Oil-Dri Corporation of America
Address:
410 North Michigan Avenue, Suite 400
Chicago, Illinois 60611-4211
U.S.A.
Telephone: (312) 321-1515
Fax: (312) 321-1271
Statistics:
Public Company
Incorporated: 1946
Employees: 670
Sales: $153.8 million (1996)
Stock Exchanges: New York
SICs: 3295 Minerals--Ground or Treated; 2899 Chemical Preparations, Not Elsewhere Classified
Company Perspectives:
To deliver innovative solutions that help our customers make the world cleaner, safer, and healthier.
Company History:
Oil-Dri Corporation of America makes and markets leading sorbent products for use by individual, industrial, agricultural, and environmental customers. The company's main commodity, cat litter, accounted for 25 percent of all litter sold in the U.S. Its Cat's Pride is the only cat litter recommended by the American Humane Association. Oil-Dri absorbents which help clean up oil spills in garages and industrial sites have been a market leader ever since the company was founded in 1941. Oil-Dri's products in more recent years have become important in helping clean up environmental oil spills, making particulate carriers for agricultural fertilizers and pesticides, and aiding manufacturers of various kinds of cooking oils. Still a family firm, Oil-Dri operates eight manufacturing facilities in the U.S., Canada, and the United Kingdom and ships over 250 items worldwide.
Origins of the Family Business
This family enterprise began with the emigration of two individuals from Eastern Europe. Alex Jaffee and Rose Ganscoe both arrived in America through Ellis Island, met in Chicago, and got married there. Their second child, Nick Jaffee, later founded Oil-Dri.
Raised in Platteville, Wisconsin, Nick Jaffee as a teenager helped his father in his business of selling fur, hides, and junk. When he was 15, Nick was sailing up and down the Mississippi River to buy furs and hides for his father's business. Thus Nick learned entrepreneurial values early in life.
In high school Nick Jaffee starred in basketball and was recruited by the Platteville School of Mining, which he attended before starting to work full-time for his father.
After the 1921 farmers' depression, Alex Jaffee moved to Chicago, while Nick remained in Platteville to run the family business. But in 1927, Nick sold the business and moved to Chicago, where he married Lucille Bloom, a University of Chicago graduate who taught school and, like her husband, was the child of immigrant parents. Nick and Lucille had two sons, Robert and Richard, born in 1933 and 1936.
Nick Jaffee during the Great Depression started his own business by selling car parts to garages, but in 1941 a wartime shortage of auto parts caused him to look for nonstrategic items to sell. Based on ideas he had learned while attending mining school, he soon thought that fuller's earth, a clay-like absorbent mineral substance used for thousands of years, could be used instead of sawdust to absorb oil spills. Unlike sawdust, fuller's earth was not flammable and thus would be a much safer alternative that would more effectively prevent slipping and job accidents.
With $3,000 borrowed from his mother, Nick Jaffee in 1941 started his sole proprietorship working out of his home, where he received 10 tons of fuller's earth in burlap bags. He first sold his product, Floor-Dri Oil and Grease Absorbent, to Sears car repair on Chicago's 79th Street.
Soon Jaffee formed a partnership with P. D. Jackson, the Motor Master owner whom Jaffee had met while selling auto parts. Jackson provided capital for investment and a trained sales force from his previous business. Jaffee changed the name of his first product from Floor-Dri to Oil-Dri. In 1941, Nick Jaffee also created the company's "slipping man" trademark, which shows a working man slipping on an oil spill. Oil-Dri Corporation has kept that image as part of its heritage and corporate culture.
Fuller's earth was not rationed during World War II, so the firm was able to obtain more raw material and expand. Oil-Dri in 1945 moved to its new office at 520 North Michigan Avenue, where it remained into the 1990s.
In 1946, the firm was incorporated under its present name, and three years later P. D. Jackson sold his share of the business to Nick Jaffee, who became the sole owner.
After Nick Jaffee's three brothers returned from military service, they joined the family business and helped start the Oil-Dri tradition of blending family and business. Woodrow Jaffee became sales manager, while Leo was the bookkeeper and Saul worked in accounting.
The Second Generation
Founder Nick Jaffee in the 1950s found a way to keep both his sons involved in the family business without fighting each other for control. With Robert, he started an Oil-Dri subsidiary called Amco Wire Corporation to make plastic and wire items for food-service use. The father and son by 1960 concentrated on building Amco.
Meanwhile, Richard Jaffee in 1952 had started working part-time for the Oil-Dri Corporation in the mailroom and office. After graduating from high school in 1953, he became a student at the University of Wisconsin, where he met his wife, Shirley Hanmaker. Jaffee earned his degree in accounting and went on to become a CPA. In 1958 he began working full-time for Oil-Dri and two years later became the firm's second president. Company sales in 1960 reached $1 million, while profits were $6,000 and the firm shipped 20,000 tons of its clay-based products.
In 1960, under Richard Jaffee's leadership, Oil-Dri introduced a new kind of product that would become its main source of income. It began marketing Cat's Pride Cat Litter to cat owners. By absorbing liquid from cat urine, this fuller's earth product slowed the growth of bacteria and the production of ammonia, the source of cat urine stench. Thus Oil-Dri helped consumers solve one of the main problems of owning a cat.
Actually, Oil-Dri was preceded by Edward Lowe Industries in introducing an absorbent clay-based cat litter. Ed Lowe started his company in the late 1940s when he controlled 100 percent of the market. Soon Oil-Dri and other firms competed in the growing market for cat litter.
Oil-Dri in the 1960s expanded in other ways. With cat litter and other new products and increasing costs of the firm's raw material, fuller's earth, Oil-Dri decided to invest in two clay mines in the South and become vertically integrated. Between 1960 and 1963, the firm acquired Cairo, Georgia Production Company and Howell Southern Products in Ripley, Mississippi. Acquiring the two plants "set us on a course in which capital costs would ratchet up," said president Richard Jaffee in a 1995 issue of Family Business. "We converted from a wholesale distributor with almost all liquid assets to a capital-intensive business."
After the founder died in 1962 at age 56, Richard Jaffee struggled without the advice of his father to make sure the family business prospered. In 1962 Oil-Dri developed its Terra Green Soil Conditioner for maintaining lawns, golf greens, and playing fields. Three years later the company introduced its Agsorb Carriers, fullers earth-based products for delivering various pesticides and other crop chemicals.
Jaffee concluded that the growing capital needs of his firm required one of two solutions. Either Oil-Dri could borrow money or become a public firm. Jaffee decided to take the firm public in 1971. Its stock was bought and sold on the New York Stock Exchange under the symbol ODC.
Just before that major turning point in Oil-Dri's history, Jaffee sold his holdings in the Amco subsidiary to his brother and his nephew, which allowed Amco to become a completely separate firm under family leadership.
Also in 1971, Oil-Dri built its clay mining facility at Ochlocknee, Georgia. Like other clay mines, the Ochlocknee facility was a strip or open pit mine. Large machines simply scooped out 3.5 tons of earth and dumped it into waiting trucks, which carried the fuller's earth to the nearby plant. There the clay was ground into precise particles, dried, and sterilized.
In 1979 Oil-Dri expanded its West Coast operations by buying the facility and clay reserves of the American Fossil Company in Christmas Valley, Oregon. In the same year, the company moved its research and development to a facility it purchased in Prairie View, Illinois.
In 1981 the firm contracted with The Clorox Company to develop nationally sold Fresh Step and Control Cat Litters. That was a major agreement that was crucial in expanding sales of Oil-Dri's key cat litter products.
By 1988, the cat litter industry had expanded to the point where Fortune published a major article about the main players: Oil-Dri with 14 percent market share, Edward Lowe Industries with a little less than a third of the market, and Excel-Mineral with a 10 percent share based on its Jonny Cat and other brands. Several other smaller firms competed with the big three for the 27 million American families who owned at least one cat, which was 30 percent of all households in the nation.
Cat litter from Oil-Dri and its competitors, along with decreasing American family size, helped the cat replace the dog as the number one pet in America in 1985. By 1988, the nation's cats outnumbered dogs 58 million to 49 million. To meet the booming demand for cat litter, about 75 brands were offered to consumers, who purchased 245 million bags of cat litter in 1988. "Cat litter has done for the cat what air conditioning did for Houston," said William Moll, Oil-Dri Corporation's vice-president of research and development, in the Fortune article.
Oil-Dri developed some new agricultural products in the 1980s. It introduced Flo-Fre Flowability Aid to prevent soybean meal and other animal feeds from caking and also Pel-Unite, which helped manufacturers make stronger food pellets and also reduce wear on their machinery. Monsanto Agricultural Company awarded Oil-Dri its Supplier Quality Recognition Award in 1990.
Foreign operations enhanced Oil-Dri's competitiveness in the 1970s and 1980s. Using new patented synthetic technology, the firm in the 1970s constructed plants in the United Kingdom and Germany for making floor absorbents and cat litter, while establishing subsidiaries in the United Kingdom, Switzerland, and Germany. In the 1980s, the Cologne, Germany plant was sold, but sales began in Malaysia, Japan, and Australia.
Oil-Dri's Canadian operations commenced in the early 1980s with the acquisition of the assets of Favorite Products, Ltd., a company based in Laval, Quebec, that manufactured Saular cat litter products, Canada's market leader.
To support its growing domestic and international sales, Oil-Dri in the 1980s took several steps. In 1983 it created Oil-Dri Transportation Company to limit its distribution costs. Its large fleet of trucks took Oil-Dri products all over the U.S. and then contracted with other companies to haul their goods on return trips. The transportation subsidiary also used railroad shipping and leased storage facilities to provide economical and quicker delivery capabilities. Oil-Dri also started a customer service department in the 1980s and purchased a new IBM mainframe computer and added over 100 user terminals at sites across the nation.
The 1990s
When Oil-Dri Corporation celebrated its 50th anniversary in 1991, its sales were 100 times greater than 20 years before. Since 1971, Oil-Dri had doubled in size every five years. Oil-Dri in the 1990s introduced new products to meet the increasing need for environmental protection. In 1990 it acquired Industrial Environmental Products, Inc., the manufacturer of polypropylene absorbents. The new line of Oil-Dri Lite polypropylene products, including Oil-Dri Rugs, Rolls, Pads, Sweeps, and Booms, could be incinerated and in some cases recycled.
Oil-Dri Booms and Sweeps contained and absorbed maritime oil spills, such as the Exxon Valdez spill in Alaska's Prince William Sound, and also were used to keep marinas free of oil. Oil-Dri Corporation added over 100 specially trained distributors to meet the needs of users of its new Oil-Dri Lite products.
Strategic alliances were another source of Oil-Dri's success in the 1990s. For example, in February 1993 Wal-Mart contracted with Oil-Dri to make its Lasting Pride brand of scoopable cat litter. Scoopable litters clump up and thus small portions can be removed daily. Wal-Mart and other mass merchandisers attracted consumers who formerly could buy scoopable litter only at pet stores.
Agreements with Wal-Mart and also K-Mart ensured that Oil-Dri cat litter would be sold by national distributors, but that was a very competitive market. For example, the increasingly popular scoopable or clumping litters introduced in 1987 were sold in the early 1990s by Oil-Dri and nine other manufacturers, including Houston's A&M Pet Products, the maker of Ever Clean, Catsanova, and Scoop Away brands; South Bend, Indiana's Golden Cat Corporation; and Alfapet Inc. of St. Louis. However, by 1997 consolidation had reduced the cat litter industry to four major players, including Oil-Dri.
In 1995 Oil-Dri was honored when a Massachusetts Mutual Life Insurance-backed panel of five judges named it the "Family Business of the Year" in the category of firms with at least 250 employees. To promote family values at Oil-Dri, it emphasized the Ten Commandments and the Golden Rule, while encouraging different family members to work for the company under certain conditions. In the spring 1995 issue of Family Business, Richard Jaffee explained this aspect of his firm's corporate culture: "the value system established by my father and mother ... was that if an employee had a good work ethic and values, chances were high his brother or uncle or kids did, too... We have modern business methods, but a folksy atmosphere."
The Jaffee family in 1995 maintained control over Oil-Dri by owning 30 percent of its stock and all its voting stock. In addition, Dan Jaffee, Richard Jaffee's son who had worked for the firm since 1987, on August 1, 1995 became the new company president and chief operating officer, while his father remained chairman and CEO. Richard Jaffee's three other children and two of his sons-in-law also worked for Oil-Dri in the 1990s.
Oil-Dri's revenues in 1997 came from three major sources. Cat litter brands, including Cats Pride, Lasting Pride, and Fresh Step, accounted for 60 percent of all sales. Agricultural products, sold to firms like Monsanto, Dow Elanco, and DuPont to provide the clay-based carriers for their insecticides, herbicides, and fungicides, brought in about 11 percent of all sales. Its fluids purification products, such as Pure-Flo to remove impurities from cooking oils and Ultra-Clear to help refine oil, represented about 12 percent of company sales. The rest of Oil-Dri's sales came from its industrial, environmental, and transportation segments.
One of Oil-Dri's major strengths in 1997 was its land used to mine the clay needed for several of its products. The firm owned or leased almost 11,300 acres of land with about 240 million tons of clay reserves in Mississippi, Georgia, Oregon, Florida, and Nevada. Another major asset was the firm's 19,100 square-foot research and pilot plant facility opened in 1991 in Vernon Hills, Illinois.
Oil-Dri continued to expand its international sales in the 1990s. For example, it sold Ultra-Clear to oil refineries and utilities in Saudi Arabia, Turkey, Germany, and Spain. By 1996, Oil-Dri sold mainly its fluids purification products to 60 nations. Its Latin American sales increased 32 percent in 1996.
With such advantages, Oil-Dri in 1997 nonetheless faced significant challenges. Due to investments in new computers, plant expansion, new products, and soft performance of its industrial commodities, Oil-Dri's stock declined from $25 per share in 1993 to about $16 per share in early 1997. Stiff competition in its primary cat litter market continued, and Oil-Dri's management faced many uncertainties, such as changing agricultural markets and fluctuating mass merchandising practices.
Principal Subsidiaries: Oil-Dri Corporation of Georgia; Oil-Dri Production Company; Oil-Dri Transportation Company; Oil-Dri S.A. (Switzerland); Oil-Dri U.K. Limited; Blue Mountain Production Company; Favorite Products Company, Ltd. (Canada).
Further Reading:
Fischetti, Mark, "How Excellent Companies Do It," Family Business, Spring 1995, pp. 12--14.
McMath, Robert, "Cat Litter: Myth and Reality," Adweek's Marketing Week, February 3, 1992, p. 24.
Moser, Penny W., "Filler's the Name, Odor's the Game," Fortune, April 25, 1988, p. 107.
"Oil-Dri Corporation of America: Interview of Richard M. Jaffee," Wall Street Corporate Reporter, January 13--19, 1997.
"Oil-Dri Corporation of America: Celebrating 50 Years Together," company videotape, July 13, 1991.
"Oil-Dri Named Family Biz of the Year," Industrial Distribution, June 1995, p. 32.
"Oil-Dri Reports Third Quarter Results; Third Quarter Net Income Up 74 Percent, Nine Months Net Income Up 54 Percent," PR Newswire, May 20, 1997, p. 520DETU048.
"Scooping Up Pet Care Products; Chains Use New Cat and Dog Products to Defend Market Turf," Discount Store News, February 15, 1993, p. S21.
Source: International Directory of Company Histories, Vol. 20. St. James Press, 1998.
