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America's Paint Company A History of Sherwin-Williams Kathleen McDermott Davis Dyer 0007-SWP-03457 6 N 4364 JLSuring the summer ofiSS6, Henry A. Sberwin, a thriftyyoung man, considered three possibilitiesfir places to inoat his life savings and his time and energy, a bank, an established drug wholesaler, and afUdgfingfirm that soldpaints, vamisha, andglass. Ofthe three opportunities, Sberwin chose the leastfamiliar and the riskiest, becoming a partner in thepaint andglass business. From that decision that summer, agyears ago, has grown a pant corporation, the Sherwin-Williams Company, the largestproducer ofpaints, varnishes, and specialty coatinp in the United State--Americas Paint Company This book commemorate the anniversary ofthe "founding' ofSherurin- Williams and is offered as a gift to our employee andfriends. Our book tells the story not only ofthe company's powth and change but also provide a reminder ofthing that have not changedsince Sherwin's time: a determination to lead our industry to supply coatinpfir all use, to sell onlyproducts ofsuperior quality to operate a safe, clean, andfriendly workplace, to observe the higher ethicalstandards in business conduct, and to reward our invetors. Sherwin- Williams's success overa century anda quarter is testimony to ourpeople. We are what we are because ofthe efforts ofthousands ofindividsials. Unfortunately only a tinyfraction ofthepeople who have made this history can be included in a small volume such as this. As we observe this major milestone, the Company is pateful to all ofour employeesfir their loyalty dedication, asid outstanding service. I know we can count on ourpeople. Iam confident that when the next anniversary book is written, the names will have changedas our new leaders emerge, but lam also sun that whet has made the Company strongfir itsfirst one hundredand twenty-fiveyears will endure. Conpatsdations and GodBless You AIL G.John Breen Chairman and ChiefExecutive Officer 0007- SVfp-034577 America's Paint Company A History of Sherwin-Williams t Chapter 1: The Right Mix, 1866-1884 11 Chapter r Covering the Earth, 1885-1919 21 Chapter;: Joining the Coatings Revolution, 1920-1939 39 Chapter 4: Matching to War, 1940-1945 S3 Chapter 5: The Postwar Boom, 1946-1965 *3 Chapter 6: SpteadingThin, 1966-1978 73 Chapter 7: Renaissance in Coatings, 1979-1991 93 Acknowledgments and Notes 109 C 0007-SWP-034578 i 0007-SWP-034579 Chapter i T he birth of a successful business is often the result of happenstance, a question of mixing the right ingredients at the right time. In the case of the Sherwin-Williams Co., the key ingredients--three entrepreneurs and a market opportunity-- came together in Cleveland in the summer of 1870, when Henry A. Shcrwin, Edward P. Williams, and Alanson T. Osborn gathered to establish a company to manufacture and market paints and varnishes. The dominant figure in the new business was Shcrwin, who served as president. Bom in Baltimore, Vermont, in 1842, he left school at age 13 to work in a general store. In i860, he moved to Cleveland at the invitation ofan unde who had opened a law practice there. Sherwin was a sober and industrious young man who found employment in Cleveland as a derk in Freeman fie Kellogg Co., a drygoods store, where he was noted for his ability to wrap hoop skirts into neat packages. After two years at Freeman fie Kellogg, where he had risen to the responsible position of bookkeeper, he moved to a similar job with Geo. Sprague fie Co., a wholesale grocery. He became a partner at Sprague, but left soon after this appointment, apparently because he disliked merchandising liquon By 1866, the frugal lad had saved sa,ooo. (To place this number in perspective, per capita income in the United Stares that year was about sdoo; using this figure as a point ofcomparison, Sherwin's savinp would be worth more than *50,000 in today's currency.) Offered employment ss a cashier in a bank, as a partner in a wholesale drug business, or as a partner in a wholesale paint business, he chose the last, buying a stake in Truman Dunham fie Co., a prosperous firm that sold painters' pigments, linseed oil, colors, brushes, glass, and other products for furnishing and decorating. Although it was "the least remunerative' ofthese opportunities, Shcrwin laser recalled that Truman Dunham 'was the one which in my youthful strength and ambition give promise ofa future greater than the others." On the other hand, he confessed that he 'quite unexpectedly dropped into the paint business. It seems to have been one ofthose opportunities due come to men eady in life, and I am free to say that I did not realize what it would lead 10.* As a partner ofTruman Dunham, Sherwin displayed an approach to business marked by discipline, hard work, and attention to detail. He began by establishing a thorough office system. +* Then, in order to learn ail l could about the goods and at the same time systematize the care and arrangement of them, l frequendy put on old etotha and worked like a porter. I opened packages and aamined their contents, found out what they were for and how used, compared costs, and evenings 11 0007-SWP-034581 Chapter c The Right Mix studied til the books and catalogs I could find which in any wiy referred to these materials. While doing these things, I was training our employees in system, good order, and cleanliness everywhere about the establishment, t have always believed a fine sense oforder prevents mistakes, saves time, pleases patrons, and is real economy to any business. In 1869, the firm built a factory in Cleveland to make linseed oil, then the base ingredient in most paints. Finding that his partners "were giving that branch of the business their particular attention, which left me without able assistance in the paint business," Sherwin proposed a "dissolution and division of the business." This event occurred in February 187a Dunham and another partner remained in the linseed oil business, while Sherwin and two like-minded friends, Osborn and Williams, each invested st$,ooo for equal shares in a new partnership. Osbom had been bookkeeper of Dunham fie Co. Williams, a Phi Bern Kappa graduate ofWestern Reserve College (forerunner of Case Western Reserve University) and a Civil War veteran, was a partner in a small glass company in Kent, Ohio. In April 1870, Sherwin recruited Sereno Peck Fenn, whom he had met on a train to a YMCA convention, as cashier and bookkeeper. The business of Sherwin, Williams 6c Co., as the new firm called itself, was listed as "importing and jobbing... Zincs, Oils, Colon, Varnishes, and Window Glass." It operated a retail store at :i8 Superior Street in Cleveland and began with a fast stare during die first year sales reached *411,390.97. Sherwin, Williams tc Co. was well positioned to respond to the booming population and heady economic growth ofpost-Civil War America. In 1870, the population of Cleveland was 92,819, more than twice its level a decade earlier, and it would double again by 1880. The city, which occupied a strategic crossroads between sources ofraw materials and agricultural goods in the West and the populous markets in the East, was on its way to becoming the sixth largest in the nation. The catalysts fot this growth the were industries ofiron and steel, metal working, railroad equipment, oil refining, and manufacturing, which attracted ever increasing numbers of immigrants looking for employment. From the perspective ofSherwin, Williams tc Co., the industrial and commercial establishments that fueled growth, and rite residential areas that housed workers, shared a common need for paints and varnishes to protea and decorate buildings and structures. At the end ofthe Civil Wan the coating* industry in Cleveland stood on the threshold not.only ofexplosive growth, but also ofsignificant technological change. Up to tfien, print was generally mixed on-site by professional printers who combined a base of oil or varnish with pigments, thinner*, and sometimes other ingredients. In 1867, in a Cleveland suburb, D.R. Averili developed a liquid, pro-mixed print which. Sherwin felt, "made use ofa formula which simply could not produce a reputable print." Avcrill't "patent prints," as these ready-mix coatings were called, 13 0007-SWP-034583 < Ciur'rca i. Tm ;Uc:it Mix tended to cover or wear poorly and acquired a questionable reputation. Although he was on friendly terms with Avcrill, Shcrwin refused to carry these patent paints on the grounds that it was 'always my endeavor to do everything I could to establish a good reputation by giving good measure and good quality, to avoid every trick that would save a penny at the expense of the other fellow.* It was not long, however, before Shetwin, Williams fie Co. began to manufacture its own coatings. In 1871, the firm readied an agreement with Murphy fie Co. ofNew York to manufacture varnishes in Cleveland under the name of Murphy, Shcrwin fie Co. A small factory purchased from George H. Kingsley housed this early operation. Two years later, the firm expanded into a one-story cooper shop acquired from Standard Oil along the Cuyahoga River, hired an experienced foreman from New York, and began making paste paints, oil colors, and putty. The first year of production consisted of about 450 lbs. of coatings, using 83 separate formulas. The firm manufactured its first quality oil color, CSP Raw Umber, on October 23,1873. Shcrwin, Williams fie Co. grew rapidly, posting sales ofs688.2t4.28 in 1874 and employing some 20 people, induding two women, in its factory. During the nett few years, although sales dropped as the nation coped with financial panics and a depression, the firm slowly expanded the scope of its business, making its own tin cans and printing the labels for them. In 1873, it produced its first ready-mix paint, a blue enamd; three years later, it followed with its first line ofready-mix interior coatings, sold under the name ofOsborn's Family Paint. Shcrwin, Williams also took la first steps outside ofOhio, establishing fine an agency and then, in 1880, a brands warehouse in Chicago, the nation's third largest dty. In the mid-t870t, Shetwin and engineer Henry Coventry devdoped a new type ofstone grinding mill to enable the production of fine colon for coach paints. Patented in 1876, this x:-inch mill relied on high-quality bearings and water-cooled grinding surfaces to produce pigments ground to extraordinary fineness and uniformity. The mill proved "so much superior to any othess known* that it remained in operation at the company, with only minor modifications for mote than 30 years. Stone grinding made possible the development ofa ready-mix exterior coating introduced in 1880 as "Painter's Prepared Paint* Renamed the following year as "Sherwin-Williams Paint* or simply *SWP," this quiekiy became the nation's best-selling outside house paint In keeping with Sherwin's insistence on selling quality goods, SWP induded a guarantee `that this paint, when properly used, will not crack, flake, or chalk off, and will cover mote surface, work better, wear longer, and permanently look better than other paints." The firm offered `to forfeit the value ofthe paint and the cost ofapplying it ifin any instance* it is not found as above represented." In addition to its insistence upon produdng and sdling quality merchandise, Shcrwin, Williams, from its earliest years, manifested a prudent approach to finance. As described by Fenn, *chc decision was dear and emphatic that progress 15 0007-SWP-034585 g o Owtu s: Tim Richt Mix should be made no faster chan working capital could be provided.* He added that this meant `short terms, prompt collections and friendly banks from which we could make reasonable borrowings, with which advantage could be taken ofall good discounts and purchases for cash connected with stock and all supplies.* This prudent approach was so deeply ingrained in the company, Fcnn insisted, chat 'there is no likelihood chat wc ot any others that may come after will ever be safe to depart.* Fcnn also noted the impact on the firm ofSherwin's passion for neatness and order. *We teamed early that a disorderly desk was an abomination in his sight.* This attitude, he added, `pertained to the minute detail ofwhat in many places and by many people is considered of little or no importance--soiled blotters, gummy inkstands and pens, shiftless waste-baskets, and careless exposure ofmail matter and letten in filing baskets and elsewhere.* This scrupulousness was not always appreciated. 'Some times,* Fcnn reflected, *it seemed to. us that mote attention was paid to these matters than was necessary, but the longer we live, the less we think so, and the more most of us consider them as essential in a thoroughly conducted business at the present time, or any other.* By i88z, the firm's capital stock totaled <95,000. Osborn, whose interests lay with making and retailing products other than paint, chose to retire from the partnership, selling his stock to Shcrwin, Williams, Fcnn, and two other partners. As part of the transaction, Osborn retained ownership ofall retail business, while Shcrwin, Williams 6c Co. focused on manufacturing and wholesaling ofoils, paints, and colors. Two years later, the firm took several actions to position itselffor further growth. To take advantage oflimited liability protection, it incorporated in Ohio, changing its name to the Sherwin-Williams Company. Part ofthe new company's corporate identity was an official logo that Shcrwin designed: a chameleon, a tropical lizard capable ofaltering its color to suit its background, curled around the edge ofa palette. The company also engaged Dt Percy Ncyman, a graduate of Boston School ofTechnology (the forerunner of the Massachusetts Institute ofTechnology), as chief chemist. Apparently the first chemist ever employed by any American paint manufacturer, Ncyman was charged to ensure the quality ofthe company's paint and varnish ingredients. 17 0007-SWP-034587 0007-SWP-034588 A litbefrmpb tftb*paint andtaler werkt *fShtrwin, WtUianu & Cempany m CanalRoad in Gotland "at they appeared before tb* fir* tfMay lOtk IM4.m According to * contemporary natation, tb*facility was "Rebuiltat eat*, math larger than before. * Intec Tb* headquarter) andtffitt building, eita at tb* CanalReadtit*. vv'- tf* 0007--SWP-034589 Covering the Earth 1885-1919 Tbtycunf tampanj'i matt tuecwfidfraduet mat SWP, a fnpartdfaintfir drthuntvral uut (bilaw). Tit but idatmimrnttfir SWP wm tatimtnialtfiam pnfiuiatudfainttn and brifhtfy toland Vietarian buildinp. ) t (' Chapter i in the four decades after its entry into the ready-mix paint business the Sherwin- Williams Company grew to become the largest producer of paints and varnishes in the world, with substantial presence* in Canada, England, Australia, and New Zealand. This was a remarkable achievement, for at its founding, Sherwin-Williams was but one ofhundreds ofsmall paint manufacturers based in the United Stats. It rose to prominence, moreover, amid older, larger, bens endowed, and bens established competitors. And although it gained from the rapidly growing economy of northeast Ohio, its leading competitors, based in the Ease and in Chicago, sold to markets that were growing still fasten To Williams, who reflected on the matter late in life, the source of the company's success was clear it was "entirely due* to the policy adopted at the outset by the managers of che business, and which had been "adhered to, with very few changes, ever since." As he explained, This policy involved a thorough and comprehensive organization ofthe business to its minutest details; a determination to sell only such goods is were the ben and which would be found to be so by our customers; and a representation in the way of traveling salesmen which should be ofsuch thigh quality as could not fail to make its force recognized by all with whom it might come in contact. In shorn perfect organnation, perfect goods and perfect and honest representation--pcsistcndy adhered to__ Had he been asked, Williams might also have listed other reasons for the company's success, including the determination ofin leaden to grow the business. As Shcrwin himself observed, competition "did not cheek our efforts for further extension, but on the contrary it served as a tonic, arousing our ambition to catch up and get ahead ofthe older houses." In his view, everyone "associated with me felt this new energy, which has never left us. To me, the whole thing became like a game or contest in which I took the keenest pleasure." Sherwin-Williams began to carve out a distinctive image at an cady dace. Although SWP, its most successful product by far, was used primarily as an exterior house paint, the company sought to develop high-quality products for commercial and industrial applications. An early slogan ran, "the right quality paint and varnish for every surface." The company sold coatings for use on railroad cats, carriages and buggies, manufacturing equipment, and ship* and marine equipment, as well as for the interior and exterior ofcommercial and residential buildings. In pursuing this strategy, Sherwin-Williams positioned itselfto take advantage of the booming growth ofdie U.S. economy. The development ofthe 0007-SWP-034591 CllArTtlt l: Covujunc THE Zarth railroad and telegraph nctwotki made it possible to break out beyond regional markets and to serve the growing national market. Sherwin-Williams was among the first American companies--and probably the first American paint company--to recognize the possibilities of such an opportunity. In 1887, Sherwin-Williams opened an office in New York, and sighs of growth were apparent throughout the company. Sales of railway paints, for instance, grew spectacularly. The company could hardly have chosen a larger and more promis ing industry to serve. Railroads were the nation's first billion dollar industry: by 1880, investment in railroads amounted to (4.6 billion, a total that doubled within the decade. Railroads were a particular interest ofWilliams who 'attended many meetings of the Railway Master Car Guilders and other railway operating executives.' He also `followed closely the development of freight car paint, passenger car colots, and other railway specialties.' In 1883, the company employed a full-time salesman dedicated to developing the market for railway pains. Gy 1888, profits were sufficiently robust to allow Sherwin-Williams to repay capital supplied by Murphy 4c Co. and to terminate is relationship with chat New York concern. In ihe same year, the company completed is first acquisition, purchasing controlling interest in the Calumet Paint Company of Chicago from the Pullman Standard Car Company, maker of the famous railroad deeping can. This transaction yielded multiple dividends. Not only did it provide the steady business of supplying one ofAmerica's largest companies but it also boosted Sherwin-Williams'! presence in Chicago, home of the McCormick Harvesting Machinery Company (later better known as International Harvester and today, as Navistar) and the agricuk, \ tural equipment indusuy. Yet another benefit was the opportunity to employ a young, hard-charging Chicago paint-maker named George A. Martin, who eventually rose to become Shcrwin-Williams'i third president. Sherwin-Williams posted in first n million sales year in [890, while capital in the business had grown to s$00,000. These milestones marked the way to continuing growth and prosperity. Two yean later, the company cemented an important connection in Canada by establishing an agency relationship with Walter H. Cotringham, a Montreal paint-maken Born in tSfifi, die year when Shcrwin entered the paint industry, Cotringham pursued a career that in many respects paralleled Shcrwin's, but was marked by even greater ambition. According to an early biographeo Cotringham'* `school days were not too numerous.* At the age of1$ he worked aa a dak in a hardware store in Pcterbofo, Ontapk From there, he moved to Montreal, where he also traded in hardware and paints. By his ijth birthday, he had made himsdfinto 'a miniature captain ofindustry.* He was proprietor in his own paint-making company, Walter H. Cotringham fie Co.; senior partner of Cotringham, Robinson fit Co., a 23 -034&93 0007-SH? Chapvcii l; Covciunc TUC EaKTK company that specialized in dye* and dyestuffs; proprietor of the Windsor Chemical Company, maker* of gold paint and gold specialties; proprietor of the Sc Lawrence Canoe and Boat Company, maker* and dealer* in canoes, boats, and fittings; and director of the Non-Chemical Laundry Company. Coctingham possessed outstanding gifts as a salesman, a quality that endeared him to his associates in Cleveland. It was said, for otample, that "though his goods were higher priced than others, Me Cottingham argued that they were worth more and then and there proved his selling ability by making a success of the different lines.* By 1897, the agency relationship between Cottingham and ShenvinWilliama had blossomed, first into joint investment in a Montreal plant to manufacture SWP, and then into a full-fledged merger: The next year, Coctingham moved to Cleveland to assume dudes as general manager of the company. From chat time foewatd, until his retirement in 1922. he was the most dynamic force in the company. In 1903, following Williams's death, he was elected vice president and general manager, in 1909, when Sherwin retired to become chairman ofthe board, Cottingham was named president. Under his leadership, Shciwin>Williams pursued a strategy of aggressive expansion. Cottingham is little known in business history, although as a salesman and organization builder, he beats comparison to such legendary figures among his contemporaries as John H. Patterson, the charismatic leader ofNarionai Cash Register Asa Candler, the leader who built Coo-Cola into a national brand; and Harley and William Procter; the architects ofthe modem Procter Sc Gamble Indeed, Coctingham had few peers as an inspirational salesman. 'Enthusiasm is a good thing,* he proclaimed. *It is good to be enthusiastic over the firm you represent. It is not a bad thing to be enthusiastic over yourself* And he went on to note, "But it is even greater ifyou can instill enthusiasm in others for your goods, your firm, and yourself Get into something where you can be enthusiastic; your chances ofsuccess will be even greater there.* The themes ofhis menages and speeches to che sala force at SherwinWilliams were always uplifting; 'Enthusiasm,* *P!udc,* 'Courage,* "Do It Now,* "Staying Power;* 'Ambition,* *Th Fight is On.* and `Forward Again!* were tides of hij editorials in the employee magazine, 7Sr QmmtUttt. As one admirer noted, "Me Coctingham imparts enthusiasm to others a> the sun warms that which it shines on. Roads that look steep, hazardous, and absolutely impassable, lose their honor after a five.minute talkwith him.* In feet, he explained, *the ingle ofvision changes and banka that appeared to be made ofsiom turn out to be only `near-stone' and not in the least formidable* A fevorite Cocringham saying noted that 'theway to get business is to go after it--don't wait fin it to come to you. Others ate keen for business. Get there early. Get there first. Get out and hustle." 0007-SWP--034595 CkaPTUI CovtlUNC THE S.\JCTI( Coccinghim'i caicnu extended far beyond rhetoric, and His business strategy and methods proved remarkably effective. They began with a vision to cover the earth with Sherwin-Williams paints. This nation, which advertising manager George W. Ford had sketched as early as 1893, was eventually captured in a new corporate logo. The official change came in 1905, when Cottingham persuaded Shcrwin to abandon the chameleon logo. Shcrwin had initially balked at the 'Cover the Earth' image, not because he disliked it, but because he believed that it was inaccurate. At that time, the company's business focused exclusively on North America. Cottingham countered by agreeing that the new symbol was not strictly accurate, but he argued that it soon would be. Cottingham also displayed a genius for organization. 'Business without system is like a ship without a rudder,* he said. `System insures a straight course and a smooth successful voyage over the sea ofcommerce.' For Sherwin-Williams, this meant an organizational structure and supporting policies that encouraged efficient production and helped promote sales. The factories in Cleveland, Chicago, and Montreal were the responsibility ofJ.C Beardsice, who served as general superintendent from 1886 to 1910. Distribution and sales were handled by dcalcts and agents who were given exclusive rights to sell Sherwin-Williams products in their trading area. Following Cottingham* arrival in Gevdand, the company established dealerships and opened warehouses throughout North America at a furious dip. By 1904, when the company printed its first organization chart, distribution and sales were organized on a regional basis, with the United Stats and Canada divided into five districts, each consisting ofseveral divisions that induded depots, warehouses, and... . in a few rare instances, retail agencies. These agenda were established by ShcrwinWilliams in smaU-to-mcdium-sizc towns such as Worcester. Massachusetts; San Diego, California (1890 population of id,159); and Binghamton, New York. These retail outlets transactod business under their own names and sold Sherwin-Williams products diroedy to consumers. Some warehouses also induded retail stores, although the company did not encourage this practice. More important dun die formal structure ofSherwin-Williams was the spirit that animated it. As Cottingham put it, `the greatest factor in building a large buainea is organization* and "the greatest factor in organization, in my estimation, ia the human factor.* He pointed out that `the reputation of the Company depends quite as much upon the character of men who represent us as it docs upon the character ofour goods and our office methods.* Accordingly, the company took pains to recruk employes with qualities similar to those of its leaders: industry, honesty, courtesy, sobriety, and, ofcourse, enthusiasm. To offset the seasonal swings ofthe business--most painting occurred in the warm weather months--Cottingham launched annual efforts in the spring to ( 27 0007-SWP-034597 CllATOill 1; COVUUNC TIIE CakTII increase business, and charged representative* 'not only to hold and increase old trade, but to prosecute a campaign for new accounts.* As a company manual put it. Remember that good paints and varnishes arc worth a good price. Quality always has a value. The best salesmanship, as well as the best manufacturing and merchandising successes have been built upon quality with a fair price for it. No permanent ot satisfactory success is ever made by selling goods for less than they are worth or in pushing a business on a price basis alone. There is no middle road. You must cither build a business on quality and get the price for it, or build on price and make the quality to fit it. The Sherwin-Williams Co., at its start, chose the first, and have adhered to ic ever since, and they expea and demand that their representatives should stand for the same prineiplc Be a quality man. Think quality, talk quality, sdl quality. Ifyou back up the goods, the goods will back you up. Like Sherwin, Coctingham was a stickler for detail, oeder, and neatness. Also like Sherwin, who had established the first company lunchroom, Coctingham insisted on providing congenial conditions ofwork for employes, including 'the best oflighting, heating and ventilating facilities* as well as `clean and attractive cloak rooms, lockets, and lavatories.* He insisted that 'there should also be, ifpossible, lunch rooms, reading rooms, and test rooms.* Such investments, Coctingham believed, made good business sense *This sort ofwork should never be done in the spirit ofcharity or in a patronizing kind ofway, but solely on the basis that a good staff is deserving ofthe best and fairest kind oftreatment, and that anything that increases the efficiency, ofthe staffis profitable to the business.* Coctingham approached the training and motivation ofemployees with charaacristic thoroughness. Annual meetings ofmanagers and sales representatives to exchange news and information had started in ittx. Under Comngham, there meetings grew into conventions during which management reviewed the year's results and offered projections for the coming yeti; and speaker* made formal presentations and led discussions on important business topis. Coctingham instituted ocher meetings and oiganizations to help improve business skills and build morale. The Cct-Togccbcr Gubt which coomtcd ofdepartment heads tad their untunes, stuted it a debaring society to help members hone speaking and presentation abilities and grew into a kind ofgeneral management committee A similar organization, the ,, Foremarib dub, assembled evety two weeks "for instruction and entertainment? and ' provided an oppeptunity for supervisory petsonnd to become better acquainted - with each othcrand their work. In 1911, reflecting the company's successful national advertising campaign around the theme 'Brighten Up Finishes,* female employees in the different divisions orguiizod "Brighten Up Giris' dubs. Affcctionarely known as 'BUG dubs,* these groups supported charitable activities and engaged in volunteer service. Other I 29 0007-SWP-034599 CilAlTUl l. CovtJUNC TH C-NJVTH company-ipomotcd organintiocu included a glee dub, a debating dub, a bacball team, ^ and a benefit society. Many meetings and events were launched by shouting the company cheer--"Sis--! Doom! Ah--h--h! S-W-P! Rah! Rah! Rah!"--or by singing SherwinWilliams songs, with inspirational or amusing lyrics about the company set to popular tuna of the day. As the company grew larger, the officers found it useful to distribute information about the company in written form "to let the staff know what we are driving at." In 1897, The CiutmtUm made the first ofits regular monthly appearances. It reported information on the business, offered advice and instruction to sales people, and included news of organization and pexsoancl changes. Sherwin edited the first several issues, which sought "to keep everyone in the organization interested in what the company is doing as a whole." In November <906, as the banquet opening the annual convention, Cottingham introduced "The Sherwin-Williams Code ofPrinciples,' ten points that embodied the company's general philosophy. "We put them into tire hands of every man who coma into the concern, that he may know what the Sherwin-Williams concern is striving for and what drey stand for." The company's aids for sala representativa were exceptionally compre hensive. Tbt Rtpmenutivt't Handbook, introduced in 1907, ran nearly 4J0 pages in length and covered virtually every aspect ofthe Sherwin-Williams organization and operation. r "The boys call it the Sherwin-Williams Bible," remarked Cottingham, who added that ^ "We expect them to know it a good deal better than the average man knows his Bible." A stream ofofficial bulletins offering news ofnew products, dps on selling, and changes in organization and procedures supplemented die handbook. To stimulate still better sales. Cottingham created the "Top-Notches" fist Employees who exceeded sala forecasts by the greatest margin, or who otherwise contributed measurably to the company's success had their nama inscribed on a trophy and wese awarded bonuses. Cotdngham's inspirational leadership and sala innovations accounted for muds ofSherwin-Williams growth during the quarter century after he assumed the position ofgeneral manager. A strong believer in die value ofa diverse product line, Cottingham defined the company's business as making "finishing materials for all usa" and "not one paint for all purposes but a special punt for each purpose." SherwinWilliams manufactured a dazzling variety ofovet 600 distinct products: paints, varnishes, colon, stains, and ensmeis. In fact, a company publication noted, "the only thing ofthe kind that the Sherwin-Williams Co. doesn't make is artists? colors." The company remsinod at the forefront ofpaint-making and varnishmaking technology. To gun greater control ova the taw materials it needed, SherwinWilliams nude ascriqyfef investments and acquisitions between 1890 and 1910. This vertical integration started oa a modest scale, with the company making its own wooden boxes for shipping cans ofpaint. (Hu company had made its own paint containers t'_ since 1874.) In 1890, the company purchased a steamship, the A. C. lirubty, to cany 31 0007-SWP-034601 Giaitcu i: Covliunc vuc Gath lumber for these boxes from Minnesota across the Great I jltw to Cleveland. Far more r ambitious was an investment in 1901 to build a linseed oil plant in Gcvciand. Two years later, the company acquired a mine in Magdalena, New Mexico, to produce zinc oxide, and a smelter in Joplin, Missouri; soon thereafter, the company built a new smelter in Coffcyviile, Kansas. And in 1910, Sherwin-Williams purchased a Detroit pigment manufacturer. Expansion was not limited to vertical integration. During the same period. Sherwin-Williams built new paint and varnish factories in Newark, New Jersey, and Oakland, California. In pursuit ofCottingham's dream to supply Sherwin- Williams paints around the globe, the company forged an alliance with the well- regarded London firm of Lewis Berger 8c Sons, Ltd., in (905. Berger 8e Sons, whose origins stretched back to the eighteenth century, was renowned as a maker of fine paints and high-quality colors for coaches. The company brought to Sherwin-Williams, or soon added, operations and outposts in Canada, Australia, New Zealand, South & Africa, India, and China. The arrangemcav!l4to^4lMM^M49MB&lt4fc0lP called for the two companies *to work entirely separately, but to aid one another where help was needed or likely to assist in bringing in new business.* Sherwin-Williams also established agencies in Paris and Beilin and shipped paints to several ports in the Caribbean and in South America. The character ofpaint manufacturing was changing dramatically in this i period. The age-old practice of mixing paints from natural raw materials was giving way to more scientific and controlled paint-making, using chemically refined ingredients. A sign ofchanging times was the career of E.C. Holton, who was hired to replace Neyman as chiefchemist in :89a. The company's research lab at this time was essentially a ono-man operation that focused on taring sampla and quality control. In 1896, with encouragement from senior managers, Holton supervised the production of dry colon from bate and intermediate chemicals, making an cosine vermillion at Cleveland. Three yean later; the manufacture ofdry colon was relocated to mote spacious quarten in Chicago, By then, colon included chrome greens, iron blues, and many others. Production ofdry colon marked a significant technological advance. In 1898, Sherwin-Williams reached another Important technical milestone when it began making vamisha under in own labcL These products also required dose chemical control and by 1906, Holton directed a technical team that included nine paint and color chemists. The experiments! department then induded *a complete paint factory on a small scale devoted cxdusivdy to (he making ofapcrimcntal and sample batcha ofall dassa ofpaint.* During World War I, the technology of paint-making was further transformed. Before 1914, American manufacturers relied heavily on dyes and dyestuffs imported from Germany to make dry colon. Once fighting began, however; these 33 0007-SWP-034603 GtAlTKK t: CoVSMNC THB E**TH chemical* wete subject to embargo, and American chemical companies and paint-makers rcrambled to jupply their own requirements. The imported dyes were derived from coal tar, and their production demanded a high level ofsophistication in chemistry and chemical engineering. With Cottingham's blessing, Sherwin-Williams established a Chemical Products Department staffed by organic chemists, including Nathan E* van Stone and several other chemist* recruited from abroad. After `very exhaustive research work,* the company, in 1915, `developed a complete line of intermediates and dyes for color making equal in every respect to the previously imported material.* During the war, Sherwin-Williams also built a plant to make lithopone, an inorganic white pigment, and supplied organic chemicals to the textile industry. Between 1900 and 1919, Sherwin-Williams revenues soared from .} million to 134.1 million. This performance reflected both the booming growth of the economy and Cottingham's relentless drive to enlarge the business. During the wan for example, the company not only supplied huge amounts ofcoatings for ships and military purposes, but it also extendod the range ofin commercial businesses. Between 19:1 and 1914, Sherwin-Williams openedits first retail stores carrying the company name outside Cleveland, in San Antonio, New Yoik, Pittsburgh, Peoria, and For Worth. These stores were not designed to compete with wholesale dealers but rather to suppon them by serving as a source ofinventory and a testing-site for new ideas and techniques in merchandising. Sherwin-Williams also completed two significant acquisitions during World War L In 1917, it purchased the Martin-Senour Company ofChicago, a wellknown maker ofpremium quality paints. Two years laces; Sherwin-Williams acquired Hemingway 0C Company, a Bound Brook, New Jersey-based chemical makes; All ofthe companies Sherwin-Williams purchased continued to operate as independent subsidiaries, each with its own brands and lines ofproducts; its own research, manufacturing, and sales organizations; and its own distribution outlets; At the dose ofWorid War I, Sherwin-Williams was a company remarkably changed from is early decades. It now supplied a enormous variety of coatings and chemicals from factories throughout the United States and Canada, and in England, It was a giant manufacturing corporation, functionally-organized and vertically integrated Grom attraction ofraw materials through to final distribution of products to consumers. With sales ofmore than 134 million, it was also a vast enterprise that was making good on its promise to cover die earth. 3S 0007-SWP-034605 Joining the Coatings Revolution 1920-1939 The era's new catting* emphasizedspeed afhying and cm* afepplicatian. Pictured; apramatianfram die mid-1920*far Ragan Brushing Lacquer, a SherwinWilliams hra,U < 0007-SWP-034608 Chapter 3 E ariy in 1910, the stockholder* of Shcrwin-WilUinu voted to raise the authorised capitalisation of the company from sit million to tdo million, including stj million in preferred stock to be sold to the public This move represented the company's first major public financing. The times seemed favorable for such an act After two decades of furious expansion under Cottingham, die company enjoyed a commanding lead as the largest manufacturer ofcoatings in the United States. Sherwin-Williams and its affiliates and subsidiaries, including Lewis Bergen Martin-Scnour, and Hemingway, owned and operated 3d manufacturing plants, 90 warehouses, and JO retail stores. The company refined its own raw materials, blended than into products ofmany types and hues, packaged them for a wide variety of markets, and distributed diem for sale throughout North America and the British Commonwealth. And it was about to post an astonishing 67 per cent sales increase to a record total ofSJ7.1 million. The company's expanded earnings and capital base provided financing for another burst ofgrowth. In 19x0, Sherwin-Williams negotiated is largest acquisition to dace, purchasing Acme Quality Punts, Inc. of Detroit lot about *6 million. Founded in 18S4 by William L Davies, his brother-in-law Thomas Neal, and two minor partners. Acme had grown to become the largest paint-maker in Detroit. It was a mulcimillion dollar business specializing in coatings for the carriage and automobile industries. Acme had dose relations with automakes, induding General Motors, Ford, and die Dodge Brothers. For a briefperiod prior to World War I, Neal had served as president ofGeneral Motors; Acme's properties induded the Lincoln Paint Company in Nebraska and the Peninsular Paint Company in Michigan, as well as ocher manufacturing plants in Dallas and Lot Angdcs. Sherwin-Williams also invested heavily in upgrading and enlarging its own facilities. During 1910 sad 1911, for example, the Oakland plant added substantial capacity to make paint and varnish, while at Bound Brook, the company erected a. plant to make acetic add. Chicago waa the site ofmajor new investments, induding a new container plant to replace the original plant dosed in Gcvdand, with a lacquer manufacturing department. In 1911, ill health caused Cotringjiam to rctiic as president, although he remained chairman ofthc board until his death in 193a He spent hb last years at Woolley Hall, an Engi&h country estate, where be followed the company's continuing growth from a distance. He remained particulariy interested in che affairs of Berger Sc Sons, the London associate firm. Although the two companies subsequendy continued their affiliation, the relationship withered after Coctingham's death, and 39 0007-SWP-034609 Chatter j; Joininc Thu CoaTIncj iUvou/noN Sherwin-Williams lost iu former ability to market its products in Europe ot in the British Commonwealth, apart from FanaAa. The new president ofSherwin-Williams, George A. Martin, was ;<J yean ofage, and amply prepared for the job. A Cleveland journalist drew a memorable portrait of Martin as being: tall, spare built and angular, slightly stooped. He has a husky voice; deep-set, dark piercing eyes under shaggy brows which seem to be hungrily reaching out to grasp his entire environment; a triangular face with narrow chin sloping up to a broad forehead, a full head ofwhite hair, long arms, long nose, long fingers. He would make a perfect El Gteeo subject or with cloak, staff and boil hat, would pass for a Pilgrim. Martin was much admired by his colleagues. A teetotaler he loved to smoke, although never in the office, where he instituted a ban. He lacked pretention, ' greeting employees at every level on a first-name basis and describing his own job as peddling paint. Like his predecessors, Martin was a self-made man whose education had been cut short by economic necessity. Born in Montdlo, Wisconsin, in r8dj, Martin's family moved to Chicago during his early childhood yeas. He left school after completing the seventh grade, caking a job with a meat-packing company. Three years later, at agehe started his own specialty meat-shipping business with a friend. This enterprise began with promise, but its succcs attracted die attention oflarger competitors which quickly put Martin out ofbusiness. He then took a job with the Union Brass Manufacturing Company, makers ofrailway eat trimmings, where he remained for 7 years in various clerics! assignments. In tlty, the itch to start his own business returned, and Martin established a paint company which specialized in railway paints. The business proved a succcsa though he waa frustrated by "failure to sdl to one of the Railroads, who continued to refer to The Sherwin-Williams Company.* A resourceful man, Martin approached Sherwin-Williams in tips with an offer to sell that company's products. The offer was not only approved, but Sberwin was so impressed with Martin due he offered him a job as general manager ofthe Chicago factory. Martin distinguished himselfnot only in that post, but as manager ofthe company's Western Sales Division from ifpt to tpoj, where he presided over a quadrupling ofbusiness, partly as a result ofIntense promotion and advertising. His neat assignment came in Cleveland, as manager ofvarious manufacturing departments. Elected a vice president in 191$, he was promoted to vicepresident and general manager ofthe company five yean laten Mifitin assumed leadership ofSherwin-Williams during a difficult period. A sharp recession had resulted in a two-year decline in revenues, and the company did not surpass its 1930 sake record until die lace 1920s. Revenue crested at sSt.) million in 1929, then they plunged again during the Great Depression, bottoming out at tpj million in 1933. In that yean Martin carried out the unhappy task ofcutting 0007-SWP Gi/urca ): Joi.stNC ruii Coatings Hcvou.t:on t the payroll and slashing employment, although the company continued to pay dividends. Not until the late 1930* could management led reasonably confident that the wont was oven This economic roller-coaster was only one of several challenges to the company during the interwar years. The pace of technological innovation quickened with a great change sweeping across the economy in this period: the "chemicalization' ofAmerican industry. During the 19101 and 19301, the advantages of synthetic materials in terms ofuniformity, standardization, reliability, controlled availability, and lower cost, became apparent everywhere Man-made products replaced "natural* < products, and chemically controlled processes supplanted customary methods In tactile*, materials, paper; printing, adhesives, perfumes, rubber, glass, cement, asphalt, and, of course, paints and varnishes. The chemicalization of the coatings industry created both problems and opportunities for Sherwin-Williams. Prosperity in awotid oftechnological complexity required the company to remain abreast ofthe latest scientific developments and to continue upgrading its technical capabilities. It was also necessary to wield marketing dour to fend offcompetition from new and unexpected rivals such as the chemical giant, Du Pont. As the leading supplier ofpaints and varnishes in North America, however. Sherwin-Williams was poised to profit from the crunsformation ofthe industry. 1 New competition was keenest in markets for industrial finishes, especially those applied to the era's most cyo-catching produet, the automobile: Between 1918 and <9x9, production ofcats in the Uoitod States soared from less chan i million to neatly j million per yean Two factors accounted for this explosive growth: Henry Ford's demonstration ofthe power ofmass production, and General Motors' demonstration ofthe power ofmass marketing. Ford's manufacturing advances drove prices steadily downward: in the 1910s, a new Modd T sold for less than szjo. The "Tin Lizzie* had a significant drawback, however; As Ford himselfput it, customers could have a Model T in any color they wanted--so long as it was black. The reason: blade belong enamd, which could be oven-dried quickly, was by far the most efficient finish available at the time; General Motota could not compete with Ford on price, so it sought instead to segment the market by 0Bering "a ear for every purse and purpose,* A key element ofthis plan was an ability to offer low-priced automobiles in a variety ofstyles and colors. During the early 19x0s, researchers at General Motors and Du Pont developed a spragpble, quick-drying, low-viscosity lacquer made from nitrocellulose. Not only did the new lacquer dry much faster than the old enamel--in z hours, as opposed to Z4--but it also permitted finishing in a wide array ofcolon. Introduced in 19Z3, the new lacquer scored an immediate hit, and within three yean. General Moton ^ overtook Ford as the worid's largest automaker: 43 0007-SWP-034613 Chapter j: Joining the Coatsncj ilcvoumoN By the mid-t9iei, automotive finishes accounted for nearly a tenth of all paint talcs in the United States. This spectacular growth waa mirrored in other industrial finishes, as quick-drying lacquers rendered mass-produced items, such as appliances and furniture, more attractive and appealing. In 1911, Shcrwin-Williams entered this last-paced field with the first of a new line oflacquers under the trade name Opes. Developed by a team of researchers led by van Stone, Opes lacquers adorned Packard ears and eventually found their way into other industrial uses. In the mid-t9aos, the company pioneered a bcashable lacquer for household use called Rogers Brushing Lacquec One of the best-selling products of its subsidiary Acme, during the :910s, was a iron-oxide primer that served as the base coating before the application ofspnyablc lacqucn. Shcrwin-Wdliams renewed its claim to technological leadership in this period by developing synthetic resins which made varnishes and enamels competitive with quick-drying lacquers. In 1919. the company introduced its first synthetic finishes a line ofKem-cnamcls. In subsequent yean, research and development spawned many other advanced eoatings and finishca that used the Kcm trademark: Kem Air Drying Enamels, Kem Railway Surfaces*, Kem An Metal Finish, Kem Bulletin Colors, Kcm Store Front Finishes, and Kem White Appliance Enamels. Research also focused on improving dry colors. In 1919, the company developed a process for making `dispersed colors' directly from dry color pulp without resorting to the time-consuming traditional method ofevaporating the water; breaking up the lumps into powdered dry color; and then mixing in oil or varnish. The new process entailed flushing out the water and mixing and grinding the panicles with oil or varnish to get a smooth paste offine and brilliant texture. The resulting colors consisted ofsmaller panicles that could be wetted more thoroughly, thus producing higher gloss. The new process diminsted "bloom* la rods, reduced bronze in blues, and increased film durability; These characteristics yielded superior results in paints, enamels, 1acquets, and printing inks. The intenvar yean witnessed a proliferation ofcoatings and finishes for specialized uses in industry, commerce, architecture, and consumer markets. Advanced technology and chemically controlled manufacturing processes made it possible to engineer products for a wide variety ofapplication methods and circumstances. Sherwin-Williams could tadoc its coatings according co customer^ specifications fix drying-time, temperature, climate, exposure to hazardous conditions, and other situations. One ofthe most promising new markets with unusual requirements was the aircraft industry. .Before the advent ofaluminum-skinned aircraft during the late 1930s, most airplanes were covered with fabric that was treated with a lacquer for protection and decoration. The rapid growth ofthe aircraft industry after Charles Lindbergh's successful flight across the Atlantic led Sherwin-Williams to create an Aeronautical 45 0007-i S' CuArrai j; Joining tiie Coatings Devolution Sales Division. In 1928, Sherwin-Williams introduced its Aero Enamel*, featuring a 'velvet finish which give a plane a handsome appearance, good visibility and ha* the added advantage of being so c!a*tic that vibration created by the plane rushing through the air will not crack the finish.*' In addition to growth into new, specialized application*. Martin guided expansion of Sherwin-Williams through more traditional means. In 19x9, the company acquired two leading paint-maken, Lowe Brother* of Dayton, Ohio, and John Lucas of Gibbsboro, New Jersey, one ofthe oldest and best-known manufacturers in the industry. These transactions included many established brands ofhigh-quality paints. Lucas, for example, had previously acquired W.W. Lawrence Sc Company of Pittsburgh, itselfa well-known produces. Martin also pursued opportunities for Sherwin-Williams in Central and Latin America, where he saw the market for high quality paints flourishing and contributing to economic development. In 1990, the company opened a retail branch in Mexico Gey and acquired a paint factory in Havana, which it oepanded and operated as the Sherwin-Williams Company ofCuba. Later in the decade, spurred by the success of this venture, Sherwin-Williams built a plant in Argentina, and established an affiliate company in BraziL Under Martin's leadership, Sherwin-Williams expanded assertively in consumer markets. In 191), to help increase public understanding of the dizzying variety ofcoating products on the market, (he company announced its `Household Guide for Painting, Varnishing, Staining sad Enameling,* calling it "the biggest idea that has hit the paint and varnish business in fifty year*.* The guide featured a matrix that listod types ofproducts and surfaces along one axis and types ofcoating products along the ochen The intersecting boxes specified the Sherwin-Williams product most suitable for the application. For example, to coat indoor furniture, the guide recommended Enamdoid as Its choice ofpaint; for other types ofapplications, the guide proposed Scar-Not Varnish, Floor-lac stain, or Old Dutch Enamel. *For the fust time.* proclaimed company literature, "the public will have a handy reference guide to hdp chan with their paint and varnish problems.* The company spent hesviy an advertising and promotion to strengthen the Sherwin-Williams brand and help establish the eovcr-thc-carth logo as one of the best known in the world. As explained by CM. Lemperiy, advertising manager, the company's advertising budget was divided about equally between national and local media. `We use national advertising to keep our name before the public Our outdoor cutouts and signrkcep our `Cover the Earttf trade-mark before people constandy. When we use national magazines we get into products a little more, but the style is still pretty general.* In 193$, at the request ofMartin, an opera buff, the company began sponsoring Sunday afternoon btoedcasts ofauditions for the Metropolitan Opera. 47 0007-SWP-034617 Giaitcji j: Joini.nc the Coquet favournoN r Wth network radio we are entirely institutional," noted Lemperiy, who added that commercials were kept to a minimum. "This restraint has brought us no end of compliments from listeners, although our sales department at time would like to hare us pound away a little harder for sales." This opportunity came later in the Cleveland area, when Martin, a director of the Cleveland Indians Baseball Gub, arranged foe Sherwin-Williams to sponsor game broadcasts: Advertising at the local level was far more aggressive. During the late 1910s, for example, the company encountered stiffprice competition from makers of low-oost paints. A gallon ofSWP sold for 14, while rival breads were available for as little as 12.30 per gallon. To counter this threat, Sherwin-Williams launched a major campaign against "cheap paint." Proclaiming that "this will be no kid-glove affair," Lemperiy announced the company's objective as "not a `drew,' but a real Itnodc-oue.'" In essence, the campaign stressed that "cheap paint" was not at all cheap, because it coveted less area per gallon, wore less well, and used inferior ingredients when compared to SWP. Consumers were warned, "Don't Be Fooled on House PaintT and to watch for "a Joker in the Cheap Paint Can." This campaign, claimed Lemperiy, was "the kind... that President Calvin Coolidge would endorse too per cent because it strikes at waste and false economy and emphasizes true values." The company's retail outlets also practiced aggressive selling tactics. c During the :910s, Shexwin-Williams began opening a handful ofstores in major metropolitan areas in order to gain `satisfactory representation* in there areas, as well as "to protect our interests' from competition. Starting in the late 1920s, the company accelerated the establishment ofretail notes across the United States. Sherwin-Williams opened an avenge ofbetween five and ten stores per yeas; and occasionally more In :93d, for example, 14 retail stores were opened. The stores carried not only Sherwin- WUUams coatings, but also paint brushes and other materials. The company stressed that its retail stores were not intended to replace but rather to supplement its network ofwholesale distributors. As described by an official policy manual, "Our Stores act as the Company's service stations, and everything should be done in them to cement doacr the relation between the agents and dealers served through rite Store in addition to securing s greater market through your Scons for our materials." Score managers, who were Sherwin-Williams employees, were encouraged to be `as obliging to wholesalers as (hey were to their own customers. As the official policy noted, "Increased prefin from such quartets helps you in your profits, helps the factory in in output and iowea the cost ofmanufacture by which all benefit," Shcrtrin-Williams approached retail management with a consistent business philosophy Coctingham's "Code ofPrindpla" was prominently featured in the ReuilSun HtnAbtok, which passed through many editions. c 49 0007-SWP-034619 GhaITER J: joiNINC THE GqaTNCS REVOLUTION Mote specific idvice in the Handbook bespoke the company's traditional values: "Nothing looks so bad as a dirty, mussed up Score, buc a well kept, neat and orderly Score is a wholesome place in which to do business. People like to come in as well as to recommend the place to cheir friends." "Stories or jokes ofan unclean character will not be permitted. It's a good plan to put this rule into effect even outside the Store and business hours." "A Score may have the best ofeverything in merchandise, delivery or anything else, but ifpoliteness combined with kindness is lacking, the Score will not progress, nor in fact last very long." Other advice reflected the times: `It's not in keeping with good manners to walk around the Score wearing your hat, and certainly not polite to wait on a lady customer wearing your hat or without wearing your coat." Like its counterpart for sales representatives, the Retail Start Handbook provided a wealth of tips to increase sales and profits: "Never greet a woman customer with `Can I show you something,' or `Yes, ma'am.' Rather begin with `Good morning' or `Splendid weather for painting, is it nod* Get her in a cheery, receptive mood and show by your manner you are there for service as well as sales." "Remember eight out oftea people who ate going to do a little job ofpainting need a brush." "Sell the customers something besides what they ask foe It's no crick to sell them something they want---that's simply waiting oa them." "Give the same attention and treatment to the shabbily dressed as you do to the welldressed. They may have their money tied up in houses, which need painting, instead ofclothes." "The real test ofthe paint and varnish merchant is to get the money in the cash drawer--have this constantly in your mind." Sherwin-Williams marketing tactics proved effective, and the company's recovery from the Great Depression was rapid and strong. A maker ofdiverse products that controlled the production ofla twr materials and its channels ofdistribu tion, Sherwin-Williams was a fundamentally healthy enterprise. In 1939, the company maintained 13,000 active paint formulas, produced 13 million gallons of paint, and recorded saless>f<93.8 million. It remained the largest coatings manufacturer in the world, despite formidable technological and competitive challenges. Bigger challenges and greater rewards were soon to come 51 0007-SWP-034621 ( JUN 1 c Haw Paint Protects tike Soldier's Equipment Helmet Mess Kit Ammunition Belt Gas Mask Cartridges Canteen Gun First Aid Kit 0007-SWP-034623 Chapter 4 I n 1940, George Martin retired as president of Sherwin-Williams at the age of 79. To succeed him, the board ofdirectors elected Arthur W. Sceudel, then 49 yean.old. Sceudel had joined the company in 190! as an office boy. He earned his first promotion within two weeks, and then rose through a series ofclerical positions in the Trade Sales Division. In 1911, he attracted the attention of Edward M. Williams, son ofthe founder and head of the Railway Sales Department. From there, Steudei's climb was swift. In t9t4, he was a department head in the Chemical and Dye Division, which he eventually led as manager. In 1913, he became assistant to the president, supervising development of the company's lacquer business. In 1937, he became vice president and general manager, and the heir apparent: Sceudd was a very popular leaden remembered affectionately as a short, 'roly-poly* man who played a whole round ofgolfwith Just two five irons fin ease one broke) and a putten He was also active In business and community affairs in Cleveland. Steudd took charge ofSherwin-Williams at a favorable time. In 1940, the company had earned the industry's admiration for a marketing fiat, introducing the Sherwin-Williams `Paint and Color Style Guide:* The company printed 43,000 copies ofthis handsome, oversized book fix its distributors and retailers. It featured color photographs of many types ofhouses, induding interior scenes, to hdp customers choose appropriate colors for many different settings. "Never before has such an array ofactual homes from all over the United Sates been displayed in color photography,* boasted the Style Guide, which noted that the photographs were 'on a scale that makes you fed you are almost stepping into the rooms standing right before the houses.* Capitalizing on the Style Guide's success, Sherwin-Williams posted s record year for sales, topping Stoo million for the first time. The outbreak ofWorid War II had an immediate, positive effect on chc paint industry,.and manufactures gated up for defense production on a massive scale. Thousands ofvital militaty items required paints, induding camouflage paint for tanks and supplies; blackout paint; aircraft, boat, and truck finishes and coatings for greottics, bullets, and bombs. Every soldierwas equipped with eighty-five separate items, each with its own special finish. Moreover the msd budding, construction machinery; water supply snd dectricai lighting systems necessary to a military campaign also requited paint. As thewar continued, the U.S. government became Sherwin-WiQiams's biggest customer, Converting Sherwin-Williams to massive defense manufacture was s challenge that engaged cvetyone. Production penonnd devised ways to distribute work loads evenly between plants. Plant engineers converted old equipment to new 55 0007-SWP manufacturing uses. Purchasing agents combed the country for raw materials, even minor ingredients, so that shortages would not halt production and delivery. Chemists ( experimented with old, almost forgotten oils and resins and treated them with modem processing equipment. Salesmen tolled up their sleeves and worked in the factories, adjusting spray guns and cheeking thinness. Ultimately, some plants devoted So per cent of their capacity to war work. As more and more male employees were called to active duty, women became indispensable to Sherwin-Williams operations. By 1943, female employees comprised one third of the company's work force and were found in factories, labs, and retail stores. And, as the SbtrwufWiltUim VfbrU, the employee newspaper of the time acknowledged, `Some ofthe jobs the women ate doing axe, in truth, being handled just a little bit better than a man would do them." In ail, 1,736 Sherwin-Williams men and women entered the armed forces, and 90 per cent were welcomed back at the end ofthe wan In 1941. Sherwin-Williams became involved more directly in the war effort. The company was drafted to construct and manage an enormous shell-loading plant in Catbondale, Illinois, as part ofa program whereby such facilities were built by well-known manufacturers. A team ofdo Sherwin-Williams employees oversew the construction ofthe plant, hiring 19,000 workers to construct the a],ooo*cre facility in less than a yean Sherwin-Williams also subsequendy managed the plant's operations. Staffed by 6.000 workers, the Catbondale plant produced enough ( bombs each day to supply a nightly RAF raid on Germany. Sherwin-Williams demonstrated leadenhip in product innovation, as weiL The company's research chemists, led by van Stone, began experimenting with new coatings concepts. They took casein, a white milk and cheese protein used by the ancient Egyptians for making paint, and emulsified, or suspended, vunish into it They then added a number ofcomponents oftraditional oil paint as a base: The new formulation consisted of28 different ingredients. In 1941, Sherwin-Williams put this new paint called Kem-Tone, on the market. At the same time, the company embarked on a major sales and advertising campaign--the most ambitious in the history ofthe entire industry spending $1 million on selling the new product Kem-Tone was marketed as the `modern miracle wall finish," described as so easy to use that it was ideal for homcmakca and for those who had never used a paint brush before. Dcmonstratots around the country showed that thinned only with tap watet it completely covered wallpaper, piastet and painted wills, without requiring messy primes, sealers or thinnea. Only a single coatwas necessary and the paint dried In one hout Advertisements also stressed that Kem-Tone ws* more washable than o3 paint and like the finere washable wailpapet; it could withstand *500 rubs with a doth under a two pound weight* 0007-SWP-034627 CllAlTtR NURCH1KC TO War The company took unprecedented measures In distributing Kem-Tone, as well. For the first time, it went outside is doseiy knit dealer and franchise organization, supplementing traditional practices with direct seUiqg and distribution. Any retailer in good standing, induding filling stations, grocery stores, and drug stores, could handle the new product and become a special Kem dealer. Uldmatdy, SherwinWilliams secured 6f,ooo new outlets for Kem-Tone. The new paint was sensationally successful and quickly outsold its competition in the interior paint market. Continuing war shortages forced Shcrwin-Williams to respond creatively. Japan's blockade of China resulted in shortages ofpig bristles, which were used to make paint brushes. In 194I1 Richard C Adams, a Sherwin-Williams engineer and a descendant of Presidents John Adams and John Quincy Adams, invented a revolu tionary new device called the Roller-Koaret Devised in Adams's basement, and constructed simply ofjute and wood, the Roller-Koarer was designed for Kem-Toning only. Inexperienced painters found it easy to use. Adams, an inveterate dnkerer and inventor, also msde miniature Roller-Koatess for charm bracelets and lapei pins. Sherwin-Williams devised innovative paint packaging, as wdL At fitst, shortages in steel and tin required the company resell Kem-Tone in glass jin with cardboard carton overcoats. In 194Z, in a plant with secondhand and homemade machines, Sherwin-Williams began producing cans made ofpaper. Carrying the company's Graphic Am Division label, "War Emergency Container--Handle with Care," the new cans were siighdy larger and more fragile than the standard metal cam. V Sherwin-Williams chemists applied their ingenuity in a number of other important ways re support the war effort. They produced vital war materials that had been German monopolies and unobtainable in the United Scares *; you* eariiet. At its New Jersey chemical plant, the company made Ij per cent ofthe nation's weal supply ofacetanilid. This bssie ingredient in die manufacture ofinfection-fighting sulfa drugs was part of a packet provided re each soldier These sulfa drup were considered a miracle a record-breaking number ofAmerican wounded recovered from their injuries. At the end ofthe was; Sherwin-Williams could look back over five successful yean. Despite shortages ofraw materials and personnel, its wartime program achieved ia goals. On the domestic side, Kem-Tooc hit the 37 million gallon mark in 1945, selling out ofstores just as fast as it was stocked. Having already secured a such a large portion ofdie domestic paint market, tha company's convention to peacetime workwas tux difficult. 0007-SWP-034629 MemorialDay 1962 manley business: Carl Tall, General Manager ofAdvertising and Publicity (J*fi), andFtwcod Gricbcl, Adi ertising Manager, (right), get help in drawing . the winning ticlct in the first Sherwin V/tlUams sweepiules. Tintprize: a Ford Thunderhird. 0007-SWP-034631 The Postwar Boom 1946-1965 In 1948, Shtrunn-WUliamt offered ahmcet twc dattn praduea ta prmtttt and kaautify dre home, each mad*far a particular purpata. 1. trick aat State* Falat 2 SWF Trla Calais i Sklaila tula 4 Strata (aaatal s TUatrt Rt4 1 laa-Taaa 7 Waiaat Fta-taa t Caaaalalt 1 Saal-lastra 11 Ua-X Citar Uaaa 11 Flaataf 12 Ua-X FlaarWaa 12 Ftat-Taaa 14 (ta-laaal Sirs Wklta tlaaa IS (ta laatl Sats Wklt* (||tkall It Mar-let Varalak 17 Iraat-lrlta 11 Ua-I Craaa Ftiltk It SWF Raaaapaiat 0007-SWP--034632 (A* Chapter 5 A < the end of World War II, corporate America turned it* attention away from war production and back to domestic markets. Sherwin-Williams, like other American companies, embarked on twenty yean ofgrowth fueled by national economic prosperity and an enormous pent-up demand for consumer goods. Although it was already the universally recognized leader in the coatings industry, the company established itself even more firmly during this period by growing and developing a pronounced retail orientation. Although Sceudd, whose strength was in marketing and sals, firmly set Sherwin-Williams's overall postwar direction. Vice President Luther Schroeder tightly controlled the rest of the company's operations. Schroeder joined the company in 1908--the same year as Steudel--as a bookkeeper. He worked his way up through the ranks, succeeding Fenn as Treasurer in 191a. Ip 1943, Schroeder was elected a vice president. His long tenure (he died in ofRce in i960, in his jand year with the company) ensured that the Sherwin-Williams tradition of fiscal conservatism endured. Schroeder guarded financial information closely and refused to allow the company to borrow money, even during the Depression. These practices paid off, SherwinWilliams's securities were considered `widow and orphan stock,* and the company was noted for having never missed a dividend. During the postwar era, changing patterns in housing and consumption provided an enormous boost to paint sales. Before World War II, most Americans had lived in cities--in apartments, flats, or sometimes small houses--often in cramped conditions. When the war ended and servicemen returned, public policy helped under write the great migration to the suburbs. Federal loan programs made it easier to acquire a home, and during the 1910s, one-fourth ofthe American population moved into suburban housing developments. An enormous, built-in market was created for all kinds ofconsumer goods, particularly paint. Fueled by America's strong economy, postwar family income virtually doubled, allowing for an unprecedented level of consumer spending, These developments helped ensure that Kcm-Tone, already the industry leaden would temain the latgcst-sdlihg wail finish on die market. In 194s alone, more than a million gallons ofKem-Tonc were sold, far more than any other brand. Even SWP, which doubled its sales in 194! after sufficing from severe supply shortages during the war, only reached one-third ofKem-Tone's sales. Kcm-Toncs popularity encouraged Sherwin-Williams to expand its Kem line ofpaints. In 1949, the company introduced a new type ofalkyd, or oil-based, enamel paint called Kem-Glo, which was advertised as appearing and washing like the 0007-SWP-034633 Sherwin-Williams Abroad Despite Henry Sherwin's doubts, Sherwin-Williams's "Cover the Earth" logo proved to be in accurate description. By 1907, the company had established an agency in Mexico, and by the 19101, Sherwin-Williams exported to South America, Europe, Airies, and the Far East. Later, it created subsidiaries with their own manufacturing facilities in Mexico, Cuba, and Braxil. fn the 19JOS, Sherwin-Williams took a different approach to international expansion. Instead of establishing subsidiaries in different countries, it invited leading foreign businessmen to sign licensing agreements for manufacturing Sherwin-Williams products in plants built for that purpose. The company provided the operational expertise, the paint formulas, and the supervisory sad technical personnel. By 1966, Sherwin-Williams had licensed companies in Argentina, Colombia, Ecuador, Peru, the Philippines, and Vcncxueia. In addition, the company sold special ised licensee to nuke SherwinWilliams automobile n&ushe* and other chemical and induatrial costings. Prior to the 1970s, SherwiaWilliam* organised its interna tional businesses as a collection of unconsolidated subsidiaries. Then it formed an International Group, as pan of a restructuring of the entire Shsrwin-WUliams organisation. By 1977, Interna tional had become one ofthe five divisions ofthe Coatings Group. By 1991, Sherwin-Williams was involved in 44 separate international venturer, through subsidiaries, joint ventures, and licansccs, in )t different countries. Although the company considers itselfa domestic organisation that has international activities, and not a global corporation. It* international busincatca are important. It has, foe example, subeidiarics in Puerto Rico, Mexico, Braxil, and Panama, and joint ventures in Saudi Arabia, and Ireland. It also continues to license coalings technologies to manufacturers iu many ether countries and to expand throughout the world. In iftf, in a landmark deal, it signed a license agreement with the People's Republic ofChina, marking the first time that Sherwin-Williams products were available in that country since the Communist Revolution in 1949. 0007--SWP-034634 Chatter s: Th* Postwar Boou baked enamel on a refrigerator. Kem-Glo' fast-drying and long-wearing properties made it an itutant success with consumers. A year later, Sherwin-Williams introduced Super Kem-Tone, a deluxe interioc paint with a new ingredient, latex emulsion, that made it both washable and extreme!/ durable. The Kem line of paints proved extraordinarily successful, and by rpjs, a total of more than 100 million gallons had been sold. The company's overwhelming success partly reflected Steudel's ambitious postwar plan to increase the number of branch stotcs owned by Sherwin-Williams, and thereby extend the company's control over the distribution of its popular paints. In 1948, the company managed approximately 400 stores in its nationwide branch organization, which was divided into eight regions, each headed by a regional director. Over the next fifteen years, the number ofstores increased dramatically, andQn some yean, the company added more than too new stores. It was a heady time headquarters employees heard excited shouts across hallways in the Cleveland ofRccs, `How many stores today?* This pace continued until 196f, when the number ofnotes across the country reached approximately z.ooo. Having met its growth objectives, the company's strategy thereafter was to expand at a rate more closely geared to population and needs. Sherwin-Williams personnel carefully chose store managers for their new stores. They visited local ministers and bankers to And highly responsible and motivated residents who might not have the capital to start their own businesses. The desirable personality profile ofthe prospective store manager often matched that of a Stcudd or Schroodcr, or even, for that mattes; a Shetwin; upright and conservative, yet entrepreneurial. Over time, it became dear that the moat profitable stores devdoped in rural areas, where the manager became part ofa closdy knit business community and had the paint market to himself; Some ofthese rural managers made more money than anyone else in their area, and banked in other towns to conceal their wealth. Branch store managers proved very entrepreneurial. There were no standard operating procedures for stores, although they were periodically audited. Given this freedom, stores could sdl, in addition to paint, almost every tool a painter or paperhanging contractor needed on the job. Most stores sold wallpaper; and others successfully offered carpeting, draperies, and curtains. To of&et seasonal dips in paint sales, many stores also had gift departments that carried pictures, pottery, mirrors, and even toys at Christmas time. Queries regarding whether a certain item was in stock was likely to be met with die joking rejoinder, Tm sure wc have it somewhere!* All the stores carried paint sundries, such as brushes, rollers, and trays. The Kem-Tone brush, equipped with special brisdes that picked up and carried more paint than conventional brushes, proved especially popular. To supply these lands ofitems to its increasing number ofstores, in 1953, Sherwin-Williams built a plant in 65 0007-SWP--034635 Oiwrta;; The Postwar Ooom Dahl, Ohio to make patching paste, caulk, brush dcaners, rollers, coven, and trays. ( The Dcshler operation was a unique factory, set deep in farm country, with a produc tion line composed of more than do per cent women. Three years laren SherwinWilliams acquired the Rubberset Company ofNew Jersey'and Canada, the world's largest manufacturer ofbrushes, founded in 1873, in its early days. Rubbcrset had manufactured shaving brushes, toothbrushes, hair brush, and scrub brush for physicians. In 1954, Bristol-Myers acquired the company, and, thereafter Rubbcrset cooperated closely with Du Pont, the producer of the first nylon filaments. Together they developed the first nylon paint brush in 194}. Subsequendy, Rubbers became known as a lead in the nylon brush industry. Throughout the 1950s, paint sundries became fairly elaborate, providing decorative challenges for the ambitious do-it-yourselfcustomer. In 1954, Sherwin-Williams introduced Applikay, a new type ofdouble roil used only with Sup Kcm-Tone. One ofthe two toilets laid on paint in one color, while the ocher; with one offive daigns ached into it, "appliqued" paint ofanother color in a partem onto the wall, mueh like offs printing. Another new product. Multicolor; was a later paint composed of a solid color base that also contained small flecks of contrasting pigment. Multicolor spray paintingwas done by String a home vacuum dean with a special applicator and reversing the vacuum's air float Under Sceudel, the company continued to lead the industry is f promoting and advertising its paint products. At the time, Sherwin-Willisms paintwas approximately 15 p cent mote expensive than oth brands, and it never went on sale. The thrust in markaing was to catch the customer's eye; once inside, the manage would explain why Sherwin-Williams was the paint to buy. Score window displays therefore concentrated on devices to attract attention. To replace the ubiquitous pyramid ofpaint cans in many store fronts, Sherwin-Williams managers devised oth eye-catching ideas. One ofthe mo successful was a device consisting of three cans ofSup Kem-Tone welded together that revolved around it 90 rpm. The whirling paint cans drew people into the stotes, demanding to know how the device worked. Anoth atamplc was a life-size, three-dimensional St. Bcmaid dogwith a can ofpaint tucked und his chin and with a sign that mad, `Rescue drab rooms with Super Kem-Tonef The company also sought to retain in position as a premium paint manufacturer through its array ofpromotional bodes and guides featuring SherwinWilliams products and providing decorating advice. In 1951. it modified the Soot design ofits stotes to crease 1 nook for women to browse through hs too-page *?aint and Colot Style G&ude.* The Scyie Guide was only available in Sherwin-Williams stores, and occasionally, the manag would allow a customer to take it home overnight Them was also a Style Guide 'Companion,* an album of139 pages 67 0007-SWP Cha.-tci s; Tne Postwax 3oom portraying the moit popular Super Kem-Tone colon. Sherwin-Williams icores also ( earned a color selector, known at the 'Cascade of Colon,* which contained six-inch square color chip* that a customer could cake home to compare with the existing decorative scheme of his or her home. By the early 1550s, Sherwin-Williams was also providing in customen with a 'Color Harmony Guide* containing a fan-like spectrum of paint colon to assist in the choice among r.joo different color combinations. Over zoo,000 'Color Harmony Guides* were distributed annually around the country for the next few years, and in 1559, over 500,000 copies were made available through the dealer and the branch-store network. The company also gave away a long-running promotional magazine on color selection and paint application called the *Home Decorator." Although it was also distributed through dealers and stores, "Home Decoratoo" Star isaued in 19:0, waa specifically targeted to homemakers, and, in many areas, local troops ofBoy Scouts and Giti Scouts delivered it door-to-dooc la 1959,12 million copies of'Home Decorator* were distributed, 8 million mote than in 1958. Throughout the mid-tjdos, the magazine, whose annual editions were unique within the industry, served as an authoritative source ofhome decorating information both in die United Stares and abroad. Branch stores also provided other helpful services to buBd business and satisfy customers. For example, they established charge accounts allowing customers to ^ 'paint now, pay latex,* Customen could taka four to five months to pay for their purchases without incurring interest or carrying charges. Scorer also arranged for free home delivery ofpains and other goods, fee free house inspections with the purchase ofpaint, and for recommendations on reliable local painting contractors. Another Sherwin-Williams service was the Kent Coiatmcccr Mating Machine, a power-driven device that was introduced in 1959. Until the invention ofdie Colormeten developed at the Dcshier plant, all paint was premized and prepackaged at the factories. Using the Colormeten a paint merchant could dispense measured amounts ofconcentrated colorant into any type ofpaint; over l^Joo colon could be mated and dispensed in the store to customer specifications. Although architectural products constituted about >o per cent of Sherwin-Williams business at this time, and consumed most ofin attention, die postwar period sew significant expansion in die area ofindustrial finishes. Innovation proceeded so rapidly on die industrial side that, in X959, over 50 per cent of the company's industrial finishing products had appeared on the market within the previous four years. Each factory relied on its own research lab, but to boost the trend toward ti$hnologicai innovation, ground was broken on a new major research facility in Chicago in i960. In the same yean after ao years sc the helm, Stcudd nominated E. Colin ^ Baldwin to succeed him as president. As the company's chiefoperating officer, Baldwin 89 0007-SWP Gwiter 5: The Postwar Boom managed operations, while Steudd remained chairman of the board, directing policy and financial matters. Although Baldwin had already served id years with the company, he had not come up through the ranks like previous company leaders; his Harvard Business School education allowed him to start higher up. In 1946, he began a long tenure as Steudd's special assistant, interrupted by a briefstint as executive vice president of the Canadian subsidiary. In 19$, he was named vice president and general manager of the entire company. In contrast to the congenial Steudd, Baldwin was more aloof He was also known to be very formal; visitors to corporate headquarters not only wore ties and jackets, but many ofthem also brushed their teeth before meeting with him. In the early 1960s, Sherwin-Williams continued its work in product development, intradudng a new exterior latex house paint called A-too. This followed on the product line ofexterior latexes called Laxon introduced in 195s, which were used to cover stucco, concrete, and bride. The company also otpanded its range of paints to suit different customer needs. In addition to exterior paints SWP and A-too, stores and dealers sold Super Kem-Tone, Kem-Glo, and a lower-priced line called ExccUo, for interior use. They also sold Rust Control Primer to fight the "Rimolcum* brand, and Marvethanc, Sherwin-Wlliams's first polyurethane retail varnish. Sherwin-Williams also entered new coatings industries in the fim halfof the 1960s. In 1961, for sample, it began chemically finishing construction materials while duy were still in their prefabricated state. This strip or ooil-caatingwork became increasingly important, especially as aluminum skiing snd metal buildings grew more popular In 196a, the company brought out Kem-CIad and Super-Clad finishes for pre-finishing wood, aluminum, steel, and metal, and Thermo-dad insulating varnish for use with electrical and electronic* products. During the postwar era, Sherwin-Wlliams made many improvements in production, marketing, and distribution to keep up with rising demand. It continually introduced new products that affirmed its place as the industry leaden and sophisticated promotional materials secured la reputation around the world. The momentum built up by postwar consumer demand and the extraordinary success ofthe Kcm line allowed the company to reach an unprecedented level ofgrowth. By the mid1960a. sake ofabout sjoo million placed it as number 17! in the Fortunepo list of industrial companies. No other company in the paint industry had a distribution system comparable to Shetwin-WUiams; its approximately :,8$o branch offices and 33,000 dealers provided it with 57 per cent ofits sales. In 1964, almost a century alter its founding, in celebration ofits prosperity and growth, Shcrwin-WHiams chose to list itselfon the Nqd Yorit Stock Exchange. 71 0007-SWP-034641 J 7 FOR FATHERS DAY/ I JUNE JP 1 -aktfC Spreading Thin 1966-1978 Stcuddandhit tuettttar Colin Baldwin beam while renewinga model tfSherwim WUlUmc't new technical center in Chicago, The complex urnpart cfa major unJ*r A/ytn'^ 0007-SWP-034644 6Chapter I n t$66, Sherwin-William* celebrated the tooth anniversary of Henry Sherwin'* entry into the paint business in a spirit of enthusiasm and confidence. During this anniversary year. Steudel retired as chairman after 5J years with the company, leaving what appeared to be a very sound enterprise, fixe ofdebt, with recotdbreaking earnings, and commanding by far the largest share ofthe market for coatings in the United States. The growth and expansion ofthe Steudel eta, however, masked significant long-term problems, many ofwhich traced bade several decades. One fundamental tension arose out of the success of Kcm-Tonc. During its fitst 7; years, the company had earned a reputation fot premium quality exterior oil paint for professional painters. After 1941, however; Kcm-Tonc's extraordinary sueeess took Sherwin-Williams in a new direction; the casy-to-apply latex paint was ideally suited to the new mass market of the do-it-yoursdfhome decorator. Sherwin-Williams pursued this market eagerly by ccpsnding its store network and catering to retail consumers. Stores reinforced this trend by carrying many new home decorating and improvement products, induding waxes and polishes. Yet at the same time, they still sold to their traditional customer base ofprofessional painters and building contractors. As long as demand remained high and the company prosperous, this tension remained bdow the surface. The riling cost oftaw materials, however, exposed serious problems. The coatings revolution ofthe 19x0* and 1930s had made SherwinWilliams accustomed to yearly decreases in the price of raw materials. Each year, the company raised retail price* a bit, resulting in a comfortable margin. This partem continued during Worfd War U, when commodity prices and demand were both artificially regulated. The postwar period brought a new instability to this way of life. With the paee ofchemical innovation slowing, and with the outbreak ofpostwar shortages, the cost ofraw material* began to level out before riling ominously. The paint industry could no longer rdy on as extra bit ofmargin each year. Sherwin-Williams's profits began to decrease uadi, by the early 19601, the company earned less pet gallon than at any dmc in is history. High volume masked dus trend, but as the tremendous pent-up demand ofthe postwar period tapeted of sales began to slow and profits to plunge. Sherwin-Williams suddenly found itselfin the uncomfortable position ofa high-cost producer. Part ofthe problem lay with production costa. The company had remodeled and built few plants during the postwar years, and as a result, many operations were outmoded and inefficient. 75 0007-SWP ChapTEX i: Si'jxaoinc Thin In i$dd. Baldwin embarked on a four-year, suo-miliion expansion and divenification program, a projected expense that equalled the total capital expenditure made by the company over the previous )j yean. Baldwin ehetc to finance thia program by borrowing targe luma for the fint time in the compan/i hiatoty. SherwinWilliams then proceeded to build or modernize a number of paint and chemical planta, warehouaes, and research and development facilities. It opened an efficient new paint factory in Morrow, Georgia, a new container plant in Elgin, Illinois, and chemical plants using new titanium dioxide and alkali blue pigment technologic. It also began work on a new research and development center in Chicago, named in honor ofSteudcL Baldwin also sought to diversify the company to oSet slow growth in the paint business. In pursuing such e strategy, Shcrwin-Wlliams followed the example ofmany American companies for which tax laws and antitrust considerations made diversification an attractive option at that dmo--in I9dl, for instance, twice as many business mergers occurred in the United States as in any previous yean Sherwin* Williams made three major acquisitions. In 1966, it bought Maumee Chemicals, a company which specialized in the production ofsaccharine and paraoesoi (used to create BHT, a widely used anti-oxidant that kept food fresh). In an effort to strengthen the small aerosol container line it had began in 1956, Sherwin-Williams also acquired, in :966. Sprayon Products ofOhio, a wdl-cstabiishcd aerosol packager specializing in spray paint. Two yean later, it acquired Osborn Manufacturing ofOhio, a producer of power-driven brushes and custom-made foundry equipment. Osborn's history was closely intertwined with that ofSherwin-Williams, having been founded by A.T. Osborn, a former partner; in the nineteenth century, ofHenry Sherwin and Edward Williams. John Sherwin Prescott, a vice president ofSherwin-Willisms and grandson of Henry Sherwin, served on Osborn's board ofdirectors. As a result of these acquisitions, the company reorganized in 196! into three functional departments. The paints, varnishes, and coatings department induded chemical coating!, trade sales, and automotive refinishes. The pigments, colors, and chemicals department included the specialty chemical business and the pigment and dye businesses. The point-related products department included sundries, such as containers, treys, and brushes. Sherwin-Williams faced a serious challcngs at this rime arising from n increasingly important retail phenomenon within the paint industry, the ma> merchandising o< discount store catering exclusively to the do-it-yoursdfdecorator market. Thocc discounters and mass merchandisers who wanted to sed the powerful Kem line in their stores directly threatened Sherwin-Wifliams's carefully structured and very successful distribution system foe ire Kem products which it had busk up in die early 19jog. It sold each paint product at one uniform price throughout the network of 77 0007-SWP-034647 Chattea 4; Sf aaOimc Thin iu approximately t.soo company-owned stores, 10,000 authorized dealer*, and jo.ooo specified Kem product* dealer*. In 195s, changes in the law brought an end to this network. Thereafter. Sherwin-Williams and its affiliated companies, such as Martin* Scnour, Lowe Brothers, and Lawrence, could only suggest, but not specify, retail pries for Kem products. Sherwin-Williams had tried to anticipate the rise ofdiscounters, and agreed to permit K-Mart department stores to sell its paint in leased departments. There were 191 K-Marts around the country selling Kem-Tonc by 1967. Increasing numbers ofdiscount chains, however, wanted to soil Sherwin-Williams products, and were able to obtain Kem and ocher paints from its affiliates. Further changes in the law required Sherwin-Williams to relinquish its occlusive deal with K-Mart and to release its Kem brands to any discounter who wanted to sdi them. These chains then sold Kem painu at half the suggested price, and deeply undercut Sherwin-Williams's company-owned stores and dealers. By 1971, with its occlusive arrangement lost, and with price competition accelerating, K-Mart derided to assume control over Sherwin- Williams' leased paint departments, although the company continued as K-Mart's supplies. In 1969, in the midst ofthis,whirlwind ofchange, Walter O. Spencec, former chemist, Chicago plant manages; and vice president ofOperations, succeeded Baldwin to the presidency. Baldwin, in turn, became chairman ofthe board. Ac 4X. Spencer was the youngest company president since Shctwin himsdfi and was expected to 'inject Urge doses ofinnovation and vitality* into the company. Hit brightly colored shim, moustache; and long sideburns reinforced a brash reputation. Noting that he didn't 'always do what's expected/ he began to tty to shake up the company His mission was to `work wonderf on Sherwin-Williams's old-fashioned organization and conservative management team. Having observed the overwhelming success ofdie discount retail chains, and taken the measure ofdie booming do-it-yourselfpopulation, Spencer decided chat Sherwin-Williamsshould pursue the lucrative home remodeling market. Unless it did so, he bdievod that the companywould lose its standing in the market. Spencer was also convinced that the company needed to target the newer and more numerous customer group ofwomen and younger buyers, rather dun rely on the traditional, and shrinking, base ofmen over 45 yean old. *We wantedjo^pc Malones to gunk ofw^i placa ifshe had a decorating problem," Speacer aqpssS^qfcs could^ga catpctmfci StfMfe window tRatmeaa4Mj^fwallpVcn paint* Spencer sought to oansftxm many Sherwin-Williams branches into retailing operations. The company slready had the most actensive store network in the industry, what it needed, he insisted, was some image-polishing to attract the do-ityourselfpublic In 197s, the company launched its 'More than a Punt Store!* 79 0007-SWP-034649 Chaitix 6; Spuaoimc Thin advertising campaign. Stores were decorated with eye-catching window displays showing that they were rescue stations, beauty and antique shops, travel agendo, and school houses--not just paint stores. The company offered unusual promotions in this advertising campaign. For example, when a store was decorated like a beauty shop and the theme was *we beautify your home,* a customer could buy a no lighted mirror for st;. When the store was a travel agency and the theme was `your passport to a painting adventure,* a customer was offered luggage at a discount. The company also tan fullpage ads in Life magazine, showing its stores as retailers ofhomo-improvement products staffed with individuals with specialized expertise. Still, Spencer believed, mom needed to be done. "We weren't going out and asking our customers what they wanted to buy, how they wanted to buy, and where,* helspmT^We had not upgraded the stores and were not aggressive enough in the marketplace. We needed more ptzszzT As a result, he inaugurated a more ambitious retail strategy and launched a massive effort to upgrade some stoics and to establish others in metropolitan markets. These 'Idea Centers' wen designed to meet all homedecoraring needs. Sherwin-William* hired women to work in these stores, advertising that customers could "Ask Shirley Willisms* for advice on picking wallpaper, carpeting, and draperies. By late 1974, over 600 stores provided professional decorating consultants to assist customea, with a new 'Color Harmony Guide* to display coordinated decorating idem at a glance. At the same time, the company embarked on an extensive market survey designed to provide inibrmarion about how employees, ocher companies, and members ofthe publicjricwedjy ft year-old "Cover the Earth* logo, The research showed that although the i^ip was one ofthe woritfs five best-known, it confined the company's ^ image to chat ofa paint manufacturer; rather dun a retailer ofmany hom^-deeofjuing^ items. "The logo had beta around fisc a long time," concerfod Spcncar. but^tKe company wet more chan the logo would indicate.* He bs&wS^that the image did not capture the diversity ofSierwiA'Willkm* businesses, including saccharin, specialized chemicals for foods and perfumes, organic chemicals, textile chemicals, containers, brushes machinery and foundry equipment, adhesives (Sherwin-Williams had recendy acquired Hadley Adhesives, founded in 1906, a custom fotmulator ofglues and adhesives), graphic acts, and aerosols. Rather than continue to restrict itselfto the `Cover the Earth* logo, Sfienria-WiUiams choee to focus on its name, which the research showed was one of the company's strongest equities. Top management sought to convey a "broader'' image, and launched an ambitious corporate identification program to devise a new print logo displaying its name in bright, crisp, blue-and-whke colors, and then to spread the new symbol throughout the company In 197;, as pan ofthe second stage ofits retail thrust, Sherwin-Williams opened a new store; unique in the American homo-decorating scene. This pilot 81 0007-SWP-034651 Chaj>te* 6: Sckcadinc Thin venture, called 'Decorating World* and located in Charlotte, North Carolina, waa many tima larger than a traditional 4.000-square foot Sherwin-William* branch, and wa* designed to act a* a laboratory for new marketing techniques. Decorating World offered customers both a complete selection ofdecorating products, including paint, wail and floor coverings, draperies and ocher window treatments, and seasonal items, like lawn furniture and kitchen and bath accessories. All ofthese items were available in various priee categories. Decorating World also provided innovative customer services, such as 'how to* decorating dinics and a child-care center. Unfortunately, efforts to change the company's Image proved much more complicated and costly than anticipated. Creating a new logo and implementing the corporate identification system alone cost st{ million. Relocating, upgrading, and enlarging scores and expanding product lines proved enormously expensive. Decorating World, in particular; in the words ofone Stores executive, was a `marketing success and a business disaster--too complex and too costly to operate:' Even after the upgraded stores began to attract home improvement customers, Shcrwin-WUliams management had insufficient retail experience to capitalize fully on their patronage. The new retail strategy also risked alienating the stotes's traditional base ofprofessional painters and building contractors. Ultimately, the company's thoroughgoing efforts to capture a new market while attempting to retain its traditional one made for a divided approach that served neither sector properly Forces external to the company further undermined Spencer's initiatives. Halfthe cost ofa can ofpassu derived from its raw materials, most ofwhich wee based,on petroleum. In 1974, the energy crisis caused raw material costs to skyrocket, causing Spencer to acknowledge that, ** terms ofmargins, the good old days ate gone, particularly in the paint business.* Federal wage-and-price controls barred the company from raising its prices and forced it to bottom money to cover operating expenses. la addition, Shawia-Williamf traditional strategy of investing heavily in raw materials was no longer paying ofC and its Chemical Division began to lose money Technology was changing so rapidly that even large infusions ofcapital could not guarantee Sherwin-Williams a competitive market position. Many ofthe plana it had bought or built over the pest demise produced pigments and chemicals that were in danger ofbecoming obsolete In the coatings business. Instead ofusing 90 per cent ofitz own raw materials, Shcrwin-WBliama had to sell 90 percent to other companies; what had been vertical integration had become horizontal integration. with the company continually working to sell these ptoduas to otheo. Hopeful ofa turnaround. Spencer pressed ahead, divesting, dosing outright, or converting a number ofpigment and chemical plants. In 197*, In a major effixt to counter dlscountea who wen increuingly using Sherwin-Williams branded paints as loss leaden, Spencer made a controversial decision to remove Sherwin-Williams paints from all markets except the company's IS 0007-SWP-034653 6iCnura Spmadimc Thin own stores. In return, the company gave its longtime dealers generous financial terras and proposed that they sell the Marrin-Senour brand instead. Many dealer*, however, chose rival brands with mote established market shares, and Sherwin-Williams lost iz million gallons ofpaint sales in the transition, representing to to ij per cent ofia total paint sales volume. Although implementation proved coady, this move was seen as imperative for Sherwin-Williams to recapture its own name brands and to allocate its different paint lines strategically between mass marketeta, dealers, and its own stores. Spencer also sought to replace old piano and technology To become the low cost producer ofthe coatinp industry, he earmarked sioo million in capital investment to build two new plants, an enamel and lacquer coatinp facility fee auto refinishing in Richmond, Kentucky, and an emulsion plant in Chicago. The plant dedicated to the automotive refinish business was long overdue. In 195S, Sherwin* Williams had invented acrylic enamel, a significant technological breakthrough that applied easily and dried instandy. From this invention came a new product, called Aayiyd. that was introduced in 196J. To show how easy it was to use, demoostratocs applied Aeryiyd in tuxedos. This new acrylic enamel technology, and later, isocyanate technology, proved so successful that, in the 1960s, die company began to open hi own specialty automotive brandies. Business soared for die 'refinish experts,* aa they called themselves, and Sherwin Williams went from last place to become the numbertwo supplier ofauto refimshes in the United Scates, and third or fourth in the world. By 197;, Sherwin-Williams operated fifty sucomodve branches; with business increasing at 20 per cent a yean automotive refinlshlag was the fastest growing part ofthe company Despite its success, the auto finishes business suffered from second-dass status in the company Its manages had to "beg, borrow, or steal* production capability out ofthe coadnp plants and adapt this, which was difficult as auto refinishes involved "high tech* procesaca which were ctpensivc. The derision to buBd die Richmond plant was a dear signal that the company was serious about developing this area ofits business With its new production capability, the division actively pursued a multibrand strategy ofselling Sherwin-Williams automotive refinish products from its branch stores direedy to body shops; selling ia Martin-Senour brand to National Automobile fats Association (NAPA), a distributor chat was the world's largest chain ofautomotive aftennaiket stores; and selling ia Acme and Rogen brand through still other channels. Industrial coatings was another busincs segment that yielded innovation and aeparuion during the 1970a. The coil coating business, one ofthe forest growing paint markets, grew at 15 per cent per year and involved a wide range ofcustomers. 85 0007-SWP-034655 Ptlm, an rmptrtnt mm imhittrUlfinish, muhartdueti m 1971. Ttf: 4 PoUrufinishing lint. * ' ii wmeautj *" fr&pr i, aA*. Wu : W. <u X* v J 0007-SWP-03465 CHAPTU i: SpUAOtNG TlQM including the business machine, structural jted, and che aircraft industries. Innovative industrial coatings research and development emphasized energy-effidenc enaWng. In 1971, for example, Sherwin-Williams introduced Polane, a successful new industrial polyurethane finish which could be applied to a wide variety ofsurfaces without baking, and which was very effective for use on heat-sensitive plastics. Polane, which had been first developed in the 19601 by the Lowe Brothers affiliate, soon set the standard in the industry. Despite positive showings by chemical coatings and automotive refmishes, and even though sals volume for the rest of the company reached an alltime high, Sherwin-Willjams earnings in the early 1970s continued to be disappointing, having dropped steadily from their peak in 1966. In fact, the rapidly accumulated acquisitions and die capital expenditures ofthe late 1960s, combined with the further expenditures and new directions ofthe i$TOt, had produced a highly diveae, debtladen company. Spencer remained upbeat, however, contending that 'a price had to be paid* for the new Sherwin-Williams, and that in fact, the company was approaching its strongest position in years. In 1976, he initiated a wave ofselling offoperations, including Osborn and a tactile chemical plant. The company also sold plana in Detroit, Dxytoa, Gibbsboro, and In Europe, as well ss a lab in Toledo. All told, it took S16.4 million in write-offi from tfacM transactions. When he Em took office, Spencer had been determined to rcvcoe * Sherwin-Williams's 100-year history ofcentralized control. He had long chafed at the company's top-down organization and the paternalistic relationships chat grew out ofit. convinced char such a system was increasingly itt-suited to a rapidly changing business environment. Starting in 1971, he began a series ofrestruaurings in order to change the company *ftom a traditional, highly centralized, functional organization to several business area organizations, each headed by one man responsible for sales, production, research snd development, tnd accounting tnd control in his business area.* The company reorganized along divisional lines, creating five profit ceatgofCoefings,Chcmicda.AuTiliarioi, International, and Spnyon.aH ofwhich were organized into groups. It instituted a formal strategic planning function and over hauled the financial office. In 1976, Spencer restructured the Costings Group under its own vice prendau. He then broke it into throe divisions. Consumes; Automotive Refuushes, and Chemical Coatings. Although he sought to make each of these responsible for ia own profits, sales, manu&cturing, distribution, and research and development, they were not dorontnlaad in that operations, and were not tme "profit centers.* In addition, the overardung corporate structure remained in place. By 1977, dua remuauring was essentially complete. Under the new system, the Coatings Group included for the first time under one umbrella the dhresze collection ofautonomously run affiliate companies and all the different subsidiaries of 87 0007-SWP-034657 Owiteji6: Spheaoinc Thin Sherwin-Williams. Ic was, in turn, restructured into five divisions. These induded Consumer, which encompassed all production, technical development, distribution, and direst sales ofpaint, other than chemical coatings andjuto refinishes; Trade Stores, which was responsible for all sales, merchandising, advertising, and operation of the company-owned stores; Chemical Coatings; Automotive Aftermarket branches; and International Coatings. Other groups induded Chemicals; Packaging Products, which managed containers; Spedaity Products, which managed Sprayon and Hadley Adhesives; and Sherwin-Williams Canada. Dapite Spencer's determined efforts, Sherwin-Williams remained, in his words, "a troubled company.* Although he predicted that it would break even in 1977, the actual financial results for that year proved much worse. At the end of the fourth quarter, the company reported a loss of s8 million on sales ofst billion, and its interest expense exeecded its earnings. Sherwin-Williams was unable to pay its dividend for the first time in its history, and it owed ii$6.S million in long-term debt. The value ofits stock had plunged from the high S40S to the sxos in little mote than five yeas. Following this distressing performance, scriotu questions were raised about the company's financial controls, and the board ofdirectors re-organized itselfto indude fewer insiders. As the stock price slid precipitously, the company became a takeover target. Several Cleveland companies considered buying Sherwin-Williams, and Gulf6c Western, a wdl-known conglomerate, was on its way to acquiring 13.4 pet cent ofthe company's stock. In March 1978, Spencer resigned, citing the frustrations oftrying to decentralize a company ofSherwin-WUliams's massive size and formidable traditions, and oftrying to fashion a market-driven organization from a production-focused structure. The job is no longer any fun," he said. He was succeeded by 60-ycar old interim president William Fine, who had been a member ofthe board for over twenty years, and who had hdd ofa number oftop financial and operating positions in the company. In the meantime, the board launched a search for a new president. 89 0007-SWP-034659 0007-SWP-034660 X Sberwio-'ViltUmi i "Color Antwert System, "it* note-af-che-ert color rcfermetfor interior and exttriorpoint. The systemfeatures 840 eolort, most ofthem hood lum, To amplify At selection proem, eolort ert errostftd 4jr color family,fathomtf Ae spectrum. Renaissance in Coatings i979-i99i JUfi 2') JSSf Pan audfitntt: Chairman and CEOJohn C. Orrm and President ThomatA. Commetpate before the portraits ofShtnoiu and Williams 7 the board room at Cleveland headquarters, a seene that highlights tht companyV continuing commitment to tht butinttt and mlntt ofinfounders. 0007-SWP-034662 Chapter 7 S herwin-William* ended the <970$ is crate and entered the 1990c is prosperity. Looking back over these yean, the itory divides into three feirfy distinct periods: a turnaround phase, a search for new growth opportunities, and finally, the present phase; soil unfolding, in which the company is refocusing on its core business of coatings. In January 1979, with bankruptcy looming, the board dramatically broke with tradition, hiring an outside* 49-year old John G. Breen, as president and chiefexecutive office*. The Cleveland-born Breen had been an executive vice presiden t at Gould, a large diversified company. At Sherwin-Williams, he quickly became known for his aggressive management style and blunt talk. In fact, in his strongly-held traditional values, and deep impatience with sdfiindulgeat habits--especially those that had an adverse affect on the company he resembled Henry Sherwin. Within a few months, Breen departed from past Sherwin- Williams practice by assembling a youthful, professionally trained, top management team. Conway G. Ivy, a soft-spoken Tetan with whom Breen had worked at Gould, arrived as vice president ofcorporate planning and development. Thomas A Comma, a risktaker whose experience with troubled companies made him ideal for Sherwin-Williams, and who had worked at Gould as well, was named senior vice president offinance. Although Breen freely admitted. "I didn't know a damn thing about the paint business,* the new management team brought a tough-minded approach, which included rigorous planning and implementation methods and tight financial controls. In addition to these newcomers, Breen relied heavily on a strong base oflong-time operational heads and middle maesfen to provide knowledge and continuity. Theimmediate prioritywas to reverse the company's financial slide. Sherwin-WHliana'i ballooning long-term debt and its chronic reliance on short-term borrowing to finance its day-to-day operations made bankruptcy seem a certainty. *My estimate, afro spending a month hoe,* noted Ivy, was that *we were probably six months away from bankruptcy." Others disagreed, chinking it might be nine months or tea. The first step, then, was to determine where the company made its money and to generate cash quickly. Sherwin-Williams began negotiating with suppliers fee extended payment schedules, the implementation ofcash management techniques, and the drafting ofchecks from the branch stores to headquarters electronically The next move wss to understand and obtain control ofthe SherwinWiiliamss many different businesses. To gather data, the new management team met monthly with all top executives to review operations. Given the company's fortunes at the tune, these fust meetings were sometimes pretty grim. In detailed written plans. 93 0007-SWP Chattis* T- Rm<ajmanc* in Coatincs minigen explained (he nature of (heir businesses, including products, strengths, weaknesses, competitors, and future plans. Every division began to submit annual operating plans, and from these, the company developed comprehensive policies that included budgeting, strategic planning and management assessment. The setting ofthese meetings vividly highlighted one aspect of the culture change brought by the new management. Breen immediately created a stir by holding them, over box lunches, in the company's boardroom in Gcveiand hcadquarten. This room, which had always been kept dosed when the board was not in session, with a pad over tea conference table, had the air ofa `mausoleum.* Within weeks, however, it took on a mote lived-in feeling. A series ofstrategic planning sessions, attended by top executives and division managers, were directly tied into the new budgeting process. These provided the necessary information for Breen's management assessment plans, which formed the structure for the company's future direction. Strategic planning and budgeting were `bottom-up* efforts. One ofthe first things that Breen made perfectly dear was chat he did not expect to run the company from the top. Instead, authority to set goals and the responsibility to fulfill them was ddegaced to people as far down in the company as possible. Top management played deviFs advocate, ensuring that goals were realistic After chat. Comma noted, top management got `out oftheir way and la them do their thing!* By giving operating staffthe autonomy to make important decisions, and by installing information systems chat could measure and coordinate objectives, the company ef&crivdy reversed hs historical orientation toward centralised control. For the fiat rime since the divisional structure had been introduced in Spencer's era, diviston managers were hdd direeriy accountable for their performance. Occentralizaaoo proceeded further by converting the company's nine domestic dinsioas into profit centers, and by installing a rigorous management accounting system that charged the divisions for the use ofworking capital and fixed assets. . According to the vice president ofhuman resources tt this rime, Breen was *absoiuteiy unreiendng in terms ofperformance.* To Breen, it was simple `Once the plans had been agreed upon, people were expected to do what they said they'd da' His demands foe accountability and responsibility were a dramatic change for theta Shetwia-WiOiama employees who expected to receive their bonuses once a year like dodework and for those who thought ofthemselves as working for the company for life. During these Sot years, many difficult derision* had to be made about personnel. The standards were high but everyone was given an equal shot to succeed. The turnover was most drastic among the company's top executives, while a strong cadre of experienced operations managers remained. To monitor and reward performance; the company instituted executive plant tied into rise planning, budgeting, and the 95 0007-SWP Giai-te* 7: Remaissamcs in Cqatincs management assessment process. In addition to the top executives, Sherwia.WitlUmf developed compensation plans tied to incentives for many other employes, particularly store manages and sals representative*. These measures had a positive efifeet. By the fail of 1979, the company had cut as tong-tom debt by sa; million, stockpiled xo millioa in cash, and doubled its accounts payable On October 30,1979, Breen convinced Gulf Sc Western chat the continuing possibility ofa takeover hurt efibrt* to rebuild Sherwia-Williams. The company bought bade its outstanding shares, which amounted to 13^ per cent, for sat million. Following that crucial success, Sherwin-Williams restored its dividend, which it had been unable to pay since 1977. In 19(0, Breen was elected chairman, and lata that yean alter conferring with employees and outsiders, he revived the 'Cover the Earth' logo. Removing the takeover threat marked die end ofSherwin- Williams' short-term crisis and the beginning ofa decade-long second phase, characterized by growth in the coatings business, by divestirure ofthe unprofitable Chemical and Container Divisions, and by short-term dlvetsiScation into drug stores. At this time, Shctwin-WiUiams was still organned in four basic business segments, or Groups. The tint and largest was the Costings Group, whidt cotssisted offour operating divisions; the Chemical Coatings Division; the Retail Stores Division (ofapproximately <,400 stores); the Consumer Division, which manufactured paint and distributed it through various marketing channels to home centers, national retailers, and hardware dealers; and the Automotive Aftermarket Division (fermeriyAutomotive Retinishing), which made and distributed ooatings fer vchidc repair and maintenance. The resuming three bustaco segments included the Chemicals Group, which produced additives used is agricultural chemicals and foods and beverages; the Container Group, which provided casts fer paints and ocher consumer products; and a Specialty Group that manufactured painting tools and accessories such as brushes and rollers. To facilitate true dccentralasrion. Breen eliminated the Group Vice President! who had repotted to the president. Once fitted from this cumbctsome management layen the heads ofthe operating drrisioes throughout the company repotted directly to Breen. The Coaxings business was by far the strongest segment. Steady demand had then over the 19708 fee new chemical coatings, partly because metal had doubled is dure ofthe construction components market. In 1979, the Chemical Coatings Drrisioa introduced a product calkd Supetdad 1:00, a heat-cured, high-performance, and loaf-lasting vinyl coating fee the aluminum siding industry. The division also introduced ha PowesQad process, which produced die fiat fuU-gloss, gloss-retentive, cathodic finish fer dearocoating general metals and farm equipment. In addition, the division developed an important niche market in priming original equipment fix plastic automobile parts. In 1914, an advanced formulation called Polane ClasOad was 97 0007-SWP CkaPTX* T- RlHAttSAMCl IN COATWea introduced due reduced the cure eyrie required for the priming of* sheet-molding compound by 50 per cent. Auto manufactures could increase their production output by using GlasGsd-treatcd. and after i$i6, ftrmiClitktreatjd, automotive body para. The Automotive Aftermarket Division ofthe Coatings Group was another area with strong growth potential In 1979, it introduced Sunfire, a highly durable acrylic urethane enamel Sunfire soon gave Sherwin-Williams the lead in the premium automobile refinishing market because it was the fins air drying finish that equalled the durability, gloss, and color retention of a factory-baked coating. Later, the division introduced and then refined, a line ofUltra Base 7 acrylic urethane finishes. In 1981, to expand market share in the production shop segment ofthe industry, SherwinWilliams acquired the assess ofWcstern Automotive Finishes, Inc., a Toss company. Even the Stores Divisioa--long considered a troubled business-- experienced a rebirth in the 1980s. Despite their broader retail service orientation during the 1970s, the stores trill mainiy served aa a distribution network for SherwinWilliams product!. "We had that manufacturing mentality. We were going to make what we want to make, and the [stores were] going to find a way to sell it,* noted one Consumer Divisioa executive. This attitude altered in the early 1980s, when SherwinWilliams began to change to a `marketing pull company rather than a manufacturing puds company * One catalyst for change was the newly installed management accounting system, which revealed that the reason the company's paint factories always seemed to be awash in money was because they were idling to a captive customer; the Stores Division. Once the charge for working capital and othen tighter financial controls had been installed, the Scotcs Divisioa began operating in the black for the first time hi its history. Throughout the 19(01, Sherwin-Williams worked to resolve the dilemma ofthe customer base ofthe branch stores. Although the do-it-yourselfdecorator market increased from a quarter ofbranch store sales in 197I to a third in 198}. the remainder ofsales were generated by pcinring contractors. Although Sherwin-Williams believed that retaS sales to do-it-yourselfcustomcts wett important, it needed to target this market segment mote carefully The company decided to dose Decorating Wodd and scak back the other larger decorating centra to full-line paint and wallpaper stores. It introduced new coetingi products, such as Super Paint, a premium quality interior and exterior laces that carriod a ten-year warranty In 1982, the Stores Divisioa began a new multimedia campaign that advised customcts to `Ask Shcrwio-Williams." The company also continually rethought its store location strategy, and, in 1983 alone, dosed many branches and opened fifty others in different locations. At the same time, the Stores Division embarked on the biggest single promotion in company history, calling for a one-miHion-gallon paint sale, and coining the slogan. Take Charge It's Up to Me in 't|T 99 0007-SWP-034669 Ckaptui t- ik Co*ma Another dilemma th impeded Sherwia-WilHams'i growth in we the need for mow outlets fee its pelt* products, particularly among discounms who were once again damodag fiac Shcrwia-VnaUms brand*. To resolve this problem, the company developed an ambitious multi-brand production and distribution strategy It began in 19S0 by acquiring thnwtO-kaown Dutch Boy name and paint facilities. Sherwin.Williams intended to offer Dutch Boy to retailers and discounters, while retaining the Shcrwta*'Williams brands in in own (tores. The company also received Dutdi Bo/s Baltimore Paint and Chemical Corporation subsidiary, a Maryland company fauuiod in tpap that ipecialhrd In traffic paint, together with in paint factories in Baltimore and Loa Aagcics. By 19S5, the Dutch Boy investment began to bear fruit. Shcrwin- WHIiamt sold Dutch Boy to home centra and other man retailed and sold Dutch Boy Super Kem-Tone to discount dtains. Although difficulties arose initially because Dutch Boy had been a dealer brand, Shcnvin-WilZhms removed Dutch Boy from the dealer channel and replaced it with the Martin-Scnour brand. Alongside in efforts to build the coatings business Sherwin-Williams began investigating other iaduaraci with fitter growth meet aa an appropriate way to divemfy In ijli, Shenrin-Willhms waa ashed to step in as a Vhite knight* & ward offa takeover aaadc on Gray Dni a Cleveland, Ohio chain ofdrugstores. A&er pmibBkifti SbcfwiWIUaa BMBftft&M&c dbscilflos drugstores made most oftheir moocy In the 611 and winter months, this business might be the ideal countereydkal dhtraificarion forwhich tfaqr had been searching. Sbetwia- WflBams bought Gray Drag fee *JJ miflloo la cash. With thii purchase (and with the stores from Drug Fain whieh Gay had acquired six months earlier) Shcrwin- Wiffiami created t new Drug Scorn Dbrisioo. caeotnpasring some 4J0 drugstore. Alfhona^ href (MCA CO (>CUf Oft GCpmdlfig afw| hi dwyijff high-growth Cnee, it came to mafiaadwtsome 0/its unprofitable Una would have w bo <fiyraL TV Qvwfinw CTHftffOt Hit ffftf1 Trvrify nftfr dw new financial controls, and the strategic planning process, revealed that its profits were illusory Sbcnrin-William* had produced eontaiacta sinee 1(74 and was still making round paint cans, as well as aerosol and oblong cans, primarily for external sale. Malting cans waa a big businea. In Sec, not counting companies making food and Ix^erage cant, Shcrwin-Wiflum* was one ofthe largest producer* ofgeneral-line cans in the eountiy In order to keep profits up, howeven h charged Shetwin-Williami'a internal businesses mote for ana than it would coat the company could buy elsewhere. In addition, the division sold 7} per cent ofha can output to competing paint companies fit 19S4, therefore, Sherwin-Williams divested the Container Division, but continued buying the cans from the new owner. 101 0007-SWP-034671 Cmattu 7: Rimauwks m CoAitNei Similarly, although the company had initially considered the chemical industry a prime area for future diversification, the Chemical Divisions continued losses in the eariy 1980s made it ripe for divestiture. In 1983, when the federal government attended ia saccharine ban, Sherwin-Williams realized it would need to devise alternative artificial sweeacacts to remain competitive. Not only did die division lack the research resources required for this particular purpose, it also lacked the funds to develop ocher new chemical products. la addition, the cyclical nature ofthe chemical business was a problem. Discussions concerning the Chemical Division's long-term viability led to ha divestiture, ia 198}, to PMC Specialties Croup. By the sale, Sherwin-Williams automatically removed itself from a number ofbusinesses, including paracresoi, alkali-blue pigments, saccharin, triazoles, and zinc aside Sherwin-Williams also reached a turning point with the Drug Score Division it had formed in 1981, as this continued to report profits below du company's threshold ofscceptability. Although the company had invested an eaotmoua of management time in the Drug Store Division, and led it through a number of important reorganizations, research in the mid-1980s showed that the division would requite another syoo million to make it into an important presence in the drugstore industry *We got the drug store business from losing money to making money," noted Commes, but this was only `a moral victory as opposed co a real economic victory" Rather than continue to invest, in 1987 Shcrwio-Williams sold the division, for a profit, to the R2co>Aid chain. The sale ofthe Drag Store Division inhered in the third and current stage ofdie Breen eta, in which Sherwin-Williams, having shed its lest non-coatings businesses in otder to concentrate its capital nd management resources squardy on coaringt. No ochar company in the coatings industry possessed Sherwia-Williamfs remarkable advanctges. bwat by far the largest, with a vast network ofover z^oo paint and automotive stores; ia nearest compcatot; by contrast, had only >80 paint branchm. Shnrwtn-WBIJams planned to buld on these advantages. Its experience* during the 1980* had aught management that efforts to diversify, and to build marka share in industries ia whkh the oompany occupied a minor position, harmed its cote business. Top management, which as of1986 consisted ofCommes as president and chief operating office* with Breen retaining the chairman and chiefexecutive officer poridoo, vowed "never again* to divert resource! and management atteatioa as the company had dooe in the 1960a and 19701 Ia addition to improving its market sham in coatings, Sberwin-WiShms focused 00 improving custooer service, and the latter halfofthe t9ios taw arigniScant amount ofinvestment in this area. In keeping with Brterfs strong interest ia empicyee performance and responsibility Sherwin-Williams gave spedal attention to developing 109 0007-SWF-034673 ChaTTU 7; RlNAUlANCi Of Coma ta staff from within the organisation. The company initiated a number ofpcognuM designed to build management depth and develop the company's future le^etship. A formal management training program for note managers jva* implemented, and man/ other areaa ofthe company became increasingly professionalised. Breen, who often spent halfa day with each dear of new trainees, believed these training and development programs were essential; has oft-quoted "Bceenirm* was *smatt people plus hard work equals success.* As pan ofia new emphasis on ooatingh Sherwin-Williams took a scrim ofimportant steps in product development, production, and distribution. In 19I7, over too new storm were opened and many new sales representatives wete hind. In 19S!, for the fitst time in n years, Sherwin-Williams updated its color system, introducing the 'Color Answem Chart,* a stato^f-tho-tit reference ofcolors for interior and exterior use Mote significandy, there was a renewed commitment to quality throughout the organization. The company also nude important irquititions in coating companies with strong niche poetdong. Building on its 19(4 acquisition of //_-_3>\Duplicoloc, a coarinp company that specialgod in automobile aftermarket paints, in f ' y1990, Sherwin-Williams bought the Kryioo and Illinois Broruc aerosol paint operations ^' ofBorden, Inc The Kryion name aunc from a 4i-ycir old Pennsylvania company that carried a complete line ofspray paints and acrylic coatings. The Illinois Bronze hint Company name was that ofa ceatury^ld, Chicago manufacturer ofaerosol and oilbased brushing paints. That same yean Sherwin-Williams also bought the architectural coatings business ofDeSoco, Inc. An Blinoii companywhich traced in room bade to 1910, DcSoto was one ofthe largest paint manufactures in the country and its architectural coatings business supplied private label paints for chains such as Seas and Home Depot. The addition ofDeSoco to the Custom Paint Products Croup made Shcrwin-WiUiaai the arodd'a larges* supplier ofcustom painci for the private4abcl market. The company's dedaion ta concentrate oo building market share in the waa timely. Discount and home*decoating chains that catered to the do-it-youiscifmarket had grown to become the biggett idlers of paint. These stores preferred to ttly on one or two major suppliers that told national brands and provided urioeal distribution, other than hundreds ofsmailet local paint companies. As it pauses to observe the njth annivessary ofits founded entry into the punt business, Sherwin-WUliams sacks to increase its lead in the coarinp industiy. Aa Breen hat pointed out, *Our mission is to be number one in every busmen wdte in.* The company's multi-brand strategy ofplacing its paint and ocher coarinp in at many different channels ofdistribution as possible gives it a good chance to succeed; indeed, for the fine rime since it introduced Kem-Tooe in 1941, Its many brands ate dearly positioned in the maikctplaca. Similarly, in its automotive aftermarket and eoau-i^, Smhm-M a> 0007-SWP-034675 l v<t` r *f' r*JT Lu Shanain- VPiBitmt onwm Saak nm. Iffi ta right. MiddU ram, teft ea right, o/Jittn andaparating managtn. Sahara 8. Vmiti. Prttidtne, Print Jtttph M. Seaminatt. Pntidtntand February 199/. Stmt Group;John C Mum Gtn. Mgr.. Spatially Pradma Pmideat and Gan. Mgr., South Diaitian SbcbardM. Wiban, Ctntrai Diritiom, Paint Start! Pntidtnt aad Gtn. Mgr* Gramp; Stair P. LaCour, Pntidtnt Santitantrn Diaitian. Paint Siam and Gtn. Mgr., Mid-Cnrrai Granp: Frank Sudrr, Pntidtnt Diaitian, Paint Sima Group; and Gtn. Mgr., Cantamar Diaitian: WiSiam 8. Eldmigt, Pmidtat, /aim G Srtan, Chairman aad lattnatianal Granp: Satan ChirfEntatiat OffittK Camaay G Kinney, Pnddtnt and Gan. Mgr* toy, Viet Pntidtnt and Tnantmt Trantpartatiaa Stnritat Diaitian: Chrittapbtr M. Cannot, Pmidant Saint O. Xftaan. Pntidtnt and and Gan. %, W'attain Diaitian. Gan. Mgr.. Cbrmital Caatinp Paint Siam Granp. Diritian: Thamat S. MMieh, Saniar Vita Pmidantfinaaaa and ChufFinaatiai Qffittr; Vittiami PannilL Vita Pntidtnt. Admiaiteratian;Jatn L Ault, Vita Prrtidtnt-Carparau CanmUtn Thamat A Ctmmrt, Pntidtnt and ChitfOptrating Offieir.Jamtt Renthau. Pntidtntaad Gtn. Mgr., Eaton Diaitian, Paint Slant Frant Sam, lift ta right, Jamtt UT Kraut*. Pntidtnt and Can. Mgr., Autamaeia* Diritian: Thamat Kratgte, Viet Pmidant Human Smarm, LarryJ, PitaraJt, Viet Pntidtnt, Gtntrai Cauntti andSatmary; Land SttUata, Attittant Sttntaty and Corporate Dinttar afTaxrt. Group. tn 0007-SWP-034676 Ciurre* y. Rxnaimanc* ih Coatinoj chemical coatinp businesses, the company's varied brands are channeled among different markets and cover a wide variety of uses. Gy using a strategy ofdeveloping its coatings business more fully and creating for itself a larger position as a marketer ofdo it- yourself products, Sherwin-Williams is ideally positioned for future growth. Although much about Sherwin-Williams has changed over the past 115 years, much remains the same The company continues to lead the paint industry, and its current strategy, to focus on quality coatings, harks back to its founders. In addition, with Breen setting the tone, the company has re-emphasized its early traditions of honesty, integrity of dealing, hard work, and focal conservatism; Cottingham's 'Code of Principles* is prominendy displayed throughout the offices oftop management. In 1991, Sherwin-Williams is one ofa small handful ofUnited States companies to lead its chosen industry for more than a century. During the past decade, the company has shown steady growth and profitability. Looking ahead, it expects to continue to grow in market share and to improve customer service; If its histoty is any guide, Sherwin-Williams's successful combination oftraditional strengths and values, and its modem management techniques, promise that it will remain "Americas Paint Company* for a long time to come. 107 0007-SWP-034677 Non ON SOUKS Shcrwin-Williams ha always been proud ofis history, end is various historians end archsvtss Im preserved e wealth ofmaterial Iran (he early year*. This book would have been fat harder to produce, for example, without the efforts ofpeople like W.R. Stephen. m pariy manager who gathered many documents over the course ofhis career and wrote descriptions ofall facets ofSberwis-WilSanu history. This book ii based primarily upon inmraal sources, upon material in che public record, end upon the oral interviews nooed above that wen conducted for due project. Unless otherwise noted, ill quotations and dtadons 60m the ten are drawn from internal sources at Sherwin-Williams. As these documents are proprietary to the company, we have not footnoted deem for due volume, and dee only references from sources available a the public. Citations 60m published or public sources Pigs JJi Mould psss for a Pilgrim father.* from Roy Rutherford, Joyef Uvtag and Working FIB Typial American's Life,* in 8*yt Grtam TtH A Sttrj Amman IxitUtim, OseWPfoisAudrfacvcIaad. IMO.p.75. Pape 77 "didn't always do wWsctpeetei* CStamiedVmk (April t. t97Q9wpu 103. Pape 79* *We weren't going our snd askingour eustomera...* Budata WWA (pchruuy 23.1976). p.. PsfiSSt "a prior had to be paid.. .* Jarieoe WW (Maids 27,1979. P- PagstSt *fiatsadxjoml...* VUTSkeer TeteacnjNduae 24,197-Q, p. 37360. Piplh * tsoehlad company.* WhfAmt 7namjpt(June 2& 1976), p. 44077. Pape 171 "The jsbbne leapsany foo.* TUNtm M Tamm (huge* 3.1971). Dl. Pigs 9U *t don't lows a damn drinpaboutthe peine buiiaem* Ammde/VMf (August 19,19*0), p. 29. Pape 119: "Our mioioti a.. .* Badam Vmi (May 5. 1986). p- 9a 0007-SWP About the authom AOCNOWUOGSMBNn Kathleen McDermott is a principal in The Vuiduop Group, lac, Cambridge, MimHiimni firm specializing in historically-bated consulting to bustncat and government She holds a graduate degree in legal hisaoty from Harvard Law School and ir the co-author of^ccttuttinfjtr Sottas: A History tf Priet Wkur&tiutmAMtrk* IS90-1990(forthcoming). Davis Dyer ix managingdirector ofthe Wuithrop Croup. He holds a PhD. in history from Harvard Univerdqr and la author or co-author ofmany boob and article* Including l*km tft Mtdtm Htmla, Tbt BnhaitH tf* Onmkdi Ctmptutf(Beaten, 1990). In die fall of 1990, Sherwin-Williamt commissioned the Vinthrop Croup to write tfu* book for the compan/i 12Sth anniversary in 1991. Although Sherwin-Williams provided rupport and encouragement for the project, and the author* met periodically with die compan/1 officer* and ttpreaencacrvct to review progress, the general structure of the book, its interpretations and conduriotu are the authors' own. Many people contributed to the production of (hii book. The author! wish first to thank Patrick S-EMredget archivist at Sherwin-Williams for her tcrong interne in, and rapport o die project. Pat*! infecdoua cnthuaSaitn for the compan/a history helped to laundi thin book Once the work gee underway, her cnqndopedic knowledge ofShctwia-Williamt, her dedication to tha project, and her attention to detail proved invaluable. Other Sherwin-Wllliims employees and retirees also provided significant encouragement and support. Tom Krocger was a helpful guide to the interview! and an aatute critic ofthe manuscript. Sally Magovich arranged moat ofthe interviews. No matter how obscure the document retjue^ Harold Molden and has crew in the Records Center always assisted cheerfully. The following people--til ofwhom were unfailingly patient and cooperative weta interviewed for this project: Frank Buder, Jack Breen, Allan Quids, Tom Commcs, Bill Bdredgr, Conway Ivy, Jim Johnson, Art Mains Tom Mikfich, Bill Moonan, Larry Pitorak, Jetty Pontius, Fred Rjnow, Valter Spencer, BobTachannen, Len Ward, and John Weaver. The authors' colleagues at dm Winthrop Croup, Paul Barnhill and Dan Jacoby, helped to track down information on Sherwin-Williaras In the public domain. Susan Surapine and Pam Bracken provided prompt and accurate transcriptions of taped interviews. This bookwas designed byjudy Kohn. founding partner of the Boston-based firm Kohn/Cruilohank. Among her credits is die prize-winning history, A Dtiictu Exfrnment; HtnmrJ Smirua Sch--i. 1909-1945 (Beacon, 1987). The colors that appear on the left-hand pages of this book are inspired by a Sherwin-Williams color chart. 109 0007-SWP-034679 Amouca's Paint Company: A HISTORY Of SHETrtN-WtUIAMS Coaipond an a Macuuodi Computer in Adobe Ganmood with duptiy Una in Adobe Helvetia Coodcawd Blade Printed on Wamn Umro Office Eaimet ten end cover ptpeo. bjr Meridba Printinj. Em Greenwich. Ri A KnUntd cdUoA was bottfld is MbnQo&bf The Rhoskb Group, Rochester. NY *0#,m 0007--SWP--034680