This industry covers establishments primarily engaged in manufacturing primary batteries, dry or wet.
335912 (Dry and Wet Primary Battery Manufacturing)
In the late 1990s and early 2000s, demand for primary (disposable, nonrechargeable) batteries remained healthy because of the ever-expanding use of portable electronic products. Longer-lasting alkaline batteries, introduced in the 1980s, continued to expand their share of the U.S. retail (household) market, which was growing at a rate of 6 to 8 percent per year. The industry also had met the challenge of producing a mercury-free battery that satisfied environmental concerns. The two major primary battery manufacturers, Duracell and Eveready, were faced with some competition from the rechargeable sector, where significant strides in research and development had been made. Given their relative convenience and low initial cost, however, disposable batteries remained dominant in the household sector through the early 2000s.
In 2000, the primary battery industry employed 9,131 people, compared to 8,699 in 1999. Production workers in 2000 numbered 7,223; they earned an average hourly income of $16.39.
Duracell (which became a division of Gillette in 1996), Eveready Battery (a division of Ralston-Purina), and Rayovac are considered the "Big Three" of disposable batteries, representing about 90 percent of U.S. sales. The total value of shipments in this industry was reported at $2.3 billion in 1997. Both Duracell and Eveready are powerful players in the European and other international markets.
Other companies have tried to wedge into the battery business, but they've generally been unsuccessful. In 1986, for example, Eastman Kodak Co. entered the alkaline market. But even with its powerful brand name, gold-tipped batteries, and flashy commercials featuring Stevie Wonder, Kodak was unable to become a strong contender. In 1995, Kodak had less than 1 percent of the U.S. alkaline market.
Around the start of the nineteenth century, the first battery was constructed by Alessandro Volta. The Leclanch cell, developed by the French engineer Georges Leclanch in 1866, immediately became a commercial success in large sizes because its component materials were easily available. Until fairly recently, however, the major use for primary batteries in the home was in flashlights. The strong growth in primary battery sales began to accelerate in the 1950s, with expanding demand for transistor radios. The continuing introduction of new electronic products—including pagers, hand-held video games, cellular phones, and portable CD players—and the increasing desire for portability has fueled the growth in sales for primary batteries. Zinc chloride batteries, which are similar to Leclanch cells but produce more energy, were dominant in the U.S. market in the 1970s and the early 1980s, when longer-lasting alkalines began to overtake them. Alkalines now represent the dominant share of the U.S. consumer battery market.
Other important primary batteries include silver oxide-zinc cells, which are used in watches, hearing aids, and cameras. Lithium cells have attracted the most research in recent years; they are particularly suited for such applications as personal paging systems, heart pacers, and automated cameras.
Throughout the late 1990s, the retail market for battery sales in the United States was characterized by constant growth. In 1997 total shipments were valued at $2.3 billion; by 2000, the value of shipments had increased to $2.8 billion. A majority of sales consisted of round and prismatic battery cells for the consumer market.
Despite new developments in rechargeable batteries in the late 1990s and early 2000s, throwaways will not soon be obsolete, or even lose their dominant position in many consumer markets. Most consumers still prefer the convenience of throwaways, even if they can ultimately save a few dollars by consistently using rechargeables.
Some of the supposed environmental benefits of rechargeables also were open to question, since primary batteries, while numerous, represented less than 1 percent of all municipal solid waste. Battery makers have been making additional efforts to cut their waste products. Panasonic, for example, designed new packaging for its batteries that was made of high-density polyethylene and was therefore recyclable through 6,000 service centers nationwide.
The top three battery companies battle fiercely for the consumer's dollar, especially at Christmas time, when batteries are needed for toys, games, and other electronic gifts. Historically, some 35 to 40 percent of all household battery sales are made in the final quarter of the year, while less than 20 percent take place in the first quarter. To distinguish their brands and maintain or expand share, the major firms spend huge sums on advertising. For example, in 1999 Duracell spent $60 million—a strategy that paid off with an increase of market share to almost 50 percent. Such heavy expenditures create a significant barrier to entry for new companies. They also make advertising characters like Eveready's Energizer Bunny familiar to almost every American who owns a TV.
At the start of the twenty-first century, battery manufacturers strove to maintain a robust market by developing improved-technology alkaline batteries. In addition to increasing the potency of interactive elements to create long-lasting cells, batteries also incorporated designs that facilitated electric flow. Longer-lasting batteries and improved flow resulted in faster, more robust performance of battery-powered devices.
In 1988, a leveraged buyout (LBO) led by Kohlberg Kravis Roberts (KKR) took Duracell private. While some LBOs have come under attack for weakening strong companies by saddling them with debt, Duracell's LBO was generally judged a success. The company completed an initial public offering in 1991 that reduced its $1.6 billion of debt by one-third, and it once again became profitable in fiscal 1992.
In 1996, Duracell once again changed hands when Gillette bought the company for $7.1 billion in stock. Most analysts were pleased with the combination, since they believed Gillette's international marketing muscle would help Duracell overseas. The company already held a solid lead in the global alkaline market, with a 42 percent share compared with 24 percent for Eveready. Since only 20 percent of Duracell sales came from outside North America and Western Europe, Gillette management believed the company offered excellent opportunities for international expansion.
Worldwide, batteries made by Duracell have been marketed under the Duracell trademark. That gave it an advantage in Europe over Eveready, which initially marketed its alkalines under local brand names in Europe. As the new millennium approached, Duracells' worldwide sales of its copper-topped battery product line out performed all other manufacturers of alkaline batteries. Duracell also continued to be a leading producer of lithium batteries for consumer applications and zinc air batteries, most of which are so-called button cells used in hearing aids and medical equipment.
Eveready is one of the oldest battery companies, dating back to the nineteenth century. Eveready was sold by Union Carbide in 1986 to Ralston-Purina, which also markets pet foods and other consumer and agricultural products. At the time of merger, the once-named Energizer Battery Co. became known simply as Energizer Holdings. According to one estimate, its U.S. market share in 1996 was 37 percent, versus 44 percent for Duracell; nonetheless, in certain market sectors, specifically dry cell batteries and flashlights, Eveready laid claim to being the world's largest manufacturer in 1999. While Eveready is a leading manufacturer of alkaline batteries, it also continues to make zinc carbon brands in huge numbers. While zinc carbon usage is declining worldwide, these batteries remain good moneymakers: because they are cheaper to produce, zinc carbon batteries' margins of profit are generally higher than those of alkalines.
Eveready's overall margins, however, have been below those of Duracell. As noted earlier, Eveready initially elected to keep the many brand names of the companies it bought in Europe, rather than consolidating them under the Eveready name. The strategy proved unworkable, and in the mid-1990s Eveready was busy trying to consolidate all of its alkaline brands under the Energizer name. Moreover, by the end of the decade, competition from Asia forced Energizer to seek a buyer for its rechargeable battery division. Despite the anticipated sale of its rechargeable business, Eveready achieved sales greater than $500 million in 1998.
In 1996, Boston financier Thomas Lee bought an 80 percent interest in Rayovac Corp., the firm accounting for the third largest amount of sales in the battery business. Despite a $20 million advertising campaign featuring Michael Jordan in 1996, its Renewal alkaline rechargeable line had yet to catch on with American consumers. While the company had some success selling low-cost alkalines, its overall share in dollar volume remained steady through the end of the 1990s at about 10 percent of total market share.
In 1993, Rayovac had introduced a rechargeable alkaline battery named Renewal, in the standard AAA, AA, C, and D sizes, putting it in direct competition with disposable alkaline products. At the beginning of 1995, no other firm produced a rechargeable primary cell. According to Machine Design, "the basic chemistry was alkaline, but the anode construction (which differs from primary cells) allowed recharging the battery with a special power supply." By the end of the decade, however, Rayovac no longer held the lead in rechargeable batteries. Battery manufacturers uniformly made rechargeable batteries out of nickel metal hydride and lithium ion.
Overall, the worldwide disposable battery market totals about 20 billion units annually. The widespread diffusion of portable electronic products in Europe and Asia has, as in the United States, been accompanied by strong sales of batteries to operate them. And again, as in the United States, there has been a move toward more-powerful alkaline batteries from zinc-chloride cells; still, non-alkaline batteries predominate. According to one estimate, in 1996 only one-third of all batteries sold worldwide were alkalines.
In 1996, the overseas market that had battery manufacturers most excited was China. Duracell was selling alkalines in all but one of China's provinces. It also was finishing construction of a $60 million alkaline plant. The plant was expected to give Duracell a huge cost advantage, since the heavy tariffs ordinarily imposed on imported batteries would be eliminated by producing locally. Also, the first two years of Duracell's profits in China were tax-exempt. Duracell expected that China would be its third largest market, after the United States and Italy, by the year 2000. In fact, by 1999 the industry's focus on China eventually manifested greatly increased sales in Asia. As reported by the U.S. Department of Commerce, most notable were increases in export sales to the Hong Kong market from $33 million in 1998 to more than $143 million in 1999—an increase of more than 400 percent.
One major focus of research and development in the early 1990s was the effort to produce mercury-free alkaline batteries. By 1994, researchers had been able to reduce mercury levels that had at one time been as high as 6 to 8 percent to merely trace elements. With the goal of mercury-free batteries largely accomplished, manufacturers have been able to concentrate on producing lighter, more powerful, and longer-lasting batteries. As electronics makers produced ever-smaller and smarter products, traditional batteries account for an increasing proportion of total weight. Thus, the development of lithium batteries has been emphasized, since these cells have the advantages of extremely high-energy density and long shelf life. In addition to their widespread use in consumer products, lithium primary batteries had become the power source of choice for a range of medical implants by 1996.
As the millennium approached, battery manufacturers continued improvement of battery design. One important strategy first introduced by Duracell and later embraced by the industry involved improved cell designs which improved efficiency and maximized output. Changing consumer needs necessitated better designs for alkaline batteries due to increased power needs of products such as digital assistants, digital cameras, handheld computers, and wireless peripheral devices.
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