Hello, Our Name Is . . . : Pasadena’s Avery Dennison Has Turned Label Making Into an Art
Charles D. Miller loves to go shopping. He wanders up and down the aisles, taking too much time and spending too much money. He simply can’t resist all those labels.
“I just can’t get out of the darn supermarket,” said Miller, the imposing, 65-year-old chief executive of Avery Dennison.
And no wonder. The grocery shelves are laden with examples of how his company has turned the mundane work of label making into a science and an art: detergent bottle labels, shampoo labels, labels on mouthwash, soda, deodorant, even chicken.
The Pasadena company has long been known for its office products--file folder labels, binders, dividers and startlingly bright orange dots among them. But behind the “Hello--My Name Is” badge, Avery Dennison is a complex weaving of more than 60 divisions that make and sell nearly everything that has to do with stuff that sticks.
It sells adhesives, paper and film materials, customized labels and automotive detailing products, the software to make labels and inventory systems to track the products bearing its handiwork. Since the Avery and Dennison companies merged in 1990, the combination has muscled its way into leadership positions in many sales arenas. Last year it pulled in revenue of $2.6 billion.
Now, with the most pressing headaches of the merger behind it, Avery Dennison appears ready to cash in on trends and emerging markets such as China and Eastern Europe.
The company continues to suffer from the economic troubles afflicting the United States and Europe. Overseas operations account for 40% of Avery Dennison’s sales, and a large portion of those are in Europe. Meanwhile, its division that produces tags for the retail market has foundered in the United States because of that industry’s consolidation and downturn, and it so far has only a small--though profitable--presence in the huge Asian garment market.
But there are other forces at work playing into Avery Dennison’s hand:
* Its broad range of products makes it a significant supplier to super stores such as Office Depot and Staples, which are establishing the standards for office supplies retailing. The addition of the Dennison products, which include felt markers and glue sticks, makes it the leader in several office product categories.
* Miller said new federal food labeling laws will be a boon to Avery Dennison and other label makers as the labels become bigger and more customized. “The government takes, and once in a while it gives,” Miller deadpanned at the company’s annual meeting in April.
* The company is making a strong push into the systems control business, in which it manages a customer’s inventory and also speeds its own delivery rates.
* Consumer product makers have also been spurring label makers to new creativity to match the trend toward “clear” liquids in clear bottles.
Avery Dennison now produces a variety of labels so smooth and transparent that they are barely detectable as labels. Instead, they look as if they have been printed on the containers.
* Avery Dennison has ventured for the first time into the computer software arena by developing label-making applications for personal computers. While analysts say software is not its forte, the company has quickly taken the lead in labels for use with laser printers.
However, its venture into hardware--marketing a computer add-on for printing individual labels--”has not been a roaring success,” Miller acknowledged.
* In Canada, Avery Dennison has begun test-marketing environmentally sensitive office products, labels and other materials that are made from recycled materials and are recyclable.
“We are constantly and very creatively finding ways to open new markets in what I always have thought is a crazy sticky-paper business,” Miller said.
The Avery side of the company had its beginnings in 1935 through the determination of R. Stanton Avery to make and sell the first self-adhesive label--one that would stick without adding glue or moisture. The tale of how he built his first label-making machine in a loft in the Los Angeles flower market and founded the company on less than $100 borrowed from his fiancee has become a local legend.
What began as a single-product company was transformed in a decade--during World War II--into an industrial manufacturer. Adhesives, rather than labels, were becoming its most important products, and remain so today.
Ironically, it was the loss of Avery’s patent on the self-adhesive process in 1952 that propelled the company into a transforming era of growth.
“When Stan Avery lost his patent . . . he thought it was the company’s darkest day,” said Avery Dennison’s vice president, Diane Dixon.
Instead, competition enlarged the market for self-adhesive products and significantly expanded Avery’s business opportunities. It turned its competitors into customers when it began selling adhesives, papers and technological know-how to other label makers.
Miller joined Avery in 1964, during a decade when the company’s growth was fueled by its materials business.
He became president of the company in 1975. In 1977 he added the chief executive’s role, and in 1983 he was elected the company’s second chairman, succeeding Stanton Avery.
During the 1980s, Miller embarked on acquisitions that nearly trebled the company’s revenue by the end of the decade. It was in 1990--at the end of the mergers-and-acquisitions boom--that Miller got the company he had wanted all along.
The merger with Dennison Manufacturing turned out to be more bumpy than Miller anticipated.
The federal government held up the deal for several months while it considered antitrust issues.
Then Miller discovered that combining two large and distinct corporations involved more than adding their factories and products together.
It took the better part of two years, Miller and analysts agree, to work out most of Avery Dennison’s kinks. Now “they have largely accomplished the integration,” said Robert Bartel of William Blair & Co., a Chicago investment banking firm.
“The fundamental business itself, principally pressure-sensitive materials and related applications, should grow two to three times the” gross domestic product.
Since the acquisition, Wall Street has remained fairly cool toward Avery Dennison. Its stock, traded as high as $33.25 a share the year before the acquisition, has hovered between $25 and $29. Only last month it climbed back to $30.25. At the close of trading Friday, shares were $30.125, down 12.5 cents, on the New York Stock Exchange.
Miller, however, said he has promised investors the company won’t make any major acquisitions for some time. The company, he said, has realized its vision.
Still, Miller is not ready to retire. Observers predict he will stay another five years (until age 70) before passing the baton to his probable successor, President and Chief Operating Officer Philip M. Neale.
And while Avery Dennison is still small compared to the giant 3M Co., which counts Scotch tape and Post-it notes among its $13.3 billion in sales, Miller is content that his company is in the hunt.
“Our office products business has grown from $25 million to $800 million (in sales) in 10 years,” he said, “and now we play with the big boys.”
Avery Dennison at a Glance * Company headquarters: Pasadena * Chairman, Chief Executive: Charles D. Miller * President: Philip M. Neale * Employees: 16,550 * Products: Avery Dennison manufactures and sells a number of pressure-sensitive adhesives and materials, including papers and films; is a market leader in office products under the Avery and Dennison brands; also makes tags for the retail industry and labels for consumer products. It is best known for its array of self-sticking labels. The materials division accounts for 45% of the company’s sales; office products, 30%; and, retail product identification and control systems, 25%. * Company background: Founded in 1935 by R. Stanton Avery to make self-adhesive labels primarily for use as retail price labels; under leadership of Miller, it expanded during the 1980s through a series of mergers culminating in the 1990 merger with Dennison.
Sticking It Out After the Avery Dennison merger, sales took a large jump but it has taken until now for the combined company’s profit and stock price to return to pre-merger levels. Net income in millions 1988: $77.7 1989: $86.5 1990*: $5.9 1991: $63.0 1992: $80.1 * merger with Dennison Stock prices Monthly closes, except latest May 28, 1993 close: $30.125, down 12.5 cents Source: Bloomberg Business News, company reports
