Acme United Corporation - Struggles and Successes: 1980s to Mid-1990s

Struggles and Successes: 1980s to Mid-1990s

Much of Acme United's growth was due to its thriving medical business, but that would begin to change in the 1980s. The company was overly dependent on a single customer, American Hospital Supply, which by 1983 accounted for $22 million in sales. Then, American Hospital elected to manufacture many of the products themselves. To make the loss of this business even worse, hospitals began to pool their orders so that they were able to demand steeper discounts, thus cutting into Acme United's margins. Moreover, the company faced strong new competition from a United Kingdom medical supplier, Smith & Nephew. Acme United spent much of the 1980s adjusting to these realities, but by the end of the decade was ready to resume expansion.

The company looked overseas to fuel growth. In January 1990, Acme United closed on the $2.8 million acquisition of Emil Schlemper G.m.b.H., a leading West German maker of scissors, shears, manicure products, and surgical instruments. With Schlemper complementing the United Kingdom division, Surmanco, Acme United was now one of the largest manufacturers of cutting instruments in the European Common Market. Several months later, it increased its market share while expanding Surmanco by paying some $900,000 to acquire Homeric Ltd., a Sheffield, England-based maker of scissors, rulers, household shears, and surgical equipment. The next major acquisition was completed in October 1991, when Acme United bought Peter Altenbach and Sons GmbH for approximately $1.9 million. Founded in 1900, Altenbach was Germany's third largest manufacturer of quality knives and scissors, with annual sales of about $7 million. As had been the case with the Schlemper and Homeric acquisitions, Altenbach was expected to become immediately profitable, as Henry Wheeler told the press that Altenbach was "an efficient, well-managed business." Unfortunately for Acme United, that assessment was not accurate. According to the New Haven Register, in a 1995 profile of Acme United, "The Altenbach purchase turned into a disaster as labor problems and poor cost controls drained earnings. Acme moved to restructure the division and cut employment by 30 percent, which proved more costly considering the high severance costs built into German labor laws."

On other fronts during the early 1990s, Acme United offered the Kleen Earth line of "green" scissors and rulers made from recycled plastic and packaged in recycled cardboard. At a cost of $5.4 million in cash and stock, it expanded its medical division in early 1992 by acquiring SePro Healthcare, Inc., the U.S. subsidiary of a United Kingdom firm, Seton Healthcare Group PLC. As a result, Acme United picked up inventory, a New Jersey facility, and exclusive distribution rights to Seton's pressure therapy bandages and specialized wound dressings, as well as an opportunity to distribute Seton's future medical products. Later in 1992, Acme United reached an exclusive marketing and distribution agreement with a New York City company, OPCO Medical Products Ltd., for the OPCO line of patented intravenous therapy products, serving both the hospital and after-care market. These products included a patented IV Bubble, an inflatable item used to keep a catheter from being accidentally dislodged, and an IV board, a companion product that immobilized a limb with a molded arm board and finger support to provide a more stabile intravenous site. Also in 1992, Acme United acquired the exclusive U.S. marketing and distribution rights for the Royal-Derm lines of skin care and wound-care products, designed to increase moisturization and provide pain relief for patients suffering from burns as well as the ulcers and wounds suffered by the bedridden.

Company Perspectives:

We aspire to be the leading supplier of cutting, measuring and safety products to offices, school and homes worldwide.

The problems with Altenbach led to a $468,000 restructuring charge in 1992. In addition, Acme United also encountered problems with the launch of the Royal-Derm and OPCO product lines. Attempts to market the latter failed completely, leading to a $264,000 charge for leftover inventory and licensing rights, while Royal-Derm met with stiff new competition, resulting in price cutting and a $415,000 charge for dated inventory. In an attempt to address Acme United's mounting difficulties, reorganization was begun in January 1994. The company was now divided into three business units: North American consumer products, European consumer products, and U.S. Medical products. Management teams were assigned to each unit and given the authority to make sweeping changes, including headcount reduction and other cost-cutting measures. In addition, 78-year-old Henry Wheeler stepped down as CEO, replaced by his 51-year-old son, Dwight C. Wheeler II. The elder Wheeler retained the chairmanship, however.