Newell Rubbermaid and Mark Ketchum are banking that the second time's the charm.

Already, there's evidence the consumer products company's second attempt at restructuring its business is working.

(ENLARGE)

Joey Ivansco/AJC (ENLARGE)

Under Mark Ketchum, who took over as CEO in 2005, Newell Rubbermaid has shifted production to low-cost countries and focused the marketing of its myriad products 'more on the consumer.'

Sales and earnings are up, and so, too, is Newell Rubbermaid's stock price, which has advanced about 40 percent since Ketchum took over as chief executive in October 2005.

The previous restructuring, announced in 2001 and completed in 2004, was less than satisfying. While the closure of 41 facilities and the elimination of 12,000 jobs helped to wring out $145 million in annual costs, something was lacking.

"If you look at our results for the three years prior to 2006, we didn't deliver any top-line growth," says Ketchum, who joined Newell Rubbermaid's board in February 2005, shortly after retiring from Procter & Gamble, where he helped to build the Pampers, Bounty and Charmin brands. "So while we were hitting our earnings-per-share projections in 2004 and 2005, we had failed to grow organically."

And that lack of revenue growth was reflected in the company's stock price, says Ketchum, 57.

"Our stock was stalled," he says. "We weren't attracting new investors."

Shifting, pruning

Stuck in what appeared to be a perpetual "fix" mode, Newell Rubbermaid's board of directors opted to shift gears. CEO Joseph Galli Jr. resigned, and Ketchum was put in charge on an interim basis before getting the job permanently, with a commitment from him to stay at least five years at the helm.

"We [the board] believed that the execution had been somewhat uneven and that a different leader who could bring consistent execution of our restructuring and a new strategy would be appropriate," Ketchum says.

The latest restructuring, begun in the fourth quarter of 2005 and recently extended by a year to 2009 to capture more cost savings, shifts the company's focus from manufacturing and distribution to marketing and development of branded products globally.

Under the old business model, retail customers — such as Wal-Mart and Target — told the company what they wanted. Newell Rubbermaid manufactured the goods, mostly in its own plants in higher-cost regions, such as the United States and Western Europe. And it provided merchants with promotional dollars and support to help drive demand from consumers.

Under the new business model, production is being shifted to low-cost countries, such as those in Asia.

By next year, Newell Rubbermaid estimates half of its products will be made by third parties, up from 17 percent in 2001. As a result, the number of the company's own manufacturing facilities will shrink to about 35 from 136 in 2001, when the first restructuring was announced.

The move to outsource production, along with a steady stream of new products and savvier marketing, is calculated to plump up profit margins and drive sales.

"We are shifting our focus now to generating consumer demand through best-in-class brand marketing and innovation, and, in turn, our retail customers will give us strong support for our brands because their customers come in the front door already wanting our brands," Ketchum says.

"So the vernacular is a change from customer push marketing to consumer pull marketing."

The company has pruned its portfolio of brands, divesting 16 businesses since 2003, including Little Tikes children's toys and furniture, Anchor Hocking glassware, Mirro cookware and Burnes picture frames.

"The divested businesses share some common characteristics we will avoid in the future — like weak brands or no brands, with little opportunity to leverage scale, high-capital with high-cost manufacturing, and little prospect for innovation, differentiation or other value added," Ketchum told analysts earlier this year.

'Sweet spot' marketing

The company, which traces its roots to 1902 as a maker of curtain rods, now markets thousands of items under more than 32 brands, such as Paper Mate, Parker, Waterman, DYMO, Rolodex, Sharpie, Calphalon, Graco, Irwin, Kirsch, Levolor and Rubbermaid.

Each brand has a sweet spot, says Ketchum, using the Calphalon cookware line as an example.

"For Calphalon, the sweet spot is the top of the market," he says. "It's for the aspiring gourmet who desires premium cookware."

For the Graco line of baby gear, it's the middle of the market.

"Graco has the No. 1 share by targeting the middle," Ketchum says. "We offer great performance and great value."

Savvier marketing also helps build sales.

"Our marketing dollars are more effective because we are focusing more on the consumer," Ketchum says. "We have shifted marketing spending from in-store to direct marketing."

Graco, for example, has developed a mailing list of expectant mothers and communicates directly with them via e-mail and catalogs, Ketchum says.

"Expectant moms are hungry for information, and we provide that information not just about our products but child rearing as well," Ketchum says. "By building this relationship, we are building a positive feeling about the Graco brand. So it's more than just a stroller or a car seat."

That strong brand identity has prompted Newell Rubbermaid to extend Graco's product line to include baby monitors.

The company eventually wants to ring up 30 percent of sales with products launched in each three-year period going forward. Last year, 22 percent of total sales of $6.2 billion came from new products, up from 15 percent in 2004.

New products must be different, "add value and beat the competitors in that space," Ketchum says.

Most of the company's sales growth will come organically, aided by "a combination of a few smaller bolt-on acquisitions every year and periodic large acquisitions," Ketchum says.

The last big one was in 2005, when the company acquired the DYMO labeling business for about $730 million to strengthen its office products segment, which last year accounted for nearly a third of total sales.

Ketchum says that Newell Rubbermaid's growth is sustainable, since there is no dominant global player in most of the company's business segments.

Bullish outlook

For this year, Ketchum estimates double-digit growth in operating income on a 3 percent to 5 percent increase in sales, aided by a 1.25- to 1.75-percentage-point increase in gross profit margin.

Operating income, which excludes restructuring costs, advanced 16.8 percent last year on an 8.5 percent increase in sales. Gross margin widened to 33.4 percent from 30.8 percent in 2005.

The improved financial performance has attracted new investors to Newell Rubbermaid, according to Ketchum.

"They have been telling us that they like where we're going, with consumer-focused branding. They like the increased investment we are making to marketing and R&D, that they have confidence in the senior management," says Ketchum, who had planned to downshift from a fast-paced career at Procter & Gamble to travel more and take Italian lessons with wife, Pamela. ("Italy's our favorite place to visit.")

"I wanted to go from 100 mph to 50 mph, so I had begun to get myself placed on the board of directors of three or four companies," says the Brookhaven resident. "But I was drafted by the board to fill the interim position, and I fell in love with the job and decided that I was ready to go back to 100 mph."

Like Newell Rubbermaid, Ketchum figures the second time's the charm.