Posted on: Sunday, June 29, 2003
Zippo smokes out business options not related to tobacco
By Thomas A. Fogarty
USA Today
BRADFORD, Pa. — George Duke refuses to be collateral damage in a worldwide war against tobacco.
Duke, 49, is co-owner of Zippo Manufacturing, maker of the iconic metal cigarette lighter. Its click symbolized home for GIs during World War II, and American-style hipness for recent generations of young Japanese and Eastern European males.
"We're not so stupid to think smoking isn't declining — it is," says Duke, drawing on a Marlboro and discussing the future at Zippo headquarters here.
Tobacco has been under full assault in the United States for 30 years. This month, Surgeon General Richard Carmona expressed personal support for an outright ban. Now, the World Health Organization is leading the effort to contain use worldwide with a treaty.
Duke's grandfather, George Blaisdell, began manufacturing high-quality, wind-proof lighters during the Great Depression — and backing them with a lifetime guarantee — in this small Allegheny Mountain town. Then, many Americans thought cigarette smoking actually aided breathing.
But smoking-related illnesses kill 5 million people annually, and the association with tobacco is nothing on which Zippo can base long-term growth.
With repositioning in order, talk at headquarters is increasingly about "selling flame," and no longer limiting itself to products that light tobacco. In a bid to diversify, Zippo last year introduced a long, slender multipurpose lighter for candles, grills, fireplaces and the like.
Changes are just beginning. To buck the anti-tobacco tide, Duke and top manager CEO Greg Booth have set an ambitious goal: By 2010, derive half the company revenue from products unrelated to tobacco. They want to double revenue over the same period. Duke says revenue this year should be about $140 million.
Diversification and the push for growth aren't optional, Duke says. Revenue has been flat for three years and lags behind the 1996 peak by about 15 percent. Sales of lighter this year, totaling 13.5 million, are off the 1996 peak by about 25 percent. The 2010 revenue goal means Zippo can ill afford to turn its back on smokers, and Duke says the company won't do that.
Times are changing, and the outlook of Zippo's top executives is broadening. Here's how:
• Licensing.
The company has always been unafraid to ask its customers to pay for quality. The basic Zippo fetches $13 in a market awash in cheap disposables. Lifetime free repair burnishes the image of quality.
People know Zippo around the world. "Zippo has almost universal recognition," says Dave Dolak, a brand consultant.
With that in mind, Zippo executives are in discussions with manufacturers of flame-related products — grills, torches, space heaters, fireplaces and the like — for a series of Zippo-branded patio products.
• New products.
Tobacco isn't dead yet, and plans are under way to make a line of expensive butane lighters, some priced at $50 or more. Booth says a refillable butane lighter would target potential customers who don't like the smell or messiness of the fuel burned in the classic Zippo.
• Acquisitions.
A decade ago, Zippo bought Case Cutlery, a knifemaker in Bradford. Booth says another acquisition is in the works.
• Marketing.
Booth, who spent the first 30 years of his career marketing motor oil, has attempted since becoming CEO in 2001 to blast Zippo from its traditional manufacturing model. It means a major push trying to introduce products to a broader demographic.
