The Uneasy Succession at Krementz

In the fall of 1997, Richard Krementz Jr. sat down in his company’s mostly empty building to ponder the fate of the business, one of America’s most venerable jewelry manufacturers. Family members had owned and operated Krementz & Co.—the originator of gold overlay—since 1866, and Krementz, third-generation descendant of the company’s founder, once had planned for his son to manage and inherit the Newark, N.J., firm. That dream had ended a decade before when the two parted ways. Now Krementz, 70, had neither a buyer nor an heir.

It had not always been so. As a child, Richard Krementz III (known as Rick) would watch his father pull a rare gem out of his pocket and challenge him to guess its worth. Other times his father would pile a handful of some colored gemstone on the kitchen table and defy him to identify the stone and where it came from. At 12, Rick Krementz accompanied his parents on buying trips to Europe. At 16, he circled the globe with his father and the company stone buyer. He married a woman he met on a gem-buying trip to Brazil.

There were uncertainties as well. Even as a teenager, Rick viewed the idea of running the family business as a mixed blessing. “I felt it was sort of assumed that I would take over the business at a certain point,” he says. “For a lot of my life, it didn’t seem as though there were alternatives.”

So Rick created his own alternative. After graduating from high school, he departed for the University of California to study theater, a decision his father vehemently opposed. “I wanted him in the business,” explains the elder Krementz.

But gems and jewelry seemed to be in Rick’s blood. At one point he took a year off from school to supervise groups of miners in a Kenyan mine owned by Campbell Bridges, discoverer of tsavorite. By November 1978, Rick Krementz, 23, was back in New Jersey working for Krementz & Co.

He began as an apprentice in the soldering and setting areas of the production department. Like his father, he performed many jobs to learn all facets of the business. He took the Gemological Institute of America’s residence course, and, like his father, bought and graded colored stones. He was on track to the top spot at Krementz & Co.

Three years later he was gone.

Rick Krementz describes the company he left in 1982 as a closed universe. “Most people were trained and brought up internally,” he says. “We rarely hired a person with outside experience. I had some frustrations with how we were doing things, and I wanted to see the world.”

Seeing the world began with a stint at Harvard Business School. Rick informed his father by faxing a letter to Saudi Arabia, where Richard was traveling at the time. “I was very surprised,” recalls the elder Krementz. “I hadn’t an inkling.”

At Harvard, Rick Krementz learned that the jewelry industry was regarded as an “artsy-craftsy business, not a real business.” Worse yet, his practical experience was irrelevant to potential employers, “even though I had been in charge of assets worth millions,” he says. “Because it was a family business and because it was jewelry.”

Toward the end of his second year at Harvard, Rick realized that leaving the jewelry business wouldn’t be so easy. “I told my father I wanted to come back to Krementz, and we started having negotiations about a job.”

First signs of trouble. Rick Krementz returned to a situation that appeared tailor-made for a 29-year-old with a newly minted Harvard degree. Krementz & Co. was known at every level of jewelry distribution. The venerable firm looked profitable, securely niched, and well-positioned for growth.

But ominous trends inside and outside were about to catch up. The erosion in gold prices after 1980 and a flood of well-crafted 14k jewelry from the Pacific Rim steadily cut the ground out from under Krementz products. Meanwhile, the company’s complex on Chestnut Street, where most Krementz products were made, was deteriorating rapidly.

Another issue was strategic. “It was very clear after I’d been back a year or two that we were very unfocused,” says Rick Krementz. “We were [manufacturing] a little religious, a little bit of bridal, a little bit of gemstones.” The company was a significant force in only one product area: gold overlay. After Rick became group vice president in charge of marketing and manufacturing all nonkarat gold jewelry (i.e., overlay), he set out to tackle the problems associated with Krementz Traditional, the Krementz brand product.

Krementz & Co. had reached the limits of its expansion by 1985, when it sold its metal wire plant in Providence, R.I. Ted Bonsignore, chief financial officer at the time, says the company was making multimillion-dollar investments in CAD and in mechanizing operations to boost production of wedding bands and signet rings. But the Chestnut Street facility was “bulging at the seams” and “not conducive to efficient operation.” Management decided to build a new facility on McCarter Highway in Newark, just south of downtown, to house all operations. “We felt it necessary to provide a better working environment to attract talented people,” says Bonsignore.

Almost alone among managers, Rick Krementz opposed the decision. He believed a new building was unnecessary and argued that “for a lot less money, we could bring the old structure up to decent standards.” The argument failed.

Other issues divided father and son, including personnel, marketing strategy, and capital investment. Primarily, Rick believed the company was too diffuse. “We were branching out and not focusing on core products,” he explains. Older managers tended to side with Richard, leaving Rick a minority of one.

Krementz & Co. had no forum for managers to resolve issues—no regular meetings, no ongoing communication. The structure, says Richard Krementz, was “very informal.” Ad hoc meetings took place in offices or hallways, often prompted by Richard’s question, “You got a minute?”

Tensions mounted between father and son, and between Rick Krementz and other executives. Both Krementzes dug in—Richard unyielding, his son impatient, at times defiant. Rick acknowledges that “my track record in managing up is lousy. I aggravated the upstairs people, such as my father and a few others. I was not very politic.”

The ’80s: Trends catch up. As the company moved into the late ’80s, only two of Krementz’s gold businesses remained competitive, Shiman Religious and Krementz Bridal, according to Bonsignore. Money needed for innovation was hard to obtain. Krementz held millions in memorandum on products in stores and had to borrow to invest in new technologies such as robotics. As gold prices slid and foreign product entered the market, the most vulnerable of Krementz’s businesses was the one that had seen it through the Depression: overlay.

Underwood Jewelers, a three-store operation in Jacksonville, Fla., was one of many retailers that dropped Krementz Traditional in the ’80s. “Our stores are fairly large, and we weren’t selling enough to justify carrying it,” says owner Clayton Bromberg.

Fred Weber, who has owned both mall and guild stores around Dayton, Ohio, since the early ’50s, remembers when new competition began to appropriate the price points traditionally dominated by overlay. “In the late ’80s and early ’90s, a lot of sterling and gold product came onto the market. From a price perspective, it took over.”

Overlay, Weber adds, “was always a quality product. And Krementz was a quality company. I was concerned about what was going to happen to the company.”

The generational conflict at Krementz came to a head in 1988. Neither Krementz will discuss the issue that triggered Rick Krementz’s departure or what exactly happened on the day he left.

“My father and I have had a challenging relationship over the years,” says Rick. “That’s a polite way of putting it. And I had a lot of concerns about how we would move forward. My father is rather strong-minded. A car can’t have two steering wheels. If I wanted to go left and he wanted to go right, well, everyone loses.”

Richard Krementz recalls it only as “a very sad day.”

Six months later Rick joined New York-based Frederick Goldman, a bridal jewelry manufacturer. He also worked for ArtCarved, in Austin, Texas. He and his wife moved to Brazil in 1990, where he began a career as a gem trader and business consultant.

Reverse course. On May 9, 1990, prodded by First Fidelity of Newark, the company’s principal lender, and an internal study by consulting firm Arthur D. Little, Richard Krementz announced he was folding Krementz’s 14k and Shiman Gold lines. The company laid off approximately 100 employees. Bonsignore, named president and CEO, told the Newark Star-Ledger that Krementz & Co. would continue manufacturing Krementz brand (overlay), Shiman Religious, and Krementz Bridal, which accounted for 75% of revenues. Two months later, on July 5, 1990, McTeigue (an 18k gold and colored stone line) was sold to Tiffany. A year later, Krementz sold its bridal jewelry division.

In August 1997, the Colibri Group, a jewelry manufacturer based in Providence, R.I., bought Krementz Traditional and Shiman Religious. By the fall of 1997, Krementz & Co. consisted of Richard Krementz Gemstones, a line of 18k and 22k colored gemstone jewelry.

Rick Krementz returned from Brazil in early summer 1998 on vacation. He was 43. His marriage had recently ended, and the Brazilian economy was lackluster. In June, his father approached him about the idea of taking over the business. “Ten years ago I never imagined I would be coming back,” he says. “And 10 years before that, I never imagined I would be leaving.”

Rick became president and CEO on Jan. 1 of this year. Richard stays on as gem buyer and product development consultant. Rick stresses this is a permanent decision. Richard says he looks forward to spending more time on the family’s 300-acre island off the coast of Maine.

Future of Krementz & Co. Today, Krementz occupies part of one floor of the building on McCarter Highway, where about 35 people, mostly highly skilled jewelers and model-makers, produce rings for Richard Krementz Gemstones, the remaining division of Krementz & Co.

Rick Krementz says the company will target the “Krementz 400,” guild stores specializing in high-end jewelry. He aspires to have the preeminent colored stone line in the less common colors. The company already has earned a reputation for unusual products. Late last year a Richard Krementz Gemstone product by designer Maria Canale earned Best of Show in the prestigious American Gem Trade Association Spectrum Awards competition (JCK, January 1999, p. 78).

“What they’ve done,” says jeweler Clayton Bromberg, “is taken the part they were best at, the part people in the company were most enthused about, and grown that into something that is a lot more than it was.”

Bromberg says Krementz Gemstones has been able to supply his wealthy and discriminating customers with extremely rare gems. “We carry fire opals, tanzanites, peridots, chrome tourmaline, tsavorites. Things you don’t see every day that are tremendously attractive.”

Rick Krementz says he’s learned that businesses need “a structured channel of communications.” He also believes the older generation’s timetable for exiting the business should be in writing.

Richard Krementz, who relishes escorting visitors through the company vault, past small flat boxes of alphabetically arranged gemstones, acknowledges that “there are a lot of things he can do far better than I can. Let him do it.”

The GM of the Jewelry Industry

Krementzes have owned and operated Krementz & Co. since 1866. The company’s longevity and success owed much to a process invented by founder George Krementz (1837-1918), who designed his products and the machines to make them. He patented a method for sheeting gold over base metal, which allowed jewelry to be stamped out of “gold overlay.” Marketed as Krementz Traditional, the jewelry had the appearance of gold at a fraction of the cost. When the Depression flattened Newark, N.J.’s 10k and 14k gold jewelry manufacturers, the company, under Krementz’s sons, Walter and Richard, survived and even bought out competitors. A third generation, consisting of Walter Krementz’s sons, Walter and Robert, and their cousin, Richard Jr., guided the company to further growth and profitability through the post-World War II boom.

“There were no conflicts,” is how Richard Krementz Jr. describes his relationship with his older cousins. The cousins—Yale men, like their fathers—divided the labor equitably among themselves. Richard Krementz took an interest in product development, technology, and colored gemstones. He left sales and marketing to Robert (1912-1997) and Walter (1911-1992), whose shares in the business he later purchased.

Many who worked at Krementz in the ’70s and ’80s credit Richard with being a far-sighted manager, completely at home in the jewelry industry, committed to a quality product. One former executive describes Richard as being “like a character out of Shakespeare.” Krementz, he says, was “self-centered and self-absorbed. But at the same time [he had] honest-to-God feelings for the ordinary people who worked on the line.”

Other colleagues and customers testify to Krementz’s integrity, intellect, and resolve. “He didn’t know what a clock was,” says Ed Jadwin, who met Richard Krementz in prep school and worked for Krementz & Co. from 1960 to 1990, mostly as executive vice president. Ted Bonsignore, who came to the company as controller and left as president and CEO, describes Richard Krementz as “someone unfailingly dedicated to the business.”

He’s also been described as “stubborn” and “hard-headed.”

“He didn’t like to be wrong and never liked to be caught if there was a possibility that he made a mistake,” says Frank Dallahan, senior vice president and general manager of the company’s bridal jewelry division from 1988 to 1991, and executive vice president of sales and marketing for Shiman Religious and Krementz Traditional from 1995 to 1997. Dallahan is now executive director of trade relations at JCK.

Bonsignore describes the company he joined in 1975 as “an amalgamation of many acquisitions.” That year, for example, Krementz had purchased McTeigue and Co., an 18k gold and colored stone line carried by high-end retailers. Richard Krementz engineered such takeovers to position his company as “the GM of the industry”—it supplied stores with the jewelry equivalent of anything from a Chevrolet to a Cadillac. The company was organized vertically—it did its own casting, refining, and stamping—and marketed to the trade horizontally, selling a range of product from overlay cufflinks to rings retailing in the high five figures.

By the mid-’80s, Krementz consisted of seven selling divisions and a wire manufacturing plant. In addition to McTeigue and Krementz Traditional (overlay), these were Shiman Religious (a 14k gold religious jewelry line), Shiman Gold (nonreligious gold jewelry), Krementz Gold (a midpriced 14k gold jewelry line), Krementz Wedding Rings, and Krementz Gemstones (formerly Jones & Woodland). The company fielded seven different sales operations, had offices in Europe, employed nearly 700 people, and generated sales of more than $50 million.