Ronco, Inc. History

Address:

5308 Derry Avenue
Agoura Hills, California 91301
U.S.A.

Telephone: (818) 775-4680
Fax: (818) 775-4664

Private Company
Incorporated: 1964 as Ronco Teleproducts, Inc.
Employees: 100
Sales: $75 million (1994 est.)
SICs: 5961 Mail Order Houses

Company History:

Best-known for its fast-paced, late-night commercials and pioneering informercials, Ronco Inc. has manufactured 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 that "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. Although company representatives declined to release annual sales estimates, Popeil's 1995 autobiography entitled 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.

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.

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 didn't 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.

Finally, one of the most important factors in the long-term Ronco scheme was the continuous introduction 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.

But, 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 didn't 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.

But 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.

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.

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 Fisherman, 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. But Ronco's profitability vacillated erratically 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 Teleproducts 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 wasn't 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.

The company tried to reorganize under Chapter 11 of the federal bankruptcy code, but was soon forced into Chapter 7 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's 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.

Entitled 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 from $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 Corp. 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 countersuits 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 new-fangled spatula called the Popeil Gripper. And no matter what the company introduces, it's liable to be pitched as "amazing."

Ronco, Inc. History

Company History:

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