M.A. Hanna Co. announced Nov. 15 it is consolidating its three colorant-producing operations - Allied Color Industries Inc., PMS Consolidated Inc. and Wilson Color Inc. - as M.A. Hanna Color. The new business unit is expected to be the largest supplier of specialty colorants in North America in terms of production capacity, and is unique to Hanna in a business segment crowded with small businesses.
Colorant operations will contribute $249 million to the company this year. Hanna reported sales of $1.7 billion in 1994, according to Jerry Herman, a Cleveland-based industry analyst for Chicago's Everen Securities Inc. However, Herman's estimate includes sales from Hanna's European colorant operations.
While quietly in the works for several months, announcement of the merger of the colorant operations comes 16 months after Hanna consolidated three of its compounding operations as M.A. Hanna Engineered Products. The move is not surprising.
Having announced Oct. 18 that it would consolidate two rubber compounding operations as M.A. Hanna Rubber Compounding, the company is merging all of the distinct polymer companies it purchased in the past nine years into function-oriented units under a single corporate identity.
On June 27, Hanna named Joseph W. Bauer president of its North American specialty colorant businesses.
Bauer joined Hanna in 1992 as president of PMS Consolidated, and took up the consolidation of the businesses that was started by George Chase, president of Allied Color and Wilson Color. Chase directed the 1993 merger of Allied Color with Avecor Inc., another colorant operation Hanna purchased in 1987.
Chase, 51, founded Allied Color in 1968. He has announced plans to retire at the end of this year, but will remain with Hanna as a consultant.
Douglas R. Schrank, vice president for North American plastics operations for Hanna, said in a prepared statement that the merger made Allied a national organization.
With the current consolidation, Hanna has added a Color Technical Center in Suwanee, Ga., that will serve all of Hanna'scolor facilities, Bauer said in a telephone interview Nov. 15 from Hanna's Cleveland headquarters.
Ampacet Corp.'s Martin Fernandi said Hanna may gain leverage in purchasing raw materials through its consolidations, but will face continued pressure from competitors. Fernandi is senior vice president for sales and marketing for Tarrytown, N.Y.-based Ampacet, considered by many to be the largest supplier of volume colorants for polymer applications in North America.
``There are new guys coming into the business all the time, and everyone in it is adding capacity. The pricing pressure has been awesome,'' Fernandi said.
Hanna may gain a competitive edge in supplying custom, low-volume colorants, but Fernandi does not expect increased competition from Hanna in large-volume colorants.
``While they may gain leverage in buying raw materials, the next factor is [competitiveness in] conversion costs,'' Fernandi said.
``No matter how much you might not like it and try to work on it, small operations have similar overhead costs that cannot be eliminated, such as quality control and local laboratories. Those can't compete with large operations that have one [quality control center] and one lab set-up and crank out the product,'' Fernandi said.
As with the consolidations of its other businesses, the merger of its colorant operations is leading to a change in the way Hanna addresses its markets for colorants. Hanna Color now will address its markets in three ways, Bauer said:
With 20 facilities spread across the United States, it can act as a local supplier of colorants to individual processors.
Bauer said each of the company's locations has its own colorant development laboratory, and each will be able to provide any of Hanna's more than 100,000 colorant formulations.
Several of these distinct locations are near each other, and Bauer said Hanna has not completed its analysis of whether some will be closed and merged with others. He expects to determine whether to consolidate those facilities in early 1996.
Hanna has established a technical service group that has expertise in processes such as extrusion, blow molding, injection molding and rotomolding.
That resident expertise, coupled with a national sales force, gives Hanna the ability to advise and supply organizations and corporations that specify colors for national and international products, Bauer said.
With those capabilities, Hanna can address-on a national level -the colorant requirements of large corporations that specify colors for their products, while working with the prime national suppliers for those products.
Then, using its local facilities, Hanna can work with individual processors to supply colorants, Bauer said.
To address and serve each of the market levels - specifier, prime or mega-processor and local processor - Hanna Color in mid-August opened a 41,000-square-foot technical center in Suwanee.
The Hanna Color Technical Center has more than 30 technicians, engineers and chemists to solve problems, test existing formulations and design and develop new colorant and additive formulations, Bauer said.
Hanna will provide products to a range of businesses cover-ing the packaging, toy, appliance, medical, sporting goods and other industries, but Bauer said the company will retain four specialty areas developed over the years.
Hanna will continue to have general managers for building, wire and cable, fiber and automotive products, he said.
Hanna's goal in combining its colorant businesses is similar to one the company set when it combined its compounding businesses: to reduce redundancy and increase efficiency while enhancing its speed to market, Bauer said.
Because of that, Herman, the industry analyst, said he does not expect Hanna to close many facilities or lay off a large number of employees.
``This is a market-based consolidation, not a cost-reduction consolidation,'' Herman said.
He added the length of time Hanna took between acquiring the companies and consolidating them demonstrates that the firm took time to understand the various businesses.
Bauer said he launched plans for the consolidation in July, just after he assumed his new role. He expects the organizational structure for the consolidation to be in place by January.