Assault and battery: The fall of the Ever Ready empire: a classic tale of British decline by David Bowen
Sunday 27 June 1993
If the story of Britain's industry were to be told as a strip cartoon, Tanfield Lea would make an appropriate setting. Two successive managements were caricatures of their times: paternalistic and vague in the Seventies, ruthlessly short-termist in the Eighties. Now a new set of managers, from the American firm Ralston Purina, has taken over: its job is to salvage what it can from the wreckage. Ralston makes Energizer batteries, now being heavily promoted. Energizers are alkaline, the batteries of the future; but they are not made in Britain.
British Ever Ready is used to being a pawn in the great game of corporate trading. It was formed in 1914 when its original parent, the American Electrical Novelty and Manufacturing Company, floated its British business. The US side was sold to National Carbon, later Union Carbide, together with a brand that later lost a letter and became Eveready.
The two businesses kept their links for many years. Their overseas businesses were merged before the Second World War, then demerged under anti-trust pressure after it. After that they competed, but had strict divisions on brand names. The British could use the Ever Ready name in Europe, and adopted the Berec name elsewhere. The Americans used Ucar when they sold in Europe.
At the end of the Sixties, British Ever Ready stood in a position that was, to say the least, comfortable. It had about 90 per cent of the home market, and large shares of other important markets, notably South Africa. It did not advertise much, but looked after the newsagents and other small shops that sold its products with a huge fleet of blue and red vans. It also spent heavily on research and development: 250 people worked in a vast laboratory in Tottenham, north London.
In the style of the day, management was remote and hierarchical. It did not lack ambition, however. In the Sixties big was beautiful and, one manager says, 'they always had aspirations to be one of the largest battery manufacturers in the world'. Ever Ready bought Superpila in Italy and Daimon in Germany. It also built Tanfield Lea, a factory so large it looked more like an industrial estate. For many years, as part of an agreement to set up in the North-east, only ex-coalminers were employed; it was not until 1988 that the first woman appeared on the factory floor.
Long-serving staff freely admit that the factory was overmanned - although as one manager points out, that is with the benefit of hindsight. 'If you are brought up with a particular level of manning, you generally believe it is right. We thought in UK terms: we didn't know what was happening in Japan.'
Tanfield Lea continued to expand through the Seventies. It produced zinc-carbon batteries, the traditional formula, and sent most of them abroad. A new kind of long-life battery, based on alkaline manganese, was making inroads in the US, but the British management chose to ignore it: too expensive, they said, it would never catch on. Ever Ready's research laboratories had made an alkaline battery in 1973, but it was not produced.
A technician who applied for a sales job in the early Seventies was told it was his job to contradict anyone who praised alkaline, even though its merits were clear. Motorised products, such as portable tape players, would hardly work without them. 'They should have been able to see the shift to alkaline by 1972 or 1973,' Chuck Parietti, European operations director, says. 'But they didn't want to believe it.' With a huge investment in zinc-carbon production, the reluctance was understandable.
In 1977 the Monopolies & Mergers Commission forced British Ever Ready to sell its stake in Mallory, which made Duracell alkaline batteries. Duracell homed in immediately on supermarkets, which the British had ignored. Ever Ready would not put batteries in blister packs, and did not like the tough terms the supermarkets demanded. Duracell could not afford to be so proud.
In retrospect, the group was heading unswervingly towards disaster, but it took an external problem to shake its complacency. By 1977 Tanfield Lea was sending almost half its output to Nigeria, winning a Queen's Award for Export and making a record annual profit as a result. Then a telex arrived cancelling the import licence: more than 500 people were made redundant.
After that, nothing seemed to go right. As part of its strategy to become a multinational, the management had set up a large plant in Hong Kong. It used local businessmen to buy a factory, and tried to manage it from Britain. Not a single battery was sold from the plant, and millions of pounds were lost.
Also, in an attempt to appear more international, the company's name was changed to Berec - the name it used outside the UK. There was dismay within the company, and derision outside it. Giving up such a strong brand name seemed potty.
In 1978, the Price Commission issued a report warning that the company 'was moving from a situation where risk had been minimised to one where the reverse is likely to be the case'. The managers were starting to agree. In particular, they realised they could not ignore Duracell, whose simple long-life message was wooing customers by the million. They dusted off their own alkaline battery and equipped a factory at Newburn, near Newcastle, to make it.
They also decided to press ahead with development of a zinc-chloride battery. This lasted longer than zinc-carbon and, though less durable than alkaline, was cheaper to make. The battery was, a manager says, 'a bit of a holding operation'. Its real appeal to the company was that, unlike alkaline, it could be made with existing equipment.
But they were too late to save the independence of the company, and the first phase of its decline came to an abrupt end. In the 1980-81 recession, profits tumbled, so did the share price, and Berec fell to Hanson.
Although James Hanson and Gordon White had founded Hanson Trust in the Sixties, they did little in Britain in the Seventies, preferring to hunt in the more politically amenable climate of the US. The arrival of a Conservative government, combined with the prospect of rich pickings from the recession, turned their attention to home, where they soon identified Berec as a suitable case for treatment. They launched a hostile bid; Berec fought hard, persuading Thomas Tilling to come into the battle as a white knight. But on 23 December, 1981, Hanson won, and Berec became the first of a string of Eighties acquisitions.
Hanson moved fast, sacking the top management and changing the name back to Ever Ready. It closed the Tottenham R & D operation, and boosted the small technical centre at Tanfield Lea to take over the work: it was given a staff of 50. The Advanced Projects Group at Abingdon was also sold off to its management. Soon after, the workforce was cut from 2,900 to 2,000; 314 of Tanfield Lea's 940 jobs were shed.
There were loud complaints at the time, but it is difficult now to find anyone who criticises the decision to decimate the R & D operation. The powerful London centre had been run by Frank Tye. He was 'a technical god with an international reputation', a former manager says, but was more interested in the academic than the practical side of battery development. 'We were getting more and more knowledge about fewer and fewer topics,' the manager says. 'We ended up knowing everything about nothing.'
The R & D operation epitomised the chaos at Berec. To bypass Tottenham, one director had set up the Tanfield Lea centre: it was this that developed the zinc-chloride battery, which Tye considered a gimmick. Another director had started Abingdon, where bromium and lithium batteries were developed.
After a six-month study, Hanson sold Daimon and Superpila to Duracell. There was outrage in the company. It was bad enough drawing back to the home base while other companies were spreading internationally; but to sell to Duracell was unforgivable. Hanson remained unrepentant. 'It was fairly strongly resented,' a consultant who worked for him says. 'But our analysis showed most of the business was not worth having, because the move towards own-label meant brands were becoming less valuable.' Shareholders were certainly happy: the disposals recouped pounds 40m of the pounds 95m paid for the company.
Then Ron Fulford arrived as chairman, and started to apply the basic principles of Hanson management. Fulford was, a former manager says, 'known as a numerate barrow-boy. He was very assertive, giving people their head, but if they didn't perform, they would be gone in an instant.' Factories became profit centres, managers were given targets and learned how to report regularly on their performance. There was a simple rule: you could do something only if it was profitable.
Most found the new style refreshing. 'Fulford would ruthlessly cut out half a factory, but he would cut through all the bullshit at the same time,' one says. 'You were given a lot of autonomy,' says John McIndoe, Tanfield Lea's works director. 'As long as you produced the result, you could arrive there by whatever measure you had evolved.'
Hanson apparently believed it was buying a low-tech, low-risk business. According to one manager, a Hanson consultant visited the design department, and asked if the work could not be done by an advertising agency. 'That was a measure of how they looked at batteries,' the manager says. 'They rapidly discovered they were risky products.'
Having realised this, Hanson had a choice. Either it could go all out to beat Duracell with an alkaline battery; or it could make the best of what it had, and make Ever Ready's decline as extended and profitable as possible. It chose the latter.
Everything Hanson did after that was designed to manage decline efficiently, though it appeared it was taking the aggressive route. The alkaline battery was revamped at Tanfield Lea, and three years later relaunched as Gold Seal. It was heavily marketed but, a former Hanson man says, 'It was a sandbagging brand - it wasn't designed to overhaul Duracell.'
The Hanson managers found themselves facing the dilemma that Ever Ready had side-stepped a decade before: how to sell alkaline batteries without cannibalising the other products. In retrospect they made a mistake in choosing to sell Gold Seal as just one of three types of battery, rather than as a totally different product. The distinctions between alkaline, zinc-chloride and zinc-carbon were lost on most consumers, who preferred Duracell's simple long-life message. Gold Seal's share of the alkaline market never went much above 20 per cent.
Not that Hanson would have been happy if it had, for the Newburn factory could make only half a million cells a day - nothing like enough to satisfy the market.
The other sandbag was the zinc-chloride battery. Accepting the previous management's logic, Hanson saw the battery - launched as Silver Seal - as a useful way of prolonging the life of its factories. The brand succeeded so well that Hanson, which is famously tight-fisted, authorised a pounds 4m investment on an automated line for making the batteries. This was the only large capital investment it made in British Ever Ready.
Because the business was driven solely by profitability, volumes were allowed to fall. 'It was obvious Ever Ready was not staying up in the world,' says Mr Parietti, who was watching from Eveready in America. 'It would only take business if it was profitable - that meant it wouldn't go for the new markets we were after, like Russia and China.' Meanwhile the relentless march of alkaline batteries continued to drive back zinc sales: they now take more than half the British market.
In the factory the lack of investment combined with repeated reductions in staff to drive morale ever lower. 'The redundancy thing came every year,' says Cavan Ward, team leader in the packing section. 'We thought, 'oh, Christmas is gone, it's redundancies again'.'
From the 80 per cent-plus of the market British Ever Ready held in the Seventies, the share in value terms slipped to 30 per cent last year, according to the Economist Intelligence Unit. It has now been overtaken by Duracell, which has 35 per cent. In volume it is still just ahead, reflecting the higher value of Duracell's products.
Hanson has never been bothered by market share, and in its own terms Ever Ready has done well. 'Hanson regards Ever Ready as a successful investment,' a spokesman says. 'We quadrupled profits during our ownership.' In the nine months to June 1992, it made a pretax profit of pounds 10.1m on sales of pounds 61.5m - a return on sales of 16.4 per cent. The previous year it had done even better, making pounds 27m on pounds 84.9m of sales.
Understanding that a one-country battery company was an anachronism, Hanson twice tried to buy its way back into the international game. It had talks with both Duracell and US Eveready, but these came to nothing. In April last year, it announced it was selling Ever Ready to Ralston Purina for pounds 132m.
Though at root a pet food company, Ralston became the biggest battery-maker in 1985, when it bought US Eveready from Union Carbide. Ralston's approach could hardly be more different from Hanson's. 'Batteries are all about performance,' says Suzanne Foley, area director for Europe. 'Ralston Purina is a marketing-driven company, but the marketing edge comes from having the best mousetrap.' As well as 30 factories, it has 400 people in its R & D centre in the Midwest.
Chuck Parietti first came to Tanfield Lea two years ago. 'What I found was not surprising relative to other companies that operate in single countries. They tend to have a lack of investment and small R & D: they are becoming dinosaurs at a time of rapid globalisation.' Ever Ready's factories were, he says, 'a number of years behind the times in terms of best-in-class. They were managing a business in decline, and the whole infrastructure was pretty thin.'
According to a worker, one American visitor was more pithy. 'It's a shit pit,' he said.
The irony is that Ralston Purina has been at least as brutal as Hanson. It is bringing Ever Ready back into an international network, but has decided only Tanfield Lea fits into its plans. Factories at Telford and Wolverhampton are being closed, and Newburn's workforce has been slashed from 205 to 30.
Zinc-carbon battery production has all but stopped - Blue Seal is now imported from Indonesia. Tanfield Lea survives as a centre for zinc-chloride production. As well as making Silver Seal batteries for Britain, it is manufacturing a Ucar version for Germany. Its workforce will climb back to 360 by next year, and eventually to 400. Exports are at 30 per cent of output, and climbing.
Mr Parietti says Ralston will use its muscle to find new markets in the Third World as demand for zinc-chloride slips in the West. This, combined with a new role supplying components to the Ever Ready empire, should ensure it will stay busy for many years.
It is difficult to argue with the logic of cutting so much British capacity. The US company has two alkaline battery factories, in France and Switzerland, that are much larger than Newburn. 'There was a very clear-cut decision to close it,' Mr Parietti says. 'It was under-invested and the production costs were much higher. Some of the neglect from the previous time was irreversible.'
Ralston is spending pounds 10m this year on the Energizer launch. Like the old Ever Ready, it spends a lot on research and development too, but with rather greater effect. It is, for example, developing a battery thinner than a human hair, that can power devices implanted under the skin. Environmental pressures have given another impetus: mercury-free batteries are the latest battleground.
British Ever Ready's R & D staff has been reduced once again, to 14 people. It is now a satellite of the US centre. Despite the cuts, Bob Jones, head of the technical group, is still trying to get used to the new regime. 'I wanted to get someone in to help, and my boss said go ahead. I said what about the budget? He said 'don't worry about that'.'
Ralston Purina has already invested dollars 5m to dollars 7m, Mr Parietti says, and 'we will put in whatever's necessary'. Mr McIndoe says that Hanson's total investment was less than pounds 5m - pounds 4m of that was on the Silver Seal line.
When Hanson sold Ever Ready, one of his financial advisers called it 'a tidying-up exercise'. Cavan Ward sees it differently. 'If the Americans hadn't come along,' he says, 'the factory wouldn't have been here in two to three years' time.'
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