SAN GABRIEL VALLEY / COVER STORY : Avery Dennison and the Public’s Big Stamp of Approval

Think of common products that have made your life easier.

Innovations such as sticky notes, paper diapers and Velcro. Things that are so simple yet revolutionary that you wonder why no one thought of them before.

Maybe someone did. Maybe it just took awhile to work out the kinks and get the product to the mass market.

Consider the self-adhesive stamp, one of the biggest innovations the mammoth U.S. Postal Service has seen since the Pony Express. The world’s first peel-and-stick stamp crept out of the research and development offices of Avery Dennison Corp. in Pasadena more than 20 years ago. It was a 1974 holiday stamp that cost 10 cents and said “Peace on Earth.”

Although more than 15 million were sold, the stamp stalled because of technical problems. Chief among them: The adhesive leached from the back of the stamp onto its face, creating unsightly stains that made collectors complain.

In 1989, Avery Dennison agreed to try again, signing up for a multimillion-dollar research and development project with the U.S. Postal Service that lasted five years.

This time, the company’s research paid off big time, culminating in the production of self-adhesive stamps that are now sold at post offices and dispensed from ATM machines and manage to satisfy everyone from collectors to postal inspectors to Aunt Millie.

The self-adhesive postage stamp is gobbling up market share faster than you can say Pac-Man. More than 6.8 billion were produced last year, about 8% of the stamp market and a 200% increase over 1993. In the next five years, the U.S. Postal Service estimates that self-adhesive stamps will multiply until they account for up to half of the 40 billion postage stamps sold annually.

And Avery Dennison expects to be right on top of this exploding market. In 1994, the multinational firm was awarded the single largest contract for producing self-adhesive stamps. The U.S. Postal Service says it is a three-year, $14-million deal to produce up to 2 billion stamps a year.

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Not bad for a firm that made $1,391 in its first year of operations. That was in 1935, when struggling college graduate Stan Avery started his own company. Avery, who at 88 has long since retired, still lives in Pasadena and goes to the office regularly (corporate officials declined requests for an interview with him).

Today, Avery Dennison, still headquartered in Pasadena, boasts $2.9 billion in annual sales and 15,550 employees in 200 manufacturing facilities and sales offices in 27 countries.

And it keeps moving forward. On April 18, the company unveiled a self-adhesive stamp of an American flag waving over a porch, of which 2 billion will be produced in 100 million books. Thanks to the firm’s research and development, which continues to improve the stamps, this latest issue will contain the simulated perforation die cut, favored by collectors, that gives stamps scalloped edges.

Both Avery Dennison and the U.S. Postal Service confirm they have stepped up production of this latest issue because of consumer demand.

“They are being sold as fast as they can be printed,” said Robin Wright, a spokesman for the U.S. Postal Service.

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Avery Dennison--best known for its huge line of office supplies--is one of three firms in the United States that produces either the paper, the adhesives or the entire self-adhesive stamps, according to Alim Fatah, a materials engineer and program manager for stamp acquisition at the Postal Service.

Although Avery Dennison doesn’t disclose exact figures, the U.S. Postal Service confirms that the company has the largest market share for self-adhesive stamps. It was certainly the first one out of the starting blocks.

Until this year, Avery Dennison produced some of its self-adhesive stamps in a secured facility in Pasadena. Now they are all manufactured at the company’s Security Printing Division plant in Clinton, S.C.

But Avery Dennison retains a strong presence in the San Gabriel Valley. In addition to its lush corporate headquarters in Pasadena, the firm’s office products division is in Diamond Bar and its factory and printing plant in Monrovia produce labels and other self-adhesive materials.

Avery Dennison is also the sole designer and supplier of self-adhesive stamps dispensed in a sheaf from the same bank ATM machine that spits out $20 bills. The ATM stamps are available at more than 2,000 bank ATM machines across the country, from Seafirst Bank in Seattle to Santa Barbara Savings and Well Fargo Bank locally. And more banks are signing up monthly.

“Our customers like it very much, and we’ve just begun marketing it,” said Patricia Merriam, a product development manager for the express banking division at the Wells Fargo Bank corporate office in San Francisco.

Wells Fargo, which has been selling ATM stamps since September, 1993, now has about 800 ATM machines that dispense them. The bank sells more than 100,000 sheets each month, Merriam said, despite a mark-up fee of 64 cents for a sheet of 18 32-cent stamps, which pushes the price to $6.40. The same sheet would sell for face value at a post office.

It’s clear to Wells Fargo that customers are willing to pay for the convenience.

“We think that peel-and-stick stamps will soon become as indispensable as fax machines, answering machines and ATMs,” predicted Charles D. Miller, chairman and chief executive officer of Avery Dennison.

First-quarter earnings, released April 25, show net income increased 37%, to $34.5 million from $25.2 million in the same period last year. Company officials attribute that increase to stronger sales and continued cost control in office and home products.

Analysts who follow the firm add that it has shrewdly positioned itself to take advantage of a market opportunity in self-adhesive stamps that it helped design and create.

“They’ve revolutionized this industry; they have excellent technology and this is just a further sign of it,” said Otto F. Grote, who studies Avery Dennison for Derby Securities in New York. “The other stuff--licking stamps--it’s not sanitary.”

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But the road from bright idea to better mousetrap is long and tortuous. And even after the product has been designed, the chemists and physicists and engineers who work on it must strive to keep up with changing environmental regulations, customer expectations and shifting demands.

Paper diapers are a good illustration of this. Avery Dennison’s corporate moguls know they will have a public relations stink on their hands if their diaper adhesive--yes, they make that, too--doesn’t stick.

“If the release tape on a diaper fails, you hear about it; that is one product that is 100% inspected by the consumer,” asserts Paul B. Germeraad, a vice president and director of corporate research at the firm’s research center in Pasadena.

Like many of the 100 employees who work at the center, Germeraad has a doctorate. His is in chemistry.

Germeraad points out that his scientists constantly test the adhesives that Avery Dennison produces, making sure the chemistry of its paper diaper adhesive, for instance, isn’t affected by the changing chemical composition of baby products, such as talcum powder or soap.

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“You want the adhesive to be able to handle contamination, new types of baby oil, so you keep modifying the product,” Germeraad mused. “It’s sort of invisible. But you hear about it if something goes wrong.”

That’s why Kuolih Tsai, a white-smocked research chemist, is bent over a million-dollar machine in an Avery Dennison lab one recent morning inspecting molecules. He is using two high-tech machines to bombard the surface of an adhesive with X-rays to detect which atoms are on the surface.

“If you get diaper powder on an adhesive it doesn’t work well,” Tsai explained.

In another lab, scientists are testing out new products. They hold up a jar that contains what looks like a milky, gloppy breakfast shake. Behold Mystery Adhesive X.

“We have to build the molecules; these are the labs where we start from scratch,” said Luan Giang, an associate chemist.

In other labs, chemists glue pieces of plastic or paper together with Avery Dennison adhesives (the company makes hundreds of different ones), then try to peel them apart with a special instrument that measures the force used.

Think about it. You want something that peels easily off the adhesive backing, that can be pulled off your finger if you apply it to your flesh by accident, yet is strong enough to bind to a letter, a glass jar, an envelope, a plastic bottle. And once it’s on it should stay there, without curling or wrinkling or sliding, through the humidity of a New Orleans April, the dry heat of a Death Valley August and the frozen tundra of a Fairbanks February.

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Stan Avery began his company with one simple product in 1935--the first commercially feasible self-adhesive label that could be applied without moistening or gluing. Avery, who had borrowed $100 from his fiancee to start the firm, called his invention “Kum-Kleen (removable) Price Stickers.”

Avery, who later served as chairman of the board at Caltech, had no training in business, chemistry or engineering. But from his youth he was an inveterate tinkerer, a “Yankee inventor,” according to a history of the firm published by Avery called “The First 50 Years.”

Ingenuity with mechanical devices ran in his family. One of his Connecticut ancestors invented a machine that made nails from wire. As a teen, Avery learned to operate a printing press, and he worked in the pressroom of the Claremont Courier to pay his way through Pomona College, where he studied humanities.

The printing experience provided the basis for his first experiments in the making of labels, since the technology of printing and die cutting are closely allied. Avery’s first machine for labels used an old washing machine motor that he turned on and off with a foot pedal he adapted from a sewing machine.

Compiling a list of Los Angeles gift shops, he sent out letters offering to sell them 1,000 of his labels for $1. Although it was the middle of the Depression, more than 10% of those queried sent back dollar bills and Avery was launched.

The Yankee inventor called his firm Avery Adhesives. At first, Stan Avery used a rubber-based adhesive but after hearing about synthetics, he gave a chemist from the B. F. Goodrich Co. a $25 research contract to come up with a synthetic adhesive, which he tested with an ultraviolet sunlamp to see how it reacted to heat.

Although Avery’s products have been refined in the past 50 years, the idea has remained the same: A label must have an ability to hold and an ability to release. Labels became Avery’s signature product.

During World War II, as adhesives grew in importance and application, the single-product company was transformed into an industrial manufacturer. Today, the greater part of its revenues comes from selling self-adhesive materials to other firms that develop them further for their own use.

Ironically, it was the firm’s loss of the patent on the self-adhesive product in 1952 that forced it to innovate and grow. As other firms swelled the market, Avery Adhesives began selling adhesives, papers and technological wizardry to its erstwhile competitors.

In the 1970s, Avery and General Manager H. Russell Smith handed over their business to a new generation of professional managers. During the 1980s, Miller, the firm’s chairman and chief executive, embarked on acquisitions that trebled the firm’s revenue. In 1990, Avery merged with Dennison Manufacturing, a company based in Framingham, Mass., that also made self-adhesive and office products.

While Avery Dennison is still small compared to the giant 3M Corp., which counts Scotch tape and Post-it notes among its $13.3-billion stable, market analysts praise its technology and business decisions.

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Although most people aren’t aware of it, it’s hard to walk into a supermarket today and not bump into an Avery Dennison product. The shelves are full of them: adhesive labels for shampoos and deodorants, mineral water and cleansers. Even chicken.

Avery Dennison products also surround consumers around the office and at home. The firm has long been famous for its office products--file folders, labels, binders, dividers, brightly colored peel-off plastic dots that don’t look all that different from the Kum-Kleen ones of 1935.

Behind the labels are more than 60 divisions that make and sell things that stick and many that don’t, like felt markers and binders and the computer inventory systems that track such supplies.

The company’s resources and talents were put to the test in the 1990s to develop clear adhesives that match the industry trend toward “clear” liquids packaged in see-through glass or plastic bottles.

But the firm has met the challenge with colorless adhesives that stick to a rounded glass bottle. Another innovation: clear labels that wrap smoothly around the glass contours without puckering.

Avery Dennison is also a market leader in computer-generated labels for use with laser printers used by direct mail marketers and offices around the world. Now it even makes the software (LabelPro 2.0 for Windows) to run it.

And the firm is poised to cash in on emerging markets in China and Eastern Europe. Overseas operations account for 40% of sales, and includes a plant in Shanghai that will manufacture pressure-sensitive materials starting next month.

“Avery’s strategy is to continually develop new products for the future,” said Bob Birnbaum, the project manager in charge of manufacturing Avery’s self-adhesive stamp. “Fifteen years from now, people will take self-adhesive stamps for granted. Eventually, I think the gum stamps will all but disappear.”