Ronco Corporation

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Ronco Corporation

21344 Superior Street
Chatsworth, California 91311
U.S.A.
Telephone: (818) 775-4602
Toll Free: (800) 486-1806
Fax: (818) 775-4664
Web site: http://www.ronco.com

Public Company
Incorporated: 1964 as Ronco Teleproducts, Inc.
Employees: 17,800
Sales: $63 million (2005 est.)
Stock Exchanges: Over the Counter
Ticker Symbol: RNCP.OB
NAIC: 454110 Electronic Shopping and Mail-Order Houses, 454113 Mail-Order Houses

Best-known for its fast-paced, late-night commercials and pioneering infomercials, Ronco Corporation has manufactured, sold, and distributed an astonishing array of well-known gadgets and goodies since its inception in the early 1960s. From the Veg-O-Matic and the Pocket Fisherman of the early days to GLH Formula #9 and the Electric Food Dehydrator of the 1990s, Ronco has chalked-up a series of well-promoted hits. In the process, company founder Ron Popeil has garnered quite a bit of media attention. In 1993 friend and fellow Mirage Hotel board member Steve Wynn told People magazine, "Ron has a knack for convincing you that you need something." A July 1981 article in People magazine dubbed him "the Horatio Alger of the TV age." The CBS Evening News called Popeil "a master, a pioneer, the king of the infomercial, a gadget savant," while television newsmagazine 20/20 dubbed him a "television visionary, the man who turned the hard sell into a blunt instrument, [and] the granddaddy of TV hucksters."

Many successes and a popular leader notwithstanding, Ronco's history has included some challenges as well. After its foundation near Chicago in 1964, the firm went public in 1969. Sales and profits increased erratically throughout the 1970s, but the early 1980s brought intense competition and eventual bankruptcy. Ron Popeil revived his firm in the late 1980s with such products as GLH "Great Looking Hair" Formula #9 (a "spray-on toupee"), the Popeil Automatic Pasta Maker, and the Ronco Electric Dehydrator. Headquartered in southern California, the reincarnated Ronco remained privately and closely held into the mid-1990s until an acquisition brought the company public again in 2005. Although company representatives declined to release annual sales estimates, Popeil's 1995 autobiography titled Salesman of the Century boasted that his firm had generated more than $1 billion in retail sales over the course of its more than 30 years in business.

1935–1964: THE BOUNDLESS HUCKSTER

The Ronco saga is as much the story of Ron Popeil as it is a company history. The hyperbolic pitchman was born to Sam and Julia Popeil in 1935 in the Bronx. Sam Popeil was trained by his uncles to demonstrate and sell kitchen gadgets, and he and his sibling Raymond launched Popeil Brothers, Inc. in Chicago in 1947. A 1989 article about the Popeil family businesses noted that their postwar television commercials were among the first to bring live demonstration to the new media, foreshadowing the infomercials and home shopping channels that would emerge decades later. Although Ron Popeil would later downplay his father's influence, a writer for the Journal of Popular Film and Television asserted that Ron "rode to success on the coattails of Popeil Brothers." Ron Popeil's career brought two generations of selling to its ultimate fruition.

He got an early education in the housewares market working weekends in his father's Chicago factory making kitchen products. At 16, Ron began selling Popeil Brothers' "Spiral Slicers" and "Slice-A-Way" gadgets in street markets. Within a year, the teenager had moved out on his own, hawking Popeil Brothers' products on a flat commission basis at the Woolworth's store in downtown Chicago.

There's little doubt that Popeil was a natural salesman. He claims to have made $1,000 each week in the early 1950s—four times an average monthly salary. He earned enough to pay for a year of classes at the University of Illinois, where he met future business partner Mel Korey. But it was hard for Popeil to justify paying for college classes when he was making money hand over fist without an advanced education. So while Korey earned his undergraduate degree, Popeil continued to sell at Woolworth's during the winter and hit the Midwest "fair circuit" in the summer. The fair circuit included county and state fairs, as well as auto, home, and garden shows. Korey joined Popeil upon graduation, selling knives, kitchen gadgets, spray shoe polish, and hobbycraft kits throughout the Midwest.

1964–1970: RONCO'S FIRST INFOMERCIALS

Their long, hard days of live demonstrations came to an end in 1964, when Popeil and Korey launched a joint partnership called Ronco Inc. in Elk Grove Village, Illinois. Their first product—and the demonstrative television commercial that promoted it—set the standard for the dozens of Ronco offerings that would follow. The Ronco Spray Gun was manufactured on contract by another company; Ronco acted essentially as a promoter and distributor. The product, a hose nozzle, was a fairly basic, inexpensive household item with a twist: the high-pressure sprayer featured water-soluble tablets of soap, wax, insecticide, or herbicide, and so the nozzle could be used to wash and wax the car, fertilize the lawn, kill weeds or insects, and wash windows. The tablets were a key consideration: they would continue to generate high-profit-margin sales long after the initial purchase of the spray nozzle.

Popeil wrote a script, traveled to a Florida television station to tape the advertisement, and starred in the spot using the motor-mouthed style that had brought him success on the fair circuit. The production cost a total of $550. Korey spent another $400 to place the ad in cheap, late-night timeslots on television stations in Illinois and Wisconsin. They sold the goods on a "guaranteed-sale" basis through local retailers. Popeil defined guaranteed-sale as the direct sale of product to the retailer with the provision that any unsold merchandise would be repurchased by Ronco. Korey eventually placed the Ronco Spray Gun in 100 cities. The campaign featured "trade support marketing"—a mention of the retail outlets that carried the product—a technique pioneered by Popeil Brothers. The spray gun was an undeniable success. Within four years, Ronco had sold almost one million units.

Several elements of Ronco's strategy emerged over the course of the next two decades, some of which were reflected in that initial offering. First, the vast majority of Ronco's products were inexpensive. Until the late 1970s, the company did not float a single item over $20 and most were priced under $10. Also, Ronco avoided manufacturing in the early days, thereby sidestepping the hefty capital outlays and risks involved in mass production. Contrary to popular belief, only a few of the company's products were invented by Ron Popeil. While he often had a hand in "refining" the gadgets, most of the products were purchased from the manufacturer or developer and sold on an exclusive contract. Therefore, Ronco vacillated between retail and mail order distribution.

COMPANY PERSPECTIVES

Other people in our business take the spaghetti approach. They throw a lot of stuff against the wall and hope something sticks. The failure rate is dependent solely on what you're throwing up against the wall. I don't operate that way. If I believe in a product idea, I'll put my time, money, and marketing skills behind it. It might take two-and-a-half years of my life to create and sell a product. But, I enjoy every minute of it!—Founder, Ron Popeil

Finally, one of the most important factors in the long-term Ronco scheme was the continuous introduc-tion of new products to replace those that had lost their novelty. Toward that end, the company considered a reported 400-plus potential products every year. In order to whittle that daunting list down to the dozen or so annual offerings, the company evaluated each one's potential for demonstration on television, whether it could be positioned as a problem-solving device, its novelty, mass appeal, and profit margin.

However, as Popeil reiterated throughout his book, television marketing was the engine that drove demand. In a rare moment of modesty in his 1995 autobiography, Popeil admitted that "In those [early] days you could advertise empty boxes on TV and sell them. It was hard not to be successful." The salesman's on-screen technique mixed old-fashioned demonstration with breathless hyperbole to convince millions of viewers that his gadgets solved everyday "problems" they did not even know they suffered until that very moment. Such Popeilesque phrases as "as seen on TV," "the perfect Christmas gift," "miracle (add product name here)," and "and that's not all!" would trigger millions of people to reach for wallets and pocketbooks in the coming decades.

Ronco refined its marketing and distribution techniques with its second televised product, the "Chop-O-Matic." Produced by Popeil Brothers, this "food chopper with rotating blades" had been peddled by Ron Popeil on the fair circuit since the late 1950s. Not only was the commercial for this device longer, at five minutes, but Ronco also made this its first mail-order product. Delighted with the Chop-O-Matic's success, Sam Popeil invented and manufactured the Dial-O-Matic and what would become Ronco's first blockbuster, the Veg-O-Matic. Ron Popeil's television ad fueled the sale of over nine million units for $50 million worth of these rather primitive food processors.

While the Veg-O-Matic was Ronco's best-known product of the era, it was pantyhose that generated over half of the company's annual sales in the late 1960s. Ronco's ads for London Aire Hosiery, the pantyhose "guaranteed in writing not to run," featured Ron Popeil abusing the double-locked-stitch nylons with such outrageous tools as a scissors, a nail file, a scouring pad, and a lit cigarette, all to show that the fabric would not run.

Ronco's sales increased from about $89,000 in 1964 to over $14 million in 1969. Net income multiplied from $4,400 to over $1.25 million during the same period. The company went public as Ronco Teleproducts, Inc. in 1969, selling a $5 million, 22 percent stake.

1970–84: PRODUCT EXPANSION

The 1970s were Ronco Teleproduct's heyday. Over the course of the decade, the company broadened its product line from its base in housewares to personal care products, record albums, and hobbycrafts, while expanding its geographic reach internationally to include Canada, Great Britain, and Australia. In the early 1970s, Ronco ranked among America's top 25 television advertisers. The new offerings formed a panoply of gadgets. Housewares included the Miracle Broom, the Roller Measure, the Salad Spinner, the Glass Froster, the Cookie Machine, and the Miracle Brush. In 1974, Ron Popeil brought out his first invention, the "Smokeless Ashtray." This device filtered cigarette smoke from the air at its source and was offered in both home and car models. Ronco's Egg Scrambler featured a battery-powered needle that whisked yolk and white together while still in the shell.

KEY DATES

1935:: Ron Popeil is born in the Bronx.
1945:: Ron's father and uncle launch Popeil Brothers, Inc., in Chicago.
1964:: Mel Korey and Ron Popeil launch a joint partnership called Ronco Inc.
1969:: Ronco makes its first public offering.
1974:: Popeil releases his first invention, the "Smokeless Ashtray."
1983:: Ronco overstocks the CleanAire Machine for the holiday season.
1984:: Ronco files for Chapter 7 bankruptcy and is temporarily out of business; Popeil forms a new partnership with former Ronco salesman Malcolm Sherman.
1987:: Trying to rebuild Ronco, Popeil tours the fair circuit and begins selling his food dehydrator.
1989:: Popeil begins selling via infomercials.
1991:: Ronco releases its first half-hour infomercial starring Popeil.
1993:: Launch of the Popeil Automatic Pasta Maker.
1997:: Release of the New and Improved Popeil Automatic Pasta and Sausage Maker.
1998:: Release of the Ron Popeil Showtime Rotisserie and Barbecue.
2005:: Popeil sells Ronco for $55 million.

Craft and hobby products included the Mr. Microphone, the Ronco Bottle and Jar Cutter, the Ronco Rhinestone and Stud Setter, a Candle-Making Kit, a Pottery Wheel, and a Flower Loom. The Pocket Fisher-man, developed by Sam Popeil, featured a telescoping rod which was so compact that it could fit into a car's glove compartment. The gadget was one of the company's best-selling (at 35 million units) and best-remembered products. Ronco also started offering record album compilations of popular music during this period, promoting four to six discs each year.

Ronco's line of personal care products included the Trim-Comb hair groomer, the Tidie Drier hair/clothes dryer, the Steam Away clothing steamer, and the Mr. Dentist. The Buttoneer had originally been something of a flop for manufacturer Dennison Manufacturing, but Popeil reduced the price by more than 25 percent and produced one of his typical problem-solving television spots. Buttoneer sales multiplied ten times within just one year.

This rapid series of product launches helped fuel steady sales growth throughout the 1970s, from $16 million in 1970 to $22.2 million in 1975 and $36.9 million by 1980. Ronco's profitability vacillated erratically, however, throughout this period, from a net loss of $796,000 in 1973 to a net income of $1.4 million in 1978.

In an effort to raise its profit margins, Ronco Tele-products introduced its best-quality, highest-priced product, the CleanAire Machine, in the late 1970s. Essentially a larger version of the "Smokeless Ashtray," the CleanAire Machine featured a charcoal filter that could clean a whole room's worth of air. But the CleanAire machine would also help contribute to Ronco's early 1980s demise. Ronco overbought the device for the 1983 Christmas season and was not up to competition from the likes of Norelco, Remington, and other leading housewares manufacturers, who initiated a price war in the category. Ronco also got burned on its guaranteed sales policy; retailers returned well over two-thirds of the CleanAire machines that year. The reduced cash flow lowered Ronco's all-important advertising budget at a time when TV advertising costs were rising quickly. Without his hallmark television ads to keep products in front of the consumer, revenues dropped by one-third from 1982 to 1983. To make matters worse, Ronco's bank called in the company's $15 million revolving line of credit.

1984–2003: RECOVERING FROM BANKRUPTCY

The company tried to reorganize under Chapter 11 of the federal bankruptcy code but was soon forced into Chapter 7 in 1984 and out of business. Popeil, who did not declare personal bankruptcy, was able to purchase much of Ronco's inventory at auction. He entered into a new partnership with former Ronco salesman Malcolm Sherman shortly thereafter. (Mel Korey had resigned from Ronco's executive team early in 1983.) From 1984 to 1987, Popeil and Sherman concentrated on selling the CleanAire Machine and the Ronco Electric Food Dehydrator. But as the end of the 1980s loomed, Popeil and Sherman parted ways. Sherman got the rights to the CleanAir Machine, while Popeil assumed sole control of the food dehydrator and the partnership.

Popeil went into a period of what he called "semi-retirement" following the demise of his namesake company. He returned to his old hunting grounds on the fair circuit from 1987 to 1990 and emerged from his self-imposed exile from television in 1989. That was when a friend suggested that Popeil team up with mail-order powerhouse Fingerhut, which was testing a home shopping television channel. Although Fingerhut closed down its home shopping operation not long thereafter, Popeil was reinfected with the television bug. In 1991, he produced his first half-hour infomercial.

Titled Incredible Inventions, the long-form ad essentially reproduced Popeil's fair demonstration and offered direct sales via a toll-free phone bank. Production and airing of the ad cost $33,000—a far cry from the $550 that Popeil had spent on his first one-minute spot. But the dehydrator sold for around $60, whereas the Chop-O-Matic had sold for $3.98. The infomercial generated a total of $80 million in food dehydrator sales by 1993.

Popeil followed up the dehydrator success with GLH Formula #9 and the Popeil Automatic Pasta Maker. He bought the first product, a spray-on "toupee" called Great Looking Hair, from its Australian inventors. The fibrous aerosol came in nine colors and cost $39.92 per can. Ronco sold 900,000 cans of the formula within just one year.

In 1993, he launched the Popeil Automatic Pasta Maker, a device that one observer called "the most substantial product Popeil's bizarrely successful company … has ever produced." While promotions via infomercials and the QVC (Quality Value Convenience) home shopping network generated unit sales of over 500,000, the introduction was not without its stumbling blocks. In 1994, Creative Technologies Corporation sued Popeil and the retailers affiliated with his pasta maker for patent infringement, false advertising, and unfair competition. State and federal courts, however, found Popeil and his company not guilty on all counts. While both parties continued to file suits and counter-suits through 1995, Popeil was able to continue promotion of his device. In 1994, he forged a contract giving Salton-Maxim the right to distribute the pasta machine in retail outlets. Popeil also hoped to derive additional sales with the introduction of branded pasta mixes.

The 60-year-old Popeil showed no signs of slowing down in 1995. Fresh from the release of his autobiography, he toured the United States promoting the book, himself, and his products old and new. Salesman of the Century hinted that future Ronco offerings could include a revival of the Pocket Fisherman and a newfangled spatula called the Popeil Gripper. And no matter what the company introduces, it's liable to be pitched as "amazing."

In 1997 Popeil was back on QVC promoting his latest invention, the New and Improved Popeil Automatic Pasta and Sausage Maker. The updated product was an improvement from the original because it not only made pastas, but also sausages. QVC infomercials featured Popeil adding meats, vegetables, and spices to the Pasta and Sausage Maker while sausage emerged from an opening on the front of the machine. Also in 1997, Popeil publicly expressed interest in selling Ronco. He wanted to continue inventing products and acting as the business's spokesperson but had grown tired of running its day-to-day operations. The most noteworthy company to show interest, LA Group Inc., started negotiations for a possible acquisition, but a sale was never finalized, and Ronco remained in Popeil's control. The LA Group, which operated the Seen on TV website that sold items pitched by infomercials, eventually launched www.Ronco.com. Under a three-year agreement the LA Group received a commission for every Ronco product sold on the website.

In 1998 Popeil released one of his most successful inventions, the Ron Popeil Showtime Rotisserie and Barbecue. Infomercials featured Popeil demonstrating the device by cooking a chicken in three hours. Owners of the product were encouraged to marinate the chicken, place it inside the Rotisserie and Barbecue, and then set the device's timer for three hours. During the advertisement Popeil repeated the phrase "set it and forget it," which became Popeil's latest infomercial catchphrase. According to HFN—Home Furnishings News magazine, Ronco generated an estimated $250 million in annual sales for 1999. Popeil explained that the high sales were proportionate to Ronco's media spending. The company spent an estimated $50 million on media in 1999 to advertise the Rotisserie and Barbecue.

2003 AND BEYOND: NEW AND IMPROVED

Richard Allen, a former marketing, brand management, and manufacturing executive, was asked by private investors to acquire a successful importing company. In 2003 Allen approached Popeil, who later agreed to sell Ronco for $55 million. In 2005 Allen raised the needed money with the help of Sanders Morris Harris Group Inc., a Texas-based investment bank. The acquisition process involved Popeil's marketing company Ronco Marketing Corp. acquiring the other companies within Ronco's fold. The new conglomerate then changed its name to Ronco Corporation and finally merged with a holding company called Fi-Tek VII, Inc., which later changed its name to Ronco Corporation. When the acquisition was completed, Ronco was traded over the counter under the symbol RNCP.

Richard Allen became the company's CEO. Popeil remained a product consultant with a $500,000 annual salary. He received an additional $10,000 for every guest appearance he made on television. Popeil was also awarded $50,000 for every new infomercial produced and was given the same amount for every appearance on the television network Home & Garden Television (HGTV), according to the Los Angeles Business Journal. "I ran the business like an entrepreneur, not like a businessman," Popeil said in the Los Angeles Business Journal. "I had about 170 employees, but I never really got involved. I hate the day-to-day stuff."

The new owners announced plans to expand Ronco beyond its infomercial roots. Because millions had been spent advertising Ronco products for direct sales, Allen believed Ronco products would successfully cross over into retailers such as Wal-Mart.

April Dougal Gasbarre