Velcro Industries N.V. History

Address:

15 Pietermaai
Willemstad, Curaçao
Netherlands Antilles

Telephone: (599) 9 433 5000
Fax: (599) 800 235 6640

Public Company
Incorporated: 1957 as Velok Ltd.
Employees: 2,858
Sales: $261.2 million (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: VELCF
NAIC: 313221 Narrow Fabric Mills; 339993 Fastener, Button, Needle and Pin Manufacturing; 551112 Offices of Other Holding Companies

Company Perspectives:

Velcro Industries N.V. is a technically-driven, global organization and the industry leader. The company, through its worldwide subsidiaries, offers hundreds of different hook and loop products and fastening systems. Offerings range from standard fastening tapes of woven and knit construction, through custom-designed specialty fasteners featuring a range of performance characteristics, materials, sizes and shapes.

Key Dates:

1957:: George de Mestral forms the company to market a novel hook and loop tape fastener.
1967:: Velcro Industries Ltd. logs annual sales of $10 million.
1978:: Expiration of the original patent opens the company to competition.
1995:: Sales are more than $150 million.
1998:: Velcro Industries acquires British rights to the VELCRO® brand.
2001:: The Velcro Direct Online business-to-business site is launched.

Company History:

Velcro Industries N.V. was created to market one of the 20th century's handiest inventions: hook and loop tape. The ubiquitous fastener is used in innumerable applications: fastening blood pressure cuffs, sneakers, wallets, industrial lift belts, prisoner leg restraints, and ready-to-assemble furniture. VELCRO brand hook and loop fasteners can be found around the world on all manner of products. The company also manufactures more conventional belts and fasteners. Ultra-Mate, One-Wrap, and Texacro are three of the company's other brands. The family of Chairman Robert Cripps has been the chief shareholder since the 1970s, and there has been speculation of plans to take the company private.

A 1940s Discovery

Walking is said by some to promote creativity, and this was literally true in the invention of the VELCRO brand hook and loop fastener. As George de Mestral hiked with his dog along some alpine countryside one day in 1941, cockleburs continually fastened themselves to his trousers. Wondering what made the spiny seeds so tacky, he examined them under a microscope, revealing thousands of tiny hooks on the surface of each one. His trousers, which he also examined, were essentially covered with loops of fabric. Although he appreciated the engineering implications of the discovery right away, it took eight years of tinkering for de Mestral to develop a usable product made out of nylon hooks and loops. The main challenge was perfecting the manufacturing process to ensure consistent results.

By the 1950s the inventor had created a company to market his novel product. The trademark "VELCRO" was appropriately derived from the French words for velvet and hook: "velour" and "crochet." Although he earned less than $60 per week in his first years in business, de Mestral earned millions after he sold rights to the invention to a new company created by Jean Revaud, an American national.

Velcro S.A. was established in Switzerland in 1952. In the mid-1950s it licensed the British rights to the hook and loop technology to a subsidiary of Senn & Co., a Swiss ribbon manufacturer. Velcro S.A. also entered a licensing agreement with Velok Ltd. of Canada in 1957. The agreement allowed Velok to produce Velcro tape in the western hemisphere as well as Asia and the Pacific. Velok agreed to give the Swiss company the rights to all patents it subsequently developed.

Velok eclipsed Velcro S.A. in innovations and growth and changed its name to Velcro Industries Ltd. in 1967. Velcro USA Inc. (originally American Velcro Inc.) and Velcro Canada Ltd. (Canadian Velcro Ltd.) were subsidiaries of Velcro Industries Ltd., which acquired the rights to the patent in the late 1960s.

Cripps Acquiring Control in the Early 1970s

In 1967, its sales were worth about $10 million a year and its stock $81 per share. C. Humphrey Cripps began acquiring shares of the company (through a Channel Islands holding company, Cohere Ltd.) when their price fell to around $5 each in the early 1970s. Cripps also took the post of company chairman and later installed two sons on the board. Velcro Industries N.V. was incorporated in the Netherlands Antilles on June 7, 1972, and soon acquired the assets of the Canadian operation, Velcro Industries, Ltd.

Velcro was not the Cripps family's first foray into entrepreneurship. Humphrey's father, Cyril, established a factory to make piano frames in 1919; it later was a supplier for the automotive industry. Other holdings included private livestock and tourism investments. Known for its philanthropy (the Cripps Foundation gave Cambridge University £1 million in the 1960s), the family drew some scrutiny in the late 1980s after the company failed to offer a dividend in spite of healthy sales and cash reserves, prompting speculation about the family taking the company private. A minority shareholder, Alan Kahn, sued to prevent the transaction, and a U.S. judge ruled that the United States had jurisdiction in the case. Cripps then canceled his plans. Within five years, however, rumors of the chairman entertaining takeover offers were reported.

The company maintained a reputation for secrecy in financial matters and product development. The New York Times likened it to a private company. It held its annual meetings on the isolated Caribbean island of St. Maarten, meetings that, as reported in Forbes magazine, were not even attended by the board, who instead met with Cripps privately.

Competition in the 1980s

By the time the patent for the original Velcro tape expired in 1978, the word "Velcro" had become a synonym for hook and loop tape. The company launched a campaign to protect the brand name from falling into general use. A subsequent advertising campaign touted the product as "the first, the best."

The expiration of the patent opened the market to a slew of low-cost competitors. The French company Aplix (the leading European fastener supplier) and Japanese-owned YKK (a leading manufacturer of zippers for clothing) capitalized on the opportunity, particularly in the apparel and footwear industries. The demand for the fastener among shoemakers was so great that Velcro could not meet it alone, and it lost some business to foreign suppliers, some of whom had licensed the Velcro technology and name until 1978. When the fashion buzz wore off, however, excess capacity among hook and loop tape suppliers forced prices down.

Fashion designers, courted by the company since the 1960s, had finally begun to appreciate the possibilities. Like the first Ford automobiles, however, Velcro tape was originally only available in black. Eventually the tape was formulated in 16 different colors. An elastic version also was developed.

The company concentrated on supplying more stable, industrial markets after the shoe fad declined. Velcro products, the company explained, helped lower assembly costs in the automotive industry. The fastening devices were used to attach door panels, among other things. The aerospace industry also appreciated the lightweight, rustproof fasteners that would not rattle. A standard component in jet planes since the 1960s, VELCRO® brand hook and loop fasteners were used on aircraft ranging from small Pipers to the space shuttle. Medical supplies provided a field in which Velcro could sell higher quality, more costly products, including the fasteners used on the Symbion Total artificial heart. Not only did the fasteners have to work perfectly, but they had to be immaculately clean as well, and, as in the fashion industry, the appearance of the products was often important.

The tape was enhanced to perform in different conditions. Flame resistant (Hi-Air), silver-coated, electrically conductive (Hi-Meg), heat and corrosion resistant (Hi-Garde), fire retardant, and weather resistant polyester were among the formulations developed.

The hook side of the tape was available in differing densities and levels of durability, as was the loop side. The orientation of the loops made a difference, however, in "peel strength." Randomly oriented loops held more firmly, whereas orderly rows of loops had a somewhat more attractive appearance. The final, unsung layer, the adhesive, was also available in different formulations. Standard backed tape, meant to be sewn, had no adhesive at all. Most had peel-off backing and pressure-sensitive adhesives of different formulations for use in different applications and environments. The most durable involved a separate adhesive to be applied and activated by the user.

One-Wrap fasteners had a hook layer on one side and loops on the other and were used for wrapping purposes. Half and Half Tape featured hook tape with an adhesive backing and the opposite, with the loops, with a fabric backing that could be sewn onto other fabrics. Texacro, a less expensive brand of standard backed tape, was manufactured in Mexico. Velstick fasteners had a rigid plastic backing. The WrapStrap, an offering of Canada's WrapStrap Industries Inc., anchored two pieces of Velcro tape with an aluminum plate for securing cables and automotive and marine applications. Velcro tapes were available in a variety of widths, from to 12 inches, and were available cut into small circles, called "Velcoin" fasteners.

The fastener also proved handy for hanging displays at conventions and in retail stores. Inevitably, more whimsical applications for Velcro tape had to surface. At some bars, customers could don a suit covered with Velcro tape and fasten themselves to a wall covered with the complementary layer. Late-night talk show host David Letterman popularized this stunt. The more adventuresome could attempt to navigate a similarly fashioned inflatable obstacle course.

Expansion in the 1990s

Annual sales in fiscal year 1988 were $93 million. They had reached $115 million by 1992. In the mid-1990s, several factors sent the company's earnings and stock price downward. Velcro was forced to make a large tax payment to the Dutch government. Overseas expansion had to be funded, and the United States--where the company ran its operations from Manchester, New Hampshire--required an increase in tax payments as well.

Velcro included hundreds of types of fasteners in its product offerings in the 1990s. It diversified into conventional fasteners such as screws and clips, which were usually custom engineered. Velcro began using stainless steel in manufacturing some of these new products, although nylon remained a component of some.

The company also developed variations of its original nylon hook and loop tape using less expensive materials. The Ultra-Mate brand HTH ("High Technology Hook") line was the pinnacle of this technology.

Ultra-Mate figured significantly in a potentially lucrative cobranding exercise with Kimberly-Clark Corporation, which used the fastener on its premium line of diapers, Huggies Supreme. Ultra-Mate's injection molding process made it more cost-effective for this application than the traditional Velcro loop tape. The Velcro brand name, however, was featured on Huggies Supreme packaging because it was so valued by consumers. The venture was expected to increase Velcro USA's sales by $5 to $10 million per year.

New uses for traditional nylon-based Velcro tape continued to be developed. TacFast Systems Canada Limited developed the TacFast carpet fastening system based on Velcro tape. The system secured carpet effectively while allowing it to be easily moved if need arose. Velcro tape also anchored the artificial turf at the Toronto SkyDome and was employed to hold down toupees.

In 1996, earnings jumped nearly 20 percent to $16.3 million, while sales increased more than 10 percent to $177.1 million. Although sales lagged in North America, Velcro Industries expected to benefit from the growth of markets in Asia and Latin America. A strong European presence remained a priority for the company, as evidenced by its acquisition of Ausonia S.R.L., the leading hook and loop producer in Italy.

Consolidating for the New Millennium

Velcro was enjoying renewed popularity in the shoe industry in the late 1990s. Well known for its contributions to the athletic sneakers of the 1980s, hook and loop closures were catching on with more high-fashion shoes, such as sandals.

Velcro Industries posted a pretax profit of $41 million on sales of $235 million in 1998. It had 1,200 employees at the time. About 240 people worked for its British licensee, Selectus Ltd. In 1999, Selectus sold the British rights to the VELCRO® trademark to Velcro's U.K. subsidiary, Addey Milner Ltd. Velcro Industries also bought its Argentine importer, Gavest, during the year.

After 50 years of development, there were still new industries to exploit, such as packaging. Outsiders also were coming up with new ways to have fun with VELCRO® hook and tape fastener, such as the fad of wearing clothing covered with the fabric and jumping onto a wall covered with matching strips, as popularized by David Letterman's late night TV show. Company officials frowned on the practice, calling it "dangerous and inappropriate."

Velcro Group officials were also vigorously defending the brand name to keep it from falling into common usage. "VELCRO® brand hook and loop fastener," as it was properly known, was considered one of the top inventions of the 20th century, and in spite of competitors, appeared to have a promising future in the new millennium.

Two of Velcro's chief competitors were former subsidiaries: APLIX S.A. (established as Velcro France in 1958), which claimed to be Europe's leading hook and loop manufacturer, and Kuraray Co., Ltd. (formerly Velcro's Japanese unit).

Velcro USA was expanding its existing facilities and building a 225,000-square-foot plant in Somersworth, New Hampshire. Velcro's U.S. subsidiary paid $700,000 to settle an air pollution lawsuit from the state of New Hampshire. The company was not required to admit guilt. In late 2001 Velcro USA introduced a business-to-business e-commerce site, Velcro Direct Online.

Another new application for Velcro closures was to help fasten ceramic armor plates to military vehicles. This system was developed with LAST Armor. LAST was a division of Waltham, Massachusetts-based Foster-Miller Inc., which had helped Velcro develop an injection-molding process in the 1970s.

Velcro USA had 650 employees and sales of around $50 million a year. About 50 of them worked in Arizona, where the sales and marketing was being expanded in 2002. Velcro also had a couple of factories in the state. One was closed in 2003 and its equipment moved to Lancaster, South Carolina. The Lancaster operation was relocated to Mexico two years later to compete with imports from Asia.

Velcro Industries employed more than 2,800 people overall. Velcro Industries posted revenues of $261.20 million for the fiscal year ended September 2003. The Americas accounted for 73 percent of sales, with Europe making up 22 percent.

Income slipped in 2004 due to increased competition and unfavorable exchange rates, reported Business Week. There was new speculation of Velcro Industries going private. The family of Chairman Robert W.H. Cripps, son of Sir Humphrey Cripps, then owned 82 percent of the company.

Principal Subsidiaries: Velcro Hong Kong Ltd.; Velcro Australia Pty. Ltd.; Zhangjiagang Velcro Fastening Systems Co., Ltd. (China; 90%); Velcro Europe S.A. (Spain); Velcro GmbH (Germany); Velcro Industries France S.A.; Velcro Italia, S.R.L.; Velcro Limited (United Kingdom); Addey Milner Limited (Great Britain); Velcro Holdings B.V. (Netherlands); Velcro USA Inc.; Velcro Canada Inc.; Velcro Group Corporation (United States); Velcro de Mexico, S.A. de C.V.; Velcro do Brasil LTDA.; Velcro Industries B.V. (Netherlands Antilles).

Principal Competitors: APLIX S.A.; Kuraray Co., Ltd.; YKK Corporation.

Velcro Industries N.V. History

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Key Dates:

Company History:

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