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Marketing Strategy of Dominion Textile Inc.
Marketing Strategy of Dominion Textile Inc. - December 17th, 2010
The Dominion Textile Inc. or Domtex was a major Canadian textile manufacturer that was founded in 1905 and closed in 1998 when its remains were purchased by the American Polymer Group, at the time headed by Jerry Zucker.
The company was formed in 1905 from a merger of four major Canadian textile companies, and it quickly gained a near monopoly in the tariff protected Canadian market. Many of its products were once household names in Canada, such as the Wabasso bedding line, Caldwell towels, and Penman's underwear. Based in Montreal, it was one of Canada's leading companies and had close links to the government. Most of the company's production was based in small towns in Quebec and elsewhere across Canada, in most of these towns the mill was the primary employer. The company was much praised during the Great Depression for keeping employment levels high despite a collapse in prices. During the Second World War the company profited as a major supplier to the Allied war effort.
In 1948 the economic situation changed dramatically as tariffs between western nations were greatly reduced, and Dominion Textile was exposed to strong competition from the United States and Britain. Dominion Textiles' market share fell dramatically from nearly 100% of the Canadian market in 1947 to only 47% a decade later. The company almost collapsed, but eventually adapted to the new conditions. It was rebranded as Domtex and moved into new areas such as the production of polyester. In the same period it became seen by Quebec nationalists as a prime example of the anglophone businesses that controlled the province. In 1967 FLQ member Jean Corbo died when a bomb detonated prematurely in an attempted attack on a Dominion Textile plant in Montreal.
In the 1970s the company began to expand abroad, seeking to compete outside Canada. It purchased smaller companies in other nations and built new factories. At its peak in the 1980s it had 14,000 employees and factories in Canada, the United States, Ireland, France, Italy and Tunisia. A leader in a number of areas, it became the world's largest producer of denim.
In the 1980s the textile industry was again changing, as General Agreement on Tariffs and Trade (GATT) provisions came into effect that opened the business to competition from low wage developing economies. Domtex tried to adapt. It entered into a long battle to try to get concessions from its unions and closed half its Canadian factories. In 1987 it made a failed bid for American giant Burlington Industries, that would have made it a global textile leader. Over the course of the 1990s the company slowly collapsed, and by 1997 it was left with only two factories. The remnants were bought for some $600 million by the Polymer Group of South Carolina in 1998.
Incorporated: 1905 as the Dominion Textile Company Limited
Sales: C$1.33 billion
Stock Exchanges: Montreal Toronto
SICs: 2200 Textile Mill Products
Dominion Textile Inc. is one of Canada's largest textile companies and the world's largest manufacturers of denim. Dominion grew slowly throughout the twentieth century, first strengthening its role as a Canadian manufacturer before acquiring a number of companies in the United States, mostly in the 1970s and 1980s. By 1994 Dominion posted sales of C$1.33 billion and held strong market positions in denim, yarn, technical fabrics, apparel fabrics, and nonwovens.
The roots of Dominion Textile reach back to 1890 with the formation of the Dominion Cotton Mills Company. Eight small, struggling textile firms had banded together to pool their resources; each had suffered from the high costs and inefficiencies associated with producing a small number of many items. Dominion, like many other Canadian textile firms, grew to depend on the profitable trade to the Far East, which had become possible with the completion of the Canadian Pacific Railway in 1885. However, the Boxer Rebellion in China in 1900 disrupted trade to that lucrative market. In 1905, in a further effort to stave off financial ruin, a handful of companies again banded together. They were the Dominion Cotton Mills, Ltd. (which by that time had plants in Halifax and Windsor, Nova Scotia; Moncton, New Brunswick; Montreal, Magog, and Caoticook, Quebec; and Kingston and Branford, Ontario), the Montmorency Cotton Mills Company, the Montreal-based Merchants Cotton Company, and the Colonial Bleaching and Printing Company, also of Montreal, for a total of eleven plants. The new entity was called the Dominion Textile Company Limited.
Montreal financier David Yuile was the company's first president, but it was Charles B. Gordon, who became president in 1909, who dominated the early history of the company. One of the first battles the company weathered was brought on by security holders of the former Dominion Cotton Mills Company and Merchants Cotton Company who had refused to sell their stock in 1905. The case was heard by the Canadian high court, the Privy Council, which ruled in favor of Dominion.
With the advent of World War I, Gordon was put in charge of war-purchase missions in the United States by the British and Canadian governments; he was later knighted for his duties. Dominion's plants ran continuously to supply goods for the war. The plants' overuse during the war meant that in the years immediately following much of the company's resources were put into repairing and refurbishing its manufacturing facilities, which included the facility that it acquired in 1919 when it bought the Mount Royal Spinning Company of Montreal.
A stock offering in 1922 brought Dominion C$2,500,000 in new capital. A new entity, the Dominion Textile Co. Limited, sometimes called Domtex, took over the assets of the Dominion Textile Company. A series of technological upgrades (after the introduction of long-draft spinning and multiple loom sets) and acquisitions swiftly followed. In 1928 Dominion bought two American companies that made tire fabric: the Jenckes-Canadian Company became a subsidiary known as Drummondville Cotton Company Limited, and the Canadian Connecticut Cotton Mills became Sherbrooke Cotton Company Limited. (In 1934 Sherbrooke was converted into a sheeting-fabric manufacturing plant, and tire manufacture was concentrated in Drummondville.) In 1930 Dominion took over the management of Montreal Cotton Limited, a company in which it had an interest since 1908. In 1948 Dominion bought the last of Montreal Cotton's shares, and by 1953 it was completely folded back into Dominion.
As with many other industries, the onset of World War II put a spur to textile production, which had suffered during the Depression. A plant that had lain dormant from 1934 was reactivated in 1940, and Dominion made a range of products for military purposes, from camouflage nets to bootlaces. With an eye on the postwar economy, Dominion entered a joint venture in 1945 to make rayon with the Burlington Mills Corporation of North Carolina, called Dominion Burlington Mills Limited. In March 1952 Dominion bought Burlington's 50 percent share and the company's name was changed to Domil Limited (those plants became fully integrated with the company in 1966).
During the 1960s, Dominion built four new plants in Quebec and Ontario, where a popular new fabric, the polyester/cotton blend, was spun, woven, and finished. One print ad created during this time featured "the unwrinkable Molly Brown," a little girl whose clothing, made of Dominion's Truprest fabric, stayed smooth and wrinkle-free. Also during this time, Dominion acquired Penmans in Ontario, a company engaged in the manufacture of knitted leisurewear. This represented Dominion's first move outside the primary textile industry.
In November of 1969 the company's name was changed to Dominion Textile Limited. A string of acquisitions and divestitures followed, as the North American textile industry tried to come to terms with the flood of cheap imports from the Far East. In 1969 Dominion bought Fiberworld Limited and Jaro Manufacturing Co. Ltd. In 1972 it formed a joint venture--DHJ Canadian, Ltd.--with New York-based DHJ Industries, Inc. Three years later, Dominion bought DHJ Industries Inc., which consisted of eight plants in the United States as well as affiliates and distributors throughout the world. That purchase strengthened Dominion's hand in the international marketplace as the textile industry continued to rapidly shift out of North America.
The DHJ takeover was an unfriendly one. The financially troubled company (with $64 million in debt, $20 million from the first nine months of 1975 alone) was dominated by chairman and founder Herbert Haskell. Much of his family's holdings in the company were held as collateral for personal loans made by Chemical Bank of New York. When Haskell refused to sell to Dominion, Dominion went to his banker and negotiated a deal without him, purchasing DHJ for $9.2 million. Haskell sued and vowed to go into direct competition with Dominion, but he eventually settled. Dominion got a lot out of the deal, for DHJ owned one of the largest denim manufacturing facilities in the United States through its Swift Textiles, Inc. subsidiary and had sales of $191 million for the fiscal year ending June 1974.
In 1979 Dominion, which had been renamed Dominion Textile Inc., continued to try to move away from "commodity" fabrics, which were dominated by imports. In October of 1979, DHJ and Facemate Corporation of Chicopee, Massachusetts, formed a joint venture--DHJ-Facemate Corporation--and merged their interlining operations. In 1980 Dominion bought Linn-Corriher Corporation of Landis, North Carolina, which made cotton and synthetic yarns, for $25 million. In 1981 it acquired Mirafi, Inc., the civil-engineering fabrics division of the Hoescht Celanese Corp. of Somerville, New Jersey. Mirafi made plastic-based materials used in roadbeds and drainage systems. In 1988, Dominion acquired Wayn-Tex, a manufacturer of carpet backing, based in Virginia. Also that year, the company acquired the London-based Klopman International, Europe's largest producer and distributor of workwear fabrics.
Recession exacerbated the difficulties brought by the inexorable growth of cheap imports, and from 1982 to 1985 Dominion lost money. Dominion responded by paring down operations. In 1981 it sold its 50 percent interest in DHJ-Facemate. Between 1983 and 1986 Dominion closed 13 of its 26 plants. Most of these facilities were in Quebec, where the company had repeatedly locked horns with the aggressive union Centrale des Syndicats Democratiques. As opposed to the United States, where most textile workers were not unionized, most of the workers in Canada at that time were, and wages ran approximately 7 to 10 percent higher than in the United States. Canadian textile executives also complained of the difficulty in competing against U.S. makers when U.S. plants were flexible enough to run seven days a week if necessary; strict union rules prohibited such flexibility, they said.
In 1986 Dominion again tried to make an incursion across the border when it tried to purchase Avondale Mills, a denim and yarn maker in Sylacauga, Alabama. Dominion lost out to AM Acquisition, which had countered its $26-dollar-a-share bid with an offer of $28. Dominion was not daunted by the effort and simply went after a bigger prize. That prize was none other than its former joint-venture partner Burlington Mills of Greensboro, North Carolina, which by 1987 was the largest textile company in the United States, with fiscal year 1986 sales of $2.8 billion. Dominion's sales in fiscal 1986 were $671 million.
Burlington was vulnerable, having become dependent on selling commodity fabrics in a market that was dominated by overseas makers. Dominion teamed up with renowned New York raider Asher Edelman to try and win Burlington. Edelman first quietly gained control of 7.6 percent of Burlington stock. Edelman and Dominion then bid $1.51 billion for the company on April 24. Some suspected that Dominion was interested in only a handful of Burlington's plants and planned, if it won control of the venerable manufacturer, to sell off the rest. Burlington's denim plants contributed 25 percent of its revenues and were considered Dominion's real goal. Dominion was also eager to put down roots in the United States in an effort to get around the expected results of lower tariffs in negotiations that were then taking place between the United States and Canada. Dominion was fearful of being undercut by larger-volume, lower-cost facilities in the United States, where Dominion earned more than a quarter of its sales.
The struggle for control of Burlington raged for over seven weeks, with a series of offers and counteroffers made until Dominion made a final offer of $2.1 billion. Lawsuits were filed on both sides. In the end Dominion lost the battle--Burlington took itself private in a leveraged buyout--but won the war. Edelman and Dominion agreed to drop their hostile takeover attempt in exchange for $25 million and certain Burlington properties. Edelman and Dominion sold their 12 percent stake for a post-tax gain of $15.2 million. Further, Dominion snapped up several of Burlington's most desirable facilities: a denim plant in Erwin, North Carolina, which it bought for $205 million (the purchase contract included an agreement to drop all litigation from the takeover attempt); Klopman International, the largest producer in Europe of polyester- and cotton-blended fabrics for workwear, purchased for $90 million; as well as included Klopman International SpA (Italy), Burlington Industries Limited (Ireland), Burlington Deutschland GmbH, and Burlington AC. These moves seemed to say that Dominion would place the bulk of its future investments outside of Canada. After the purchase of Burlington's denim factories, Dominion became one of the world's largest denim manufacturers.
The acquisitions of the 1980s left the company in debt, and the recession that hit the apparel industry in 1989 meant that Dominion lost money in 1990 and 1991. Dominion restructured to bring focus to the company's sprawling assemblage of plants and subsidiaries, which made everything from electrical insulation to book bindings, bedding to upholstery. Plants were closed and divisions sold. Mirafi was sold off during this time, and Dominion merged its Caldwell towel division with the operations of New York-based C.S. Brooks Corporation. In 1992 it sold off its Wayn-Tex and Dominion Fabrics Co. divisions. Poly-Bond Inc., a wholly owned subsidiary, became the focus of its nonwovens efforts in North America, and heavy investments were made at its Waynesboro, Virginia, facilities.
Thus Dominion's emphasis was on denims, nonwoven fabrics, and commodity yarns. In 1990, Dominion had acquired Quebec-based Textiles Dionne, which specialized in cotton and synthetic yarns. The company acquired Nordlys S.A., a nonwovens manufacturer in Bailleul, France, and in 1991 completed construction on a modern new facility to house all of the operations. In 1992, another nonwovens plant was built in Malaysia. In further efforts to strengthen its core businesses, Dominion agreed in 1995 to sell DHJ Industries to Chargeurs Textiles of France. The company also restructured Dominion Specialty Yarns in Canada to focus on its most profitable product lines, and the Poly-Bond subsidiary entered into a joint venture with Corovin GmbH to produce new high-technology nonwovens.
The popularity of denim in the early 1990s (denim demand grew by 30 percent from 1990 through 1993) and a 20 percent drop in cotton prices helped Dominion's financial position. In 1994 sales were C$1.33 billion, with a net income of C$33.5 million, a turnaround from two years before when it had lost C$74.8 million. In 1994, the bulk of its business was derived from denim, which accounted for 39 percent of sales (C$518.3 million), yarns, which made up 21 percent (C$281.4 million), and technical fabrics, 17 percent (C$228.4 million). Apparel brought in 13 percent of sales (C$178.1 million).
Principal Subsidiaries: Swift Textiles, Inc.; Swift Textiles Canada; Swift Textiles (Far East) Ltd.; Dominion Yarn Corporation; Dominion Yarn Company; Dominion Specialty Yarns; Dominion Textile (USA) Inc.; Dominion Cotton Services; Intech-PEM Inc.; Vivatex; Dominion Textile International B.V.; Dominion Textile International (Asia) Pte. Ltd.; Nordly's S.A.; Klopman International S.r.l.; Klopman International Ltd.; Poly-Bond Inc.; Dominion Industrial Fabrics Company.
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