Zippo Manufacturing Company
33 Barbour Street
Bradford, Pennsylvania 16701-1973
Telephone: (814) 368-2700
Fax: (800) 362-3598
Web site: http://www.zippo.com
Sales: $200 million (2004 est.)
NAIC: 339999 All Other Miscellaneous Manufacturing; 339911 Jewelry (Except Costume) Manufacturing; 332211 Cutlery and Flatware (Except Precious) Manufacturing; 339941 Pen and Mechanical Pencil Manufacturing
Zippo Manufacturing Company is world famous for its Zippo windproof lighter, its lifetime guarantee, and the distinctive "click" it makes when opened. The company has sold more than 400 million lighters since its founding in 1932 and each year produces thousands of different designs, including ones aimed specifically at collectors. In addition to its trademark rectangular pocket lighter, the design of which has been little changed since its early 1930s launch, Zippo in 2002 introduced the MPL (or Multi-Purpose Lighter), a long, slender model designed to light candles, grills, fireplaces, and the like—a break from the traditional idea of the "cigarette lighter." The dominant maker of refillable lighters in the United States, with an estimated market share of 40 percent, Zippo also sells its lighters in more than 120 other countries, with Japan being its largest export market. Following the launch of a big overseas push in the mid-1980s, Zippo began to derive 60 percent of its sales from exports. Since diversifying for the first time in 1962 (when a tape measure was introduced), Zippo manufacturers and sells such items as pocket knives, money clips, and writing instruments. The company owns W.R. Case & Sons Cutlery Company, a venerable maker of high-quality pocket, hunting, fishing, camping, and utility knives that, like Zippo, is based in the small Allegheny Mountain town of Bradford, Pennsylvania. Another subsidiary, Zippo Fashion Italia S.r.l., based in Vicenza, Italy, produces a variety of Zippo-branded leather goods, including handbags, belts, wallets, and briefcases, for sale through more than 1,500 boutiques and shops in Europe.
George Grant Blaisdell, Zippo's founder, had a checkered career in business prior to focusing on lighters. His father ran a machine shop in Blaisdell's hometown of Bradford, Pennsylvania, where Blaisdell started work as a machinist at age 16 (working a 56-hour week at 10 cents an hour), then became a salesman, and at age 20 took over the business. He managed to keep the business afloat during World War I through government contracts, then sold out in 1920. Blaisdell headed for New York; having failed to strike it rich playing the stock market, he returned to Bradford and invested what money remained in local oil wells (through his co-ownership, with his brother Walter, of Blaisdell Oil Company), making a modest living over the next ten years from the proceeds. Thereupon, in the early 1930s he was waiting for the right business opportunity.
On a muggy summer night in Bradford in 1932, Blaisdell and a friend stepped out on the terrace of the Pennhill Country Club. Blaisdell's friend used a cumbersome-looking Austrian lighter with a removable brass top to light a cigarette. Blaisdell proceeded to chide his friend: "You're all dressed up. Why don't you get a lighter that looks decent?" In an enthusiastic reply, his friend said: "Well, George, it works!"
Blaisdell was suitably impressed and decided to try to sell the lighters himself. He obtained rights to distribute the product in the United States, imported them for 12 cents each, and attempted to sell them for $1 each. But this venture failed, mainly because of the clumsy nature of the lighter's design. Blaisdell then decided to design his own lighter, one that was attractive, easy to use, and dependable.
The resulting original model was rectangular in shape—made from brass tubing with soldered tops and bottoms and square corners—with a chrome-plated hinge soldered on the outside for easy opening and closing. Sized to fit comfortably in a hand, the lighter featured a windhood to protect the wick. Blaisdell liked the name of another recent invention, the zipper, so he christened his lighter the "Zippo" (and his new firm, Zippo Manufacturing Company).
Production of Zippos began in 1933 in a $10 per month rented room over the Rickerson & Pryde garage in Bradford. The shop had $260 in equipment and two employees, from which came lighters retailing for $1.95 with the backing of a lifetime guarantee.
Struggling Early Years
Sales of the lighters got off to a slow start, with only 1,100 sold during the inaugural production year. Blaisdell tried all kinds of methods to move his brainchild. He gave away samples and gifts to long-distance bus drivers, jewelers, and tobacconists. In December 1937 he paid $3,000 of mostly borrowed money for a full-page ad in Esquire magazine after he found that retailers shied away from products that were not advertised. Unfortunately, Blaisdell did not yet have sufficient distribution to take advantage of the effect of such advertising so this gambit failed to pay off.
While handling sales himself and struggling to develop a market for his windproof lighter, Blaisdell also tinkered with the design. The lighter was shortened by a quarter inch in 1933, decorative diagonal lines were added in 1934, the hinge was placed on the inside of the case in 1936, and rounded tops and bottoms replaced the square corners of the original design in 1937. This last alteration was important from a production standpoint as the lid and bottom could now be formed as a whole, eliminating the soldering process.
Blaisdell achieved his first big sales break in 1934 when he started selling Zippos on punchboards, two-cents-per-play gambling games popular in U.S. tobacco and confectionery shops, poolrooms, and cigar stands. Before punchboards were outlawed in 1940, more than 300,000 Zippos were sold through this game of chance, enough for Zippo Manufacturing to achieve its first profits, modest though they were.
While punchboards were a short-lived chapter in Zippo history, another of Blaisdell's marketing methods had a much longer-lasting impact. In 1936 an Iowa life insurance company ordered 200 engraved lighters that it gave to its agents as contest prizes. Bradford's own Kendall Oil Company ordered 500 engraved lighters for its customers and employees. Thus began Zippo's specialty advertising business, which would become an increasingly important venture in the coming decades.
With sales increasing thanks to the punchboards and the special markets deals, Blaisdell expanded his operations. First, the production facility expanded into the entire second floor of the Rickerson & Pryde building; Blaisdell also added a new office elsewhere in Bradford. Then in 1938 the factory and offices were both moved into a former garage on Barbour Street in Bradford. That same year, Zippo's first table lighter debuted, a four-and-a-half inch tall model that held four times the fuel of a pocket lighter. The following year Zippo introduced a sophisticated new lighter model, the 14-karat solid gold Zippo, available in both plain and engine-turned models.
World War II Brought Zippo Fame
With the onset of U.S. involvement in World War II, the U.S. government forced the halt in production of many consumer products. Blaisdell continued Zippo production, but as he had during World War I, he again moved into government contracting—all Zippos became destined for the U.S. military. With brass reserved for military uses only, the wartime lighters were made of a low-grade steel. Since this provided a poor finish, they were spray-painted black then baked, which produced a crackle finish.
Blaisdell sold some of these Zippos to the military post exchanges at such a low price that they were then resold for $1.00, making them the most affordable lighter available. He also sent hundreds of lighters to celebrities, including the famous war correspondent Ernie Pyle who then gave them away to servicemen overseas. (Pyle gave Blaisdell the nickname "Mr. Zippo.") Through these actions, the Zippo became the favorite lighter of GIs, whose loyalty to the product would help fuel postwar sales. Numerous war stories also helped cement the Zippo as an American icon—the Zippo that stopped a bullet, that cooked soup in helmets, that illuminated the darkened instrument panel of an Army pilot's disabled plane, enabling him to land safely. Zippos also began making frequent appearances in Hollywood movies—notably war movies, such as Casablanca (1942), at first but later films noir—enhancing their iconic status. Meanwhile, wartime production peaked in 1945 when three million Zippos were made.
Postwar Design Improvements,
Expansions, and Diversification
The Zippo repair clinic became famous in its own right by backing up the Zippo guarantee. Repaired lighters were returned at no cost to the customer, not even return postage. The clinic provided more than just customer goodwill. It also provided invaluable information about design flaws. Over the long run, the repair clinic found that a faulty or broken hinge was the most common reason for a Zippo to be returned. But soon after World War II, in 1946, Blaisdell discovered that the most frequent repairs were for worn striking wheels—wheels that had been coming from an outside supplier. Blaisdell immediately stopped production to address the problem. He decided to bring production of the wheels in-house and spent $300,000 on a new flint wheel capable of firing a lighter as many as 78,000 times. This top-quality wheel was produced by a knurling operation that remained a company secret.
Beginning with the first lighter in 1933, every Zippo lighter has been backed by our lifetime guarantee, "it works or we fix it free." Zippo lighters are uniquely positioned as valuable and timeless classics that should never be thrown away.
Whether used in everyday life, taken on uncommon adventures as a reliable companion, or simply collected for its charm and character, the Zippo lighter continues to be respected and treasured around the world.
Zippo continued to develop new lighter models following the war. In 1947 Town and Country designs were introduced that featured images of pheasants, mallards, geese, sailboats, trout, setters, and horses. Three years later, full cover leather lighters and sterling silver lighters made their debuts.
Meanwhile, Blaisdell sought to improve his sales force. From 1939 to 1950 Zippo's entire sales operation consisted of two cigar salesmen, who sold Zippos as a sideline mainly to tobacco wholesalers. The two men each were charged with a vast selling territory. In 1950 Blaisdell established his own sales force, with district managers assigned specific regions. This sales force was not restricted to tobacco wholesalers, but also called on jewelry, drugstore, and grocery wholesalers.
Also in 1950, Zippo set up its first foreign subsidiary, Zippo Manufacturing Company of Canada Limited. Located in Niagara Falls, Ontario, the company consisted of a small production facility that helped increase overall Zippo capacity, which reached 20,000 lighters a day by 1952. Annual revenues had reached $9.5 million and the company enjoyed healthy after-tax profits of almost 10 percent.
Zippo continued to expand its facilities in the 1950s and 1960s to meet the growing demand, both domestic and foreign. In 1954 a new building for chrome plating and fabricating, located on Congress Street in Bradford, was completed. New corporate offices were built in 1955 next to the Barbour Street factory in Bradford. During the 1960s the Congress Street plant underwent a series of additions and eventually became the main location for fabricating and assembling Zippo products.
After 30 years as a lighter-only company, Zippo in 1962 diversified for the first time when it introduced a six-foot flexible-steel pocket tape measure. This was followed by a compact pocketknife and nail file, a money-clip knife, a golf ball, a key holder, a magnifier, and a letter opener. Unlike Zippo lighters, however, none of these products were made available for retail purchase; they were available only through Zippo's specialty advertising operation, which by the mid-1960s accounted for 40 percent of overall company volume. Zippo boasted of more than 27,000 commercial accounts at the time. All of Zippo's metal products were backed by the same Zippo pledge: "If for any reason your Zippo will not work, regardless of age or condition—we'll fix it free." (For unfixable items, the company sent the customer a replacement.) Zippo even guaranteed its golf ball as playable for 180 holes.
End of Blaisdell Era in the 1970s
After introducing the first of a series of lighters with space designs in 1969—the first honoring the landing on the moon—Zippo ushered in the 1970s appropriately enough with a Zodiac lighter series. In 1976 a commemorative bicentennial lighter hit the market, as did an in-fashion denim-like lighter.
The year 1978 marked the end of an era when Blaisdell died. Ownership of Zippo Manufacturing passed to Blaisdell's daughters, Harriet Wick and Sarah Dorn, who had worked for the company for years and would continue to do so for years to come but did not wish to run it. They entrusted the presidency to a longtime employee, Robert Galey.
Unfortunately, throughout the 1970s and into the early 1980s, Zippo's sales stagnated at about $30 million a year. The firm was manufacturing-oriented and needed to become more marketing-focused in order to get past this plateau. As it turned out, Galey's stint as president was short-lived since he retired in 1986. Zippo's third president was Michael Schuler, who had joined the company as controller shortly after Blaisdell's death and then was promoted to vice-president and controller in 1982. Under Schuler's leadership, Zippo's revenues increased five-fold within ten years.
Schuler Era: 1986 to 2000
The spectacular growth of this period was generated by a combination of increased exports, the aggressive targeting of the collector's and gift/souvenir markets, and creative line extensions. On the export front, Japan remained the top market—one of every four Zippos made in the late 1980s went to Japan—and Western European sales were strong also, but Schuler targeted such emerging areas as China and South Asia and Eastern Europe following the fall of communism. Many of these emerging nations had high percentages of smokers, making them prime Zippo territory. This contrasted sharply with Zippo's domestic market, where antismoking crusades continued to gain momentum throughout the 1990s. Overall, whereas exports constituted only 40 percent of total company sales in the mid-1980s, by 1995 65 percent of sales originated outside the United States.
- George Grant Blaisdell founds Zippo Manufacturing Company.
- After an attempt to sell lighters imported from Austria fails, Blaisdell designs his own lighter, which he christens the "Zippo," and begins manufacturing in Bradford, Pennsylvania.
- Following U.S. entry into World War II, Zippo continues to produce lighters but all are now destined for the U.S. military, through which the brand will achieve fame.
- Blaisdell establishes his own sales force; first foreign subsidiary is established in Canada.
- Zippo diversifies for the first time, producing a pocket tape measure.
- Upon Blaisdell's death, ownership of Zippo passes to his two daughters.
- W.R. Case & Sons Cutlery Company is acquired; through a license agreement, a line of Zippo clothing is offered in Japan.
- George B. Duke, grandson of the founder, gains control of the company.
- Zippo launches its Multi-Purpose Lighter (MPL).
- First Zippo retail store opens in Hangzhou, China.
- DDM Italia S.r.l., maker of Zippo brand leather goods, is acquired and renamed Zippo Fashion Italia S.r.l.
Credit for Zippo's "discovery" of the collector's and gift markets for Zippo lighters goes to the person Schuler hired in 1991 as head of sales and marketing, James Baldo. Soon after taking the job, Baldo commissioned customer surveys that showed that 30 percent of Zippo's customers defined themselves as "collectors." The surveys also showed that many buyers gave the lighters away as gifts. In response, Zippo began offering premium-priced—$19 to $40—gift/souvenir lighter sets, including ones with licensed brands (Harley-Davidson, Corvette) or images of tourist destinations (Niagara Falls, Empire State Building).
Then Zippo began offering limited edition "collector" Zippos, directly targeting the collector's market. In 1992, a 60th anniversary lighter appeared, followed by 1993's Varga Girl lighter, 1994's D-Day commemorative lighter, 1995's Mysteries of the Forest, and 1996's Zippo Salutes Pinup Girls. Zippo also began producing a collector's guide and, starting in 1993, sponsored an annual July swap meet at the Bradford headquarters. In 1994 the company took the further step of opening in Bradford the Zippo Family Store and Museum, highly popular with collectors, which was expanded to five times its original size in 1996.
Zippo had been criticized at times throughout its history for being too conservative, in particular in regard to line extensions. But under Schuler, Zippo began a more aggressive diversification approach, beginning in 1993 with the acquisition of the cross-town W.R. Case & Sons Cutlery Company, a firm with annual sales of $15 million. Case was founded in 1889 in Little Valley, New York, but relocated to Bradford in 1905, where it developed a line of pocket knives, hunting knives, household cutlery, and commemoratives. The company had filed for bankruptcy after a difficult period and then was bought out of bankruptcy by a limited partnership, River Associates, in 1990. Case's products meshed well with Zippo's and provided Zippo with another avenue into the retail market. Soon after the acquisition, in fact, dual gift sets that included a Case knife and a Zippo lighter were soon being retailed at prices ranging from $50 to $200.
A much more dramatic extension came via the 1993 license agreement with Japanese clothing manufacturer Itochu Fashion System Co. Itochu gained the right to the Zippo name and soon offered Zippo jeans, gloves, and leather jackets in Japan.
With antismoking forces gaining steam in the United States, Zippo came up in 1995 with a creative way to keep its brand strong. It introduced the ZipLight pocket flashlight, which was simply a traditional lighter casing with a replaceable battery pack inside. Zippo spent $500,000 on a television advertising campaign to launch this new product, one of its largest campaigns ever.
The Zippo brand, prematurely declared dead by USA Today in 1989, was clearly alive and well and seemed as ubiquitous as ever. Revenues for 1996 were estimated to have reached a record $150 million. The company was now producing 80,000 lighters a day, and the 300 millionth Zippo lighter rolled off the assembly line that year. One year later, the company opened the Zippo/Case Visitors Center to replace the previous Family Store and Museum. The new visitors center encompassed the Zippo/Case Museum and the Zippo/Case Store and also offered visitors a chance to view repair technicians practicing their craft in the Zippo Repair Clinic.
Unfortunately for the company, 1996 turned out to be a peak year, as sales dropped off in the late 1990s and into the new century. Zippo's diversification drive, including the heavily promoted ZipLight, never produced any big winners, and even the push into the collectibles market, while meeting with the approval of many customers, failed to nudge sales higher. Certainly in the U.S. market, part of the problem was the steady decline in smoking: 42 percent of American adults were smokers in 1965, a figure that was down to 24 percent by 1998 and then to 20 percent by 2001. Finally, the muddled ownership situation was another key hindrance. The two daughters of the founder, plus their four children, all had equal control of the company, and all worked there as well. Having six persons equally in charge made it difficult for Zippo to adopt new strategies and led to a certain malaise, particularly following some of the failed attempts to ramp up sales.
New Ownership, New Management, New Strategies
for the New Century
One of the grandchildren of the founder, George B. Duke, began negotiating to buy out his relatives in 1998. By 2000 he, along with his mother, Sarah Dorn, had gained control of the company. Feeling that the firm needed to become more marketing oriented, Duke in 2001 replaced Schuler, the CEO, with Greg Booth, who had years of marketing experience with Kendall Motor Oil, Sunoco, Inc., and the Zippo subsidiary W.R. Case & Sons. The new owner and new manager soon commissioned studies by two outside consulting firms, both of which reached the same conclusion, that the Zippo brand was extremely strong and that there were tremendous possibilities for creating a broader line of Zippo products through licensing deals. Based on this research, and to counter the antismoking trends that were hurting sales of lighters, Duke and Booth set an ambitious goal of deriving half of the company's revenues from products unrelated to tobacco by 2010. They also aimed to double the company's overall revenues by that same year.
Ironically, the first new product to come out of this new strategy was in fact a lighter—just not a traditional cigarette lighter. Zippo launched its Multi-Purpose Lighter (MPL) in 2002 via a major television advertising campaign led off on the Home & Garden Television cable channel. The MPL was part of the rapidly growing multipurpose lighter category, but it was the first premium refillable model on the market. Offered in two models carrying suggested retail prices of $14.95 and $19.95, the MPL featured a long, slender, ergonomic design with a window showing the level of the butane fuel. With its adjustable flame, the MPL was designed to light candles, lanterns, grills, fireplaces, stoves, campfires, and more. In another break with tradition, Zippo contracted with a Chinese company to make the MPL, but it nonetheless backed it with the usual lifetime guarantee. The company continued to make its traditional pocket lighters in Bradford, despite increasing cut-price competition from low-wage countries.
Sales of the MPL got off to a good start, with about two million units sold the first year—far exceeding company expectations. Even more encouraging than the numbers, however, was that the people buying the new lighter skewed mostly female and younger than the average Zippo customer. The MPL's child-resistant safety button was seen to be a key feature in attracting female buyers. Another plus was that the MPL expanded Zippo's base of retailers as such chains as Bed Bath & Beyond Inc. became Zippo sellers for the first time. Unfortunately, in October 2004 Zippo was forced to recall about 100,000 MPLs because in some cases fuel was spilling out of the nozzle when the lighter was first used. The company set up a system to send out replacement lighters to consumers who had purchased the affected models. At the same time, Zippo was developing for release in 2005 a second version of the MPL, one geared to outdoor use when hiking or camping, for example, and featuring a more durable, windproof design and a built-in flashlight.
While launching the MPL, Zippo also continued to pursue opportunities in the collectors market. In 2002 the company founded an international club for Zippo collectors, Zippo Click, naming it after the distinctive sound of a Zippo lighter opening. For a $20 membership fee, collectors received a number of benefits, including a subscription to a quarterly magazine; access to a members-only web site providing opportunities for communicating with other collectors and for buying, selling, and trading merchandise; and the chance to purchase products available only to members. Just a couple years after its formation, Zippo Click had gained more than 7,000 members. There were also by this time dozens of independent lighter collectors' clubs with thousands of members around the world.
In September 2003 Zippo Manufacturing reached another milestone with the production of its 400 millionth lighter. That same year, the company elected to consolidate its North American production in Bradford by shutting down the plant in Niagara Falls, Canada, which had been producing about 500,000 lighters per year for the Canadian market. Also, Zippo was the subject of criticism that year stemming from its sponsorship of a web site, zippotricks.com, featuring hundreds of tricks that can be performed with a Zippo lighter. The National Fire Protection Association and others in the fire safety industry contended that the company, through the web site, was encouraging people to play with fire. Although Zippo officials disagreed with this criticism, they pulled the plug on the site under withering pressure. The web site's original creator subsequently transformed it into the more generic lightertricks.com , which was unaffiliated with Zippo.
In the early 2000s Zippo's leaders were becoming increasingly concerned about the production of cheap knockoff lighters, many of which were being made in China. The company estimated that it was losing as much as a third of its potential worldwide sales to counterfeiters, particularly factories in southern China that were capable of churning out 45,000 fake Zippos a day. Zippo therefore accelerated an effort to trademark the distinctive shape of its lighter—a rectangular metal shell with beveled edges and a gently curving flip-top—around the world. Trademark protection in the United States was granted in 2002. The company pulled back from a related effort to trademark the distinctive Zippo click.
Coincidentally or not, China was at the center of another development in 2003, the opening of the first Zippo retail store. Located in Hangzhou, a city of several million people located about 110 miles southeast of Shanghai, the store sold only Zippo products but more than just lighters and lighter accessories. It offered Zippo clothing, watches, sunglasses, and leather goods such as wallets and belts. Zippo products were already available in 450 outlets throughout China, a rapidly growing market in which it was estimated that one-third of all the world's tobacco was consumed and where 40 percent of the adult population were smokers. The company planned to open several more Zippo stores in China.
In stepping up its efforts to protect its precious brand, Zippo discovered that a family-owned company in Italy called DDM Italia S.r.l. had been selling a line of leather goods—handbags, belts, wallets, and the like—under the Zippo name since the late 1980s. Zippo Manufacturing had not registered the name under clothing and leather categories, which led to a lengthy trademark dispute and contentious court battles. In early 2004 Zippo settled the matter by acquiring DDM Italia for an undisclosed sum. The Italian firm was renamed Zippo Fashion Italia S.r.l., and it continued to operate separately and sell Zippo brand fashion accessories throughout Europe. The Italian subsidiary also began exploring the idea of producing men's leather accessories for sale both in Europe and elsewhere.
Zippo at this time was also working hard to develop its first line of Zippo licensed products for release in 2005. These brand-extending items were to be produced under license by other manufacturers, and Booth told the Bradford Era in June 2003 that they would be "stainless steel, rugged, durable, and premium grade products that come with extended or lifetime warranties." Zippo was particularly investigating flame-related outdoor products, such as grills, patio heaters, and Tiki torches, for the initial launch, to be followed most likely by camping equipment and other outdoor gear, perhaps even mountain bikes. Eventually, the hope was to be able to set up in-store boutiques within retailers offering the entire range of Zippo products. Concurrently under development was a refillable butane pocket lighter aimed at customers not enamored of the smell or messiness of the traditional Zippo lighter fluid.
As Zippo Manufacturing pursued its aggressive growth and diversification goals, it faced a new challenge. In April 2005 the U.S. Transportation Security Administration began implementing a ban on all lighters within the cabin of aircraft and in checked luggage. Zippo agreed that lighters posed a potential threat within passenger cabins, but objected to the ban on packing them in checked luggage. The firm released a statement in which Booth said, "We have not uncovered one instance in which lighters in checked luggage exploded, caught fire, or otherwise posed a danger to the aircraft." He said that the ban could potentially cut total Zippo sales by 20 to 30 percent. The ban threatened the company's gift business, as well as its sales in airports and duty-free shops, and also prevented collectors from taking their wares to and from swap meets and shows when traveling by air. This latest threat seemed to provide added impetus to the drive to extend the Zippo brand beyond lighters.
W.R. Case & Sons Cutlery Company; Zippo Canada Sales, Ltd.; Zippo France S.A.; Zippo GmbH (Germany); Zippo Fashion Italia S.r.l. (Italy); Zippo Italia S.r.l. (Italy); Zippo Japan; Zippo South Africa; Zippo U.K. Limited.
Société BIC; Swedish Match AB; Tokai Corporation; Swiss Army Brands, Inc.; Ronson Corporation; Buck Knives Inc.
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Ziff Davis Media Inc. Zondervan Corporation
The Problem: Zippo has a strong brand name, but stagnant sales. Can the fabled firm market its way out of the doldrums?
Violet Snyder, global licensing manager of Zippo Manufacturing Co., was in a Park Avenue elevator when she got her wake-up call. On her way to visit the offices of the National Football League, a Zippo licensing partner, a fellow passenger spotted her Zippo tote bag. "Zippo -- cool!" he said. She smiled. "Are they still in business?" he continued. Snyder stopped smiling. "Here I am on my way to visit a major customer and the world is not even sure we're alive," she says.
When she related the incident back at the home office in Bradford, Pa., there was rueful sympathy but little surprise. Zippo, the fabled 72-year-old maker of cigarette lighters, had been battling reports of its demise for years. The company dominates the refillable lighter business with an enviable two-thirds market share. But that market has been steadily shrinking for years. In 2001, just over 20% of American adults were smokers, according to the Centers for Disease Control. That's down from 24% in 1998 and 42% in 1965. Zippo sales, which boomed in the mid-'80s thanks to an international expansion, have been flat for much of the last five years. Sure, it may be one of America's storied brands, carried by U.S. soldiers during World War II, with current recognition in the 90% range. But thanks to its association with the embattled tobacco industry, many assume it is already extinct.
George Duke, grandson of the company's founder, a lifelong employee and current chairman of the board, is on a mission to beat that back. But getting a third-generation family-owned business to change course has not been easy. By the mid-'90s, the company was owned by six family members, all with equal control, equal-size offices in the company headquarters, and equally passionate views on which way the company should go. "It was difficult to come to a consensus in a timely manner," says Duke. "It was very hard to embark on a strategy." Not that they didn't try. There was the ZipLight, a battery-powered flashlight in a traditional lighter casing. There were Zippo pens, belt buckles, and money clips. There was the ambitious attempt to license the Zippo name to upscale Swiss watches. That project flopped when retailers balked at the three-figure price tag. And there was the push to expand Zippo's offerings in the collectible market. That met with plenty of approval from current Zippo customers but did almost nothing to expand the company's market. As such attempts failed, executives pulled back and nerves began to fray. "There was a stay-the-course, stick-to-your-guns, keep-banging-out-the-same-product mindset," says Mark Paup, now head of global marketing, then a junior member of the sales department. "It was a very frustrating time."
No one was more frustrated than Duke, who was convinced that Zippo had to change -- and fast. In 1998, he began secret negotiations to buy out his cousins. By 2000, he was controlling owner, along with his mother, who is now retired. He took another big step by replacing the company CEO, Michael Schuler, a CPA and former Zippo controller, with Greg Booth, who had spent years as a marketer with Kendall Motor Oil, Sunoco, and W.R. Case & Sons, a cutlery company. With new management in place, Duke broke another age-old family tradition: He looked outside the company for advice. Zippo commissioned two studies, one by Prophet, a San Francisco firm run by branding guru David Aaker, and the second by Pittsburgh-based Prescott & Associates. Both studies came back with the same findings: that Zippo had tremendous brand recognition and strong possibilities as a licensed line. "Brand is really the only thing we have," Booth says. "If we think of ourselves as a lighter company, we are nowhere." The question was how to act on that revelation.
In 2001, Zippo officially abandoned the strategic mindset of a one-product manufacturing business and entered the 21st century world of brand management. First up: the Zippo Multi-Purpose Lighter, which hit stores in 2002. This longer, slimmer lighter is made to handle noncigarette lighting chores, such as grills, fireplaces, candles, and lanterns. Launched with a major television ad campaign, it made its debut on cable's Home & Garden Television channel. Industry watchers estimate the product sold about 2 million units in its first year -- a small slice of the market for such lighters, but a good start for a new product. Even more encouraging, buyers skewed mostly female and younger than the average Zippo customer. And the new product opened new doors for Zippo. Its base of retailers expanded by 40%, as new chains like Bed Bath & Beyond became Zippo sellers. A second version of the multipurpose lighter, this one larger and geared for outdoor use, is set to debut next year.
In addition to such brand extensions, Zippo revisited its licensing efforts. The company was no stranger to licensing -- but it was almost always as a canvas for other brands, such as the NFL, Harley-Davidson, and Jim Beam. This time, things would be different. Booth hired Nancy Bailey & Associates, a licensing agent with clients such as Crayola, Hostess, and Mr. Clean, to create a broad licensing strategy. After a year of pounding the pavement at trade shows, the agency's strategy was in place.
In 2005, a new generation of Zippo licensed products will debut, these ones founded on consumer research rather than family wisdom. The licensing program sticks close to Zippo's core brand image as a reliable flame and will feature grills and outdoor accessories -- such as Tiki torches and patio heaters. If all goes well, those will be followed by camping equipment and other outdoor gear. More traditional licensed products, such as watches and fashion items, will be focused primarily in international markets. Here in the U.S., Zippo hopes eventually to provide retailers with in-store boutique "flame centers," featuring the entire array of Zippo products. "We think the brand can go far, but we want to take it one step at a time," says Duke. "We'll crawl before we run."
Finally, Zippo is hard at work addressing its aging boomer problem. Ever see the lighter salute at a rock concert? Zippo hopes tapping into that time-honored tradition will help attract younger fans. This year, it is sponsoring a rock band competition, the Zippo Hot Tour, with nightclub performances at 72 events across the country. Using a dedicated website, bands are invited to submit their work; online fans will determine who advances to the live performances. When the site went live in June, so many fans logged on in the first hour that the server crashed. Says Paup: "I got a voice-mail message from our CFO. He said, 'Well, you certainly got someone's attention," says Paup. Zippo is also courting younger consumers by developing new products, including a sleeker, high-tech version of its trademark lighter, code-named Blue Flame.
Booth has big dreams for his brand extension program: double company revenue -- currently estimated at about $200 million -- by 2010, with half coming from nonsmoking-related products. Already this year, sales are trending upward, Duke says. That makes him confident that the company he passes on to his sons, now 12 and 14, will be a sophisticated, marketing-driven enterprise rather than the old-style manufacturer he inherited. "Zippo will be a lifestyle," Duke predicts.
The Experts Weigh In: Can Zippo license its way to growth?
Zippo's bid for younger consumers has potential. The secret to success -- as a product and as a brand -- lies in knowing what Generation Y (22 and younger) wants and how they want it. They want marketing to reflect their real-life experiences. Zippo has keyed into this by sponsoring music tours. Of course, concertgoers pull out their lighters at key moments as part of the happening. But it is critical for Zippo to reach Gen Y's early. Brand names are important to this generation.
It's a good idea to move on from collectibles. But whether or not licensing is a good bet depends not just on the brand equity, but on whether the equity is leveraged into a product that is unique and meaningful to the consumer. It is also dependent upon good execution. There are lots of venerable classic brand names. Zippo clearly has equity; however, any foray into additional product lines will require that the brand have a point of difference that is meaningful to the consumer.
There are two ways to go with any licensing program. The stupid way is to sell your brand to as many people for as much money as you can. The smart way is to license your brand in categories that reflect your brand's strengths. It appears Zippo is taking the smart path. Zippo is about ruggedness and durability. It could give Coleman a major run for its money in the camping category. But if Zippo starts putting its brand on a nightgown or fashion jeans, it's over.