Sanford L.P.

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Sanford L.P.

2707 Butterfield Road
Oakbrook, Illinois 60523
U.S.A.
Telephone: (708) 547-6650
Toll Free: (800) 323-0749
Fax: (708) 547-6719
Web site: http://www.sanfordcorp.com

Division of Newell Rubbermaid
Incorporated: 1857 as Sanford Manufacturing Company
Employees: 3,000
Sales: $1 billion (2006 est.)
NAIC: 339942 Lead Pencil and Art Good Manufacturing; 339941 Pen and Mechanical Pencil

Sanford L.P. is a division of Newell Rubbermaid and one of the world's leading makers of both fine and mass-market writing instruments. The company began as an ink manufacturer, established an important brand in mid-century with Sharpie permanent marking pens, and controls a variety of well-known pen, marker, and art supply brands. Sanford makes Accent highlighters, Expo dry erase markers, Prismacolor art markers and pencils, Grumbacher artist's paints and brushes, and the Foohy line of children's markers, colored pencils, pens, and erasers. Sanford also sells the Papermate line of low-end pens, Uni-ball ballpoints, and two lines of high-end pens and fountain pens, Waterman and Parker. Sensa and Rotring are two more lines of writing instruments in the Sanford stable. Sanford has manufacturing facilities in Tennessee, Wisconsin, California, Canada, Mexico, and Thailand, and several locations in the United Kingdom, Europe, and Latin America. It sells its products worldwide.

A 19TH-CENTURY INK MAKER

Sanford started out in Worcester, Massachusetts, the project of two investors, Frederick W. Redington and William H. Sanford, Jr. They founded an ink and glue manufacturing company in 1857, known then simply as the Sanford Manufacturing Co. In 1866, the company moved west, leaving Massachusetts for the booming lakeside town of Chicago. Sanford's factory was damaged five years later in the notorious Great Chicago Fire, but it was quickly rebuilt. In 1885, the company acquired a patent on a "universal ink stand," a safe and clean container for opened ink. Sanford was a leading brand of what was then an all-important product. Business records and correspondence were all written with fountain pens in this era, and companies, schools, and organizations required constant supplies of fountain pen ink. The company also made other business essentials such as mucilage (rubber cement) and sealing wax. The company apparently did well, and when another fire destroyed its factory in 1899, Sanford had a new factory up and running a year later.

GROWTH AT MID-TWENTIETH CENTURY

Sanford continued to thrive as a privately owned ink manufacturer through the early 20th century. In 1940, the company changed its name from Sanford Manufacturing to the Sanford Ink Company. In 1947, Sanford moved from downtown Chicago to a new, larger location in suburban Bellwood, Illinois. At that time, Sanford had just 100 employees. Annual sales were around $500,000. The company seems to have been quietly profitable. Ownership had dispersed into the hands of five families by the 1960s. The company primarily sold to wholesalers, who in turn sold Sanford products to what was then a still highly fragmented market of small office supply and stationery stores. The company's best-known product came out in 1964, the Sharpie marker. This was a fine-tipped felt pen that boasted indelible black ink. The Sharpie marker soon became ubiquitous, and was joined by a similar marker, the Rub-a-Dub, marketed specifically for laundry-marking clothing.

Five families held stock in the company, which was chaired in the 1960s by Charles Lofgren. Lofgren's son-in-law, Henry Pearsall, joined Sanford in 1969. At just 23 years old, Pearsall set to work in the purchasing department. Ten years later, Pearsall had risen to president of Sanford. Although Pearsall had married into the business, he evidently had a genuine knack for the writing instruments industry, and Sanford was admirably profitable under his leadership. Sanford kept its costs down by using its own inks in the pens and markers it sold. In addition, the company was clever at investigating many niche products. Sanford made markers for children, for artists, for people writing on transparencies for overhead projectors. It developed a special nonsmearing marker for use on the treated paper used in fax machines. Attention to the market allowed Sanford to grasp what customers wanted, and to bring out new products for many different needs.

With the company making money and expanding, Pearsall offered to buy out the other family members. In 1984, he put together $66 million with some other investors, and bought out his father-in-law and the other longstanding stockholders. Then a year later, in August 1985, Sanford went public, with an initial stock price of $17. The company was admired by Wall Street analysts for its double-digit return on equity. Sales in 1985 stood at $69 million, with a profit of $4.9 million. By 1988, sales had risen to $102 million, and profit reached $17.6 million. In the late 1980s, two-thirds of Sanford's sales were from its lines of markers, while stamp pads, adhesives, and other writing instruments made up the remainder.

There were a few clouds on the horizon in the late 1980s, however. Sanford had paid $31 million in 1988 to acquire a Borden, Inc., subsidiary called Sterling Plastics Co. Sterling's sales were around $22 million annually, and its principal products were plastic storage boxes, school supplies, and desk accessories. This was perhaps a high price to pay for a unit that was not as spectacularly profitable as Sanford itself. By the late 1980s, the way office supplies were sold began to change. As the so-called big-box office stores like Staples spread, and other mass-marketers like Kmart and Wal-Mart became bigger purveyors of school and office supplies, the distribution picture changed. These large chain retailers were able to negotiate lower prices from their suppliers, and Sanford had to adapt. Then in 1991, San-ford employees went on strike. The company at that time employed 700 people total, with some 300 represented by a division of the Teamsters Union. When economic issues could not be settled, Sanford's workforce walked out. The short-lived strike impacted profits, and a few months later, in November 1991, Sanford announced that the company was being acquired by the consumer products company Newell Co.

NEWELLIZATION IN THE 1990S

Newell Co. began as Newell Manufacturing Co., Inc., a maker of curtain rods. Founded in 1902 in Ogdensburg, New York, it gradually expanded through the East Coast and Canada over the next 50 years. In 1962, Newell moved its headquarters to Freeport, Illinois, and for the next many years it acquired companies in a variety of industries. By 1992, the year the Sanford acquisition was finalized, Newell owned many prominent consumer brands, including Mirro cookware, Anchor Hocking housewares, and other hardware and so-called do-it-yourself products. The acquisition of Sanford was New-ell's first venture into office supplies. Sanford president Henry Pearsall's rationale for the sale was that Newell had established expertise in dealing with the big discount retailers like Wal-Mart. These were becoming increasingly big players in Sanford's industry, and leaning on Newell's experience seemed a viable move. The sale went through as a stock swap valued at more than $686 million. Sanford then became a division of Newell.

COMPANY PERSPECTIVES

Offering more than 3,000 products and brands that include Sharpie, Papermate, Uni-ball, Parker, Grumbacher, and Waterman, Sanford is an undisputed leader in the writing instrument and art industry.

Over the next three years, parent Newell almost doubled in size, with sales topping $2 billion. This was achieved through a string of acquisitions. The company coined the term "Newellization" for the way it brought struggling companies into its fold, raised profit margins and shed underperforming segments. Newell had concentrated its acquisitions on companies that were not doing well, but Sanford was an exception. Its profit margins had long been stellar. Nevertheless, Newell made changes at Sanford. The new parent added to Sanford by grouping it with other acquisitions, such as the Eberhard Faber line of pencils and ballpoints. In 1994, sales of Newell's combined office products division had grown to $383 million, while Sanford's sales had been slightly more than $100 million five years earlier.

Sanford began building a new warehouse and distribution center in 1996, in Shelbyville, Tennessee. This gave the company a more centralized facility for its brands, which were reaching international markets. In 1999, parent Newell changed its name to Newell Rubbermaid when it bought Rubbermaid Inc. The biggest change for Sanford came in 2000, when Newell Rubbermaid paid $743 million for the pen business of the Gillette Co. Gillette owned two venerable fine pen lines, Parker Pen and Waterman, as well as the low-end line of Papermate pens and the Liquid Paper brand of typewriter correction fluid. These became part of Sanford.

Both Parker and Waterman were storied companies with 19th-century roots. They had been two of what was known as the "Big Four" pen manufacturers in the heyday of the fountain pen, from the early 20th century to around World War II. Parker Pen was founded in Janesville, Wisconsin, in 1889 by George Parker. Parker was responsible for many advances in pen design, including the guaranteed ink-tight Jack Knife Safety pen. Parker Pen's signature product was the "Big Red," a popular and distinctive pen still valued by collectors. The L.E. Waterman Fountain Pen company was founded in New York at about the same time as Parker. Its founder was an insurance agent who had, out of frustration with a leaking pen, invented a new ink filling system that was the impetus for a new generation of writing instruments. Waterman led the world in fountain pen production around the turn of the 19th century, with strong sales in Europe as well as North America. With the introduction of ballpoint pens, which became widely available during World War II, the leading fountain pen makers began to suffer. Waterman closed its North American operations in the 1950s, confining its operations to Europe. It was then acquired by the Gillette Company, known principally for its disposable shaving razors, in 1989. Gillette also bought Parker in 1993.

Gillette had started out making disposable razors, but evolved by the 1990s into a diversified personal care products company with dozens of brands. Its pen brands, which were part of the company's stationery unit, seemed to not quite fit with the rest of Gillette's stable. Growth in the early 1990s was satisfactory, with Parker's sales increasing by 7 to 8 percent annually and reaching about $300 million. Parker was the leading pen in the $5-and-up range. Gillette spent some time trying to come up with marketing that would differentiate the Parker and Waterman brands. By the end of the 1990s, Gillette's stationery unit was clearly in decline. While sales were stagnant or declining, the unit saw a drop in profit of almost 90 percent over its fourth quarter in 1999, and rumors grew that Gillette would unload the unit. Although the cheap, disposable Papermate brand of ballpoints may have been a better fit with Gillette's overall line, the fine pen lines of Parker and Waterman suffered acutely. Rebecca Mann, writing about the brands for Travel Retailer International (December 2002) described Parker and Waterman as "all but dead in the water" at the time Sanford bought Gillette's stationery unit.

KEY DATES

1857:: Sanford Manufacturing Company is founded in Massachusetts.
1866:: Company headquarters are moved to Chicago.
1899:: A new factory is built after the fire.
1940:: The company name is changed to Sanford Ink Company.
1947:: Headquarters are moved to suburban Bell-wood, Illinois.
1964:: Sanford debuts the Sharpie marker.
1984:: Henry Pearsall buys out other family shareholders.
1985:: Sanford goes public.
1991:: Sanford is acquired by Newell.
2000:: The Parker and Waterman brands are acquired from Gillette.

REPOSITIONING FOR GROWTH IN THE EARLY 2000S

Meanwhile, Sanford's parent Newell Rubbermaid was going through some difficult transitions. The company got a new chief executive, Joseph Galli, Jr., in 2001. The company had suffered earnings setbacks since the Rubbermaid acquisition two years earlier, and the company's leader vowed to cut costs and to redirect energy to some of Newell Rubbermaid's units. Galli singled out Sanford as one Newell Rubbermaid division that was ready for more growth. By the early 2000s, Sanford's combined brands held a global market share of close to 40 percent. The addition of Gillette's stationery brands was seen as adding to Sanford's robustness. With sales of around $1 billion by the early 2000s, a huge increase since a decade earlier, the unit was seen as one of the more hopeful spots in the Newell galaxy. And there was still room for growth. In 2001, Newell and Sanford management announced plans to gain a market share of 10 percent in the children's coloring market. This was a market long dominated by Crayola, then owned by Hallmark Cards, which controlled some 75 percent of the market share in children's coloring. Sanford launched a new marketing campaign, aiming to grab a bigger portion of this lucrative market.

The Parker and Waterman brands represented another area where Sanford could look to increase sales. The brands still had tremendous recognition, and fine writing instruments were beginning to enjoy something of a comeback. Sanford reissued some classic Parker and Waterman pens, such as the famous Parker 51, which had originally come out in 1939 to celebrate Parker's 51st anniversary. This sold well for Sanford, as did limited edition Waterman reissues. Sanford made a concentrated effort to bring its fine pens into distribution at duty-free shops and other so-called travel-retail outlets, where travelers frequently bought writing instruments as gifts.

The Rotring brand also attracted the interest of the travel-retail market. Rotring was a German company founded in 1928. It was best known for its Rapidograph drafting pens. These pens with ultra-fine points had been used by artists, architects, and draftsmen for years, but they faded somewhat as computers replaced hand drawing in these fields. Newell acquired the brand in 1998, where it became part of Sanford. The staid, quotidian Sharpie also had something of a surge in the 2000s. Sanford used the brand name to sponsor a Nascar race in 2001, and began its first national advertising for the markers the next year. Sharpie got much free publicity as well, when a San Francisco 49ers football player whipped a Sharpie out of his sock on the playing field, to autograph a ball he had just made a touchdown with. While the player's antics were deplored, Sharpie found itself in the news. Sales grew, and Sanford extended the product line to 34 different colors and 18 different tips over the next few years.

Nevertheless, cost-cutting measures, including factory closings and layoffs, came along with parent Newell Rubbermaid's search for a return to higher profits. While increasing its investment in a manufacturing plant in Thailand in 2004, some domestic plants closed. The plant in Bellwood, Illinois, where Sharpie markers had long been produced, shut in 2004, as production moved to the Shelbyville, Tennessee, plant. In 2006, Sanford began shutting down a Santa Monica, California, plant that made Papermate pens. It closed two plants in Madison, Wisconsin, that same year. Production from the California and Wisconsin plants was moved to a large Sanford manufacturing facility in Maryville, Tennessee.