Company Perspectives:
Our mission is to be a leading worldwide formulator, manufacturer and marketer of technology-driven specialty chemical products and relate d services and solutions. We are committed to the balanced interests of our customers, employees, shareholders and communities. We will co nduct business ethically and profitably, and exercise leadership as a responsible corporate citizen.
A top performer among specialty chemicals firms, H.B. Fuller Company markets adhesives, sealants, coatings, paints, and several other spec ialty chemical products in 34 countries. Fuller's international marke ts, which have been aggressively pursued since the 1970s, account for more than 45 percent of the company's overall revenue. The company o riginated during the late 19th century as the first paste and glue ma nufacturer in Minnesota. Despite a long list of successes, Fuller ran ked as the second smallest adhesive firm in the country up until Worl d War II, at which time majority ownership and management of the comp any was passed from one of the founder's sons, H.B. Fuller, Jr., to E lmer Andersen, a highly successful sales manager. Andersen inaugurate d a "double it in five" strategy, a systematic campaign for decentral ized growth that would ensure 14 percent annual sales increases, or t he doubling of sales every five years. By 1950, the company had becom e the fourth largest adhesives manufacturer in the country. When Ande rsen's son, Tony, assumed leadership of the company in 1971, further rapidly paced growth came through overseas expansion. Since the early 1980s, Fuller's growth has generally slowed, and net earnings have t ended to fluctuate. Albert Stroucken, who took over the helm in the l ate 1990s, becoming the first outsider to lead H.B. Fuller, thoroughl y restructured the company, leading by 2004 to a healthy, nearly 10 p ercent, jump in revenues.
Early Years
The company was launched in 1887 when Harvey Benjamin Fuller, Sr., tr aveled from Chicago to St. Paul, Minnesota, with the sole intention o f inventing and selling glue. In Chicago Fuller had experimented with glue mixing, while successfully buying, repackaging, and marketing a n existing adhesive that was guaranteed to "cement everything." His m arketing took the form of various promotional rhymes, including cleve r Mother Goose spoofs: "Maid was in the garden, hanging out her cloth es/Along came a blackbird, and nipped off her nose/When she found her nose was off, what was she to do/But go and stick it on again with F ULLER'S 'PREMIUM GLUE.'" Fuller regarded St. Paul, together with its "twin city" Minneapolis, as the ideal urban center to establish his b usiness, because general industry was thriving there and competition was scarce. In addition, flour, then a key ingredient in gluemaking, was in abundant supply because of a strong agricultural base and such rising concerns as Pillsbury and General Mills's precursor, Washburn -Crosby Company.
Fuller's business plan was simple. "What the world needed," according to A Fuller Life and H.B. Fuller, Sr., "was a convenient, eco nomical, strong adhesive--an adhesive so versatile that homemakers an d manufacturers could both use it." His equipment was also simple: an iron kettle and the family's wood-burning stove. Soon Fuller concoct ed a wet, flour-based paste with which he was satisfied. He then bega n selling the mixture in small batches to local paperhangers, who wer e generally glad not to have to make their own glue. As the Fuller br and name gained recognition, Fuller realized his business required ou tside capital to sustain growth. The company was incorporated when th ree Minneapolis lawyers agreed to invest a total of $600. Thereaf ter, Fuller Manufacturing Company marketed its glue to a wide variety of customers, including flour mills, shoe companies, box manufacture rs, bookbinders, printers, and households. The company also made and sold laundry blueing and did a brisk business in ink for the city sch ools. By 1888, the company, which was really just Fuller serving as j ack-of-all-trades, added its first employee, Fuller's oldest son, Alb ert. Two years later the company moved into its own manufacturing fac ility, where Albert assumed primary responsibility for filling orders and discovering new formulas while Harvey generated more revenues by expanding his sales areas.
In 1892 the company acquired a Minneapolis competitor, The Minnesota Paste Company, for $200. Although several decades later such acqu isitions would become regular occurrences, Fuller meanwhile was desti ned to grow by internal development, particularly through a successio n of inventions by the founder that greatly expanded both its product line and its manufacturing capabilities. In late 1893 Harvey success fully produced Fuller's Cold Water Dry Wall Cleaner, intended for use on wallpaper (at that time it was customary to clean walls twice yea rly, but existing cleaners tended to decompose under warm conditions) , and applied for a patent. The item was in wide production by the fo llowing spring and became enormously popular. The elder Fuller's next invention was Fuller's Cold Water Dry Paste, which became even more successful than Fuller's Cleaner. Because it was packaged dry, withou t the added weight of water, the product could be shipped at lower co st, saving both the manufacturer and the customer money. In addition, Fuller's Paste was remarkably easy to work with, and advertisements boasted that "a child can mix and use it." By 1898, Fuller Manufactur ing was posting annual sales of $10,000. By 1905, the company was not only shipping its paste and cleaner to both coasts, it also had entered markets in England, Germany, and Australia.
One setback for the firm, however, was the lack of an obvious success or to the post of president, for Albert and Roger, Fuller's middle so n, both left the business. Furthermore, Fuller's youngest son, Harvey , Jr., was more inclined to a career in art than manufacturing. Never theless, upon his graduation from the University of Chicago in 1909, Harvey, Jr., joined the company full time and made an immediate impac t by bolstering advertising and creating the first comprehensive cata log of Fuller products.
Increasing its workforce to include an experienced bookkeeper, a sten ographer, and a sales manager, Fuller Manufacturing entered the 1910s prepared for heightened growth. In 1915 the firm reincorporated as H .B. Fuller Company and issued stock valued at $75,000. World War I, already underway, was to be the primary impetus for Fuller's short -term growth. With the engagement of American troops came the need fo r shipping mass quantities of food overseas. U.S. canneries were read y to comply but had a need for a quality adhesive that would speed th e labeling process. Fuller filled that need and prospered. After the war, however, Fuller's sales dropped off and Harvey, Sr., fell ill, d ying late in 1921.
Struggles in the 1920s and 1930s
During this difficult period, when the company faced the possibility of bankruptcy, Harvey, Jr., made what was undoubtedly his greatest de cision: that of hiring a full-time chemist named Ray Burgess. By the time Harvey inherited the presidency from his father, the company had regained its momentum, due in large part to Burgess's self-taught ge nius and his ability to develop customized adhesives and formulas for the industrial market. The list of Fuller products expanded to sever al dozen by the mid-1920s and record-setting sales of $157,000 ca pped the end of the decade.
In 1930, following the stock market crash, Fuller acquired The Selvas ize Company of St. Paul, the maker of a combination plaster and wallp aper adhesive, for $2,000. Fuller, with steady customers in 38 st ates and a near monopoly on glue production in the Twin Cities, remai ned relatively healthy throughout the Great Depression. A number of e vents highlighted the 1930s. The company hired its first degreed chem ist, who became responsible for several new patents, such as Ice Proo f, a glue resistant to cold water. In addition, a research team was f ormed, Fuller began a full-scale entry into international markets, an d Elmer Andersen, a business administration graduate and budding sale sman, joined the company, which celebrated its 50th anniversary in 19 37.
Also during this time, Burgess developed an important new product kno wn as Nu-Type Hot Pick-Up. Until Burgess's invention, the company, li ke its competitors, had marketed several hot pick-up glues for use in automated labeling; all such glues, however, were notoriously diffic ult to work with, either too hard or too sticky in bulk form, and alw ays cumbersome to apply in measured amounts. Nu-Type Hot Pick-Up was the first glue that solved each of these problems. Consequently, Full er cornered the hot glue market nationwide.
Not all the corporate news was as favorable, however. The company, wi th just half of one percent of industry sales, was still conspicuousl y overshadowed by such giants as National Adhesives Corporation, whic h controlled approximately 65 percent of the market. Every new sale, therefore, mattered greatly, which made all the more devastating the revelation in late 1937 that three of Fuller's regional salesmen had been undercutting the company's orders through the creation of a bogu s firm, which they now claimed to represent. Sales, depressed already by the still struggling economy, dropped from $212,000 that year to $165,000 the following year. Even more devastating to the com pany's long-term prospects was the debilitating stroke Harvey Fuller suffered in 1939.
In March 1941 a large Chicago competitor named Paisley Products appro ached the ailing St. Paul firm with an acquisition offer. Both Fuller , then in his mid-50s, and Andersen, 32, attended a meeting with Pais ley's representatives, who formally proposed to purchase H.B. Fuller Company for $50,000. Fuller was prepared to retire but was also d iscouraged by the low offer he had received. Andersen provided an alt ernative solution. His plan involved assuming leadership of and a maj ority position in the company himself, while still allowing Fuller to retain at least a 25 percent stake. The deal was completed in July a fter Andersen borrowed heavily to finance a $10,000 down payment on the stock he was required to purchase. Mere months later, Pearl Ha rbor was attacked.
World War II and Postwar Growth
Far more so than the previous war, World War II afforded the company a chance to develop a broad line of adhesives that the government dem anded for an equally broad array of uses. Fuller became one of the na tion's first companies to specialize, among other areas, in waterproo f adhesives. It thus earned a place on the government's recommended s uppliers list which, in turn, brought it enhanced recognition nationa lly. The company scored another victory when it was able, during the midst of rationing, to supply Nabisco with raw glucose from its inven tory, which had been dramatically enlarged by Andersen as a cost-savi ng measure. Nabisco subsequently became a major user of Fuller's adhe sives for its boxed foods and other products. Both during and followi ng the war, the company focused on decentralizing operations--bringin g the product closer to the customer--by establishing a number of bra nch plants, beginning with Kansas City in 1943. At the close of the d ecade, Fuller ranked fourth among U.S. adhesives companies, behind Na tional Starch (later owned by Unilever, then Imperial Chemical Indust ries PLC), Paisley Products (acquired by Fuller in 1975), and Swift.
In 1949, Andersen was elected to the state senate and became a part-t ime company president. Al Vigard assumed control of day-to-day operat ions in Andersen's absence; he later became president when Andersen e xtended his political career by winning the governorship of Minnesota in 1960. A steady introduction of new products, a systematic develop ment of a strong nationwide sales force, and a greater attention to i nternational expansion typified this transitional era. In 1958, the c ompany launched H.B. Fuller Company (Canada) Ltd. in Winnipeg. Shortl y thereafter, Fuller Adhesives International of Panama was establishe d. Numerous other international subsidiaries followed, each of which conformed to the Fuller blueprint for growth. A three-stage process, this blueprint called for: (1) building export volume to a high level ; (2) forming or acquiring a subsidiary, or sometimes establishing a co-venture with a noncompetitor, in a clearly defined market; and (3) sustaining the business by hiring and training a local workforce to produce customized products.
One of Fuller's most significant ventures outside the United States w as Kativo Chemical Industries Ltd. A promising but nearly bankrupt pa int, inks, plastics, and chemicals business based in Costa Rica, Kati vo was begun by a Kansas inventor named Dr. Frank Jirik. During the e arly 1960s, Fuller acquired a minority interest in the company, but b y early 1967 Jirik approached Elmer Andersen with a proposal that Ful ler assume a majority interest to fuel the company's plans for expans ion. In A Fuller Life, Andersen recounted the visit that clinc hed his decision: "It was Kativo's people who made all the difference to us. ... We trusted them. We had confidence in them and we cut the m loose. We decided to send no U.S. Fuller employees to work in the K ativo operation." In addition, Andersen awarded the 13 Kativo executi ves the right to own stock in the company they had helped build. Soon Kativo became the heart of Fuller's Latin American operations, from Mexico to Argentina. Surviving plant and monetary losses from both th e June 1979 revolution in Nicaragua and General Manuel Noriega's ramp ages during the U.S. invasion of Panama ten years later, Kativo and i ts related businesses ranked among the fastest growing in the Fuller fold into the 1990s. One of Kativo's original executives, Costa Rican native Walter Kissling, eventually served as president and chief ope rating officer of Fuller.
Late 20th Century: International Growth and Restructuring
In 1971, three years after Fuller went public, Tony Andersen became c ompany president. International sales accounted for around 15 percent of total revenues, and Andersen was given the primary responsibility for boosting this figure, while increasing overall volume. Consequen tly, he became a president routinely in transit, flying from one coun try to the next. Not until 1980 did he return to head U.S. operations full-time. During the interim, he oversaw some two dozen acquisition s--half in foreign countries--and, significantly, the first of these provided important new market entries into Japan and Europe. From 197 1 to 1980, sales grew from $60 million to $296 million (reach ing $100 million in 1974). Andersen's greatest contribution to th e company, however, came shortly after his return to the St. Paul hea dquarters. In what was then an unpopular maneuver, he decided to reva mp the company's entire infrastructure, which because of rapid geogra phic-oriented expansion had become both inefficient and inconsistent. A market-driven organization stressing product and price uniformity was Andersen's answer. Because of an economic downturn, the payoff wa s slow to come. By 1985, however, earnings had improved dramatically, and three years later, Andersen was named executive of the year by Corporate Report Minnesota. H.B. Fuller, meanwhile, became a Fortune 500 company in 1984 when revenues hit $425 million.
Fuller inaugurated the 1990s by broadening its Asia/Pacific operation s with a hot-melt production plant in Guangzhou, China. Plant expansi ons around the globe, as well as continuing investment in research an d development, typified the company through 1992. In April of that ye ar, Elmer Andersen officially stepped down as company chairperson. In a speech to shareholders, he optimistically stated, "The past is pro logue: you ain't seen nothing yet." During this time, however, Anders en's statement was somewhat eclipsed by publicity surrounding Fuller' s Resistol glue and its use as an inhalant by children in Latin Ameri ca. Widely respected for its sponsorship of charitable and educationa l causes, Fuller pulled the product from markets in Honduras and Guat emala in the fall of 1992 and continued to fund social programs that helped minimize such abuse. Despite these moves, the Resistol issue s imply would not go away. More negative publicity came in 1996 when th e company was sued for negligence by the family of a 16-year-old Guat emalan boy. The suit, brought in U.S. District Court in St. Paul, cla imed that the boy died as a result of years of inhaling Resistol. The judge in the case dismissed the suit, having concluded that it lacke d jurisdiction.
When Elmer Andersen retired in 1992, Tony Andersen took over as chair man and Kissling became president. Kissling added the CEO position as well in 1995. Under Kissling's leadership, Fuller in the mid-1990s w orked to reduce its operating expenses through the closure and consol idation of plants, particularly in Europe and Latin America. The comp any was aided in these efforts by the liberalization of tariffs in th ese regions. Whereas previously the company was forced to locate a pl ant in nearly every country in which it hoped to sell its products, i t could now consolidate its factories on a regional basis. In concert with these moves came a reorganizing of the European and Latin Ameri can operations into strategic business units that were based on produ ct lines rather than on geography. Company sales, meantime, surpassed the $1 billion mark for the first time in 1994 and then grew to $1.28 billion by 1996.
In 1997 Fuller joined its automotive adhesives, sealants, and coating s operations (with annual sales of $100 million to $115 milli on) with the automotive adhesives business of Zurich-based EMS-Chemie Holding AG to form EFTEC. The Detroit-based joint venture had revenu es of about $250 million, making it the second largest automotive supplier, after Dow's Essex, and enabling it to operate on a global basis.
The following year Kissling retired from the company. His successor a s president and CEO was Albert Stroucken, the first outsider in the c ompany's 111-year history to take over the top positions. A native of the Netherlands, Stroucken was a 29-year veteran with Bayer A.G. Str oucken's first major task as head of Fuller was to improve the compan y's net earnings, which had for years stood at around 3 percent. The investment community had long complained that Fuller's corporate cult ure, which helped earn the company a consistent place on lists of the best places to work, did not place enough emphasis on the bottom lin e. The company had a longstanding pledge that "its responsibilities, in order of priority [are] to its customers, employees, stockholders and communities."
It became immediately clear that this outsider would bring startling changes to Fuller and propel it into a new era. Most strikingly, in 1 998 the Stroucken-led Fuller changed its mission statement, which now read in part, "H.B. Fuller is committed to the balanced interests of its customers, employees, shareholders and communities." In August 1 998, a mere four months after his arrival, Stroucken announced a majo r restructuring aimed at reducing costs by $30 million per year a nd improving net margins to 5 percent through the closure of about a dozen plants, the divestment of underperforming units, and the elimin ation of about 600 jobs worldwide--all over an 18-month period. Strou cken also took a more aggressive stance toward acquisitions, aiming t o displace Imperial Chemical Industries' National Starch subsidiary f rom the number one position in the global adhesives market. During 19 98 Fuller spent $92.4 million on acquisitions, purchasing the Aus tralian and New Zealand adhesives business of Croda International PLC and Peterson Chemicals Adhesives from Ecolab Inc. Stroucken told ana lysts in mid-1999 that he was identifying acquisition targets with sa les of at least $100 million, a huge jump from the $5 million to $10 million companies that Fuller typically purchased. The ne w leader's moves were quick to pay off as 1999 revenues increased 2 p ercent to $1.36 billion and profits jumped from $16 million t o $43.4 million. Late in 1999 Stroucken succeeded Andersen as cha irman of H.B. Fuller.
Developments in the Early 2000s
In 2000 and 2001 the company's results suffered first from the rapidl y rising cost of petroleum-based raw materials and then from the econ omic downturn, which weakened demand for H.B. Fuller's products. Earl y in 2002 Stroucken launched another major restructuring to slash the firm's existing manufacturing capacity by 20 percent and yield annua l savings of more than $10 million. By 2003 the company had shut down 14 manufacturing plants, mainly in North America, eliminated 556 positions from the payroll, and recorded pretax restructuring charge s of more than $40 million. Since taking over, Stroucken had cut the number of Fuller plants from 70 to 39 and trimmed the workforce f rom 6,400 to 4,600; he also improved the company's efficiency by slas hing the number of its product offerings from 8,000 to approximately 2,700.
On the strategic front, EFTEC, the 70 percent owned automotive joint venture, acquired a 48 percent stake in Autotek Sealants, Inc., a pro vider of bonding, sealing, and coating technology within the automoti ve industry. After switching its stock from the NASDAQ to the New Yor k Stock Exchange in December 2002, Fuller completed the first signifi cant acquisition of the Stroucken era in February 2004. Acquired that month were the adhesives and resins businesses of Probos, S.A., a fi rm based in Oporto, Portugal. The purchased product lines, with annua l revenues of about $30 million, mainly derived from the Portugue se and Spanish markets, included water-based, hot melt, reactive, and solvent-based adhesives for the assembly, woodworking, and convertin g industries, and emulsions for the paints, textiles, and food produc t industries. The businesses were incorporated into H.B. Fuller's Eur opean operations.
During 2004 another dramatic run-up in raw material prices was at lea st partially offset by the beneficial weakness of the U.S. dollar. Wh en coupled with improved sales volume and gains from the Iberian acqu isition, these factors led to the company's best revenue gain in many years. The $1.41 billion in revenues were nearly 10 percent more than the previous year. Profits, however, fell $3 million, total ing just $35.6 million. Fuller was also embarrassed to discover i rregularities in the financial statements of its operations in Chile and was forced to reduce its net income for the year by $3.8 mill ion.
In the spring of 2005 Fuller shifted its operations in Japan and Chin a into joint ventures with Sekisui Chemical Co., Ltd., a Japanese con struction supplier and house manufacturer. The two firms merged their Japanese adhesives businesses to form Sekisui-Fuller Company, Ltd., initially 60 percent owned by Sekisui and 40 percent by Fuller (with the latter holding an option to buy a further 10 percent in 2007 for $12 million). The new entity, with annual sales of about $150 million, ranked as one of the leading adhesive firms in Japan. Fulle r also sold a 20 percent stake in its China operations to Sekisui. As these transactions were being completed, H.B. Fuller continued to st ruggle with the effects of rising raw material costs. The company inc reased the prices of its products but could not do so enough to offse t the rising raw material burden. Fuller thus faced additional pressu re to cut costs and improve efficiency.
Principal Subsidiaries: H.B. Fuller International Inc.; Specia lty Constructions Brands, Inc.; H.B. Fuller Licensing & Financing , Inc.; Adalis Corporation; Stratyc, Inc.; H.B. Fuller Automotive Com pany; EFTEC North America, LLC (70%); EFTEC Latin America (Panama ; 88.5%); EFTEC Europe Holding AG (Switzerland; 30%); EFTEC A sia Pte. Ltd. (Singapore; 60%); H.B. Fuller Canada Holding Co.; H .B. Fuller Mexico, S.A.; H.B. Fuller Benelux B.V. (Netherlands); H.B. Fuller Austria Produktions GesmbH (90%); H.B. Fuller Austria Ges mbH (90%); H.B. Fuller Belgium N.V./S.A. (99.8%); H.B. Fuller Deutschland Holding GmbH (Germany); H.B. Fuller Deutschland Produkti ons GmbH (Germany); H.B. Fuller Deutschland GmbH (Germany); H.B. Full er France SAS; H.B. Fuller Finance (Ireland); H.B. Fuller Italia Hold ing s.r.l. (Italy); H.B. Fuller Italia Produzione s.r.l. (Italy); H.B . Fuller Italia s.r.l. (Italy); H.B. Fuller Portugal - SGPS, Lda.; Pr oadec Productos Quimicos, S.A. (Portugal); Isar-Rakoll Chemie Portugu esa, S.A. (Portugal); Isar-Rakoll, S.A. (Portugal); H.B. Fuller Sveri ge AB (Sweden); H.B. Fuller Espana, S.A. (Spain); Proadec Quimicos Es pana, S.A. (Spain); H.B. Fuller Europe GmbH (Switzerland); H.B. Fulle r Holdings Limited (U.K.); H.B. Fuller Group Limited (U.K.); H.B. Ful ler U.K. Operations Ltd.; H.B. F. Ltd. (U.K.); H.B. Fuller U.K. Ltd.; H.B. Fuller Powder Coatings Limited (U.K.); Powderstore Limited (U.K .); Datac Ltd. (U.K.); H.B. Fuller U.K. Manufacturing Limited; H.B. F uller Company Australia Pty. Ltd.; H.B. Fuller (China) Adhesives Ltd. (99%); H.B. Fuller (Shanghai) Trading Ltd. (China); H.B. Fuller (Shanghai) Consulting Ltd. (China); H.B. Fuller Japan Company, Ltd.; H.B. Fuller Korea, Ltd.; H.B. Fuller Company (N.Z.) Ltd. (New Zealand ; 99.9%); H.B. Fuller (Philippines), Inc. (93.68%); H.B. Full er Taiwan Co., Ltd.; H.B. Fuller (Thailand) Co., Ltd. (99.9%); Ce ntro de Pinturas Glidden-Protecto, S.A. (Panama); Fabrica de Pinturas Glidden, S.A. (Panama); H.B. Fuller Holding Panama Co.; Glidden Pana ma S.A.; Kativo Chemical Industries, S.A. (Panama).
Principal Competitors: Henkel KGaA; Eastman Chemical Company; Ashland Specialty Chemical Company; Sovereign Specialty Chemicals, In c.; National Starch and Chemical Company; Dow Corning Corporation; Ro hm and Haas Company.
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