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Hercules Incorporated - Lehman Brothers Collection

Hercules Incorporated

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The Hercules Powder Company, a small explosives company, was acquired by the Du Pont Company in the 1880s. The company became independent in 1912, when anti-trust laws forced Du Pont to disband. Despite this break-up, the connection between Hercules and Du Pont remained intact; in fact, the new company was staffed by executives from Du Pont. The company was set up as a fully developed business entity, complete with several explosives factories, a healthy segment of the explosives market, and a $5 million "loan" in its treasury. Hercules operated successfully and made a profit from its very first year, starting as an explosives company serving the mining industry, gun owners, and the military. Like other manufacturers of explosives, the company preferred many small plants to a few large ones. Due to the risks involved in transporting their product, these plants were located in proximity to customers, rather than near the source of raw materials.

The company's first big break came in 1916, when it signed a lucrative contract to supply Britain with acetone. During World War I it became the largest U.S. producer of TNT. In 1920 Hercules began to manufacture cotton cellulose from the lint left over from cotton seeds once the high-quality cotton has been extracted. Hercules quickly became the world's leading maker of cotton cellulose, a fiber that has hundreds of industrial uses. Throughout its history, the company has been successful at transforming a previously worthless substance into something useful; however, Hercules has not been without its failures in this area. In 1920 a Senate Committee predicted that the virgin pine forests from which high-quality naval stores were derived would soon be exhausted and that there would be no naval stores industry left in the United States. "Naval stores" is a term that refers to products derived from tree sap and recalls the early use of pitch to caulk boats. Gums, turpentine, and various adhesives are all referred to as naval stores. After the Senate Committee's prediction, Hercules saw a chance to corner the market and quickly became the world's largest producer of naval stores. However, the expected shortage of naval stores never occurred. Hercules was able to salvage its naval stores division by developing a paler turpentine and convincing its customers that wood (as opposed to pitch) naval stores were a bargain. Naval stores and products derived from them eventually became a mainstay of the company, albeit one with slow growth.

The company had five divisions by 1935: explosives, naval stores, nitrocellulose, chemical cotton, and paper products. The paper products division began in 1931 with the purchase of Paper Makers Chemical Corporation, which provided 70 percent of U.S. demand for the rosin "sizing" used to stiffen paper. At the time of America's entrance into World War II, Hercules was the country's largest producer of naval stores and the third-largest producer of explosives. Around that time, Hercules, Atlas, and Du Pont were convicted of a joint price-fixing scheme.

In the 1950s Hercules diversified into two markets it was later to dominate: DMT and polypropylene. The company began to use waste gases from refineries to manufacture polypropylene, an increasingly important type of plastic. Polypropylene was used for food packaging, among other things. DMT is the chemical base for polyester fiber and was sold as a commodity to both chemical and polyester makers like Du Pont. Hercules also continued to look for new uses for naval stores from which it already derived chemicals used in insecticides, textiles, paints, and rubber. Hercules saw its sales double between 1955 and 1963, but this was due in large part to government contracts. In 1959 the company diversified into rocket fuels and propulsion systems for the Polaris, Minuteman, and Honest John missiles. Throughout the Vietnam War, the company continued to derive approximately 25 percent of its profits from rocket fuels, anti-personnel weapons, and specialty chemicals such as Agent Orange and napalm. In 1966 the company was renamed Hercules Incorporated.

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