Marketing Mistakes and Successes, 12th Edition

CHAPTER EIGHT

Newell's Acquisition of Rubbermaid: An Unbelievable Disappointment

John McDonough, CEO of Newell, specialized in buying small marginal firms and improving their operations. In ten years he bought seventy-five such firms and polished them by eliminating poorer products, employees, and factories, and by stressing customer service. This format began to be called “Newellizing.” It was hardly surprising that most of the acquisitions had strong brand names but mediocre customer service. Rubbermaid fit this mode, though it was by far the biggest acquisition and would nearly double Newell's sales.

Rubbermaid, manufacturer and marketer of high-volume, branded plastic and rubber consumer products and toys, had been a darling of investors and academics alike. For ten years in a row, it placed in the Fortune survey of “America's Most Admired Corporations,” and it was No. 1 in both 1993 and 1994. It was ranked as the second most powerful brand in a Baylor University study of consumer goodwill, and received the Thomas Edison Award for developing products to make people's lives better. Under CEO Stanley Gault, Rubbermaid's emphasis on innovation often resulted in a new product every day, thereby helping the stock routinely to return 25 percent annually.

Surprisingly, by the middle 1990s, Rubbermaid began faltering, partly because of inability to meet the service demands of Wal-Mart, a major customer. Rubbermaid stock plummeted 40 percent from the 1992 high, leaving it ripe for a ...