Case Study: In-Sink-Erator Division

In-Sink-Erator Division,

Emerson Electric Co.,

Racine, Wisconsin


Situation:

When Robert Amter joined In-Sink-Erator in 1976, sales were $38 million and its share of the household garbage disposer market was 44%.  In-Sink-Erator was a single product line company in a high profit niche.  Ninety percent of sales were to plumbing distributors and ten percent were sold to Sears under the Kenmore private label.

In 1985, In-Sink-Erator had grown into a three product line company with sales of $145 million and 16% compound annual growth.  A 32% pretax profit margin, and a household disposer market share of 72%.  The two new product lines were household water dispensers and dishwashers.

Results Achieved.  Robert Amter’s contribution to achieving the above results:

» Dishwashers.  In 1979, while General Manager of commercial products, planned and implemented In-Sink-Erator’s entry into the USA household dishwasher market.

Kitchen-Aid was one of In-Sink-Erator’s largest household disposer competitors and held a large share of the household dishwasher market.  Kitchen-Aid was aggressively trying to penetrate In-Sink-Erator’s plumbing distributors by offering a package of disposers and dishwashers.  In-Sink-Erator did not sell dishwashers.

As a defensive strategy, In-Sink-Erator entered the dishwasher market with a two model product line purchased under private label from Whirlpool.  First year sales were $1 million at a 14% pretax profit margin.  By 1989, sales were over $25 million with an 18% pretax profit margin.

» International.  Annual sales could be as low as $500,000.  As In-Sink-Erator’s high profit USA business grew, Emerson was concerned that a European dishwasher manufacturer might enter the disposer market.

Starting in Europe and, as unit sales grew to enable production of a cost competitive disposer, expanding into the high profit USA market.  There was additional concern that, as the USA disposer market became fully saturated, In-Sink-Erator’s growth would be stopped.

In 1980, Amter was appointed to implement the international market development strategy.

International Financial results achieved:

Fiscal Year (000$)                                   1979                1985                1989           Annual Growth ’79-’89

Sales                                                    $2,000             $6,300             $15,900           23%

Pretax Profit                                             380             1,400                2,800               22%

        % to Sales                                          19%                  22%                 18%

Thru-Put Pretax Profit                            nil               2,300                7,500              144%

        % to Sales                                           nil                 37%                 48%

International Strategy to achieve objectives:

» United Kingdom.  Opened In-Sink-Erator’s first offshore warehouse and sales operation. To achieve low overhead costs, used a public warehouse for storage and order processing. Employed a public accounting firm for credits, collections and financial reports.

Set-up exclusive territories with appliance distributors for In-Sink-Erator brand sales. Maintained strict pricing and sales territory policies which was unlike competition.  Set competitive price points which eliminated most requests for special prices.

Established local disposer installation and repair service agencies that were separate from the network of customers.  Competition expected its customers to arrange for repair and installation.

Maintained a three month unit sales inventory to achieve a 3 to 5 day order/delivery cycle. Competitors cycles were 3 weeks to 3 months.

Instituted a private label sales program to United Kingdom appliance and disposer manufacturers.  Results achieved with the private label program included, starting in 1984, two United Kingdom appliance manufacturers became customers:

~ The Kenwood Division of Thorn-EMI Ltd. Stopped production of disposers.

~ The Xpelair Division of GEC Ltd., a Tappan customer, switched to In-Sink-Erator disposers.

Financial results for the United Kingdom operation:

Fiscal Year (000$)                            1979                   1985                1989               Annual Growth ’79-’89

            Sales                                        $400                $2,200             $4,900                  29%

            Pretax Profit                               75                       310                    730                  26%

                   % to Sales                             19%                    14%                    15%

            Thru-Put Pretax Profit             nil                     1,120               2,500                  119%

% to Sales                             nil                         51%                 51%

» France.  In 1980, French Federal Law prohibited the use of garbage  disposers.  However, market research indicated that the French government was concerned with food waste that was disposed of in plastic bags.  Leakage from the bags caused pollution, particularly where fishing was a large industry.

In 1982, In-Sink-Erator hired a Paris consultant with close political ties to the Socialist and Radical political parties to have the law amended.

In 1983, retained Germany’s University of Stuttgart to study the impact of household disposers on sewage processing plants and the environment.

The University of Stuttgart is the most respected sewage engineering school in Europe.

The report was used to help persuade the French engineers and officials to amend the law prohibiting disposers.  In addition, disposers had been installed in La Rochelle, France to enable the engineers to conduct practical and laboratory tests.  This report was later used to try to open the New York City market.

In 1983, filed an application to amend the French law in one geographic area.  It was approved.  Obtained In-Sink-Erator’s first French disposer purchase order from an appliance wholesaler in 1983.

In 1984, hired a Paris based sales manager to expand sales in France, and to open the markets in Italy, Germany and the Netherlands.  Established a warehouse at Emerson Electric’s Brussels facility.

In 1982, disposer sales in France were zero.  1985 sales were $130,000 and exceeded $1 million in 1989.

» Australia.  In-Sink-Erator had been reasonably satisfied with its Australian exclusive distributor until the respected Managing Director died unexpectedly at age 33 in 1982.

The new managing director changed strategies and tactics.  Sales dropped 33% in 1983 versus 1982.  Continuing the relationship was an issue.

In 1985, In-Sink-Erator acquired the distributor with annual sales of $2 million.  In 1989, sales exceeded $5 million with a number one market share.

At the same time, Emerson’s H&H Products Division reported directly to Robert Amter. H&H is a medium-technology product manufacturer.


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