Diversification aids commodity wholesaler in changing market

EARLY last year, Parr Lumber Co., L.Chino, Ca., realized it was in the middle of a crisis. The wholesaler was snictly a commodity lumber and plywood volume house. It made its money by quickly turning large quantities of the basics at minimum margins. Times had been prosperous then suddenly, with the slowdown in housing constmction in the West. the bottom fell out.

"We were selling only to retailers who in turn sold to conu'actors," 5aid Pete Parrella, owner and president. "Consequently, we were only busy if they were busy. And there wasn't enough business to go around."

Downsizing was the first reaction. "We cut it back to bare bones," he said. 'We had a lot of overhead. We reduced from 30 people to 17."

Still, the forecast looked bleak. It was time to rethink the business. Palr lured specialty products expert Jerry Long from Somerville Plywood Corp., Hawthorne, Ca., to spearhead a broad diversification.

The yard, which had always been filled with sheathing, is now stocked with melamine overlays, OSB and many other specialty panel products. Canying the new products meant entering a field of less competition in the area and a new base of industrial customers. Pan sells the higher priced, higher margin products to cabinet shops and manufacturcrs of everything from closet organizers to walkin coolers.

While Parr has retained all its existing commodity customers, the specialties now account for about 4070 of its business. And the segment continues to grow. "We're building (the business) back up," Panella said. "Unlike most companies, we're actively looking for salespeople. we've got something to offer."

Now celebrating its l5th anniversary, the company began as an office wholesaler in Orange, Ca. "Pete quickly realized there are limits to what an office wholesaler can be," explained executive vice president/general manager Rick Houk. "He wanted Parr Lumber to have more than that. Thirteen years ago he bought the distribution center with l0 acres in Chino."

Foresight. When Pan'came to town, Chino was sparse. Neighbor Intemational Forest R'oducts was the only other lumber company nearby. Forest products businesses now blanket the area and mortgage and lease mtes have been skyrocketing. Pan's moftgage will be paid off in two years, reducing overhead to keep prices even lower.

The firm's financial strength is a major factor in its survival. "You pay your bills, you keep your credit," said Panella. "In 15 years we've never missed a payroll or a discount."

"You must go with someone who's going to be around," Houk added. "We can weather the storm. The mills know it.