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Bic Corporation Business Information, Profile, and History

company pens lighters market

500 BIC Drive
Milford, Connecticut 06460
U.S.A.

Company Perspectives:

Bic's core activities are the manufacture and sale of stationery products, lighters and shavers. Bic monitors the entire manufacturing process, giving constant attention to the development and improvement of its products. Bic's aim is to provide consumers with top quality products for their day-to-day lives at the minimum fair price.

History of Bic Corporation

BIC Corporation is the country's leading manufacturer of disposable ballpoint pens and cigarette lighters. It is also an industry leader in the production of disposable shavers. BIC has extensive manufacturing facilities in North and South America, including in Toronto, Canada; Milford, Connecticut; Clearwater and St. Petersburg, Florida; Guatemala City, Guatemala; and Cuautitlan, Mexico. BIC's products are primarily low-cost plastic items. Its pens, lighters, and shavers are typically the most affordable in their category, retailing for less than other brands. Pens comprise about half of the company's production, as well as half of its sales and earnings. One of BIC's most prominent products is its clear plastic ballpoint. BIC's lighter is the top-selling lighter in North America, first popularized in the 1970s with the slogan "Flick my BIC." BIC also makes correction fluid and correction pens and has acquired a premium pen manufacturer, Sheaffer.

Early History

The company was founded by Marcel Bich, who left his job as production manager for an ink company in 1945 to set up his own business outside of Paris, manufacturing parts for fountain pens and mechanical pencils. During this time ballpoint pens, although still very expensive, were becoming popular in Europe, and the first ballpoint pens were introduced in the United States, selling for $12.50 each at New York's Gimbel's Department Store.

First Bich expanded his business to include the manufacture of plastic barrels for ballpoint pen companies, and then, in 1949, he introduced his own line of ballpoint pens. Called BICs--using the phonetic spelling of Bich's name--the pens were of a simple design, nonretractable with clear plastic barrels, and sold for around 19 cents each. Whereas early ballpoint pens were known to clog and leak, Bich's pens proved reliable and achieved immediate success in Europe with annual sales exceeding $5 million by 1955. Bich then turned his attention to marketing his products in the United States.

The Waterman Pen Company in Seymour, Connecticut was founded by Lewis E. Waterman, a U.S. insurance salesperson and part-time inventor, who developed the first practical fountain pen in 1884. At one time Waterman Pen was the world's leading maker of fountain pens. In the 1950s, however, with the growing popularity of ballpoint pens, the company had begun to falter. In 1958 Bich agreed to purchase 60 percent of the company for $1 million. When the true financial condition of the company became known, Bich was able to acquire the remaining 40 percent for nothing. The company was renamed the Waterman-BIC Pen Corporation, and its headquarters was moved to Milford, Connecticut.

The inexpensive BIC pens did not catch on as quickly in the United States as they had in Europe, probably because the U.S. market had been flooded with shoddy pens by other companies. The leading brand in the "over-a-dollar" pen market was made by the PaperMate pen company, purchased in 1955 by The Gillette Company. Bich's U.S. managers urged him to make a more expensive ballpoint to compete with PaperMate, but Bich resisted. He reportedly told his advisers, "Waterman is 100 percent mine. You are going to do what you are told."

Expansion in the 1960s

In the early 1960s Waterman-BIC launched an aggressive television advertising campaign that boasted that BIC pens would write "First Time, Every Time." To prove that a 29 cent BIC pen would perform as well as pens costing several times more, the commercials showed BIC pens still working after being drilled through wallboard, shot from guns, fire-blasted, and strapped to the feet of ice skaters. In another effort to establish a market in the United States, Waterman-BIC distributed its pens for sale in grocery stores and small shops near schools where students congregated, rather than in the department stores that carried more expensive pens.

After a rocky start, Waterman-BIC established itself as the largest maker of ballpoint pens in the United States. By 1967 the company was turning out nearly 500 million pens annually, accounting for nearly 60 percent of the U.S. market. In 1972 Time reported, "Baron Bich has done for ballpoints what Henry Ford did for cars: he has produced a cheap but serviceable model." In 1974 a reporter for Forbes wrote, "From the start, Bich concentrated on the cheap end of the market--but with a difference. Where his competitors were turning out junk, Bich made a reliable pen that could command a premium, but still cheap price. ... By the time his competitors figured out how to build an equally good pen for the price, Bich had a lock on the market."

In 1971 Waterman-BIC became the BIC Pen Corporation, more accurately reflecting its business. That name soon became outdated, however, as the company embarked on its first diversification.

Expanding Its Product Line in the 1970s

In 1970 Gillette purchased the S. T. Dupont Company, a prestigious French manufacturer whose principal product was luxury cigarette lighters that sold for hundreds of dollars. During this time Dupont explored the possibilities of marketing a disposable lighter, developing an inexpensive disposable lighter called Cricket, which it introduced in the United States in 1972. Later that year Time reported that BIC was test marketing a disposable lighter that could provide 3,000 lights before wearing out. BIC introduced this lighter in 1973.

To compete with Gillette, which was solidly entrenched as the market leader, BIC again turned to creative television advertising. A series of commercials soon showed sensuous women urging cigarette smokers to "Flick my BIC," a phrase perceived as having sexual connotations, that soon became a part of the national lexicon. Writing about network censors in The Best Thing on TV: Commercials, Jonathan Price remarked, "They absolutely do not see sex in advertising if it's blatant. ... They can find sex in a garage mechanic talking about shock absorbers. But let somebody say, 'Flick my BIC,'--this is beautifully obscene--everyone nods their heads and lets that go, because ... well, we know you can't possibly mean that, that would be obscene."

BIC also slashed the wholesale price of its lighters so they sold at retail for less than one dollar. This action set off a fierce price war with Gillette. But, by the end of 1978, BIC had surpassed Cricket and, in 1984, Gillette acknowledged defeat. It pulled Cricket from the market and later sold the brand to Swedish Match Corporation, which licensed the lighter for distribution in the United States. At the time BIC controlled about 65 percent of the market for disposable lighters.

During the time that BIC and Gillette were battling over disposable lighters, the companies were also going head-to-head for a new segment of Gillette's traditional business, disposable shavers. King C. Gillette had invented the safety razor in 1903, and the company he founded dominated the market for the next 70 years. Then in 1975, BIC's parent corporation, the French Société BIC, S.A., introduced a disposable plastic shaver in Europe. Anticipating that BIC next would bring out the shaver in the United States, Gillette quickly introduced its own disposable razor dubbed "Good News!" in 1976, a full year before the BIC shaver made its U.S. debut. Gillette seriously underestimated the demand for disposable razors, however. Furthermore, it was not eager to see customers switch from its reusable razor systems to its disposables, since Good News! cost more to make and sold for less than the company's replacement blades. Therefore, Gillette spent very little on advertising.

BIC, however, advertised heavily, again relying on catchy television commercials. In one series of commercials, people were blindfolded and shaved by professional barbers, using either the BIC Shaver or Gillette's nondisposable Trac II razor. According to the ads, 58 percent of the participants claimed that there was no difference between the BIC shave and the Gillette shave. Gillette leaders were incensed by the ads and asked the three major television networks not to run the commercials unless BIC could document its claims.

By the end of 1979 Gillette and BIC each controlled about 50 percent of the market for disposables, which had grown to represent 20 percent of the total market for wet-shave razors. Disposables were especially popular among teenagers, and women appreciated the BIC Lady Shaver, the first razor specially designed and marketed with them in mind. Within ten years, Gillette would stop advertising its disposables to concentrate on its razor systems and replacement blades.

Challenges in the 1980s

In 1982, with revenues approaching $220 million, BIC acknowledged its expanding status as a leading maker of lighters and shavers by dropping "pen" from its name to become, officially, BIC Corporation. By then BIC had also taken a tentative step into sports equipment. In 1982 the company introduced the BIC Sailboard, which quickly became the North American market leader. In 1985, however, the company was forced to stop selling the sailboard in the United States when a U.S. District Court ruled that BIC had infringed on a patent owned by Windsurfing International. BIC reintroduced the sailboard to the U.S. market when the patent expired in 1987.

Having weathered fierce competitive battles for three decades, BIC faced perhaps its most serious threat in April 1987 when the New York Times reported that at least three people had died because BIC lighters had malfunctioned. The newspaper also reported that the company agreed to pay $3.2 million in damages to a Pennsylvania woman who claimed her lighter ignited in a pocket while she was on a camping trip.

The Pennsylvania case was the first involving BIC to go to trial, and the Times reported that although "claims began to trickle in soon after Bic introduced its throwaway lighters in 1972 ... the company has until recently been able to keep the cases quiet by settling them out of court." The newspaper stated that BIC had settled more than 20 cases for amounts ranging from $5,000 to almost $500,000. During the trial, design engineers testified that BIC lighters occasionally leaked, and debris could cause the shut-off valve to fail. There were also reports of BIC lighters flaring up while they were being used or accidentally igniting while lying on overheated automobile dashboards.

At the time lighters accounted for about 40 percent of BIC's revenues, and the day the story appeared, BIC stock fell 25 percent, from $32 to $24 per share. For a week the company stonewalled, refusing to provide information or answer questions about the allegations amid rumors that thousands of lawsuits had been brought against the company and that a New Jersey congressman was threatening to hold hearings on the safety of BIC lighters. Eventually, the company changed its tactics and revealed that there were 42 lawsuits then pending. BIC maintained that most of the incidents were caused by user negligence. Also acknowledging that a woman had died in an accident involving one of its lighters, BIC reassured the public that it had discontinued the model that was involved in the accident.

As a result of BIC management's candor, the company's stock began to regain value. Although it stumbled again briefly in September following the airing of the ABC television program "20/20," which featured a story on lighter safety, the stock was back to $31 per share by October. Bruno Bich, Marcel's son, who became president of the U.S. subsidiary in 1982, later told Investor Relations, "With hindsight we should have given out more information and done it faster to avoid the inaccuracies and exaggerations that appeared in the press."

Safety Issues in the Early 1990s

According to BIC, the company defended itself in more than 50 lawsuits involving lighters between 1988 and 1993, losing only three. In one of those, however, a jury in Creek County, Oklahoma found BIC responsible for injuries to three children severely burned while playing with a lighter, awarding $22 million in actual and punitive damages. The lighter allegedly exploded when it was dropped while lit. Attorneys for the children argued that the lighter should have been more child resistant; BIC argued that the children should have been better supervised.

In its 1992 annual report, the company said it was "vigorously appealing the verdict." The annual report went on to say, "The legal expenses of defending product liability claims involving lighters continue to be heavy. However, as a result of our longstanding philosophy to vigorously defend these claims, and our success in doing so, the number of lawsuits continues to decline." The first adverse decision resulted in a $1,000 verdict, and the second verdict that went against BIC was reversed and remanded for a new trial following BIC's successful appeal.

Also that year, BIC introduced a lighter with a "child resistant" catch, reportedly the result of a seven-year, $21 million development program. The patented Child Guard lighter required that a safety latch be moved to the side and up before it would light. The latch slid back into place automatically after each use. The Consumer Product Safety Commission also adopted a child-resistant standard for disposable lighters that became effective in July 1994.

The issue of safety became even more convoluted in 1992, however, when a U.S. Court of Appeals in Philadelphia ruled that manufacturers of products completely safe when used as intended may also have an obligation to make the product safe in unconventional circumstances. The ruling involved a case in which a three-year-old child took a BIC lighter from his father's pants pocket and set fire to an infant's bedclothes. The case, Griggs v. BIC Corp., was remanded to a lower court that had originally dismissed the case.

Other Developments in the 1990s

During this time BIC attempted a further diversification by launching a line of inexpensive, pocket-sized perfume "spritzers" in 1989. Marketed under the name Parfum BIC, the fragrances were first introduced by Société BIC, S.A. in Europe, where they were sold alongside other BIC products. Analysts were skeptical whether U.S. consumers would accept an inexpensive French perfume since part of the appeal of French perfumes lay in their image as luxurious and expensive. Despite an ad campaign that Advertising Age estimated as costing $22 million, touting the fragrances as "Paris in your pocket," Parfum BIC lasted less than a year in the United States. Sales of the fragrances lasted longer in Europe, but were eventually dropped overseas as well in 1991.

In 1992 BIC purchased Wite-Out Products, Inc., the second largest maker of correction fluids for office use in the United States. The correction fluid subsequently was reintroduced as BIC Wite-Out. The company also changed the name of its Writing Instruments division to Stationery Products, indicating an intention to market an expanded line of stationery-related products, while continuing to expand its successful lines of pens, lighters, and shavers. The company reported its highest ever sales and earnings in 1992 and moved its trading from the American Stock Exchange to the New York Stock Exchange.

The company's share price climbed astronomically in the early 1990s, rising from $8 a share in November 1990 to peak at $41 by March 1993. Though BIC still trailed Gillette's pens in terms of pens sold to offices, the firm led the market for pens sold to individuals and had enhanced its line with many attractive new models. BIC marketed a line of "fashion" pens, featuring bright colors and graphics wrapped around the barrel, to appeal to children and teenagers. This so-called Wavelengths line soon led the market in the fashion pen category. BIC also broke out a new shaver, a twin-blade model. BIC's lighters also continued to sell well, enhanced with the new child-resistant features. By the mid-1990s lighters accounted for 24 percent of the company's sales. Lighters continued to be profitable for BIC in spite of increasing competition from China and Thailand. In 1994 BIC filed a petition with the Department of Commerce and the U.S. International Trade Commission asking to impose antidumping duties against disposable lighters from these two countries. BIC alleged that imports from China and Thailand were being sold at below market value, with lighters going for as little as six cents each wholesale, and the numbers of such cheap lighters were increasing yearly. Nevertheless, BIC, with its massive name recognition, did not appear to be struggling.

The company's great profitability seemed due to its efficient, low-cost manufacturing. Double-digit growth in sales and net income was steady and, sometimes, spectacular. For the fourth quarter of 1995, BIC announced a 22 percent increase in profits and a 17 percent increase in sales. The company was a Wall Street favorite. Even when the stocks of many name-brand consumer product manufacturers hit a bump in the summer of 1993, analysts predicted more rosy growth for BIC. In 1995, with exchange rates very favorable to the French franc, BIC's parent, Société BIC, S.A., offered to buy up a large chunk of BIC Corporation's stock and take the company private. The offer came at a time when there was some speculation that rising plastic prices might cut into BIC Corporation's profit margins. Société BIC was anxious to take advantage of the weak dollar and quickly made a sweet deal with stockholders to secure the merger. In December 1995 BIC Corporation ceased trading as a public company on the New York Stock Exchange. Société BIC now owned 86 percent of its U.S. subsidiary.

After the merger, business did not change substantially at BIC Corporation. The company had for the most part operated independently of its European parent, and the relationship did not alter after BIC Corporation went private. The company brought out a correction pen in 1996, using technology gained from its earlier acquisition of Wite-Out. This strengthened BIC's position in the correction products market. Another significant development in the late 1990s was BIC's acquisition of Sheaffer Group in 1997. The privately held Fort Madison, Iowa company manufactured high-end fountain pens, ballpoints, roller pens, and pencils. Sheaffer pens retailed from $25 to as much as $5,000 each, in stark contrast to BIC's line, all of which sold for less than a couple of dollars. BIC planned to continue to market the Sheaffer pens under the Sheaffer name. The acquisition of Sheaffer put BIC in a better position against its long-time competitor Gillette, which had acquired two high-end pen companies several years earlier.

Principal Subsidiaries: BIC Sport, Inc.; Guy Laroche NA; Bic Inc. (Canada); No Sabe Fallar SA (Mexico); Bic de Guatemala; Bic Puerto Rico.

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