Manufacturer Invents New Markets for Plastic
Allied Plastics has prospered in this high volume, low-margin business
IT'S that time of year when grinning jack-o'-lanterns pop up on bright orange plastic bags all over suburban lawns.
Many of them have the stamp of Allied Plastics Inc., a privately held company that began 30 years ago with the philosophy of simple, practical, plastic.
Allied Plastics was already making Christmas tree removal bags and plastic tree skirts when the jack-o'-lantern leaf bags bloomed into popularity several years ago. But when supply for them couldn't keep up with demand, some retailers turned to Allied Plastics for help, says Leonard Levie, the company's chairman.
After some research, Mr. Levie realized that part of Allied Plastics' own mass-production process for its Christmas tree sacks could be easily retrofitted to produce Halloween leaf bags. He signed a licensing agreement with the small Connecticut company that made the original bags, and Allied began turning them out in huge quantities.
The company has about 100 basic items that have some 500 different variations of colors, sizes, and shapes. ``They are all product line extensions,'' Levie says.
This year Levie expects to sell more than 2 million sacks he now calls ``motif bags'' because they are decorated with both Halloween and Christmas characters.
In 1992, the company generated more than $17 million in revenue from the sale of decorative household items and automotive accessories, its two primary markets. Besides coffee cup holders, the company also makes fluid funnels, tire pressure gauges, oil pans, siphons, and those ubiquitous trays designed to hold spare change, drinks, and music cassettes.
Allied's competitors are mostly smaller companies that make only a few items for either the household or automotive markets.
Allied's strategy builds on the company's original plastic product - a magnetic windshield cover designed by founder Dan Page. Mr. Page was driving an ice-cream delivery truck in Arkansas when he came up with the idea to protect the truck's windshield from overnight frost accumulation. He sold the first cover to Sam Walton of Wal-Mart in 1962. Today, Allied sells its products in drugstores, hardware chains, and convenience stores in the US and in 40 foreign countries.
This end of the plastics business is high volume and low margin. To distance itself from its competitors, Allied follows two strategies.
One is to take prototypes to its chief accounts (such as Wal-Mart and K mart) for evaluation and redesign, if necessary, before deciding to go into mass production.
The other is the company's use of electronic data interchange. At day's end, Allied can review what an individual store has sold of its products and ship replacement inventory immediately. Allied also can make arrangements to remove those items that are not selling well.
``We love inventors,'' Levie says about the company's ongoing interest in plastic innovations it will either buy outright or license. ``New products are the lifeblood of the economy,'' Levie says.
Among the company's newer products are a credit card-sized de-icer designed by a Minneapolis marketing executive and a notepad holder that plugs into the lighter socket on a car's dashboard that was designed by a San Diego preschool teacher. Allied signed licensing agreements with both women inventors.
In fact, Levie says women inventors' design styles fit with Allied's dual strategy. ``Women create and organize products with a sense of aesthetic value and for a variety of applications,'' he observes. ``Men see a product in only one setting.''
In December 1986, Levie and a group of investors that included the Industrial Bank of Japan and the Pacific Mutual Life Insurance Co., bought Allied Plastics.
Today it employs 250 people, and has five non-union plants: four in North Carolina and one in New Jersey.
Allied, which makes its plastic products using an injection molding process, is using an increasing amount of recycled plastic in its products because the price per pound is up to 25 percent cheaper than virgin plastic.