Hamilton Beach/Proctor Silex Inc. Business Information, Profile, and History
Glen Allen, Virginia 23060
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History of Hamilton Beach/Proctor Silex Inc.
Hamilton Beach/Proctor-Silex Inc. is a leading manufacturer of more than 27 different household appliances, from coffeemakers to blenders, toasters to irons. A combination of two revered names in household appliance manufacturing, the company has taken a number of steps in the late 1980s and 1990s that have made it a leader in every field it enters, with double-digit market share in nearly every product group. Although, traditionally, Proctor-Silex had been known as a maker of heating appliances and Hamilton Beach had been known for its motorized appliances, the management of the joined company opted to spread product mix across the two brands, positioning Proctor-Silex as the entry brand and Hamilton Beach as the premium brand. This strategy, along with other innovative management and development techniques, has made Hamilton Beach/Proctor-Silex a strong player in the stable of its parent company, Nacco Industries, of Mayfield Heights, Ohio.
From Old Companies, New Ideas
Although Hamilton Beach/Proctor-Silex Inc. (HB/PS) is now a fully modernized and diversified appliance manufacturer, it traces its origins to some of the innovators in the field of household convenience. The Hamilton Beach Manufacturing Company began when two young employees of the Arnold Electric Company of Racine, Wisconsin, Chester Beach and L. H. Hamilton, teamed up to invent a motor that could run off either AC or DC electricity. At a time when different regions of the United States used different types of power, the "universal motor" allowed the company to begin offering the first commercial drink mixer to a national market beginning in 1911. Their timing was right, for malted milks were the latest health drink in drugstores across the nation and the mixers sold well. Soon the entrepreneurs adapted their motor for sewing machines, mixers, can openers, electric knives, and other motorized appliances. For decades thereafter Hamilton Beach operated as a successful, though undynamic, maker of quality home appliances.
The Proctor-Silex brand also traces its beginnings to a young inventor, in this case a 14-year-old Jackson, Michigan boy named Joe Myers. Myers tinkered with his mother's single-setting iron, inventing an adjustable temperature control that he tried to sell to several appliance companies without success. Finally, Myers convinced a Cleveland, Ohio company to back him in displaying the first adjustable temperature iron at the United States sesquicentennial celebration in 1926. The iron attracted the attention of automatic toaster inventors Proctor & Schwartz, who purchased Myers's Liberty Gauge Company and began marketing both the toaster and the iron in 1929. Thirty years later, in 1960, Proctor & Schwartz acquired the coffeemaker manufacturer Silex to form the Proctor-Silex company. The new company soon branched out into the manufacture of can openers, popcorn poppers, and toaster ovens.
Like Hamilton Beach, Proctor-Silex enjoyed a steady though unspectacular success through most of its history. The company went through a number of management changes over the years: it was acquired by SCM in 1966, then sold to Wesray and Management in 1983. A year later, Wesray merged Proctor-Silex with Wear-Ever, an aluminum cookware company founded in 1901 as part of the United States Aluminum Co. After enjoying two years as a publicly owned company, in 1988 Wear-Ever/Proctor-Silex was purchased outright by NACCO Industries for $104.6 million in cash. NACCO dumped Wear-Ever less than a year later, on January 31, 1989, for $39.7 million and renamed the company Proctor-Silex Inc. On October 11, 1990, NACCO merged Proctor-Silex Inc. with its newest acquisition, Hamilton Beach Inc., to form Hamilton Beach/Proctor-Silex Inc. Thus out of two old companies, a new company was formed.
Teaching an Old Dog New Tricks
Managers at HB/PS were faced with a number of problems in making their company a success. Not least among these problems was the inherently cyclical nature of the small appliance business. When the economy was booming, appliance makers could count on their goods flying off the shelves. But when the economy was bad&mdash it had been in the early 1980s&mdash〉pliance makers truly suffered, for their profit margins were never substantial to begin with. Both Hamilton Beach and Proctor-Silex had suffered through the recession of the early 1980s, plagued by high manufacturing costs and declining product quality. Moreover, increased competition from European appliance makers like Krups and Braun forced the companies into the lower end of the market, where profit margins were especially slim.
When George Nebel became president of HB/PS early in 1991, he sought to turn the difficulties of the appliance business into virtues. HFD reporter Linda Purpura noted that most executives see "low-margin business as inflexible and risky ventures that require keen management, savvy, strong brand strength, and highly efficient manufacturing to avoid losses." But with the backing of the NACCO board, Nebel took steps to turn his new company into an efficient and, above all, profitable enterprise. Nebel closed two factories, slashed personnel and advertising, and sought to increase the efficiency of existing operations. By 1992 the latter step was clearly taking effect, as factories were running at 70 to 80 percent capacity and plant managers were encouraged to reach 90 percent capacity by 1993. These steps returned the company to profitability by the end of 1991. Earnings for that year were $2.8 million on sales of $392 million. But Nebel was not yet satisfied. "As a public company, HB/PS must show an acceptable level of profitability to its shareholders, which we define as 5 percent after tax profit," he told Purpura.
Nebel next set out to reposition the Hamilton Beach and Proctor-Silex brands in an incredibly competitive market. HB/PS sought to maintain its historic strength in offering lower-priced appliances. "But equally important to HB/PS," noted Purpura, "is leveraging the popularity of its lower-priced goods to win placement for its higher-priced, and better-featured merchandise." Achieving such a goal required that HB/PS broaden its line of products, improve product quality, get these products into stores, and convince consumers to buy them. Achieving the profitability that Nebel desired meant that HB/PS needed to learn to succeed at each of these different tasks. Remarkably, they did.
New product development became an important project for HB/PS. Parent company NACCO invested more than $15 million in product development, engineering, and molding equipment. "We recognize that technology changes," Nebel told Purpura. "We can't be the low-cost producer with the last generation of technology." The addition of computer-aided design (CAD) equipment cut development time to less than six months and allowed HB/PS to stay abreast of current styling trends. By 1993 HB/PS had introduced new lines or expanded old lines in its best-selling ranges of coffeemakers, toasters, blenders, and irons. The logic behind the new product development was to create a Hamilton Beach or Proctor-Silex brand product for each price point in a product range. With this expanded line, customers who had purchased the inexpensive Proctor-Silex coffeemaker when they first started a household could now move up to the full-featured Hamilton Beach Aroma Elite coffeemaker as their earning power increased.
The mere existence of an expanded product line was attractive to retailers, who in displaying the entire range of HB/PS products could offer their customers a range of value without having to purchase from a variety of manufacturers. But HB/PS did not rest on new products alone. They also instituted an aggressive marketing plan to get their products into every available market. "Our mission has been to become the vendor of choice in the small appliance industry," Judy McBee, executive vice-president of marketing, told HFN's Michelle Nellett Abdeddaim. HB/PS marketers and salespeople worked to educate existing retailers about how best to display and market HB/PS products and sought to open new channels of distribution. In 1994, HFN reported that the company "restructured its sales staff to service department stores and specialty shops with a sales force trained specifically for these distribution channels." Such stores were expected to be the premier distribution channel for the new Hamilton Beach Professional Line of products, as well as carriers of other Hamilton Beach and Proctor-Silex products.
Finally, HB/PS sought to improve upon its brand recognition with an expanded and innovative advertising campaign. Print advertising in home magazines served as one channel to let consumers know about the new face of HB/PS products. In addition, the company initiated an innovative new idea in television marketing: an infomercial that promotes an entire range of products rather than just a single item. The "Hamilton Beach Showcase" infomercial, which featured television personality Sarah Purcell and Piero Biondi, host of the radio program "Chef Piero's Food and Wine Show," began airing in 1993 and featured the Steam Grill, the Food Steamer/Rice Cooker, and the Super Shooter cookie press. "The Hamilton Beach Showcase really illustrates the numerous benefits of the three products--benefits like ease, speed and convenience," Ian Sole, vice-president of marketing, told HFD.
Market share information for the years 1992 and 1993 showed that HB/PS's tactics paid off, for the company held double-digit market share in nearly every category in which it placed a product. HB/PS led all manufacturers in the toaster market with a 39 percent market share, held second place in the blender and electric knives markets, with 26 and 20 percent, respectively, and claimed 15 percent of the portable mixer market and 10 percent of the electric can opener market, all according to Appliance Manufacturer magazine. In the overall core electric housewares market, HB/PS held a 26.4 percent market share, just behind Black & Decker's 28.6 percent and ahead of competitors Sunbeam, Mr. Coffee, Toastmaster, Braun, Rival, Oster, and a host of other smaller manufacturers, according to Appliance magazine.
Innovations and Future Prospects
Nebel left HB/PS early in 1995 to head consumer electronics manufacturer Gemini Industries, and he was replaced in 1996 by former S. C. Johnson & Son Inc. executive Richard Posey. NACCO Chairman and Chief Executive Officer Alfred M. Ranking, Jr. told the Richmond Times-Dispatch that Posey "brings to the company the leadership experience and strategic vision vital to the company's continuing growth and reputation." Mike Morecroft, vice-president of engineering, added, "The main thing he brings is consumerism.... How do we give the consumer what he wants?"
Posey inherited from Nebel a product development and testing staff that was eager to produce the most consumer-friendly products it could build. Engineers, market researchers, and industrial designers teamed to develop products that combined the latest features with a high degree of usability. Referring to product development as a painstaking and detailed process, Morecroft told Times-Dispatch reporter Chip Jones, "Sometimes my mind is blown by the millions of dollars in computer power [it takes to make] a $9 coffee maker." Once the basic product was designed, marketers tested colors and features with focus groups to come up with a product line that would appeal to the greatest number of consumers. In the product testing lab at corporate headquarters in Glen Allen, Virginia, technicians put the products through a diabolical series of tests designed to tease out any faults a consumer might find in years of usage. "We do abusive things to our products," Chris Zachwieja, manager of product safety and reliability, told Jones.
An example of the output of such a process was the cow line of Proctor-Silex products that was introduced in 1994. Four products--a coffeemaker, a toaster, an electric can opener, and a slow cooker--all bore the distinctive image of a healthy black-and-white spotted cow. "You don't have to be a cow lover to appreciate the line's classic good looks," marketer Sole told HFD. Such research also led to careful choices of colors to match contemporary home decor and to extensive focus-group testing of the features offered on irons.
HB/PS entered the digital age shortly after Posey's arrival with the debut of its site on the World Wide Web, an information network available to many computer users. The site invited browsers to imagine themselves in a home environment in which they can choose just the items they need to suit their lifestyles--and in which they can quickly consult an expert willing to offer advice and information about Hamilton Beach and Proctor-Silex products. Included in the multilayered web site were a Virtual Kitchen, Products on Parade (a richly photographed catalog), and At Home Suites (depicting designer suites of specialty appliances). The web site allowed the company to create a world in which the consumer is surrounded by its products, a marketer's dream world. Left to be seen, however, was whether such a site was also a consumer's dream world. To their credit, the site's designers left visitors with a way out, in the form of links to other sites on the World Wide Web. The site was given the Top Shopping Site award by the All-Internet Shopping Directory in 1996.
HB/PS prepared to enter the 21st century in strong shape. With 1994 sales of $377.5 million, a slowly expanding mid-decade economy, and aggressive plans for further product development and placement, the company stood poised to challenge for the leading market share in every market it entered. With Posey's consumer focus and a skilled and efficient manufacturing base, this combination of two venerable appliance makers intended to extend its longstanding record of success.
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