Company builds on original formula for success, expands sales in era of competitive challenges.

Do one thing. Do it well. it's a philosophy of doing business that's not strikingly original. But for the major regional architectural coatings manufacturer Duron Inc., it's an axiom that defines a company mission that has remained intact since the late Harry Feinberg, a paint chemist, became part-owner of a small paint-manufacturing company in Washington, D.C. some 50 years ago.

That company, which Mr. Feinberg later acquired in total and renamed Duron Inc., has never wavered from a single-minded focus on the professional painter. Mr. Feinberg, who had worked as technical director of a paint manufacturer in Baltimore, built his business around one overarching concept - that this focus on the professional painter could pay off handsomely for the company that did it well.

Tom Schwartzbeck, Duron's current president and a veteran company executive who came on board in 1975, says Mr. Feinberg's thinking was somewhat of a departure from conventional wisdom of the time - this notion that the professional paint user should be the recipient of premium products and top-notch service. Schwartzbeck calls Harry Feinberg "a legend."

Asked about Duron's record of growth even in the era of strong competition from the rapidly expanding home-center, mass-merchandiser retail machine, Schwartzbeck says the company remains true to the founder's business blueprint.

"It's pretty easy for us," Schwartzbeck says of Duron's strategy. "Our channel of distribution is focused on the professional paint user."

That's the concept. But the devil is in the details, as they say - in the execution. Here, Duron's top brass, led by Chairman Robert Feinberg - son of Harry - stick to variations on the theme of customer service first, last and always. It's an operating philosophy that is all-encompassing, from the offices of the chairman and president to the clerks in Duron's 280 stores and service centers.

This focus on service, service, service infuses every aspect of the company's operations, with unusually close scrutiny of every sort of interaction with the customer. The company even monitors incoming calls to stores, checking to ensure the phone is answered by the third ring.

"We do whatever it takes to help our customers build their business," Schwartzbeck says. "We live it."

The single-minded focus on the professional painter has taken some new-age twists, too, as Duron has embraced the Internet era with programs aimed at professional painters and their business needs. The company's latest entry is "Painter's Advantage," an initiative that offers a range of business and marketing tools to the painter - estimating-software programs, merchandising aids such as business cards, door hangers and other advertising materials, and business pointers designed to help the painter improve his operations. The company even helps customers develop and operate websites.

In the product department, Duron also continues to roll out new paint offerings while adhering to an emphasis on quality and performance in its various end-user segments. Schwartzbeck says these products reflect the different needs of specific users - for example, the builder's requirement for paints that can be applied in relatively cold temperatures, or the health-care institution's need for low- or no-odor coatings that can be used without disrupting daily functions. One new waterborne product is specifically targeted for application to old oil-based paint surfaces without sanding.

"We design products specific to the segment," Schwartzbeck says. Recent Duron product introductions include deck and siding stains, multicolor and texture products, premium waterborne semigloss enamels, the "Genesis" no-odor, no-VOC acrylic coating, and a low-VOC interior alkyd that features a range of gloss levels.

The result of this combination of customer service and product quality, Duron says, is an impressive growth record that builds sales despite daunting challenges from increased government regulation, industry consolidation and a highly competitive marketplace.

In just the last three years, Duron has opened more than 60 new stores, entering new markets such as Ohio, Indiana, Tennessee, and the Chicago area. The company's ambitious plans call for the opening of 20-30 new stores each year, with the stores total nearly doubling by 2010. Annual sales, which were approximately $90,000 in Duron's first year in 1949, have reached $350 million, the company says. Not too shabby for the local paint company Harry Feinberg took over more than 50 years ago.

The Feinberg Vision:
Delivering Service, Quality to the Professional Painter

Another Harry - Truman - was president when Harry Feinberg left his job as laboratory chief at the H.B. Davis Co. in Baltimore and purchased a half interest in Norman Paints of Washington, D.C. Mr. Feinberg, a chemist by trade, also donned the salesman's hat after renaming the company Duron. Company lore holds that Harry began peddling paint from the back of his station wagon, offering a gallon free to convince contractors to give his product a try.

Duron opened its first store in Washington in 1950, starting an expansion trend that has continued ever since. Sales quadrupled between 1952 and 1957, and the company's market area expanded from its original D.C. base to Maryland, Virginia, Pennsylvania, Delaware, and Massachusetts. Duron in 1957 opened a new manufacturing plant in Beltsville, MD, boasting a production capacity of 6,000 gallons a day. Among the notable new products spawned by the company's R&D laboratories: Duron's "Vinyl Plastic" interior latex paints, which generated strong demand for Duron products, the company says.

Expansion continued in the 1960s and 1970s with the acquisition of Duron dealers in Baltimore and Richmond, VA, and entry into new markets in eastern Pennsylvania and North Carolina. The capacity of the Beltsville plant was doubled and the 45th Duron store opened for business in 1974. In 1976, Harry Feinberg convinced son Robert, who holds a doctorate degree from Oxford University in England, to join the family business.

If anything, Duron's growth curve accelerated following Robert Feinberg's arrival as secretary-treasurer in 1976 and then his appointment as president in 1980. He directed additional expansions at the Beltsville plant and later, in 1988, the construction of a new production plant in Atlanta, the base of Duron's southern growth push.

Robert Feinberg, who became chairman and CEO following his father's death in 1996, has presided over the company's expansion from 60 stores and $30 million in annual sales in 1976 to the current 260-plus stores and approximately $300 million in sales. With the additions to the Beltsville plant and the new manufacturing capacity in Atlanta, Duron's output capabilities exceed 50,000 gallons of paint per day.

Company's Focus Generates Growth Despite Glut of Giant Retailers

Duron's company-owned stores remain the primary selling avenue and catalyst for the company's record of double-digit annual sales increases over the last decade, says Gary Saiter, director of Marketing. With their focus on the professional painter, the stores have helped Duron achieve this growth despite the breakneck expansion pace of home-center and other mass-merchandiser chains and their volume-oriented paint-selling methods.

"We do a considerable retail (DIY) business due to word of mouth, but we don't advertise [to that market]," Saiter says.

Duron, in fact, has prospered despite the loss of sales that followed Home Depot's decision in 1999 to discontinue the sale of several regional paint brands, including Duron products. Saiter says the company's sales at mass-merchandiser outlets were not significant, and were the result of the retailers' generally unsuccessful attempts to attract more contractor customers. He says that within a year, Duron successfully replaced lost sales that resulted from the termination of supply deals with Home Depot and other mass-merchandiser outlets.

In its 51-year history, Saiter says Duron has built a "huge reputation as a service organization," based on its close working relationship with the customer through its field sales representatives. The company's top management, he says, "has never given employees permission to say no to the customer."

In addition to its 280 stores and service centers located in 16 states in the eastern United States and in Washington, D.C., Duron sells products through approximately 160 dealers. Dealer outlets remain important in smaller markets where the opening of company-owned stores is not viewed as economically viable. Duron also has acquired local dealer groups in Philadelphia, Chicago and Florida, and has converted those outlets to Duron stores.

Although Duron's forays into the mass-merchandiser arena have not delivered long-term results, President Schwartzbeck says the company is always looking to boost its sales with new initiatives that target a wider market - chiefly with what he calls "partnerships." The company recently entered into an agreement with the True Value hardware-store chain to supply paint to True Value's approximately 3,000 stores. Duron's paint brands will be an "add-on" to True Value's own label, which is manufactured by the paint division of the parent company.

"We'll be doing what we do best - bringing in contractor business," Schwartzbeck says of the deal, which is seen as a complementary program in which True Value is seeking to boost its sales to professional users.

"True Value is strong in the DIY trade, and geographically is strong in the Midwest and West, while we're strong in the East," Schwartzbeck says. "We'll help them with contractor business, and they'll help us with consumer business."

The agreement is viewed as being more in line with Duron's overall market approach than earlier supply deals in the home-center segment. Prior to its arrangement with Home Depot, Duron supplied paint to the now-defunct Hechinger's store chain.

Schwartzbeck says Duron will continue to focus expansion programs on the eastern and midwestern states, saying the company is far from reaching its potential penetration in many major markets in the region. Strong growth prospects are envisioned for a number of areas where Duron is a recent arrival, such as Chicago, Indianapolis, Columbus, OH, and Nashville. Florida has proven to be a major sales growth area, he says. Overall, the Washington, D.C. area, including Baltimore and northern Virginia, remains Duron's core market, followed by Georgia.

Demographics, Economics Play a Part in Growth Trend for Contractor Market

Duron Inc. has zeroed in on the professional-painter market segment in a strategy that reflects the company's long-held strengths. But an added boost, coincidentally, can be attributed to demographics and economics.

Duron and other companies catering to professional users have enjoyed sales growth fueled in good part by the graying and growing affluence of the population, as aging homeowners are less inclined to climb a ladder to paint the house - and have achieved the financial ability to hire a contractor to do the job.

The success of companies selling effectively to the professional-painter segment makes sense, say experts who follow market trends in the architectural-paint market. One such observer - Chuck Bangert of the highly respected industry consulting firm Orr & Boss - says these companies are better positioned to benefit from the growth of the professional trade than are mass merchandisers that sell primarily to the do-it-yourselfer.

But Bangert adds the caveat that success in the company-owned store business requires efficient operation of a contractor-focused retail operation, with optimal store locations in the right geographic areas that offer the right products at low prices. Other crucial requirements are providing services such as job-site delivery, early hours of operation and credit terms.

In 1999, according to Orr & Boss figures, company-owned paint stores accounted for 49% of total U.S. architectural paint sales, at $3.36 billion. Independent dealers held a 30% share, with $2.04 billion, and mass merchandisers - home centers, discount chains and department stores - accounted for 21%, at $1.43 billion.

Orr & Boss estimates that paint sold through the mass-merchandiser channel is growing at a faster rate - 7-9% a year - than sales through company-owned paint stores, where annual growth is estimated at approximately 3%. Sales through the independent-dealer channel are declining by 3-4% a year, according to Orr & Boss estimates.

But Bangert points out that mass-merchandiser sales growth has been fueled in large part by the rapid pace of new-store openings. The biggest home-center chain, Home Depot, has more than 1,000 stores in the United States, Canada, Puerto Rico, Chile, and Argentina, and the company is opening new stores by the hundreds every year. Home Depot says it expects to be operating more than 2,300 stores by the end of 2004.

"Same-store growth at Home Depot for paint is not nearly as impressive," Bangert says. "As Lowe's and Home Depot begin to saturate the market, that will be a factor. That's when you'll begin to see growth slow down." Research by Orr & Boss suggests that the mass-merchandiser channel is siphoning some business from the independent paint dealers, but less from the company paint-store channel.

Another factor affecting architectural-paint sales trends is the growing importance of the contractor segment. Orr & Boss estimates that 65% of the paint sold currently is purchased by professional users, with the DIY user purchasing 35%. The breakdown is essentially the reverse of 20 to 25 years ago, when the market was thought to be split 60-40 in favor of DIY users, he says.

Key factors in this transformation include the aging of the country's huge post-World War II baby-boom generation and the prevalence of two-income households where both husband and wife put in long hours on the job and have less time for household tasks such as painting. In addition, the strong U.S. economy has put additional spending money in the pockets of consumers, who thus enjoy the luxury of hiring a contractor rather than doing the paint job themselves.

Feinberg, Schwartzbeck Chart Duron's Direction

Robert Feinberg, a graduate of Harvard University who has a doctoral degree from Oxford University in England, became chairman and CEO of Duron Inc. following the death of his father, company founder Harry Feinberg, in 1996.

Since joining Duron as secretary-treasurer in 1976, Robert Feinberg has presided over the company's expansion from 60 stores and $30 million in annual sales to the current 283 stores and approximately $300 million in sales. He also has directed the expansion and modernization of Duron's Beltsville, MD, plant and construction of a second production plant, in Atlanta, in 1988.

Tom Schwartzbeck, who was named president in 1996, is a veteran of more than 25 years with the company who has held a series of key positions since joining Duron in 1975. After holding leadership positions in the areas of sundries, distribution, merchandising, facilities development, and real estate, and as vice president of Sales, he was named executive vice president in 1994. He also has played a major role in the company's expansion, as sales rose by more than $25 million a year and Duron opened more than 100 stores during his stint as executive vice president.