Samuel Cabot Inc.

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Samuel Cabot Inc.

100 Hale Street
Newburyport, Massachusetts 01950-3504
U.S.A.
Telephone: (978) 465-1900
Fax: (978) 462-0511
Web site: http://www.cabotstain.com

Private Company
Founded: 1887
Employees: 100
Sales: $50 million (2001 est.)
NAIC: 325510 Paint and Coating Manufacturing; 325612 Polish and Other Sanitation Good Manufacturing

Samuel Cabot Inc. makes wood stains and surface preparation products, mostly for exterior use. The company’s product line features cleaners, primers, strippers, varnishes, stains, and waterproofing. It also offers specialized products for decking, siding, and interiors.

19th-century Origins

In 1877 a 27-year-old chemist, Samuel Cabot, a graduate of both the fledgling Massachusetts Institute of Technology (MIT) and Switzerland’s Zurich Polytechnicum, started his own coal-tar dye business in Chelsea, Massachusetts. By saturating felt paper with coal tar imbedded with gravel, the Cabot business made tarpaper, a construction staple at the time. Tarpaper kept flat roofs tight, and flat roofs made for more efficient building. With his business partner, Frederick Nourse, Cabot later focused on the manufacture of fine calcined lampblack. Residual soot accumulated from the burning of oil distilled from coal tar, lampblack had commercial applications including printer’s ink, shoe polish, and stove polish. In the fall of 1878 Nourse left the partnership.

Cabot thrived on his chemical curiosity, conducting research to improve existing products and invent new ones. His notebooks contained hints of products that would come many years later. In 1882 an architect uncle asked Cabot if he could develop a product that would preserve shingles from the ever-changing New England weather without hiding the wood’s grain. Soon Cabot had developed a formula for creosote stain, which may have been the first preservative stain for exterior wood and was certainly a breakthrough product. By 1884 Cabot’s Creosote Shingle Stain was used throughout New England and beyond. The product would go on to become a standard throughout the country due to its combination of durability and preservation.

Around the same time Cabot’s father, a doctor, suggested he develop a disinfectant. Samuel created a coal tar disinfectant that became a well-known household product called Cabot’s Sylpho-Napthol. Later he developed Cabot’s Clear Brick Waterproofing and many other products.

Cabot’s business expansion included mineral exploration in western Pennsylvania. He established a carbon black plant there, putting his brother, Godfrey Lowell Cabot, in charge. Later Cabot sold the business to his brother, and by World War I Godfrey L. Cabot, Inc.(later called Cabot Corporation) dwarfed Cabot’s own Boston and Chelsea operation, mainly because carbon black became an important ingredient in the vulcanized rubber on America’s growing fleet of automobiles.

Believing everything had a useful purpose, Cabot was initially stumped by eelgrass. No one on the Massachusetts shore could think of a use for eelgrass, which got in the way of boats and swimmers, resulting in huge ugly piles of the stuff on the beach. Soon Cabot learned that early settlers had used eelgrass as a crude home insulation. In the summer of 1893 he created a prototype insulation with layers of eelgrass stitched between sheets of heavy paper. The product, Cabot’s Quilt, quickly found an eager market and became one of the company’s primary products until the mid-1940s.

Cabot caught pneumonia and died suddenly in November of 1906. His 22-year-old son, Samuel Cabot II, took over the business in 1910 after completing graduate studies in chemistry at MIT. On May 13, 1907 the company was incorporated as Samuel Cabot Inc. Disaster struck April 12, 1908, however, when a fire destroyed more than 17 miles of Chelsea streets. Although the Cabot property was a total loss, public and private money poured in and the city was in better shape three years later than it had been before the fire.

Cabot II and Collopaking in 1922

Cabot IPs most significant technological contribution to the company was a pigment-grinding process he called collopaking. He patented the process in 1922 and trademarked a family of heavy-bodied stains under the name Cabot’s Collopakes. The product had the preservation quality of stain, but also provided the rich covering color of paint.

By 1930 the company had developed a gloss collopake for doors, shutters, and trim. At the same time, the company boasted a range of other products, including lubricating oils, wood putties, wood preservatives, brick and cement waterproofing products, and interior stains.

Collopaking led to the development of Old Virginia Tints, a product line sold with the tagline, “covers like a paint and performs like a stain.” This product would remain one of the company’s best sellers into the year 2000.

The same technology that produced Old Virginia Tints produced the first titanium-based white house paint, Double-White. This innovation was nearly twice as heavy as other white paints because collopaking allowed for the suspension of a disproportionate amount of finely ground titanium. The company showcased the product after it was used to paint Colonial Williamsburg in Virginia.

Expansion Under Cabot III

Born in 1910, Samuel Cabot III joined the company after graduating from Harvard in 1933. His father actually helped force his involvement in the family business by limiting his son’s funding. With the Great Depression on, jobs were scarce, and Cabot III had little choice but to follow his father’s footsteps. By the onset of World War II, Cabot III was working as company sales manager and treasurer.

Into the 1940s many of Cabot’s main sellers were close kin to products from the company’s earliest days. Old products, such as Lampblack, Beehive Pitch, and Cabot’s Quilt, continued to bring in major revenue. During World War II, while Cabot III served in the Army Air Corps, Cabot II developed new products. He and his associates created Klengon, a hand cleaner. His black-out paint, used to darken windows to reduce their visibility to German war planes, was mainly sold to U.S. government agencies. In October 1944 Cabot II won a patent on “a method of reducing the visibility of an object when seen against the sky, water or distant background.” Total company sales increased every year from 1942 through 1954.

Credit Cabot III for expanding Cabot internationally. He developed considerable business in West Germany and Australia. The company partnered with the Australian firm Kenneth H. Brock & Son Pty. Ltd. (Kenbrock) in 1960. Australian architects used Cabot Stains on red cedar timber imported from Canada and the United States. By 1970, concentrates of all Cabot products were imported to the Kenbrock plant where they were then diluted and canned. By 2000 Cabot would control more than half of the Australian wood care market and sold more stains per capita in Australia than anywhere else.

In 1960 Samuel Cabot Inc. was still a small company, partially because Cabot II had not reinvested profits into the company. Moreover, the company spent little on advertising and marketing outside of New England. Two years earlier, in 1958, Weyerhauser Corporation had purchased Olympic Stains, and soon Olympic surpassed Cabot as the number one selling stain. Believing that Cabot needed a merger to remain competitive, Cabot III inked a deal to sell the company to the O’Brien Company of South Bend, Indiana. However, his father and the company board negated the deal.

Cabot IV in the 1970s-80s

Samuel Cabot IV, born in 1940, took an active position in the company at age 29. His grandfather had died two years earlier, his father was closing in on retirement, and he wanted to serve under his father to learn the business. His early decision to have the company convert to the world standard metric system ended up costing the company when the U.S. move to metrics died. However, he did succeed in installing Cabot’s first generation of computers, an IBM System 3.

Cabot IV officially took over in 1977 when the company’s annual sales were $3 million and the growth rate was near zero. He promptly hired a new management team that included Tony Faria as vice-president of sales. Faria developed a two-step distribution system in which Cabot forged relationships with independent sales representatives who then re-sold Cabot products to retailers. The new system produced cost-savings by eliminating the need for warehouses.

In the late 1970s the company began limiting its product line and concentrating on its strength: architectural stains. A study of the firm revealed the stains were the only Cabot product that sold in high volume with reasonable profitability. The timing proved fortuitous. Samuel Cabot Inc. focused on stains just as the U.S. market dramatically increased its interest in building with natural materials, particularly often wood.

Later, another internal business analysis concluded that company growth was restricted by the limited product line. In response, Cabot introduced wood cleaners, wood brighteners, primers, strippers, and a flagship product called The Finish, a high-tech paint containing Teflon.

Company Perspectives:

The Cabot company seeks to foster ideas, relationships, and adventure. Ideas because employees need to reinvent their job every day. Relationships because the company wants an atmosphere of harmony, openness, and empowerment. Adventure because Cabot seeks a bias toward action and thinking outside the box.

A growing U.S. economy, especially in the construction business, helped lead the business to significant growth in the 1980s. Cabot also created a marketing tool that gathered wide attention. The company published a calendar featuring historic structures that had been treated with Cabot products. The calendars showcased landmarks such as the Paul Revere House, the mission at San Juan Capistrano, the John F. Kennedy Staten Island ferryboat, and buildings at the Baseball Hall of Fame’s Doubleday Field. In 1985 Cabot launched its first major advertising campaign, hiring Ingalls, Quinn & Johnson and spending about $700,000 on national media.

The growth of the 1980s enabled Cabot to move out of its deteriorating Chelsea plant and build a new facility in Newburyport, Massachusetts. After more than 100 years in a Chelsea plant, Cabot built a $9 million facility on Hale Street in 1985. The 100,000 square foot factory was the second largest one-story plant ever built in Newburyport. Computers controlled most of the plant’s processing, as well as its stock records, shipping, and receiving. Cabot called the factory a model of safety with “explosion proof” electrical equipment, tanks with special flame arrestors, and an air system that changed the air six times an hour in the plant mixing area. Slightly smaller than the former plant in Chelsea, the Newburyport plant doubled the company’s production capacity.

Late 1980s Rough Spot

Revenues, which grew steadily throughout most of the 1980s stumbled in 1989 and 1990. The U.S. economy grew soft. Cabot overspent by offering distributors and dealers a costly sales incentive—an all-expenses-paid Caribbean cruise. The market became overstocked with Cabot products, reducing sales until inventories returned to normal levels. Cabot IV also decided to maintain loyalty to independent paint stores and not pursue sales with such home improvement chain stores as Home Depot and Wal-Mart. All these factors contributed to the downturn. The firm avoided layoffs, but trimmed salaries and benefits over a four-year period.

As chain stores drew more market share, the surviving independent retailers began dropping nationally branded stock that could easily be found at the discount chains. To distinguish themselves, the independent retailers stocked independent brands like Cabot, and the company began to experience revenue growth once more. Vice-President of Sales John Schutz stretched Cabot’s definition of independents to include the large co-ops, groups of independent retailers who joined together for buying and marketing clout. Cabot’s market was especially enhanced by serving the two largest co-ops, True Value (9,000 independent store members) and ACE (6,500 independents).

The 1990s also brought another round of international expansion. Cabot’s Australian partner, Orica, began distributing products in New Zealand, New Guinea, and Fiji. Samuel Cabot Inc. signed a license agreement with Chilcorrofin, a Chilean firm in 1996. Berger Paints, a global coatings company, began marketing Cabot products in the Caribbean late that decade.

Mid-1990s and Beyond

In 1994 Schutz’s drive to bypass the company’s traditional distributor pipeline and offer direct prices to retailers backfired when its largest distributor, a company that brought in 20 percent of Cabot’s sales, announced it was dropping the Cabot line. It took a week of serious talks before Schutz succeeded in convincing the distributor to reinstate the line. In February 2000 Cabot promoted Schutz to president, making him the first non-Cabot family member to hold that position.

New products and greater market penetration produced a doubling of company revenues during the last five years of the 20th century. During the time period 1993-2000, the private company reported that its revenues were increasing “at an impressive annual rate.” Under the leadership of Cabot IV, the company grew to 12 times its 1975 size, and was an industry leader in the development, manufacture, and distribution of premium-quality interior and exterior wood care products. Samuel Cabot Inc. reached $1.5 billion in annual sales in 2001.

Principal Competitors

Benjamin Moore & Co.; PPG Industries Inc.; The Sherwin-Williams Company; McCormick Paint Works Co.

Key Dates:

1877:: Samuel Cabot starts a coal-tar dye business.
1882:: Cabot develops a creosote stain to preserve wood shingles.
1907:: The company is incorporated.
1910:: Founder’s son, Samuel Cabot II, becomes president.
1922:: Cabot II patents the collopaking process.
1942:: Sales begin a 12-year annual increase.
1960:: Cabot III oversees international expansion, particularly in West Germany and Australia.
1977:: Cabot IV becomes company president.
1985:: The company launches its first major advertising campaign and builds a new $9 million Newburyport plant.
2000:: John Schutz is named president, making him the first non-Cabot to hold that position; Cabot IV remains as chairman.
2001:: Company reaches $50 million in annual sales.