New chief unclogging Delta sales

With its stock declining and one of its primary revenue streams slowing, Taylor, Mich.-based Masco Corp. in November 1999 named John C. Wills president of its Indianapolis-based subsidiary, Delta Faucet Co. In his first 18 months, Wills doubled Delta’s product development staff, initiated a $20 million branding and marketing campaign, including changing the company’s decades-old logo, unveiled a new line of faucets designed to compete in more upscale markets, and made a bigger push into the retail sector.

Wielding their new logo and a collection of the company’s first truly innovative products in more than a decade, Delta Faucet officials made a big splash at the annual Kitchen and Bath Industry Show, one of the industry’s largest, in Orlando this April, industry observers said. “I’ve always thought Delta did an excellent job, but there’s always been a void in their design,” said Colette Whitney, owner of Whitney Interiors Ltd. in New York City and president of the National Kitchen and Bath Association’s Manhattan chapter. “I think they’ve stepped up to the plate, and they’ve done it brilliantly.”

While Delta officials don’t expect an immediate payback, they’ve already seen a spike in sales since the trade show in Orlando. Revenue for the first quarter this year was down compared with 2000–the first time sales had regressed–but comparative sales have since turned around. “This is an investment in getting this company back to a growth mode,” Wills said. “We have long-term goals, but it’s already paying off. We saw a dramatic uptick in sales in May.” Masco officials are so excited about the changes they’ve invited Wills and several top Delta lieutenants to give a special one-hour presentation to Wall Street investors and analysts June 22. Masco officials hope the changes at its Delta subsidiary will bolster the company’s stock, which has settled around $20 after sliding from around $33 in the early fall of 1999.

“People on Wall Street are eager to hear about Delta’s big plans,” said Brian McLoughlin, an analyst following Masco for J.P. Morgan in New York. “Delta is still a major driver for the company’s profits and what it does has a major bearing on Masco.” Delta’s Wall Street presentation is coming at a critical time, McLoughlin said. “Masco has disappointed investors by lowering projections the last three quarters, so the stock is in a show-me state,” he said. “Delta has become a relative under-performer, which has made it a source of attention for Wall Street analysts. But it’s in an area of tremendous growth potential, so a lot of people have been waiting to see what form the changes at Delta will take.”

Delta, founded here by Masco in 1952, was Masco’s original building products division. The company became known primarily for affordable, dependable faucets, and gained a huge following with plumbers, contractors and wholesalers. The company also became a cash cow for Masco, analysts said. But instead of plowing cash back into Delta, Masco officials often used the revenue to fuel other acquisitions.

Wills, who took over for Chuck Boyd as Delta president, sought to stop that trend, and Masco leaders backed him. “This company had become a market leader, but recently had been playing to protect its lead,” said Wills, who headed Masco Corp.’s sales and marketing almost seven years before taking over at Delta. “It was time to make some changes and get more aggressive.”

Though Masco does not release revenue figures for individual subsidiaries, industry insiders said Delta sales increased about 5 percent annually in recent years, below company expectations. Masco earned $591.7 million, or $1.31 per share, on sales of $7.24 billion in 2000. Plumbing products brought in $1.84 billion in 2000 sales, and analysts said Delta represents more than half of that.

But Delta’s growth had slowed since the early 1990s as distribution channels changed and consumers began demanding more out of their faucets than water. Companies such as Lowe’s and Home Depot brought consumers to a higher awareness level, and Delta was ill-positioned to take advantage of the changes. Delta was more of a nuts-and-bolts company,” Whitney said. “They never gave much attention to style. But with this move, they’ve positioned themselves in design at a much more affordable price point than their competitors. They’ve created a whole new niche, and there’s a tremendous hunger for it.”

To initiate change, Wills pulled together 30 Delta employees from all levels of the company to identify critical issues. He commissioned several consumer surveys and in-depth studies on buying habits. Wills also commissioned Delta officials to begin paying attention to trends and styles, even outside the kitchen and bath industry. “What we found was we had underinvested in product development,” said Ray A. Kennedy, Delta’s marketing vice president. “We were seer as dependable, but dated and not necessarily upscale.”

As the studies became complete, Delta officials decided to overhaul the company’s logo. Gone is the traditional-looking faucet, replaced by a series of water drops in a circular form. The heavy typestyle was lightened and a thick border was removed. “The logo has a less contractorish look and is more consumer-oriented,” Whitney said. “It really tells you a lot about this company’s bold move.”

Delta’s repositioning also involves some aggressive advertising, including 52-week runs on popular cable television shows such as “This Old House” and “Hometime,” along with ads on network TV and in a slew of trade and consumer magazines, such as Better Homes and Gardens and The Family Handyman. Industry insiders note Delta’s repositioning is’ as much about substance as style and point to recent product launches, including products with an array of high quality finishes never before offered by Delta and the first electronically controlled residential faucet. Kennedy said the fortified research and development staff has shortened product development cycles from five years to six to 12 months.

“The repositioning focuses on the whole company,” said Pat Lenius, managing editor for Supply House Times Magazine, a trade publication focused on wholesale plumbing and building sup plies. “It’s not just for advertising purposes. They’re talking about the mind-set of the company. It will touch every aspect of the way they do business.”

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