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REV: SEPTEMBER 2, 2005

CYNTHIA A. MONTGOMERY

Newell Rubbermaid: Strategy in Transition
Joe Galli, 43, was recruited to be the CEO of Newell Rubbermaid in January 2001, two years after the two companies were combined. His mission was to forge a turnaround after a string of disappointing earnings. As he moved ahead, Galli took a personal, hands-on approach. Always in motion, whether walking the aisles of retail stores, meeting with customers, or training his new cadre of managers, Galli’s energy seemed boundless. He strove to embody the attitudes and behavior he felt were vital to achieving his far-reaching agenda for the company. It was an agenda Wall Street seemed to like. In December, 2000, the month before Galli took over, Newell’s stock price dipped to $19.50; it closed at $35.99 in August of the following year.1 While still below the company’s historic high of $54.44 four years earlier, the momentum was forward.2 By the spring of 2003 Merrill Lynch, Prudential Financial, Fahnestock & Co., Inc. and Banc of America Securities maintained ‘buy’ ratings on the stock while Raymond James & Associates reiterated a ‘strong buy’. What did the future hold for the 100 year-old company?

Newell’s Former Strategy
Newel defines its basic business as that of manufacturing and distributing volume merchandise lines to the volume merchandisers. — Newell Company Strategy, 1967

In 1966, Daniel Ferguson became CEO of Newell Company, a privately held curtain rod manufacturer. At the time, discount retailing was taking the country by storm. Ferguson recognized the opportunity and leapt. Rather than selling one product, curtain rods, to many channels, he flipped the strategy on its head and announced that Newell would sell a variety of products to one channel – the discount retailers. To do so, Ferguson assembled a stable of businesses via acquisition and built an organization that was tailored to the needs of discount retailers. On the surface, the products in Newell’s portfolio might have appeared to have few similarities. Underneath, however, the key success factors necessary to produce and sell the products were virtually identical.
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Professor Cynthia A. Montgomery and Research Associates Rhonda Kaufman and Carole Winkler prepared this case. Sections relating to Newell’s historic corporate strategy draw heavily on two earlier cases, “Newell Company: Corporate Strategy,” HBS No. 799-139 written by Professor Cynthia A. Montgomery and Elizabeth Gordon and “Newell Co.: Acquisition Straegy,” HBS No. 794-066 writen by Professor David J. Collis. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2004 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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Staple Products
Newell’s products were durable, staple consumer goods that stayed the same from year to year. Examples included curtain rods, paint brushes, picture frames, and over two dozen other products found in nearly every household. Reflecting Newell’s values and philosophy, the products were not eye-catching, flashy, or unusually stylish. Rather, they were high quality, no-frills, utilitarian goods that were reasonably priced. The company’s brands were well known to discount retailers but may not have been easily evoked from consumers, although some may have recognized them when seeing them on the shelf. Except for some retailers’ print circulars, Newell did no advertising, and succeeded at holding SG&A to 15%. To protect its shelf space at each price point, Newell offered a range of “good,” “better” and “best” products. In some categories, such as paintbrushes, this was done with one brand; in others that required more differentiation, such as cookware, separate brands were used. In all categories the goal was to educate the consumer in the store aisle so that he or she could confidently make a purchase decision without the aid of a sales clerk. Doing so required careful merchandising that highlighted the product attributes and facilitated comparison across price points. Done well, the program gave discount retailers no reason to go to another supplier, and their customers no reason to go to another store.

Efficient Operations
Newell tailored its operations to meet the needs of the discount retailers and forwent serving other channels whose needs were different. Towards this end, the company was one of the first suppliers to implement an Electronic Data Interchange (EDI) system that allowed customers to place electronic orders. Over time, the system evolved into one that enabled Newell to automatically replenish customers’ inventories. These technological capabilities improved customer service and lowered costs, resulting in a win-win situation for Newell and the retailer. To avoid “stockouts,” discounters demanded quick and precise delivery times, well before other retailers. An article published in 1992 interviewed Linda Snavely, Newell’s corporate manager of transportation services:3 “Service is all we have,” she says. “We don’t deal in high-tech products. We’re in very competitive markets, working on narrow margins. As our customers reduce their inventory, we have to ship more often. Our turnaround has to be faster than ever.” Presently, at least 98 percent of all orders are shipped within 4-–5 days of receipt of customer order, with a 97 percent complete fill rate. The goal is 100/100. To achieve high quality and low costs, Newell maintained a high degree of control over 30 budget items in the manufacturing and sales processes. Corporate management closely monitored these items for each division and called for a “bracket meeting” if a variance occurred. These meetings were serious in tone and underscored for division managers the importance of tightly controlling their businesses. These exchanges also were an opportunity for well-seasoned corporate officers, most of whom had grown up in the business, to coach less experienced managers on how to improve their performance.

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Corporate Office
Newell’s corporate office provided backroom support to its businesses. Legal and tax issues were handled there, as were benefits, credit and collection, and financial control systems. Corporate also set the financial terms on which business would be done. The company’s 2%–3%, 45-payment agreements were not negotiable by the divisions or by their customers, the large discount retailers. Newell regarded its seasoned management team as one of its most valuable resources. The company developed general managers by rotating people across functions, and by moving successful division presidents to bigger and more challenging divisions. Such transfers were facilitated by common compensation and pension systems and a strong, shared corporate culture. Division presidents and their functional VPS in sales, operations, personnel, accounting and control, and customer service met with their counterparts from other divisions several times a year to share best practices and to keep abreast of company-wide developments. The corporate charge to the divisions was 2% of sales. Newell’s management interfaced with their customers—the discount retailers—at every level. Division managers were responsible for maintaining good relationships with customers’ buying organizations. Corporate managers, on the other hand, interacted with the highest levels of management within discount retailing, and worked hard to build and maintain Newell’s overall corporate reputation.

Growth Through Acquisition
While individual divisions had autonomy over the design, manufacturing, sales, distribution, and service of their products, Newell Corporate had very specific guidelines about the range of products they could offer. To maximize efficiency, divisions were prohibited from introducing products that weren’t within their existing charters. For example, the paintbrush division could introduce a paintbrush with a special grip, but it couldn’t offer power sprayers or step ladders. Senior management believed that this discipline increased the businesses’ efficiency and predictability, but inhibited internal growth. To combat this problem, Newell became an active acquirer of companies that fit its strategy and benefited from being part of its business model. The term “Newellization” was coined to describe the company’s process of purchasing, streamlining and integrating acquisitions. In February of 1990, Julianne Slovak of Fortune wrote: The recipe? First, pick up faltering companies with proven, well-known product lines similar to yours. Then, slice off businesses that don’t fit. Fatten operating margins by improving manufacturing, warehousing, distribution, and customer service. Mix well with an existing network of loyal customers to gain market share. And voila! You’re cooking in the style that Chief Executive Daniel Ferguson, who has been with the company 40 years, dubs “Newellization.” Crain’s Chicago Business noted, “When Daniel Ferguson promises to cut corporate fat, he’s not talking about any conventional diet. Liposuction is more like it.”4 Between 1968 and 1998, the company made over 75 acquisitions.5

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Performance
Newell’s finely honed system helped the manufacturer establish strong positions in a long succession of markets. By the late 1990s Newell was an important player in all its product categories, and the market leader in most. An industry observer noted: “. . . over the last 10 years [Newell] has emerged as the single most important company in the housewares industry today.”6 Ferguson’s strategy reaped handsome financial returns as well. In a 1989 research report titled “Never a Dull Moment; Stock Still Exceptionally Attractive”, Shearson Lehman Hutton wrote, “Newell’s 17-year record of acquiring ailing housewares and hardware producers is superb.”7 The company grew at a compound annual growth rate of 21% from 1977 to 1997 while its net income grew at a compound annual growth rate of 19% annually. Figure A displays accolades from the national press as it tried to describe Newell’s performance during these years.8 (See Exhibit 1 for financials 1987-2003.) While overall performance remained strong, by the mid-1990s a subtle erosion had begun in a number of the company’s key profit metrics, such as return on assets, and return on invested capital. Neither management nor the company’s Board of Directors saw this as a sign of serious trouble, but rather as an indication that a proactive “course correction” would be advisable. Figure A Newell Headlines and Quotes

“Sales and profits at this manufacturer of baking dishes and other housewares have puffed up like a soufflé in recent years,” said Fortune Magazine in 1990. “. . . its profits have been the stuff of dreams. . . .,” wrote Business Week in 1991. “Newell Builds Success From Diamonds in the Rough—Winning Formula Doubles Firm’s Size To $2.07 Billion in Just Three Years,” headlined The Wall Street Journal in 1995. “Newell’s management team has a great track record of delivering extraordinary profit margins from so-called mundane businesses . . .,” said The Milwakee Journal Sentinel in 1998.

Opportunities and Challenges
While leaning on its traditional strengths, the company acquired two small businesses with different missions—Burnes of Boston manufactured premium picture frames and Calphalon Corporation sold premium priced cookware. Both companies had traditionally sold their products through department stores but had recently begun to penetrate discount channels. In making these acquisitions, Newell’s intent was not to change its channel focus or acquire new capabilities, but to keep these brands out of the discount channels where they were beginning to threaten some of Newell’s “best” product offerings. In 1999, Newell acquired Rubbermaid, Inc., a company whose $2.5 billion in annual sales was almost as large as Newell’s $3.5 billion. Newell had long looked up to Rubbermaid. The highly regarded company had a stable of well-known brands, an established new product development
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process, and a strong international presence. In 1994 and 1995 Fortune magazine had named Rubbermaid the nation’s most admired company. In the mid-1990s Rubbermaid introduced over one new product per day. Its inventions weren’t necessarily flashy: 9 . . . they depend on making small improvements to some 5,000 unspectacular products: mailboxes, window boxes, storage boxes, toys, mops, dust mitts, spatulas, snap-together furniture, desk organizers, stepstools, wall coverings, playhouses, drink coasters, lint brushes, ice cube trays, stadium seats, garbage pails, bathmats, sporting goods, dinnerware, playground equipment, laundry hampers, dish drainers (pause to inhale), and more. Recently, for example, they took a mop bucket, added an antimicrobial agent to its plastic, and—voila!—the only antimicrobial mop bucket on the market. In the spring of 1994 the price of resin, which already contributed 30% to Rubbermaid’s total product cost, rose significantly. An increase of one penny per pound cost the company $10 million.10 Other plastics manufacturers absorbed much of the increase themselves, but Rubbermaid tried to pass it on to the buyers. Wal-Mart refused and instead turned to Sterilite, a small supplier in the plastics business. Wal-Mart featured Sterilite in its promotional materials and gave the company one of its “Most Valued Supplier” awards in 1995.11 While Sterilite’s business grew in double digits, Rubbermaid’s profits fell by one-third.12 Rubbermaid was also plagued by a reputation for poor customer service. Retailers complained that the company often wasn’t able to meet demand for highly sought after products. The same year Fortune dubbed Rubbermaid “most admired,” it also took them to task for operational deficiencies: “Although [Rubbermaid] excels in creativity, product quality, and merchandising, Rubbermaid is showing itself to be a laggard in more mundane areas such as modernizing machinery, eliminating unnecessary jobs, and making deliveries on time.”13 Rubbermaid’s stock began to fall along with its earnings (see Exhibit 2). Although Rubbermaid’s sales increased at a CAGR of 5.4% from 1993 to 1998, its net income fell by an average of –7.6% per year even though resin prices leveled out in 1996. Rubbermaid’s management began spending more on marketing and advertising, hoping to leverage the brand’s reputation for quality and ruggedness. As a result, SG&A rose, outstripping revenue growth by an average of 2.4% per year (a CAGR of 7.8%).14 (See Exhibit 2.) Newell watched as Rubbermaid’s troubles mounted. In many ways the company appeared to be its perfect complement: Newell excelled in operations efficiency, service and delivery, while Rubbermaid faltered. Rubbermaid had a strong history of internal growth and spent about 14% per year on research and development, while Newell didn’t even have an R&D organization. Rubbermaid marshaled strong consumer brands and a well recognized reputation for product quality, while Newell lacked both of these end-user advantages, but was very well regarded by the large discount retailers. Further, Rubbermaid’s durable, non-cyclical products shared many similarities with Newell’s and were sold through the same channels. It appeared to be a “match made in heaven.” Newell CEO John McDonough was confident that the company’s experience in integrating over 50 acquisitions would guide their hand in this endeavor. Despite Rubbermaid’s size, McDonough was confident it could be “Newellized.” Newell announced the merger on October 20, 1998. Its stock price fell from $49.06 to $43.25 the next day, a drop of 11.8%. On March 25, 1999 the company completed the purchase for $5.55 billion in stock, a 49% premium over Rubbermaid’s closing price the day of the announcement.15 By the
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Monday after the merger, Newell’s stock had regained ground, reaching a price of $50.00, 1.9% higher than before the October announcement.

Rubbermaid Proves Difficult to “Newellize”
Within six months Rubbermaid’s on-time product delivery was boosted from the high 70% range to over 90% and Wal-Mart began to restock some (but not all) of its shelves with the company’s products. Still, Rubbermaid’s operations were in worse shape than Newell had expected. Unknown to Newell, Rubbermaid sales people had been giving deep discounts to compensate for their poor customer service.16 Raising prices and regaining shelf space would be a long, uphill battle. Despite these problems, McDonough continued to market Newell Rubbermaid to Wall Street as a growth company. The company failed to meet several quarterly earnings targets, causing Newell’s stock to plunge (see Exhibit 3). In September of 1999 Business Week’s Andrew Osterland commented: “Suddenly it looks like instead of Newellizing Rubbermaid, Newell is being Rubbermaided.”17 By October 26, 2000 Newell Rubbermaid’s stock closed at a four-year low of $18.69.18 McDonough’s inability to integrate the acquisition, stem the losses and turn the company around led to his resignation on November 2, 2000. William P. Sovey, the company’s previous CEO and current board chairman was appointed interim CEO, and the search for a new leader commenced.19

Joe Galli Takes the Reins
Ferguson and Sovey had heard of Joe Galli when he was a “marketing wunderkind”20 at Black & Decker in the mid-1990s. Galli had started out as a sales rep and moved up quickly. By age 33 he was overseeing $2.8 of Black & Decker’s $4.8 billion in sales, with responsibility for the company’s power tool and outdoor product lines, as well as the housewares business outside the U.S. Subsequent to Black & Decker, he served intermittent stints as Chief Operating Officer at Amazon.com and CEO of Verticalnet.com. Galli viewed the Newell Rubbermaid opportunity as a way to go back to what he had always excelled in: marketing durable everyday household goods. In January 2001, he became the company’s new CEO. A Forbes cover story on Galli described his initial reaction to the company and in particular to Rubbermaid’s stable of products soon after he assumed the role of CEO. 21 Galli was stunned by the lassitude he saw…In his first week he hit the housewares show in Chicago. In its heyday in the early 1990s Rubbermaid earned 30% of its sales from new products and dazzled the show with its elaborate displays. His tour of the Rubbermaid booth took five minutes—only three new products were on display. Seven years earlier, Rubbermaid had sent approximately 100 new products to that show.22 Galli came to believe that although Rubbermaid had been fortunate years earlier to catch the trend of changing products from metal to resin, that wave of innovation had slowed considerably –not only after its acquisition by Newell, but before it as well. Although Rubbermaid had appeared to be a strong global player, Galli discovered that the reality was less than the promise: 23

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The company was very U.S. centric, with a management team from the Midwest and operating units in Europe, Latin America, and Asia. Rubbermaid had purchased the leading Polish plastic injection molder and the leading Dutch plastic molder, but had never integrated them with its U.S. operations to leverage skills and design. In fact, there were no similarities between the products sold in Europe and those sold in the U.S. There were problems on the “Newell side of the house” as well. In particular, Galli was struck by the “huge” number of brands in the company’s portfolio alongside the near absence of any marketing:24 There was a rule in the company, and I don’t know where this came from, that divisions weren’t allowed to have a position that bore the title “Marketing.” They had VPs of Merchandising, but not a title called Marketing. I asked, “Who is your head of marketing?” and a division president responded “We don’t have marketing—we have a head of merchandising.” Well, a couple of the businesses had broken rank and changed the title to Marketing, but they told me that they couldn’t communicate that to corporate.” The scant advertising that had been done was directed at the trade, or in cooperation with individual retailers. Merchandising, in contrast, was very important to Newell. Galli gave this view: “What they would do is merchandise an eight-foot section impeccably; the wall would be beautiful with wire fixtures and hooks, and they would let the retailer sell it through. This worked beautifully,” he added, “until the reality of China imports and private labels.”25 Financial performance in both companies had deteriorated since the merger was announced. Added together, corporate net income fell from $482 million in 1998 to $422 million in 2000.26 The Storage, Organization and Cleaning segment in Rubbermaid had experienced a net sales decline of 10% from 1998 to 2000, while operating margins had fallen by 3% over that period. The profitability of some Newell segments had deteriorated as well. The operating margin for the Food Preparation, Cooking & Serving group fell from 16.9% in 1999 to 14.5% in 2000; for Home Décor from 14.5% to 12.1%; and for Hardware & Tools from 17.5% to 16.9%.

Changes in the Business Landscape
The external business environment also presented a number of challenges. At the end of 2000, the realization set in that many internet and technology companies were severely overvalued; severe declines in stock prices followed. The U.S. economy struggled in other sectors as well, with employers eliminating jobs and consumers cutting back on discretionary spending. The terrorist attacks on September 11, 2001 only deepened the nation’s economic woes. The discount retailing industry was in the midst of a shakeout that had started in the early 1990s. Many firms had declared bankruptcy: Ames (1990); Hills Department Stores (1991); Alexander’s Inc. (1992); Fisher’s Big Wheel (1993); Jamesway Corporation (1993); Rose’s Stores, Inc. (1993); Montgomery Wards (1997); Lechmere (1997) and Fedco (1999). Other retailers, such as department stores, were also squeezed, as higher-end products began to appear on the discount retailers’ shelves. In contrast to these woes, other discount retailers prospered. By 2003, the four largest discount retailers were Wal-Mart, Target, Costco and Kohl’s (see Table A). Kmart had been second in this ranking until it declared bankruptcy and closed 300 stores in the spring of 2002.

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Table A

(in millions)
FY 1998 Revenues FY 2003 Revenues $244,524 43,917 41,693 9,120 Compound Annual Growth Rate 15.7% 7.5 11.8 24.4

Wal-Mart Target Costco Kohl’s
Source:

$117,958 30,662 23,830 3,060

Company earnings releases.

Wal-Mart continued to be an aggressive price competitor that demanded and got price rollbacks from its suppliers. Table B illustrates that Wal-Mart’s gross margins improved slightly between 1997 and 2002, while those of some of its suppliers shrunk considerably? Table B Wal-Mart versus Suppliers' Gross Margins
Basis Point Change from 1997–2002 109 (1,133) (998) (573) (346) (1,195)

1997 Wal-Mart Clorox Dial Corp Del Monte Foods Gillette Revlon
Source:

1998 21.0% 55.1 48.4 31.6 61.7 66.1

1999 21.4% 50.3 50.0 33.6 62.5 63.1

2000 21.5% 43.6 48.3 37.0 63.6 62.9

2001 21.2% 40.0 50.3 33.2 62.0 58.8

2002 21.9% 42.9 37.3 27.0 58.5 54.9

20.8% 54.2 47.3 32.7 61.9 68.8

UBS Investment Research Report, “Wal-Mart Stores: An American Idol,” September 17, 2003, p. 16.

According to Donaldson, Lufkin & Jenrette Securities, the bargaining power of manufacturers was declining as concentration in the discount retail channel increased: . . . all of these retailers know how important they are for manufacturers’ growth and they are using that power. Any manufacturer studying these statistics knows that it must work with the few retailers that offer growth in the 1990s, or it will encounter market share declines. Thus, the balance of power has clearly shifted.27 Foreign manufacturers’ costs were often lower than domestic suppliers’, encouraging discount retailers to purchase some of their goods from overseas. In 1992 Wal-Mart imported 5.8% of its goods, or $2.6 billion. Kmart and Target were also importing an increasing percentage of their products. By the mid to late 1990s, problems in service and delivery that had restrained the move to overseas suppliers were starting to be solved. Private labels had also begun to take hold in the U.S. Although they started off as the same black and white “generic” products that had appeared years before, they were beginning to morph into attractively packaged, high quality goods offered at lower prices. Some were so good that the private label attracted a following and almost became a brand itself, such as Wal-Mart’s Ole’ Roy dog food. Financial analyst Gary Balter of Donaldson, Lufkin & Jenrette Securities wrote that it was technology that first allowed Wal-Mart to discover the value of the private label:28
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One of the major advantages of the manufacturers in the 1970s and 1980s was that even the larger retailers at the time—Kmart, Kroger, Safeway—either lacked the technology to know where they made their profits, or allowed the manufacturers to reward them based on regional market share, thereby eliminating the advantage of being a large national chain. Both of these are changing. First, with Wal-Mart buying centrally, and forcing manufacturers to reward it based on its overall size, we are seeing other retailers, most notably Kroger and Kmart, centralize their buying and asking the manufacturers for similar pricing. More importantly, the advent of programs (such as Spaceman II) will allow retailers to calculate gross margins, operating margins and rate of returns on products and by foot of shelf space. Until these programs developed, many retailers believed that the higher prices on national brands, and the very visible support dollars, more than offset the lower gross margins. These programs are not only telling them that the private label has much higher productivity, but it is creating a data trail for retailers to use in their negotiations with manufacturers. Again, the loser in this scenario will be the manufacturer.

A New Strategy
Galli reviewed the situation at Newell Rubbermaid, the fierce price competition from low-cost imports, and the increasing market power of the large discount retailers. He concluded that the company’s old strategy of selling staple, low-cost products through one channel was no longer viable. Something had to be done to increase margins. And although it was tempting to make “cosmetic changes,” Galli sensed that something far more fundamental was required. He reflected that conviction in the new strategy he crafted for the company.

Newell Rubbermaid markets branded, value-added products through a broad network of retailers and distributors. Including: • Durables, semi-durables and consumables • Consumer and commercial grade products • Consumer and commercial focused channels • Consumers and commercial users
—Newell Rubbermaid Strategy 2001 The decision to pursue consumer and commercial products, users, and channels grew out of an assessment of the company’s profitability by channel and customer. Some of the businesses the company had acquired recently sold to commercial as well consumer channels. Although sales in these lines accounted for only a quarter of the company’s total revenue, their profitability was considerably higher than the average of the other lines. Galli also noted that commercial users generally demanded products of high quality and reliability, attributes that were valued by high-end retail customers who were willing to pay premium prices for top-of-the-line goods. Many of the features and products that were initially introduced in the commercial market could in time migrate to the retail market, and support the company’s drive for product differentiation and higher margins.

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To implement this strategy, Galli outlined “Six Strategic Initiatives” that targeted efficiency enhancement and revenue growth.

Efficiency
The intensely competitive discount retailing environment put increased pressure on suppliers. Highly experienced, well-informed retail buyer offices, armed with reams of internal sales and profit data, were eager to see prices go down—not up—over time. Passing on price increases, even those due to material changes in the cost of supply, was getting more difficult each year. The company’s efficiency initiatives were designed with this in mind. The goal in these efforts was not to “break new ground” or set new standards on the cost side, but to insure that the company’s costs would be competitive with the best in the business, anywhere in the world. Efficiency initiatives included: Productivity, Collaboration, and Streamlining.

Productivity The cost of goods sold would be minimized by cutting manufacturing costs five percent per year. This would involve reducing overhead, finding and eliminating inefficiencies, and improving purchasing procedures. The company planned to double its foreign manufacturing capacity from 25% to 50% of its products by 2005, and incur up to $350 million in restructuring costs to shut down a number of U.S. factories. Streamlining SG&A would be reduced by eliminating excess procedures, programs, and layers of management. An example of streamlining was reducing the number of brands that the company offered by a factor of 10. Collaboration This initiative served the dual purposes of efficiency and growth. It involved the sharing of manufacturing, training, administrative, and marketing knowledge across all divisions of the company. For example, managers in one division would share information about a customer or opportunity with another division, or one division would help another trouble shoot a problem in manufacturing or service.

Revenue Growth
While Galli viewed cost control as necessary for the long-run health of the company, he believed that the company’s critical differentiators would be on the revenue side. These drivers would increase customers’ willingness to pay and, in turn, boost the company’s gross margins. To describe these revenue enhancers, Galli coined the term special sauce:” Special sauce to me is something that a company does that no other company can quite get. They might try to copy it but they just don’t know what the ingredients are, or they don’t have the right blend of people and knowledge. It’s something that sets a company apart. It can’t be replicated. It’s important, too, to recognize where we are doing this –in household consumer durables. No one will be able to match us with these competencies in this market space. The three strategic initiatives to support revenue growth were: Marketing, and Strategic Account Management. New Product Development,

New Product Development While it was extraordinarily difficult to raise or maintain prices on existing products, Galli believed that higher margins could be achieved on new products in the early stages of their life cycles. This made innovation and new product introductions essential. Since the company was relatively inexperienced at new product development, this would necessitate establishing a company-wide process for generating new concepts and moving them from design
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through manufacturing (in house or out) and delivery. To do so, the company would recruit some engineering and management talent from other companies, and involve both the end user and the retailer in the development process to assure that the new products would appeal to consumers.

Marketing Galli believed that three elements of “creative differentiation” were necessary to maintain a price premium: the product must be innovative; the brand must matter to consumers; and the company must invest in the brand through demonstrations, advertising, or other marketing activities. Shedding its traditional low profile, Newell Rubbermaid would invest in “power brands” and add value through advertising, creative merchandising and special promotions. Many of these brands—such as Rubbermaid, Calphalon, Levolor and Sharpie—were already in the company’s portfolio, but had received scant advertising support in the past. The extra costs for marketing and advertising would be folded into SG&A, which was expected to increase one to two-and-a-half points as a percent of sales. Strategic Account Management Historically, each of Newell Rubbermaid’s businesses called on retail buyers individually. While preserving these relationships, Galli appointed President-level sales managers for three strategic accounts—Wal-Mart, Home Depot, and Lowe’s. These account managers would share responsibility with the division presidents for sales to these retailers, join division presidents at sales calls, and nurture and maintain the overall relationship between Newell Rubbermaid and the retailer.

Accountability
Going forward, the company would measure its progress by using five key metrics (see Table C): Table C Five Key Measures
Long-Term Target Internal Sales Growtha Operating Income as a % of Salesb Working Capital as a % of Salesc Free Cash Flowd Return on Invested Capitale 5%+ 15% 20% 10%+ 15% 2003 -9.5% 23.9% $242.3M 9.5% 2002 3.3% 10.4% 25.8% $391.6M 10.5% 2001 (7.6%) 9.5% 29.6% 392.4M 7.9%

Source: Newell Rubbermaid reports, Investor Relations, and Kelly Nash, “Initiating Coverage,” McDonald Investments Inc., July 2, 2003.
a.Internal sales growth is the growth of businesses that have been part of the company for over one year, including minor

acquisitions and divestitures. bOperating income, excluding restructuring and other non-recurring charges, as a percent of sales. cFive quarter average of accounts receivables plus inventory, net of accounts payable, divided by sales. dCash flow provided by operations, net of dividends and capital expenditures. eAfter-tax operating income excluding charges divided by a five quarter average of debt and equity.

Three Years at the Helm
By 2003, the company had discontinued 80,000 SKUs, closed 78 facilities29 and laid off 10,300 employees.30 Over one hundred new products had been introduced.

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Two companies that met Galli’s requirements for “premium price franchises” were acquired in 2003: American Saw & Manufacturing Company, which marketed tools under the Lenox® brand, and American Tool Companies,31 maker of Vise Grip® pliers. In a major organizational change, Newell Rubbermaid was restructured into four strategic groups:

Rubbermaid Group The Rubbermaid Group was a top seller of indoor and outdoor organization, storage and cleaning products, most made out of plastic, and sold under the Rubbermaid®, Stain Shield®, TakeAlongs®, Roughneck®, and Rolodex® brand names. In addition, the group sold baby products such as high chairs, car seats, and strollers under the Graco® brand name and juvenile products such as toys, play yards and outdoor play equipment under the Little Tikes® brand name. Calphalon Group The Calphalon Group consisted of high-end cookware sold under the Calphalon® brand, low- and medium-end cookware sold under the Mirro® and Wearever® and Panex® brands; glass products such as ovenware and servingware under the Anchor Hocking® brand; and picture frames under Connoisseur® and Burnes of Boston® brand names. Irwin Group The Irwin group consisted of blinds, shades, drapery hardware, and accessories sold under the Levolor®, and Kirsch® brands, and in Europe under the Swish® U.K. brand. The group also sold hand tools and power tools under the Irwin®, Vise-Grip®, and Lenox® brands, BernzOmatic® propane torches, cabinet hardware and window systems under the Amerock® or Bulldog® brands, and paint applicators under the Shur-Line® and Rubbermaid® brands. Sharpie Group The Sharpie Group sold writing instruments under the Sharpie®, Parker®, Paper Mate®, Rotring®, and Waterman® brands. In addition, the group sold hair accessories under the Goody® brand.

Marketing Momentum
Galli launched “Phoenix,” a new field-based sales and merchandising program, named after the mythical bird that supposedly died by fire and rose from the ashes. To staff it, the company hired hundreds of personable, energetic and bright recent college graduates. These men and women worked in teams to merchandise products at Newell Rubbermaid’s major accounts. Galli was optimistic that the program would help the company regain lost shelf space and customer goodwill, and create excitement about the company’s brands. (See Exhibit 4.) Fortune magazine had high praise for the Phoenix program:32 This army of high-achieving, super-motivated greenhorns has generated, on average, double-digit, year-over-year product sales increases in whatever store they take on. Their war stories recall such feats as ramping up paper-towel-holder sales by 1,000% in just seven days. That’s good news for stores, as well as for Newell [Rubbermaid], and Phoenix efforts have improved the company’s once fraught relationships with its retail customers. In addition to serving as a recruiting vehicle, Phoenix functioned as a training vehicle, allowing the company to develop young managers from within and give them extensive exposure to the company’s businesses. Galli emphasized that Phoenix would help nurture “human qualities that were very important ingredients for the company’s special sauce.”33 He also noted that it would be nearly impossible for competitors to duplicate the program, since its economic viability depended on both the scale and scope of products Newell Rubbermaid sold through the discount retailing channel.

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“Grass-roots” marketing efforts also got off to a fast start. The company began to sponsor community events where employees created excitement around a brand by demonstrating products and explaining their benefits. The company was a major sponsor of the annual SkillsUSA (VICA) conference where technical high school students competed in carpentry, metalwork, cooking, and a host of other trades. In 2002 Joe Galli was the keynote speaker for this event that included a Rubbermaid Block Party and an Irwin Workshop. Since 2001, the company had sponsored a car and driver in the NASCAR races and manned product booths at the track. At some of these events an Irwin employee called “The Hackman” used a chainsaw with a Lenox blade to cut a bus in half. In 2002, the company’s marketing efforts got an unexpected boost from a well- publicized, serendipitous event. After scoring a touchdown in a football game against the Seattle Seahawks, San Francisco wide receiver Terrell Owens, still in the end zone, reached into his sock, pulled out a Sharpie®, and signed his autograph on the ball –all on nationwide television.

Breakthrough Leadership
The company started an in-house executive education program called ‘Breakthrough Leadership.’ The purpose of the program was to establish company standards and to disseminate that knowledge throughout the organization. In every week-long course, participants prepared slide presentations about the key insights they wanted to take back to their businesses and the list of things they were going to do differently upon their return. At the end of each course, these presentations were graded and rank-ordered by top management. Though intense, the sessions were high-spirited and engendered a strong sense of camaraderie among the participants. Galli and his senior management team did much of the teaching in the program. He gave this description of one manager’s experience: This guy had just joined the company, and he went through Break-Through Leadership. Six days—it’s boot camp. After the course he was so motivated that he lost 45 pounds, read three books, and cleaned up his office which used to look like a pigsty. All of this in addition to the basics of Breakthrough Leadership which are to improve operating excellence, and develop power brands. The whole end result is to raise the bar on yourself. Look in the mirror: how do you make yourself a more effective leader?

Wall Street Responds
As Newell Rubbermaid began to reposition itself, Wall Street reacted positively. In January 2003 there were 10 buy ratings on the company’s stock. Analysts from Merrill Lynch attended a presentation by Joe Galli in March 2003. They reported:34 Yesterday afternoon Newell Rubbermaid reviewed its strategy and key current developments. We came away encouraged by the strides the company continues to make, particularly regarding shelf space gains at retail and the upcoming numerous new products for 2003, which will help drive top line growth and gross margin expansion. On July 2, 2003 Kelly Nash of McDonald Investments Inc. wrote: “After implementing a company strategy with specific measurable objectives and steps to achieve these objectives, NWL has shown improvement and we expect this trend to continue.”35

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Problems along the Way
Kmart, Newell Rubbermaid’s second largest customer, declared bankruptcy in January 2002. (See Exhibit 5.) Although the company had expected the filing and was serving Kmart on a cash-only basis, the bankruptcy caused Newell Rubbermaid to forgo approximately $130 and $170 million in revenues, in 2002 and 2003, respectively. The same year, an attempt to sell Anchor Hocking, a business that did not fit the new strategy, to Libbey Inc. for $332 million was blocked by the Federal Trade Commission, on the grounds that it may reduce competition. The price of resin spiked up sharply in 2002 and 2003, driving down margins on Rubbermaid’s resin intensive products, many of which were already being challenged by generic competitors’ opening price points. Raymond James & Associates estimated that in June, 2003 the company paid $.407 per “basket” of resin, up from $.262 in March, 2002; by March of 2004 they predicted a rise to $.412.36 This meant that resin alone accounted for approximately eight percent of the total company’s cost of goods sold in 2002 and 2003.37 (See Exhibit 6.) The company also faced a reduction in sales, and margin compressions, in some of its “old line” businesses, including low-end cookware and picture frames. Writing instrument sales, though still highly profitable, also fell somewhat short of its targets for 2003. In combination, these events led the company to reduce its earnings guidance on July 31 and again on December 9, 2003. The price of the company’s stock followed suit, closing at $22.77 on December 31, 2003. (See Exhibit 7.) Internal changes followed. The President of the Calphalon Group left the company. The Presidents of two groups—James Roberts of the Irwin Group, and Bob Parker of the Sharpie Group— both highly seasoned executives, took on additional responsibilities, with Roberts overseeing the Rubbermaid home and commercial businesses, and Parker overseeing the Graco and Little Tikes businesses. David Klatt, former president of the Rubbermaid Group, was assigned to head New Business Ventures. Kristine Juster was promoted to lead Calphalon and Mirro cookware, reporting directly to Parker. Jesse Herron, who had headed Investor Relations before being promoted to another position in the company, reassumed that role. (See Exhibit 8 for the growth and profit for the four groups.)

Management Reaffirms Strategy
A man who thrives on success, Galli found 2003 sobering in many ways. The business environment had proven even fiercer than expected, forcing internal changes at an even faster pace. Galli emphasized, however, that these were not reasons to change the company’s strategy, but to reaffirm it. He stressed the following points: • • • In the competitive environment Newell faces, only differentiated products with true brand value will be able to command premium prices. Businesses or product lines that do not fit with this strategy will be sold. Even with strong brands, operational excellence will always be important. A company cannot afford to be disadvantaged on cost. Efforts to restructure the company’s supply chain remain a high priority.

Reflecting on the situation he had stepped into in 1999, Galli offered these comments:38

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When I joined Newell I thought that I was joining a company with a well-run operations supply chain and that I needed to come in and plug in product development, brand building, and marketing, and viola—what a great company it would be! In a year we could get these things going with our operations juggernaut. What we learned was that the operations issues—particularly related to off shore sources of supply—needed the same amount of time and attention as the marketing and sales issues. And frankly, there is a sequence to it. First you have to make your supply chain choices—settle your make-versus-buy decisions and country of origin decisions. That all has to be done first or else you end up making it more complicated by plugging in new products. He spoke in particular about the challenges in some of the Rubbermaid businesses:39 After Newell made the acquisition, they worked hard to fix the service and delivery issues which were a mess. They did so by pouring hundreds of millions of dollars of fixed capital into the plants. But they never stepped back and challenged the fundamental business model of injection-molded products. I came in and focused on re-invigorating the product development process and leveraging Rubbermaid’s great brand. And we could see the progress that was being made. But, in retrospect, one sees that the relatively low prices of resin in late 2001 and early 2002 masked serious productivity issues in the business. As the year ended, the company announced that it would close Rubbermaid’s production operations in Wooster, Ohio, where that company was founded in 1920. The site employed approximately 1,250 people. The company also announced that it would be exiting low-margin product lines and divesting businesses that had been identified as non-strategic. In anticipation of doing so, the company took a $454 million impairment and restructuring charge against 2003 earnings. Discussing the year, and looking ahead, Galli remained sanguine about the future of the company:40 It has been a challenging time for Newell Rubbermaid; however, our team made great progress in the transformation of this company as we continued the execution of our restructuring plan. There are not many firms out there that have accomplished as much as we have in the last three years. It is taking a little longer than we would have liked, but in the long run—when we succeed—a little more time at this end is not going to be a big part of the story.

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Exhibit 1

Newell Rubbermaid Financials 1987–2003 (in millions)

1987 Sales Cost of Sales Gross Profit SG&A EBITDA Pretax Income Net Income Basic EPS—Excl. Extra Item Basic EPS—Incl. Extra Item Diluted EPS—Excl. Extra Item Diluted EPS—Incl. Extra Item $720 511 208 105 103 67 37 0.34 0.34 0.34 0.34

1988 $988 688 300 141 160 104 61 0.55 0.55 0.51 0.51

1989 $1,123 776 347 149 197 146 85 0.71 0.71 0.71 0.71

1990 $1,073 719 354 150 203 171 101 0.84 0.84 0.84 0.84

1991 $1,119 732 387 159 228 187 112 0.91 0.91 0.91 0.91

1992 $1,452 955 497 201 295 278 163 1.05 0.77 1.05 0.77

1993 $1,645 1,054 591 257 334 276 165 1.05 1.05 1.05 1.05

1994 $2,075 1,347 728 313 415 329 196 1.24 1.24 1.24 1.24

1995 $2,498 1,633 865 363 502 371 222 1.41 1.41 1.41 1.41

1996 $2,873 1,873 1,000 422 578 425 256 1.62 1.62 1.62 1.62

1997 $3,234 2,090 1,144 474 670 482 290 1.83 1.83 1.82 1.82

1998 $3,720 2,439 1,281 583 698 685 396 2.44 2.44 2.38 2.38

1999 $6,413 4,341 2,072 926 1,147 231 95 0.34 0.34 0.34 0.34

2000 $6,935 4,860 2,075 891 1,184 685 422 1.57 1.57 1.57 1.57

2001 $6,909 4,767 2,142 1,156 986 416 265 0.99 0.99 0.99 0.99

2002 $7,454 5,100 2,354 1,300 1,054 469 312 1.17 (0.76) 1.16 (0.76)

2003 $7,750 5,683 2,067 1,353 714 20 (47)a 0.17 0.17 0.17 0.17

Net Income as a % of Sales SG&A as a % of Sales Gross Profit Margin Return on Assets Return on Equity Return on Investment

5.2% 14.7% 29.0% 3.8% 14.8% 5.4%

6.2% 14.2% 30.4% 6.3% 19.8% 9.4%

7.6% 13.3% 30.9% 9.7% 18.8% 15.2%

9.4% 14.0% 33.0% 11.6% 20.0% 16.9%

10.0% 14.2% 34.6% 10.8% 18.4% 14.3%

11.2% 13.9% 34.2% 10.4% 19.0% 15.8%

10.1% 15.6% 35.9% 8.5% 16.9% 13.8%

9.4% 15.1% 35.1% 7.9% 17.4% 12.7%

8.9% 14.5% 34.6% 7.6% 17.1% 10.8%

8.9% 14.7% 34.8% 8.5% 17.2% 11.9%

9.0% 14.7% 35.4% 7.4% 16.9% 9.7%

10.6% 15.7% 34.4% 9.2% 20.7% 12.1%

1.5% 14.4% 32.3% 1.4% 3.5% 2.1%

6.1% 12.8% 29.9% 5.8% 17.2% 8.0%

3.8% 16.7% 31.0% 3.6% 10.9% 6.2%

4.2% 17.4% 31.6% 4.2% 15.1% 7.0%

(.6%) 17.5% 26.7% (0.6%) (2.3%) (0.9%)

Source:

Compustat for the years 1987-2002 and company earnings release for the year 2003.

1Includes restructuring, acquisition, and divestiture related charges. These charges consist of $15.1 million in restructuring costs relating to product line exits (shown in costs of products sold), $3.3

million of restructuring related costs associated with relocation of property and equipment (shown in selling, general and administrative expenses), $245 million of restructuring costs related to exiting certain facilities (shown in restructuring costs in Newell SEC filings), $289.4 million in impairment charges related to non-core businesses targeted for sale, $30.3 million, which is primarily the loss on the sale of the Cosmolab division (shown in “other” in Newell SEC filings). Figure does not include a one-time accounting change.

For the exclusive use of A. Ouellet, 2015.
Newell Rubbermaid: Strategy in Transition 704-491

Exhibit 2

Rubbermaid, Inc.’s Performance Before Merger with the Newell Company

Rubbermaid Stock Price and PE 1990 - Date of NWL Merger Announcement 10/20/1998
$140 $120 $100 $80 $60 $40 $20 $0

PE Price

111111111Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan1990 1991 1992 1993 1994 1995 1996 1997 1998

Source:

Adapted from Thomson Financial Securities Data.

Rubbermaid Sales and Net Income 1993-1998
$3,000
CAGR 5.4%

(in millions)

$2,000 Sales Net Income $1,000
CAGR –7.6%

$0 1993 1994 1995 1996 1997 1998

Source:

Adapted from: Sales and Net Income data from Stephen East and Matthew Moyer, “Newell Company,” A.G. Edwards, February 25, 1999, p. 3.

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Newell Rubbermaid: Strategy in Transition

Exhibit 3

Newell Rubbermaid Stock Price against the S&P 500

Newell Stock Price against the S&P 500 1984 - 2004
$60 $50 $40
Closing Price

$30 $20 $10 $0
1984 1985 1986 1988 1989 1991 1992 1994 1995 1997 1998 2000 2001 2003
2004

NWL S&P 500

Year

Source:

Thomson Financial DataStream.

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Exhibit 4

Power Brands—Calphalon Home Group, Sharpie Group, Irwin Group, Rubbermaid Group

Irwin Group Irwin Group
Irwin—Power Tool Accessories Irwin—Power Tool Accessories Home Décor Europe Swish UK Home Décor Europe Swish UK Irwin—Hand Tools Irwin—Hand Tools Levolor/Kirsch Levolor/Kirsch Amerock Amerock Shur-Line Shur-Line
Levolor® Levolor® Kirsch® Kirsch® Irwin® Vise-Grip® Vise-Grip® Quick-Grip® Quick-Grip® Bernz-O-Matic® Bernz-O-Matic® Lenox® Lenox®

Rubbermaid Group Rubbermaid Group
Rubbermaid Commercial Products Rubbermaid Commercial Products Rubbermaid Home Products Rubbermaid Home Products Rubbermaid Europe Rubbermaid Europe Little Tikes Little Tikes Graco Graco

Rubbermaid® Rubbermaid® Stain Shield® Stain Shield®

TakeAlongs® TakeAlongs® Roughneck® Roughneck®

Blue Ice® Blue Ice®

Marathon® Marathon®

Sharpie Group Sharpie Group
Sanford North America Sanford North America Sanford International Sanford International Goody Goody
Sharpie® Sharpie® Parker® Parker® Papermate® Papermate® Waterman® Waterman® Colorific® Colorific® Goody® Goody®

Calphalon Home Group Calphalon Home Group
Calphalon Cookware and Bakeware Calphalon Cookware and Bakeware Anchor Hocking Anchor Hocking Housewares Europe Housewares Europe Connoisseur/Burnes Connoisseur/Burnes Newell Photo— Newell Photo— Fashion Fashion Europe Europe
Calphalon® Calphalon®

Source: Company reports.

For the exclusive use of A. Ouellet, 2015.
704-491 Newell Rubbermaid: Strategy in Transition

Exhibit 5

15 Largest Retailers Ranked by Market Capitalization as of November 14, 2003

Source:

The Center for Research in Security Prices, University of Chicago (CRSP) as accessed through Wharton Research Databases (WRDS).

20

Newell Rubbermaid: Strategy in Transition

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Exhibit 6

Resin Prices December 1996 – March 2004

Note:

Raymond James estimates that the “basket” of resins used by Newell Rubbermaid is comprised of 30% High Density Polyethylene (HDPE), 30% Linear Low Density Polyethylene (LLDPE) and 40% Polypropylene (PP).

NWL Resin Market Basket
$0.45 $0.40 $.351 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00
Dec- 9 6 Mar -97 Dec- 9 7 Mar -9 8 Dec- 9 8 Mar -9 9 Dec- 9 9 Mar -0 0 Dec- 0 0 Mar -0 1 Jun-01 Sep - 0 1 Dec- 0 1 Mar -02 Dec- 0 2 Mar -0 3 Dec- 0 3 Mar -0 4 Jun-9 7 Sep - 9 7 Jun-9 8 Sep - 9 8 Jun-9 9 Jun-0 0 Sep - 0 0 Jun-0 2 Sep - 0 2 Sep - 9 9 Jun-0 3 Sep - 0 3

HDPE

LLDPE

PP
$.36

$.412

$.225

So urce: P lastics News, Raymo nd James Research Estimates

Source:

Budd Bugatch and Chris Thornsberry, “Newell Rubbermaid Inc.,” Raymond James & Associates, Inc., January 26, 2004, p. 2.

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Newell Rubbermaid: Strategy in Transition

Exhibit 7

Newell Rubbermaid Stock Price and Earnings Guidance

2003 EARNINGS GUIDANCE
Operating Income (OI) Original Budget Contingency Guidance $945 $79 $866 EPS $2.00 $0.20 $1.77–$1.87

WHAT HAPPENED
Rubbermaid Home Products Frames Writing Instruments-North America Cookware All Other ($120) ($58) ($37) ($33) +$38

-$0.62
+$0.10

2003 Actual

$735

$1.48

Newell Rubbermaid Stock Price in 2003/2004
$35
April 29, 2003: NWL Predicts 2003 EPS

$1.77-$1.87

$30.05

January 29, 2004 NWL Reports FY’03 EPS of $1.49

$30 Closing Price $25
July 30, 2003 NWL lowers 2003 EPS to

$28.42

December 9, 2003 NWL lowers 2003 EPS to

$1.46-$1.49

$24.22 $21.00

$1.60-$1.68

$20

Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan03 03 03 03 03 03 03 03 03 03 03 03 04 Date
Source: Datastream, company earnings releases.

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Exhibit 8

Growth and Profitability of Newell Rubbermaid’s Four Groups

NWL 2003 Growth & Profitability of Four Groups
25% 20% 15% 10% 5% 0% -20% -10% 0% Growth Rubbermaid Sharpie Irwin Calphalon Home 10% 20% 30%

Profitability (Operating Margin)

Source:

Newell Rubbermaid 2003 4th Quarter Earnings Release.

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Newell Rubbermaid: Strategy in Transition

Endnotes
1 2 3

Stock price is from Datastream. NWL high was on July 17, 1998. Stock price is from Datastream.

E.J. Muller, “Is It Possible To Control Costs And Still Maintain Quality Services? Yes, Says This Manufacturer Of Housewares, Hardware And Office Supplies,” Chilton’s Distribution, November 1, 1992.
4

H. Lee Murphy, “Newell’s Sharpened Glass Unit Set to Shine,” Crain’s Chicago Business, May 30, 1988.

5 “Daily Briefing A quick look at today’s business news Newell buys Rubbermaid for $5.8 billion in stock,” The Atlanta Journal Constitution, October 21, 1998. 6 Thyra Porter, “Newell Follows Wal-Mart Lead,” HFN, weekly newspaper for the Home Furnishings Network, July 13, 1998, p. 48.

G.R. Odening, “Never a Dull Moment; Stock Still Exceptionally Attractive,” Shearson Lehman Hutton Inc., March 6, 1989. Julianne Slovak, “Newell (Companies to Watch),” Fortune, February 12, 1990; Kevin Kelly, “Newell isn’t Bagging Big Game Anymore—Two Buyout Bids Are Stalled—and Stanley Looks out of Reach,” Business Week, July 8, 1991; Calmetta Coleman, “Newell Builds Success From Diamonds in the Rough—Winning Formula Doubles Firm’s Size To $2.07 Billion in Just Three Years,” The Wall Street Journal, April 14, 1995; Kathleen Gallagher, “Street Smart Toughness should drive Newell’s earnings, analyst says,” The Milwaukee Journal Sentinel, December 21, 1998.
9 8

7

Alan Farnham, “America’s Most Admired Company,” Fortune, February 7, 1994.

Mary Etheridge, “Wooster, Ohio, Rubbermaid Improves Relationship with Wal-Mart after Merger,” Knight Ridder Tribune Business News: Source: World Reporter™, July 16, 2000.
11

10

Lee Smith, “Rubbermaid Goes Thump”, Fortune, October 2, 1995.

12 Mary Etheridge, “Wooster, Ohio, Rubbermaid Improves Relationship with Wal-Mart after Merger,” Knight Ridder Tribune Business News: Source: World Reporter™, July 16, 2000. 13

Lee Smith, “Rubbermaid Goes Thump,” Fortune, October 2, 1995.

14 Stephen East, CFA and Matthew Moyer, “Newell Rubbermaid, coming soon to a Mass Merchant near you”, A. G. Edwards, February 25, 1999, available from The Investext Group, http://www.investext.com, accessed August 5, 2003. 15 16

Rubbermaid closed at $25.88 on October 20, 1998, the day the companies announced the merger.

Andrew Osterland, “Fixing Rubbermaid is No Snap Newell’s stodgy turnaround effort has investors upset,” Business Week, September 20, 1999.
17 18 19

Ibid. Prices from Datastream.

Michael J. McCarthy, “Newell Rubbermaid CEO Quits; Chairman is Set to Succeed Him,” The Wall Street Journal, November 2, 2000.
20 Bruce Upbin, “Rebirth of a Sales Man; Joe Galli, the master marketer who made even hammer drills exciting, flopped when he went over to Amazon. Then he moved back into his element—pitching the most mundane of objects. He might turn Newell Rubbermaid into a surprising winner,” Forbes, October 1, 2001. 21 22

Ibid., Bruce Upbin. “Rebirth of a Sales Man,” Forbes, Vol. 168, Iss. 08, October 1, 2001, pp. 94–104. Alan Farnham, “America’s Most Admired Company,” Fortune, February 7, 1994.

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23 24 25 26 27

Source: Galli interview. Source: Galli interview. Source: Galli interview. 1998 figure has been restated to include the Rubbermaid Acquisition.

Gary Balter, “Wal-Mart Stores, Inc.—Company Report,” Donaldson, Lufkin & Jenrette Securities, February 22, 1994, p. 35. Gary Balter, “Wal-Mart Stores, Inc.—Company Report,” Donaldson, Lufkin & Jenrette Securities, February 22, 1994.
29 30 31 32 33 34 28

Karen Jacobs, “Newell Profit Down, Merrill Says Sell,” Reuters, July 31, 2003. Source: Newell Rubbermaid Investor Relations. The first half of the company had been purchased several years earlier. Matthew Boyle, “Joe Galli’s Army,” Fortune, December 30, 2002. Source: Galli interview.

Carol Warner Wilke, Christopher Ferrara and Olivia Tong, “Highlights from the Merrill Lynch Conference,” Merrill Lynch Capital Markets, March 19, 2003.
35

Kelly Nash, “Newell Rubbermaid Inc.,” McDonald Investments, July 2, 2003.

36 The company uses a special blend of 30% High Density Polyethylene (HDPE), 30% Linear Low Density Polyethylene (LLDPE), and 40% Polypropylene (PP).

Budd Bugatch and Rexford Henderson, “Newell Rubbermaid Inc.,” Raymond James & Associates, March 10, 2003.
38 39 40

37

Source: Galli interview. Source: Galli interview. Source: Galli interview.

25

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