Ad-Tech Hits a Bull's-Eye in Glue-gun Market
By Tom Gagne
New Hampshire Business Review, March 16-31, 1986Reprinted with permission of the New Hampshire Business Review
For anyone with a good enough idea," remarks Peter Melendy, president of Adhesive Technologies Co. in Hampton, "there's money to be had out there for its development, distribution, and marketing." He should know.
Melendy and his associates, Dick Belanger and Bob Ornsteen, weren't content with having someone else subsidize their revolutionary glue-gun design. They wanted to take charge of their own ideas and company - Hampton-based Adhesive Technologies Co. - no small task if you don't happen to have a barrelful of cash or a hefty inheritance at hand. But what began as a few sketches drawn under Belanger's basement light has blossomed into a multi-million-dollar, multinational concern.
After earning a master's degree from Dartmouth's Amos Tuck School of Business, and unwilling to be another management wheel in a giant corporation, Melendy decided to shop around his home state of New Hampshire for a small company ready for his talents. It happened that a fried, Bob Ornsteen, was working for a manufacturer of hot-melt glue guns, mainly for the industrial sector. Melendy climbed on board.
But within a year, the company was bought out by a larger firm, and Melendy, Ornsteen, and Belanger - another employee at the firm - found themselves in the awkward position of "old-guard" management. The timing, though, couldn't have been better.
At that point, the retail market for glue guns was just taking off in Europe and the United States. It was still a volatile, thin margined market, and Melendy and Belanger saw an opportunity in Dexter's reluctance to pursue retailing the guns.
They wagered that everyday consumers were ready for a reliable, clean adhesive method and formed their own company, Adhesive Technologies.
By 1981, Belanger had developed a prototype gun that featured innovative feeding and heating components. The first step had been made.
"How do you create and inventory without borrowing?" asked Melendy. In his case, he taught operations management classes at the University of New Hampshire, lived frugally, and plowed every spare cent back into the business.
Ad Tech's break came in 1982 in the form of a licensing agreement with the Sears department store giant to produce the firm's "Pro-90" gun. Sears liked the innovations and the price - it was the first glue gun to sell for less than $10. And the public responded even better than expected, with three times as many glue guns sold during Ad-Tech's first promotional period than in the same period the year before. While royalties from the Sears sales finally provided Ad-Tech with some capital, overall profits remained meager, topping out at $10,000 for the first year.
Enter Bob Ornsteen again. Ornsteen, who had previously been unable to join Ad-Tech because of obligations to Dexter, had finished his work there by 1983 and joined the fledging company. A veteran in the adhesive business, Ornsteen, said Melendy, "is the best known hot-melt glue-gun man in the world."
While Belanger developed smaller and larger versions of the "Pro-90" and Melendy was busy adding even more previously untapped markets to the business, Ornsteen got busy working on European deals. His extensive overseas connections resulted in, among others, lucrative contracts with a large German glue-gun manufacturer and a French manufacturer of glue sticks.
Last year, Adhesive Technologies hit a record $5 million in sales, with expectations to double that figure this year. In fact, the company's sales have nearly doubled each year since its inception, and things don't seem to be slowing down. The firm recently expanded into the glue stick manufacturing business and its manufacturing private-label products for scores of companies including such well-known names as Beecham Products, and Emerson Electric. And though it's based in Hampton, Ad Tech has business the world over, from France to Taiwan.
Melendy points to three keys to Ad Tech's growth: constant innovation, competitive pricing - and most significantly - private labeling, which reduces the firm's overhead, creates a positive cash flow and provides a source of capital.
When asked if he could put his finger on a common denominator of success, Melendy paused and said, "Perhaps overcoming ones own anxiety. It can affect your ability to make a decision, make you hesitate. In my case, I had the support of my wife and friends during the gray times. They're the foundation of my success."