Dow: Time for an industry built by plastics to move on

The main entrance to the Dow Chemical world headquarters complex in Midland, Mich.

Dow Chemical, founded in 1897, is one of the most iconic companies in the United States. But after 116 years, the largest chemical maker in the country is considering dropping the word "chemical" from its name. It's not a marketing ploy or a rebranding scheme; Dow is selling off its commodity chemical business, which is responsible for things like epoxy and cheap plastic grocery bags.

In the early years Dow made its money selling two products: bleach and potassium bromide, an over-the-counter sedative. And with both products, foreign companies tried to undercut Dow's sales. When German bromide producers flooded the U.S. with cheap bromide, Dow bought it and sold it back to competitors of the German companies. The strategy kept Dow alive and taught it a valuable lesson: diversify.

In 1953 Dow created a consumer products division that gave birth to a string of wildly popular products like Saran Wrap, the Zip Lock bag, and a whole range of plastics it sold to manufacturers.

"Suddenly the world was very alive to the possibility of replacing natural materials with synthetically produced materials, and plastics were a big part of that," says Duke business professor Ashish Arora.

Because Dow could produce chemicals cheaply, it had an advantage over competitors. But as technology spread, foreign companies were able to produce those chemicals for much less. "The significant advantage that Dow had in producing those chemicals," says Arora, "diminishes to the point where it's no longer advantageous for the company to be in those businesses."

Dow plans to exit the chlorine business, the foundation of its original product, altogether. Instead Dow wants to develop products with higher profit margins, like agricultural seeds, electronics and packaging made from, you guessed it, plastics.

"As far as standard plastics, Dow is actually making major investments on those in the U.S. Gulf Coast because of all the shale gas development that's going on," says Frank Esposito, a senior reporter at Plastics News.

According to Esposito, no one thought companies would be investing in plastic manufacturing in the U.S. five years ago. But with the abundance of natural gas from shale, there is an unexpected source of the raw materials needed to make plastics.

Dow Chemical is making a major move in deciding to remove itself from the chemical industry. And re-branding a company that has become so synonymous with chemicals will be challenging. A window into Dow Chemical's past...

  A Dow Chemical commercial that's out of date now. For more reasons than one. 

A vintage Dow Chemical advertisement

 

 

About the author

David Weinberg is a general assignment reporter at Marketplace.

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