Telling Formica’s Fascinating Story

by WOHe


I’ll admit that I was shocked when I heard on the radio March 5
that the Formica Corp. had filed for Chapter 11 bankruptcy
protection.

To me, Formica always seemed formidable. One of the most
recognized brand names in the kitchen and bath industry, Formica
epitomized the emergence of the modern kitchen that became a
universal feature of U.S. housing in the years immediately after
World War II.

The company’s history is worth recounting in this column,
because it parallels the modern history of countertop fabrication
in general. Further information can be found on the company’s Web
site, www.formica.com, and in the book Top Sellers USA by Molly
Wade McGrath.

In The Beginning
Plastic laminates, which gained enormous mass-market appeal as a
decorative, durable and reasonably priced tabletop and kitchen
countertop surfacing material, have been at the core of Formica’s
business since the company was founded in Cincinnati in 1913.
Interestingly, though, decorative uses were not the original market
for plastic laminates.

Formica’s founders, Daniel O’Conor and Herbert Faber, were
former Westinghouse employees who were experts in electrical
insulating materials. O’Conor had developed a process of
manufacturing electrical insulating materials by coating fabrics
with plastic resins. They concluded that there was a growing market
for such products in the rapidly expanding electrical industry, but
believed that Westinghouse was doing a poor job of serving that
market. So, they quit their jobs with the firm and started their
own company.

A layered, translucent mineral called mica had been used as an
electrical insulator in those early years, and the product from
Faber and O’Conor was initially marketed as a substitute “for
mica.” That phrase became the name of the company.

The initial big market was manufacturing insulators for
automotive electric starter motors, which were beginning to replace
hand cranks with in the luxury car market. Interestingly, the
National Electrical Manufacturers Association (NEMA) still controls
technical standards for plastic laminates.

Defense orders during World War I caused another boom in
business, and included insulating parts for military radio systems.
The company’s engineers also discovered that plastic laminates
could be machined into lightweight, durable pulleys and gears,
which were used in the aircraft industry.

After the war, the consumer radio industry took off, and
developed into a good market for the young company. Plastic
laminate gears were marketed to rapidly growing automobile
companies, and also to textile machinery manufacturers.

Formica’s relationship with the radio industry led to the first
decorative application for plastic laminates. In 1927, the company
patented a rotogravure process that enabled them to print a
realistic wood grain pattern onto the surface of a sheet of plastic
laminate, and they began selling this product for use in
manufacturing radio cabinets. Wall paneling was the next logical
market that offered increased volume potential.

During the Great Depression, the company gradually gained
acceptance of this new decorative product, which was less expensive
and more durable than real wood paneling. It was used extensively
in the construction of New York City’s Radio City Music Hall.
Britain’s Cunard Lines used it on its new luxury cruise ship, the
Queen Mary. Such prestigious applications gained the company
invaluable publicity.

Enter Melamine
A major breakthrough occurred with the introduction of melamine
resins in 1938. Used as a topcoat layer, melamine was more
transparent, durable and moisture-resistant than earlier resins
used for this purpose. Plastic laminates were now practical for
tabletops and kitchen countertops, and melamine’s clarity meant
that a wider variety of colors and patterns could be offered.
However, World War II caused the company to place decorative
products on the back burner for the duration, and return to
products with obvious military benefit.
In late 1945, Formica was blessed with enormous pent-up demand for
the decorative products it had perfected just before the war
started. No new homes had been built during the war, and millions
of veterans were returning to civilian life to begin families. By
1952, six million new homes had been built, and two million of them
featured the
latest trend Formica kitchen countertops.

The 1950s and 1960s were the Golden Era for Formica, exemplified
by the futuristic idea house the company built at the 1964 World’s
Fair in New York. Postforming of plastic laminates became practical
with the development of appropriate resins. This is a process of
applying heat to the material after manufacturing, allowing it to
become pliable and bend to form shapes such as coved backsplashes
and the famous “no drip” edge that characterizes mass-produced
plastic laminate countertops.

As it prospered, the company also gained formidable competitors.
Westinghouse, the former employer of Formica’s founders,
manufactured plastic laminates under the Micarta brand name. Other
successful brands included Wilsonart, Nevamar and Pionite.

Craft-oriented fabrication of countertops gave way, in the mass
market at least, to automated, efficient production of enormous
volumes of countertop blanks at exceptionally low prices. Plastic
laminate technology was now mature, and the only way to gain market
share was through innovations in design and marketing. This added
significant costs to a product that was once seen as innovative and
modernistic but increasingly was perceived by many as outdated and
generic. Whether or not entirely justified, such shifts in customer
perceptions are difficult to reverse. The seed of Formica’s current
problems had been sown.
Formica’s greatest strength in those years was consumer brand name
recognition far higher than any of its competitors. This advantage
was challenged in 1978 when the Federal Trade Commission’s Denver
office filed a petition to cancel the registration of the Formica
trademark. The FTC claimed that “Formica” had become a generic name
for all decorative laminates, and should no longer be considered a
valid trademark. The company contested this vigorously, and
eventually prevailed in protecting its famous trademark.

The last major technical innovation in plastic laminate
manufacturing was the introduction of ColorCore laminates in the
mid-1980s, which eliminated the characteristic black line visible
at exposed edges of the laminate. Although ColorCore was
technically elegant, it cost several times as much as conventional
laminates, and was available only in solid colors. Accordingly, it
was able to carve out only a limited niche market.

Competing Surfaces
It was another upscale, niche product that presented Formica Corp.
with its greatest challenges in recent decades. Introduced on a
limited basis by DuPont in the late 1960s, Corian was the original
solid surface material. In the 1970s, it seemed to represent little
threat to the plastic laminate industry. However, introduction of a
successful joint adhesive system and integrated kitchen sinks
allowed sophisticated custom fabrication to proliferate, and Corian
gained both a luxurious reputation and a steadily growing market
share.

In the 1980s, national competitors such as Avonite and
Fountainhead entered the solid surface market, colors and patterns
proliferated, and it seemed that almost every issue of every
shelter magazine featured articles on solid surface materials.
Despite the competition, or maybe even because of it, Corian sales
soared.

Formica entered the solid surface market in 1986 with great
fanfare, offering a product called 2000X. Unfortunately, the
company encountered a variety of problems with 2000X, and it was
soon withdrawn from the market. It was later replaced with Surell
solid surface material. Years later, after a reorganization of
Nevamar, Formica acquired that company’s solid surface brand,
Fountainhead.

From 1957 to 1985, Formica was a subsidiary of American
Cyanamid. Since then, the company has undergone mergers, buyouts
and corporate reorganizations in 1989, 1994 and 1998. Despite these
efforts, the Formica Corp. has lost money every year for the past
seven years. It has tried to stem the tide by introducing a variety
of new products real wood laminates, metal laminates and plastic
laminate flooring. In each case, the products were copies of those
pioneered by other companies.

Last year, Moody’s Investors Service twice downgraded Formica’s
credit rating, citing “seven consecutive years of losses, its
excessive balance sheet leverage, thin interest coverage and
negative tangible net worth and its constrained liquidity.”

On January 8 of this year, longtime CEO Vince Langone was
terminated and replaced by Frank Riddick III, formerly of Armstrong
World Industries and Triangle Pacific. Major owners of the company,
which is privately held, include Credit Suisse First Boston Private
Equity, Citicorp Venture Capital, Ltd. and CVC Capital Partners
Limited. The company retained the services of Lazard Freres &
Co. LLC to assist in another corporate restructuring.

After the Chapter 11 bankruptcy filing on March 5, Reuters News
Service quoted Riddick as saying that the niche for Formica
products had been “eaten away over the last 20 years” by changing
consumer tastes leading to increased demand for “solid surfacing,
granite and other natural stone products.”

However, in a statement released by the company, Riddick said,
“Formica has a brand name that is truly an American icon, and it
has the designs, innovative products and dedicated employees to
propel its growth.” Riddick added that Formica’s operations would
continue as usual, without interruption, during the restructuring
process.

Time will tell whether this latest restructuring will save this
famous company. I certainly hope that it’s successful.

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