U.S. Battery Makers Wary of Japanese Joint Venture

Times Staff Writer

About two-fifths of all household batteries consumed in the United States are sold at Christmastime. At the Toys R Us store in Torrance, for instance, customers have been snapping up plastic-wrapped batteries by the carton to power everything from talking dolls to educational toys, manager Victor Green said. “It’s probably about three times as many (as in a normal month.) We sell a lot of things that require ‘C’ cells and we can’t keep them in stock.”

Such talk ought to bring good cheer to U.S. battery manufacturers, but instead this Noel season is a time of worry. Kraft has put up for sale its highly profitable Duracell subsidiary. And a gigantic Japanese multinational is about to plunge into the $2.5-billion U.S. market long dominated by three domestic producers.

Ultra Technologies and Tokyo-based Matsushita Electric announced last Tuesday a joint venture to build a large alkaline battery manufacturing plant in the United States. Matsushita, the world’s largest manufacturer of home electronics, will own 70% of the company and will put up two-thirds of the $30 million initial investment to start the business, which will be called Matsushita-Ultra Tech Battery Corp.

Eveready on Top in U.S.


The move by Matsushita to open U.S. battery production facilities should alarm Eveready, Duracell and Rayovac, the nation’s three largest battery producers, said Brian Fernandez, an analyst with Brean Murray Foster Securities, a New York investment bank and institutional broker. “Anybody who doesn’t take Japanese entry into a consumer market based on mass production seriously has got to be out of his mind. . . . If I were running (Eveready), I’d be pushing the everyone-to-battle-stations button.”

Eveready, a subsidiary of St. Louis-based Ralston Purina, sells about 60% of the nation’s batteries, said John M. McMillin, an analyst with Prudential-Bache Securities. Eveready officials could not be reached for comment on Wednesday or Thursday.

May Lower Costs

Matsushita-Ultra Tech’s new, state-of-the-art plant may be located in the Sunbelt and will employ several hundred workers to produce several hundred million alkaline batteries a year, said James E. Moxley, president of Newark, N.Y.-based Ultra Technologies. “Several hundred million batteries” means at least 200 million batteries, Kodak spokesman Henry Kaska said, declining to elaborate.


Since July, 1986, Kodak has sold alkaline batteries made by Matsushita in Japan.

The two multinationals considered building a plant in northern Mexico, but ultimately vetoed the idea because most of the cost of making batteries lies in building the plant and buying materials, not in hiring labor, Moxley said.

Just putting batteries into packages of imported Matsushita consumer electronics brands--such as National, Panasonic, Quasar and Technics--would account for as many as 60 million batteries a year, Fernandez said. Such a strategy might be economical if savings from lower shipping charges and cheaper U.S. production costs outweighed the costs of repackaging products here. No new battery factories have been built in the United States in many years, so the new plant incorporating the latest in production technologies could give Matsushita and Kodak significantly lower costs than their competitors, he said.

Alkaline batteries account for about two-thirds of the 2.5 billion batteries sold each year in the United States, Moxley said. Sales of alkalines have grown by 10% to 12% this year, and Kodak expects the higher-priced market segment to continue to grow by 7% to 8% annually over the next five years as portable consumer electronics proliferate and as cheaper zinc-carbon batteries with shorter lifetimes are replaced, he added.


Sales of zinc-carbon batteries, for which Eveready holds 90% of the market, are “flat as a pancake” and may even be declining slightly, McMillin said.

Kodak’s announcement followed a statement by Kraft on Dec. 3 that it would seek a buyer for Duracell, which holds about 28% of the overall battery market. Kraft decided to sell the lucrative subsidiary--which earned $40.7 million in operating profit on sales of $286.8 million in the third quarter--to raise money for the repurchase of shares and the expansion of its food businesses, Chairman and Chief Executive John M. Richman said.

By foreshadowing greater competition in the battery industry, Kodak’s agreement with Matsushita may depress Duracell’s price slightly, McMillin said. But the company still should go for between $800 million and $1 billion, with potential buyers including Fort Worth-based Tandy Corp., Kodak and a few Japanese conglomerates, he said.

Industry speculation initially focused on Kodak as Duracell’s most likely buyer. If Kodak plans to pursue Duracell despite the Matsushita tie-up, Tuesday’s announcement may have been a move to push down the price, McMillin said.


Moxley denied this. “The timing of this particular announcement really was totally coincidental with the Kraft announcement,” he said, adding that the Matsushita deal “does not preclude” a Kodak attempt to buy Duracell.

The alkaline battery business has thrived in tandem with growing sales of power-hungry gadgetry, added Moxley, who recently bought a small tape deck for his daughter’s third birthday. With five “C” batteries, he said, “I’m not sure the box booms, but it barks a little.”

But as interesting to Moxley was how frequently the device’s batteries needed changing. “I’m happy to say that baby uses them like crazy.”



Market share of leading batteries, based on annual industry sales of $2.5 billion.

Rayovc 5% Duracell 28% Eveready 60% Kodak 5% Other 5% Source: Prudential-Bache Securities