Tupperware Corporation

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Tupperware Corporation

14901 S. Orange Blossom Trail
Orlando, Florida 32837
U.S.A.
(407) 826-5050
(800) 858-7221
Fax: (407) 826-8268
Web site: http://www.tupperware.com

Public Company
Incorporated : 1946
Employees : 6,800
Sales : $1.08 billion (1998)
Stock Exchanges : New York
Ticker Symbol : TUP
NAIC : 422130 Sanitary Food Containers Wholesaling; 326199 Kitchen Utensils, Plastics, Manufacturing

Tupperware Corporation, whose well-known Tupperware parties have spread to more than 100 countries, is one of the largest direct sellers in the world. Relying on independent consultants rather than employees for sales, the company generated more than $1 billion in revenues in 1998. Although Tupperware’s mainstay for 50 years had been plastic food storage containers, in the 1990s the company expanded into kitchen tools, small appliances, and baby and toddler products. Although U.S. sales declined steadily in the 1980s and 1990s, international sales expanded, with the result that more than 85 percent of company revenues came from international business in the mid-1990s. The economic declines in the Far East and Latin America in the late 1990s left Tupperware with overall falling sales and an unsure outlook for the coming years.

Company Origins

Company founder Earl Tupper was an early plastics pioneer. The young inventor found work at DuPont in the 1930s without the benefit of a college education. By 1938 Tupper was ready to strike out on his own and devote himself to research in plastics. That year he started his own company, leaving DuPont with only his experience and a discarded piece of polyethylene, remains from the oil refining process that no one had yet manipulated into a practical form. Tupper’s fledgling company kept afloat by making plastic parts for gas masks in World War II, although Tupper continued to pursue his research with polyethylene. Tupper modified his own refining process, searching for more useful and appealing forms of plastic.

By 1942 Tupper had developed a plastic that was both durable and safe for food storage. The lightweight, flexible, and unbreakable material was also clear, odorless, and nontoxic. Tupper dubbed the new material Poly-T, and he further refined the product over the next few years. In 1946 he founded a new company, Tupperware, and began manufacturing food storage and serving containers with Poly-T. The containers were enhanced the following year with the unique Tupperware seal, an innovation that consumers would still find useful more than 50 years later. Tupper had gotten the idea for the airtight seal from a paint can lid.

Although Tupper quickly found department and hardware stores to carry his product, customers were harder to come by. Consumers were unfamiliar with the benefits of the new material and did not know how to operate the seal. Sales finally took off in the late 1940s when a few direct sellers of Stanley Home Products added Tupperware to their demonstrations. The products flourished with the direct selling approach because salespeople could explain the benefits of the plastic and personally demonstrate the seal to consumers. In addition, Stanley Home Products salespeople did not sell door to door, but rather sold their products at home parties. This method was particularly suited to Tupperware sales because homemakers felt they were getting advice from other homemakers who actually used the products.

Expansion in the 1950s-70s

The most successful early direct seller of Tupperware was Brownie Wise, a Detroit secretary and single mother. Tupper hired her in 1951 to create a direct selling system for his company. Within a few months Tupper had established the subsidiary Tupperware Home Parties, Inc. and had abandoned selling his products through retail stores. Wise’s home party system used a sales force of independent consultants who earned a flat percentage of the goods they sold and won incentives in the form of bonuses and products. Wise, together with Gary McDonald, another Stanley veteran, created the Tupperware Jubilee, an annual sales convention that became famous and provided a format for the conventions of numerous direct-selling companies.

Sales skyrocketed, multiplying 25 times within three years. By the late 1950s Tupperware had become a household name. With almost no advertising, Tupperware had created phenomenal brand awareness. The company’s rapid success can be attributed to its recruitment of almost 9,000 independent consultants by 1954, most of them women, and their enthusiastic spread of Tupperware parties.

Tupperware home parties provided an easy entrée into the workforce for women. Able to schedule the parties around their home and family responsibilities, women could earn extra cash and get together with friends and neighbors at the same time. In addition, the home party plan provided a milieu in which women were trusted as salespeople, unlike door-to-door sales, where women were not accepted at the time.

In 1958 Wise resigned from her vice-president position and Tupper sold the company to Rexall Drug. Despite the change in management the company continued to thrive. Throughout the 1960s and 1970s sales and earnings doubled every five years. The company had grown not only in the United States but also had entered and thrived in several foreign countries. Tupperware’s first venture outside the United States was to Canada in 1958. Tupperware parties were soon being thrown in Latin America, Western Europe, and Japan. International sales became a significant source of revenue for Tupperware in the 1970s, and Rexall Drug, which had become Dart Industries, had changed the subsidiary’s name to Tupperware International.

Slipping Sales in the Early 1980s

Sales exceeded the half billion dollar mark in 1976. Four years later Dart Industries and Kraft Inc. merged, and the newly formed company looked to subsidiary Tupperware International to fuel its growth. Tupperware’s growth slowed in the early 1980s, however, and by 1983 the subsidiary had cut seven percent from its sales and lost 15 percent from its earnings. Several factors contributed to the slip in sales and earnings. Competition had increased from Rubbermaid Inc., Eagle Affiliates, and other retail companies. In addition, an economic recovery had allowed many part-time sales people to find full-time work elsewhere, and the movement of women into the workforce had dried up the company’s source for part-time labor and limited the time many women had to attend parties. The company exacerbated the labor problem, however, by not enticing people with higher commissions and by lowering the quality of their bonus prizes.

Sales continued to fall, slipping six percent in 1984, from $827 million to $777 million. Even worse, earnings plummeted 27 percent, to $139 million. The following year was no better: Sales dropped to $762 million and earnings declined to a mere $96 million. Tupperware finally took action, bringing in a new management team in 1985. K. Douglas Martin took over as president of Tupperware USA, and Dart and Kraft moved William L. Jackson from the company’s Duracell battery division to the chairmanship of Tupperware. Having made significant improvements in the Duracell division, Jackson was expected to help turn Tupperware around.

Jackson immediately made several changes. To bolster slipping party attendance, he loosened the rules governing parties and allowed adaptations to the parties that would appeal to working women, such as shorter parties and parties thrown at the workplace. In addition, Jackson worked to improve Tupperware’s training of its salespeople and eliminated any bonuses and sales incentives that appeared ineffective. Over the next couple of years Jackson instituted further changes. The company introduced its first catalog, which was sent out only in response to requests made to its toll-free number. In addition, national print and television advertising was stepped up to help counteract competition from Rubbermaid and other retail product lines. To improve the company’s delivery speed, Tupperware built several new warehouses and a large distribution center.

Company Perspectives

Tupperware conducts its business through a single business segment, manufacturing and marketing a broad line of high-quality consumer products for the home. The core of Tupperware’s product line consists of food storage containers which preserve freshness through the well-known Tupperware seals. Tupperware also has an established line of children’s educational toys, serving products and gifts. The line of products has expanded over the years into kitchen, home storage and organizing uses with products such as Modular Mates containers, Fridge Stackables containers, OneTouch canisters, the Rock N’Serve line, Meals in Minutes line, Legacy Serving line and TupperMagic line, and many specialized containers. In recent years, Tupperware has expanded its offerings in the food preparation and servicing areas through the addition of a number of products, including double colanders, tumblers and mugs, mixing and serving bowls, serving centers, microwaveable cooking and serving products, and kitchen utensils.

Tupperware continues to introduce new designs and colors in its product lines, and to extend existing products into new markets around the world. The development of new products varies in different markets in order to address differences in cultures, lifestyles, tastes and needs of the markets.

New products in the mid-1980s helped boost both sales and company morale. In 1985 Tupperware introduced Ultra 21, a line of cookware to which market research had shown consumers would respond favorably. The company’s new microwave cookware did very well and by 1987 had shown significant growth. Other products, including the company’s traditional storage containers, struggled merely to maintain their sales figures.

Uneven Recovery in the Late 1980s and Early 1990s

In 1986 Dart and Kraft reversed their ill-fated merger. Dart renamed itself Premark International Inc., and former Kraft president Warren Batts took over as chair and chief executive officer. Tupperware apparently responded well to the change. Although the subsidiary posted a $58 million loss in 1986, its profits rose 48 percent in 1987.

Progress at Tupperware was uneven over the next several years. Sales in the United States continued to decline, although international business grew steadily. As a result, the proportion of U.S. to international sales gradually shifted until international sales accounted for more than half the company’s revenues in 1992. That year, Tupperware’s operations in the United States reported a loss of $22 million. In another management shift, Rick Goings, executive at direct sales leader Avon, took over as president of Tupperware in 1992.

In an effort to halt the decline in U.S. earnings, Tupperware cut costs and stepped up its sales force recruiting efforts. In addition, the company moved into direct mail, for the first time sending out unsolicited catalogs in 1992. Sales representatives provided names and addresses and paid Tupperware 65 cents for each catalog sent to one of their customers. Catalog customers then bought directly from their sales representatives. The company saw the catalog as yet another way to entice busy working women back into the Tupperware fold.

In 1993 the company was again enjoying profits in the United States, with earnings that year at $12.5 million. Sales also continued to grow internationally, helping improve the company’s image on Wall Street. Shares of Premark International rose from $48 at the beginning of 1993 to $88 at the end of the year, due in large part to Tupperware’s recovery.

Overall sales continued to improve in the mid-1990s, in part fueled by massive product introductions. Tupperware brought out approximately 100 new products between 1994 and 1996, including entire new product lines and specialty items catering to particular needs internationally, such as Kimono Keepers in Japan. As had been the case for the last decade, international sales growth outstripped that in the United States. Sales in the Far East and Latin America boomed, while sales in the United States improved slowly. As a result, by 1996, Tupperware relied on international business for 85 percent of its revenues and 95 percent of its profits.

Independence in 1996

Tupperware’s finances continued to improve. By 1996 sales had reached 1.4 billion with earnings of $235 million. Premark International’s food equipment and decorative product businesses were not faring quite as well: $2.2 billion in sales resulted in $168 million in earnings. Premark shares were trading well below competitors as a result, and management felt Tupperware was being held back by the company’s other businesses. Consequently, in May 1996, Premark International spun off Tupperware, making it an independent public company. Premark shareholders received one share of Tupperware stock for each Premark share they held.

Wall Street responded positively to the spinoff; Tupperware shares began trading at $42 and soon rose to $55. Certain analysts sang the company’s praises, including David Boczar, who told Financial World, “There is a perception of higher quality with Tupperware as well as the multifunctionality of the products, and also the nature of the distribution.” He felt that the long-term prospects for the newly independent company were good.

The steady improvement in sales and earnings in the mid-1990s faltered in 1997. Revenues declined from a high of $1.37 billion in 1996 to $1.23 billion in 1997. Earnings plummeted 53 percent, from $175 million in 1996 to $82 million in 1997. Several factors had contributed to the decline. Domestically, a change in the company’s sales plan led to a loss in its vital sales force. Quite a few sales representatives left Tupperware when the company raised the level of sales needed to qualify for a company minivan. Tupperware later renewed its recruiting efforts by offering subcompact company cars to sales representatives.

Internationally, the Asian economic crisis significantly affected Tupperware’s performance, which relied on Japan alone for 12 percent of its sales in 1996. In addition, a third party vendor delayed Tupperware’s delivery of products to its Japanese sales representatives, causing a major customer service problem. Although sales in the Far East continued to decline as the economic crisis there deepened, Tupperware hoped its expansion into India, Russia, and China in 1997 would offset the loss in sales.

In 1997 Tupperware experienced further discord with some of its U.S. consultants when it began enforcing a company policy prohibiting the sale of Tupperware online. The company’s crackdown included cutting off from their distributors consultants who refused to shut down their web sites. Consultants with web sites resented the intrusion into how they ran their businesses, for as independent franchise owners, Tupperware consultants are not employees. By early 1998, however, only six web sites remained in operation from a high of almost 100 in 1996. Lawrie Hall, director of external affairs at Tupperware, explained the policy to Fortune : “We believe that the product-demonstration and customer services that our consultants offer face to face can’t be adequately provided in an Internet environment.” The following year, in a complete about-face from that position, Tupperware announced plans to sell merchandise over its own corporate web site.

Sales and earnings fell further in 1998. Revenues declined to $1.1 billion, a 21 percent decline since the company was divested from Premark two years earlier. Net income fell to $69 million, the company’s lowest profits since its loss in 1992. Further erosion of the company’s independent sales force in the United States was responsible in part for the decline in domestic sales. Internationally, slipping sales in Latin America and Japan posed the greatest threat to overall growth.

In the late 1990s Tupperware pursued several strategies to combat persistent declines in sales in the United States. Diversifying its distribution channels was one strategy. Tupperware had plans for selling over the Internet, through television infomercials, and at shopping mall kiosks. Diversifying its product line was another. Throughout the middle to late 1990s, Tupperware had been expanding into new product areas, including kitchen tools, small kitchen appliances, and children’s products. Tupperware introduced a new sales technique in April 1998 with the “Demo in a Box.” Consultants can purchase these boxes that come completely outfitted with recipes, apron, invitation inserts, video and audio training tapes, etc. Internationally, Tupperware continued to move into new geographic areas and to expand its independent sales force.

Although some analysts saw hope in the company’s move into more traditional retail venues, overall confidence on Wall Street was low, as evidenced by the 63 percent decline in the company’s stock price between 1997 and 1999. However, new products are introduced each month along with hostess incentives to keep interest high for customers to host/attend frequent parties and customer loyalty remains strong.