Sunbeam-Oster Co., Inc. History

Company History:

Sunbeam and Oster are consumer brand names recognizable from coast to coast, and by all generations of Americans. Although the Sunbeam-Oster Company is a relatively new entity, formed in 1989, its brand names predate the present company by many decades. Currently the company manufactures and markets a wide variety of high quality Sunbeam and Oster products via its four principal operations: Outdoor Products, led by barbecue grills with a 50 percent market share, and outdoor aluminum furniture with better than 60 percent market share; Household Products, led by market-leading warming blankets and heated throws; Specialty Products, led by personal care items used by barbers and beauticians; and the International division, which markets Sunbeam and Oster products in over sixty countries, primarily Canada and Latin America. Twenty percent of the company's billion-dollar sales derive from the increasingly important foreign market. Sunbeam-Oster is the only small appliance manufacturer in the United States whose brand names are known worldwide.

The Sunbeam-Oster Company emerged from the stormy bankruptcy proceedings of Allegheny International in 1989. Prior to their merger, Sunbeam and Oster were separate firms within the sprawling Allegheny International (AI) group of companies. Only five years before the establishment of Sunbeam-Oster, this group of companies within AI had a workforce of 40,000 worldwide and was engaged in dozens of different enterprises. Hit hard by the recession of 1981-82, over extended and out of touch with the market, AI was compelled to sell off its businesses one by one, until all that remained were the profitable Sunbeam and Oster firms.

In 1898, in the heyday of steel making, the Allegheny Steel and Iron Company (which changed its name five years later to the Allegheny Steel Company, and after World War II became Allegheny Ludlum Industries) was incorporated in Pennsylvania, with headquarters in Pittsburgh. Over the next few decades, Allegheny Ludlum Industries acquired numerous businesses, most notably the Chemetron Corporation and the Wilkinson Sword Group. When Sunbeam was purchased in 1981, the transformation of Allegheny into Allegheny International, Inc. was complete.

Sunbeam originated in 1897 as the Chicago Flexible Shaft Company, a maker of electrical appliances. So successful were the range of its products, from toasters to irons to mixers, that the company changed its name to Sunbeam Corporation in 1946. When AI purchased Sunbeam in 1981 (whereupon it became the Sunbeam Appliance Division), Sunbeam had sales of well over one billion dollars and was already the best known brand of small electrical appliances in the country.

The Oster brand was named after John Oster Sr., who organized the John Oster Manufacturing Company in Racine, Wisconsin in 1924. The company primarily catered to the barber and beauty salon supply market. Increasingly, Oster expanded its product range to include massage equipment and other beauty care items. During World War II, the company switched from beauty care products to the production of small electric motors for military planes. While the company returned to civilian production at the war's end, its experience as a manufacturer of small machines did not go to waste. A year after the war, the Oster company took its first tentative steps into the housewares products arena with a blender it called the Osterizer, which quickly became a household word. The success of this product led to expansion into other related businesses. In the 1950s, Oster acquired the Northern Electric Company, which produced such consumer items as electric blankets and mattresses, vaporizers, thermostats and humidifiers, a variety of hair dryers, hair setters, and mirrors.

In 1980, however, the Oster Company was acquired by the Sunbeam Corporation, which a year later found itself part of the Allegheny International group of companies. As part of AI, the Sunbeam division included the John Zink Company, manufacturer of air pollution control devices, and Hanson Scale, manufacturer of bathroom scales and other balance machines.

By the mid-1980s, Allegheny International's four principal divisions, Sunbeam/Oster, Sunbeam Leisure, Northern Electric and Almet/Lawnlite, had entered a period of steep decline in sales revenues. Nearly half of AI's manufactures derived from its most important division, the Sunbeam/Oster group of companies. Neither their products nor the famous Sunbeam and Oster brands were in jeopardy; rather, problems centered around over-extension, poor morale in the workforce, and an unusually high turnover in management. Stockholders in 1986 accused Chairman and CEO Robert J. Buckley of mismanagement and a lavish lifestyle at company expense.

Buckley's successor, Oliver S. Travers, who had been head of AI's consumer products group, energetically set about to downsize the firm, ridding it in due course of no less than twenty-four diverse business operations. By 1988, AI essentially consisted of Sunbeam and Oster. One third of AI's workforce was let go and managers' salaries were frozen. Nonetheless, the decline continued, accelerated by the stock market crash in October, 1987. Four months later, AI filed in court for re-organization under Chapter 11 bankruptcy. The court approved re-organization was expected to put AI back on its feet.

Instead, the entity that would emerge from the wreckage, Sunbeam-Oster Corp., was entirely distinct from its predecessor. In the fall of 1989, an investment group calling itself Japonica Partners purchased the remains of AI for a $250 million, which market analysts considered a textbook example of well thought out bankruptcy investment. Only two years later, the investment yielded a billion dollars in sales revenues.

As the major stockholders of the bankrupt AI, Japonica Partners had created a new company, Sunbeam-Oster Company, Inc., reflecting the name recognition and abiding market strengths of these well regarded brands. AI was dissolved; the youthful Paul B. Kazarian was appointed CEO and chairman, and under his aggressive (some said domineering) management, Sunbeam-Oster emerged from the doldrums a dynamic and profitable firm.

Much of the downsizing and trimming of the former AI's operations had been accomplished by AI's last chairman, Oliver Travers, who had rid the ailing firm of half of its former businesses. Nonetheless, Mr. Kazarian set about streamlining a dozen diverse operations into four coordinated businesses: Outdoor Products, Household Products, Specialty Products and International sales. Layers of management inherited from the former AI were pared down, marginally profitable products were discontinued, and total spending was reduced a hefty 17 percent. The firm's headquarters also were re-located from Pittsburgh to Providence, Rhode Island. These and other changes occurred during the worst period of the 1990s recession. By late 1991, however, Sunbeam-Oster's sales had increased seven percent and totaled nearly a billion dollars, enabling it to make the list of Fortune 500 companies.

The new stockholders at the same time approved a coordinated business strategy that emphasized the manufacture of new products; quick distribution by means of electronic communication with the customer; working closely with retailers to promote efficiency and service; and lastly, the promotion of brand name marketing, the company's greatest strength. Advertising would be continuous and year round. The budget for advertising increased nine million dollars from 1991 to 1992, to $59 million. Promotions focussed on making consumers aware of the "Made In America" labels on many Sunbeam and Oster products.

The new Sunbeam-Oster company, with its historic old brands, was a success in a very short time. Though Chairman Kazarian's accomplishments were notable, his manner so antagonized the majority of company stockholders that they dismissed him in early 1993. Under his successor, interim Chairman and CEO Charles J. Thayer, the company continued its record growth, as well as its expansion into international markets. The four operating divisions of Sunbeam-Oster pursue the strategy put into effect at the company's founding, with each business segment holding dominant market shares in their respective products. Outdoor Products, which accounts for approximately one third of total sales and manufactures an array of barbecue grills and other products, has at least a 50 percent market share in grill commodities as well as in outdoor aluminum furniture. Household Products, which account for another third of company sales, manufactures and sells a huge variety of small electrical appliances, and holds a leading market share in such items as warming blankets and throws, heating pads, mixers and blenders. Specialty Products, which produces a variety of beauty and personal care products such as hair dryers, curlers, and scales, holds a number one market share in weather stations and thermometers, as well as in hair clippers for human and animal hair. This division generates around ten percent of company revenues.

The international division accounts for nearly one quarter of company sales, and while most of these sales are generated in Canada and Latin America, the company is making efforts to expand in the United Kingdom, the Middle East and Eastern Europe. In Latin America, Sunbeam and Oster are the most popular small appliance brands, and the company holds number one market positions in small kitchen appliances in Peru and Venezuela. While most Sunbeam-Oster products are made in the United States, the company has some manufacturing facilities in Mexico, Venezuela, and Peru. Sales and distribution of Sunbeam-Oster products in Canada have been extremely strong for decades, with market shares mirroring those in the United States. Sunbeam-Oster plans to expand its international presence by building on its brand name recognition and marketing an increasing number of products that hitherto had been sold mainly in the United States and Canada, such as outdoor folding furniture and barbecue grills. International markets will play an increasingly important role in the fortunes of Sunbeam-Oster.

In August of 1993 Sunbeam-Oster elected Roger W. Schipke as chairman and CEO. Schipke brought to the company recognized leadership in the consumer products industry. He joined Sunbeam-Oster from the Ryland Group, where he served as chairman and CEO. Prior to joining Ryland in 1990, Schipke spent 29 years with General Electric, ultimately serving on the GE Corporate Executive Council as senior vice-president in charge of General Electric's Appliances Division. He grew the Appliances Division over an eight-year period from approximately $2 billion in revenues with primarily a domestic focus to an approximately $5.5 billion global consumer products business with manufacturing facilities around the world.

The company's greatest strengths in the future will remain its widespread brand recognition, which is synonymous with quality and durability, as well its huge variety of products. A steady stream of new products continuously appear on Sunbeam-Oster's assembly lines, some, such as the unique warming blanket that adjusts heat by sensing the body's temperature, requiring high technological proficiency. The list of new products is grows steadily, and includes an automatic shut-off iron, large print bath scales, an angled toothbrush and side burner grills. Approximately one quarter of company sales derive from new products that have come on the market over the past few years. Traditional and new products are sold in such large discount stores as Wal-Mart, K-Mart, Target, Sears, and Best Products.

Further Reading:

• Allegheny International: A New Global Business Enterprise, New York: Newcomen Society, 1983.
• "Peanuts' Linus to Blanket Media for Sunbeam-Oster," April 19, 1993, p. 6.
• Ratliff, Duke, "Sunbeam-Oster Shaking Up Massager Field," HFD: The Weekly Home Furnishings Newspaper, May 17, 1993, p. 54.
• Rothman, Matt, "Keeping the Faith in Allegheny International," Business Week, January 18, 1988, pp. 74-75.
• Schifrin, Matthew, "Hidden Value," Forbes, May 11, 1992, pp. 60, 64.
• Schroeder, Michael, "Allegheny's Battle to Come Back from the Abyss," Business Week, June 26, 1989, pp. 130, 134.
• Silver, A. J., "Sunbeam-Oster Co., Inc. Company Report," Dillon, Read & Co., September 10, 1992.
• "Sunbeam-Oster Plans to Post 48 Percent Increase in Second Period Net," Wall Street Journal, July 28, 1993, p. A8.

Source: International Directory of Company Histories, Vol. 9. St. James Press, 1994.

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