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Fruit of the Loom, Inc.

Fruit of the Loom, Inc.

5000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
U.S.A.
(312) 876-1724
Fax: (312) 993-1749
(800) 888-2600
Web site: http://www.fruit.com

Public Company
Incorporated:
1955
Employees: 30,000
Sales: $2.1 billion (1997)
Stock Exchanges: American Chicago Pittsburgh Pacific
Ticker Symbol: FTL
SICs: 2211 Broadwoven Fabric Mills, Cotton; 2252 Hosiery Not Elsewhere Classified; 2253 Knit Outerwear Mills; 2254 Knit Underwear and Nightwear Mills; 2321 Mens and Boys Shirts; 2322 Mens/Boys Underwear & Nightwear; 2329 Mens/ Boys Clothing Not Elsewhere Classified; 2341 Womens/Childrens Underwear

Fruit of the Loom, Inc., a global manufacturer and marketer of family apparel, is Americas biggest seller of mens briefs. The companys products also include underwear for men, women, and children, as well as T-shirts, activewear, casualwear, and clothing for children. As of the late 1990s, the companys brands, which included BVD, Munsingwear, Gitano, and the namesake Fruit of the Loom, were among the best known in the world. In addition to these popular brands, the company licensed characters for childrens apparelsuch as Winnie the Pooh and Batmanand the names, logos, and trademarks of colleges, universities, and professional sports teams. With more than 60 manufacturing and distribution facilities, the company had operations in ten states and in various countries around the world, including Canada, Mexico, and Germany.

Brand Introduction in the Mid-Nineteenth Century

The history of the company involves two separate entities: the B. B. & R. Knight Brothers textile company and The Union Underwear Company. The Knight Brothers established a textile company in Pontiac, Rhode Island, in the mid-nineteenth century. Their high quality broadcloth was recognized as some of the best fabric for the homemade clothing and linens that were common at the time. In 1851, when trademarking was still in its infancy, the brothers gave their cloth the imaginative name Fruit of the Loom.

Rufus Skeel, one of the merchants who sold the Knight brothers cloth commercially, operated a dry goods store in New Yorks Hudson Valley, and his daughter, an artist, painted pictures of local apple varieties. Over time, her paintings became associated with the Fruit of the Loom name. Soon, the apple accompanied the name on printed labels that identified the Knight brothers increasingly popular cloth. The serendipitous combination of the two components helped make Fruit of the Loom the first branded textile product in the United States. When the federal patent and trademark office opened in 1871, the trademark (which had grown to include a cluster of fruits) received the United States 418th patent.

As long as women made their own clothing and linens, Fruit of the Loom textiles remained in demand. But the development of the manufactured apparel industry in the early twentieth century considerably diminished the fabric market. The market for piecegoods declined as homemakers did less sewing and began to favor ready-made clothing and linens. Although the original products market dwindled, the trademark still enjoyed popularity. Thus, in 1928, the Fruit of the Loom Company began to license the brand to manufacturers of finished garments.

At about the same time that Fruit of the Loom lost its direct consumer market, a young immigrant named Jacob (Jack) Goldfarb decided to start his own clothing business. Goldfarb learned about the apparel industry through his work with the Ferguson Manufacturing Company. There he noticed that Ferguson only made low-priced sale items available to those retailers who also purchased the companys higher priced goods. Goldfarb reasoned that if he could provide retailers with strictly lower-priced, quality undergarments, he could establish a popular business.

He decided to concentrate on the most popular style of mens underwear of the nineteenth centurythe unionsuitand named his endeavor The Union Underwear Company. Like the term unionsuit itself, there is some controversy about the origin of the company name. Some historians assert that the term unionsuit referred to the union of a top and bottom, while others maintain that the name grew out of the fact that members of the Civil War-era Union Army wore the garment. Whether the name for The Union Underwear Company alluded to the United States or the construction of its clothing remains a mystery.

Oddly enough, Goldfarb started his manufacturing business without a factory. He purchased cloth from one supplier, had it delivered to a cutter, then sent the parts to a sewing shop for finishing and shipping. Union Underwears first garments were sewn by nuns in and around Indianapolis, Indiana, the site of the companys first finishing plant.

Goldfarb continued to work within this complex system even through the onset of the Great Depression. Then, in 1930, he was approached by some promoters from Frankfort, Kentucky, who were looking for an industry that would provide employment and increase the citys tax base during the lengthy depression. The municipality offered to build a plant for the business, which would bring all of Unions operations to a single location. Goldfarb agreed to the lucrative offer, and within five years employed 650 people at the new location.

Union Underwear and Fruit of the Looms fortunes converged near the end of the decade. In his quest to become a national marketer, Goldfarb purchased a 25-year license for the Fruit of the Loom trademark in 1938. He was certain that the well-known brand would propel his products to national prominence.

Union Underwear built a second plantwhich produced broadcloth boxer shortsin Bowling Green, Kentucky, on the eve of World War II. When America joined the Allied effort in 1941, the company was enlisted to manufacture millions of pairs of G.I. shorts. Union Underwear received numerous commendations from the government for its contribution on the homefront.

Postwar Brand Extensions and Innovations

Goldfarb made several promotional innovations in the postwar era that set Union Underwear and the Fruit of the Loom label apart from other undergarment manufacturers. Before World War II, underwear was usually sold separately, but in the late 1940s, Goldfarb introduced a printed cellophane bag with three pair of shorts inside. The new packages were displayed separately to call attention to Unions branded undergarments. The move established a trend that has become an industry standard for most basic underwear. And even though Goldfarb was only a licensee of the trademark, he became the only licensee to invest his own funds in consumer advertising.

The company expanded its product line from unionsuits and boxer shorts to include knit underwear in 1948, and opened its third plant in Campbellsville, Kentucky, in 1952. The plant provided internal knitting and bleaching facilities for Union manufacturing for the first time, helping the company to gain more vertical control of production and facilitating the production of a wider variety of mens and boys undergarments.

Goldfarb continued his promotional innovations when Union became the first underwear company to advertise on network television in 1955. The company purchased spots during Dave Garroways Today Show. Union also utilized banners, posters, signs, price tickets, newspaper slicks, and a cooperative advertising program to support Fruit of the Loom sales. Consumer advertising campaigns were coordinated with such seasonal events as Fathers Day, Back-to-School, and Christmas to maximize the companys advertising dollar.

Around the same time, Union allied itself to the mass merchandisers that were beginning to spring up in the mid-1950s. The companys growth was soon tied to these new retailers success: by the early 1990s, 45 percent of mens basic underwear was sold by discount stores.

Structural Changes in the 1950s and 1960s

The mid-1950s saw the start of a string of acquisitions that would place Union Underwear in several different hands over the next three decades. In 1955, Union Underwear was taken over by the Philadelphia & Reading Corporation, a newly-formed conglomerate. The new corporate structure provided Union with additional resources, enabling it to extend its manufacturing operations.

At that point, Union Underwear had grown to become Fruit of the Looms dominant licensee, and to most people, the name had come to mean underwear more than fabric. The licensee, in fact, had grown larger than Fruit of the Loom. In order to assure the availability of its well-known trademark, Philadelphia & Reading acquired the Fruit of the Loom Licensing Company in 1961.

In 1968, Union Underwears parent was purchased by Northwest Industries. The consolidation furnished new capital which further facilitated the companys growth. That same year, Goldfarb stepped down from the chair to be replaced by Everett Moore, who had joined the company in 1932 at the Frankfort plant.

Advertising in the 1960s and 1970s

Union Underwear strove to energize advertising for mens underwear in the late 1960s and early 1970s. In 1969 the company contracted sportscaster Howard Cosell to appear in five television commercials over three years. Next, British comedian Terry Thomas was named spokesperson, as advertisers hoped that an English representative would lend an air of quality and endurance to their commercials. The use of celebrity spokespersons brought more public attention to Fruit of the Loom underwear, but the company continued to seek more brand recognition and market share.

In 1975, Union made advertising history with the first Fruit of the Loom Guys campaign. The commercials featured three men in costume as a bunch of grapes, an Autumn leaf, and an apple, all elements of the brands trademark. The characters helped propel the Fruit of the Loom brand to 98 percent recognition and doubled Unions share of the market for mens and boys underwear.

Also that year, Moore retired and was succeeded by John Holland. In 1976 Union acquired the century-old BVD trademark. The company began to merchandise BVD as a completely separate line of underwear aimed at the more upscale department store market. Union also began to expand its product line in 1978 to include Underoosdecorated underwear for boys and girland began to supply blank T-shirts for the screen print market during the 1970s. The expansion into plain T-shirts soon evolved into a huge business known as Screen Stars, which sold unbranded T-shirts, sweatshirts, and sweatpants to wholesalers who imprinted them for promotional uses.

Mid-1980s Leveraged Buyout and Reorganization

Union did not escape the trend toward leveraged buyouts of the 1980s. In 1984, William F. Farley acquired Union Underwear when he bought Northwest Industries for $1.4 billion. Farley privatized the parent company and renamed it Farley Industries. In the 1980s tradition of leveraged buyouts and junk bonds, Farley parlayed his acquisitions into larger and larger conquests until, by the end of the decade, he had fashioned a textile and apparel conglomerate with $4 billion in annual sales and 65,000 employees worldwide.

In 1985, the conglomerate was restructured, $260 million in shares were sold, and Union Underwear was renamed Fruit of the Loom, Inc. to relate the business more closely to its famous trademark. Farley, a former encyclopedia salesperson, worked to improve Fruit of the Looms operational efficiency and squeeze more profits out of the companys number-one status as the holder of a 35 percent share of the undergarment market. Farley proceeded to sell the bulk of Northwest Industries other businesses and cut costs at Fruit of the Loom. The proceeds of the asset sales were combined with revenues from bond issues to finance domestic modernization and expansion into Europe.

Over the course of the 1980s, those manufacturing changes facilitated Fruit of the Looms evolution from an underwear manufacturer into an apparel company. Farley and Chief Executive Holland decided to expand into mens fashion underwear, womens underwear, and socks over the course of the decade, putting the Fruit of the Loom label on sportswear in 1987. Womens panties became one of the brands most popular extensions. The company launched that division in 1984 and led the category with a ten percent share within four years. Fruit of the Loom also made apparel history with its popular pocket T-shirt. Produced in a rainbow of colors, the wardrobe staples flexibility made it a consumer favorite for decades.

In 1982, sales of mens and boys white underwear accounted for 80 percent of the companys revenues, but by 1988, brand extensions comprised more than 40 percent of revenues. The active wear market also grew much more rapidly than the underwear category: activewear sales tripled in the 1980s, while the underwear market grew only about six percent annually.

Losses in the Late 1980s

Capital improvements had enabled Fruit of the Loom to expand into newer, faster-growing markets, but they also left the company saddled with debt. Fruits debt-to-equity ratio of 3.5-to-1 contributed to three out of four years of losses before the decade was over. Interest expenses also consumed ten percent of annual sales revenues in 1989. At the same time, Fruit of the Loom was threatened on two fronts: low priced imports began to eat into Fruit of the Looms 38 percent market share of basic mens undergarments, and the companys largest competitor, Sara Lee Corp.s Hanes Knit Products, was raising the ante in the underwars.

In an effort to promote its move from department stores to discount merchandisers, Hanes introduced Inspector 12 into its advertising campaigns in 1982. The curmudgeonly quality-control character claimed that her brand fit better and shrank less than Fruit of the Looms. Fruit of the Loom fired back with promotions that featured the tagline, Sorry, Hanes, you lose! The war escalated into a legal battle that ended with an out-of-court settlement wherein the two competitors agreed to pull the offensive ads.

The Fruit of the Loom Guys were phased out when the company launched its more modern We fit America like we never did before campaign in 1988. The television spots featured family scenes, including a mother dropping her daughter off at the school bus, and also included the first views of a woman in a pair of panties on network television. The $25 million campaign, created by Grey Advertising, Inc., emphasized Fruit of the Looms move into basic apparel for both sexes and all ages.

The brand extensions, expanded capacity, advertising blitz and years of debt paid off in 1988 when Fruit of the Loom made its first profit since its acquisition by Farley. The mid-1980s capital investments had pumped up domestic operating margins to 20 to 25 percent, and European plants began earning profits in the early 1990s. Sales had actually grown 13 percent annually since 1976 to $1 billion in 1988, but debt had consumed all of the income.

In 1990, Fruit of the Loom unveiled the underwear industrys first network advertisements that featured a male model sporting the flagship white briefs. The commercials asked the musical question, Whose underwear is under there? The answer was provided by hunky celebrities Ed Marinare, Patrick Duffy, and James DePavia. Lawyers for Grey Advertising spent two weeks battling one of the big three networks to air the commercials that would have been banned just three years earlier. Over the next two years, Fruit of the Looms celebrity underwearers would include soap-opera star Don Diamont, action-adventure hero David Hasselhoff, and sitcom dad Alan Thicke.

Continued Challenges in the 1990s and Beyond

In 1991, Fruit of the Loom introduced the Its your time, campaign for its growing line of casualwear, which was extended to include garments for infants and toddlers. The company enlarged its array of brands that year through a licensing agreement with the upscale Munsingwear brand in the hopes of expanding Fruit of the Looms retail distribution.

The companys financial restabilization continued. Debt was reduced by more than $332 million with the help of sales totaling $1.4 billion, a stock offering of $100 million, a decline in capital expenditures, and the conversion of $60 million of debt into equity. Fruit of the Looms European sales surged 43 percent in 1990 as these divisions hit stride.

Despite a lingering recession in the United States, the company once again found its capacity constrained. Farley and Holland predicted that Fruit of the Loom would invest $125 million in new equipment and increase the workforce by 3,000 at plants in the United States, Canada, and Europe in 1992. With strong ties to mass merchandisers, major product launches, and line extensions, Fruit of the Loom hoped to increase sales 15 percent each year, decrease debt load, and grow per share earnings by one third annually in the 1990s.

However, Fruit of the Looms optimism led to manufacturing overcapacity in 1993. Management responded by cutting back production; unfortunately, customer spending was starting to rebound then from the recession of the early 1990s. In 1994, cotton prices unexpectedly rose and exacerbated the companys problems. Fruit of the Looms stock price fell 50 percent between 1993 and 1995.

The company took several steps to correct its problems. In an effort to reduce its dependency on low-margin briefs and boxers, Fruit of the Loom focused on developing activewear and casualwear products, both by continuing to broaden the product lines of its traditional brands and by purchasing new brands. In 1993 the company acquired Salem Sportswear and arranged a licensing agreement to manufacture and market athletic wear under the Wilson logo. The following year it acquired sports logo clothing makers Artex Manufacturing Inc. and Pro Player. Also in 1994 it bought the bankrupt sportswear maker Gitano Group, Inc., for $100 million. By 1995, only 25 percent of the companys revenues derived from sales of mens and boys underwear.

Fruit of the Loom also addressed operating inefficiencies in the early and mid-1990s. It invested in modernizing its manufacturing facilities, from spinning the yarn to assembling the finished clothing. However, in 1995 the company took more drastic measures to cut costs: It closed nine manufacturing facilities in the United States and laid off 6,000 employees. With the hope of cutting costs through lower-cost offshore labor, the company began moving its sewing operationsa labor-intensive step in manufacturing clothingto the Caribbean and Central America. One-time charges related to the plant closings and relocations added to Fruit of the Looms losses for 1995, which tallied in at $227 million.

The following year, Fruit of the Loom helped fund its manufacturing relocations by selling the operating assets of its hosiery division to Renfro Corp. for $90 million. In 1997 the company laid off an additional 4,800 workers and closed another U.S. plant. By that time, over 60 percent of the companys production was taking place internationally, with plans for it to reach 80 percent by 1999.

Although the company returned to the black in 1996, with approximately $147 million in net earnings, in 1997 the company saw another loss. The net loss of $488 million was due in part to continuing costs of moving sewing operations offshore, and to a charge of $102 million made to pay a legal judgment against Fruit of the Loom. The court judgment ended litigation dating from 1984 related to the Fruit of the Loom subsidiary Universal Manufacturing (which the company sold in 1986). However, sales were also down to $2.1 billion from $2.4 billion in 1996.

The companys reduction in labor expenses seemed to be reaping rewards early in 1998. First quarter profits were up 38 percent, and a price increase in mens underwear in April 1998 indicated potentially higher margins in a traditionally low-margin area for Fruit of the Loom. CEO William Farley expressed confidence in a press release in February 1998: We feel strongly that the company can affect a strong recovery in 1998. Inventories are expected to decline while capital spending will continue to be restrained. These factors should help to improve cash flow and, along with better operating performance, result in improved shareholder returns. However, similar optimism had been expressed earlier in the decade and the predictions did not materialize. The companys performance over the next couple of years would tell if such confidence was warranted.

Principal Subsidiaries

NWI Land Management Corp.; Union Underwear Co., Inc.; Fruit of the Loom GmbH; Russell Hosier Mills, Inc.; Camp Hosiery Company, Inc.; Union Sales, Inc.; Union Yarn Mills, Inc.; FOL International; Fruit of the Loom International, Ltd.; Fruit of the Loom Investments, Ltd.; Fruit of the Loom Trading Company.

Further Reading

Applebaum, Cara, Fruit of the Loom Sticks with Stars, Adweeks Marketing Week, February 4, 1991, p. 8.

Bill Farley Could Lose His Shirt and His Underwear, Business Week, March 11, 1991, p. 86.

Boyswear Brightens the Apparel Picture, Discount Merchandiser, December 1991, p. 52.

Commanding Lead in Mens Underwear, Discount Merchandiser, August 1992, p. 38.

Corwin, Pat, More Options in Mens Underwear, Discount Merchandiser, September 1990, pp. 3639.

Esquivel, Josephine R., The Pains and Gains of 91, Bobbin, June 1992, pp. 5060.

Fannin, Rebecca, Underwear: Inspector 12 Takes on the Fruits, Marketing & Media Decisions, April 1988, pp. 5556.

Fruit of the Loom, Hanes Stretch from Skivvies into Active Wear, Adweeks Marketing Week, December 2, 1991, p. 7.

Greising, David. Bill Farley in on Pins and Needles, Business Week, September 18, 1989, p. 58.

Laing, Jonathan R., Love that Leverage! Barrons, May 1, 1989, p. 6.

Levine, Joshua, Marketing: Fantasy, Not Flesh, Forbes, January 22, 1990, pp. 118120.

Oneal, Michael, Fruit of the Loom Escalates the Underwars, Business Week, February 22, 1988, p. 114.

Profit Surges 38% on Moves to Reduce Labor Expenses, Wall Street Journal, April 16, 1998, p. A8.

Schifrin, Matthew, Matchmaker Leon? Forbes, March 28, 1994, p. 20.

Stark, Ellen, The Underwear King Could Snap Back for a 43 % Gain, Money, February 1995, p. 57.

Zipser, Andy, Cherry-picking Fruit of the Loom, Barrons, May 20, 1991, pp. 3031.

April S. Dougal
updated by Susan Windisch Brown

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Fruit of the Loom, Inc.

Fruit of the Loom, Inc.

5000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
U.S.A.
(312) 876-1724
Fax: (312) 993-1749

Wholly Owned Subsidiary of Farley Inc.
Incorporated: 1955
Employees: 32,000
Sales: $1.8 billion
Stock Exchanges: American Chicago Pittsburgh Pacific
SICs: 2322 Mens/Boys Underwear & Nightwear; 2341 Womens/Childrens Underwear; 2329 Mens/ BoysClothing Nec; 2252 Hosiery Nec; 2211 Broadwoven Fabric Mills, Cotton; 2321 Mens and Boys Shirts; 2253 Knit Outerwear Mills; 2254 Knit Underwear and Nightwear Mills

Fruit of the Loom, Inc., a global manufacturer and marketer of family apparel, is Americas biggest seller of mens briefs. The companys brands, which include BVD, Munsingwear, and the namesake Fruit of the Loom, are among the best known in the world. With more than 50 manufacturing facilities, the company has operations in eleven states, Canada, Northern Ireland, and the Republic of Ireland, and produces almost one billion garments per year.

The history of the company involves two separate entities: the B. B. & R. Knight Brothers textile company and The Union Underwear Company. The Knight Brothers established a textile company in Pontiac, Rhode Island, in the mid-nineteenth century. Their high quality broadcloth was recognized as some of the best fabric for the homemade clothing and linens that were common at the time. In 1851, when trademarking was still in its infancy, the brothers gave their cloth the imaginative name Fruit of the Loom.

Rufus Skeel, one of the merchants who sold the Knight brothers cloth commercially, operated a dry goods store in New Yorks Hudson Valley, and his daughter, an artist, painted pictures of local apple varieties. Over time, her paintings became associated with the Fruit of the Loom name. Soon the apple accompanied the name on printed labels that identified the Knight brothers increasingly popular cloth. The serendipitous combination of the two components helped make Fruit of the Loom the first branded textile product in America. When the federal patent and trademark office opened in 1871, the trademark (which had grown to include a cluster of fruits) received the United States 418th patent.

As long as women made their own clothing and linens, Fruit of the Loom textiles remained in demand. But the development of the manufactured apparel industry in the early twentieth century considerably diminished the fabric market. The market for piecegoods declined as homemakers did less sewing and began to favor ready made clothing and linens. Although the original products market dwindled, the trademark still enjoyed popularity, so in 1928, the Fruit of the Loom Company began to license the brand to manufacturers of finished garments.

At about the same time that Fruit of the Loom lost its direct consumer market, a young immigrant named Jacob (Jack) Gold-farb decided to start his own clothing business. Goldfarb learned about the apparel industry through his work with the Ferguson Manufacturing Company. There he noticed that Ferguson only made low-priced sale items available to those retailers who also purchased the companys higher priced goods. Goldfarb reasoned that if he could provide retailers with strictly lower-priced, quality undergarments, he could establish a popular business.

He decided to concentrate on the most popular style of mens underwear of the nineteenth century, the unionsuit, and named his endeavor The Union Underwear Company. Like the term unionsuit itself, there is some controversy about the origin of the company name. Some historians assert that the term union-suit referred to the union of a top and bottom, while others maintain that the name grew out of the fact that members of the Civil War-era Union Army wore the garment. Whether the name for The Union Underwear Company alluded to the United States or the construction of its clothing remains a mystery as well.

Oddly enough, Goldfarb started his manufacturing business without a factory. He purchased cloth from one supplier, had it delivered to a cutter, then sent the parts to a sewing shop for finishing and shipping. Union Underwears first garments were sewn by nuns in and around Indianapolis, Indiana, the site of the companys first finishing plant.

Goldfarb continued to work under this complex system even through the onset of the Great Depression. Then, in 1930, he was approached by some promoters from Frankfort, Kentucky, who were looking for an industry that would provide employment and increase the citys tax base during the lengthy depression. The municipality offered to build a plant for the business, which would bring all of Unions operations to a single location. Goldfarb agreed to the lucrative offer, and within five years employed 650 people.

Union Underwear and Fruit of the Looms fortunes converged near the end of the decade. In his quest to become a national marketer, Golfarb purchased a 25-year license for the Fruit of the Loom trademark in 1938. He was certain that the well-known brand would propel his products to national prominence.

Union Underwear built a second plantwhich produced broadcloth boxer shortsin Bowling Green, Kentucky, on the eve of World War II. When America joined the Allied effort in 1941, the company was enlisted to manufacture millions of pairs of G.I. shorts. Union Underwear received numerous commendations from the government for its contribution on the homefront.

Goldfarb made several promotional innovations in the postwar era that set Union Underwear and the Fruit of the Loom label apart from other undergarment manufacturers. Before World War II, underwear was usually sold separately, but in the late 1940s, Goldfarb introduced a printed cellophane bag with three pair of shorts inside. The new packages were displayed separately to call attention to Unions branded undergarments. The move established a trend that has become an industry standard for most basic underwear. And even though Goldfarb was only a licensee of the trademark, he became the only licensee to invest his own funds in consumer advertising.

The company expanded its product line from unionsuits and boxer shorts to include knit underwear in 1948, and opened its third plant in Campbellsville, Kentucky, in 1952. The plant provided internal knitting and bleaching facilities for Union manufacturing for the first time, helping the company to gain more vertical control of production and facilitating the production of a wider variety of mens and boys undergarments.

Goldfarb continued his promotional innovations when Union became the first underwear company to advertise on network television in 1955. The company purchased spots during Dave Garroways Today Show. Union also utilized banners, posters, signs, price tickets, newspaper slicks, and a cooperative advertising program to support Fruit of the Loom sales. Consumer advertising campaigns were coordinated with such seasonal events as Fathers Day, Back-to-School, and Christmas to maximize the companys advertising dollar.

Around the same time, Union allied itself to the mass merchandisers that were beginning to spring up in the mid-1950s. The companys growth was soon tied to these new retailers success: by the early 1990s, 45 percent of mens basic underwear was sold by discount stores.

The mid-1950s saw the start of a string of acquisitions that would place Union Underwear in several different hands over the next three decades. In 1955, Union Underwear was taken over by the Philadelphia & Reading Corporation, a newly-formed conglomerate. The new corporate structure provided Union with additional resources, enabling it to extend its manufacturing operations.

By this time, Union Underwear had grown to become Fruit of the Looms dominant licensee, and to most people, the name had come to mean underwear more than fabric. The licensee, in fact, had grown larger than Fruit of the Loom. In order to assure the availability of its well-known trademark, Philadelphia & Reading acquired the Fruit of the Loom Licensing Company in 1961.

In 1968, Union Underwears parent was purchased by Northwest Industries. The consolidation furnished new capital which further facilitated the companys growth. That same year, Goldfarb stepped down from the chair to be replaced by Everett Moore, who had joined the company in 1932 at the Frankfort plant.

Union Underwear strove to energize advertising for mens underwear in the late 1960s and early 1970s. In 1969 the company contracted sportscaster Howard Cosell to appear in five television commercials over three years. Next, British comedian Terry Thomas was named spokesperson, as advertisers hoped that an English representative would lend an air of quality and endurance to their commercials. The use of celebrity spokespersons brought more public attention to Fruit of the Loom underwear, but the company continued to seek more brand recognition and market share.

In 1975, Union made advertising history with the first Fruit of the Loom Guys campaign. The commercials featured three men in costume as a bunch of grapes, an Autumn leaf, and an apple, all elements of the brands trademark. The characters helped propel the Fruit of the Loom brand to 98 percent recognition and doubled Unions share of the market for mens and boys underwear.

Also that year Moore retired and was succeeded by John Holland. In 1976 Union acquired the century-old BVD trademark. The company began to merchandise BVD as a completely separate line of underwear aimed at the more upscale department store market. Union also began to expand its product line to include Underoos decorated underwear for boys and girls in 1978, and began to supply blank T-shirts for the screen print market during the 1970s. The expansion into plain T-shirts soon evolved into a huge business known as Screen Stars, which sold unbranded T-shirts, sweatshirts, and sweatpants to wholesalers who imprinted them for promotional uses.

Union did not escape the trend toward leveraged buyouts of the 1980s. In 1984, William F. Farley acquired Union Underwear when he bought Northwest Industries for $1.4 billion. Farley privatized the parent company and renamed it Farley Industries. Just two years earlier, Farley had made his first major acquisition, defense contractor Condec Corp. In the 1980s tradition of leveraged buyouts and junk bonds, Farley parlayed his acquisitions into larger and larger conquests until, by the end of the decade, he had fashioned a textile and apparel conglomerate with $4 billion in annual sales and 65,000 employees worldwide.

In 1985, the conglomerate was restructured, $260 million in shares were sold, and Union Underwear was renamed Fruit of the Loom, Inc. to relate the business more closely to its famous trademark. Farley, a former encyclopedia salesperson, worked to improve Fruit of the Looms operational efficiency and squeeze more profits out of the companys number-one status as the holder of a 35 percent share of the undergarment market. Farley proceeded to sell the bulk of Northwest Industries other businesses and cut costs at Fruit of the Loom. The proceeds of the asset sales were combined with revenues from bond issues to finance domestic modernization and expansion into Europe.

Over the course of the 1980s, those manufacturing changes facilitated Fruit of the Looms evolution from an underwear manufacturer into an apparel company. Farley and Chief Executive Holland decided to expand into mens fashion underwear, womens underwear, and socks over the course of the decade, putting the Fruit of the Loom label on sportswear in 1987. Womens panties became one of the brands most popular extensions. The company launched that division in 1984 and led the category with a ten percent share within four years. Fruit of the Loom also made apparel history with its popular pocket T-shirt. Produced in a rainbow of colors, the wardrobe staples flexibility made it a consumer favorite for decades.

In 1982, sales of mens and boys white underwear made up 80 percent of the companys revenues, but by 1988, brand extensions comprised more than 40 percent of revenues. The active-wear market also grew much more rapidly than the underwear category: activewear sales tripled in the 1980s, while the underwear market grew only about six percent annually.

Capital improvements had enabled Fruit of the Loom to expand into newer, faster-growing markets, but they also left the company saddled with debt. Fruits debt-to-equity ratio of 3.5-to-l contributed to three out of four years of losses before the decade was over. Interest expenses also consumed ten percent of annual sales revenues in 1989. At the same time, Fruit of the Loom was threatened on two fronts: low priced imports began to eat into Fruit of the Looms 38 percent market share of basic mens undergarments, and the companys largest competitor, Sara Lee Corp.s Hanes Knit Products, was raising the ante in the un-derwars.

In an effort to promote its move from department stores to discount merchandisers, Hanes introduced Inspector 12 into its advertising campaigns in 1982. The curmudgeonly quality-control character claimed that her brand fit better and shrank less than Fruit of the Looms. Fruit of the Loom fired back with promotions that featured the tagline, Sorry, Hanes, you lose! The war escalated into a legal battle that ended with an out-of-court settlement wherein the two competitors agreed to pull the offending ads.

The Fruit of the Loom Guys were phased out when the company launched its more modern We fit America like we never did before campaign. Introduced in 1988, the television spots featured family scenes, including a mother dropping her daughter off at the school bus, and also included the first views of a woman in a pair of panties on network television. The $25 million campaign, created by Grey Advertising, Inc., emphasized Fruit of the Looms move into basic apparel for both sexes and all ages.

The brand extensions, expanded capacity, advertising blitz and years of debt paid off in 1988 when Fruit of the Loom made its first profit since its acquisition by Farley. The mid-1980s capital investments had pumped up domestic operating margins to 20-25 percent, and European plants began earning profits in the early 1990s. Sales had actually grown 13 percent annually since 1976 to $1 billion in 1988, but debt had consumed all of the income.

In 1990, Fruit of the Loom unveiled the underwear industrys first network advertisements that featured a male model sporting the flagship white briefs. The commercials asked the musical question, Whose underwear is under there? The answer was provided by hunky celebrities Ed Marinaro, Patrick Duffy, and James DePavia. Lawyers for Grey Advertising spent two weeks battling one of the big three networks to air the commercials that would have been banned just three years earlier. Over the next two years, Fruit of the Looms celebrity underwearers would include soap-opera star Don Diamont, action-adventure hero David Hasselhoff, and sitcom dad Alan Thicke.

In 1991, Fruit of the Loom introduced the Its your time, campaign for its growing line of casualwear, which was extended to include garments for infants and toddlers. The company enlarged its array of brands that year through a licensing agreement with the upscale Munsingwear brand in the hopes of expanding Fruit of the Looms retail distribution.

The companys financial restabilization continued. Debt was reduced by more than $332 million with the help of sales totaling $1.4 billion, a stock offering of $100 million, a decline in capital expenditures, and the conversion of $60 million of debt into equity. Fruit of the Looms European sales surged 43 percent over 1990 as these divisions hit stride.

And despite a lingering recession in the United States, the company once again found its capacity constrained. Farley and Holland predicted that Fruit of the Loom would invest $125 million in new equipment and increase the workforce by 3,000 at plants in the United States, Canada, and Europe in 1992. With strong ties to mass merchandisers, major product launches, and line extensions, Fruit of the Loom hoped to increase sales 15 percent each year, decrease debt load, and grow per share earnings by one third annually in the 1990s.

Further Reading

Applebaum, Cara, Fruit of the Loom Sticks with Stars, Adweeks Marketing Week, February 4, 1991, p. 8.

Fruit of the Loom, Hanes Stretch from Skivvies into Active Wear, Adweeks Marketing Week, December 2, 1991, p. 7.

Corwin, Pat, More Options in Mens Underwear, Discount Merchandiser, September 1990, pp. 3639.

Boyswear Brightens the Apparel Picture, Discount Merchandiser, December 1991, pp. 5254, 6970.

Commanding Lead in Mens Underwear, Discount Merchandiser, August 1992, pp. 3845, 61.

Esquivel, Josephine R., The Pains and Gains of 91, Bobbin, June 1992, pp. 5060.

Fannin, Rebecca, Underwear: Inspector 12 Takes on the Fruits, Marketing & Media Decisions, April 1988, pp. 556.

Greising, David. Bill Farley in on Pins and Needles, Business Week, September 18, 1989, pp. 58, 61.

Bill Farley Could Lose His Shirtand His Underwear, Business Week, March 11, 1991, p. 86.

Laing, Jonathan R., Love that Leverage! Barrens, May 1, 1989, pp. 67, 31-33.

Levine, Joshua, Marketing: Fantasy, Not Flesh, Forbes, January 22, 1990, pp. 118120.

Oneal, Michael, Fruit of the Loom Escalates the Underwars, Business Week, February 22, 1988, pp. 114, 118.

Zipser, Andy, Cherry-picking Fruit of the Loom, Barrens, May 20, 1991, pp. 3031.

April S. Dougal

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Fruit of the Loom, Inc.

Fruit of the Loom, Inc.

founded: 1926



Contact Information:

headquarters: 5000 sears tower, 233 s. wacker dr. chicago, il 60606 phone: (312)876-1724 fax: (312)993-1749 toll free: (800)447-8761 url: http://www.fruit.com

OVERVIEW

Fruit of the Loom is a vertically integrated international apparel company, one of the leading U.S. manufacturers of basic apparel and boys'-and-men's and girls'-and-women's underwear and the top supplier to the U.S. screen print T-shirt market. In 1996, Fruit of the Loom was the fourth largest U.S. apparel company and the fourth largest licensed apparel maker. That same year, it was the seventh most admired apparel company as ranked by Fortune magazine. With a total of 98 offices and manufacturing and warehouse facilities in over 50 locations worldwide, Fruit of the Loom makes products under brand names that include Fruit of the Loom, BVD, Gitano, Wilson, and Pro Player. In the 1990s mismanagement left the company in bad shape and investors were outraged. Fruit of the Loom's efforts to move manufacturing offshore were intended to improve the company's production efficiency and cost position, but increased foreign competition, intense price pressure, and mounting debt have left the company with profound operating challenges. Trying to salvage the company in early 1998 at least enough to prepare it for sale, Fruit of the Loom's chairman of the board and CEO, William F. Farley, proposed to move operations to the Cayman Islands.



COMPANY FINANCES

Fruit of the Loom struggled through the second half of the 1990s, losing ground to fashion underwear brands like Calvin Klein and yielding its number one position to Sara Lee Corporation's Hanes. In 1995, Fruit of the Loom recorded an after-tax charge of $287 million to pay for worldwide restructuring efforts to improve operations and reduce the company's cost structure. That year, the company closed 9 plants in the United States and laid off more than 6,000 employees. The following year, Fruit of the Loom returned to profit with net earnings of $151.2 million despite flat sales totaling about $2.44 billion. In 1997 the company reported disappointing earnings, which were largely attributed to price discounting and significant promotional activity. That year, Fruit of the Loom's operating cash flow was a negative $94.9 million; the company had sales of only about $2.14 billion and a net income of negative $487 million. Fruit of the Loom's price-earnings (P/E) ratio was 41.7. At the end of 1997, Fruit of the Loom's total outstanding debt reached $1.2 billion, and the company announced that it was taking another after-tax charge, this time for $372 million, to help make the company more competitive. The sum would be used to help pay for Fruit of the Loom's worldwide restructuring efforts, including the closing and disposal of several domestic manufacturing and distribution facilities.




ANALYSTS' OPINIONS

In early 1998, Fruit of the Loom's chairman and CEO, William Farley, announced his plan to move Fruit of the Loom offshore to the Cayman Islands where foreign income is not subjected to corporate tax—Fruit of the Loom's tax rate would fall from 28 to 11 percent. Though presented as a plan to help the company come back from years of debt and failed attempts at restructuring, some held that Farley was largely interested in preparing Fruit of the Loom for sale. In May 1998, Credit Suisse First Boston analyst Dennis S. Rosenberg suggested that two years of solid performance and free cash flow of at least $300 million could indeed put Fruit of the Loom in a good position for a sale.




HISTORY

Polish immigrant Jacob Goldfarb began his clothing business in 1926 with the goal of producing low priced, quality undergarments—most notably, the popular one-piece men's underwear known as the "unionsuit." Appropriately, Goldfarb called his business The Union Underwear Company. Originally, Goldfarb operated without a factory, buying fabric from a supplier, delivering it to a cutter, then sending the cut pieces to a shop for sewing and finishing. In 1930 promoters from Frankfort, Kentucky, looking for a business to provide employment and money for their town during the Depression, offered to donate a plant for Goldfarb's Union Underwear Company, thereby uniting all the manufacturing operations in one location. By the end of the decade, Goldfarb purchased a 25-year license to use the Fruit of the Loom trademark, hoping the brand would help make his products nationally known. In 1952 Gold-farb opened a Union Underwear plant in Campbellsville, Kentucky, that stood in marked contrast to his earliest approach to manufacturing. This facility provided for on-site knitting and bleaching, in addition to cutting, sewing, and finishing, thereby providing even greater vertical control.

In 1955 a newly formed holding company called the Pacific & Reading Corporation, formerly the Philadelphia & Reading coal railroad and mining operation, took over Union Underwear, providing it with additional financial resources and enabling it to expand its operations. By this time, Union Underwear was Fruit of the Loom's most prominent licensee—in fact, Union Underwear had grown much larger than Fruit of the Loom—and people had come to identify the brand more with underwear than with fabric. In 1961, to ensure future availability of the Fruit of the Loom trademark, Philadelphia & Reading purchased the Fruit of the Loom Licensing Company. In 1968 Northwest Industries acquired Pacific & Reading, and so, also, Union Underwear. A year later, in an effort to perk up the advertising for its underwear, Union hired well-known and somewhat controversial sportscaster Howard Cosell to appear in five of its television advertisements over the following three years.

In 1975 Union Underwear began its "Fruit of the Loom Guys" campaign, which would be tremendously successful, greatly increasing Union Underwear's market share and brand awareness with consumers. The year after that campaign was launched, Union purchased the 100 year old BVD trademark, which the company used for a separate line of underwear targeted at a more up-scale market. Union branched out from men's and boys' underwear and, in 1978, began making "Underoos" decorated underwear for both boys and girls. Also in the 1970s, Union began supplying undecorated T-shirts to the screen print market. Soon this enterprise developed into an enormous business supplying plain T-shirts, sweatshirts, and sweat pants to wholesalers. The business was called Screen Stars.

The 1980s was a heady time of leveraged buyouts, and in 1984, William Farley purchased Northwest Industries for $1.4 billion, thereby acquiring Fruit of the Loom. Farley privatized Northwest Industries and renamed it Farley Industries. The following year Farley restructured the company, sold about $260 million in shares, and changed the name of Union Underwear to Fruit of the Loom, Inc. Farley focused on maximizing profits of Fruit of the Loom, then the top U.S. under-garment company with about 35 percent of the market.

Farley cut costs at Fruit of Loom, sold off many of Farley Industries' other businesses, and used asset sales and revenues from bond issues to modernize domestic operations and expand into Europe. Over the course of the 1980s, Fruit of the Loom expanded into men's fashion underwear, women's underwear, socks, and sportswear. During this time, the activewear market tripled in sales while the underwear market only increased by about 6 percent per year. By the end of the 1980s, Farley Industries was a worldwide textile and clothing corporation bringing in about $4 billion in sales annually. Capital improvements left Fruit of the Loom strapped with debt, and interest expenses consumed huge portions of annual sales revenues—10 percent in 1989. In the late 1980s, low-priced imports began to erode Fruit of the Loom's market share of basic men's undergarments. In 1987 the company went public and changed its name to Fruit of the Loom. The following year, Fruit of the Loom phased out its Fruit of the Loom Guys in favor of a modern campaign with the slogan "We fit America like we never did before." This campaign emphasized Fruit of the Loom as a basic apparel brand for all ages and both sexes and featured family scenes, as well as ads showing the first woman in panties on network TV.

FAST FACTS: About Fruit of the Loom, Inc.


Ownership: Fruit of the Loom, Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: FTL

Officers: William F. Farley, Chmn. & CEO, 54, $2,850,000; Larry K. Switzer, Sr. Exec. VP & CFO, 53, $1,085,000; Richard D. Davis, Sr. VP & General Manager Activewear; Robert F. Heise, Sr. VP & Chief Information Officer

Employees: 32,900

Principal Subsidiary Companies: Some of Fruit of the Loom's principal subsidiaries include: Brundidge Shirt Corp.; Camp Hosiery Inc.; Fruit of the Loom Inc. South Carolina Div.; Gitano Group Inc.; Jeanerette Mills Inc.; Panola Mills Inc.; Pro Player Inc.; Salem Sportswear Corp.; and Union Underwear Company Inc.

Chief Competitors: Fruit of the Loom not only manufactures about 35 percent of all male and 15 percent of all female underwear sold in the United States, but it is also the top supplier to the U.S. screen print T-shirt market. The company's principal competitors include: Sara Lee Corporation, manufacturer of Hanes products and Champion athletic knitwear products and the top U.S. maker of intimate apparel, women's and girls' underwear, boys' and men's underwear, and socks; Jockey International, manufacturer of men's, women's, and children's underwear and activewear; and Calvin Klein Inc., maker of haute couture and ready-to-wear apparel including underwear, jeans, and sportswear




In 1988, for the first time since Farley acquired Northwest Industries, Fruit of the Loom showed a profit. In 1990 the company again used male celebrities to sell underwear, this time on network TV. The following year, Fruit of the Loom launched the "It's your time" campaign for its line of casual wear, now expanded to include infant and toddler apparel. At this time, Fruit of the Loom became a top company in underwear for infants and toddlers and in 1994, it purchased the Gitano brand. Farley continued efforts to restabilize the company, reducing its debt by over $332 million with increased sales reaching $1.4 billion. In 1995 Fruit of the Loom closed 9 plants in the United States, laid off over 6,000 employees, and began moving operations to Central America and the Caribbean.

With the stated goal of more than doubling Fruit of the Loom's revenues to $5 billion, Farley had bought smaller apparel companies and had soon built a virtual empire, as well as a virtual mountain of debt—$1.2 billion by 1997. Some of the companies lost money and none yielded the hope for profit. In May and June of 1997 Farley angered investors by selling about 900,000 of his shares of Fruit of the Loom stock, raking in over $30 million just prior to announcing a 51-percent fall in second quarter earnings. Fruit of the Loom took a $101-million charge in 1997 to pay for a legal judgment from a suit filed by a business sold in 1986. Also in 1997 the company announced layoffs of 7,700 employees at seven plants, two of which it would be closing. Despite Fruit of the Loom's two restructuring efforts, and its layoffs and plant closings, in 1997 operating results had fallen to a $283-million loss. Moreover, by this time Fruit of the Loom had lost market share to Calvin Klein and Tommy Hilfiger, who captured part of the market by defining men's underwear as fashionable. With its production license for Ralph Lauren, Hanes elbowed Fruit of the Loom out of its number one spot in the undergarment industry. By 1998 Fruit of the Loom's debt stood at 50 percent of capital, and the company had average annual interest payments of $100 million. At this point, Farley announced plans to move Fruit of the Loom to the Cayman Islands where foreign income is not subject to corporate taxes.




STRATEGY

Jacob Goldfarb employed several marketing strategies with tremendous results. In the 1940s, he developed the idea of bundling three pairs of underwear in one cellophane package; this idea permanently changed the way most basic underwear were sold in the United States. In 1955 Goldfarb launched extensive nationwide advertising employing banners, posters, signs, and admission tickets, and broke new marketing ground in the industry by becoming the first company to advertise underwear on network television. At about the same time, mass merchandisers were beginning to appear on the retail scene, and Union began to ally itself with them; by the early 1990s, 45 percent of men's basic underwear would be sold in discount stores.

As early as 1969, Union Underwear began the then-unusual move of using celebrities to promote its underwear. First, Howard Cosell appeared in five of the company's TV commercials. Then the company hired British comedian Terry Thomas, hoping his "Englishness" would lend an air of superiority to the product. In 1990 Fruit of the Loom would return to this strategy, this time actually showing celebrities like Ed Marinaro, Patrick Duffy, and David Hasselhoff, for example, in their Fruit of the Loom underwear in commercials on network television.

CHRONOLOGY: Key Dates for Fruit of the Loom, Inc.


1851:

B.B. & R. Knight Brothers create a cloth trademark called "Fruit of the Loom"

1926:

Jacob Goldfarb begins a low-priced, high-quality undergarments business called The Union Underwear Company

1930:

Investors in Frankfort, Kentucky, offer to donate a factory to Union to bring jobs to the town

1938:

Goldfarb purchases a 25-year license for the Fruit of the Loom trademark

1948:

Begins marketing Fruit of the Loom in a printed cellophane bag with three pairs of underwear inside, now an industry packing standard

1955:

Philadelphia & Reading Corporation buys Union

1961:

Philadelphia & Reading acquires the Fruit of the Loom Licensing Company

1968:

Goldfarb steps down as the company chairman

1975:

Union introduces the "Fruit of the Loom Guys"

1976:

Acquires BVD

1984:

William F. Farley acquires Union's parent company

1985:

Union Underwear is renamed to Fruit of the Loom, Inc.

1998:

Farley announces plans to move Fruit of the Loom to the Cayman Islands




Union Underwear launched an extremely successful advertising campaign in 1975 when it introduced its Fruit of the Loom Guys. The Fruit of the Loom Guys campaign featured three men dressed as three of the items composing the companies trademark: an apple, a bunch of grapes, and a leaf. The campaign doubled Union Underwear's share of the men's and boys' underwear market and increased public recognition of the brand to 98 percent.

A less successful campaign was launched in response to Hanes Knit Products' 1982 "Inspector 12" advertising campaign. Hanes' campaign featured a quality control character who would always judge Hanes brand superior to Fruit of the Loom. Fruit of the Loom responded with a series of advertisements all ending with the tagline, "Sorry Hanes. You lose!" Eventually, this "underwar" resulted in a legal battle that was settled out of court with the requirement that both companies withdraw their advertisements.

Fruit of the Loom anticipated the value of developing licensing partnerships to expand its line and boost sales. Its partnerships included agreements with Warnaco, manufacturer of slips and bras, and Wilson, who agreed to Fruit of the Loom's manufacturing a complete line of athletic activewear under the Wilson label. Other licensing partnerships included some with major U.S. professional sports leagues like the National Basketball Association and the National Football League, as well as large entertainment companies like Time Warner and Walt Disney. Fruit of the Loom acquired it own sportswear companies including Salem Sportswear in 1993, and Artex Manufacturing Inc. and Pro Player in 1994.

In September 1997, to promote its newly designed men's briefs, Fruit of the Loom ran an ad in over 1 million subscription issues of Rolling Stone magazine featuring an actual 3-inch pair of men's briefs made from the same fabric and including the same improved features as the full-sized briefs. The tiny briefs prompted such a large and enthusiastic consumer response that Fruit of the Loom distributed another 200,000 ad inserts the following month. Consumers used them as soda can holders, golf club covers, and as apparel for stuffed animals.




CURRENT TRENDS

In the 1990s Fruit of the Loom began laying off employees, closing plants, and moving manufacturing operations overseas. In early 1998, chairman and CEO William Farley announced plans to relocate the company to the Cayman Islands. To some, it wasn't clear whether Farley was interested in saving the company or in saving his own investment as the largest shareholder since a move to the Caymans wouldn't go far toward solving Fruit of the Loom's fundamental operating problems. Farley claimed that the move would eventually save the company about $100 million annually by trimming the tax rate from 28 to 11 percent, and this money could be used to pay off debt.

But apparently, the relocation would provide more than a corporate tax break for the company. Fruit of the Loom's filings with the Securities & Exchange Commission (SEC) revealed that the Cayman move had been structured so Farley would receive a huge personal tax break not available to other investors. In the first half of 1998, Farley owned 10 percent of the company, or 7 million shares—82 percent were class B shares worth 5 votes each, giving him a 30-percent voting stake in the company. The relocation was structured to keep Farley's voting majority, and under the terms of the relocation, he would have an opportunity to purchase preferred shares in a Fruit of the Loom subsidiary called FTL-Delaware, the first Fruit of the Loom shares to offer dividends since the company went public in 1987.




PRODUCTS

Fruit of the Loom offers basic, value-priced clothing for infants to senior citizens. Active wear, athletic sportswear, casual wear, children's wear, hosiery, sports-licensed apparel, and underwear are its leading products. The company sells products principally under the brand names Best, Botany 500, BVD, Fruit of the Loom, Fun-pals, Gitano, John Henry, Kangaroo, Lofteez, Munsing-wear, Pro Player, Salem Sportswear, Screen Stars, and Wilson.

In the 1980s, Fruit of the Loom began its evolution from being a basic underwear manufacturer to being an apparel company producing socks, sweatshirts, men's fashion underwear, and women's underwear. Within four years of launching its women's underwear division in 1984, Fruit of the Loom led that category with a 10-percent market share. By the late 1980s brand extensions made up over 40 percent of revenues. In 1991, Fruit of the Loom began offering infants' and toddlers' apparel and Warnaco started to produce and market bras under the Fruit of the Loom name. In 1993 Fruit of the Loom struck a deal with Wilson Sporting Goods to manufacture and sell Wilson athletic wear in the United States. Also in 1993, Fruit of the Loom acquired Salem Sportswear. The following year, the company purchased Artex Manufacturing, which licensed sports leagues and famous cartoon characters from Disney, Peanuts, and Looney Tunes. Fruit of the Loom's three-year licensing agreement with Walt Disney Co. allowed Fruit of the Loom to manufacture and sell apparel sporting Disney characters in the Middle East, Europe, and eastern Europe.




GLOBAL PRESENCE

Fruit of the Loom's main market is the United States, which in 1996, accounted for 85 percent of the company's total sales and 86 percent of the company's total operating income. In 1995 Fruit of the Loom began moving operations to Mexico, the Caribbean, and Central America, hoping to reduce operating costs. Fruit of the Loom maintains 47 manufacturing facilities in Canada, El Salvador, Honduras, Ireland, Jamaica, Morocco, the United Kingdom, and the United States and hopes to move its headquarters to the Cayman Islands by the end of the decade.




EMPLOYMENT

During the 1990s, Fruit of the Loom shut down many U.S. plants and facilities. Some operations it moved abroad; some it simply closed. In 1995 the company closed nine U.S. plants and laid off upwards of 6,000 workers. In 1997 it laid off more than 7,700 employees at seven plants, two of which it closed altogether. In April 1998, the company announced that it would close its Campbellsville, Kentucky, plant and thereby lay off more than 800 more workers. All told, from 1994 to early 1998, Fruit of the Loom laid off 16,355 employees.

By the start of 1998, Fruit of the Loom had almost entirely eliminated its U.S. sewing operations, moving them to cheaper locations abroad. The incentive for U.S. garment makers to move manufacturing operations abroad is powerful. On average, U.S. apparel workers are paid $8 an hour, plus benefits; minimum wage in Mexico is $1 an hour; in Haiti, the minimum hourly wage is $.29. Larry Martin, president of the American Apparel Manufacturers Association observes that "[l]abor costs are 40 percent of making a garment, so it's pretty difficult to compete at $8 to $10 an hour."




SOURCES OF INFORMATION

Bibliography

1997 fruit of the loom annual report. chicago, il: fruit of the loom, inc., 1997.

aran, kimberly. "fruit of the loom to license disney, but europe's no magic kingdom." crain's chicago business, 31 october 1994.

business rankings annual, detroit, mi: gale research, 1998.

"calvin klein inc." hoover's online, 18 may 1998. available at http://www.hoovers.com.

dougal, april s. "fruit of the loom, inc." international directory of company histories, vol. 8. detroit, mi: st. james press, 1994.

"fruit of the loom ratings placed on watch neg by s&p." business wire, 12 february 1998.

"fruit of the loom to cut 800 jobs in another plant closing." new york times, 16 april 1998.

"fruit of the loom, inc." hoover's online, 28 july 1998. available at http://www.hoovers.com.

hunt, nigel. "fruit of the loom cuts about 3,000 us sewing jobs." reuters business report, 11 november 1997.

"jockey international." hoover's online, 18 may 1998. available at http://www.hoovers.com.

lazich, robert s., ed. market share reporter- 1998, detroit, mi: gale research, 1997.

poole, shelia m. "kentucky town in despair over losing apparel plants." the atlanta journal and constitution, 27 november 1997.

"s&p description: fruit of the loom." standard & poor's, 15 april 1998.

"sara lee corporation." hoover's online, 18 may 1998. available at http://www.hoovers.com.

"tiny briefs mean big news for fruit of the loom." business wire, 28 september 1997.

weimer, de'ann. "fruit of the loom: a killing in the caymans?" business week, 11 may 1998.


For an annual report:

on the internet at: http://www.fruit.comor write: corporate communications center, inc., 400 s. jefferson, ste. 303, chicago, il 60607


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. fruit of the loom's primary sics are:

2252 hosiery, nec

2322 mens/boys' underwear & nightwear

2329 mens/boys' clothing, nec

2341 women/children's underwear

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