Pella Corporation Business Information, Profile, and History

Company Perspectives:

Pella's mission is to provide the highest quality, highest value window and door products and services to customers in our selected markets at a level of profitability sufficient to encourage risk-taking and to reward employees and stockholders.

History of Pella Corporation

Pella Corporation is a leading manufacturer of windows and doors, specializing in high-end products. Based in Pella, Iowa, the company operates five manufacturing plants in its home state, as well as another window manufacturing facility in Gettysburg, Pennsylvania. Pella sells its products through a network of Pella Window Stores and Pella Windowscaping Centers throughout the United States. Its least expensive product line is also available at selected lumberyards and building material retailers, including the Home Depot chain stores. The company also operates three subsidiary companies. Cole Sewell Corporation, in Clear Lake, Iowa, is a leading manufacturer of storm doors. Pella's Viking Industries subsidiary makes lower-end vinyl windows and sells primarily in the western United States. Pease Industries, of Fairfield, Ohio, is Pella's third subsidiary company, a manufacturer of entry doors. Pella Corporation is privately owned by the family of founder Pete Kuyper. The company changed its name from Rolscreen in 1992.

Starting Off With a Unique Product in the 1920s

Rolscreen was founded by P.H. 'Pete' Kuyper and his wife Lucille. They purchased a small company in 1925 that, one year earlier, had started manufacturing unique roll-up windows. In 1926 they moved the company to Pella, their home town, and set up shop. The original operation consisted of a three-person workforce headed by Kuyper. The company soon was forced to expand as a result of surging demand for its 'Rolscreen' window screens. Kuyper's manufacturing operations more than doubled by the end of the 1920s.

Despite economic hardship during the Depression era, Rolscreen continued to grow. In 1934, in fact, Kuyper introduced his second product--high-quality venetian blinds. Three years later he started selling his patented deluxe casement window, a steel-framed casement with a wood interior, divided windowpanes, exterior wash feature, and removable insulating glass. As demand for all of Rolscreen's premium products swelled, the company expanded nationwide. By the mid-1930s Rolscreen had established sales offices in 24 U.S. cities and 15 foreign countries. During the late 1930s Kuyper's sales were particularly brisk, mostly because of orders for its unique casement windows. Rolscreen eventually sold more than one million of those units.

Rolscreen shifted gears beginning in the early 1940s, switching from private-sector manufacturing to building windows for defense-related construction. Government purchases during World War II proved a significant boon to the company, and the postwar housing shortage kept its factories running at full tilt. Demand was so great, in fact, that a temporary mill was established in Pella during 1948 and 1949 to process raw lumber. As the postwar economy and population boomed during the 1950s and 1960s, company sales climbed rapidly as architects and builders increasingly turned to the manufacturer for high-quality building components.

Postwar Expansion

Rolscreen met surging markets with a flurry of new products. In 1950, for example, the company created the Pella multipurpose window, which could be used as either a casement or awning. Likewise, Kuyper introduced the Pella wood folding door in 1952. That was followed in 1957 by the Pella twinlite window, one of the first window systems to offer efficient insulating glass as an option. Among other new products, Pella introduced the first removable wood windowpane divider in 1958, the first of many new industry products for the company.

Also during the late 1950s, the popular Pella wooden sliding glass doors were introduced. By the early 1960s those items emerged as a popular design element in many newer homes. Significant product introductions during the 1960s included: folding wood partitions; patented double-hung windows that pivoted for easy washing; wood casement windows; and the first low-maintenance aluminum clad window, which enjoyed immediate acceptance in the homebuilding industry. One of Rolscreen's most important innovations was its 'Slimshade' blinds--which featured blinds positioned between the exterior and removable interior glass panes, thus reducing cleaning and maintenance requirements.

The company's growth--even during the Great Depression--was due to a steady stream of product innovations as well as Kuyper's quality strategy. Indeed, from the company's inception Kuyper displayed a commitment to his goal of producing the highest quality products available. Although Pella windows and doors were often more expensive than competing brands, Kuyper found a ready market among designers and builders of quality homes. The company eventually earned a reputation as one of the top window and door producers in the United States. 'Our philosophy was, if you built a better product, then somebody would come buy it,' explained a company representative in Fortune in 1993.

The Pella brand sustained its reputation for quality while the company continued to broaden its distribution network and introduce new products. In 1970, for example, Rolscreen introduced its successful line of low-maintenance clad casement windows, which included later add-ons like pivoting windows and clad sliding glass doors. The organization also introduced popular French sliding glass doors in 1979 and a line of sunrooms and skylights in 1980, reflecting a trend toward more openness and natural lighting in homes.

As a result of savvy innovation and quality strategies, Rolscreen enjoyed solid long-term profit gains. Following World War II and through most of the 1980s, the company increased sales at an average rate of nine percent annually while relying on internal financing and a minimal debt load. The company's employees were rewarded with a generous profit-sharing plan and virtually no layoffs. Although a downturn in construction hampered growth in the late 1970s, housing markets recovered in the 1980s and the Pella brand continued to boost revenues.

Pella's gains were also a result of its strong distribution network. It focused on the high-margin, top end of the construction industry. Through its network of about 80 distribution centers, the company focused on upscale homeowners, professional designers, and builders of high-quality homes, rather than on the lower-profit mass consumer market. Pella profited from the support of independent distributors that were motivated to sell its products, and Pella distributors benefited from being the primary local suppliers for some of the best products available.

Pella continued to benefit from its established distribution network during the 1980s. In addition, it opened the first Pella Window Store to sell its products to upscale retail buyers. The chain proved extremely successful and spiraled to about 370 in number by the early 1990s. The company also continued to introduce new products and to improve internal operations. It expanded its production facilities with a new plant in Carroll, Iowa, and brought out new products such as vented skylights; specially coated, energy efficient windows; and stronger wooden doors that closely simulated solid wood.

With thousands of workers churning out windows and doors in high volume, Pella's manufacturing plants in the 1980s barely resembled its shops of the 1930s and 1940s. But the company's goal was to ensure that every component that left the factory had a handcrafted look. Pella continued to manufacture most of its own hardware and fittings, and even manufactured many of its production machines. Quality and productivity were achieved with high-tech manufacturing and quality control systems. For example, new designs were tested with optical (laser) equipment to ensure that they matched perfectly with blueprints.

In a Rut in the 1980s

Because of its superior quality, Pella had firmly established itself as a top producer in the door and window industry by the late 1980s. The U.S. economy began to slow in 1988, however, and the high-end market tailed off. Pella's profits flattened. The company had experienced market downturns before, but management (Kuyper had since retired) sensed that this slowdown was different. Indeed, the building supplies distribution market began shifting during the 1980s to favor producers that could market lower-priced products geared for the larger mass consumer market. As a result, Pella's customer base became increasingly narrow compared with the overall building supply market.

Of paramount concern to Pella management was the rapidly proliferating market consisting of home renovators, small contractors, and do-it-yourselfers. Those segments had grown quickly, particularly during the late 1980s, and were expected to supply the majority of growth in home construction markets through the end of the century. Most of those customers did not buy through Pella Window Stores or through Pella's chain of independent distributors. Instead, they often bought from various low-cost suppliers, including the many rapidly growing home and hardware supercenters that were opening up around the nation. Even many of those that were familiar with Pella viewed its products as unaffordable.

Recognizing the need for a major change in its strategy, Pella hired a consulting firm to study its dilemma and make suggestions. The analysis contended that Pella had become too complex, and that it was manufacturing too many products for too small a market niche. The study suggested that the company broaden its target market to include the giant middle-market. To do that, it would have to reduce the complexity of its offerings and focus on reducing production costs so that it could compete with other manufacturers on price.

Reshaping the Company in the 1990s and Beyond

Between 1990 and 1993 Pella spent $35 million restructuring its operations and reshaping its marketing and distribution strategy. The company reevaluated each of its products and jettisoned those that did not contribute significantly to the bottom line. Pella also redesigned many of its major products in an effort to make them simpler and more cost-effective to manufacture. It rearranged the products into three groups, or series: Designer, Architect, and Proline. The Designer Series consisted of Pella's more contemporary offerings, and the more expensive Architect Series was made up of traditionally styled items. Both were sold through Pella Window Stores and wholesale distributors.

The Proline series represented Pella's attempt to penetrate the blooming renovation/do-it-yourself market. Proline windows and doors were designed to be marketed through the proliferating giant home-supply chains such as Builder's Square and Home Depot. Proline components offered fewer options and were designed to be easier to understand and install. They were generally priced at about ten percent to 20 percent less than components sold in the designer series. Although they were less expensive, the company said that the components were similar in quality. To ease distributors' fear of competition from the Proline Series, Pella gave them a percentage of all Proline products sold in their territory. Pella also trained them in servicing and installing Proline goods.

In addition to reorganizing its product lines, Pella instituted a number of measures aimed at further improving productivity; Pella's Carroll plant already had been recognized as one of the nation's most efficient manufacturing facilities by Industry Week Magazine. To gain efficiency, Pella adopted a Japanese worker-management process known as kaizen. Some Pella executives were introduced to kaizen in 1992, at a point when Pella seemed to be losing ground to its competitor Andersen Corporation and to products sold through the big-box home center stores. Convinced that kaizen would help them change the company, the executives hired the TBM Consulting Group to guide Pella through the process. Using kaizen sessions to focus on problems and quick, if imperfect, solutions, almost every aspect of the way Pella did business changed. One kaizen session looked at the way Pella's core product, double-hung windows, were made. Within a few months, workers and managers cut the amount of space used to make the windows by three quarters. Gradually other changes were implemented, so that the factory no longer made standard products for inventory, but was able to fill orders as they came in. The factory was reconfigured so it could make different sized windows (mixed production) at once, instead of making batches of the same thing. Pella also reduced the number of suppliers it used and cut its lumber inventory. The fallout of the efficiency efforts was that the time necessary to fill orders at the company dropped from ten to five days, while productivity in some areas increased 25 percent. Pella had been notoriously late in filling orders, but by the late 1990s that had changed. By 2000, Pella delivered 98.5 percent of its orders on time. Custom orders that formerly took five weeks to fill now took two. Pella's improved service allowed its dealers to operate more efficiently as well. They were able to reduce markups because they needed less space, less inventory, and fewer employees.

Pella's efforts to market its lower-end products also paid off. Its Proline series was the least expensive of Pella's three market divisions, yet Proline windows were at the high end of the price range at home center stores. Pella's competitor Andersen also had tried to sell its windows through Home Depot in the early 1990s, without raging success. But Pella pleased Home Depot by shipping direct from its factories to Home Depot's distribution centers and by making its Proline on a two-day production schedule, giving the store time to restock between weekends. According to Fortune magazine (November 13, 2000), Pella's sales to home center stores including Home Depot probably reached $100 million annually by the end of the 1990s.

In the late 1990s, Pella began a series of key acquisitions. In 1997, the company purchased Cole Sewell Corporation. Cole Sewell was another Iowa company, and one of the leading manufacturers of storm doors in the United States. The next year, Pella purchased a company in Portland, Oregon called Viking Industries. Viking made vinyl windows, considered a lower-end product than Pella's, and sold them primarily in the West. In 1999, Pella made one more acquisition, the door manufacturer Pease Industries. Pease, of Fairfield, Ohio, had founded the steel door industry in the 1960s and was the dominant player in the entry door market in the United States. Pella ran all three of its new companies under their own names, as wholly owned subsidiaries. The acquisitions enhanced Pella's product line in a logical way, since all three made leading brands in related market categories.

Pella underwent significant change in the 1990s, revamping almost every aspect of the way it did business. It improved efficiency enormously, opened new factories, and entered new markets with its Proline and with the products brought by its acquired subsidiaries. The company began working with advertising giant Young & Rubicam in the late 1990s to project a different image. The company wanted its brands to be seen as belonging to a class of high-end home products, so that Pella was not just the best in windows but the best of the best. In an interview with Adweek (January 20, 1997), Pella's marketing director Jerry Dow explained, 'We're competing with Sub-Zero refrigerators, Jacuzzi tubs, and Kohler faucets,' not just other door and window manufacturers like Andersen. Clearly, the company had its sights set high. Evidence showed that it was succeeding. Sales grew an estimated 50 percent over 1999, leading to an estimated total sales figure of around $900 million. Pella remained dedicated to its kaizen process, telling Fortune (November 13, 2000) that it was still working on making changes, so that every year its products would get better. Pella demonstrated throughout the 1990s that it could improve itself, and it seemed likely that it would carry out its innovations into the next decade as well.

Principal Subsidiaries: Cole Sewell Corporation; Viking Industries; Pease Industries.

Principal Competitors: Andersen Corporation; JELD-WEN, inc.; Atrium Companies Inc.

Chronology

• Key Dates:

• 1925: Company is founded as Rolscreen.
• 1934: Rolscreen introduces line of venetian blinds.
• 1957: Company introduces double-glass Twinlite windows.
• 1988: Company's long profitability slows appreciably.
• 1992: Name is changed to Pella Corporation; company restructures using Japanese management technique called kaizen.