Salton, Inc. History

Address:

550 Business Center Drive
Mount Prospect, Illinois 60056
U.S.A.

Telephone: (847) 803-4600
Fax: (847) 803-1186

Public Company
Incorporated: 1943
Employees: 219
Sales: $305.6 million (1998)
Stock Exchanges: New York
Ticker Symbol: SALT
NAIC: 335211 Electric Housewares & Household Fan Manufacturing; 335221 Household Cooking Appliance Manufacturing

Company Perspectives:

With its commitment to innovation, Salton Inc. continues to provide the nation's top retailers with unique products that meet the different needs, tastes, preferences and budgets of millions of consumers.

Company History:

Salton, Inc. is a leading manufacturer of small electronics, principally for the kitchen. It has a roster of strong selling items, including the George Foreman Grill, the Juiceman juice extractor, and the Breadman bread machine. It markets appliances under a variety of other well-known brand names such as Toastmaster, White Westinghouse, Farberware, Block China, and its own Salton line. The company sells its goods both in department stores and in mass market outlets such as Kmart. It also has had key success selling appliances through television infomercials: half-hour programs that demonstrate a product, usually with a celebrity spokesperson. The company has kept abreast of changing tastes by bringing out new products quickly, catching fads and then moving on to the next. Salton experienced enormous growth in the 1990s, with sales growing at over 60 percent annually between 1996 and 1999. Company headquarters are in suburban Chicago, but almost all its manufacturing is contracted in Asia.

Entrepreneurial Beginnings

Salton got its start in 1943 as the brainchild of inventor Lewis Salton. Salton left his native Poland shortly after the German invasion in 1939 and settled in New York, where he was soon employed as an engineer for RCA Corporation. He worked long hours and often got home after supper, to be faced with cold leftovers. Salton's wife dutifully ran to the kitchen to warm his food in the oven, but the engineer decided there must be a better way. He invented a heated serving cart on wheels. Now his supper could stay warm, and be easily rolled out to him as soon as he got home. Salton raised enough money to begin manufacturing his hot tray, and began going from store to store in New York trying to get a buyer. All along, Salton had a bigger idea in mind. He wanted to sell enough hot trays to finance what he thought would be really useful and a big money-maker: an industrial tape dispenser. However, the hot tray held its own, and the Salton Tape Dispenser never made it off the drawing board. Lewis Salton recalled in an interview with Advertising Age in the July 12, 1982 issue, that on one visit to a department store buyer, his business suddenly took off. "I left the cart on the floor and walked into the buyer's office and described it to him," he told Advertising Age. "As I did, a saleslady walked in and asked the price of it. I told her $49.95. She came back and said, 'I just sold two."' In an hour, Salton had an order for 60 hot trays.

Business was up and down at first, but in the 1950s the Salton Hotray became a staple in many U.S. homes. Two factors influenced early sales. Products like the Salton Hotray existed in Europe, and imports in the 1950s helped create a demand. Then Salton scored influential free advertising with a Ladies' Home Journal feature on the device. Stressing the convenience of the product, the article concluded with a woman declaring she would rather be without her front door than without her Salton Hotray. After the article appeared, sales tripled.

Salton followed the success of the hot tray with a bun warmer in 1963. The company focused on convenience products that saved time in the kitchen or allowed consumers to make things easily at home that they would otherwise buy ready-made. Consequently, Salton manufactured an ice cream maker, a peanut butter grinder, a yogurt maker, a coffee grinder, a personal fan, and other such products. But sales of the core product, the Salton Hotray, began to drop off in the 1970s as microwave ovens became prevalent. Microwave ovens were the ultimate quick cooker and food warmer, and the simple hot tray could not compete.

Under New Owners in the 1980s

By the early 1980s, Salton had developed into a worldwide company, with branches in the United Kingdom and in South Africa. Sales stood at about $8 million annually by 1983. However, the Hotray had dropped off in sales steadily since at least 1978. Headquartered at its manufacturing facility in the Bronx and still partially overseen by Lewis Salton as vice-chairman, the company was stagnating. In 1980 the company was purchased by Bromaine Holding Company, a South African conglomerate that had already bought the rights to Salton U.K. and Salton South Africa. Bromaine brought in a new president for the firm, and then another and another. In two years, Salton ran through three top executives, and it was clear the company lacked direction. Salton needed to develop new products to stay atop the fickle home appliance market, but it lacked cash to develop them. By 1982 Salton's research and development team numbered only three people. The company seemed to be going nowhere, and in 1983, Bromaine decided to sell Salton. The buyer, for an undisclosed amount, was the British firm Marley Ltd. Marley was on a buying spree in the United States, picking up two other housewares firms, Ingrid Ltd. and Max Klein Plastic Products. Marley planned to infuse cash into the dormant company, and redevelop the dwindling hot tray market. The new leadership also planned to work on the specialty coffee maker business. Lewis Salton ceased his association with the company he had founded at this point. He signed a non-compete agreement and began a new company. In 1985 Salton's headquarters moved to the Chicago area.

New Start in the Late 1980s

Marley's fleet of housewares companies was subsequently bought by Sevco, Inc. The consolidation of these businesses was tricky, and apparently never worked. Sevco filed for bankruptcy in 1990, claiming that costs incurred in the acquisition and consolidation of its businesses had driven it under. Salton got out from under its parent in 1988 in a leveraged buyout orchestrated by Leon Dreimann. Dreimann had been head of Salton's Australian arm, and he had a clearer idea of where the company should go than any of its recent owners. He became chief executive officer in 1987, and in 1988 wangled the buyout of the firm, using only $2.5 million in venture capital. Dreimann acted quickly to get Salton back on the right track. He renamed the firm Salton Housewares, and switched its manufacturing suppliers from European firms to much less expensive producers in Hong Kong and Taiwan. In 1989, Salton Housewares merged with another small appliance manufacturer, Maxim, and the name changed again, to Salton/Maxim. The company was doing sales of around $10 million annually in the late 1980s, and after the Maxim merger, it jumped to $18 million. Then the company began to grow quickly, fueled in two ways. It began acquiring key brands, and it marketed products very successfully using television infomercials.

Salton/Maxim's first infomercial success was the Sandwich Maker, in 1990. The Sandwich Maker was a product that had long been a staple in Dreimann's native Australia, but it had not been sold in the United States. It was a small counter-top grill that cooked a sandwich while pinching the two bread slices together, so the filling was neatly enclosed. Salton/Maxim first ran a test infomercial for the Sandwich Maker in Florida. Dreimann recounted in a June 1997 interview with Adweek that the Sandwich Maker infomercial initiated an enormous interest in the small appliance. One Florida retailer called and asked for an entire shipping container of 6,000 units. The company did not have that many on hand. The contractor who made the Sandwich Makers insisted on selling Salton/Maxim at least 20,000 units, and Dreimann took the risk. Driven by the infomercial, the 6,000 units destined for Florida sold out immediately. When the company took the infomercial national, the rest of that initial order sold out, too. Over the next 15 to 16 months, Salton/Maxim sold over three million Sandwich Makers, and sales leaped from $18 million to $52 million.

Salton/Maxim was suddenly a hot company. Buoyed by the sudden success of the Sandwich Maker, Dreimann decided to take the firm public. The company made an initial public offering in October 1991, selling just over 40 percent of the company, or 2.3 million shares, at $12 a share. Just after the company went public, it suffered a series of setbacks, so that key products it expected to have on the shelf for Christmas were delayed. Salton/Maxim's stock price plunged as a result. Several groups of stockholders sued, arguing that the prospectus for the public offering was misleading. The company eventually settled the suits in 1994 by issuing $900,000 of new stock to the disgruntled investors. As it turned out, the stumble after the public offering was an aberration.

Growth and Acquisitions in the 1990s

Salton/Maxim actually had a very effective formula for marketing its products. Interest in the Sandwich Maker virtually ceased by the end of 1991, but the company was able to pick up on a new fad, juice extractors. Interest in this product was driven by an infomercial narrated by Jay Korditch, an ex-football player who swore that juicing fruits and vegetables had helped him overcome cancer. Korditch advertised the Juiceman brand juicer, and Salton/Maxim did brisk sales of its own similar appliance. After six months, the juicing craze seemed to end. But then Salton/Maxim's Dreimann took an unusual step. Though his own company had warehouses full of unwanted juicers, Dreimann advocated buying the Juiceman brand juicer. Since Juiceman was the leading brand, Dreimann gambled that it might outlast the fad. He proved correct, and the Juiceman became one of Salton/Maxim's staple products. Salton/Maxim also bought Breadman in 1994, another market-leading popular kitchen item sold through infomercials. Salton/Maxim began a steady series of its own infomercials, finding that even if sales through the ads themselves only broke even, retail sales usually jumped. Another 1994 acquisition was distribution rights for a line of products marketed by Ron Popeil, a noted infomercial salesman. Popeil's products included an Automatic Pasta Maker and Popeil's Automatic Food Dehydrator. Salton/Maxim also acquired Block China, a noted supplier of tableware and glassware, in 1996.

After going on this acquisition streak, Salton/Maxim allowed itself to be 50 percent acquired in 1996 by Windmere-Durable Holdings, Inc., a manufacturer of kitchen and personal care appliances. Windmere had produced many of Salton/Maxim's appliances at its Hong Kong factory since the early 1980s. The alliance gave Salton/Maxim needed cash, and provided the company access to Windmere's mass market distribution channels. Salton/Maxim also licensed the White Westinghouse brand name for small kitchen appliances in 1996.

Salton/Maxim continued its strategy of marketing innovative products through both infomercials and mass marketers. It had a big hit in the late 1990s with its George Foreman Grill. Salton made the grill as a joint venture with Foreman, a former heavyweight boxing champion. The countertop grill, endorsed by a celebrity, advocated as a cooker that reduced fat, produced sales of approximately $200 million within four years. Total company sales in the late 1990s rose precipitately, from about $99 million in 1996 to $182 million in 1997 to over $305 million in 1998. By 1998 roughly half the company's sales were brought in by products marketed through infomercials.

Salton/Maxim decided to end its alliance with Windmere in 1998, and it bought back the half of its stock that company had owned. Shortly after, Windmere had a financial shock that almost brought it to collapse. Other small appliance makers also had troubles in the late 1990s, including Sunbeam and Hamilton Beach/Procter Silex Inc. Salton/Maxim seemed far and away the best run and most profitable of all the companies in its niche. Shortly after buying its shares back from Windmere, Salton/Maxim agreed to buy Toastmaster for around $53 million. Toastmaster was a well known brand of small household appliances with sales of about $100 million.

In 1999 Salton/Maxim changed its name officially to Salton, Inc. The public company, which had been sold on the NASDAQ, moved to the prestigious New York Stock Exchange that year. Salton announced that it would expand its presence in infomercials, and push into Internet sales. The company had a strong roster of top brands, with its new Toastmaster, the continued blockbuster George Foreman Grill, the Breadman, the Juiceman, White Westinghouse and a slew of coffeemakers, waffle irons, shower radios, and assorted other home gadgets. The company continued to bring out new items, hoping to ignite fads. These ranged from a modest bagel slicing machine to a high-priced kitchen computer with video, CD, cable television, and Internet and e-mail access from the countertop. Salton had grown from a modest company with one principal product to a comprehensive kitchen and home electronics distributor. Perhaps most importantly, Salton had proved inimitable in its marketing know-how. Its surge of growth in the 1990s was extraordinary. Yet it was possible its expansion would continue, as the company held on to its formula of quick rollouts of new products and highly effective advertising.

Principal Subsidiaries: Toastmaster Inc.

Salton, Inc. History

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