Velcro Industries N.V.
Address:
15 Pietermaai
Willemstad, Curaç
Netherlands Antilles
Fax: +31-(0) 603-669-1728
http://www.velcro.com
Statistics:
Public Company
Incorporated: 1957 as Velok Ltd.
Employees: 1,200
Sales: $177.1 million (1996)
Stock Exchanges: NASDAQ
SICs: 3965 Fasteners, Buttons, Needles & Pins
Company Perspectives:
"Velcro Industries N.V. is incorporated and domiciled in Curaç, Netherlands Antilles, as a Naamloze Vennootschap (limited liabilities company). The company acts as the holding company of the Velcro companies which are primarily involved in the manufacturing and marketing of Velcro and Texacro brand fasteners and Ultra-Mate brand hook fasteners throughout the world."
Company History:
Velcro Industries N.V. was created in order to market one of the century's handiest inventions: hook and loop tape. The ubiquitous fastener has spawned almost innumerable applications, fastening blood pressure cuffs, sneakers, wallets, industrial lift belts, and prisoner leg restraints. Velcro products can be found around the world. The company also manufactures more conventional belts and fasteners. Ultra-Mate and Texacro are two of the company's other brands.
A 1940s Discovery
Walking is said to promote creativity, and this was literally true in the invention of Velcro hook and loop tape. As George de Mestral hiked with his dog along some alpine countryside one day in 1941, cockleburs continually fastened themselves to his trousers. Wondering what made the spiny seeds so tacky, he examined them under a microscope revealing thousands of tiny hooks on the surface of each one. His trousers, which he also examined, were essentially covered with loops of fabric. Although he appreciated the engineering implications of the discovery right away, it took eight years of tinkering for de Mestral to develop a usable product made out of nylon hooks and loops. The main challenge was perfecting the manufacturing process to ensure consistent results.
By the 1950s the inventor had created a company to market his novel product. The trademark "Velcro" was appropriately derived from the French words for velvet and hook: "velour" and "crochet." Although he earned less than $60 per week in his first years in business, de Mestral earned millions after he sold rights to the invention to a new company created by Jean Revaud, an American national.
Velcro S.A. was based in Switzerland. It entered a licensing agreement with Velok Ltd. of Canada in 1957. The agreement allowed Velok to produce Velcro tape in the Western Hemisphere as well as Asia and the Pacific. Velok agreed to give the Swiss company the rights to all patents it subsequently developed.
Velok changed its name to Velcro Industries Ltd. and eclipsed Velcro S.A. in innovations and growth. Velcro USA Inc. (originally American Velcro Inc.) and Velcro Canada Ltd. (Canadian Velcro Ltd.) were subsidiaries of Velcro Industries Ltd. The company eventually acquired the rights to the patent in the late 1960s.
In 1967, its sales were worth about $10 million a year and its stock $81 per share. C. Humphrey Cripps began acquiring shares of the company (through a Channel Islands holding company, Cohere Ltd.) when their price fell to around $5 each in the early 1970s. Cripps also took the post of company chairman and later installed two sons on the board.
Velcro was not the Cripps family's first foray into entrepreneurship. Humphrey's father, Cyril, established a factory to make piano frames in 1919; it later was a supplier for the automotive industry. Other holdings included private livestock and tourism investments. Known for its philanthropy (the Cripps Foundation gave Cambridge University £1 million in the 1960s), the family drew some scrutiny in the late 1980s after the company failed to offer a dividend in spite of healthy sales and cash reserves, prompting speculation about the family taking the company private. A minority shareholder, Alan Kahn, sued to prevent the transaction, and a U.S. judge ruled that the United States had jurisdiction in the case. Cripps canceled his plans. However, within five years, rumors of the chairman entertaining takeover offers were reported.
The company maintained a reputation for secrecy in financial matters and product development. The New York Times likened it to a private company. It held its annual meetings on the isolated Caribbean island of St. Maarten, meetings that, as reported in Forbes magazine, were not even attended by the board, who instead met with Cripps privately.
The Competitive 1980s
By the time the patent for the original Velcro tape expired in 1978, the word "Velcro" had become a synonym for hook and loop tape. The company launched a campaign to protect the brand name from falling into general use. A subsequent advertising campaign touted the product as "the first, the best."
The expiration of the patent opened the market to a slew of low-cost competitors. The French company Aplix (the leading European fastener supplier) and Japanese-owned YKK (a leading manufacturer of zippers for clothing) capitalized on the opportunity, particularly in the apparel and footwear industries. The demand for the fastener among shoe makers was so great that Velcro could not meet it alone, and it lost some business to foreign suppliers, some of whom had licensed the Velcro technology and name until 1978. However, when the fashion buzz wore off, excess capacity among hook and loop tape suppliers forced prices down.
Fashion designers, courted by the company since the 1960s, had finally begun to appreciate the possibilities. However, like the first Ford automobiles, Velcro tape was originally only available in black. Eventually the tape was formulated in sixteen different colors. An elastic version was also developed.
The company concentrated on supplying more stable, industrial markets after the shoe fad declined. Velcro products, the company explained, helped lower assembly costs in the automotive industry. The fastening devices were used to attach door panels among other things. The aerospace industry also appreciated the lightweight, rustproof fasteners that would not rattle. A standard component in jet planes since the 1960s, Velcro fasteners were used on aircraft ranging from small Pipers to the Space Shuttle. Medical supplies, which tended to be very expensive, provided a field in which Velcro could sell higher quality, more costly products, including the fasteners used on the Symbion Total artificial heart. Not only did the fasteners have to work perfectly, but they had to be immaculately clean as well, and, as in the fashion industry, the appearance of the products was often important as well.
The tape was enhanced to perform in different conditions. Flame resistant (Hi-Air), silver coated, electrically conductive (Hi-Meg), heat and corrosion resistant (Hi-Garde), fire retardant, and weather resistant polyester were among the formulations developed.
The hook side of the tape was available in differing densities and levels of durability; the loop side was also. However, the orientation of the loops made a difference in "peel strength." Randomly-oriented loops held more firmly, whereas orderly rows of loops had a somewhat more attractive appearance. The final, unsung layer, the adhesive, was also available in different formulations. Standard backed tape, meant to be sewn, had no adhesive at all. Most had peel-off backing and pressure-sensitive adhesives of different formulations for use in different applications and environments. The most durable involved a separate adhesive to be applied and activated by the user.
One-Wrap fasteners had a hook layer on one side and loops on the other and were used for wrapping purposes. Half and Half Tape featured hook tape with an adhesive backing and the opposite, with the loops, with a fabric backing that could be sewn onto other fabrics. Texacro, a less expensive brand of standard backed tape, was manufactured in Mexico. Velstick fasteners had a rigid plastic backing. The WrapStrap, an offering of Canada's WrapStrap Industries Inc., anchored two pieces of Velcro tape with an aluminum plate for securing cables and automotive and marine applications. Velcro tapes were available in a variety of widths, from
The fastener also proved handy for hanging displays at conventions and in retail stores. Inevitably, more whimsical applications for Velcro tape had to surface. At some bars, customers could don a suit covered with Velcro tape and fasten themselves to a wall covered with the complementary layer. Late-night talk show host David Letterman popularized this stunt. The more adventuresome could attempt to navigate a similarly fashioned inflatable obstacle course.
Expansion in the 1990s
Annual sales in fiscal year 1988 were $93 million. They had reached $115 million by 1992. In the mid-1990s, several factors sent the company's earnings and stock price downward. Velcro was forced to make a large tax payment to the Dutch government. Overseas expansion had to be funded, and the United States--where the company essentially runs its operations from Manchester, New Hampshire--required an increase in tax payments as well.
Velcro included hundreds of types of fasteners in its product offerings in the 1990s. It diversified into such conventional fasteners as screws and clips, which were usually custom engineered. Velcro began using stainless steel in manufacturing some of these new products, although nylon remained a component of some.
The company also developed variations of its original nylon hook and loop tape using less expensive materials. The Ultra-Mate brand HTH ("High Technology Hook") line was the pinnacle of this technology.
Ultra-Mate figured largely in a potentially lucrative cobranding exercise with Kimberly-Clark Corp., which used the fastener on its premium line of diapers, Huggies Supreme. Ultra-Mate's injection molding process made it more cost effective for this application than the traditional Velcro loop tape. However, the Velcro brand was featured on Huggies Supreme packaging because customers valued it. The venture was expected to increase Velcro USA's sales by $5 to $10 million per year.
New uses for traditional nylon-based Velcro tape continued to be developed. TacFast Systems Canada Limited developed the TacFast carpet fastening system based on Velcro tape. The system secured carpet effectively while allowing it to be easily moved if need arose. Velcro tape also anchored the artificial turf at the Toronto SkyDome and was employed to hold down toupees.
In 1996, earnings jumped nearly 20 percent to $16.3 million, while sales increased over 10 percent to $177.1 million. Although sales lagged in North America, Velcro Industries expected to benefit from the growth of markets in Asia and Latin America. A strong European presence remained a priority for the company, as evidenced by its acquisition of Ausonia S.r.l., the leading hook and loop producer in Italy.
Principal Subsidiaries:Velcro Hong Kong Limited; Velcro Australia Pty. Ltd.; Zhangjiagang Velcro Fastening Systems Co., Ltd. (China; 75%); Velcro Europe S.A. (Spain); Systemes de Fermeture S.A. (France); Velcro GmbH (Germany); Velcro Italia S.R.L.; Addey Milner Limited (Great Britain); Velcro Holdings B.V. (The Netherlands); Velcro USA Inc.; Velcro Laminates Inc. (USA); Velcro Canada Inc.; Velcromex S.A. de C.V. (Mexico); Velcro Finance Limited (Bermuda); Velcro Group Corporation (USA); Briole S.A. (Uruguay); Velcro de Costa Rica, S.A.; Velcro de Mexico, S.A. de C.V.; Velcro do Brasil LTDA.; Velcro Industries B.V. (Netherlands Antilles); Velcro Properties N.V. (Netherlands Antilles).
Principal Divisions: Automotive Division; Consumer Division; Industrial Division.
Further Reading:
Berss, Marcia, "'A Wacko Situation'," Forbes, May 23, 1994, p. 82.
Brush, Michael, "It Keeps Your Pants on, but Can It Fatten Your Wallet?" New York Times, April 14, 1996, p. F3.
Fastech of Jacksonville, http://www.fastech-velcro.com.
Giges, Nancy, "Velcro Faces Patent Problems by Diversifying Line," Advertising Age, November 7, 1977, p. 24.
Jancsurak, Joe, "Getting Hooked," Appliance Manufacturer, February 1994.
"Kimberly-Clark Revamps Huggies to Steal March on P&G's Pampers," Marketing Week, August 9, 1996, p. 10.
Krantz, K. Theodor, "How Velcro Got Hooked on Quality," Harvard Business Review, September/October 1989, pp. 34-40.
Marcial, Gene G., "Sticking with Velcro," Business Week, January 18, 1993, p. 74.
Meeks, Fleming, "Some Call It Greed," Forbes, October 3, 1988.
"There's No Such Thing as 'Velcro'," Manchester, New Hampshire: Velcro USA Inc., n.d.
"Velcro: A Success Story," Magazine of Wall Street, June 10, 1967, pp. 31-32, 40.
"Velcro's Stuck on Flying Disk Game," Playthings, April 1994.
"Velcro USA Inc.," Automotive Industries, June 1995.
Source: International Directory of Company Histories, Vol. 19. St. James Press, 1998.
