American Safety Razor Company

1920–1925

American Safety Razor Company (ASR) is a leading manufacturer and marketer of brand-name and private-label personal care products, and the largest manufacturer in terms of units of private-label and value-brand shaving blades and razors in the United States&mdashcounting for 66 percent of their net sales. In addition to shaving blades and razors, the company primarily produces fiber and foot care products, custom bar soap, bladed hand tools and blades, industrial and specialty blades, and medical blades. These products provide a value-priced alternative to other premium national brands, generally selling 25-35 percent below competitors' prices. Products are sold under a retailer's own store label or under ASR's brand names such as Personna, Gem, Flicker, PFB, Treet, GEM Blue Star, and Pal, and are marketed to major national mass-merchandise, drug and supermarket chains such as Wal-Mart, Kmart, Walgreen, Rite Aid, Kroger, and Safeway. ASR also ranks as the largest manufacturer in terms of revenue of both premium and value-priced bladed hand tools and blades, sold primarily under the Personna, American Line, and Ardell brand names&mdash′oducts which include carpet knives, utility knives, and paint scrapers, which are sold through home-improvement centers, retail paint chains, and hardware stores such as Home Depot and Sherwin-Williams. ASR is the second largest manufacturer in terms of revenues, of cosmetic/skin care, bath, pharmaceutical, and specialty custom bar soaps, sold under the company's brand names such as Kensington, Lavender & Old Lace, and Sandalwood. As one of the largest specialty soap manufacturers in the world, ASR's custom bar soap is sold by Johnson & Johnson, Estée Lauder, and Neiman Marcus.

ASR also serves a variety of industries including food-processing, fiber cutting, automotive and printing, in addition to its consumer products. These specialty blades that perform the cutting, chopping, and slicing functions involved in manufacturing processes are sold to companies such as DuPont and Ford. Voluntary Hospitals of America and Baxter International buy carbon and stainless steel surgical blades, disposable scalpels, and surgical prep blades under the Personna brand name.

The American Safety Razor Company originally produced straight razor blades for the shaving public, but profited due to the frustration of a traveling salesman, who lamented the dull edge on his traditional razor. King Gillette imagined a new type of razor, one with a double-edged, disposable blade. He employed the skills of a machinist, William Nickerson, who had been educated at the Massachusetts Institute of Technology, to develop the tools and processes needed for blade production. Before long several companies were producing disposable blades, and Gillette changed the name of his company to The Gillette Safety Razor Company, and began a decades-long competitive race with The American Safety Razor Company.

By this time ASR was well established in the blade market and in January 1920 the company turned over all of its foreign assets and a substantial amount of cash to The American Safety Razor Export Corporation, incorporated in Delaware, giving the export subsidiary sole license for the use of American Safety Razor trademarks and patents throughout the world.

From Burma Shave to Buyout: 1925-63

Then, in 1989 ASR was acquired for $140 million in cash by John W.

1925–1992

Blade manufacturing diversified into the production of soaps and shaving aids. Burma-Shave was a brand of shaving cream developed in 1925 by Minnesota entrepreneur Clinton Odell from his father's liniment made of camphor, cassia, and cajeput oils--a recipe reputedly offered to his grandfather by an old sea captain. Beginning in 1926, Burma-Shave advertising became popular along American roadsides, made memorable by signs placed in sets of six spaced at 100 feet apart, each sign containing silk-screened jingles aimed at capturing the attention of male drivers: "He played/A sax/Had no b.o./But his whiskers scratched/So she let him go." In the 1930s and 1940s the small red signs were visible on most rural highways. During World War II signs were visible in places as far away as the South Pole, upon request by the U.S. Navy to help boost the morale of officers stationed in Antarctica. By the 1950s there were more than 7,000 sets of signs throughout the U.S., but faster driving and television advertising left the Burma-Shave campaign in the dust. Phillip Morris bought the company in 1963 and discontinued the then-famous advertising signs and later dropped all Burma-Shave trademarks, until they were re-registered by American Safety Razor--then a division of Phillip Morris--in 1979, one year after ASR bought the Burma-Shave Division from Morris. Leonard Odell, the mastermind behind the signs, became president of the new ASR division, which continued to produce a limited supply of the shaving cream.

More Owners, 1970s-80s

Bic Pen Corporation bought out ASR in the 1970s, competing with companies like Gillette for the blade market, until Phillip Morris took the company over. Then, in 1989 ASR was acquired for $140 million in cash by John W. Jordan, seven years after he set up the Jordan Company and entered the leveraged buyout business. After graduating from the University of Notre Dame, Jordan began his career in the trust department of the First National Bank in Kansas City, Missouri. Finding the Kansas City business climate too slow for his ambitions, he moved to New York and for ten years worked for Carl Marks & Company, a Wall Street Investment firm. He amassed a portfolio of 25 companies during that time--before quitting his job to form the diversified industrial holding company, Jordan Industries, Inc., along with David Zelaznick who had worked with him at Carl Marks & Co.

In January 1990, the Anti-Trust Division of the U.S. Justice Department filed a complaint against ASR and its wholly owned subsidiary, Ardell Industries, Inc., alleging that the acquisition of Ardell by ASR in April 1989 violated antitrust laws through the combination of the two companies' industrial blade businesses. The suit was settled in 1990 and the ASR was required to sell certain equipment and terminate a non-compete agreement. Litigation expenses cost ASR approximately $1.7 million, and Ardell lost a substantial portion of its customer base and encountered operational difficulties at its facilities. During 1992 Ardell's business was consolidated with that of its parent, adding restructuring expenses of approximately $2 million.

Complicating their legal and financial difficulties, in June 1992 ASR was faced with a patent infringement suit brought against them by Warner-Lambert Company. The suit was filed in regard to ASR's alleged use of a water soluble lubricating strip on certain of its shaving products. As part of the $12 million settlement, ASR was permitted to manufacture and sell razor blade cartridges with lubricating strip attachments throughout the world. The company also obtained a non-exclusive license to patent rights in exchange for the payment to Warner-Lambert of $1.4 million over 2

1988–1995

years.

ASR Goes Public, 1993

Following Jordan Industries' acquisition of ASR, the management team had determined that going public should become a major objective since capital was needed to reduce debt. The company sustained net losses of $4.1 million in 1989, $5.2 million in 1990, $39.8 million in 1991, and $3.6 million in 1992. In June 1993 the company sold 5,000,000 shares of common stock in its initial public offering, receiving net proceeds of $54.8 million. Finally, by the end of 1993 ASR was in the black, and positioned to focus on long-term objectives: developing new products, establishing an international presence, and improving its branded shaving product business. Increased operating income allowed the company to expand manufacturing in Europe and to transfer more production assembly to their facility in Obregon, Mexico.

In response to the health care industry's concern for safety in preventing possible HIV infection, ASR introduced the disposable Personna Safety Scalpel, which has a protective shield that covers the blade when the scalpel is passed between doctors and nurses. Sales of specialty medical blades almost doubled between 1988 and 1992. The growth of a more health-conscious public also affected the specialty-soap business. Particularly among the elderly, soaps using pH-sensitive materials were gaining ground. A new soap manufacturing facility was opened in Columbus, Indiana, expanding soap making capabilities for pharmaceutical, skin care, and cosmetic soaps.

Big Strides in 1995

1995–1997

ASR produced the Moving Blade Cartridge (MBC system) as described in a 1995 annual report: "We developed our MBC system for sophisticated consumers who look to technology to deliver a close, comfortable and safe shave. This system offers a level of technical sophistication that draws on several patents to allow the shaving blades to adjust to the contours of a man's face. The system's flow-through design quickly rinses away soap residue and whiskers for easier cleaning, and a closer shave." Counting on value-pricing and the nostalgia of older shavers, ASR relaunched its Burma Shave line with its pungent, soapy smell. Another innovation, the Bump Fighter, was a shaving system designed to meet the "unique shaving needs of African-American men." A shaving condition called pseudofolliculitis barbae (razor bumps or ingrown hair) affects over half of this population of men, which can be remedied by using the patented Bump Guard, a blade that shaves whiskers at a precise length to help prevent razor bumps. The product includes an accessories line including a shaving gel, cleanser, beard relaxer, and skin conditioner. The female systems market is the fastest-growing segment of the shaving category. Lady MBC, which uses the same patented moving blade technology to protect a woman's sensitive skin, was introduced in 1995. Strong sales in this segment--$13. 2 million in 1996, led to emphasis on other female products including the March 1997 introduction of the Revlon "Perfect Finish," a shaving system marketed under a license agreement with Revlon.

By 1995 sales and operating income were the highest in the company's 120-year history. The company began expanding in the consumer products sector, accounting for 82 percent of total sales. Price increases in raw materials challenged management to seek greater manufacturing efficiencies and to further reduce costs. Having previously acquired Megas Beauty Care Inc., ASR then acquired Absorbent Cotton Company, another manufacturer of cotton balls and puffs, cosmetic pads, swabs, foot care products, and pharmaceutical coils--and consolidated the manufacturing, sales and distribution, and administrative functions of the two. In April 1997 ASR completed its acquisition of The Cotton Division of American White Cross, Inc. for $9.8 million. In 1996 ASR expanded its shaving razor and blade manufacturing capabilities when it acquired Bond-America Israel Blades, Inc., manufacturers and distributors of private-brand and value-brand shaving razors and blades.

The Present and the Future

ASR's first quarter of 1997 showed record financial results over previous first quarters, with sales of domestic private-brand shaving products and international shaving products experiencing double-digit increases. A modest decline in domestic branded shaving products was attributed to inventory adjustments. The company was optimistic about the performance of its newer products which have been well received by the retail trade. The acquisition of Bond-America Israel Blades, Inc. was an investment aimed at enhancing ASR's distribution system by utilizing that company's existing channels, and with the intention of broadening the line of products to these markets. The company is already an established presence in the U.K., Europe, and Canada, and looks toward growth in international markets such as Asia, Africa, the Middle East, and Latin America.