SSL International plc

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SSL International plc

Toft Hall, Toft
Knutsford, Cheshire WA 16 SPD
United Kingdom
Telephone: +44-156-562-4000
Fax: +44-156-562-4001
Web site: http://www.ssl-international.com

Public Company
Incorporated: 1999
Employees: 7,000
Sales: $844.5 million (2002)
Stock Exchanges: London
Ticker Symbol: SSL
NAIC: 325412 Pharmaceutical Preparations Manufacturing; 326299 All Other Rubber Product Manufacturing; 339113 Surgical Appliance and Supplies Manufacturing; 316219 Other Footwear Manufacturing

SSL International plc is one of the United Kingdom’s major healthcare companies. It markets and manufactures a variety of well-known brands, including Durex condoms and Dr. Scholl footcare and footwear products. It also makes surgical gloves under the Regent Biogel brand name, and the leading household glove in England, Marigold. Its Hibi line of antiseptics is another major brand. SSL was formed from the merger of several earlier companies. Scholl plc was the non-U.S. arm of the famed Dr. Scholl’s footcare line, and this merged with Seton Healthcare Group in 1998 to form Seton Scholl Healthcare. This company then merged with another venerable English company, London International Group, in 1999, to form the current SSL International. London International Group, formerly London Rubber Co., was the oldest and largest manufacturer of condoms in the world. SSL’s Durex brand controls about 20 percent of the global market share in condoms, with a much larger market share in the United Kingdom and Europe.

Origins of the Dr. Scholl Brand

The Dr. Scholl brand is one of the world’s best-known names in footcare products. Dr. Scholl was William Mathias Scholl, born on a dairy farm in La Porte, Indiana, in 1882. Scholl began attending medical school in Chicago in 1899, and he received his medical degree in 1904. However, his abiding interest was in shoes and feet, and he never practiced general medicine. Scholl had worked in a shoe store to support his studies, and he became convinced that uncomfortable and ill-fitting shoes were responsible for much woe. Even before he completed his medical degree he was granted a patent for a device called the “Foot-Eazer” arch support, and he began his career by peddling his handmade leather shoe inserts to Chicago shoe stores. Scholl’s medical training helped him market the Foot-Eazer. He carried a real human skeleton foot with him on his rounds, and used it to demonstrate the stresses unsupported feet were subjected to. In 1907 Scholl incorporated the Scholl Manufacturing Company, and by 1909 the company had its own Chicago factory. Besides the Foot-Eazer, the company made an array of footcare products, including corn plasters, foot powder, special foot soap, and others. Very early on the line was packaged in a distinctive yellow and blue, a color scheme the Dr. Scholl’s line still carries.

William Scholl’s younger brother Frank joined the firm in 1908, and he became responsible for much of the company’s growth in England and the rest of Europe. William Scholl made many trips to Europe, once fitting arch supports for Kaiser Wilhelm II. He also fitted arch supports for the era’s famed runner Paavo Nurmi, “the flying Finn.” Eventually Scholl dispatched his brother to Europe for good, to develop business there. Frank Scholl’s idea was to open a line of retail footcare shops. Over his older brother’s objections, Frank opened the first Dr. Scholl Foot Comfort Shop in 1913 in London. His doctor brother was afraid the Foot Comfort Shops would have difficulty competing with the drugstores and shoe stores that already sold Scholl products. But Frank was a magnificent retailer who made the Comfort Shops irresistible. He crammed the large front display windows with products, with posters explaining the products, and then with moving demonstrations of the products. One eye-catcher was a huge sledgehammer endlessly smashing down on the knee of a skeletal leg. Emblazoned “140 pounds, the weight of the average man,” the sledgehammer purported to illustrate the ordeal that walking caused the foot and ankle.

In 1933, the Scholl Manufacturing Co. included a line of retail shoe shops selling Dr. Scholl brand shoes. From the 1930s through the 1960s the Scholl shops offered a line of comfortable padded shoes designed mainly for people who worked on their feet all day. By the early 1960s, there were about 100 Dr. Scholl’s Foot Comfort Shops in the United States, and over 400 overseas. The Scholl shoe line took a huge leap in the 1960s when its wooden exercise sandals became all the rage for young women. The exercise sandal was designed by Frank Scholl’s son William, born in London in 1920. William Scholl joined Scholl Manufacturing following World War II, after studying modern languages at Cambridge University. He came across a wooden sandal in Germany in the late 1950s, embellished its design and added a leather strap across the toes. He began marketing it as the “Original Exercise Sandal,” claiming that wearing it toned the leg muscles. In the mid-1960s British women discovered the Dr. Scholl’s sandals. The bulk of the Scholl shoe line was far from fashionable, designed as they were for people with foot problems and foot fatigue. But the sandals appealed to young people—women in particular—who seemed to like the way they looked with a mini skirt. William Scholl enhanced the distribution of the sandals, making them available in self-service racks in drugstores. The sudden popularity of the exercise sandal brought new recognition to the Dr. Scholl’s brand.

Scholl Under New Ownership in the 1970s and 1980s

Founder William M. Scholl died in 1968, and his heirs incorporated Scholl Inc. as a public company to settle his estate. Its first public stock offering was in 1971. Scholl Inc. was split into two parts, each run by one of Scholl’s nephews. The U.S. operations were run by Jack Scholl, who was vice-president and general manager, and William Scholl became president of the company, overseeing markets in Europe, Japan, Latin America, Canada, and New Zealand. About 45 percent of Scholl Inc.’s sales came from its non-U.S. operations, and about one-third of its foreign sales came from England. The company as a whole sold over 500 different foot and leg care products as well as its line of shoes. Sales had risen extensively starting in the mid-1960s. Sales were close to $60 million in 1966, and reached over $150 million by 1974.

Sales and earnings remained roughly static over the next few years of the 1970s. In 1978, the company was sold to Schering-Plough Corp., a large New Jersey maker of pharmaceuticals. Schering-Plough paid $130 million for Scholl Inc. William Scholl went to work for the parent company in its overseas markets. He eventually became president of Schering-Plough’s international consumer products division, until he retired in 1984. In 1987, Schering-Plough sold the overseas operations of the Dr. Scholl brand. European Home Products of Basingstoke, England, paid $160 million for the Scholl business in Europe, Latin America, and Asia. European Home Products was known as a manufacturer of household electrical appliances. Following the merger, the company took the name Scholl plc.

London Rubber Co.

London Rubber Co. was another company with a long history that later became part of SSL International. The company was founded by L.A. Jackson in London in 1915 to sell “barber’s sundries.” Whatever else the sundries were, the stock included rubber condoms, at that time imported from Germany. Condoms made of animal gut had been known in Europe since the 16th century. By the mid-1700s, shops specializing in condoms existed in European cities. It first became possible to manufacture condoms out of rubber beginning in 1843, with the invention of the rubber vulcanization process. In 1915, Jackson’s London Rubber Co. was a small affair, selling its imported stock out of a small room behind a tobacconist’s shop. In 1929, the company trademarked the brand name that later held a virtual monopoly over the British condom market. The name was Durex, which stood for Durability, Reliability, and Excellence. Though the company continued to import condoms from Germany, London Rubber Co. set up its own factory in England in 1932. The factory made latex condoms, using a process and material that had just been invented. The Durex factory had to increase its production during World War II, when London Rubber Co. was cut off from its suppliers in Germany.

After the war, the company developed more sophisticated manufacturing and testing processes. London Rubber Co. was almost free of competition in Britain and thus enjoyed a huge share of the market there. It incorporated as a public company, trading on the London Stock Exchange, in 1950. The company also exported to Europe in the 1950s under other brand names including London and Hatu. Though there were other manufacturers in Europe, through 1990 the company controlled almost 50 percent of the European condom market. London Rubber ventured into farther flung markets as well. The company began a joint operating agreement with a manufacturer in India in 1961. In 1962 it acquired a U.S. condom maker, Julius Schmid Inc. It sold the Ramses and Sheik brand condoms in the United States, though it had a far smaller market share there than in most of its other markets. In the late 1960s London Rubber began advertising in the United Kingdom for the first time.

But as the birth control pill became more popular, condom sales began to flag. In 1981, the company was run by an American named Alan Woltz. Woltz decided that the company should bolster its sales by diversifying into other product lines. Woltz put London Rubber into a variety of new businesses, including fine china, health and beauty aids, and retail photo finishing. By the mid-1980s, the company was no longer primarily a condom maker, and it changed its name to London International Group (LIG) in 1986. But the diversification strategy did not pay off. The photo processing business in particular was expensive to run, and drained the company of cash. By early 1993, many of LIG’s new businesses were in the red, but Woltz managed to cover up this fact, misleading investors. The London Stock Exchange censured LIG in 1993 for hiding its losses, and Alan Woltz resigned.

Company Perspectives

SSL International plc is a major global healthcare organization committed to developing, manufacturing and marketing premium healthcare brands in its core business areas. SSL’s activities will benefit consumers, healthcare professionals and employees worldwide, as well as maximise shareholder value.

Woltz’s successor was Nicholas Hodges, who had run LIG’s European operations and also built up a profitable niche in surgical gloves. Hodges shed the unprofitable divisions, and then began trying to cut costs in the company’s core business area, which was again condoms. LIG’s profit margin on condom manufacturing was very low, and some insiders thought the company was headed for bankruptcy. LIG shut some of its facilities in England and opened new ones in Malaysia, Thailand, and India, where costs were lower. The company had to take a $220 million charge in 1994 for its discontinued operations, and ended up in the red by some $37 million. This was at a time when it held an 80 percent market share in the British condom market with its Durex brand and a roughly 45 percent market share for its brands in Europe. In addition, the AIDS epidemic had been expected to increase the use of condoms. If the company could not do well under these market conditions, things looked dire.

The company had a strategy for turning itself around. It decided to launch Durex as a global brand, replacing the many brand names its products were sold under outside of England. LIG increased its advertising, for example putting out a new campaign on MTV Europe in 1994, reaching millions of potential customers in 37 countries. It was still the world’s largest maker of condoms, and some 15 percent of its sales were to governments and government agencies like the U.S. Agency for International Development. By the late 1990s, LIG had managed to increase its worldwide condom sales by about 3 percent annually. Overall earnings grew 10 to 15 percent annually during 1996 and 1997, and the company hoped to be able to sustain this pace. LIG also hoped to gain a larger share of the U.S. market. The company had a 50 percent market share in Europe by 1998, with a similar market share over much of its Asian markets, but in the U.S. its various brands put together had only about a 20 percent market share. LIG phased out Sheik, Ramses, and its other brand names and unified them as Durex. The company made acquisitions of other condom makers in the 1990s, too, buying up the Malaysian brand Mister in 1995, and the Spanish brand Androtex the next year. In 1996 LIG also bought a U.S. manufacturer of both condoms and medical gloves, Aladan Corporation, for $69.5 million.

Formation of New Company Through Series of Mergers in Late 1990s

Meanwhile, Scholl plc had its ups and downs in the 1990s. It had tried to jump-start its support hosiery business in 1993, hiring a young celebrity to endorse the line and moving distribution into supermarkets. Though the company’s sales were up as much as 10 percent for 1994, operating profits were eaten away by the high cost of promotion and distribution. In 1995 Scholl sold off a French cosmetics business it operated and closed down over 20 retail stores. In 1998 Scholl announced it was being acquired for $568 million by Seton Healthcare Group. Seton was another British company which made a variety of consumer healthcare products. It had a line of bandages and skin treatments, as well as the Woodward brand of baby medicines. The merged company took the name Seton Scholl plc, and aimed to focus on its several core brands.

One year later, Seton Scholl embarked on a new merger deal, and acquired LIG for $984.7 million. LIG had not seemed able to find its feet in the 1990s. In 1999, the British Office of Fair Trade announced its second investigation in five years into LIG’s trading practices in England, where the company held 70 percent of the condom market. The Office of Fair Trade’s Monopolies & Mergers Commission had already put strictures on LIG in 1994, and the condom market was supposed to be open to more competition. In 1999 the commissioned revealed that it was going to look into LIG again. This bad news came just months after LIG announced it would not meet its profit projections, and as a result its share price tumbled 30 percent. The merger placed LIG under new management as part of the new company, now named SSL International plc. The company moved into headquarters in an ancient country estate in Cheshire, Toft Hall.

SSL International found itself with four principal divisions. Its consumer division comprised its condom business, the Dr. Scholl’s footcare and footwear lines, and over-the-counter medicines. Besides the Woodward line of baby medicines, the company also had a line of antiseptics, Hibi, that it acquired from AstraZeneca in 2000. Consumer healthcare products made up about 55 percent of the company’s sales. Another 33 percent of sales came from its medical products division, which included surgical gloves. Marigold gloves, the leading British household glove brand which came with LIG, accounted for another 8 percent of sales and formed its own division within the new company. A miscellaneous division of other products included various sports and leisure goods. The cost of integrating the merged companies was high. Operating costs also ate into SSL’s profits, and in 2002 the company had to issue a warning that it would not meet its profit goals, and it would have to lay off workers. Investors Chronicle (May 31, 2002) described the company as having “stumbled from one crisis to the next” ever since the 1999 merger. The company sold 21 of its over-the-counter drug brands in 2002, and announced that it would also sell historic Toft Hall. The company’s plans for the future focused on promoting four of its leading brands: Durex condoms, the Dr. Scholl line, Regent surgical gloves, and Hibi antiseptics. SSL shared marketing and technology for its Scholl line with Schering-Plough, which still ran the U.S. operations for the brand. SSL’s launch of Flight Socks in 2002 was one of its most successful new products for Dr. Scholl’s.

Key Dates

1907:: Scholl Manufacturing Company is founded.
1913:: First Dr. Scholl’s Foot Comfort Shop opens in London.
1915:: London Rubber Co. is founded.
1929:: Durex brand name is trademarked.
1950:: London Rubber Co. goes public.
1971:: Scholl Inc. incorporates as public company.
1978:: Schering-Plough buys Scholl Inc.
1986:: London Rubber changes name to London International Group.
1987:: Non-U.S. operations of Scholl are sold to British firm, which takes the name Scholl plc.
1998:: Seton Scholl is formed out of Seton Healthcare and Scholl plc.
1999:: Seton Scholl buys London International; new company is named SSL International plc.