What's Luck Got to Do with It?

When competition was heating up and Aladan was at 25% capacity in 1989, Ted Borek was brought on board as vice-president of sales and marketing. "When I joined," says Borek, "they had a basic Chevy exam glove." Borek helped roll out a Cadillac line, which helped keep Aladan out of the commodity gutter.

Among those products was the popular and reasonably priced powder-free glove, which Aladan introduced in 1990. Formerly sold in small quantities at astronomical prices to the electronics industry, the gloves now move in mass quantities to hospitals and laboratory environments, places that routinely conduct tests that could be altered by the presence of a starch. In 1993 the powder-free glove accounted for a whopping 30% of all the company's glove sales.

Today Aladan gloves are even being sold in retail outlets. Last year $5 million worth of gloves was moved through that highly profitable channel. Still, it's spit in the ocean compared with the hospital market. Laboratory work, physicians' clinics, emergency-rescue businesses, and nursing homes are all markets Borek has targeted in light of the Centers for Disease Control recommendation that all workers who come in contact with bodily fluids wear gloves.

As yet another hedge against becoming a mere commodity business, Aladan entered the retail fray in 1991, shortly after Gene Freed, the fifth Aladan key manager, was brought on board from Ansell, where he had been in charge of that company's LifeStyles brand of condoms. Now he is vice-president of sales and marketing for all Aladan condoms, including those made by Safetex, a floundering condom company Aladan purchased to gain some equipment as well as established retail channels and brands.

Safetex also allowed Aladan to acquire the FDA approvals necessary to bid on a lucrative contract to supply condoms to the Agency of International Development, which distributes condoms to developing countries. Aladan won that $35-million-plus three-year contract in 1993, underbidding Ansell. Povlacs estimates that Ansell lost two-thirds of its U.S. condom business as a result, making Aladan the largest condom producer in the United States.

Danielly figures the retail division of Safetex was a bonus, and he's expending a good deal of money and energy trying to shore it up. It's no cinch getting newly branded condoms into drugstores that are loyal to traditional suppliers. That's why Safetex is pursuing more offbeat distribution channels for condoms, as they come out from underneath the counter and go mainstream. Freed's mission at Aladan is to open up those distribution channels for what are now called the Saxon Gold and Gold Circle Coin brand condoms, the latter top-rated by Consumer Reports. The $110-million wholesale market is split between four major players, of which Aladan is the smallest, with just a 5% toehold. After a year of calling on 7-Eleven, Freed got his line into 6,000 stores.

Danielly believes it's worth taking a chance on developing the brands because a retail brand makes Aladan less dependent on health-care distribution channels, spreading the company's risk. Danielly is convinced the market is there for a more updated brand.

Tomorrow's task is to optimize the efficiency of the medical marketing and distribution channels. "By design, I want to get the company away from latex technology. We've built a strong marketing division and brand-name recognition, and I'd like to leverage that by taking on additional disposable medical products," says Danielly.

In theory, the plan sounds great. As major hospital distributors try to reduce the number of suppliers they use, one- and two-product companies like Aladan are going to be at a disadvantage compared with those that have a family of products to sell. But today the disposable-medical-products industry is a price-competitive, mature industry; it's not the industry it was during the 1960s, when Danielly built his empire of products at G.D. Searle.

Current market conditions, according to John Brown, CEO of Stryker, a medical-device manufacturer in Kalamazoo, Mich., will force medical suppliers to "deliver more for less." To keep out of the commodity trap, Danielly is shopping for items that are more high-tech and less price-sensitive than gloves are.

At the end of the day, Danielly is optimistic that there's room for Aladan to grow as a medical supplier, despite the increasingly fierce marketplace. "Medical services will still need products. But you have to be the low-cost, high-quality provider," he says. "It's simple to say, difficult to do." He should know.

The Aladan Growth Lines

* projected

The Big Picture

Production versus demand for the latex glove industry, in billions of units:

Source: Aladan n