Blame Wal-Mart for this catastrophe
World's largest retailer decides which suppliers live, die, even how their products should look
Rubbermaid is shriveling and 850 of our neighbors are soon to be out of work.
I blame Wal-Mart.
If you shop there even if you could afford to shop someplace else, then I blame you, too.
In 1993 and 1994, Rubbermaid Inc. was named America's most admired company by Fortune magazine. Its descent into mediocrity is a sad, sad story that is used routinely in college classrooms to illustrate the immense power and vicious corporate culture of Wal-Mart.
Rubbermaid's been dying since late 1994, when it found itself in a war of wills with Wal-Mart Stores Inc., the world's largest company.
At that time, Rubbermaid wanted to raise the prices of some of its products because the cost of raw materials had risen suddenly by 80 percent. (Rubbermaid lost $250 million on resin costs alone in 1995, according to the company's annual report.)
Rubbermaid executives traveled numerous times to Wal-Mart headquarters in Bentonville, Ark., to plead their case. Wal-Mart kept saying no.
Look-alikes substituted
When Rubbermaid refused to go along with Wal-Mart's hard line on price, the retailer pulled Rubbermaid products off the shelf and replaced them with those manufactured by Sterilite, a little-known Massachusetts company adept at making Rubbermaid look-alikes at lower cost.
Sterilite, a closely held company with a manufacturing plant in Massillon, saw double-digit sales increases in 1995, according to industry estimates at the time; Rubbermaid'searnings fell 30 percent that year, according to its annual report.
When Rubbermaid finally made peace with Wal-Mart, it was by succumbing to the retailer's demands for cheaper products made to Wal-Mart specifications.
Rubbermaid planned to introduce a line of housewares in a shade it called Euro Blue. Rubbermaid designers had seen the color's emerging popularity abroad and believed it would catch on in the United States.
It manufactured the Euro Blue line, but Wal-Mart refused to carry it, forcing Rubbermaid to return to making its country blue and hunter green for Wal-Mart.
Euro Blue soon became one of the hottest hues in housewares, and Wal-Mart executives were frustrated and ashamed.
Wal-Mart has brought some good things to retailing. It has forced inefficient operations to get their acts together. It pioneered just-in-time inventory and expanded the use of technology to improve the flow of products. It has taught other retailers how to demand accountability from their suppliers.
But, as one former Rubbermaid executive told me, Wal-Mart ``squeezed too hard.''
By 1997, the floundering Rubbermaid was widely seen as takeover bait -- just three years after it was named the most admired company.
In 1999, Rubbermaid was purchased by Newell Inc., a lesser-known company with a reputation for whipping weaklings into shape.
Suppliers succumb
Rubbermaid is hardly alone in bowing to Wal-Mart pressure.
Wal-Mart represents the largest chunk of business -- anywhere from 10 percent to 35 percent of annual revenues -- of all of the major consumer products companies.
About 450 suppliers have opened offices in tiny Bentonville and 800 more plan to do so in the next five years.
Wal-Mart, by all accounts, played a big role in Kellogg's purchase of Keebler in 2001: The company wanted as much muscle as it could develop to deal with the retailer.
Procter & Gamble sold its Crisco and Jif peanut butter brands to the J.M. Smucker Co. of Orrville so it could focus on peddling heavy hitters such as Tide detergent to Wal-Mart.
Many, many other companies have changed their products to please Wal-Mart. Most major manufacturers make special products for sale at Wal-Mart and nowhere else. Those who make large products, such as plastic backyard toys, have had to alter their products or packaging to make it easier for Wal-Mart to shelve them.
Sometimes the changes seem small, but they are insidious.
Planet Moon Studios altered a video game by coloring blood green instead of red, toning down the language and putting a bikini on a topless character -- all to win Wal-Mart's approval.
Newell Rubbermaid Inc. insists that it is still committed to the Rubbermaid brand. After all, it incorporated the name.
But as Wal-Mart grows more powerful, as it does every single day, the chances of the brand's survival in any recognizable form are diminished greatly.
So next time you elbow your way into Wal-Mart to get a dirt-cheap television or bargain shoelaces, think about the price you, and the American economy, are really paying.