CHICAGO - Rubbermaid Inc. plans to cash in on its household popularity to enter the fast-changing trash bag market. North American Plastics Corp. agreed to a multiyear deal to make extra-tough bags that Rubbermaid will market as premium products. The Wooster, Ohio, consumer products giant will sell them under its Roughneck tradename and dovetail their marketing with its 42-year-old trash container business.
This is a natural extension of our refuse container line,'' Ben Anderson-Ray, vice president of marketing and business development for the firm's Home Products Division, said in an Aug. 11 news release.
Rubbermaid will seek a portion of the private-label trash bag market, which accounts for about 24 percent of the $1 billion-per-year target market at mass merchandisers, hardware stores and home centers, where most trash containers are sold. A Rubbermaid spokeswoman said the trash bag market is growing about 7 percent a year.
If they are fortunate, this will turn into a good business on a small wager,'' said analyst Eric Bosshard of Midwest Research/ Maxus Group Ltd. of Cleveland. Bosshard thinks Rubbermaid's strengths are design and marketing and that it avoids high production start-up costs by partnering with an established trash bag producer.
Bosshard saw pros and cons in Rubbermaid's strategy. It can easily cross-merchandise trash bags and related containers but consumers have different buying habits for the two items. Un-known is whether the Rubber-maid name will convince consumers to repeatedly buy a premium-priced and premium-performance trash bag.
Rubbermaid will be in full swing with its trash bag line in the fourth quarter of 1996, about when North American Plastics completes the first phase of a $14 million expansion. By October North American will add 36 million pounds per year of capacity and eight extrusion lines at its Aurora, Ill., plant. North American Plastics President Gary Kerlagon said his firm embarked on the expansion before it knew it would get the Rubbermaid business. It has begun a second expansion phase due to add six more extrusion lines early next year. Kerlagon said Rubbermaid gains ``instant access to North American's new production equipment and its experience in running high performance resins.
Kerlagon said Rubbermaid trash bags will be monolayer products from resins incorporating high-strength hexene-based linear low density polyethylene. He did not disclose its major LLDPE supplier but denied a report that North American has an exclusive resin supply agreement.
Kerlagon said in a telephone interview that the Rubbermaid agreement will not conflict with North American's other private label business. North American makes high-strength trash bags for Ace Hardware and Sam's division of Wal-Mart but Rubber-maid's bags will have their own distinguishing features. Private label brands for these and other accounts are North American's main business. In 1995, North American had film sales of $88 million.
Rubbermaid is entering a market reeling from ownership changes among some major brands. Ten-neco acquired the Hefty trash bag business last year when it bought Mo-bil's Plastics Division for $1.27 billion. Tyco International Ltd. of Exeter, N.H., will enter the trash bag business in September when it completes the acquisition of Carlisle Plastics Inc. of Phoenix. Carlisle makes Ruffies trash bags.
Tenneco Packaging intends to maintain leadership'' with its Hefty trash bags, according to Sharilee Norton, vice president of quality management and strategy. Norton said her firm will invest in product development and can realize economies of scale because it is a large buyer of PE for a range of plastics packaging and is integrated into paper cartons and boxes.
She said Rubbermaid's market estimate is conservative. Inclu-sion of warehouse clubs, convenience stores and other outlets boosts the trash bag market to about $1.3 billion, she estimated in a telephone interview from Tenneco Packaging's headquarters in Evanston, Ill.
The market might be able to absorb another high-end bag supplier but price wars have even hit premium bag producers, said a Carlisle official at the National Housewares Show. David Riffey, vice president of sales for Carlisle's Non Foods Division in Minneapolis said a new player could have trouble getting shelf space, since some retailers are committed to Hefty or First Brands Corp.'s Glad.
While Rubbermaid tries to muscle in on the trash bag market, one of its housewares competitors has launched its own trash bag and container cross-brand campaign. Zeta Consumer Prod-ucts Corp., new owner of Tucker Housewares, will introduce Tucker trash bags and Renew trash containers.
Rubbermaid designed its bags to fit its refuse and kitchen containers in sizes of 13, 32, 39 and 45 gallons. Bags will have color-coded labels to show which container they fit. The company's research indicated consumers want bags that are strong and fit well with containers. Some consumers believed Rubbermaid already makes trash bags since it is the dominant supplier of trash containers, its research showed.
Rubbermaid will promote its campaign heavily and will offer displays to make the bags easy to sell. I think the bag business is highly competitive, said Raj Bal, Zeta's president, at the National Hardware Show. He questioned how successful Rubbermaid will be if it does not manufacture the bags. I'm not sure it can work with dual profit centers.
Analyst Bosshard has a different read on Rubbermaid's strategy. Part of [Rubbermaid's] strategy is to outsource more manufacturing. That way the fixed costs are on someone else's books.
Plastics News managing editor Don Loepp contributed to this story from the National Hardware Show, held Aug. 11-14 in Chicago.