Red Spot Paint & Varnish Company - Company Profile, Information, Business Description, History, Background Information on Red Spot Paint & Varnish Company

1107 East Louisiana Street
Evansville, Indiana 47711

Company Perspectives:

We will become the best company in the world at developing, marketing, and manufacturing specialized coatings for plastics. We will understand customer needs, both current and future; listen to our customers to keep pace with a changing market; and provide our customers with a product that satisfies all their requirements at the right time.

History of Red Spot Paint & Varnish Company

Privately held and family run, Red Spot Paint & Varnish Company is a leading supplier of coatings for plastics. Founded as a hardware retailer in 1903, Red Spot has concentrated on plastics since the 1930s. The company formulates and manufactures paints and primers for sporting equipment, personal electronics, aerospace components, cosmetics packaging, and business machines. The bulk of its business, however, is in the automotive sector, where it supplies an array of coatings that are used on cars--from bumper to bumper, both inside and out. General Motors, Ford Motor Company, DaimlerChrysler, and Toyota are among Red Spot's customers.

Painting Plastic in the Early 1900s

In 1903, Harry D. Bourland founded Evansville Paint & Varnish Co. in Evansville, Indiana. Bourland initially sold hardware and turpentine wholesale to dealers, but the company flourished as he expanded the product offerings and opened his own retail hardware stores in the tri-state area where Indiana, Kentucky, and Illinois meet. Seeking to broaden his company's appeal in the region, Bourland changed its name to Red Spot Paint & Varnish in 1921. The company's bulls-eye logo became a familiar sight in the area.

The family-run business made a significant acquisition in 1927, when Rozaline Bourland (the daughter of Red Spot's founder) married Milton Z. Thorson. Although Thorson started out with Red Spot as a brush cleaner, he would ultimately transform the company from an Indiana-based paint seller to an international force in paints and plastics.

Thorson gradually rose through the company ranks, moving up from brush cleaner to traveling salesman. While out on the road drumming up business for Red Spot paints in the mid-1930s, he was approached by a representative of Hoosier Cardinal, Inc. Hoosier was a plastics manufacturer and was experimenting with a paint that could be applied to the back side of clear plastic, which Hoosier called a "see deep finish." The plastics industry was young, and Hoosier needed someone to manufacture this novel paint. Hoosier's request seemed an odd one, as no one had previously considered mixing plastics and paints. Indeed, when Thorson ran the idea by Red Spot's only researcher, he laughed and told Thorson to focus on furniture coatings. Disregarding this advice, however, Thorson followed his gut and made Red Spot the exclusive paint supplier to Hoosier. Red Spot opened a coating development laboratory and a production facility to accommodate Hoosier's needs. The partnership flourished, and by the late 1930s, the Evansville area was referred to as "Plastics Valley."

World War II and the Maturation of the Plastics Industry

Red Spot's rise was closely linked to that of the plastics industry as a whole. The outbreak of World War II in 1939 created great demand for all sorts of plastic products, particularly those that could substitute for materials--such as rubber--that were in short supply due to the war effort. During the war years, Thorson landed Red Spot contracts for defense supplies. For example, Red Spot provided salt-resistant paints--in the obligatory olive drab combat colors--to Chrysler Corp.'s ammunition plant.

Even beyond the short-term economic opportunities, the war had a profound effect on the plastics industry as a whole. With the tremendous national push for the large-scale production of synthetic rubbers, researchers undertook an extensive examination of the chemistry of polymer formations to figure out how best to achieve this goal. Their findings markedly broadened the industry's understanding of the ways plastics could be created and the range of feasible uses for them. In the decade following the war, plastics producers developed such industry workhorses as polypropylene and high-density polyethylene, which had a range of important applications.

Red Spot was determined to be a part of the expansion of the postwar plastics industry. Using its wartime relationship with Chrysler as a jumping off point, Red Spot spent the immediate postwar years looking for new markets. It courted both appliance and automotive manufacturers, who were incorporating new plastics into their products and needed coatings for these materials. While these efforts bore some fruit during the 1950s, the company's field of vision still did not extend far beyond the tri-state area. Red Spot ended the decade still regarded primarily as a house paint manufacturer and hardware retailer for the Indiana-Illinois-Kentucky region.

Working his way up the company hierarchy, Milton Thorson had a different vision for Red Spot. Recognizing that the plastics business was likely to go global as Europe and Asia continued to rebound from the devastation of the war years, Thorson took his first overseas trip to Paris in 1959 to drum up business for his paints. The company was so shocked by what it perceived to be yet another one of Thorson's quirky ideas that he was forced to pay for his trip out of pocket. Undeterred, Thorson followed up his European tour with trips to the Far East, and by the early 1960s, Red Spot was doing business with Japanese electronics companies. At the same time, Red Spot obtained manufacturing licenses in England and Australia and found sales agents in Japan and Hong Kong. An interesting dichotomy developed, as Red Spot's domestic sales were driven by its house paints and other maintenance coatings, while it built its reputation overseas on industrial coatings. The industrial side of the business would grow rapidly in the coming years.

Dramatic Changes in the 1970s-80s

The plastics industry continued to evolve rapidly. The 1970s saw the introduction of extremely dense plastics--particularly linear low-density polyethylene, released in 1978--which were sufficiently strong and reliable to compete with more "traditional" materials, such as metal, wood, paper, glass, and leather. As large-scale production of this new generation of plastics began, the costs of these materials fell dramatically. Consequently, manufacturers in a variety of industries turned to these high performance and inexpensive new plastics to replace the more expensive natural materials upon which they had previously relied. Seizing this opportunity, plastics producers began to tinker with alloys and blends of polymers, which made it possible to create individualized plastics capable of satisfying specific performance requirements. This customization further broadened the uses to which these plastics could be put. Automobile manufacturers were particularly interested in these strong, resilient, and comparatively inexpensive new plastics. As they were significantly lighter than traditional materials, they increased fuel efficiency, a notable concern during the energy crisis of the late 1970s.

Car companies had some very particularized requirements, however. They needed specialized coatings for the new materials. They were also extremely concerned that the plastics used in cars did not look or feel like traditional industrial plastics, as consumers were adamant about avoiding coldly "institutional" vehicles. Auto makers turned to coatings manufacturers like Red Spot for color keyed interior auto parts and specialized lacquer coatings. Red Spot in turn developed vacuum metallizing coatings that allowed mirror-bright finishes on plastics, which the auto industry cherished.

Red Spot grew significantly in the 1980s. One key factor in its success was its development of a urethane coating flexible enough to withstand impact on newly developed plastic. In other words, Red Spot produced the first paint that could be used on a plastic car bumper. To boost production, Red Spot expanded its facilities with an eye toward accommodating the needs of the Detroit automotive sector. The company purchased a manufacturing plant in Westland, Michigan, in 1987 and a sales office in Plymouth, Michigan, two years later. Despite its increased attention to production and sales, though, the company remained focused on product development. Nearly one quarter of Red Spot's employees were involved in research and development.

A New Landscape in the 1990s

By the early 1990s, Red Spot was at a crossroads. Its hardware stores, once the core of its business, were struggling to remain profitable, and it was clear that the company's future was in automotive coatings, not consumer paints. In 1991, therefore, the company eliminated its retail division, severing that link with its roots.

The 1990s brought a multitude of changes to the coating industry in the form of more vigilant environmental regulations. The Clean Air Act Amendments of 1990 empowered the Environmental Protection Agency (EPA) to regulate and limit the devastating environmental impact of Volatile Organic Compounds (VOC's), which were a common component of many coatings. Many states, most notably California, adopted even tougher standards. These new restrictions required the coatings industry not only to limit VOC's in the coatings produced but also to change the process by which the coatings were applied. Many of the high-tech coatings developed for the automotive industry in the 1970s and 1980s used solvent solutions to apply the coatings, which were out of compliance with the new environmental laws.

Car manufacturers did not want to have to choose between innovative, high-quality coatings and environmental compliance. The onus thus fell on coatings manufacturers to develop cost-effective and high-tech coatings that met new regulations. Moving away from the lacquers, enamels, and solvent-borne (or solvent-applied) paints that had been the primary coatings used for car makers in the 1960s and 1970s, coatings manufacturers perfected high-solid enamels (which contained fewer VOC's than the earlier enamels), waterborne coatings (instead of solvent-borne), and powder coatings in the 1990s. This change was a dramatic one. "These new products represent a 95 percent turnover in chemistries from just ten years ago," an industry insider told Industrial Paint and Powder. This burst of innovation belied the chorus of complaints that had been raised by both automotive and coatings industries about the apocalyptic impact the stricter regulations would have on their businesses. Indeed, Red Spot was particularly well positioned to benefit from the changes necessitated by the new laws. The company had always placed a premium on innovation and new technology rather than on the mass production of basic coatings.

New environmental regulations were not the only dramatic change for the automotive coatings industry in the early 1990s. The globalization of the automotive sector raised the bar for coatings producers still further during this period. Milton Thorson had indeed seen the future when he boarded the plane to Paris to drum up overseas business. As they moved away from their national roots to become multinational conglomerates, car companies wanted relationships with fewer suppliers; they wanted coatings producers who could make all the coatings needed for a given car; they wanted to build partnerships with coatings companies that had a global base. Once again, Red Spot was in an ideal position to benefit from this change. By 1993, Red Spot had rung up $70 million in sales and did about 18 percent of its business in international markets.

In 1994, Red Spot opened a new facility that promised to meet its dual needs, increasing both manufacturing capacity and its research and development base. This $8.3 million, 53,500-square-foot plant was the world's largest facility for the development of automotive plastics. The company planned to use its new facility to create environmentally friendly coatings for plastics used in cars.

But Red Spot was not the only company seeking to make bold technological leaps. In the mid-1990s, Red Spot found itself in a race against rival Morton Automotive Coatings to develop a waterborne "soft-touch" coating. Auto designers were interested in cutting manufacturing costs by limiting the amount of foam and upholstery used on the interior of a car. Rather than layering a soft material on top of plastic, they wanted a coating that would be soft to the touch. In other words, they wanted a paint that felt like velvet for car interiors. The real challenge was to develop this coating without a solvent-borne application. By 1995, Red Spot had prevailed and produced the first waterborne "soft touch" coating, which it named Soft Feel. Two years later, General Motors selected the coating to be used in the interior of the Pontiac Grand Am.

Buoyed by this success, Red Spot opened a 28,000-square-foot Coatings Application Center in Plymouth, Michigan, in 1998. The facility was intended for the development of application systems as well as pioneering new decorative coatings.

New Partnerships in the New Millennium

In an effort to continue to grow its international sales--which had risen to account for over 20 percent of total revenue in 2000--Red Spot focused on establishing additional licenses and sales agents. It also formed several alliances with key international partners. Three of these alliances were cemented in 2000, when Red Spot joined forces with the English coatings manufacturer Sonneborn & Rieck, the Japanese firm Fujikura Kasei, and the American outfit Mays Chemical Company. The alliances with Sonneborn & Rieck and Fujikura Kasei were well chosen because the products manufactured by these companies complemented Red Spot's. For example, Fujikara specialized in the production of the raw acrylics that Red Spot utilized in its coatings.

The most significant partnership, though, was with Mays and involved the creation of a joint venture--Mays + Red Spot Coatings, LLC. The joint venture, which was expected to begin operations in 2002, was intended to handle distribution, customer service, sales, and technical support for product-finishing customers in North America. Mays, a chemical distributor that supplied fluid management services and chemicals to various industries, brought distribution and supply chain expertise to the table, while Red Spot offered its research and development skills, along with its original equipment manufacturers (OEM) product manufacturing capabilities.

Red Spot expanded its reach even further in December 2000 when it acquired the Michigan-based Seibert-Oxidermo, Inc., which specialized in primers for plastics and other coatings used in the transportation industry. Red Spot's president declared that the move provided "further penetration into other areas of the transportation sector and complements our core businesses."

Red Spot's future looked bright. It had diversified its automotive clients so that the company did not rely too heavily on its long-time mainstay Ford Motor Company. In five years, Red Spot cut the portion of its business derived from Ford from 50 percent to 35 percent (General Motors accounted for 32 percent, Chrysler for 13 percent, and Japanese auto manufacturers for 20 percent). Its export sales continued to climb, and the company successfully weathered both the Asian economic crisis and tough financial times in the American automotive industry. Red Spot's 2001 sales topped $95 million.

Principal Competitors: Akzo Nobel N.V.; E.I. du Pont de Nemours and Company; The Valspar Corporation.


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