Businessweek Archives

Dial Succeeds By Stepping In Bigger Footsteps'


The Corporation

DIAL SUCCEEDS BY STEPPING IN BIGGER FOOTSTEPS'

Flashy, it isn't. Dial Corp. doesn't try to come up with innovative new products. It doesn't aim to build big-name, flagship brands. And it doesn't spend zillions of dollars to make its offerings household names across the nation. Instead, Dial prefers to coast in the slipstream of giant rivals, such as Procter & Gamble Co. Aside from Dial soap, the company's lineup consists largely of me-too products and second-tier regional brands.

That low-profile approach has been producing some pretty eye-catching results. Last year, Dial's earnings from continuing operations hit $110 million, a hefty 17% jump from 1992, on revenues of $3 billion, up 4.4%. And J.P. Morgan Securities Inc. analyst Heather I. Hay expects earnings to leap an additional 30% this year as revenues rise 19%. Roughly half of Dial's sales and earnings come from an eclectic mix of service businesses that include a money-order operation and an airline-catering business. But Chairman and CEO John W. Teets has managed to wring 28 consecutive quarters of improved operating income from a clutch of consumer products in such ordinarily slow-growth businesses as detergent, fabric softener, and canned meat.

YOU FIRST. How does Dial do it? Instead of spending big on research and development or marketing, Dial leaves it to others. Its R&D spending is about 1.25% of consumer-product sales, vs. 2% for the industry, estimates Hay. Teets has also overhauled Dial's manufacturing and distribution, cutting $12 million in annual costs. And Dial lets other companies educate consumers about new products. P&G, for instance, introduced concentrated powder detergents in 1990. Dial followed over a year later with its own concentrated version, Purex--priced as much as one-third lower than P&G's Tide. "They have figured out what a vendor has to do to survive," says Gabriel D. Lowy, head of consumer-product research at Oppenheimer & Co.

Dial may have a hard time maintaining its stronghold in the bloody brand wars, however. Marketers ranging from P&G to Philip Morris Cos. have been slashing prices and repositioning brands to appeal to value-minded consumers (BW--May 2)--moves that are putting these titans squarely in Dial's territory. "The big guys are going to play me-too to the Dials of the world," says Gary M. Stibel, principal of New England Consulting Group. Already, Dial's share of some markets has slipped (chart, page 82).

Still, today's Dial is a far cry from the unwieldy conglomerate Teets inherited in 1981. He sold its $1.8 billion meat-packing business and Greyhound bus lines and spun off other units, using the proceeds to add to Dial's stable of service businesses and build its shelf of consumer brands. He bought Purex Corp. in 1985, added Breck hair-care products in 1990, and last year bought the $121 million Renuzit air-freshener brand from S.C. Johnson Wax Co.

FULL OVEN. Teets, 60, has learned the hard way to stay away from risky innovations. After spending $20 million to develop and launch a line of microwavable meals in 1986, he watched competitors invade the market and undercut his prices. These days, Dial's product introductions are largely line extensions, such as Dial Plus moisturizing soap.

Teets tends to concentrate his marketing firepower in specific regions. Last year, for instance, he quickly pulled Dial's Sno Bol toilet cleaner back to its core markets in the upper Midwest and Florida after a short-lived push outside flopped. "You withdraw from those markets where you don't have penetration and spend money in those markets where you have strength," Teets says.

And he does what it takes to keep Dial's retailers happy. The company makes private-label products for such chains as Winn-Dixie Stores Inc. and Food Lion Inc., a practice shunned by its larger rivals, which fear the discount products will undermine their premium brands. And Dial spends aggressively on trade promotions, says one retailer.

Dial has been burned whenever it has deviated from its unassuming recipe. Two years ago, the company spent $25 million to reformulate and reintroduce the Breck hair-care line in an aggressive nationwide launch. But the brand ran into brutal competition from rivals. "We should know better than that," Teets grumbles. Dial will relaunch Breck this summer as a value brand in regional markets at a lower price. Teets's path may not be glamorous, but he has taken Dial down some profitable byways.Amy Barrett in Phoenix


Toyota's Hydrogen Man
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus