield, Illinois 60015
U.S.A.
(708) 405-6000
Fax: (708) 405-6013

Public Company
Incorporated: 1986
Employees: 24,700
Sales: $2.59 billion
Stock Exchanges: New York Pacific London

Premark International is divided into three groups. The consumer and decorative products group produces Wilsonart laminates for building and furniture construction, West Bend small appliances, and Precor physical fitness equipment. The food-equipment group produces commercial food mixers, weighing and wrapping equipment, ovens, and refrigeration units. Premark’s third division, Tupperware, manufactures high-quality plastic food and serving containers, educational toys, and home products.

Premark International was formed in 1986, with the breakup of the six-year-old Dart & Kraft merger. Originally a food concern, Kraft returned almost completely to food. The Dart side of the merger, consisting of the Tupperware, Ralph Wilson Plastics, and West Bend operations, became Premark. Hobart, which was acquired by Dart & Kraft, became part of Premark. Kraft felt its earnings were held back by these companies, whose combined 1985 sales of $1.8 billion lagged behind Kraft’s sales of $7.06 billion.

Premark opened its doors on October 31, 1986. Its first year was rough, ending with a $98.3 million loss, partly due to a $46 million charge for plant consolidations and inventory adjustments. Tupperware wrote off $98 million in assets at two plants. Tupperware’s foreign operations provided 60% of the division’s revenue. Restructuring of overseas plants plus taxes on their earnings cost $17.1 million. The plant writedowns plus the taxes added up to a $57.9 million loss for Tupperware.

Before the changing lifestyles of the 1980s started Tupperware’s slide, the line of plastic storage containers enjoyed a secure market niche. Created in 1942 by New Hampshire inventor Earl Tupper, the containers found fervent champions in the company’s first distributors, who sold them at home parties. This direct sales method had advantages over the attempts Tupper made to sell his wares to retail outlets—it eliminated competition, produced a relaxed shopping mood, and allowed for demonstration of the airtight seal that was added in 1947. By 1949 Tupper had distributors in Miami and the Northeast, with weekly sales between $1,000 and $1,500. Noting the success of the home party sales method, Tupper stopped selling his food savers through stores in 1951 and founded Tupperware Home Parties.

In September 1958, Tupper sold his business to the Rexall Drug & Chemical Company for $16 million. The company’s new status as a Rexall subsidiary brought it access to markets in Hawaii and Canada. Rexall was subsequently renamed Dart Industries. By 1969 there were 14 plants throughout the world manufacturing Tupperware. The line was popular in Australia, Japan, the Philippines, and Malaysia. This international popularity showed in sales, which reached $509 million in 1976, with the help of new subsidiaries in Argentina and Chile.

In the 1980s, Tupperware updated and modernized plants and equipment. It completed construction of a new hydroelectric generating station providing partial power for its Rhode Island plant, with the goal of saving 21,000 barrels of oil annually. The first U.S. plant of its kind to receive a license under federal energy regulations, it was designed to help reduce dependence on foreign oil. Other new plants started production in Portugal, Brazil, and Mexico.

In 1982 more than 50% of company sales came from overseas markets. Tupperware manufactured 225 products. Tupper ware’s $890 million in sales were 9% of the Dart & Kraft total, providing 26% of its profits.

Two years later, sales sank to $777 million, and the bonanza was over. More women entered the work force every year, which affected both the market and the dealer force. Women who might have sold Tupperware opted for other careers. Full time working women also had little time to host and attend Tupperware parties. Instead, they picked up cheaper plastic food containers and disposables in retail stores.

The company responded to the change on several fronts. First, they made William Jackson, president of the profitable Duracell battery division, chairman of Tupperware. The party plan was revised, to accommodate the needs of working women—in addition to the traditional home parties, short, 20-minute parties were added at work sites and other locations outside the home. A preview catalog was introduced to allow party guests to settle on possible purchases before attending a party. The company improved promotional programs to attract independent dealers, and the company rolled out its entry into the cookware market—Ultra 21 plastic food containers for the freezer, microwave, or oven.

Ultra 21 had been on the drawing board since 1981, when Dart & Kraft bought the patent from Carborundum Company. In 1984, the company built a $140 million resin plant in Georgia to supply the necessary raw material, and spent millions advertising the new product line. Between July and December 1985, Ultra 21 captured 30% of all nonmetal cookware sales, attracting many purchasers to Tupperware parties. However, raw materials and production expenses were high, eroding the profit margin. Sales restructuring and advertising had not yet affected the bottom line, and 1985 profits declined by 10%. Sales shrunk to $762 million.

Ohio-based Hobart Corporation, core of Premark’s food-equipment group, also was well known in 1986. Founded in 1897 as an electric-engine manufacturer, it was sold in 1904 to four investors. The same year, Hobart produced its first kitchen appliance—an electric coffee grinder. The company’s product line expanded rapidly to include KitchenAid dishwashers, food mixers, and commercial food equipment.

David A. Meeker, a young engineer who joined Hobart in 1925, married the daughter of one of the investors, and became president and chief operating officer in 1945. He invented several Hobart products, obtaining about 80 patents. Meeker remained president until 1963, and chief operating officer until 1970. His son, David B. Meeker, became president and chief executive officer in 1970. By the 1970s Hubart was a leading food-equipment manufacturer, with sales exceeding $350 million.

In 1981, Hobart had become the focus of a takeover bid by Canadian Pacific Enterprises, the U.S. unit of a $8.5 billion Montreal corporation with interests in oil, steel, forest products, and agribusiness. Attracted by Hobart’s 25 U.S. plants, 12 overseas facilities, and its sales and service organization which supported marketing operations in 100 countries, Canadian Pacific offered $32.50 per share—an estimated $300 million. Hobart did not accept the offer, preferring to remain independent. Hobart appealed to the Senate Judiciary Committee to hold hearings opposing the takeover bid. Two congressmen wrote to Treasury Secretary Donald T. Regan, urging that the offer be blocked on grounds of national security. Realizing it might not be able to fight off future takeovers, Hobart instead accepted Dart & Kraft’s $460 million offer.

Dart & Kraft immediately streamlined Hobart’s operations. It closed plants, four of them European, cut the work force by 16%, and slashed more than $65 million from inventories. To improve marketing and product strategies, Hobart and its subsidiaries introduced new products.

By 1986 products were available under the Hobart, Vulcan, Stero, Foster, and Wolf trademarks. More than 25% of Hobart’s $681.9 million in sales came from exports to over 100 countries. In 1986 the food-equipment group provided $24.7 million in profits, although restructuring and plant consolidation cost Premark $21.5 million.

Premark’s consumer-products group also required reorganization after the spin-off. Facing stiff pricing competition from other small-appliance manufacturers, the West Bend division consolidated production capacity, targeted new product categories in housewares, and expanded its domestic and Japanese distribution efforts for Premiere cookware. Precor, supplying physical-fitness equipment, expanded its product line. Ralph Wilson Plastics, producing Wilsonart brand decorative plastic laminates, benefited from the increasing popularity of easy-care laminates for furniture surfaces and for building remodeling and updating. Group sales for 1986 reached $455.1 million, with profits of $23.6 million.

In 1987 Tupperware made a determined effort to reach buyers without access to parties. Consumers could call toll-free to get the preview catalog, creating new avenues for parties and demonstrations. Television commercials boosted consumer awareness of new products as did new party formats, and national print advertising in women’s service magazines like Ladies Home Journal.

Tupperware’s delivery system also was in need of reorganization. Independent dealers took weekly orders to local distributors, often located in other cities. Orders were filled from distributors’ inventories and delivered by the dealer to the party host. Payment was collected at the time of delivery. This system did not reach all potential customers, since dealers avoided parties in downtown areas with expensive, limited parking. Dealers also were leery of rural locations, because of the great driving distances.

The company’s answer to this problem was a four-year, $60 million outlay for new warehouses and a major distribution center in Hemingway, South Carolina, and Halls, Tennessee. Tupperware also tested a new factory-to-customer delivery system called Tupperware Express. Scheduled for nationwide use by 1990, it ran into problems—dealers needed training to adapt from payment-on-delivery to payment-with-order. Sales declined in test areas, although final sales for 1988 increased 8% to $967.2 million.

In 1988, Premark sold its Georgia-based Dartco plant to Amoco Performance Products, with another plant in Neshanic, New Jersey, for $25 million. The Georgia plant, producing liquid-crystal compounds called Xydar, the raw material for the Ultra 21 line. Ultra 21, however, was successful only in the United States and Japan, losing $15 million in 1987. Premark found it more profitable to let Amoco provide the raw materials for Ultra 21. The line has since been replaced by the Tupperware cookware system.

The lifestyle changes affecting Tupperware also affected the other Premark divisions. The food-equipment group found new markets in changing fast-food menus that required new equipment. One chain of chicken restaurants ordered 5,000 catalytic fryers during 1987, and a Mexican fast-food outlet bought 1,000 grooved griddles to be used for fajitas.

The trend toward take-home food also improved sales for the food-equipment group. Grocery stores were experimenting with in-store bakeries, building about 2,500 bakeries in 1987 alone. Each cost about $130,000 to equip, though some went as high as $300,000. Pizza gained popularity in England, while Japanese consumers turned increasingly to Western-style food. These trends helped food-equipment group sales reach $874 million in 1988, contributing $57.8 million to the company’s profits.

Consumer and decorative products group sales reached $555.8 million in 1988, increasing 14% over 1987 despite heavy competition. In December 1988, Premark acquired the Tibbals Flooring Company for $94 million. Precor, the physical fitness company, introduced a stair-climbing machine, an advanced treadmill, and an exercise bicycle offering computer programming to let cyclists compete on a display screen. These new products accounted for 37% of Precor’s 1988 sales.

In 1989, Premark’s sales reached $2.6 billion. The company cited unfavorable foreign exchange rates, high promotional expenses, and substantial capital outlays, especially for Tupperware Express for lowering profits. Tupperware profits also were hurt by lower sales in Latin America, Japan, and the United States, while the food-equipment group suffered because of reduced profit margins and lower domestic production volume. Even so, Premark bought Sikes Corporation for $201 million in 1990. The decorative ceramic-tile company took Premark more deeply into the decorative building-products industry.