Crown Cork

Company Perspectives:

We owe our success to a legacy of leadership and invention that began in 1892 when our founder, William Painter, invented a better way to package soft drinks and beer. Painter's vision revolutionized the bottling industry. His ingenuity, and the leadership of those who came after him, helped to build Crown Cork & Seal into the world-class company it is today.

History of Crown Cork & Seal Company, Inc.

Crown Cork & Seal Company, Inc. is one of the world's leading packaging manufacturers, making one out of every five beverage cans used in the world and one out of every three food cans used in North America and Europe. In addition to making metal food and beverage cans, Crown Cork also produces other metal packaging, including aerosol cans, specialty packaging, can ends, and closures and crowns. The company also makes plastic containers for beverages, food, household and industrial products, personal care products, cosmetics and fragrances, and medical and pharmaceutical products; composite packaging, such as that used for frozen juice concentrate; and can making equipment. With 223 plants located in 49 countries, Crown Cork derives about 60 percent of its revenues from outside the United States, with almost three-fourths of non-U.S. revenues derived in Europe. The company's position as a global packaging powerhouse was largely gained through an aggressive program of acquisition launched in 1989, which increased net sales from $1.9 billion to $8.3 billion by the late 1990s.

Early History: From Crowns to Cans

The company traces its origins to 1892 when William Painter invented the 'crown cork,' a metal crown used to package soft drinks and beer in bottles. Painter soon started the Crown Cork & Seal Company of Baltimore. He quickly expanded the company overseas and by the time of his death in 1906 the company had manufacturing operations in Germany, France, the United Kingdom, Japan, and Brazil. After recovering from the disruptions of World War I, Crown Cork survived the Prohibition era by shifting its production from beer to soft drinks.

In 1927 the company was incorporated in New York City as Crown Cork & Seal Company, Inc. following its merger with New Process Cork Company Inc. and New York Improved Patents Corporation. The following year the company formed the Crown Cork International Corporation as a holding company for subsidiaries engaged in bottle crown and other cork business outside the United States. Crown Cork's early entry into the foreign market gave Crown Cork an advantage over its competitors in the container and closure fields.

Crown Cork did not even venture into the can making business until 1936 when it purchased the Acme Can Company and began building its first large can plant in Philadelphia under the name Crown Can. While the middle of the Great Depression would seem to be the worst possible time to enter a capital-intensive industry, Crown's can operation was successful right from the start. Processed canning was quickly taking the place of home canning as the preferred way to preserve and store perishable goods. For this reason the container industry--for most of the 20th century--remained immune to the economic cycles that plagued most other types of businesses, industrial or otherwise.

Late 1950s: Connelly and the Turnaround

Crown Cork & Seal was an enigma within the container business because it had achieved financial results that contradicted industry logic. Profit margins in can manufacturing had been small and shrinking for decades, and can makers like American and Continental had been relying on diversification and economies of scale to create profits. Crown Cork & Seal, on the other hand, had neither expanded into noncontainer fields nor sought to augment its own can making program by purchasing other small can operations. Yet it managed to maintain an earnings growth rate of 20 percent a year. How did it do this?

The answer can be traced back to 1957, when John F. Connelly, an Irishman and son of a Philadelphia blacksmith, became its president. At that time Crown Cork lacked strong leadership and was dangerously close to bankruptcy. It suffered a first-quarter loss of over $600,000, and Bankers Trust was calling in a $2.5 million loan, with an additional $4.5 million due by the end of the year.

Connelly took dramatic measures. He halted can production altogether and filled the company's remaining orders with a large stockpile of unpurchased cans that had been allowed to accumulate. The customers did not object, and the money saved by selling old inventory instead of producing new cans brought Crown Cork close to solvency. In addition, unprofitable and unpromising product lines, such as ice cube trays, were immediately discontinued.

Connelly also reduced overhead costs, particularly those incurred by redundant labor. In one 20-month span the payroll was cut by 25 percent, with pink slips issued to managers and unskilled workers alike. The moves were drastic but necessary. By the end of 1957 the company was making both cans and profits. The following year Crown Cork moved its corporate headquarters to Philadelphia.

Once the initial bankruptcy crisis had passed, Connelly directed Crown Cork & Seal with renewed energy into two areas within which Crown had traditionally held an advantage: aerosol cans and foreign container markets. In the years immediately preceding Connelly's tenure, the company, while not neglecting these markets, had not pursued them with the vigor they warranted.

Crown Cork & Seal had pioneered the aerosol can in 1946 and Connelly was shrewd enough to recognize its potential. Hair spray, bathroom cleaning supplies, insecticides, and many other household products would come to be staples for the American consumer and would be marketed in aerosol dispensers.

In 1963, for example, Crown installed two aerosol can product lines in its Toronto factory, thinking that it would take the market five years to absorb the output. Within a year, however, another plant was required to handle the orders. A decade later, the same situation was repeated in Mexico. Only in the late 1970s and 1980s, when the negative environmental impact of aerosol cans became widely known (it was discovered that aerosol containers expel fluorocarbons which destroy the earth's fragile ozone layer), did Crown begin to reexamine this sector of its business. The company was among the first to develop an aerosol can that did not propel fluorocarbons into the atmosphere.

Connelly invested