THE MAGAZINE FOR LEADING BUSINESS EXECUTIVES
Bringing Old Traditions to a New Location
Establishing a Self-Sufficient Energy Alternative
Penneco Oil Company
Pioneer Oil Company
Winter/ Spring 2010
2 | USBusinessExecutive Winter/Spring 2010
PRODUCTION DESIGNER Julie Hudak
MANAGING EDITOR Tony Ware
LETTER FROM THE EDITOR
EDITOR-IN-CHEIF Anthony S. Jacobs
STAFF WRITER Molly Cohen STAFF WRITER Kellie Ducharme ASSOCIATE WRITERS H.M. Kuldell and Kelly Matlock ADVERTISING SALES DIRECTOR Patrick Rose EXECUTIVE DIRECTOR OF EDITORIAL RESEARCH Mike Richards
PUBLISHER Bull Run Media EXECUTIVE EDITOR Keyla Carr
SENIOR DESIGNER Sheryvonn McDonald DESIGNERS Heather Darazs, Cesar Sosa, Jay Vandewani
DIRECTOR OF OPERATIONS Karyn Dowty OPERATIONS Kelly Matlock Meredith Friedline, Daniella Gonzalez, Rebekah Tingley, Valerie Landers
Being headquartered just outside of Washington, D.C., home to so much ever-shifting legislation, US Business Executive is never lacking for action to cover. And this has been particularly true in the energy sector recently, as just a few miles east off the Virginia coast a ban has been lifted on offshore drilling for oil and natural gas. Of course, the impact of that decision won’t be known for some time, and this journal looks forward to charting the impact of new regulations. In the meantime, US Business Executive looks at alternative “energy” of all sorts, turning an eye toward not only refineries but also breweries, to the food service and education arenas, as well as manufacturing. Spring has sprung, and the stage is set for telling many tales of rejuvenated activity. For example, Imperial Frozen Foods began as a hobby in a Brooklyn, N.Y., grocery store and has become a multimillion dollar frozen fruit business. Starting out as a provider of fresh canned fruits (jams and jellies) Imperial Frozen Foods became one of the few frozen fruit brokers in the United States for much of its initial existence. Imperial has focused efforts developing and supplying many private label retailers across the U.S. Through strategic purchases and conscientious management Imperial has established a multinational food manufacturing base, and has evolved from the humble milk carton of frozen strawberries to a full line of frozen fruit, including frozen whole strawberries, blackberries, blueberries, berry medleys, peaches and rhubarb (which many people will be surprised to find out is a vegetable not a fruit). Although in a completely different industry, the Penneco Oil Company is an equally family-oriented company that found its niche. Penneco Oil Company’s business history dates back to the early ’50s, but the exploration and production company was not incorporated until 1979, when the company went through a restructuring period. Penneco currently has 60 employees and holdings in Pennsylvania, West Virginia, Utah, Michigan and Oklahoma. But, despite the company’s growth, Penneco is still a family-style company, according to president Terry Jacobs. “My father, brother and I were involved in the founding; and now my brother’s sons have joined us,” he says. Penneco was one of the principal companies involved in Utah’s Covenant Oil Field discovery in 2004, and produces a product that has encouraged the growth of America throughout the country’s history. The combination of old school principles and modern aspects solidify Penneco’s place in the industry as one of America’s most respected domestic energy resources. Similarly, as a fourth generation oilman, Donald E. Jones Jr.’s blood has been in the Illinois oil basin since his great grandfather moved there from the Oklahoma wells in 1937. And it was in 1972 that Jones, after completing a trade school for welders, joined his father in founding Pioneer Oil Company Inc., an oil and natural gas producing company that works in Illinois, northwestern Oklahoma, western Kansas, Kentucky and Indiana. Now Pioneer is a company that produces oil and natural gas, has a drilling company called Pioneer Oil Field Services LLC, and has a stimulation company called Franklin Well Services Inc. Based on his philosophy that natural gas is going to be an influential energy source in the near future, Jones’ plan for the company’s future growth and investments is based on unconventional reservoirs and innovative horizontal drilling techniques. With foresight, a realistic view of the country’s needs, and a thorough management style, companies of all sorts will continue to “fuel” this country and this journal.
— US Business Executive
Food & Drink
ATLANTA CHEESECAKE COMPANY Baking Up Sweet Success
CREATIVE OCCASIONS INC. Taking the Cake
Table of Contents
On the cover
GULF ISLAND SHRIMP II LLC/ FRENCH MARKET FOODS Products Stuffed With Promise
For Gulf Island Shrimp II LLC, a food company headquartered out of Lake Charles, La., variety and spices are just two of the components that have been well combined within a multi-faceted conglomerate that continues to strategically redefine its retail share of both the domestic shrimp and specialty entrée markets.
Page 120 Pioneer Oil Company
Establishing a Self-Sufficient Energy Alternative
As a fourth generation oilman, Donald E. Jones Jr.’s blood has been in the Illinois oil basin
since his great grandfather moved there from the Oklahoma wells in 1937. “I’ve been in the industry all my life, I got my education in my dad’s pickup truck,” he says.
Page 137 Penneco Oil Company
CHUNG'S GOURMET FOODS Feeding the Need for Quality
ELAN NUTRITION INC. Raising the Bar on Nutritional Snacks
MILK PRODUCTS LLC A Lean, Green Success Machine
ROCKY MOUNTAIN PIES LLC Enjoying the Recipe for Success
WILD ROCKET FOODS On a Trajectory of Growth
HIGH DESERT MILK
Does Everybody Good
NECO FOODS A Mouthwatering Success
ED JONES FOOD SERVICE INC. "We've Come a Long Way"
PEPPERS UNLIMITED OF LOUISIANA INC. A Spicy Success Story 22 TURRI'S ITALIAN FOODS, INC. Keeping Tradition Fresh in a Changing Market
ROCKLAND BAKERY INC. Baking Up Big Success
EVOLUTION, JUICE HARVEST CORPORATION Growing a Taste Bud Sensation
Bringing Old Traditions to a New Location
Chung's Gourmet Foods | page 18
4 | USBusinessExecutive Winter/Spring 2010
Central Lakes College | page 64
NORTH AMERICAN BREWERIES A Smooth Transition
LISA'S ORGANICS Fabulous Frozen Foods
CENTRAL LAKES COLLEGE Prepping Students for the Next Step
CALDWELL COLLEGE Preparing Students through Tradition and New Programs
BLOOMFIELD COLLEGE Growing by Degrees to Better Serve
VOGEL INDUSTRIES INC. Manufacturing Diversity for Half a Century
CENTRAL VIRGINIA COMMUNITY COLLEGE Employing a Wealth of Education
KIRKOR ARCHITECTS AND PLANNERS Housing Distinctive Ideas
THE SKILLMAN CORPORATION Managing Midwest Construction, Start to Finish
BROOKSTON RESOURCES INC. Seeing the Oil Industry's Big Picture
GLOBAL DIVING AND SALVAGE Diving Deep for Growth
SAN BERNARD ELECTRICAL COOPERATIVE INC. Still Energetic at Seventy
THE INDEPENDENT OIL AND GAS ASSOCIATION OF PENNSYLVANIA Increasing Outreach in a Burgeoning Region
BLX INC. Small Company, Big Plans
Stan Berdell had been in the oil and gas production industry for five years when he struck out on his own and founded BLX Inc.
ONONDAGA COUNTY WATER AUTHORITY Keeping Flow with New York’s Water System 212 RESOURCES CORPORATION Portable Problem Solvers
ROYAL DRILLING AND PRODUCING INC. They Know The Drill
BOONE COUNTY WATER DISTRICT Every Drop Counts
CHESTER COUNTY SOLID WASTE AUTHORITY Wasting Nothing
THE ILLINOIS OIL AND GAS ASSOCIATION Representing the Midwest’s Energy Supplier
C&M MACHINE PRODUCTS INC. Renewed and Freshly Imbued 95 SAPONA MANUFACTURING INC. America’s Last Stretch of Fabric Production
AARON OIL Hitting Gold for Resources Reclamation
AP INNOVATIONS Fueling a Better Tomorrow
MID VALLEY INDUSTRIES LLC Making Parts to Empower Big Industries
OHIO VALLEY MANUFACTURING The Tools to Succeed
SEABREEZE SEAFOODS INTERNATIONAL A Fresh Catch in Commodities
TURM OIL INC. Going with the Flow in Pennsylvania THE LOUISIANA OIL AND GAS ASSOCIATION Dedicated to Clean Distribution of Resources
PETROQUEST ENERGY Focusing a Natural (Gas) Expansion
MAP OIL Pumping Both Oil and Enthusiasm
81 FAULKNERUSA Securing a Project's Focus
Food & Drink
Imperial Frozen Foods
A Company that Keeps Heating Up Produced by Sean Barr & Written by Kellie Ducharme Big things often have small origins. Such is the case with Imperial Frozen Foods, the brainchild of Peter Skolnick’s father Sam, a Russian immigrant more than 80 years ago. What began as a hobby in a Brooklyn, N.Y. grocery store has become a multimillion dollar frozen fruit business. During the 1930s, Peter Skolnick’s grandfather made fresh jams and jellies in the grocery storeroom. The canning business grew quickly and Skolnick’s grandfather bought a nearby factory and manufactured juices and jams during the war for the government and local grocery companies. The firm, at the time called Fruitcrest, continued to operate in Brooklyn for many years. Imperial Frozen Foods was born under the umbrella of Fruitcrest in 1957. Sam, who had experience as a fruit buyer, separated Imperial from the Fruitcrest label then moved the new Imperial Frozen Foods to Great Neck, N.Y. A New Era Imperial Frozen Foods was one of the few frozen fruit brokers in the United States for much of its initial existence. The Empire State remained Imperial’s base of operations for close to 40 years, until the younger Skolnick took over in 1995 and moved the company headquarters to Monterey, Calif., with an eye to expansion (a branch office in New York still handles sales and logistics). Returning to the West Coast and the Pacific Ocean was a sort of homecoming for Skolnick, who remembers spending long periods of time on the west coast of Mexico, where his family owned a villa in the popular resort town, Puerto Vallarta, which was close to the growing and processing areas in Jalisco. Imperial purchased a strawberry processing plant in central Mexico in 1962, and was one of the first companies to establish a multinational food manufacturing facility, says Skolnick. “[My father] felt bringing the quality standards that he knew from manufacturing in the U.S. to Mexico and 6 | USBusinessExecutive Winter/Spring 2010
also creating a bigger supply-base for strawberries in the United States … would be successful.” Intermex (the Mexican plant) and Imperial Frozen Foods became one of the largest exporters of frozen strawberries from south of the border. At its peak, Imperial exported 80 million pounds of frozen fruit a year. At the time, Imperial sold most of its fruit to yogurt, ice cream and jam companies, but it also produced a brand of strawberries (packaged in milk cartons) called SunVale, which was widely sold to southeastern and Texan supermarkets. “He had high standards, which made the Mexican strawberries acceptable to U.S. markets,” explains Skolnick.
Skolnick learned the basics of the business at an early age. At just 12 years old, Skolnick remembers sitting on the floor in Great Neck office and stuffing envelopes with newsletters for his father. “Since my family has been in the business so long, I’m working with the sons and daughters of the people my father did business with for decades,” Skolnick says. “I have a memory of many of the customers as I used to see all the names on the envelopes.” Constant Evolution Today, many of the same clients that he sent newsletters to all those decades ago remain loyal to Imperial. Currently, Imperial offers a biweekly e-mail newsletter that goes out to 1,000 key executives in the frozen food and supermarket industry. “One of the real areas of growth in our business has been through the newsletter,” explains Skolnick, adding that each newsletter has a direct link to his e-mail so potential clients can communicate with him at the click of a button. “It’s been terrific for our business, for new customers and for our credibility.” Imperial is a member of the American Frozen Foods Institute, a trade organization that promotes the
Food & Drink interests of both United States and international frozen food providers. The firm participates in AFFI’s annual tradeshow on the West Coast. Skolnick says the company's Web site, www.imperialfrozenfoods.com, has been another useful marketing method. The site features many useful tools for companies interested in working with Imperial. Imperial is always interested in gaining new customers, but also maintaining and enhancing the relationships it has with existing clients. “I like to grow the existing business and get new customers,” explains Skolnick. “Sometimes your existing customer base is your best opportunity for growth, because you know their businesses and already have experience with them.” Imperial has focused efforts developing and supplying many private label
8 | USBusinessExecutive Winter/Spring 2010
Food & Drink retailers across the U.S. Skolnick explains that the privatelabel frozen fruit business dominates 75 percent of supermarket frozen fruit sales.
Imperial has business relations with manufacturing facilities in the Pacific Northwest, southern Michigan and upstate New York. These widely placed locations give Imperial a distribution service advantage for their customers. An exclusive 25-year sales and marketing relationship with National Commodity Sales, based in Atlanta, has resulted in solid privatelabel distribution to a wide market. The private-label industry has been experiencing constant growth and has been a beneficial market for Imperial. Imperialâ€™s SunVale brand has evolved from the humble milk carton of frozen strawberries to a full line of frozen fruit, including frozen whole strawberries, blackberries, blueberries, berry medleys, peaches and rhubarb (which many people may be surprised to find out is a vegetable not a fruit). Imperial also has close-knit relationships with many of its suppliers and factories. The company contracts with processors of blueberries from
10 | USBusinessExecutive Winter/Spring 2010
Michigan, strawberries from California, and raspberries from the Pacific Northwest and Chile. “We’ve done business with them for decades,” explains Skolnick, who adds that a lot of the factories are family-run American businesses. “They are known for their quality and their dedication to us. They work hard to make the whole package work.”
explains Skolnick, who works with his dedicated team to assure both suppliers and customers can depend on Imperial Frozen Foods products. What started in the back of a single corner grocer has now found its way throughout the nation’s shelves thanks to decades of measured decisions; but there’s a reason they always say that slow and steady wins the race. n
Skolnick guides the company as a whole with focus on quality and value. Under his leadership, this family-run company continues to expand as one of the nation’s leading manufacturers of frozen fruit. “I see double-digit growth,”
Food & Drink
Atlanta Cheesecake Company Baking Up Sweet Success Produced by Sean Barr & Written by H.M. Kuldell
Like many great desserts, Atlanta Cheesecake Company’s recipes have roots in a grandmother’s kitchen. For this particularly tasty story, that kitchen was on the van der Blom family farm, Panarama Ranch, in Anniston, Ala. Armed with the cheesecake recipe and blessing of their grandmother, Margret, Dina and David van der Blom founded a commercial bakery on the farm in 1988. The trio sold the goods under the Granny Boozer Gourmet Cheesecake label. At the time, cheesecakes were luxury desserts, not grocerystore items. And forget about a range of flavors; cheesecakes were traditional, New York-style. “Early on in the lifecycle of the category, most bakeries or retailers were selling only large cakes which kept the pool of buyers to mainly large families and people looking for a special occasion dessert,” says Vice President Chris Carpenter. But Atlanta Cheesecake's owner and president, Margret “Meg” Sapp, had an idea on how to overcome that for one of the company's first private-label clients, Sam's Club: Atlanta Cheesecake invented the first cheesecake sampler. “It was Meg’s thought that the customer would like to try different varieties of cheesecake, but probably wouldn’t or couldn’t buy three or four flavors of whole cakes,” says Carpenter. “Also Sam’s Club was not in a position to stock numerous amounts of flavors, so it worked out for both our customer and the end consumer. It was one of the bestselling items in the Sam’s bakeries upon introduction and has gone on to be duplicated by several other manufacturers and is now a staple in the category.” The Sam’s Club cheesecake sampler was one of the Atlanta Cheesecake Company’s most influential successes as a 12 | USBusinessExecutive Winter/Spring 2010
private label. The private-label business for retailers began as “generics,” products comparable, but less expensive than the national brands they were selling. The quality of those “comparable” products were often lacking. “Over the years, the retailers began realizing that they could get quality items similar to what the national brands were offering without having to pay for that brand name that comes with advertising and other promotional dollars built in to the cost,” explains Carpenter. “The retailers in most cases are proud to put their name and logo on their private-label products because they know the quality is there and their customer can buy it for less than the national brand.” Receiving the Company’s Just Desserts More than 20 years later, Atlanta Cheesecake Company is a proudly woman-owned and family-operated subsidiary of Panarama Incorporated and employs 100-plus people. The company's annual revenue has increased by working with national and regional grocery chains, wholesale clubs and wholesale distributors. The headquarters in Kennesaw, Ga., coordinates regional sales representatives and distribution throughout the continental U.S., Canada and the Caribbean. Even though the company is substantially larger than its start on the farm, it focuses on what it did on day one: creating a high-quality products for everyday indulgences, sourced from fine ingredients through long-standing vendor relationships. Opportunities still exist for the company beyond its privatelabel cheesecake. It recently opened Atlanta Cheesecake Café at its facility to showcase the the company's various products, and does an increasing amount of ecommerce through www.atlantacheesecakecompany.com. It ’s also carefully exploring other food products, such as the growing appetizer
segment, as well as looking into other frozen desserts (even savory profiles). “Once we develop items, we will conduct
customer intercept research to determine if we are on the right path and will follow it up with focus groups and taste panels to insure we have the right products,” Carpenter says. But the company hasn't done all it can do with its cornerstone dessert. One way Atlanta Cheesecake continues to make cheesecake more accessible is by offering its cheesecakes in smaller packaging, such as the quarter-cake or two-slice packages. “Basically the concept of selling smaller, cheaper versions of original products has been around for a while, but we didn’t want to skimp on quality, hence we decided to sell smaller portions of our larger, high-quality cakes,” says Carpenter. Smaller packaging allows smaller households to indulge without the guilt of wasting money on unfinished cake.
Naturally, the company also experiments with new flavors, but not at the expense of customer favorites. “Your basic flavors are always your best sellers, such as strawberry swirl, chocolate and turtle,” says Carpenter. “We can and have done over 100 flavors of cheesecakes over the years, but it basically comes back to the tried and true flavors that are your best sellers.” In fact, Atlanta Cheesecake Company's all-time bestseller is still New York-style – and the “Sampler” cheesecake that was originated many years ago. n
Food & Drink
Creative Occasions Inc. Taking the Cake
Produced by Sean Barr & Written by Kellie Ducharme Sheet cakes, square cakes, bar cakes, round cakes, organic cakes, iced cakes, seasonal cakes, wedding cakes … getting hungry? It’s OK, because there’s a fat-free cake, too. As one of the nation’s leading cake makers, Creative Occasions Inc. bakes just about any type or flavor of cake imaginable.
lots of sugar, butter, cream and personalized attention. “Each cake is handmade and customized.”
Having just experienced its eighth anniversary, the company has grown exponentially since its inception in 2002. Creative
Creative Occasions has a 65,000 square foot production facility and a 12,000 square foot freezer in its Nashville, Tenn., plant. Crow strategically chose the Nashville location because it is just 650 miles from more than 50 percent of the nation, thus minimizing transportation costs for the
Occasions makes up to 15,000 cakes a day, each one carefully crafted by one of its 135 food specialists. “We put the goodies back into cakes,” chuckles Phil Crow, the company’s founder and owner, describing mouthwatering recipes that include
product. Crow, who has a bachelor’s degree from the University of Virginia and a master's in business administration from Baldwin Wallace University, began his 29-year career in the
14 | USBusinessExecutive Winter/Spring 2010
food industry with a Cleveland food production company. He later moved on to Dawn Food Products, a billion-dollar operation in Mississippi, where he spent 16 years perfecting the company's brand. Crow eventually became the president of Dawn's international branch, spreading the company's products to the United Kingdom and Mexico by building plants, developing management teams and streamlining production facilities.
lines and new products. Crow says he wants Creative Occasions to grow by 25 percent each year, a goal that can be easily accomplished with the company’s current level of ambition and professional execution. n
Seeing a market for retail, however, Crow struck out on his own. Now Creative Occasions is a highly regarded purveyor of baked goods that handles its cake-making in-house, self-performing all design, baking and icing mixtures. The company may, however, buy premade fillings and concentrates from specialty suppliers, and relies fully on outside trucking companies for transportation. “Having good vendors is critical,” says Crow, adding that he takes into consideration “costs and flexibility” when choosing between subcontractors and vendors. Adapting Swiftly “The market changed dramatically two years ago due to commodity and fuel prices, such as sugar, shortening and eggs; there was a 60 to 70 percent increase in pricing,” Crow explains. Unlike many companies whose sales were struck by the economy, Creative Occasions decided to invest more money into its business in order to remain competitive. In fact, the company bought out of a few of its competitors and then rebranded them under the Creative Occasions name. “We took a percentage [of our money] and decided to go after our competitors’ business, which has allowed us to control costs by picking up their distribution and exposure.” Thus, in an unlikely maneuver, Creative Occasions actually expanded in 2009 during the downturn. In addition to acquiring new locations, the company introduced a line of “clean label, all natural cakes,” which are essentially cakes made with organic, unprocessed ingredients. The firm also created a trans fat-free cake, which required significant effort to develop. “It took us nearly a year to come up with the right taste,” Crow says, adding that the company sets aside resource and development dollars to develop new lines. Currently, Creative Occasions has 96 different product lines and projects underway, including adult-themed cakes, wedding lines and private-label desserts. “They’re all interesting to me,” Crow shares, explaining that the variety of projects is one of his favorite things about the cakemaking business. For example, Creative Occasions recently acquired a contract with Honey Baked Hams to make all of that company’s cakes. The company is also looking into spreading into brownie production. Over the next few years, Creative Occasions plans to continue its legacy of growth by adding a few automated production 15
Food & Drink
Gulf Island Shrimp II LLC/ French Market Foods Products Stuffed With Promise Produced by Sean Barr & Written by Tony Ware
They say variety is the spice of life. A variety of spices doesn’t hurt when it comes to keeping things lively, either. And for Gulf Island Shrimp II LLC, a food company headquartered out of Lake Charles, La., variety and spices are just two of the components that have been well combined within a multifaceted conglomerate that continues to strategically redefine its retail share of both the domestic shrimp and specialty entrée markets. The company was formed from a long line of acquisitions, a series that began in 1996 when Larry Avery became a managing partner of Abe’s Cajun Boudin Inc., a business originally formed in 1992 by brothers Mark, Jim and Scott Abraham. Larry and Mark went on to partner with Paul Day to form Gulf Island Shrimp & Seafood in 1999, operating out of leased facilities in Mobile, Ala., and under the brand Bayou Gold. In 2000, Gulf Island Shrimp & Seafood II LLC was formed after the purchase of the Scott-Co shrimp 16 | USBusinessExecutive Winter/Spring 2010
processing plant in Dulac, La., as well as the folding in of the Scott’s Pride and Bayou Pride brands. Abe’s would go on to build a USDA plant, purchase the assets of Signature Foods of Lafayette, and become French Market Foods. Then eventually French Market Foods and Gulf Island Shrimp II would be consolidated into a company that employs 200 people between three seafood facilities and one meat plant, and brings in between $30 and $40 million in annual revenue. The shrimp boats, trucking and meat vendors are all independent contractors, but the company holds all processing and packaging in-house. Seasoned Veterans Partner Gulf Island Shrimp’s initial forays were as a commodity shrimp company for providers such as U.S. Foodservice and Sysco, acting as one of many suppliers competing in terms of
price in the food-service sector. It’s a cutthroat corner of the industry, and one that Gulf Island Shrimp still supplies, but simultaneously Avery and partners made the savvy decision to pursue the grocery store market. And within a few years, serendipity smiled on the company. “We believed that we needed to redefine ourselves, and in 2003 we negotiated a partnership with Tony Chachere’s Creole Foods, rebranded our products and started rolling out the meat side of Tony Chachere’s,” recalls Avery. “We were already using the company’s seasoning in our products, so it was a natural move. “Also, a few years ago an important thing was done,” continues Avery. “It was made law to do country-of-origin labeling, and at that point people started looking for a wild caught domestic shrimp, which we provide. A lot of folks over-chemical their product with preservatives, adding weight and carbon miles. So we decided to focus on high quality and a good name, started offering everything through TonyChachere.com, and we’ve found that even though some people have turned away from higher-priced proteins, the business has grown 35 percent annually in the past several years.”
enjoy it. We’re especially strong in the five states that border Louisiana: Texas, Mississippi, Arkansas, Alabama and into Oklahoma, but we do have strengths that are national.” Gulf Island Shrimp II/ French Market Foods has progressed through a series of synergies, and has prepared to further this trend with the recent hiring of Bob Murray as vice president of sales and marketing, who is experienced in building brands (such as Lender’s Bagels and Sara Lee). Additionally, Murray has brought in Derrick Nagel to realign the sales team with the frozen meat channel to reach a goal of 30-percent growth within a year. Additionally, relationships with a network of cold storage facilities have been established to promote distribution and to allow a contingency plan to minimize losses in case of natural disasters. With this discipline coupled to a delicious line of developing products, Gulf Island Shrimp II/French Market Foods is poised to become a giant among Louisiana Creole cuisine companies. n
Bayou for You Something that has helped this growth has been that there is more to Gulf Island Shrimp than shrimp. The French Market Foods division has emerged as a leader in single-serve, fully cooked creole entrées, such as gumbo and etouffee, as well as holiday items, such as the Tur-Duc-Hen [made famous by John Madden] and eight varieties of boneless chickens stuffed with everything from crawfish cornbread to broccoli and cheese in order to appeal to multiple regions. “These items have really caught on in the national space,” says Avery, who lists retail outlets including Kroger, Walmart and HEB. “We believe that creole is more of a cuisine, like Italian or Chinese, and that there can be people all over the country that can 17
Food & Drink
Chung's Gourmet Foods Feeding the Need for Quality Produced by Sean Barr & Written by Molly Cohen In only four years, a food company looking for its identity has transformed into the top Asian snack food distributor in the country. When purchased in 2005, Chung’s Gourmet Foods immediately got an intense rebranding makeover and quickly began growing in double digits. Currently, Chung’s, which is located in Houston, Texas, houses around 110 employees and manufactures all of the company’s products except for the entrée line, spring rolls and sauces.
working with vendors,” says Kujawa. His philosophy toward vendor relationships is as follows: “You don’t abuse people. Period. It’s all about the relationship. If you treat people right, they’re going to treat you right.” After solidifying the vendor connection, the next step is “to make sure all the dealings are extremely ethical and above board,” Kujawa explains. Kujawa also looks for certain quality parameters. “We’ll put out the specs, we’ll work with the vendor to meet those specs, and then after that it really
“I think we’ve been able to hit the sweet spot in terms of providing the customer with a value proposition that includes both quality and price; we couple that together with a very nice package,” says Charlie Kujawa, Chung’s president. Recent Changes In this economy, consumers have honed their shopping habits to get the best bang for their buck, and Chung’s has certainly noticed the change. “We’re seeing consumers are much more focused on value, and we’ve changed promotion efforts and maintained a cost perspective,” Kujawa explains. “We have a strategy and we’re going to maintain prices for as long as possible.” In addition to consumers, retailers are changing and refocusing, as well. “What’s happening is retailers are … carrying one private label and either one or two top national brands in that particular item range,” says Kujawa. However, with Chung’s top rating, and specifically planned pricing strategy, “we’re able to out-compete the labels based on the quality of our product. They’re having a tough time meeting us in pricing unless they put an extremely cheap product out there,” Kujawa says. Maintaining a strong relationship with vendors is also vital to Chung’s success. “Relationships are critical when you’re 18 | USBusinessExecutive Winter/Spring 2010
boils down to pricing.” Maintaining Quality “Anytime you’re in the food industry the one thing you’re always concerned with is making sure that you’re producing a safe, high-quality, wholesome product for the public,” says Kujawa. To create high-quality products, Kujawa has all of the employees in the quality assurance and production departments get Hazard Analysis and Critical Control Point
(HACCP) certified. HACCP is recognized nationwide as preventative measures, rather than post-production inspection. “I want to make sure everybody understands what food safety is, how to run a HACCP program, how to write a HACCP program and why it’s important,” Kujawa explains. “It’s making sure that above all else, everything is done exactly correct, every single time, no matter what, end of story.” Maintaining quality and consistency is critical to a food production company. Without those two factors, Chung’s will not be successful. “But I don’t really worry about that because I know the guys are extremely confident,” says Kujawa. “I’ve been very fortunate this year and have been able to build an exceptional team, probably the best one I have ever worked with.”
Overall, Kujawa intends to continue growing Chung’s brand. “I’m really looking at all of it together,” he says. “I tend not to get excited about a single aberration; I look at things in trends to see the direction that people are going.” Kujawa expects Chung’s to greatly expand in size. “I plan to focus on building the brand with exceptional quality and value for the consumer, as well as focusing on the needs of the retailer,” he shares. “I see us taking this company and continuing in double digit growth and beyond. I would expect within the next couple of years we’ll double or triple the size of the company.” n
Kujawa also monitors his food, post-production. “We normally do a tasting every week; we’ll bring one of our products in, and then take a look at it,” he says. Chung’s also benefits from its proximity to the University of Houston’s main campus. “The great thing about it is they have a culinary school … we work with some of the professors and grad students and they do consumer acceptance testing for us,” Kujawa explains. In this fashion, the graduate students get real world experience with food comparison, while Chung’s analyzes the testing results. “They’ll do a comparative testing between our eggrolls and a competitor, or if we’re looking at some changes, or a new product market,” says Kujawa. Future Plans Kujawa has big plans for Chung’s future; he’s recently completed some test marketing for a new entrée line and is now revamping the packaging for the product. “We’ve had excellent feedback in terms of quality of product, but we’re taking the whole packaging, retailing and marketing concept and changing it based on that feedback,” says Kujawa. “We anticipate the launch to be at the end of the first quarter of next year. In addition to the entrée line, Chung’s plans to “satisfy some of those green packaging initiatives” so the consumer has “a little something extra in the package, not just a piece of junk you’ll throw away in the trash,” explains Kujawa.
Food & Drink
Peppers Unlimited of Louisiana Inc. A Spicy Success Story Produced by Sean Barr & Written by Kellie Ducharme George Bulliard Sr. can’t imagine a meal where spicy flavorings – his metaphorical life’s blood — is not discussed at length and drizzled over each course. Now in his early ’70s, Bulliard has given his life to perfecting the art of pepper sauce. As the founder and president of Peppers Unlimited of Louisiana, Inc., one of Louisiana’s largest seasoning producers, Bulliard is always surrounded by his life’s passion, and he is constantly thinking of new ways to improve the formula. “It’s all I’ve ever done, hot sauce is my whole life,” Bulliard reflects. “It’s how I was raised; I’ve got it in my veins.” Since 1910 Bulliard’s family has been involved in hot sauce and seasoning companies – with George being the third generation of Bulliard involved in the industry – so he is wellversed in the hot and cold of the industry. Growing up, Bulliard was taught the perfect blend of peppers for each type of hot sauce. And in 1993, after working as a consultant for several other companies, Bulliard gathered his secret recipes – most of which were simply stored in the deep corners of his brain – and started a new, now multimillion dollar company, which he plans to eventually pass to his children. “Hot sauce is not something you can just have a formula for; it’s more than a science for us,” he says. “We’ve been doing it for so many years, I’ve been doing it for over 50 years myself and my kids are doing it right now.” Peppers has just under 100 employees, does more than $30 million a year in sales, and bottles 100 million bottles of hot 20 | USBusinessExecutive Winter/Spring 2010
sauce a year. While hot sauce and pepper are the company’s main commodities, Peppers also makes chicken wing sauce, steak sauce, worcestershire sauce, marinade, BBQ, teriyaki, soy and chipotle sauce. The Private-Label Market In addition to the sauces under the Peppers Unlimited label, the firm also produces seasonings for the food service sector (Topco, Food Club, Sysco, U.S. Foodservice), as well as private-label companies. In fact, the private-label sector of the company has grown exponentially over the past few years. To stay abreast with the needs of the privatelabel industry, Peppers is a member of the Private Label Manufacturers Association. “Whatever they want, we can make it,” says Bulliard, adding that 2010 is going to be the company’s busiest year yet for private-label products. “We’ve picked up some big customers as we go.” With three chemists on staff always exploring new flavor profiles, Peppers Unlimited has made garlic and barbecue sauce, among other items, for its private-label contracts. “It’s very good, Peppers Unlimited has a lot of capacity; we’ve got five production lines running all the time, and we’re building a sixth,” Bulliard continues. With new equipment and packaging, Peppers’ ability to produce hot sauce quickly has increased tenfold since the firm’s inception in the 1990s. “In about a week’s time we do more now than we used to do in whole year,” Bulliard shares. “Peppers Unlimited used to produce 1 million pounds of pepper a year, now we do 2
million pounds a month. We went from 70 bottles a minute to 300-400 bottles a minute.” Quick production is essential to Peppers Unlimited success. Many private label contracts require product delivery sauces within two weeks, so production time can feel like a whirlwind.
“It’s time for me to take off and start doing a few things,” he starts, trailing off. “But I’m still here every day…” After a few minutes lost in his thoughts, he continues, saying without a flicker of doubt that he knows his children will continue to grow Peppers Unlimited with as much pride as he has. That way Bulliard can relax on the golf course, knowing topquality hot sauce will always be within reach. n
Quality is Key Despite the fast pace, Peppers Unlimited makes sure nothing that leaves the factory is less than remarkably delicious. Peppers Unlimited has three full-time quality managers and the family is directly involved in producing the product.
“Hot sauce is not something you can just have a formula for; it’s more than a science for us. We’ve been doing it for so many years, I’ve been doing it for over 50 years myself and my kids are doing it right now.” - George Bulliard, Peppers Unlimited Founder & President
“We’re always making sure [our products] are up to snuff with us; Peppers Unlimited wants a consistent product all the time, so we’ve got a lot of watch dogs,” Bulliard continues. “It’s a family operation and everything is watched more closely [than in larger companies]. A lot more goes into the product itself; nothing goes out of here without making sure its first class.” Currently, the firm is working on ways to negate the rising costs of glass packaging and freight. Bulliard has been looking into international packaging companies, outside of the U.S. and Mexico, and exploring alternative transportation methods. “Freight costs have gone up about 40 percent, at least, over the past two years,” admits Bulliard. Besides shipping and bottling, Peppers Unlimited has survived the recession unscathed. In fact, the firm’s profits have continued to rise despite the credit crunch. With its prospects untouched and production poised to increase, the future of Peppers Unlimited holds as much promise as the company’s name. But, as much as he loves hot sauce, Bulliard has been contemplating retirement for a while. As he prepares to leave his life’s work, he’s realizing that it’s harder than he thought. 21
Food & Drink
Turri's Italian Foods, Inc.
Keeping Tradition Fresh in a Changing Market Produced by Sean Barr & Written by Tony Ware “I have a notepad right by my phone, and you’d be surprised how many times over the years I woke up, wrote something down about the business, because I live and breathe this place,” says John Turri, executive vice president of plant operations at Turri’s Italian Foods, Inc. (TIF), a familyrun company celebrating 60 years of growth. “I’m always thinking of what we can do to make this place better. I’ll drive everybody nuts, that’s my job now,” laughs John.
over for dinner. Angeline’s homemade raviolis were such a hit that the two converted the basement into a small production facility in order to service restaurants and independent Italian markets throughout the Detroit area. Anthony saw the opportunity available from the innovation of homestyle, frozen Italian goods sold through privatelabel and food-service channels. And TIF remains the same privately held supplier where John started tagging along on the delivery truck, albeit on a much grander scale, now spanning over 130,000 square feet, employing over 235 with further expansion on the horizon and producing product distributed as far as Australia, Korea, Japan and China. No Noodling on Quality “I’ve done this all my life, and I love the fact we make good quality pasta,” says John. “I might not have liked cleaning as much as I liked making the food, or making it as much as I liked selling it, but it was all fun. I don’t think I’ve ever really considered this a job. It’s great to come in every day and get my hands dirty, though maybe I shouldn’t put it that way in the food industry!”
John is among the four generations of the Turri family who has produced pasta products since Anthony and Angeline Turri turned family recipes into a Michigan-based industry. In 1950 Anthony was an accountant who would have clients 22 | USBusinessExecutive Winter/Spring 2010
Indeed, John has grown alongside the company through several phases, working alongside relatives Tony, Bernie, Tom, Mary and Joe, among others. Beginning in the late 1970s, TIF found itself at a crossroads where bigger companies wanted to get into the pasta end, and the family knew it could make the finest components. This redirection — which led to relationships with certain national restaurant chains and industrial customers that now stretch back
30 years — allowed the company to invest in custom manufacturing equipment that increased both efficiency and the range of product available. Key to this continued success has been due diligence from supply chain to finished product. Vendors of only the finest durum and semolina wheat, the top-grade ricotta and parmigiano-romano, are sourced, and all have to go through an extensive qualification process. “Cheaper isn’t always worth the price, it’s more about flavor profile,” says John.
“We’ve only lost one customer in the last 20 years, and that says a lot in terms of quality.” Assisting that track record are daily checks of product plucked directly from the line and tasted in order to assure the proper ingredients ratio are maintained to bring out the maximum flavor for the price. All production and packaging is handled in-house from scratch; no co-manufacturing takes place. TIF has a total of three facilities, one each in Roseville, Harrison and Chesterfield. Company trucks may transport product between locations, but everything is shipped by subcontracted LTL freight. Stock remains under company control in a large freezer facility. Recycling programs have been put in place at all stages, and waste is greatly reduced. Food for Thought What began as a company known for its traditional meat ravioli has become one known for the ability to adapt to a customer’s needs. From
Food & Drink manicotti, canelloni and tortelinni to pierogi to specialty stuffings such as sweet potato, TIF can fulfill almost any desire in the pasta sector. Investments in intricate, exclusive equipment, much of it imported from Italy, as well as recent hirings of additional research and development personnel has resulted in several ingenious offerings. Working behind the scenes, TIF has supported several initiatives to introduce more ultragrain products into the market, promoting all natural options. And the company’s most recent facility in Chesterfield is focused on an automated
line allowing for increased capacity and consistency of long goods — spaghetti, linguine, etc. Produced alongside a recently developed means of blanching short goods — penne, rotini, etc. — TIF has the capability to offer restaurants and other outlets par-boiled product that can be ready to sauce and serve from the freezer with only 30 to 60 seconds in boiling water. This ability to forecast new means of satisfying the customer base has allowed TIF its continued success. “I think setting growth by percent goals is hard to reach, but we’re always bringing in people that will eventually bring that to us,” says John, who reveals 2008 and 2009 saw not only physical but economic expansion. Sales are up, as Turri’s Italian Foods produces a range of product that satisfies luxury dining to everyday staples. “You make a commitment, you target what you can, forecast the best you can, then believe in it and sell it,” says John. “It’s been 30 years since I started and it’s been a blink of the eye. More and more family businesses have been bought by corporations, but we still have a great deal of pride in our name and how it’s associated with quality. When someone calls to strike a deal, they talk to a family member. And we will keep the same focus on everyday details to keep us viable.” n
24 | USBusinessExecutive Winter/Spring 2010
Elan Nutrition Inc.
Raising the Bar on Nutritional Snacks Produced by Sean Barr & Written by Molly Cohen [Editor’s Note: Elan Nutrition was acquired in April 2010 by ConAgra Foods, one of North America’s leading food companies. Elan Nutrition will be integrated into ConAgra Foods’ Store
from a customer, or a customer calls with a concept for Elan’s food science group to develop. “We can do either, but we’re best when we can collaborate in the middle,” Olive explains. For each product, Elan combines all the raw material components together in-house. Three years ago Elan had 300 to 400 raw material components; currently, thanks to an expanding, diligently vetted list of vendors, Elan can draw from upwards of 900. Raw materials come primarily from suppliers with whom Elan has long-term relationships, though the company is constantly looking to tap into other specialty channels. “When you’re continuously growing a customer base that has new and different demands, so our supplier list has simultaneously grown over the years,” Olive says.
Brands business as part of its Snacks platform. The article below was written prior to the acquisition.]
Tom Olive has 25 years of experience in the food industry, the last six of which he’s served as the president/CEO of Elan Nutrition Inc. – a private-label manufacturer of greattasting nutrition food bars originally founded in 1980 that saw renewed focus after changing ownership in 2003. As a business-to-business operator, contract developer and manufacturer for marketers of nutrition bars, Elan does not own or do any branding. However, its products have gone into Japan, Italy, Mexico and Canada, in addition to its extensive domestic range. Elan is developing 120 to 150 products at a time; three to five might be for one customer under one brand with different flavors and a similar nutritional profile. Each year Elan introduces 60 to 75 new products. “We have a very active new product cycle … it’s our lifeblood,” says Olive. From Supplier to Stomach To make the nutritional food bars, Elan works with formulae
Elan uses specific criteria to pick suppliers. Candidates must have technical moxie and the ability to evolve. The suppliers must have high-quality products based on Elan’s auditing process. The company looks for good manufacturing practices, critical control point identification and environmental monitoring programs. “We look at dependability and reliability,” Olive explains. “We try to run an efficient system, so we want a supplier that delivers the day and amount they say they will.” Efficiency from the Start Reliable and quality suppliers are the first steps in Elan’s team-inspired efficiency model. Creating that team-focused culture was integral to jumpstarting Elan. And next in the company’s culture is service. “It makes a difference to your customers, to have value-added services tailored to meet the needs they have,” Olive shares. Lastly, Elan requires innovation and excellence of execution. Elan’s all-time record of taking a product from drawing board to shelf might be six to eight weeks, but it is normally a sixmonth cycle, depending on the customer. Larger companies have processes through which they move at a deliberate pace. But upstart companies often have very short decision 25
Food & Drink chains that go very fast. “For us, certainly, the experience here was developing and sharing a common set of goals about what we wanted to be as Elan grew and became a successful company,” Olive reflects. Keeping to that philosophy, Elan continues to evolve as it grows. In the last 18 months, it adopted several sustainability procedures. “We focus on waste reduction to minimize and recycle any packaging – from corrugated to plastic to barrels,” Olive shares. “We … reduce energy usage, from the lights to climate control and managing workstations.” Elan also uses a formal communications structure to increase efficiency. Each month, Olive addresses the management team while the vice president of operations addresses the operations areas to coordinate results. “We also have well-developed processes with a flexible structure … that encourage communication throughout the team, so folks who need to make decisions on a daily and hourly basis have the best information,” touts Olive. Branching off the communication plan, five years ago Elan implemented an Enterprise Resource Planning (ERP) system that became the backbone to its operations. “We
26 | USBusinessExecutive Winter/Spring 2010
have a lot of analytical tools and communications tools off that backbone,” adds Olive. Paying It Forward These efficiency proceedings are adapted by each of the nearly 350 employees at Elan’s single site in Grand Rapids, Mich. The 230,000 square foot facility incorporates the entire company, including the food science/product development division, manufacturing and administration. This single facility allows Elan to concentrate on keeping every process efficient, and account for every worker. Satisfied employees are the key to a strong company, as Elan discovered. “We have limited turnover, and we’ve been stable for the last six years at the senior level; no added divisions or anything like that,” says Olive. In addition to satisfying its employees, Elan is also passionately supporting its community. About four years ago Elan partnered with Kids Food Basket, an organization providing suppers to at-risk children in the Grand Rapids school district. The program provides children who might not get substantial dinners with sack suppers offering appropriate caloric intake. “This is our charitable effort; we make a cash contribution annually and donate hours with
employees making the suppers, running juice-box drives and ice cream socials to raise funds,” Olive reports. Thriving Under Pressure Elan’s well-delineated programs were instrumental when the economy began spiraling downward. Thankfully, Olive sees an end to the spiral. “I think you inevitably reach a bottom and we’ve realized that trough and the quarter versus quarter is getting better,” he shares. “We weathered this last 18 months pretty well, and we have seen solid business and
Food & Drink continued growth.” Elan seems to thrive through challenges; the company works to keep up with the ever-changing marketplace. Case in point: When fiber emerged as a trend, Elan immediately developed highly successful products to meet that need. Being able to immediately provide answers to current market demands is an in-place practice at Elan. “We know any trend will ebb and something new will flow into its place, and our biggest challenge is to stay current with our suppliers, understand the positioning and brand are customers are attempting to offer, and provide what their nutritionists want to put forward,” Olive explains. Of course, keeping up as, say, fortified granola bars come up the ladder and blur the product space is not as valuable as forecasting or even starting trends. With this in mind, Olive has plans for Elan to redefine the literal shape of the nutrition snack and reposition it in new categories away from the traditional bar and morning nosh. “We are looking to mix up the format and still deliver a delicious food product beyond breakfast and a morning snack, looking at the afternoon or post-workout,” Olive begins. “Nutrition bars are usually a sweet offering, but they aren’t
28 | USBusinessExecutive Winter/Spring 2010
yet a salty snack opportunity or something savory, so, how do you get there and deliver it in a form that would not be intellectually incongruous with the consumer ... we see that as a good challenge,” he finishes. In the past five years, Elan experienced a 20-percent annualized revenue growth, and continues to seek further opportunities as a bar manufacturer. “Growth may come in fits and starts, but we’re always looking to keep along the line,” says Olive. In 2009 the company placed itself in the midst of a capacity expansion in terms of sheeting/slabbing capability, as well as implemented continuous mixing and chocolate tempering capabilities to allow new constructs and coating applications. The company is constantly in talks with various customers as to how to take advantage of this. With the company’s successful history and aggressive approach to the market, Elan Nutrition Inc. has blended the business savvy and variety of flavor profiles to mix up the performance and balanced nutrition bar segments. n
Milk Products LLC
A Lean, Green Success Machine Produced by Sean Barr & Written by Kelly Matlock A mother’s milk sustains most young mammals early in their development. But when it can’t, Milk Products LLC steps in to supplement the needs of baby livestock through its production of milk replacer formula. Thus, “Cheesehead” territory, a.k.a. Wisconsin, is the ideal location for Milk Products, which will celebrate a century of operation in 2011. The company employs over 60 people and brings in around $60 million in annual revenue, all from one location in rural Chilton, Wis.
(including some of Milk Products competition, which is primarily located in the Midwest). Speaking to the variety in Wisconsin, it’s “not only the Green Bay Packers,” jokes Dave Kuehnel, president of Milk Products. Kuehnel is a reliable source regarding the company’s evolution throughout the 20th century; he is a good-natured, knowledgeable source of information on the industry, having been involved with farming, agriculture, and livestock his entire life, growing up on a diversified farm as one of 16 children.
The plant, which is one of the nation’s largest manufacturers of milk replacer, can be found on 10 acres, surrounded by land devoted to agriculture and various industries
Under Kuehnel’s careful management of internal systems and external suppliers, Milk Products stays profitable by catering to a wide range of private labels and by managing its
Food & Drink own brand, the Sav-A-Caf line, which includes a range of milk replacers, nutritional and health products for calves, piglets, kids, lambs, foals, puppies, kittens and young animals of many other species. Transitions Milk Products hasnâ€™t always served livestock needs; from 1911 to 1979, the company was a Carnation plant, serving the food industry. From 1911 to 1955, the company was in liquid production, making cans of condensed milk for human consumption, and from 1955 to 1979, the plant operated as a dry processing plant, producing instant milk powder, packaged in the iconic red and white Carnation boxes. The switch from human to animal food was a successful transition, however, with 40 years already behind the company in the animal milk replacement industry. The company serves primarily two groups: commercial livestock and â€œlifestyleâ€? farmers, which refers to people who live in rural areas across the country and raise animals for their own use and enjoyment.
30 | USBusinessExecutive Winter/Spring 2010
Within the last two decades, in both customer groups, interest has increased in smaller packaging, including singledose packaging and two- to eight-pound bags, a change from the old standard of larger 40- and 50-pound bags. As well as changes in sizing, “Everyone wants their own unique twists,” explains Kuehnel. The company services over 700 private labels, all with slightly different profiles. However, while Milk Products caters uniquely to many different customers, one thing stays the same: quality.
The dairy market has been challenged by low prices in the recent economic downturn; to counter these challenges, Milk Products has applied the principles of “Lean manufacturing,” also known as “Next Generation” manufacturing. The
Quality control is especially important, considering Milk Products’ milk replacer formulas are made from over 40 ingredients. It is a complex recipe of carbohydrates, fats, proteins, essential vitamins, supplements, antioxidants, amino acids, stabilizers, emulsifiers and minerals. In short, it’s everything a baby animal requires during an intensive and critical period of growth and development. The inputs are carefully managed so that consistency is the result; and it begins for Milk Products with reliable suppliers from the food industry that generate consistent quality ingredients. Milk Products must be doubly careful to abide by FDA compliance programs in traceability and cGMPs. Lean Manufacturing
Food & Drink increased efficiency from Lean methods has helped Milk Products weather the economic turmoil, which has had a substantial negative impact on the profitability of dairy farmers. Learning the new system came first, then the company took time to invest in restructuring processes to remove “all waste, anything that didn’t add value,” declares Kuehnel. “We applied ourselves to the study and the application.” Immersion in the philosophy resulted in a fairly seamless transition of all processes. “Marketing, manufacturing, lab, production, [across the board] we’ve applied the Lean methods; it’s lowered costs and helps us serve our customers better and faster,” Kuehnel explains of the tremendous benefits he has witnessed. “Everything is better, safer, more ergonomic … it’s smarter.” The informed decision to invest in Lean methods has increased efficiency and supported profitability, as well; 2009 was another great year for Milk Products. Smooth Sailing Above the Rest of the Competition Success comes down to what Milk Products creates and supplies to its customers. The key to the company’s smooth formula lies in what is referred to as “The Peebles System,” which the company credits for its ability to create a superior product in “wetability, mixability and economy.” The secret to The Peebles System is described by Milk Products as lying in “the heart” of its manufacturing equipment — a hydrator tower that creates “Magic Crystals,” as they are affectionately known. The tower adds a small amount of moisture to dry powder ingredients, slightly dampening the milk replacer particles, allowing them to fall down through the hydrator and form larger “agglomerates.” Moisture is then removed in fluid bed dryers. When the product is ready for the customer to use, the hydration and agglomeration technique shines; the larger particles “drink” water that is added to the mix, using capillary action, allowing the powder to “melt” into a solution quickly, easily and uniformly. Milk Products is also the only ISO 9001:2000 certified manufacturer of baby animal nutrition products in North America. The certification was completed in mid-2005 with recertification in 2008 (recertification is required every three years). ISO stands for International Organization for Standardization, and it’s an independent organization that “helps companies and governments develop and adhere to internationally recognized standards for manufacturing and business. ISO certifies that these systems meet the standards set, and audits each company at regular intervals; it is an internationally recognized achievement in manufacturing.” Milk-ing Success 32 | USBusinessExecutive Winter/Spring 2010
Milk Products continues to evolve and meet market needs, even as the market changes. Recently the company has focused on increased production of its colostrum-based health products. Colostrum is the “first milk” that a baby animal receives from its mother. The profile of the milk is nutrient-rich, ensuring that the baby receives all necessary immune system boosters. The first 48 hours of colostrum-nursing are critical in the baby animal’s health; Milk Products understands how essential it is that its product is well-made and abundant in immunoglobulin, fat and protein. New packaging is another way to meet market demands, and changes. Milk Products has made its product easier to handle, more economical, less perishable and increasingly environmentally conscious. The company has largely gone away from using a heavy plastic pail and toward resealable bags in various sizes; the bags use less packaging making them earth-friendly, and they cost less to manufacture, accounting for savings that can be passed on to customers. Packaging needs also require reliable suppliers. Another area that Milk Products has streamlined is its management of corrugated cardboard suppliers, and particularly its inventory of these supplies. “Our suppliers are integrated with our purchasing department; they look at orders and the type of packaging needed three to five days out,” Kuehnel explains. This integration allows them to send supply as it is needed, meaning there is no extraneous, unnecessary or wasted inventory. “The market varies, and this integration ensures that we don’t buy too much, or the wrong sizes, or have discontinued packaging on hand,” Kuehnel continues. It also results in a reduced number of suppliers, contributing to the company’s noted quality control. Additionally, the company has made a conscious effort to green its facility, upgrading the lighting in the buildings to operate on auto sensors, ensuring no lights are left on to drain energy. On top of this upgrade, Kuehnel says Milk Products is looking into solar applications for hot water heating. These green efforts are woven into the holistic structure of Lean in avoiding waste and working smarter. All these decisions have paid off for Milk Products. The company has found a system that works across all areas of quality control— suppliers, ingredients, processes, packaging and customer service — allowing them to celebrate a welldeserved 100 years in production in 2011, with another solid century to come. n
Rocky Mountain Pies LLC
Enjoying the Recipe for Success Produced by Sean Barr & Written by Molly Cohen Mark Grandinetti spent his adult life surrounded by desserts. Not eating them, but producing and selling them across the United States. He started in the ’70s at a Marie Callender’s Restaurant & Bakery franchise in Salt Lake City, where he met his business partner Sam Park.
their pie category when they switched to Rocky Mountain Pies products. “We do the little and extra things to make our products stand out; we’re one of the only companies with
In 1990 Grandinetti, Park and one other gentleman founded Western Country Pies, which they operated for seven years. “We took that company from zero to $40 million until we sold it to Edwards Fine Foods in Atlanta,” Grandinetti summarizes. Grandinetti was initially contracted to continue managing the company, but chose to stay in Salt Lake City with several partners when the company’s factories were relocated to the East Coast. “We let our contracts expire and then opened up a new place, Rocky Mountain Pies LLC,” Grandinetti says. As president, Grandinetti attests to Rocky Mountain Pies’ stand-out qualities. “We dare to be different,” he says. “We slow our machines, add handwork to the lines and have points of difference with every product, while our competitors run their machines at 100 to 200 pies per minute.” Attention to detail resulted in increased success; now Grandinetti has his well-deserved piece of the pie industry. Assembling the Crew According to Grandinetti, every new Rocky Mountain Pie customer has experienced a sales increase in 33
Food & Drink hand-latticed pies,” Grandinetti says. “We have not lost a customer since we’ve been in business.” From its start, Rocky Mountain Pies used a play-to-win strategy. Its first load of product was made when an old customer called in the middle of the 2006 holiday season, requesting trucks of pies. The company’s facility was not even fully completed. “But we were able to produce the orders and assist an old customer who was in a jam for the holiday season, and then we hit the ground running from there,” Grandinetti remembers. Three years later, the company’s annual revenue tops $30 million. But no company is successful without its employees, and Rocky Mountain Pies finished the 2009 holiday season with 250 people, including a full
34 | USBusinessExecutive Winter/Spring 2010
a week, using our formulas and tweaking them to meet the customer’s request.” Despite the company’s success, it hasn’t avoided rough times. “The year 2008 marked an unprecedented time in our industry because of raw material cost increases,” says Grandinetti. Companies lost hundreds of thousands of dollars before they could right their ships. Rocky Mountain Pies looked at how it operates internally – how it purchases, how it contracts – eventually raised prices. “But we weathered that storm and ultimately made money in 2008,” Grandinetti reveals. From a Dream to Reality
research and development department, and on-staff food scientist. Supplying Pies, Nationwide The company’s 85,000 square foot production campus is still being expanded to include two additional production lines, along with an R&D center and additional office space. “We’re working toward bringing this additional production capability on line in 2011,” Grandinetti shares. Rocky Mountain Pies also maintains an off-site frozen storage venue. The freezer handles finished goods, as well as frozen raw materials. Sales are directed from the Salt Lake office, and there is additionally a National Sales manager based in Atlanta. Rocky Mountain Pies has a nationwide network of brokers who assist the company with its sales efforts. “Our customer base reaches from Seattle to Florida,” says Grandinetti.
Based on this experience, Grandinetti knew that he has a seasoned team that is poised to prosper. “Our goal is $50 million in five years, and so far we’re on pace,” he shares. And to make that goal a reality Rocky Mountain Pies is looking to some fresh markets. “We’ve identified the gluten-free market; there are not a lot of desserts out there for celiac disease-conscious people, so we’ve rolled a new line of gluten-free products,” says Grandinetti. In addition, Rocky Mountain Pies created a line of “eightinch, hand-tied lattice fruit pies and meringue pies that can be displayed at ambient temperature,” Grandinetti says. Grandinetti makes rounds at grocery stores, comparing his company’s products to competitor products, and has found Rocky Mountain Pies has a recipe for success. By combining a life’s worth of experience with a quality product and an eye for finances, Grandinetti has the ingredients to continue baking up a sweet future for his company. n
The company’s biggest concern is maintaining consistency and quality of its product. “We make a frozen, seasonal, perishable product; I don’t know of a crazier combination!” Grandinetti insists. To control production, Grandinetti tracks customer’s inventory, in-house inventory, results from the day before, labor hours, production efficiencies and pies by man-hour. Production Fluctuations Rocky Mountain Pies has drastically improved product development time. “In other business I’ve been in involved with it would take six months to get a product approved,” says Grandinetti. “But now we turn products in less than 35
Food & Drink
Wild Rocket Foods
On a Trajectory of Growth Produced by Sean Barr & Written by Molly Cohen Wild Rocket Foods opened its Riverside, Calif., plant in October of 2007, and Bob Aicklen joined as CEO in May of 2009. The company, a natural produce subsidiary of the United Kingdom-based Langmead Group, was created to expand upon a partnership opportunity provided by the success of Natures Way Foods, another Langmead Group enterprise that has supplied a wide range of produce-related products to Tesco UK for over a decade. “Tesco was very happy with the quality and service that it received from Natures Way Foods, so when it opened the Fresh & Easy Neighborhood Market chain on the West Coast of the United States, it asked us to build a factory to supply the produce categories for the chain,” explains Aicklen, an ex-PepsiCo beverage executive.
extra step for food safety and quality. “We also had the opportunity to do it right in regards to sustainability,” says Aicklen. “We recycle water from our cooling system, use recycled corrugated and plastics, send food waste to farms for animal feed, use timers on motors – anything that we can do to minimize our environmental impact. I am particularly proud of our food waste program, where we squeeze the water out of the produce waste and ship daily to a local dairy farm for consumption. They have some happy cows over there! “We do everything; grade and pack our produce, process wet salads, cut fruits, produce bagged salads and vegetables, and make fresh juices, ades and brew teas all in this one facility,” Aicklen continues. “The plant is located within two miles of Fresh & Easy’s distribution center, which saves on fuel usage and costs, and helps to reduce the company’s carbon footprint even more. It also reduces the time it takes to get from farm to the shelf, cutting one to two days out of the cycle.” Over 400 employees support the facility. Of these employees, 70 percent are permanent the other 30 percent are acquired through an agency. “We develop the best of our agency employees and after a few months hire them permanently to keep pace with our growth,” says Aicklen. “I believe that we really treat our employees like family, we treat them right. We pay them a little better than other companies and offer full benefits and 401(k) options.”
Firing on All Cylinders “Our 130,000 square foot factory was designed and built with a major focus on offering the best quality and setting new standards in food safety,” says Aicklen. The company’s key objectives when commissioning the plant were to build a state-of-the-art facility that took that 36 | USBusinessExecutive Winter/Spring 2010
All Wild Rocket Foods employees are committed to maintaining high standards of food quality and safety on a day-to-day basis. As Aicklen explains, quality is everyone’s job – from the line worker to the CEO. “Every day we evaluate a broad sample of products at varied stages of shelf life with a focus around would I buy this and serve it to my family. When you handle over 200 SKU's the variability keeps you on your toes. It takes a disciplined process to get it right every day. We have a team out in the stores talking to customers and store personnel to make sure we know what
Food & Drink they think.” This process may help to reinforce Aicklen’s outlook on food quality, but not the fiscal concerns with growing a new company in the current state of the economy. “We are a small company and have to be very careful with our costs, but at the same time I want to be ready for growth so we must have the resources and talent needed to look for the long term.” “Right now, Fresh & Easy is our primary customer, with 148 stores across three states – California, Arizona and Nevada,” says Aicklen. “They are an outstanding customer, very much focused on supplying the best produce and juices at a great price every day. It is a pleasure to work with a team who values the things that are important to us, such as quality, sustainability and service. We’re a new company that’s growing very quickly. We experienced steady growth in 2008 and 2009, and have added new customers this year. I am focusing on continuing to build our operational excellence so we are ready to double or triple our business. We have a terrific team that is focused on delivering high efficiency and high quality products.” Harvesting the Garden On the supply side, Wild Rocket Foods has worked with key growers to develop partnerships. “We work together to achieve exacting standards of food safety and quality,” says Aicklen. “We ask for a lot from our growers and they do a great job. They have had faith in us and have helped us grow over the past few years.” The extra measures and strong partnerships make all the difference when it comes to innovating Fresh & Easy’s wide range of products. “It’s basically taking a product, listening to what the consumers want and updating taste offers,” Aicklen simplifies. Specific examples of new products include a “Bistro Salad” in convenient bagged salad form, vegetables and vegetable mixes that can be microwaved right in the package, and fresher recipes to attract attention among other items such as salsa and guacamole. “One of our iconic products is our juice,” says Aicklen. “It is a product line that has grown tremendously over the last two years and I can safely say that our orange juice is the best on the market. And we’re 38 | USBusinessExecutive Winter/Spring 2010
constantly working to develop new flavors like mango orange juice, raspberry lemonade and cherry limeade.” Planting Seeds for a New Season One thing Aicklen does not worry about is the company’s future. “I’m optimistic,” he says. “I see 2010 as a huge year; we’ve weathered the worst of it and it’s only going to get
better.” Indeed, the year 2010 marks the next step in Wild Rocket Foods’ expansion plan. As Fresh & Easy grows its stores, Wild Rocket Foods will grow with it. “We’re very excited about Fresh & Easy’s future and growing with them along with several great new customers that we’ve just landed,” Aicklen reiterates. “We want to have five or six key partners who align with our principles and strengths to really push things forward.” Aicklen’s ideal customer, like Fresh & Easy, will care about food safety, customer service, sustainability and people. “Once we find them, we want to be partners for many years,” he adds. Aicklen’s careful consideration for each piece of produce and big picture mentality can guide Wild Rocket Foods into the future, meeting its goal to supply key, large-scale companies. And by achieving these goals Wild Rocket Foods is aiming to be among the nation’s best produce and juice suppliers. n
High Desert Milk
Does Everybody Good Produced by Sean Barr & Written by Kellie Ducharme “We can trace every drop of milk that goes through our plant,” says Randy Robinson, a partner in the High Desert Milk (HDM) cooperative located in Burley, Idaho. “We know exactly where it comes from and what feeds the animals.” High Desert Milk acts as a partnership between six large dairy farms so that they can receive better bargaining powers with milk distributors. The co-op is an all-inclusive operation, following the milk product through each stage of production. “We grow the feed for the cows, milk the cows, and take the milk right to the plant, so there’s traceability all the way though,” Robinson shares.“We also started a pharmaceutical division where we have our own vets that service our dairies. “The six dairies got together in 2004 and tried to think of a better way to market our milk, and we thought that if we did it as a group we could get a better value for our milk,” continues Robinson, explaining the co-op’s impetus. By 2008, the partnership was ready to grow again. “We started thinking about vertically integrating … about taking it to the next step and building a plant, and we just went from there." “We figured the best way to get into the market was to build a powdered milk plant, then go to butter, and eventually cheese,” says Robinson, recounting the company's expansion timeline. Currently, HDM’s plant has implemented the ability to produce powdered milk, and the six partners are looking into that next step. In the meantime, the co-op created its own trucking division, which brings its entire milk product to the farm.
All together, HDM makes more than $150 million each year, employing over 300 laborers on the farm and 66 workers at the plant, along with five veterinarian specialists. “There’s a good demand for our product, both nationally and internationally,” says Robinson, noting the level of prosperity HDM has seen in just six years. However, HDM
has had its fair share of difficulties. Overcoming Challenges “Low milk prices have been our biggest challenge for the whole year,” explains Robinson, referring to a severe economic downturn that struck in 2009 and severely lowered the margins of many products. “It’s a struggle; we make powder, and when powder is down so low, it’s hard to make ends meet.” Because HDM is extensively diversified, however, the coop has been able to weather the stifling economy, while still growing its operations. 39
Food & Drink “We try to do the best we can with what we’ve got; the farms subsidize the dairies a little and the dairies subsidize the plant a little,” says Robinson. “When you own everything you have to cut here and cut there and try to make things work. “We haven’t laid anyone off at the plant; in fact we’ve hired a few people,” Robinson continues. “You just try to watch your dimes and nickels as close as you can.” Though Robinson and his partners are carefully watching their ledgers, they are also on the cusp of one of HDM’s largest expansions. “We built this plant with the thought of expansion, so we built it big enough that we can add things,” Robinson shares. In fact, HDM is set to expand veterinarian services on its property this year, with plans for the butter factory addition in 2011. “That’s a natural fit,” Robinson says.
40 | USBusinessExecutive Winter/Spring 2010
Despite his confidence in HMD’s plans for growth, Robinson is still apprehensive about the economy. “I just haven’t seen something like this in my lifetime,” he laments, adding that as a business owner “it’s quite a lot of responsibility that you have, because not only are you responsible for your own family, but also all of those employees that you hire.”
A Family-oriented Way of Business It’s the constant concern about its employees’ families that makes HMD a unique partnership. Nestled in a small town, the cooperative’s partners are friends with many of its employees and subcontractors. “When you’ve been in an area long, you know just about everybody and what they can provide and how they can help you,” Robinson says. “You’re friends with everybody in town, so you just throw some business their way.
“They need to work for someone else before they work for themselves; it gives you a whole other perspective before having people work for you and around you,” he explains. “You need to be on both sides.” At the center of High Desert Milk’s business philosophy is respecting others and conducting an honest, transparent cooperative. It is this attitude that will guide the partnership’s growth and continued success. “If you take care of the others, the bank account will take care of itself,” says Robinson, confidently. n
“Most all of us that own this plant, our great grandparents settled this area, so we are involved in the community,” he continues. “This is home; none of us has ever lived anywhere else.” With long histories in the Burley area, HMD actively gives to its community. In 2009, despite a downturn, the co-op gave $14,000 worth of scholarship money to local students. Robinson has several of his children working with him at the co-op: a son that runs two of his dairies, and another two sons on the farm taking care of business there while Robinson is running the plant. Before they were allowed to work for him, they had to get a college education and a few years of experience with another company.
Food & Drink
A Mouthwatering Success Produced by Sean Barr & Written by Kellie Ducharme Based out of Palm Beach County, Fla., Neco Foods manufactures high-quality, fresh food products as branded and private-label goods for the retail, food service and restaurant industries. Neco creates its made-to-order products with state-of-the-art preparation and small batch and kettle production. Neco specializes in all natural soups, fresh dips and spreads, pre-made salads, compound finishing butters, sauces, stuffings and crab products. All the products are made with the finest ingredients. Established in the 1980s, the company has been producing the finest products for “best in class” retail supermarkets, and local and regional restaurants. In June 2008, new ownership brought in new financial and management resources, which helped the company expand its product and customer base. “Neco is an innovative, flexible and responsive manufacturer of private-label and foodservice products, all of which are produced in small batches,” explains John McGeough, VP of sales and marketing. “Our research and development, and quality assurance will set us apart. Neco has a wide range of capabilities; we can produce allnatural, organic, premium or signature recipes, and produce customized or proprietary recipes for our customers.”
42 | USBusinessExecutive Winter/Spring 2010
Inner Operations Neco employs approximately 100 people, including assembly line workers, food technicians and quality assurance professionals. Its 55,000 square foot facility is located in Lantana, Fla., and encompasses hot and cold production facilities, R&D and testing facilities, and storage of ingredient and packaging components, among others. Neco performs all of its hot and cold processing in-house, and has partnerships with companies that design and produce packaging and labels. McGeough says that having an efficient supply chain is essential to the success of his company. “It’s vital to have trusted suppliers in a fresh production environment,” he says. “You need to make sure you have partners that you can rely on.” Neco has a key set of ingredient and packaging suppliers that it uses for almost 100 percent of its contract needs in those areas. “We don’t have an extensive inventory, [we get] materials ‘just in time,’” McGeough says. Though deadlines are tight, it can provide great tasting, high-quality products because of the strong relationships built with area suppliers. “Flexibility and price are extremely important aspects” when building new relationships with contractors, McGeough adds. Encompassing Growth In 2009 Neco reformulated some recipes in response to customer demands for lower cost products that still retain the same taste and quality of the original products. New flavors and products with existing customers helped manage the business. In 2010 Neco will launch new categories of products, such as: sauces, pre-made salads, stuffings, gluten free products and a line of hummus. “We’re working with retailers right now [to] launch many new products and categories,” McGeough explains. Over the past year, Neco has already redesigned its branded packaging to create a fresh, new look to attract new clients.
As Neco navigates the economic downturn that hit the food industry hard in 2009, McGeough is hopeful for a brighter future in 2010. “Some retail programs and initiatives are now coming off hold, which tells us things are getting better,” he shares. “There is a sense of hope that [the economy] is turning around, and new projects will be the focus.” And, as prosperity returns, Neco is poised to continually take advantage of the uptick in private-label segment and strengthen its business over the next few years. n
McGeough plans to expand distribution and increase Neco’s revenue in 2010. “We want to diversify our customer and product base,” he says. “We would also like to reinvest in our facility and production equipment in the future.” “We would like to consider a newer facility with more efficiencies, and to expand our manufacturing capabilities,” McGeough continues, adding that he also wants to increase Neco’s sustainability practices. McGeough has been in the consumer products industry for 18 years, working for national food companies such as Stoneyfield Farms, Nestle/PowerBar and Old Mother Hubbard/Wellness Pet Food.
Food & Drink
Ed Jones Food Service Inc. "We've Come a Long Way" Produced by Sean Barr & Written by Kelly Matlock Ed Jones was a butcher who in 1954 opened a small meat counter in the back of a neighborhood grocery store in Vallejo, Calif., a community tucked into the picturesque San Francisco Bay Area. Ed Jones Food Service Inc. is now a 27-employee company that grosses $20 million in annual revenue by serving over 100 school districts in the San Francisco Bay Area as a cooperative with the United States Department of Agriculture. Current company President Kevin Lyons met the actual Ed
44 | USBusinessExecutive Winter/Spring 2010
Jones 23 years later, in 1977, when Jones hired Lyons for his now expanded business. The small meat counter had caught on in Vallejo, where locals came to rely on Jones’ cuts of beef. Jones’ success as a simple butcher evolved into a more complex role and business plan, when in 1957 Jones began supplying the local Vallejo school district with hot dogs and fresh ground beef. The school district supply business grew for Ed and his family, particularly Ed’s son, Gary Jones, who was the
driving force of the expansion and evolution of the company that was strictly family-run for over two decades. A Lyons in the Ed Jones Den Lyons first crossed paths with the Jones when he was hired in a “catch-all” position. “I started as a truck driver, warehouseman, meat cutter and clean-up boy,” Lyons laughs. “I was the only employee outside of the family.” Lyons has been in the food industry since high school in the early ’70s. Lyons planned to join the Air Force, but when an alternate offer came in that was too good to refuse, he began his 30-plus years in the food industry at a French bread bakery. Lyons then moved onto Ed Jones, where his ambition quickly took hold and he moved into a sales position where he expanded the food service business to more schools, as well as donut houses and coffee shops. In 1983 Lyons was a driving force behind getting the company to incorporate, which is when it changed its name from Ed Jones Meat to Ed Jones Food Service, Inc., and adopted the slogan “Service, we made it a part of our name.” In 1984 Lyons was the general manager, when he left to work with one of the Ed Jones suppliers. In 1993 Lyons returned to Ed Jones,
however, and was involved in the company’s most drastic phase of evolution: relocating its Fairfield warehouse. In 1993 the company pursued its niche as a cooperative, serving school districts with USDA commodities; the company relocated to Fairfield from Vallejo in order to form the co-op. Fairfield is where the company remains today, although Vallejo school district remains its “lead agency.” “Vallejo has been with us since 1957,” Lyons explains. “We’ve built a reputation,” based on reliable long-term service. And in order to form a co-op for the USDA, a company has to have a “lead” school district, so the long-term partnership with Vallejo has benefited both parties. As more districts have joined Vallejo, the total number of students serviced by the company has also swelled to nearly 240,000. USDA Grade-A Partnerships There are two parts to the co-op business: “brown-box” and “further processed” USDA commodities, both of which the school districts have contracted Ed Jones Food
Food & Drink those savings onto the schools. For example, schools pay half the cost of many processed goods, explains Lyons. “It’s a considerable saving to the schools.” The nature of the free and reduced lunch program is that it thrives in a bad economy when families’ incomes suffer and more kids qualify for the program. The current economy has actually been a boon to Ed Jones Food Service Inc. Although the reasons more kids qualify are unfortunate, the free and reduced lunch program has come a long way from the 1950s, just as Ed Jones Food Service has. “When I was in school, kids were in line with a blue ticket for the free lunch; it was a stigma,” Lyons remarks. “Now it’s a great system. It’s hard to identify who is on the free and reduced lunch program.” And all the kids have the access to incredibly evolved cafeterias — places which offered the trite Salisbury-steakmashed-potato type meals in the 1950s now cater to a wide range of complex tastes and allergies, offering meals that are equally nutritious and desirable to the students. The Drive to Succeed
Service Inc. to deliver. Brown box commodities are raw, unprocessed goods, such as green beans and canned fruit. Further-processed commodities are just that: goods which the company sends out to processing plants, such as cheese from the USDA that will be added to pizzas. The USDA goods that are delivered to Ed Jones Food Service Inc. are free (minus a tax); thanks to a program that enables free and reduced school lunches. What Ed Jones Food Service Inc. really does is add value to those USDA commodities by processing at a lower net cost, then passing 46 | USBusinessExecutive Winter/Spring 2010
Active throughout the Ed Jones expansion, Lyons built on his experience and moved up from general manager to the vice president position in 1995, before assuming the role of president in 1998. And it was in 1995 that another pivotal player, Dan Haimbaugh, joined Ed Jones Food Service. “Dan applied for the position of operations manager, but I brought him in as a truck driver so he could really learn the business,” Lyon explains. “He had zero experience in the food industry; he was a retired Air Force guy. But what impressed me were his computer skills — he took a government program and made it paperless.” Lyons’ gut feeling, to invest in Haimbaugh’s venture into the food industry, did not disappoint. In December of 1998 Lyons formed a partnership with Haimbaugh, and
the two bought out controlling interest of the company,” as they formed a new corporation in which they still hold 100-percent ownership. “Dan is like my brother … I always say between the two of us we make one hell of a business man,” states Lyons, who adds that Dan has made a major impact in the company’s growing success through the utilization of technology and development of online services. The “new” venture rested on old beliefs of efficiency and customer value, however. “We look for valued-added in any company [processor] we deal with. I do what’s best for the customer. I try to look at things from both sides,” Lyons states. A Well-balanced Plate of Services The Lyons-Haimbaugh partnership continues to seek out innovation, and subsequently improvement. One particular area of improvement that the company has devoted itself to is in the efficiency of invoices received by a school. Lyons’ goal has been to get “all the charges associated with a delivery on that particular delivery invoice … you can’t believe how hard it has been.” In the past the procedure was such that the school district received separate invoices for processing, delivery, state taxes and storage. Lyons’ wants to limit the paperwork burden on schools through combining all charges associated with a delivery on one invoice, coming directly from Ed Jones Food Service Inc., and fortunately Lyons’ can say after a generous amount of planning and effort, “we are very close to that right now.” Another way the company plans to provide better service is through becoming more of a “total supplier,” meaning in addition to food items Ed Jones Food Service Inc. will deliver non-food items, such as composite trays, various sized cups and cutlery. This helps the school district minimize vendors and meet minimums on delivered goods. This willingness to improve on functions is a big reason the company is successful. “We continue to look for better ways of doing things,” acknowledges Lyons, of the company milieu toward advancing processes.
members on staff — a brother, son, daughter, nephew, even his wife. However, all staff is considered “family” and Lyons treats employees accordingly.
“Our customers can source from anywhere,” Lyons recognizes, noting that in order to keep customers his company has to add value and maintain “the level of service, dependability and consistency that you want for yourself.”
Lyons’ appreciation comes from a very real place, along a long road from truck driver to ownership, and he reflects that “you have to understand where you have come from to appreciate where you are now … and it’s been fun growing a business – hopefully it will continue to grow.” A company that looks at the industry in the right light, and evolves to serve customers to the very best of its ability, Ed Jones Food Service Inc. definitely appears destined to grow. n
A Long Road of Right Turns While Ed Jones Food Service Inc. may have changed hands from its founders, the company continues to maintain the family values on which it was founded. “We are a family business still,” notes Lyons, who has multiple family
Lyons has never forgotten where he came from, and he appreciates those roots. “I have in our lobby a picture of our old facility, where we worked in Vallejo, the old ice house,” Lyons shares. “It’s an aerial view and has a shot of the original milk truck I drove. And look at where we are now with eight trucks … we’ve come a long way.”
Food & Drink
Rockland Bakery Inc. Baking Up Big Success Produced by Sean Barr & Written by Kelly Matlock New York is known for a lot of things: baseball, its boroughs, a diverse ethnic mix, an independent art scene and well-loved local businesses. And New York City, its surroundings combined, has made for the perfect setting for the steady rise of Rockland Bakery Inc. Rockland Bakery was formed by the amalgamation of a handful of small bakeries in the 1960s, leading to the corporation as it stands today, which was taken over in 1986 by Ignazio “Sal” Battaglia, the current president and one of five sons from the Battaglia family, who immigrated to New York from Italy in the ’70s.
48 | USBusinessExecutive Winter/Spring 2010
The once-modest bakery is now big business, with its current headquarters in Nanuet, N.Y. (about 30 miles from the center of the big city) employing over 400 people and working with more than bread dough, to the tune of around $55 million in revenue a year. Customizing Customer Service “We try to do one-stop shopping for all of our customers, listen to their feedback and use it to maintain quality and customer service,” Battaglia explains of the company’s
“customer-first” philosophy. If a customer requests a new item, “We’ll try it,” he genuinely adds. Customers can now access Rockland’s goods in five states, picking up their bakery needs in various venues in New York, Pennsylvania, Connecticut, New Jersey and Delaware. These products include old favorites and a steady supply of new innovations. “We try to come up with new things every year, but only when it maintains the quality,” Battaglia says.
As always, the fresh-baked products, ever-increasing in variety, require a multitude of ingredients that are serviced through reliable suppliers. “It’s a really important part of our business,” notes Battaglia. The company relies on most of the same vendors, counting on their “delivery and service,” while accounting for the seven-day work week of Rockland. “If we need something at any given time, they need to get it here, just like we do for our customers if they need something,” says Battaglia.
Distribution, through several depots, extends to gourmet shops, schools, restaurants, delis, airlines, hospitals, sports arenas, nursing homes, senior residences and hotels, as well as other venues/outlets, including street vendors (big business in itself in and around Manhattan). Wide distribution ensures a range of people in the northeast U.S. should at some point get a taste of the sweet and savory success in some form: bread, bagel, roll, cake, pie and/or pastry.
The reciprocity of good business extends from supplier to producer to customer; Battaglia knows the importance in maintaining the integrity of Rockland’s supply chain. He also tries to streamline the supply chain, keeping a tight hold on the amount of suppliers on which Rockland relies.
A recent new line of “artisan” products has been a focus of Rockland. Also important has been continually improving on the wholesomeness of certain products, including an increased use of whole grains and whole wheat while avoiding high fructose corn syrup and trans fat.
Besides maintaining its list of suppliers, Battaglia also maintains the internal workings of Rockland, including production, which was intensively automated around 2005. Increased reliance on equipment speeds production, increases volume without increasing the labor pool, and also ensures consistency in results. Battaglia found the entire process life-changing; “It’s like doing a puzzle, when you automate,” he shares. “Designing and building the expansion, fitting it together and making it work … it gives you pleasure.”
Food & Drink
The puzzle requires figuring out how to seamlessly fit all parts of the production line together to optimize efficiency of everything from receiving supplies to shipping and selling, while maintaining quality (ever a theme at Rockland) — not unlike unlocking the secret to baking by understanding timing and combining in various ratios. Through three decades Rockland has figured it out, and the company holds the reins tight in its bread-kneading fists. The Lasting Bonds of Brotherhood Figuring out this formula have been multiple generations of family. The Battaglia roots run deep, with the eldest three of five sons — Sal, Joe and Phil — born in Sicily before immigrating to the Bronx with the family in the 1970s. The year was 1977 when the family bought
50 | USBusinessExecutive Winter/Spring 2010
its first bakery. “I was 22 years old at the time; it was a little bakery in the Bronx and we all grew into the business,” shares Battaglia. His father is retired but still comes into the bakery every day. “He walks around and makes sure everybody’s doing the right thing; we could use more people like him,” Battaglia says respectfully.
2011. It is easy to smell the dough rising thanks to Battaglia’s smart and efficient business plan, good old-fashioned experience and solid know-how. Still family-owned and – operated, Rockland Bakery Inc. is in good hands. n
Business doesn’t come without obstacles, such as the economy of late, and issues such as government regulations and taxation. “We don’t know what is going to come down the pipeline, who knows, [but] you take one day at a time, and you see what happens,” Battaglia acknowledges. Maintaining a positive attitude, while trying to maintain prices and minimize overhead, is working for Rockland as the company focuses on stoking the home fires of its customer base to increase volume and negate the cool economy. Battaglia’s mission is to continue growing; he doesn’t want to become “stagnant,” doesn’t want a “slump.” Stale is not an acceptable state of operation in any aspect of the bakery business, from actual product to efficiency of service. So the company is always researching new outlets for its always fresh and natural items. If history is telling, Rockland Bakery Inc. will again increase its operations to meet demand as it approaches a 25-year anniversary in
Food & Drink
Evolution, Juice Harvest Corporation
Growing a Taste Bud Sensation Produced by Sean Barr & Written by Kellie Ducharme Juice has been an integral part of the lives of Jimmy Rosenberg and Shawn Sugarman for more than 25 years. Rosenberg is the creator of Evolution, a fresh juice and smoothie company in California, and Sugarman is the firm’s recently acquired star strategist, who worked for juice giants like Minute Made for almost three decades. Rosenberg has been an innovator in the juice industry since the early 1980s, when he created the now internationally famous natural juice brand Naked Juice, which is stocked in every Starbucks across America. Rosenberg started Naked by squeezing juice in Santa Monica and delivering it to friends, neighbors and beachgoers. From there, the company grew like wildfire, and in 1989 Rosenberg sold Naked Juice for millions. Although Rosenberg thought he had shut the door on the juice industry for good, he would soon realize that he hadn’t quite gotten rid of the itch. “Jimmy was one of the pioneers of fresh juices,” explains Sugarman, a longtime friend of Rosenberg’s, as well as a business associate. “He still had the bug, so he started Evolution, which he named because it represented his personal evolution in the juice business.” 52 | USBusinessExecutive Winter/Spring 2010
Developing a Niche Rosenberg began Evolution in the mid-1990s, and since its inception he’s grown the brand in Southern California and, more recently, ventured north through California and into Seattle and Portland. Evolution sells a variety of 100-percent natural juices, smoothies, soups and fresh cut fruit; however, the company’s main focus as it prepares for national growth is orange juice. A recent high-profile acquisition, Sugarman’s “job is to figure out how to grow this business without losing its character.” His strategic plan is to focus on something that Evolution produces particularly skillfully and market that. When Sugarman first tasted Rosenberg’s orange juice, he knew immediately that it was the right product to promote. “When I tasted Jimmy’s product [I realized] that would be the stake we would put in the ground, and that all of our other projects would benefit from the fact that we would build a reputation as having the ultra-premium orange juice offering,” explains Sugarman. “I think there’s basis here for a great growth model and a successful business. “The quality of the juice that you can buy today, I’ve watched it overtime diminish as [massive, cooperate] companies face the difficulties of being as large as they are and still putting out a consistently good product,” Sugarman continues, citing brands such as Minute Maid, Tropicana and Simply Orange as examples. “The nature of these large orange juice companies, they can’t really deliver the promise of ‘straight from the orange to the package,’ and yet we’re doing it every day here at Evolution.” A Fresh Look on Fresh Products In general, Evolution markets itself to a more affluent clientele, because using 100-percent fresh fruits is an expensive undertaking that reflects on the product’s final price. And, because fresh juices are an elective product, Evolution has seen sales dip slightly since the economic downturn that began in 2008. “The economy is affecting anyone who is selling products at the end, because we are an expensive juice because of what it is, it’s a super-premium product,” reiterates Sugarman. “There’s been some erosion of [sales] because of folks substituting lesser products.” But Sugarman contents that the company still has a very loyal client-base that he knows will stick by Evolution juices no matter the extenuating circumstances. “That fresh taste is so important to certain people; it's so important to them that they know it’s real, and authentic and fresh from the fruit,” he explains.
Another challenge that the company has had to face during the past year is the quality of fruit crop, which was been less than stellar during 2009. “It’s very hard to make a great, consistent product, because you get what you get from nature,” laments Sugarman. “With nature being variable, our challenge is often how we blend certain varieties of fruit to come up with the [great] taste.”
Food & Drink Sugarman says that because of this factor, it’s extremely important to build strong relationships with suppliers and to educate the company on crop quality, availability and timing. In the end, he says, all you can do is “cross your
fingers.” When choosing vendors, Evolution looks first at product quality, then company reliability and, thirdly, fair pricing. Many of Evolution’s suppliers and fruit brokers have been working with the company for more than a decade. Once obtained, careful and timely handling of the fruit is essential. “The challenge for us is always shelf life, so we’ve spent a lot of investment in our facility to make sure that we … get the maximum amount of shelf life from our
products,” Sugarman shares. “If I showed you a list of what we have to get in here every day, it would boggle your mind. And it’s a testament to our people and it’s a minor miracle every day what we can put out.” At the end of the day, Evolution’s juices are worth all the hard work, Sugarman says. Fresh juice is ultimately healthier for the environment, the consumer and the food industry, and he wants people beyond California to know. “We need to let the world know that there’s a huge difference, not only from a taste standpoint but from the purity of the process and the honesty of the product.” n
54 | USBusinessExecutive Winter/Spring 2010
North American Breweries A Smooth Transition
Produced by Sean Barr & Written by Kellie Ducharme New York state-based North American Breweries (NAB) was formed in 2009 by private equity firm KPS Capital Partners as the company’s platform for alcoholic beverages. The creation of NAB came following the purchase the Genesee Brewing Company of Rochester, N.Y., and Labatt USA, an importer and marketer of Labatt-branded beers. The purchases comprising NAB included the Genesee Family of beers, Dundee Ales and Lagers, and a perpetual license from Pernod Ricard USA for Seagram’s Escapes, a flavored malt beverage. The acquisitions by North American Breweries were heralded as the “Deal of the Year” by Mergers and Acquisitions Magazine. “In a one-month period we created this company, North American Breweries, that had these already longestablished assets, brands and business ties,” says Richard
Lozyniak, CEO of NAB. Now holding assets that date back more than 150 years, NAB is thriving and on its way to becoming even bigger and more successful. Acquired and Inspired The Genesee Brewing Company – which includes the Genesee line and Dundee Ales & Lagers (including the ever-popular Original Honey Brown) – is a lynchpin in the NAB empire. The brewery has continually operated since 1878. From Prohibition until 1999, it had been owned by four generations of the same family. In 1999, the family was looking to sell and a group of local investors, who realized the historical value of the company, bought the brewery. Unfortunately, the company was undercapitalized, and as a result it struggled severely during the next decade. Then
Food & Drink in stepped NAB. “We repositioned Genesee as a value brand,” Lozyniak explains. “You have to understand, this is a brand that’s been in decline for 25 years, and in the last year we’ve seen substantial growth in it. To turn around a brand in a one-year period is something that we’re really proud of.” On top of reinventing the brewery to appeal to any manner of tastes – craft to economy, hoppy to malty, session to seasonal – NAB also had to amalgamate it with the other acquisitions. This was a move that, though successful at the end, proved to be quite a challenge. “There were the natural challenges of merging [two] distinct organizations – putting companies together with very different cultures is a challenge – but I am pleasantly surprised at how well we’ve done getting the cultures together and taking the best of the two,” says Lozyniak. Essential to Success: Suppliers and Distributers Despite the struggles, NAB found there were those the company could count on. “The support that the company received from its suppliers prior to KPS coming in … was phenomenal,” shares Lozyniak. “I was very pleasantly surprised. “There is no other business in the United States like the beer business, in the sense that the relationships that you have with your distributors and your retailers are much stronger than you see in most businesses,” continues Lozyniak. “A lot of the distributors are family-owned businesses and it’s a different type of relationship than your normal corporate environment.” To this end, there are many other aspects to NAB’s relationships with vendors. “I never want to be in a one-dimensional relationship with a supplier, in [terms] of price,” Lozyniak continues. “These are all equal parts: price, service, quality, flexibility and reliability.” Plans for the Future Lozyniak is content with where he sees the company headed over the next decade. He understands that NAB is still on the horizon of what’s possible. “[We] look at this as a platform and we want to grow the business, we want to find some additional brands that would fit well in our portfolio,” he shares. “We’ve got a very nice mix right now going from a value 56 | USBusinessExecutive Winter/Spring 2010
brand like Genesee, through a premium import like Labatt, a premium domestic like Honey Brown, and then all the way up to craft beer like Dundee … now we’re looking for an additional domestic premium beer or another flavored
malt beverage like Seagram’s. “We’re looking, we’ve just got to make a decision on a brand that makes sense for us, one that we can grow, and that will complement our other brands, not necessarily compete against them.” Lozyniak continues. As Lozyniak looks for the perfect brew, he’s slowly discovering the perfect blend of leadership and relationships that will continue to lead the North American Breweries toward national success in a unique industry. Right now, in the present, however, he’s still drinking it all in. n
Food & Drink
Fabulous Frozen Foods Produced by Sean Barr & Written by Kelli Ducharme For many wholesale food producers and distributors, the label “organic” is simply a sales tactic, and not the crux of their business model. But for California-based Sierra Retail Partners (SRP) and the food production company's brand Lisa’s Organics, the organic food model is incorporated in every aspect of its business. Lisa’s is focused on the production of frozen organic fruit and vegetable materials for both its own line and those of private labels. “We’re a company that does more than just say we provide organic products; we're not people out there that said, ‘Oh, we need to do something organic to get to a new market,’” begins Mark Griffin, co-founder and president of SRP, and not a fan of companies lacking the holistic food values that authentic organic companies do. “We’ve always been organic. Not only do we have certified organic products and growing methods, but we do other [eco-friendly] things,
58 | USBusinessExecutive Winter/Spring 2010
from our carbon offset program right down to the type of packaging that we source to working with carriers who are part of the Environmental Protection Agency’s program for environmental shipping. We walk the walk, and organic is our business.” For SRP, business began in 1998. Griffin and his wife/ inspiration/partner Lisa Boudreau met while they attended the Rochester Institute of Technology in New York, and majored in food marketing and distribution. After graduation Griffin worked first as a private-label coordinator for Wild Oats Co., then a senior buyer of frozen food for Trader Joes, but soon decided to “jump ship” and branch out on his own. Griffin’s love of the food industry started even before college. “I’ve pretty much been doing food since before I
can get something similar at a different price, you always cringe. “But we responded by continuing our company philosophy, and we didn’t start trying to source from America’s competitors, we continued to produce the highest quality product at the best price domestically,” Griffin continues, adding that, in the end, that was the best long-term decision. Over the last few years, production companies have received strong criticism for sending jobs and money overseas, and a large crop of customers – the great majority of them in the organic buyers demographic – began buying only domestically produced products. “The result was that now buyers have come full circle and now retailers are getting market pressure and consumer pressure to offer domestic items,” Griffin concludes. The past year, several of Lisa’s new contracts required that the company produce its products solely in domestic plants. “We’ve stayed true to our mission and that’s really worked out for us.” Defrost For the past 10 years, Lisa’s main stables have been frozen vegetables and fruit. With the coming decade, however, Griffin has decided to expand the company into new markets, many of which are uncharted by organic producers. was old enough to work,” he shares. “The local ice cream stand was my first job, and I never stopped.” Since his days dipping cones for the ice cream parlor, Griffin has come a long way. The multimillion dollar SRP company has grown by more than 30 percent each year for the past 10 years. Within 2010, Lisa’s is projected to double the products under its label, up to a possible 30, including organic chicken and herbs, two new markets for the company. As it stands, the Lisa’s brand is in 600 locations across the country, and its private-label product is in even more. “We’re growing aggressively and quickly,” shares Griffin. Keeping Production Domestic The last decade was an unsettling one for food production companies. As markets began to outsource product to international plants at an increasing rate, it became difficult for companies that produced domestically to compete with the bottom-dollar prices of those with operations in countries like China. "We were getting a lot of price pressure from buyers who were saying, ‘Hey, these guys can beat you from anywhere from five to 25-percent per pound on a commodity,’” explains Griffin. “At first, whenever a buyer tells you they
“Right now we’re in the midst of a 2010 launch, which is going to be organic herbs: everything from chives to cilantro to oregano – it's something you don’t see much in the U.S.,” Griffin shares. “Imagine having small resealable packages of chopped herbs … they’re going to be very affordable.” Griffin believes that by combining convenience with organic quality, something that is not easily done, Lisa’s has found an untapped market in the food industry. “What this provides for the customer is the ability to store organic prepped herbs in your freezer and not come home from the framers market with a bunch of basil that ends up rotting in the crisper after two days,” he explains. Taking the concept of providing cooking components even a step further, Lisa’s is currently in the sampling and development stage of two product lines. First, the company is devising a series of packaged organic ingredients that include all the sliced and diced, cubed and chipped vegetables, spices, sauces and more a professional kitchen needs prepped as base for a robust dish. For example, Lisa’s would assemble and market all the carrots, potatoes, onions, seasonings, etc. needed to fill a crock pot for a pot roast. Additionally, Lisa’s is planning to launch a line of blended fixings that take the guess work out of how to enhance a 59
Food & Drink this company is going to grow, and it's going to head upwards." A Superior Product Griffin has found means by which to keep his company's growth as smartly controlled and healthy as its supply chain. SRP has a small staff of five professionals, including Griffin and his wife. With a small staff, the company doesn’t own the factories or farms that produce its product, but instead coordinates the production through contracts with independently owned entities.
meal. The range of pan-heated product will go from proteininclusive entrees – such as tender Rocket Chicken with arugula, roasted garlic, roasted tomato and lemon-basil broth – to hearty pasta dishes – such as squash agnolotti with brown butter sauce or chicken tortellini with spicy pomodoro sauce. Vegetable sides will also be available to complement a cook’s chosen presentation – whether its wrapping corn tortillas around a fiesta blend (black beans, red peppers, corn and roasted tomatoes in ranchero sauce) or plating seared chops with a marco polo blend (featuring an herbed balsamic glaze). Lisa’s will also launch a frozen chicken product that will be 25-percent more affordable than most fresh organic chicken, and of the same quality. “We’re not going to be able to hit conventional [non-organic] pricing on poultry, but we are going to be able to offer the customer a reason to come back to a store,” Griffin shares excitedly. “They will know they are getting a value there, and that is really the key to success.” By diversifying its product line, Lisa’s is expecting more growth than ever in 2010. “We’ve found a huge opportunity in moving away from commoditization," Griffin continues. "It will always be our basis, that’s how we came to the party, but by taking that and creating some really unique products ... that’s where 60 | USBusinessExecutive Winter/Spring 2010
“We believe the key to our offering a successful and consistent product line is the fact that we actually aren’t the farmers or the processors; it gives me a lot of more flexibility,” shares Griffin, giving a recent example: “We just shipped 1 million pounds of broccoli florets back to California because the quality wasn’t there. If I was the grower on that, I would be in a position where I might be backed into a corner to compromise on the quality of my product. “I don’t have to compromise, however," Griffin continues. "If it’s not top quality, then it’s not good for us. When you eat our product, it tastes better. We get countless emails and calls from customers that say, ‘Your corn is the best I’ve ever had, your green beans are the next best thing to fresh.'” In addition to having good product to work with, balancing the different aspects of production is essential to the success of the Lisa’s Organics brand, explains Griffin. “It’s our buying and sourcing [and supply] that fuels the engine … everything from safety issues to quality control to the organic certifications and the supply of volume, things like not over-committing to a customer what you can provide, that’s what has been the key to our success.” But without an unwavering love of organic food, Griffin’s company could never have thrived. In the end, he says, that’s what sets Lisa’s apart from its competition. “This didn’t start as a business plan,” he shares. “It started because Lisa and I love to do this; this is our passion, so we just followed our heart.” n
Seabreeze Seafoods International A Fresh Catch in Commodities Produced by Sean Barr & Written by Kelly Matlock Dave Nemzek, president of Seabreeze Seafoods International, knows good seafood and good seafood business. “We are the seafood commodity specialist for our customers,” Nemzek explains. Seabreeze imports containers of top-quality seafood from all over the world – such as orange roughy, mahi mahi, hoki, pollock, calamari, mussels, etc. – cold-stores the inventory in Southern California, and then contracts out the delivery of the delectable goods in case quantities, supplying many customers with more “exotic” catches in smaller quantities. Seabreeze, established in 1993, extends its distribution out from Southern California to Arizona, Nevada, Texas, Illinois, Colorado, Oregon, Washington, and across the Pacific to Hawaii – all from the company headquarters just east of Los Angeles. When it first started, Seabreeze had five employees, and 17 years later it still has five employees. Although relatively small on the office side, Seabreeze has been extremely successful in its niche, garnering between $10 million and $15 million in annual revenue. Seabreeze is successful for a good reason: the well-educated and hard-working employees know the in’s and out’s of the industry, and they know seafood, across the board. Seabreeze uses this knowledge when consulting with food service distributors. The Seabreeze team is savvy and happily offers seminars to educate customers to all the options and benefits of seafood. “We can give them a broad overview [of seafood], and we’ve been doing it for 15 years,” says Nemzek. Some of the company’s best customers, and also those looking for a reliable source of information, are the big guys – national broadline food service distributor chains and national retailers. These large outfits count on getting their specialty seafood stock from the “small guys” like Seabreeze Seafoods. That’s a valuable partnership that
has been established, and these companies can rely on Seabreeze for “boutique” case orders (maybe 15 to 20 at a time) of product they can trust. “We fill that little niche, kind of under the radar,” shares Nemzek. And when it comes to sharing industry knowledge, it’s not just Seabreeze product that is getting grilled. “You know what, even if I can’t sell a customer one of our products, I still love it when they call me,” Nemzek explains, describing how he will sometimes answer questions just to share his industry insight. “If I can help them become better fish buyers, then that helps us in the long run. I want my customers to be smart … the better informed they are, the 61
Food & Drink years in the industry, and 17 years with Seabreeze Seafoods, experience has ushered in expertise for Nemzek and his qualified guys, whose combined knowledge make the company what it is. Expertise is particularly where Seabreeze excels. “Sometimes our competition can’t supply the customer with the knowledge we can, they can’t go work a food show or go do a training for their sales staff … and that’s something we can do,” Nemzek shares. “Many times it’s the difference between making a sale or not, and building a lasting relationship with the customer.” Expertise Transfers to Processes better off we are.” History and Know-How Nemzek is the right guy to helm Seabreeze Seafoods – genuine and accessible, to both suppliers and customers. In 1979 Nemzek got his start in the industry working in Dutch Harbor, Alaska, for a king crab season. Boats (such as those now shown on “The Deadliest Catch”) would return with a catch, tie up next to the processing vessel on which Nemzek worked, and then would offload the king crab to be processed. Although he worked on a processing vessel tied to a dock, Nemzek did hit the high seas eventually. “At one point we had to steam from Dutch Harbor to Kodiak, and for a kid from Southern California who has wheel watch one night in the pitch black in 30 foot seas and 60 mile-per-hour winds, watching the radar screen, seeing green water coming up over the bow, the whole boat shuttering as it tries to come up through the wave, it was pretty crazy,” Nemzek acknowledges with respect, given the nature of high-seas fishing. “I tell you, hats off to those fishermen. People don’t realize how dangerous it can be.” “I came back [from Alaska] and started working with my father-in-law in his company,” Nemzek shares. “I was the guy doing the messaging to our overseas suppliers on the Telex at that time. This was way before fax and email, and I was the only one that could type. So I was able to build some pretty good relations with those guys overseas.” And 15 years later Seabreeze was founded. Now, with 30 62 | USBusinessExecutive Winter/Spring 2010
Seabreeze imports 40,000-pound containers of frozen product, and expertise is required considering the various characteristics of every product, all of which goes through differing processes based on the export/import guidelines in the country of origin. Seabreeze simplifies the process of consistency and quality assurance for its customers by verifying all product no matter how unique has passed its requirements and is provided in premium condition. And Seabreeze will go to any length to guarantee this product for its customers. For example, several years ago Seabreeze was contracted by a company in Quebec, Canada, to supply shark cartilage imported from Japan to fuel the study of the hopefully beneficial interaction of cartilage with cancerous cells. Nemzek went to a small town in northern Japan devoted to the shark fishing industry in order to get the large quantity of shark cartilage necessary for a potentially lifechanging study. “The whole town revolves around the shark industry,” Nemzek shares, explaining the impression the town’s long-held shark-devotion made on him. “You know you go to Hershey, Penn., and the light posts look like little Hershey kisses … well, this town had little shark statues all over the place. For centuries it has been the center of a large shark fishery.” Relationships Defying Challenges While interesting projects have involved international supply partners, recent challenges also involve international bodies. These challenges are concentrated in the form of foreign competition, which has been increasing within the
last decade. In response Seabreeze has focused on building good relationships to offset increased competition. “Especially over the last five to 10 years we’ve found that while it’s certainly important to have good customers it’s also hugely important to have good suppliers,” Nemzek says. “We’ve been fortunate to cement some really good supplier relationships overseas, whether it’s in China, New Zealand, Australia or Taiwan. If you can’t get the fish, it doesn’t matter how good your customers are. You can’t sell from an empty wagon.” “A lot of our suppliers we’ve known for 15 or 20 years; it results in consistency of product,” Nemzek says. “Our customers depend on us, and we depend on our suppliers. Having those good relationships has helped us, a lot, in this tough market.” Having those well-established partners has meant Seabreeze can fulfill orders on time, in the right quantity and at the right price. Product is delivered as promised, as Seabreeze uses vendors who have been smart about business management even within a difficult economy. Seabreeze has also established a reputation that can help loosen financing strings from long-held, trusted banking partners. The company is able to get additional credit for a big import if a situation dictates, despite the economy. This trust enables Seabreeze to import necessary items as they are available, items that might not be available two months down the road, ensuring product is accessible to costumers when they need it most.
Sailing into the Future A new service the company has rolled out for broadline distributors is helping them to step into the fresh seafood business. “For a lot of the broadliners, because they are so big, the fresh business is hard for them,” Nemzek explains. “We’ve started working as a broker for some of the big guys with smaller distributions of fresh seafood. We do this as a convenience for some of our larger customers.” Although not necessarily the easiest service for Seabreeze to provide, the company will serve its customers the best way possible, and “at the end of the day, if they call us again, then we are doing our job,” Nemzek says. Although Nemzek sees some “rough water” ahead, due to the economic downturn, he’s optimistic. “You just have to work a little harder, if you’re doing it right, you’re gonna get the business,” says Nemzek. “The fish business gets in your blood,” Nemzek says. “A lot of guys get into it and few get out of it.” Seabreeze Seafoods International certainly isn’t getting out; rather, the company is only sailing deeper into building strong supplier relationships, ensuring value-added customer service by delivering top-quality product, and sharing expertise with business partners. This deepens the pool of resources, strengthening the company and industry. n 63
Central Lakes College
Prepping Students for the Next Step Produced by Mike Armstrong & Written by Molly Cohen Minnesota-based Central Lakes College (CLC) has two main campuses – one in Brainerd and the other in Staples. Originally, the campuses were three separate schools, but in response to legislative action that merged college and university systems, the previous colleges merged. Thus, in July of 1995, the technical and community colleges amalgamated into one comprehensive two-year college, becoming one of the 32 members making up the Minnesota
In accordance with these circumstances, much of the school’s mission is focused on helping students transfer from high school to higher levels of instruction. “Along those lines, we have a bridges program, where we work with six regional high schools in six program areas creating pathways to go from secondary to post-secondary education,” says Lundblad. This focus on transferring seems to be garnering interested students, as CLC has experienced significant growth over the last three years. “Our full-time student [body has] increased by 42 percent in the last three years. That’s an increase of 1,000 fulltime equivalents since the fall of 2007,” Lundblad explains. CLC also has increased its presence within the nearby K-12 school districts. “We offer postsecondary options to juniors and seniors in high school who, if they meet academic requirements, can take college credits,” says Lundblad.
State Colleges and Universities (MNSCU). The merger was a success, and as CLC nears its 75th anniversary it 3,400 full-time students, 100 full-time faculty members and 100 additional staff members, according to Dr. Larry Lundblad, the school’s president. Since CLC is located in an economically depressed region, many of its students are the first in their family to attend college, or are coming from underserved populations. “According to state definitions, about 25 percent of our students are first generation,” Lundblad explains. 64 | USBusinessExecutive Winter/Spring 2010
However, some of the school’s growth might be attributed to the economic downturn; taking college courses might be attractive to young individuals having trouble finding jobs, given high unemployment rates in the U.S. “Our fastest growing group within the college is the 25 to 35 age group; I think we’ve increased 90 percent in three years in that cohort,” Lundblad explains. An Array of Choices Considering CLC’s vast array of educational programs, it is a great place for young people to pick up a specialty degree, or prepare themselves for professional jobs. “We offer a wide variety of economical educational opportunities and
we have a strong record of college transfer and technical job placement,” Lundblad touts. CLC’s educational paths make the most of its surroundings; Brainerd and Staples are located in a heavily forested area, near many lakes and abutting the Mississippi River. “We have a strong natural resource program and horticulture program,” says Lundblad. Additionally, the school’s criminal justice program prepares students for work with natural resources as game wardens and environment protectors. Equally valuable programs exist on the more mechanical side of things. “We have a heavy-equipment program that is unique to the upper Midwest; there are only one or two programs outside of Minnesota in the upper-Midwest,” Lundblad explains. “It’s a signature program.” Also, CLC offers cutting-edge robotics courses, a growing program as industry moves in that direction. As the nationwide demand for nurses increases, CLC has upped its offerings in the health division. “We’ve expanded the nursing, RN program, last year and there is continuing demand for that program,” says Lundblad. And the school has many of its core classes in the liberal arts sector. “We are developing an honors degree and theater degrees that will be transferable; much of the faculty have been here for years, and the English department even offers a writers workshop,” Lundblad shares. CLC also has a private partnership with The College of St. Scholastica, located in Duluth, Minn., that offers four-year programs on its Brainerd campus. This partnership started around 25 years ago and allows students to pursue any
of six different baccalaureate degrees. Currently, CLC is discussing additional programs, like this one, with other MNSCU partners. “We’re looking at a university center where we could provide a number of majors since two-year colleges in Minnesota cannot offer baccalaureate degrees,” Lundblad explains. In addition to a well-rounded educational process, CLC also offers sports teams to its students. The school has a strong women’s volleyball team that has competed at least five times at the national level in the last 10 years. Additionally, the men’s basketball and golf teams are usually expected to excel within the state and beyond. “We even won the state championship in football this year for the first time,” Lundblad says proudly. Supporting Students’ Needs Besides cultivating school spirit through campus sports teams, CLC meets its students’ other needs, sometimes using in-house services, and other times relying on subcontractors. For example, the dining services available at the school’s Brainerd and Staples campuses are provided through a vendor. Although the school does not offer a formal housing program; it does have available apartments that ring the Brainerd campus. “We also have special arrangements with at least one apartment complex near the school that reserves most of its space for students,” says Lundblad. However, the college’s bookstore is handled in-house, as are the school’s computer labs. But “we’re looking down the road to when students [will] have access to laptops; we might cut the number of labs we currently have, but that’s not a plan for the short-term because of the economy,” Lundblad shares. Likewise, campus security is managed by a hired individual, with the aid of several part-time students, primarily in the school’s criminal justice program. This opportunity is a real-world application of topics they may be learning in class. When the school does outsource its needs, Lundblad says that “managing our supply chain is important since we pay very close attention to the bottom line and we’re looking for ways to streamline and economize.” To streamline, CLC uses a Lean program similar to the efficiency and cost-cutting programs used within 65
Education the construction industry. “So when it comes to picking a supplier, we base the decision mostly on price,” Lundblad shares. “We look at all our processes and how we spend and we’re making changes.” One such change is the school’s effort to go paperless. “This semester we’re electronically billing students, for example,” says Lundblad. This is a way to save resources, as well as billing costs. Financial Concerns Budgeting is a main concern for CLC, and Lundblad, who shares, “Our general budget is about $27 million, including tuition and state appropriation. Financial aid would be another pot of money on top of that, putting it above $37 million, but I only work with that $27 million.” Managing the school’s budget has been Lundblad’s biggest obstacle. Tuition is tied to state appropriation, because tuition is established with board approval. “So the system basically establishes a benchmark that we have to follow,” Lundblad explains. The tightening budget also affects faculty members. “As enrollment increases and the budget decreases, we haven’t been able to add people to our staff, so we’ve got faculty members who are working extremely hard to get a large amount of stuff done in any given semester,” says Lundblad. Even though CLC has had significant budget cuts in the past year, the state is looking at another $1.2 billion cut. “So we’re anticipating tightening the budget further; we recently trimmed the budget by about a million so that’s been the biggest challenge for me,” Lundblad summarizes. Expanding the Merge Lundblad joined CLC three-and-a-half years ago, after 30 years at South Central College with campuses in Mankato and Fairbault, Minn. He began his teaching career at Kirkwood Community College in 1975. His passion for teaching and guiding students through a community college venue is evident in CLC’s expanding programs. One such program is the availability of classes online, including subjects like viticulture. “We have a growing online presence; I think last year our online participation was up 14 or 15 percent and we’re anticipating the same for this year,” Lundblad says. CLC has also opened its doors to foreign exchange students. “We have started to work with international programs and we’re building our capacity for international students,” says Lundblad. “We already have about 15 or 16 international students representing 10 or 11 different countries.”
66 | USBusinessExecutive Winter/Spring 2010
Two years ago, CLC had a ribbon-cutting ceremony to commemorate a $5 million expansion of the heavyequipment program. This expansion featured new construction added onto an existing classroom facility; the expansion made room for new shops and some additional classroom space. After that successful addition, CLC continued the expansions by completing a similar addition in the music department. And, “I’ll be testifying in St. Paul because we’re looking for some dollars to enhance our existing theater,” Lundblad shares. The idea for a theater update began when a group of people in the community became interested in creating a performing arts center. Just before the economy went south, CLC did a feasibility study and was ready to launch a campaign to raise money for a $20 million complex. “And then things went the wrong direction, but we had about $5 million of [the funds] raised,” says Lundblad. “It’s on hold, but there’s still an interest.” One department that CLC does have funding for is the college’s renewable energy department, run on grant money received in association with the Department of Agriculture. Using these funds, CLC is growing six perennial plants, planted last year, which will be ready for harvesting in a year or two. These plants, on the 400-acre farm, will be put toward creating biodiesel and other alternative energies. Another successful expansion strategy for the school is in solidifying relationships with the region’s Native American population. After hiring a diversity director who is Native American and has ties to several reservations, CLC realized the potential it has in providing further education opportunities for these communities. “We started to work very closely with the MilleLacs tribe to provide a number of college courses right on their reservation — we started last semester and we’ve added a significant number of classes this semester,” Lundblad explains. “It’s been very much a success.” With these areas of expansion already gaining steam, Lundblad continues to look toward the next step, and the ultimate goal. “I really see us as a regional provider of higher education,” he says. It is Lundblad’s open-mindedness that has helped guide CLC through the recession, all the while growing the school’s student body. As the economy begins to recover and stabilize, it will be Lundblad’s ability to plan ahead and see the bigger picture that will position Central Lakes College to continue growing and molding the minds of the next generation. n
Preparing Students Through Tradition and New Programs Produced by Mike Armstrong & Written by Molly Cohen In 2009 Nancy Blattner left her position as the Vice President and Dean for Academic Affairs at Fontbonne University in St. Louis, Mo., and brought her 30 years’ experience in higher education to the position of president of Caldwell College in Caldwell, N.J. “It’s a place where things can really happen,” she says.
founding body, the Sisters of Saint Dominic, who have been on the school's site for more than 100 years. “That’s one unique thing about our college … we exist within a tradition with a much longer history,” says Blattner. Although the school has a relatively short 70-year history, its heritage is the Dominican tradition that has an 800-year legacy.
All presidents prior to Blattner were Sisters of the College’s
And, with its 83 full-time and 125 adjunct faculty members
Education teaching 2,300 students, Caldwell College’s 70-acre campus is bursting with activity. In order to facilitate all its services, the College combines in-house capabilities with a series of proven vendors. The school provides residence halls for 500 students and also has an in-house information technology department. Dining services are subcontracted to Sodexo Inc. and the bookstore is subcontracted to Follett Corporation. The College’s total operating budget is $35 million. “Although the college has received a number of federal grants in recent years, the college is primarily tuition and fee dependent,” Blattner shares. Focus Points The integration of many on-campus services ensures that Caldwell College operations run smoothly for students. But Blattner says students often pick Caldwell College because it offers them a truly nurturing environment. “The entire Dominican charism and heritage are built around four
68 | USBusinessExecutive Winter/Spring 2010
pillars that we embrace,” according to Blattner. These four pillars are study, community, ministry or service, and prayer. For the first two pillars, Blattner fosters an atmosphere of knowing every student individually by inviting each student to her home for a meal or interacting with them on campus. In the academic realm, the goal is to match each student’s career goals with education and experience. “Going to Caldwell … gives students an opportunity to develop leadership roles not available at bigger campuses, so when they leave they are completely well-rounded and prepared to be functioning citizens of the world,” Blattner states. As for the pillar of service, Blattner instituted the first annual Caldwell Day on April 30, 2010. On this day all classes were canceled and offices closed. Faculty, staff and students spent the day in the community volunteering for social organizations, hospitals, food banks, soup kitchens, churches and schools. Afterward, members of the school community reflected on “what service means to us, why we volunteered, what we learned about ourselves and our community neighbors,” says Blattner. However, students often take efforts into their own hands. After the January 12, 2010, earthquake in Haiti, Caldwell students began a relief collection effort. A campus-wide email went to all faculty, staff and students, indicating various times and places around campus for collections. “We have some students from Haiti and some faculty and staff with family members in Haiti, and as a community we came together to support them,” Blattner remembers. Campus Evolution Despite its foundational pillars, Caldwell College like many small private liberal arts institutions faced recent challenges stemming from the current economic situation. Many students are in need of more aid than in years past, according to Blattner. A gap forms between the financial aid available and what the student can pay. “We are working very hard to offer financial packages to help the students since they, like we, have experienced the impact from the downturn in the economy,” Blattner comments. As is true in many states, another issue for Caldwell College is the dwindling population of students graduating from high school. Of its students, about 1,000 are the traditional 18 to 23 year olds. The remaining students are taking graduate classes or are adult students coming back to begin or to continue an interrupted undergraduate program.
Caldwell became the only New Jersey school offering a doctoral program in Applied Behavior Analysis. This discipline focuses on the diagnosis and treatment of autism. This program is particularly relevant for New Jersey since its prevalence of autism is higher than any other state in the United States. In conjunction with its new program, Caldwell is creating a new center where children with autism can be diagnosed, and where parents and caregivers can receive instruction in how to work with these children to help them develop communication skills and socially appropriate behaviors. And, through a videoequipped classroom, Caldwell faculty and students will assist families, social agencies and schools throughout the state of New Jersey so teachers have a better toolkit to work with autistic children. Another curriculum change involves Caldwell’s new relationship with Mountainside Hospital in Montclair, N.J. This relationship allows Caldwell to provide students their first two years toward a bachelor’s degree in nursing, while the hospital will provide the practicum and clinical experiences during the remaining years. These new programs are part of the school’s build up toward its 75th anniversary. Other recent expansion projects include a 200-bed suite-style residence hall and student fitness center. “I would like to take us from a college to a university as part of a five-year strategic planning process initiated last fall,” Blattner shares. In the next few years, Blattner sees Caldwell maximizing the vibrancy of campus life for the undergraduate population. Blattner began meeting with students in the dorms to discuss campus life and looks forward to working with students to enhance their college experience. Blattner also plans to increase Caldwell’s programming for graduate level courses. “When we were approved to offer our first doctoral program, the college agreed to have a second ‘related’ doctoral program, probably in education, in the near future,” Blattner explains. With the potential of new educational programs and campus life additions, Caldwell College’s future has endless possibilities. n
Students come to Caldwell for its strong liberal arts core curriculum as well as its professional programs. And its most recent program is a new extension of an existing master’s program. After receiving approval in July 2009, 69
Growing by Degrees to Better Serve Produced by Mike Armstrong & Written by Molly Cohen Bloomfield College in Bloomfield, N.J., is “a wonderfully diverse community. Last year we graduated students from 40 different countries. Our student body is made up of African American, Latino, Asian, and Caucasian and we enjoy the richness of cultural exchanges both in the classroom and in extracurricular activities,” says Richard
Levao, the school’s president. Founded in 1868 as a Presbyterian seminary, Bloomfield has greatly expanded its course offerings in response to its increasingly diverse student body and has become a liberal arts institution bringing in $40 million annual revenue. This year 2,300 students are going for their bachelor degrees. Some 1,600 other students are seeking professional certificates in various fields, including real estate, medical billing and network engineering. “It’s a broad service with traditional and nontraditional courses,” Levao says. 70 | USBusinessExecutive Winter/Spring 2010
Levao has been Bloomfield’s president for the past seven years. During his previous career as a trial lawyer, Levao used his spare time to assist with governance and teaching at universities. He was, and continues to be (for 20 years now) a Board of Trustees member at Rutgers University;
he’s served as an adjunct law professor at Cornell University for 10 years, specializing in environmental law; and he has spent nine years as a board member for the Woodrow Wilson Fellowship. Eventually Levao was contacted for his current position by an executive search firm. “I just loved the campus, it was a lovely little place and people were interested in opportunities,” he remembers. Student Life
During his tenure, Levao has noticed many changes on campus. The school’s student body is now trending more toward a traditional age than in past years. “We have more younger, full-time students. Formerly it was a mix, but I think this is reflective of a bad economy and people trying to get a degree before trying to get jobs,” he speculates.
this economy with lenders being very conservative, we’re working hard to get it,” Levao shares. Expanding Classes and Buildings
However, the attraction to Bloomfield does not surprise Levao. “We’re on the train line to Manhattan, a plus for students who don’t get into New York often, and we have 12 to 14 students per class. The 71 full-time and 200 parttime faculty members … are close with students, giving out home phone numbers and communicating directly with them,” he says. The school has residential and commuter students. “About half of our first-year full-time students live on campus and we just opened a new residential facility that houses 91 students; we’re hoping to build a new residence hall for 220 students,” says Levao. “For those students who commute, our Center for Leadership and Engagement offers daytime and early evening events to engage those students who spend their off hours away from the campus.” Some of Bloomfield’s on-campus services for students are subcontracted, while others are handled in-house. For example, the school’s bookstore is outsourced to Follett Corporation, an educational materials supplier. Likewise, dining services are outsourced to Gourmet Dining LLC. In contrast, the school’s information technology division is in-house, and consultants are hired when Bloomfield reorganizes its system. Housing is also an in-house operation, although about 150 students from Bloomfield live in Newark at University Center, a dorm for students from schools in the surrounding areas. Even with so many nearby schools, competition is the least of Levao’s concerns. Instead, Bloomfield is counter-cyclical; “We’ve seen a 40percent increase in applications in the last two years, which we attribute to the recession,” Levao says. “But it has posed a problem with respect to students paying bills.” To help, Bloomfield has special scholarships for students who have been taking classes at the college for some time and want to continue. But there are other areas in which funds are not so easy to allocate. “The biggest challenge is capital, funds to build new facilities like laboratories, classrooms and residence halls … in 71
Education Despite these challenges, Bloomfield offers a wide mixture of traditional liberal arts programs and pre-professional programs. The traditional liberal arts courses include social and liberal sciences, sociology, political science and the humanities, while the school’s pre-professional programs are in nursing, education and business.
Creative Arts and Technology program (CAT). This program has been running for 12 years and is a blend of animation, multimedia, sound technology and game development. “It’s quite popular and tends to draw students from wider geographic areas because it’s an unusual program,” says Levao.
One of the school’s stand-out divisions, however, is the
Earlier this year Bloomfield expanded its course offerings by starting the school’s first master’s program – a Master of Science degree program in accounting. In addition to expanding its courses, Bloomfield also just built a new Center for Academic Development – a learning resource center – using state and federal grants and internal funds without special fundraising. Likewise, several of Bloomfield’s buildings, which were once old Victorian homes, are being rejuvenated for educational use. “One was completely gutted and renovated and is now the Office for the Educational Opportunity Fund, a New Jersey state program encouraging college attendance by inner city, lower-income students,” says Levao. Adjacent to that building is another old home getting a makeover to become the English as a Second Language building for the school’s growing number of Latino and Asian students learning English. A third Victorian home that used to be the reverend’s house back in the school’s seminary days will be converted into the education division. The school also completed two new science labs using a Predominantly Black Institutions grant. “We are looking forward to building a new residence hall on a parcel of land in downtown Bloomfield which will expand the college’s footprint,” Levao shares. Beyond these current or pending ventures, Levao eyes future growth for the school’s masters programs, “like fine arts through the CAT program, nursing, education, maybe MED or MAT, or perhaps an MBA,” he foresees. With such ambitious plans for the future, Bloomfield College seems ready to take on more students and prepare them for the working world. “Bloomfield may be faced with challenges but it has tremendous potential and a wonderful mission,” concludes Levao. n
72 | USBusinessExecutive Winter/Spring 2010
Central Virginia Community College Employing a Wealth of Education Produced by Mike Armstrong & Written by Molly Cohen Darrel Staat has a passion for education readily apparent in his past 11 years as president of Central Virginia Community College (CVCC). As the school’s sixth president, Staat has focused on forging a loyal and lasting relationship between his college and local businesses. “In 1999 we surveyed local businesses to see what they thought about the college and how well the college was doing in terms of [filling] their needs [by providing good hires] and found it was lacking,” Staat reflects. “We made an effort to remedy that and we’ve been very successful.”
Founded in 1966, the college offers programs preparing students to join local companies or transfer to other colleges and continue their education. Transfer students usually go in-state to the University of Virginia (UVA); Virginia Polytechnic Institute and State University (Virginia Tech); Longwood University; Radford University, Lynchburg College or Liberty University. “CVCC has an agreement with 30 schools in the state so the students know they have a better chance of being admitted to them,” says Staat. In addition to the partnerships with other schools, Staat says students choose CVCC because, “We fit their particular needs at a price they can afford.” School Evolution Perhaps based on those reasons, CVCC has seen a 28-percent increase in enrollment over the last three years,
according to Staat. “It has been difficult, because on one hand we want to serve those students; but on the other hand the state budget has been dropping very significantly, so we have had to raise tuition, which gets in the way of accessibility for students,” he adds. Currently, CVCC counts about 2,750 full-time students out of 8,000 total students, making about 65 percent of students part-time. “Usually the younger students are fulltime,” Staat explains. “A lot of students come for a two-year degree, but it might take three years or more if they have a family and job.” Fortunately, CVCC has ample space for all students. The main campus in Lynchburg has 108 acres; buildings are on 20 to 25 acres. The rest of the land is comprised of six tennis courts, a soccer field and a wooded area with a walking path. Besides the main campus, CVCC has four offcampus centers throughout the college service area. “Offcampus centers are leased,” explains Staat. “In addition to traditionally taught classes, we offer classes through an interactive video format; so if we have a couple different people spread between the centers and the main campus who want to take a class, we can offer the course. Our faculty is very good at teaching remotely.” Another option for students is online education. About 15 percent of CVCC’s full-time students take classes online and 25 percent of the college’s students are taking at least one online course. “We had two online classes in 1999; now we have more than 70 and two online degrees,” Staat touts. CVCC has many individuals teaching and providing student services, whether online or on campus. The school has 65 full-time faculty members and 200 adjunct faculty members. Additionally, CVCC has an administrative staff of close to 65 full-time and another 50 part-time. CVCC subcontracts both cafeteria and vending machine services to one company; it also subcontracts janitorial and housekeeping services. Barnes and Noble is the school’s bookstore provider and the company is in the process of building its own free-standing building on campus. 73
Education Managing vendors is beneficial for the school; CVCC profits from book and food sales. These profits, along with sources such as parking fines, equal annual gross revenue of about $16 million. Distinctive Programs CVCC offers many curriculums that attract students, but the school is especially known for its transfer, health and business programs. However, it also has a large technical school focusing on machine tool, heating ventilation and air conditioning, welding, electricity, engineering and electronics. When Staat first came to CVCC, the technical labs were out of date. He was told to either close them or upgrade them. Working with local businesses and implementing state money, Staat raised $10.5 million to build and equip the facility. The school’s partnership with local businesses runs deep for CVCC. About four years ago, a local company called AREVA wanted to gear up with young engineers. “ We developed a program where we teach the first two years of engineering and the University of Virginia teaches the second two at the college so local students can take all their classes here leading to a bachelor’s degree in engineering,” Staat explains. “AREVA and 14 other businesses often hire the graduates, and they also offer some students full tuition to participate in that program.” Similarly, CVCC also works closely with a local health organization called Centra Health to place students graduating with health services degrees. Careful Planning Even with such innovative, career-minded programs, CVCC still has its challenges. The school’s biggest competitor in the area, Liberty University, has about 12,000 students, and runs an online program involving nearly 25,000 students, according to Staat. About 2,500 of Liberty University’s students come from an area that CVCC services. In addition to overlapping target pools, Staat is also concerned about the school’s budget. With government cuts, CVCC will be forced to raise tuition. “We have a tentative budget, but we’re waiting to see what shoes drop,” explains Staat. “We’ve worked successfully to have no layoffs of full-time faculty or staff.” Based on the budget issue, Staat plans to spend the next one to two years keeping the school’s head above water, while developing new programs for students. “Right now we’re looking at a program for uses of agricultural land, but we would need a grant to get that started,” Staat explains. 74 | USBusinessExecutive Winter/Spring 2010
That said, this school year CVCC debuted its culinary arts program in a new, standalone building on campus. Other new expansion includes $4.1 million of library renovations. “We completely rebuilt it to include all kinds of electronic components – there are PCs on the ground floor and interactive, compressed video rooms on the second floor,” says Staat. Future growth will be centered on an existing building that will be renovated to include an electricity lab, aerobics center, cardiovascular sonography lab, workout facility and locker rooms. An old lecture hall will be updated with theater seating for around 85 people. “Over the last 10 years we’ve planned out what we wanted to do point-bypoint and followed that plan, but we have to be careful what we plan next, because if we can’t get grants to support it we’re out of luck,” Staat warns. Hard work, however, trumps luck as the main factor in CVCC’s equation for success. Staat has studied the area’s needs and worked to shape the school to provide workable opportunities for CVCC’s students. With its wide variety of degree programs and deeply woven connections to local businesses, Central Virginia Community College should have a productive future full of striving students. n
Kirkor Architects and Planners Housing Distinctive Ideas Produced by Hanim Samara & Written by Molly Cohen Urban living has become a viable option in Canada, and with that influx comes the demand for increased housing options. Finding new space in a crowded city, however, can be a challenge. Kirkor Architects and Planners, a firm located in Toronto, Ontario, has the abilities and resources to tackle this issue. “We specialize in redeveloping low-rise, grey-field and under-utilized properties by transforming them into mixed-use, high rise residential developments with a greatly increased number of dwelling units,” says Steven Kirshenblatt, the firm’s senior partner. Kirshenblatt and his business partner Clifford Korman started the company in 1981. Now, 29 years later, Kirkor has grown significantly in various regards. “We now have
five partners,” Kirshenblatt explains. “We’ve introduced a junior partner level three years ago to keep the firm fresh, while giving it longevity.” Kirkor’s geographical footprint has experienced growth, as well, and the firm works on projects throughout Canada and the United States. Kirkor’s capabilities have also evolved, integrating the ability to tackle commercial projects ranging from shopping centers to industrial facilities. “We do a lot of work of master plan redevelopment design work in the Greater Toronto area, as well as work in the city of Toronto, taking low rise or under-utilized sites and redeveloping them into new urban sustainable communities,” says Kirshenblatt. Those regions, which are located in Toronto, Ontario, have experienced significant growth due in part to Kirkor’s ability to help the local municipalities meet the Province’s growth strategies. Growing and Blending Kirkor is currently working in the Avonshire neighborhood of North York, overseeing the redevelopment of three story walk-up rental apartment neighborhood into new condominium towers. This project is a joint venture between Toronto-based real estate development companies Tridel and K&G Group. “Three residential towers are currently under construction,” explains Kirshenblatt. “The first tower to be occupied is a rental apartment building that replaces the rental units that have been demolished. The other two are residential condos. There are another two towers proposed and there’s also a group of townhouse buildings. The townhouses are used as a buffer and transition to the existing singlefamily neighbors. The overall development will be about 1,100 units.” The site was once owned solely by K&G Group, who built the development in the early ’50s. The area included several low-rise, three-story, walkup apartment buildings with approximately 330 units. “K&G Group retained us to look at redevelopment of the overall land for higher 75
Construction density,” says Kirshenblatt. “Because of provincial and city policies, the 330 units needed to be preserved, so the plan was to build one new rental high-rise and free up the land for additional high-rise condos, and low-rise townhouse development. We took the project through official plan amendment, zoning bylaw amendment and site plan approval. K&G then partnered with Tridel to develop, market and construct buildings.” Unique challenges often go hand-in-hand with projects of this size and scope. “The challenge on this property is getting through the municipal approval process,” Kirshenblatt adds. “The overall uses and densities of the land were really not that much of an issue, but the city was very critical on urban design issues that had to be incorporated into the project.” The completed site plan will extend the high-density neighborhood west of the original Avonshire community. “It creates pleasant streetscapes and a wonderful urban feel. There is a new park being created in our development to enhance the feeling of community,” says Kirshenblatt. The project was originally going to be considered for the new neighborhood certification program as set by Leadership in Energy and Environmental Design (LEED).
76 | USBusinessExecutive Winter/Spring 2010
Construction In the end, however, the designers complied with the city of Toronto’s green building design practices instead of LEED’s. Avonshire’s rental apartment building is expected to be completed in the summer of 2010. The Work of the Future Kirkor uses a unique marketing technique to attract business from across North America (its designs have made it as south as Nevada and Texas). “My partner, Cliff Korman, has actually done a number of presentations and speaking engagements to the development industry across the continent,” Kirshenblatt explains. “That led to a lot of exciting business, especially in the U.S., when the market was stronger. It is a great way to find new prospective clients – at tradeshows and speaking arrangements. He also writes for some publications.” Korman’s proactive marketing efforts have led to easily identifiable results. One of Kirkor’s most interesting projects, in Kirshenblatt’s opinion, was the NY Towers Community. “The firm was involved with the Daniels Corporation and has created a series of high-rise, mixeduse (but predominantly residential) buildings with a variety of built forms and unusual skyline features. The last component is the building we call the Arc that took a very
78 | USBusinessExecutive Winter/Spring 2010
difficult site and created a very interesting cruise ship form that has received great response from the community,” says Kirshenblatt. The Community has six towers and 1,200 condominiums. In 2002, this site won the Community of the Year Award of the Greater Toronto Home Builder Awards. The greater Toronto area real estate market has remained strong. Kirkor is well-positioned to contribute its expertise to the development market. Kirkor has no plans to scale back nor particularly to ramp up. “We may grow a little, but the partners are very involved with each project. To keep that hands-on approach, we don’t want to get too big,” Kirshenblatt explains. Kirshenblatt foresees the company’s work becoming more popular in the coming years as its reputation grows (the firm even has designs in competition for projects in China). “The nature of the work we’re doing is the future. Smart growth and sustainable design is really creating a new world for high density residential urban development,” he says. “Our firm is well-positioned. We are also looking to take our expertise to other communities.” With the success the company has had throughout Canada, Kirkor will continue to grow and quickly make a name for itself wherever it may plant its flag. n
The Skillman Corporation
Managing Midwest Construction, Start to Finish Produced by Hanim Samara & Written by Molly Cohen The Skillman Corporation, a full-service construction management company headquartered in Indianapolis, Ind., has sprouted additional offices in Ohio, Michigan and Indiana. These branches show just how quickly the ambitious company has expanded since its founding in 1972. Skillman’s expertise lies in managing every step of the construction processes. The company’s capabilities run through four project stages: program management, pre-construction, construction and occupancy. “We work on many public projects, such as schools, libraries and higher education facilities,” says Mike Hennessy, Skillman’s vice president. “Sometimes we also perform contracting.” In total, Skillman has completed over 400 public projects serving as a project owner’s representative throughout the construction process. During these projects Skillman has worked with 80 different design firms in the Midwest. “This is easy because we strive for a collaborative work environment for the benefit of the project owner,” says Hennessy. After 40 years in the industry, Hennessy cites meeting the customers’ needs as one of Skillman’s best qualities. With 80 percent of the company’s work generated through repeat business, his customers agree with him. Helping garner this attention is an exemplary safety record, thanks to efforts including toolbox talks specific to each month’s progress. For example, Skillman was acknowledged on April 15, 2010, by the Metropolitan Indianapolis Coalition for Construction Safety with an Outstanding Project award. The project in question – the Greenfield Central Junior High – was recognized for involving $27 million in work and logging 33,000 man-hours with zero recordable accidents. And Skillman brings this same attention to detail to all its sites.
Remaking a Classic One of Skillman’s clients, Hendricks Regional Health YMCA, has recently contracted the company to work on its branch located in Avon, Ind. “We’re serving as the general contractor for this project, so we sub everything out,” explains Hennessy, who is the project manager for the build. “American Structurepoint is the architect for this YMCA.” Skillman prepared for this project by sending a representative to various YMCAs in Indiana and Ohio to get ideas and pick the best features from the nearby states. This Skillman-managed construction uses a typical YMCA design, but it’s unique because it’s a combination of a YMCA and medical office building. The two establishments, however, are not affiliated. “It’s a two-story, 120,000 square foot building under one roof with both entities having similar missions, but delivered in different ways,” Hennessy shares. 79
Construction This YMCA features a lap pool, therapy pool, spa, sauna and hot tub for its members. “The intent is that when a person has a medical problem, they will come over to the YMCA side for therapy and exercise,” says Hennessy.
“Essentially, the YMCA is hoping that person will join after they get better.” Hennessy may lose sleep mulling over the daily issues of an intricate job like this, but he is confident in his company’s ability to oversee the work. “It’s our job to be proactive in addressing issues, before they become a major problem,” he says. “That’s all part of the planning process.” Waiting on Legislation Skillman also strives to stay knowledgeable in regards to the green movement. “We continuously review Leadership in Energy and Environmental Design (LEED) qualifications, even though I am a LEED Accredited Professional and so is the design crew,” says Hennessy. (In total Skillman has 15 LEED Accredited Professionals on staff.) However, the YMCA project did not include officially documented sustainability techniques as there are sometimes time and budget constraints impacting the LEED certification on projects. More public buildings may soon be forced to incorporate LEED designs into their buildings. “Laws have recently passed in Ohio that state that all public buildings must be LEED certified. Currently we have 14 projects under construction in Ohio that are pursuing LEED Certification. ,” noted Hennessy. Skillman continues to look for other jobs to maintain cash flow until those laws pass. “We’ve completed a lot of schools in the area,” says Hennessy, “and we also completed Evansville Vanderburgh Central Library and Lawrenceburg Public Library, both in Indiana.” The Skillman Corporation has the opportunity to perfect its managerial process while looking for new opportunities in the public sector and maintaining the positive and necessary relationships it has with subcontractors. That way, Skillman will be ready to lead (or LEED) projects successfully from start to finish no matter what comes calling. n
80 | USBusinessExecutive Winter/Spring 2010
Securing a Project's Focus Produced by Hanim Samara & Written by Molly Cohen FaulknerUSA, a construction company founded in 1962, has experience working in the private and public-private markets. Headquartered in Austin, Texas, the once local company is now known nationwide as a comprehensive design-build firm with completed projects in the hospitality, mixed-use, residential, education, commercial, corrections and military facilities.
FaulknerUSA, a powerhouse that brings in around $142 million in annual revenue, might be recognized as the company behind many of the nationâ€™s Hilton and Hyatt convention centers and hotels, but it is best known for its extensive work on correctional facilities across the country. Currently, FaulknerUSA is the general contractor for
Construction construction on a jail in Arizona called the Mohave County Adult Detention Facility. Capturing a Distinctive Design “We offered the county of Mohave a fixed-price maximum contract for the construction of its jail,” says Dean McMichael, the project executive. “We are finishing out the jail so it is able to house 688 inmates, but at its capacity, if it was completely built, it could hold 848 inmates.” The large-scale jail will hold an assortment of inmates from low to high security. Durrant Architects, with lead architect Richard Johnson, designed the innovative structure. The nationwide Durrant Architects has an office in Phoenix, Ariz., so Johnson came into the project with experience designing for the Southwestern locale. Thus, he created a design that is reflective of the county’s natural elements, and actually utilized some of Arizona’s geological elements. Particularly distinctive is the fact the new Mohave County Detention Center is built into the side of a mountain. If building a jail into a mountain wasn't difficult enough, the floor plan offers its own complexities. “The jail is six stories high, but it merges with an administrative area on
82 | USBusinessExecutive Winter/Spring 2010
LEED Accredited Professionals on staff, and they have tremendous experience in LEED design techniques. Moving the Mountain FaulknerUSA faced numerous challenges while overseeing the Mohave County Adult Detention Facility construction. “The biggest challenge to the project was combining the physical location and design of the building,” says McMichael. To incorporate the new building’s design into the mountainous landscape, FaulknerUSA had to make a rather substantial chink in the mountain. “The job required the removal of thousands of tons of earth from a mountainside to do the construction,” McMichael explains. “But there wasn’t any dynamite or blasting involved, just large amounts of scraping with bulldozers to fracture or pulverize the rock.” Looking beyond this project, McMichael hopes to find additional work in the commercial and public works sectors. “Right now in the construction business there are plenty of things that keep everyone in the industry awake at night,” he says. “I’m hoping for an economic improvement, specifically for projects such as hotel convention centers and municipal projects like jails.” the third floor, therefore it’s a complex design compared to a sprawling two-story design that is typical of jails,” McMichael explains. “So it is relatively compact, but it has verticality to it.” The jail is roughly 183,000 square feet, and also has a juvenile detention area housed in a separate building. In addition to its distinctive vertical design, the jail also has a standout physical structure in its central retaining wall that is 583-feet long, 18-inches thick, and 26-feet tall. The wall serves two purposes: It works as the backbone of a building, and it forms one wall of a security corridor. Another special feature for the Mohave County Detention Center is its sustainable design aspects. “While we’re not going for LEED certification, we are reaching for LEED equivalency,” says McMichael. “We are utilizing boilers and other mechanical components that actually have a much higher efficiency rate than would normally be found.” Durrant Architects typically includes environmentally friendly components in its jobsites, regardless of whether it is part of the job specifications. The company has several
McMichael recommends that project owners continue with their construction plans. “I hope these guys will continue with construction on their sites in this time when they can get the best pricing. They need to recognize, to the extent they can, that this is the time to fund and move forward with work.” With FaulknerUSA’s vast area of expertise and impressive showcase projects like the Mohave County Adult Detention Facility, the company will remain at the top of the list for any upcoming projects. In its nearly 50 years in business, the company has completed over 700 projects for public clients and private partners, nationwide. Project owners can entrust their funding in companies with proven success, such as FaulknerUSA. n
Ohio Valley Manufacturing The Tools to Succeed
Produced by Chase Bertke & Written by Kellie Ducharme Ohio Valley Manufacturing (OVM), located in Mansfield, Ohio, has been manufacturing heavy-ton, large-bed applications, tools and machinery since 1999. With presses
that range from 250 to 4,000 tons, the firm has the ability to make products of all size, giving OVM an edge above other independently owned competitors. With 70 employees and an 80,000 square foot facility, the firm does more than $34 million in annual sales under the guidance of president Mike Fanello and his son, John Fanello, who acts as the company’s operations manager. Four years ago, OVM added a tool-making facility to its operation, and it has since become one of the factory’s busiest sectors. “We have a 20,000-square-foot tool room with 12 toolmakers, and we build tools for our customers that they may need for different specialty programs that they come to us with,” says John Fanello, adding that the company self-performs 100 percent of its work. “We are really self-sufficient with all of the great people we have here … we’ll build the tools and everything needed for production.” To assist with the completion of heavyduty tools – which can weigh upwards of 100 pounds – OVM recently installed a mechanical device that Fanello and his associates developed themselves. “It’s hard for two guys to lift heavy tools all day long,” Fanello explains. “So we implemented a robot that helps with our production. All of our internal people developed a concept and did all of the electrical work and programming the robot [in-house]. Weathering the Economy When the stock market plummeted in 2008, the reverberations shocked OVM throughout 2009, forcing the company to make changes in order to weather the decline. “We really had to change our way of thinking
84 | USBusinessExecutive Winter/Spring 2010
and our way of running our plant,” explains Fanello, “We were lean on our manufacturing, our inventory, our personnel, we were lean on the raw material we were purchasing, because we didn’t have the extra money to buy [in bulk] and continue cash flow. “We got to the point where we were leaving work on Wednesday afternoon because we didn’t have anything to do at one point, and this meant we were low on labor,” Fanello continues. “The office personnel stepped up, though, and went out in the plant and helped us get our production done. A lot of us worked 18 to 20 hour days just to get our orders out,” he finishes. Fanello says that there was no denying it; the economy shook OVM to its core. But the result was a company more fortified than ever; it is a company in which the core employees knew they were valued and that OVM would take whatever percussions necessary to keep them on. OVM itself had never been trimmer and more efficient, every dime was traced and every nickel accounted for.
been open in 1999,” Fanello shares. “As far as pieces and dollars, we set records in the middle of November, and that’s over a 10-year period. Everything is turning for the better,” Fanello says excitedly. The impetuous for the boom was the individual success of OVM's clients, who have seen their own uptick in business and therefore needed large inventories of parts and equipment replenished immediately. “A couple of our largest customers, they’ve shown about a 30-percent increase in their volume for the first quarter of 2010.” “Things are turning around," Fanello concludes. "We are seeing schedules increase; we’re starting to get a feel that better things are going to stick around for a while." By maintaining its commitment to quality and to instantly adapt to its clients needs, Ohio Valley Manufacturing has made the key to its continued success. n
Thus, when the economy began gearing up again near the tail end of 2009, OVM was poised to take complete advantage of the turn in fate. "In the middle of November, we had our longest single day shipping record since we’ve
Mid Valley Industries LLC
Making Parts to Empower Big Industries Produced by Chase Bertke & Written by Molly Cohen Mid Valley Industries LLC (MVI) is a custom and contract heavy metal machining and fabricating shop founded in 1996. MVI uses precision machining equipment and techniques to create small- to large-sized parts for mining, power gear transmissions, cranes, medical equipment,
well as throughout the world. MVI has 100 highly skilled, highly valued employees. “We try to make sure each employee gets credit for their work, from top to bottom,” says Kevin Schmid, the company’s president. As an overall guiding stratagem, MVI is committed to performing as a regional leader in the job machine shop industry, utilizing its talents and technology to deliver quality, service and value to all of its customers. To meet these goals, MVI has a year-over-year proven track record for high-quality service, punctual deliveries and continuing growth. Team Strategy Every company has its own qualities that make it stand out from the pack. For MVI, “the biggest thing that differentiates us from other companies is our culture, mindset, determination and desire to service our customers,” says Doug Pribyl, vice president of sales. “These qualities lead to a lot of great things such as better quality, better service and response to issues that occur and a better overall business.” These company focus points are also reflected in MVI’s employees. The company employs what it believes to be many of the most knowledgeable and talented custom and contract manufacturing personnel in the Fox Valley Area. Relying on the strength of its management team and a companywide “can do” mentality sets it apart from competition.
hydraulics, compressions and injection moldings, the oil and gas industry, and the food and bottling industry. The company’s facility is located in Kaukauna, Wis., but its finished parts are shipped all across the United States, as 86 | USBusinessExecutive Winter/Spring 2010
According to Pribyl, one of MVI’s keys to success is the focus on a team environment. “We’re one group working for a common cause,” he explains. Each MVI employee has specific skills and qualities for which he or she is highly regarded. “The management team at the top might be the driving forces,
but everybody has a hand on the rope, pulling us along, and that teamwork is what makes us successful,” says Pribyl. And this team-oriented secret to success has proved useful during economic challenges, and has proved invaluable when the company needed diversification. “We’ve been able to expand beyond our normal scope of work … and as a result increased our value added services,” says Pribyl. Following an intelligent growth plan, the company has done an expansion within the industries it already serves, as well as diversified into new markets. “We have a pretty diverse industry base we serve now, and there are a lot of opportunities within those industries that we’re exploring more than ever before,” Pribyl explains. MVI has bolstered its in-house equipment and skill level to accommodate the largest machining requirements. The company believes it is one of the most well-rounded and capable shops in the upper Midwest region. Maintaining Utilities for Job Success MVI’s shop certainly has a wide range of abilities. At 55,000 square feet, it is a fully air-conditioned, world class facility, complete with numerous cranes, primary heavy-duty machinery and small support equipment. This 24-hour, six-day-per-week working environment reduces tolerance related defects, machine down-time, and machinist fatigue for consistent output day-in and day-out. MVI’s QMS System is ISO 9001:2008 compliant and should be certified and registered in July 2010. MVI has the latest technology and productivity enhancement tools available on-site. In order to put this facility to best use. MVI now has numerous resources in-house, including: certified welding, thermal stress relieving, vibratory stress relieving, horizontal and vertical machining centers, large horizontal boring bars, horizontal and vertical lathes, wire EDM, assembly and CMM inspection. However, the company occasionally outsources some tasks, including chrome and nickel plating, ceramic coating, painting, anodizing and heat treatments. When MVI does have to outsource, it establishes partnerships with suppliers and uses the same companies repetitively. That way, MVI can rely on its outsourcing company’s skills, knowledge of MVI requirements, expectations and promptness. The company’s strategic alliances handle non-
core operations, such as heat-treating, painting, special coatings, plating and non-destructive testing. Typically, MVI does not have to use shipping companies, however, since it has its own fleet of flatbed trucks. “We have some alliances in place with trucking or freight suppliers who specialize in handling and transporting the fragile highend parts and components we manufacture and ensure the products get to their final destination without issues or damage,” Pribyl shares. In 2008, MVI reinvested capital back into the company to improve and update its operations. “We expanded our operation, spending approximately several million on our plant and equipment,” Schmid says. “Reinvesting is very important to us, staying current with technology, with our training and capabilities; this is necessary for a thriving, growth-driven company.” And these improvements came just in time for MVI. It was recently selected to begin refurbishing and modernizing the Dworshak Dam in Clearwater County, Idaho. As the third tallest dam in the United States, this hydroelectric dam modernization project was a challenge for the company, based on the sheer size of the components it was working on. “We’re helping to refurbish some large components within the dam,” Pribyl adds. Adding this impressive job to the company’s completed works only adds to its long list of accomplishments. As a company that maintains a supportive team focus, understands controlled growth, and knows how to carefully reinvest necessary supplies to grow its capabilities, MVI is poised to reach its intended goals. n 87
Vogel Industries Inc.
Manufacturing Diversity for Half a Century Produced by Chase Bertke & Written by Molly Cohen Having a wide variety of skills is a great way to maintain profitability in this fluctuating economy, and Vogel Industries Inc. is a manufacturing jack-of-all-trades. Founded in 1960, Vogel Industries Inc. is celebrating its 50th anniversary as a manufacturer of precision machined components. Vogel does not have one specific niche. Instead, Vogel has become a connoisseur of numerous types of services, including prototype, service parts, high-volume production,
88 | USBusinessExecutive Winter/Spring 2010
heavy truck parts, and providing alternative energy (solar and wind) components. The company is a nimble tier 1 supplier and is headquartered in Marine City, Mich. Quality Recognition Serving the U.S. as well as international clients, Vogel is now running on 25 employees, a slightly down-sized number; however, for the most part the company has not been adversely affected from the economic decline thanks to its
ability to diversify. “Last year, two of our major customers filed for bankruptcy,” Rich Pirrotta, president, explains. “With that, we lost a truck line, but were fortunate that our successful efforts in acquiring other customers enabled us to survive.” Currently, the company makes between $12 million and $18 million in annual revenue. Vogel has a 50,000 square foot facility that manufactures and assembles high-quality components and assemblies. Thanks to Vogel’s quality reputation, General Motors (GM) has recognized the company as a mega quality supplier, one of only a handful of companies to receive the designation among GM’s over 1,300 direct material suppliers. The final customer use for most of the components Vogel produces is often hard to discern. Fred Nothdurft, Vogel’s Chief Operating Officer, explains that the process “… begins with a raw casting or forging, and may include work with our suppliers who may perform heat treating, anodizing, painting, or non-destructive testing. We offer a turnkey approach by carefully understanding the customer requirements and ensuring services we can’t provide are fully addressed by our suppliers.” One of the parts Vogel makes that most can identify is the tow hooks that go on the popular Hummer H-2 and H-3 vehicles.
Planning for the Future Although traditionally the company’s biggest expenses, besides labor, is raw materials for suppliers who provide castings and forgings, Vogel invested in a restructuring two years ago to establish itself in the alternative energy sector, specifically in the manufacturing of wind and solar powered energy components. It is also involved in the production of a low-speed electric vehicle. As these types of energy sources become more mainstreamed, suppliers like Vogel are key to producing components and creating replacement parts. By getting into the alternative energy sector early, Vogel can establish itself as a leader in the field, and as a competent firm that will have the experience that many will seek out as the sector grows. Hopes for Growth Pirrotta explains his philosophy in managing the course of Vogel, and looking to grow the business, when he says, “Don’t think you’re just investing in the customer; focus on investing in people and the culture required to win.” Pirrotta uses this service philosophy as the key to Vogel’s
Manufacturing success. Using this tactic, Pirrotta hopes that in the next couple of years Vogel will “rev up to deliver significant profit and sales. I believe we can double our size and get to $30 million in revenue.” Pirrotta’s goal for growth and increased profits may be partially based on his optimistic, yet realistic, view of the cyclical nature of the economy. “It has to stabilize eventually,” he says. “We are already acquiring new customers because the base of companies who can manufacture components has dropped significantly.” In the meantime, Vogel will be preparing for any and all business and when the time comes will be ready to aggressively plunge into expanded work and new sectors, meeting the manufacturing needs of many. n
90 | USBusinessExecutive Winter/Spring 2010
C&M Machine Products Inc. Renewed and Freshly Imbued Produced by Chase Bertke & Written by Molly Cohen Founded in 1978, C&M Machine Products Inc. has been supplying the upper echelon of Fortune 500 companies, as well as middle and lower tier OEM’s with all of their precision component needs for more than 30 years. C&M specializes in CNC turning with milling and crossdrilling operations, while the company’s machine shop and secondary operations department concentrates on the labor intensive side of the business.
such as mechanical subassembly, contract manufacturing, laser marking, parts washing and laser welding. However, C&M was not always the expansive job shop it is today. Originally, the company started as a smaller, family-owned mechanical parts supplier. “My father was the finance guy, my grandfather was the screw machine guy, and Roger Martin was CFO,” says Dan Villemaire, the company’s president.
With 60-plus CNC machines, C&M manufactures fasteners, bushings, fittings, connectors and many other types of screw machine products. The company also offers services
C&M quickly evolved, however, into a larger, more competitive components business that delivers on faster lead times and greater quality. Propelled by key accounts, C&M has found itself on the fast track to making its facility more modernized, saving the company’s labor force time and increasing safety. The component supplier was already rising through the precision parts industry before it was put in the capable hands of Villemaire, who at age 26 might be considered young for his position in the company. But Villemaire brings five years previous experience with C&M, where he worked while attending the University of New Hampshire, located not too far from the company’s facility. Villemaire’s course of study might not seem an obvious choice for a mechanical parts supplying company, but he brings passion and fresh energy to the company. “I got my degree in finance, which had nothing to do with manufacturing, but my father taught me the ropes; he hasn’t kept anything from me which led to a successful transition,” says Villemaire. Increasing Work in a Decreasing Economy In the years since Villemaire came onboard, the company has seen further transitions, including the move to a larger working facility. C&M’s Hudson, N.H., plants measure at 84,000 square feet total, but the company did not move to the new building until recently. “We had planned on moving out of our old location two years ago and 91
92 | USBusinessExecutive Winter/Spring 2010
had all of the engineering done, but then the economy went south, so we pushed the move off,” Villemaire remembers. “We now have two facilities while we wait for the expansion on the new building to be complete. We’ve retrofitted the new building on the inside, painted it and had the floors redone; we’ve taken care of everything,” says Villemaire proudly. In addition to increasing its service facilities, C&M is also hoping to increase its number of employees. “Right now we have 60 employees, but we’re looking to add at least 20 jobs this year,” Villemaire shares. Bringing on new employees is a definite possibility for the company since in the last couple of months, C&M picked up a large account, which will be the start to getting the company back on the pre-recession track. “This contract is really going to propel us into the next dimension of C&M; we’re getting into rotary transfer machines, which is highvolume production,” says Villemaire. As of right now Villemaire says C&M handles mid-level production of mechanical machinery components, like the more difficult parts that require high precision. “The
equipment we’re getting is what they run automotive parts on – it’s the newest, latest and greatest you can get,” Villemaire explains. “It’s something we can integrate into our shops and it’s not as mechanical as it used to be, so that’s a good thing.” This update in technology and passion for the industry is not new, however; it resonated within C&M even during the economic decline. “We picked up a couple new accounts during the recession and now it’s looking really good,” reveals Villemaire. “We’re getting new parts from existing customers; a lot of positive things are about to happen.” These new accounts kept C&M’s employees working hard, especially since the company does about 98 percent of its work in-house. However, occasionally C&M does rely on subcontracting to meet its customers’ orders. “We use a couple good machine shops that have an all-encompassing package for when we can’t do it all,” Villemaire explains. Once the parts are ready, C&M uses two distribution channels to get the products to the customers. “We have a couple of our own vans and a 24-foot box truck, but mostly
Manufacturing we use UPS as directed by our customers,” Villemaire says. Through its successful production and distribution to old and new customers alike, C&M was able to maintain its annual revenue during the economic drop, and has every intention to see it increase. Transcending Everyday Challenges Although C&M has fared pretty well during the economic storm, Villemaire is still kept awake at night while wondering how the company will get things going and
out the door. “It’s just those little problems every day, whether it’s with an outside vendor or making a good first impression,” he explains. In response to his concerns Villemaire cut costs, ate up excess in-house materials, and had to cut down on overtime. “Everyone took on bigger responsibilities,” recognizes Villemaire, thankful for everyone’s contribution. While certain unfortunate concessions had to be made in late 2008/early 2009, including layoffs, Villemaire’s methods have allowed for some rehiring as business has picked back up. As loyal clients start to rebound from the recession, C&M sees the business coming back. “I see things getting a lot better; we deal a lot with industrial automation and they’re all coming out strong,” he shares. And, of course, C&M has never ceased being ready to work to support its growth model. With its new facilities, streamlined operations, fresh contracts and an optimistic outlook, C&M Machine Products is perfectly structured to increase its market share in the foreseeable future. n
94 | USBusinessExecutive Winter/Spring 2010
Sapona Manufacturing Inc.
America’s Last Stretch of Fabric Production Produced by Michael Hackney & Written by Molly Cohen S. Steele Redding, president of Sapona Manufacturing Inc., has been in the textile industry for almost 40 years, “but it feels like 140,” he jokes. Sapona Manufacturing began business in 1836 as a cotton spinning operation located in Cedar Falls, N.C. However, it was redesigned in 1916 for the textile industry and Redding purchased the company in 1972.
taking industry sales with it. Sapona Manufacturing was one of the few companies that stayed in the United States. “We used to have 70 competitors and now we have about two,” Redding shares. Currently Sapona specializes in nylon, polyester, spandex or lycra for socks, woven fabrics, sheer hosieries and active wear, etc., plus several different types of yarns that clients use.
Since then, Redding has seen the textile industry’s numerous changes over the years. The recent and most significant change occurred when a large portion of the textile industry shipped overseas for inexpressive labor,
Strength in Service To maintain sales, Redding did not need to create a crafty new business scheme; he focused on the intrinsic qualities
Manufacturing that have always led Sapona. “We do everything we can to give the customers what they want, when they want it,” Redding shares. “This means we have to do a lot of changing and dancing around here, but we try to keep the quality up and we’re more willing to be driven by what our different customers want and react to it than others have been.”
Often Sapona is approached by people selling “various antimicrobial yarns, and we’ve had yarns with copper oxide in them and one with charcoal, coconut husks or something – we were running at it for a while, but then everyone forgets it,” Redding shares. “We’ve been in and out of a number of things like that, but it’s still just the basic business.”
Sapona’s employees, whose numbers range from 190 to 215 based on how busy the company is, work hard to meet this promise of quality, efficiency and customization. “Anyone who wants something we make knows about us,” says Redding.
Based on this new product pattern, Redding is taking a different approach for the next couple of years. “One of the biggest things is trying to maintain … sometimes you have to hunker down and lie low,” Redding explains.
From all of its sales, Sapona’s revenue for 2009 finished around $54 million, impacted primarily by raw materials as the company’s biggest expense. Sticking with the Classics The company’s recent revenue numbers are on the rise, compared to previous years after a reduction in sales beginning in October of 2008. “Our sales held up longer than I expected them to,” Redding admits. “Sales dropped again in January 2009, but gradually picked back up.” Sapona was able to overcome these economic challenges based on the company’s impeccable efficiency “and the fact that we’ve gone quite a few years without any debt,” Redding adds. “The equipment we buy is very expensive, but we try to stay with a little security blanket at the bank.” And that equipment has been a key to the company’s success since updating it allows Sapona to handle all production tasks and shipping in-house. “Once in a while we’ll have someone produce a little product for us when we’re tied up, but not much – there are very few left to even do that anymore,” says Redding. Much like Sapona’s workflow, the company’s inventory can also peak and plummet. “We’ve had some periods where we were able to keep our inventory low, but … we produce so many individual items that sometimes we feel like we have a full warehouse and have trouble shipping,” says Redding. But for the most part, the Sapona’s inventory has not changed over the years. “We spent several years coming up with new and exciting things that people just loved until we declared the price,” says Redding. Sapona spent those years combining different yarns, or yarns with other materials, and customers showed excitement until they saw the price. “If we were willing to sell it for nothing and at a total loss it might have done something, but the excitement just sort of went away,” Redding remembers. “We spent several years and tons of research and development money creating new products.”
96 | USBusinessExecutive Winter/Spring 2010
While Sapona adopts Redding’s “lie low” approach, the company will focus on perfecting its efficiency processes and maintaining its high quality standards. This will encourage customers to keep coming back to Sapona Manufacturing, so the company can continue raising its sales, keeping the textile industry going strong in the United States. n
Energy & Power
Global Diving and Salvage Diving Deep for Growth Produced by Zach Smith & Written by Kellie Ducharme Founded in 1979, Global Diving and Salvage (GDS) began with just four deep sea divers. The company has since grown to become the West Coastâ€™s largest diving contractor, employing 350 people nationwide and making over $50
million each year. GDS is headquartered in Seattle and has two satellite offices: Anchorage, Alaska, and Rio Vista, Calif. Tim Beaver, the companyâ€™s CEO, has been with GDS since a year after its inception, and in that time he has seen
Energy & Power exponential growth nationally, he says. “We do a lot of offshore oil field diving, primarily mixed gas and saturation diving, and we specialize in well intervention and life-form removal,” says Beaver, who adds that the firm has more that one specialty. “We’re a little bit unique when it comes to a diving company in that we do both oil field diving and underwater construction diving.”
underwater inspections, environmental audits, marine construction and causality response services. For all of its services, GDS provides in-house project management, salvage engineering, cargo recovery, heavy lift operations, lightering, blackwater photography and video, ship husbandry, underwater wielding, rig support, pipeline tieins, clamp installations, hot tapping, matt installations and dozens of other complex services.
GDS offers diving services near all of its offices and off Gulf Coast. In addition, GDS can helm offshore support services,
The firm is well-known by companies who require this work often, and as such has built several long-term relationships
98 | USBusinessExecutive Winter/Spring 2010
production of the area’s Transbay Tube. Growing Above Water As GDS gears up for its next decade of business, Beaver expects the firm to continue to prosper. It has remained relatively unscathed by the recent economic downturn because of its focus on a non-luxury, highly specialized market. “We haven't been forced to make a lot of changes, our pricing has always been competitive,” Beaver says. “We found that in the energy sector the oil prices are holding firm and the work has been relatively steady."
with oil companies and municipalities. “We work on a national level; we’re not like a Subway where people come in and order a sandwich and leave,” Beaver jokes. “We’re a highly specialized, well-regarded firm, so the people who need this kind of work know who we are and they seek us out.” Going Below the Surface GDS recently completed a series of dives for New York City. The dives involved GDS personnel venturing into a narrow shaft of the Delaware Aqueduct. The firm’s divers made a 680-foot dive to access the shaft’s plumbing and mechanical networks. “This involved setting up an offshore saturation diving platform inside a building and then making these dives to the construction work at that depth,” explains Beaver, who explains that diving at such an extreme depth while performing construction requires a complex balance of resources and manpower.
The only significant change has been the tapering down of support funds in hurricane ridden areas like the Gulf of Mexico. “Offshore oil support services for Hurricane Ivan and Hurricane Katrina are winding down a little bit,” Beaver explains. “So there is some restructuring of the marketplace with that.” GDS does want to strengthen its national presence and gradually expand its international markets, Beaver reports. “We are solidifying our regional presence from California to Alaska and fortifying our lead position on the West Coast,” Beaver says. “We’re also expanding our offshore diving marketing to include offshore markets in South America and the Middle East.” As for Global Diving and Salvage's scope of work, Beaver indicates there's little need to tamper with success. “[In the future] I see us doing more of the same thing that we’re doing now, just perfecting it. We continually strive to do better.” n
“So, in this particular project we combined underwater construction expertise with our offshore deep diving capabilities to provide a solution for our clients, one that we were uniquely qualified to provide,” Beaver continues. GDS also recently finished a successful fuel recovery from a 1,666-foot offshore supply vessel that was submerged at the base of an oil platform in Alaska. In the San Francisco Bay area, GDS is currently providing diving assistance for the replacement of 14 anode array assemblies used for the 99
Energy & Power
Boone County Water District Every Drop Counts
Produced by Zach Smith & Written by Kelly Matlock Waste not, want not. This idiom is often applied to the Earth’s resources, and as it can be applied to water conservation it can also be applied to the organizational efficiency utilized by the Boone County Water District (BCWD). Founded in 1952, the BCWD is a 58-yearold municipal management organization that manages the drinking water supply in Boone County, Ky., and prides itself on its model of wasting the least amount of energy, money and natural resources. However, it always wants to increase efficiency. Phillip Trzop, general manager, shares that the BCWD’s efficiency is achieved through increased – digital efficiency programs, such as paperless billing and automated processes, particularly the recent transition to the satellite meter reading system. With only a few water meters to be hand-read across the 23,000 meters the company manages, this amounts to a significant savings in time, energy and fuel. “We can save 15- to 16-percent mileage using this system versus [the outdated drive-by radio frequency] MMI meters,” shares Trzop. These savings benefit employees, customers and, of course, natural resources. The recent increase of the company’s reliance on computers to facilitate business transactions has been particularly adroit in terms of increased speed and savings. One area to have benefited from automated systems was, naturally, billing. This helps the company, as well as the client. The BCWD has 1,956 eBill accounts, 3,630 ACH accounts (meaning direct withdrawal from checking or savings) and 1,400 payments dropped by the office; the rest are mailed by customers to an automated bank collection center, processed, and uploaded to the accounts each morning. For those taking advantage of non-paper statements, there is a savings of $0.55 a stamp, which can be passed on to customers. It all adds up, and will hopefully be a trend that increases in the future.
100 | USBusinessExecutive Winter/Spring 2010
Cumulative Drops in the Body of Success The BCWD sees annual revenue around $12 million. But where it really registers success is in ensuring that customers have a safe and dependable supply of drinking water, serviced to them in a way that is simple, easily accessible, and also helpful. Additionally, the BCWD integrates customers into conservation efforts with thorough education and reassurance of what to do in the event the water supply in the county becomes critical. However, the company also takes steps to ensure it won’t reach that critical level. “We purchased our water in 2008 from the Boone Florence Water Commission (BFWC)/Greater Cincinnati Water Works (GCWW), which is treated surface water from the Ohio River, and this 30 million gallon-a-day system should meet our future community needs past the year 2025,” says Trzop.
Ultimately, Boone Country Water District is successful because it dually avoids wasting time, energy and resources (i.e. water). “It was the most cost-efficient move we’ve made,” notes Trzop, proud to be furthering improvements on the water procurement, treatment and conservation process. Resourceful - and Respectful - Servicing The Boone County Water District meets the needs of surrounding municipalities by carefully managing the water supply and alerting the public during critical low points that could call for an ”emergency” response on a varying degree of importance. The Water Emergency Supply Plan has been created to dictate company personnel and public action during periods of low water supply; it considers many factors, including the assessment of the water supply, the daily customer demand and anticipated rainfall (that would decrease outdoor water use). If water is waning, a big component of the emergency response is carried out through customer conservation, but also internal measures taken by the BCWD that involve suspending nonessential flushing, detecting leaks, increasing the education of customers on conservation, suspending flushing of new lines, suspending issuing hydrant permits, and initiating communications with fire departments within affected area to suspend “wet drills” that use water. Based on the direness of the situation, an appropriate response level is undertaken. With Level 1 being the least dire and Level 4 the most, the response incorporates requests and/or requirements for limiting “nonessential outdoor watering,” which encompasses a range of outdoor water uses including landscape watering, the fill of scenic and recreational bodies of water (pools, fountains, artificial waterfalls, etc.) to sidewalk washing and car washing. Public education of water conservation is good-business for the Earth, as well as necessary in times of critically low supply. The BCWD educates and also offers helpful tools to save water through customer leak detection kits, educational brochures, inserts with “how to conserve” tips, and by thoroughly defining “nonessential outdoor watering” so customers understand all it encompasses. Another resource for costumers is the Annual Drinking Water Quality Report, the last of which was completed mid2009. The District knows that its 23,000 customers want to rest assured that their water supply is safe, and the BCWD goes to great lengths to ensure it is, but also communicates openly with the costumers so that their water business is truly transparent.
The BCWD meets at regularly scheduled meetings, the second Monday of each month, at the district office at noon. It also offers a wealth of information on the organization’s Web site, where customers can also access their accounts. Strategic Use of Resources Online access has been a time- and money-saving initiative on the customer side, while hiring subcontractors has helped the BCWD on the operational side. Subcontractors are used for meter installations when work is plentiful and can’t be covered solely by employed staff, while all the concrete and yard-work is always done in-house. Excess work will go to approved subcontractors; the lowest priced company that is also project-engineer recommended – usually companies who have done work with BCWD in the past, and have proven themselves reliable and qualified. Projects around the $1 million to $2 million mark often warrant subs. At every opportunity the Boone County Water District has shown an ability to make smart choices managing its resources. And with its electronic efficiency and educational tools firmly in place, the organization is positioned to keep things flowing smoothly throughout the next two securely stocked decades and beyond. n 101
Energy & Power
Chester County Solid Waste Authority Wasting Nothing
Produced by Zach Smith & Written by Kellie Ducharme Since its inception in August 1984, the Chester County Solid Waste Authority (CCSWA) has served Pennsylvania by running the Lanchester Sanitary Landfill. As part of its mission of proper waste disposal and waste reduction, the CCSWA is also one of the community’s biggest proponents of environmental sustainability. Located outside of Philadelphia, the CCSWA has been a model for the way landfills across the nation operate by harnessing landfill gas, encouraging recycling, and promoting environmental awareness throughout the community. Currently headed by Robert Watts, the Authority’s executive director for the past 11 years, the 600-acre property (bridging the Honey Brook, Salisbury and Caernarvon townships in southeastern Pennsylvania) serves 49 municipalities and
102 | USBusinessExecutive Winter/Spring 2010
375,000 people. With only four years of capacity left, the Authority has filed with the Pennsylvania Environmental Protection Agency to expand. Green in Action For the CCSWA, being green is at the center of its mission. The CCSWA has made this charge a reality by channeling methane and carbon dioxide landfill gas, a potentially harmful byproduct of landfill waste, into energy used to power local businesses. “With the landfill this size, landfill gas is one of the most important things to manage and can also cause a landfill manager the most headaches,” explains Watts. “We were the first landfill in the state, maybe even in the country,
to develop a 13-mile pipeline that initially served multiple businesses with renewable energy from landfill gas.” Since December 2004, the pipeline serves as an energy source for several businesses, innovatively turning a harmful product into a useful one, and reducing the community’s draw on natural gas resources. In 2009 the CCSWA has linked its homeowner-sized windmill power production in close to real time to its Web site. This windmill was obtained by a state grant to demonstrate to the public the viability of wind power. Promoting the Environment The CCSWA is giving people the power to change the way waste can be conscientiously managed in more ways than one. Many people have no idea that you can recycle aluminum foil, anti freeze and used oil filters. The CCSWA accepts dozens of items that can be recycled, and advertizes these opportunities on its Web site, through direct mail and newspaper ads placed in its service area. Flyers are posted in libraries, environmental groups, synagogues, churches and municipalities. The Authority’s recycling center is
open six days a week. The center also advocates nature’s version of recycling: composting. The CCSWA distributes literature that explains how allowing certain items to experience the natural process of decay is not only less wasteful, but better for the environment because of the minerals released from the process. The Authority is partnering with the county’s board of commissioners to offer master composter classes to county residences, conducts workshops and makes finished compost available to the public. The CCSWA also promotes supports safe hazardous waste regional collection events. For children, the Authority is a free disposal and recycling site for the Great American Cleanup, Pennsylvania, an organization that helps kids recycle in their local communities and holds organized trash pick-up events. The CCSWA also has its own recycling team where kids can volunteer to meet student service hours. The Authority offers free interactive programs on recycling, waste reduction, environmental shipping, alternative cleaning products and buying recycled. Supporting the Community In 2001, the Authority repurposed the top of one of its capped and closed landfills to offer a scenic overlook above the Welsh Mountains, providing views of the Conestoga and Brandywine valleys. Widely used as a recreational area for families, the free overlook has open-air pavilions, picnic tables, a hitching post for horses, a bike rack, two binocular stations and a playground for children. Local families come to the lookout to relax and picnic on the property. With the future on the horizon, the CCSWA is gearing up for its expansion and always continuing to explore new ways to promote and incorporate ways to further add to its community. “We’ll gear up for requesting bids and finding contractors,” explains Watts. “Right now our plans are just to continue to serve our designated service area.” As the Chester County Solid Waste Authority serves Chester County’s disposal needs, it promotes the importance of recycling and sustainability throughout Pennsylvania’s suburban community, assuring a greener tomorrow for company and community alike. n
Energy & Power
San Bernard Electrical Cooperative Inc. Still Energetic at Seventy Produced by Arianna Serino & Written by Kellie Ducharme The oldest member of the San Bernard Electrical Cooperative Inc. is 104 years old. Her late husband was one of the first board members of the co-op when it began in 1939, and she remembers stopping cars on the local Bellville road to recruit Texans to join the Co-Op. Today, that same kind of personal touch can be found at the nonprofit, where the executives see members as family rather than customers with open wallets. “We are part of your neighborhood. When we get up, we’ve got to look our neighbors in the eye,” says Billy Marricle, a longtime project manager with the Co-Op. “With that we always try to make the right decisions because we answer to the community.” Numbers that Talk San Bernard began when several leaders from Austin and Colorado counties became interested in securing service for their farms, and took its name from the San Bernard River, which is the common boundary between Austin and Colorado counties. Today, San Bernard runs 3,700 miles of distribution line, 93 miles of transition line and 25,000 energy meters in eight counties: Austin, Colorado, Lavaca, Waller, Montgomery, Harris, Grimes and Fayette. Altogether, its service area is 170 miles long from one end of the system to another, and averages 486 kilowatts of energy a year. The Co-Op’s lines run through urban centers such as San Antonio and rural farming communities such as the Cardwell Flats. “We serve the full gamut,” explains Marricle. “We are 50 miles west of Houston so we have bedrock communities, and then the further south you go we [serve] the rural areas.” San Bernard has 116 employees and four offices in Magnolia, Hallettsville, Columbus and Bellville, where the co-op's headquarters are located. San Bernard is a distribution utility. The C0-Op does not own or operate any electrical generating plants. Instead, San Bernard's power requirements are purchased from the Lower Colorado River Authority 104 | USBusinessExecutive Winter/Spring 2010
(LCRA) and City Public Service Energy (CPS) and are distributed by San Bernard Electric to its members. The non-profit works to provide power at the lowest cost possible and takes its funds and directly invests back in the company. Membership within San Bernard allows the opportunity to talk to the Co-Op management about any problems, the right to attend the annual meeting and vote for directors, the responsibility to report hazardous situations or vandalism, and the responsibility to keep accounts current in order to help the cooperative’s financial strength. Each member also received a copy of Texas CoOp Power magazine, which is full of news bites, power conservation tips and more. Understanding the Value of Local Contractors Though the company has more than 100 employees, it tries to keep local companies busy by contracting system improvements to Texas subcontractors whenever possible. At all times, the co-op self-performs member-requested jobs and lately, because of the economy, San Bernard’s laborers have been doing all the Co-Op’s labor themselves. “With the downturn in the economy, we’ve had to let one
contractor go to keep our crews busy,” says Marricle. “We don’t want to have to lay one of our employees off, so we’ve staffed up to the point where we are always utilizing outside help, but when things go south the outside help can be put on hold.” Of course, there are some “outside” companies that are anything but. One of San Bernard’s contractors has been working with the company for nearly 40 years, and the coop would remain loyal to them until the end. “We don’t want to lose them, there’s so much history,” says Marricle. “They know our system almost as well as anyone in-house.”
to manipulate its meters. “I know we were one of the first co-ops in the state of Texas that read meters over a Fireline carrier, and I think we were probably the first to have full deployment of all our meters in the state of Texas,” Marricle boasts. Over the next decade, San Bernard doesn’t profess immediate plans for exponential growth. Instead, San Bernard will continue to make decisions that will benefit its members first and foremost, showing how it values growing trust more than territory. n
Embracing the Technology-Era As for in-house employees, San Bernard likes a mix of natural talent and brainy drive. “We’re not looking for the typical alignment — the big, burly guy,” Marricle continues. “There’s got to be just a little bit of geek in him, and I say that with affection. Our people just have got to be savvy enough to work the field and computer.” Since the turn of the 21st century, San Bernard has increasingly embraced the importance of technology. The co-op began reading meters in 1989 and was one of the first electrical co-ops in the nation to use data control networks
Energy & Power
Onondaga County Water Authority Keeping Flow with New York’s Water System Produced by Neal Russo & Written by Molly Cohen As one of the Earth’s most easily accessible resources, water is also one of the highest demands for our planet’s consumers. Everyone needs water, but water is useless unless it is clean enough to consume. Many citizens in central New York state turn to the Onondaga County Water Authority (OCWA) to meet their H2O needs. OCWA was founded in 1955 and provides water to approximately 340,000 people through 91,000 service connections, according to Michael
E. Hooker, the organization’s executive director. OCWA employs 127 people and generates revenues of $35 million each year. Improving Water Quality A water system for such a population must constantly be updated, thus the Authority began two major expansion and upgrade projects in 2008. First, OCWA started a $14.25 million expansion and renovation of the water treatment plant in Marcellus, N.Y. This project, to be completed in June 2010, included construction of two new filters and energy efficiency improvements which enhances the treatment plant’s ability to comply with new requirements for the Safe Drinking Water Act (SDWA). The project also enables the plant to be better prepared for any amendments or changes in the future to the SDWA, which was established by the Environment Protection Agency (EPA) in 1974 in order to regulate local and state standards for safe drinking water. In 2008 OCWA also undertook a $33 million tank upgrade for the eastern and western county reservoirs. Currently the reservoirs in question are open to the atmosphere and are being replaced with covered, concrete storage facilities, which will enhance safe drinking water by keeping pollutants, animals, and unwanted human activity out of water sources. Construction on both of the two tanks began in 2009 with the 20 million gallon (MG) Van Buren tank slated to go on-line in July of 2010 and the 30 MG Manlius tank going into service by the end of 2010. In addition to the OCWA’s three current major projects, the organization also assumed control over the Southern Branch pipeline that uses water from the City of Syracuse Water Department to supply customers in the southern part of Onondaga County. Southern Branch features large transmission mains, two large pump stations and three storage tanks.
106 | USBusinessExecutive Winter/Spring 2010
Additional projects, such as the replacement of a water line in the Village of Canastota that is being coordinated in association with the Oneida County Department of Transportation, are also underway. Water Sources OCWA’s three major sources of water are Otisco Lake, Lake Ontario and Skaneateles Lake, and consumers generally receive water from one specific source, but in some areas they may receive water from a combination of two of the three sources. Sometimes the water source for a specific area may change with seasonal demand. Water from Otisco Lake, the easternmost and smallest of New York’s Finger Lakes, gets treated and filtered by the OCWA and then delivered to consumers. In 2009, 43.4 percent of OCWA's water originated in Otisco Lake, and Otisco Lake consumers most likely live in the southern and western half of Onondaga County. OCWA purchases Lake Ontario wholesale water from the Metropolitan Water Board, which also treats and filters the water. In 2009, 53.2 percent of the OCWA's water originated in Lake Ontario, and customers in the northern and eastern half of Onondaga County most likely receive this source. Additionally, OCWA customers in Madison, Oneida and Oswego counties use this water. The Syracuse Water Department treats and delivers the water from Skaneateles Lake. In 2009, three percent of the OCWA’s water came from Skaneateles Lake. OCWA purchases this water from the City of Syracuse Water Department. Skaneateles water is used to supplemental areas close to the city’s boundary, and these OCWA customers likely live near the city’s transmission lines or the Southern Branch pipeline in the New York towns of Onondaga, Jamesville and Camillus. OCWA also supplies water to owners of seasonal camps where public water is available. Interestingly, the number of seasonal camps is dwindling as more and more former summer homes are being converted to year-round residences. To ensure the water that is provided to customers is high quality, both the City of Syracuse Water Department and OCWA conduct ongoing watershed inspections for their respective water supplies, and they regularly inspecting lake conditions before the water gets treated. In 2009 this process added a Source Water Assessment Program (SWAP) that will distinguish latent sources of pollutants in every water source available throughout the state of New York.
adequate water is a very important job. In 2009 the OCWA delivered on average 36.8 million gallons each day to its consumers. Recognizing that a viable water system is a key to current future economic development opportunities, the Onondaga County Water Authority is constantly updating and perfecting its system to meet changing government health requirements and the needs of its consumers of today and tomorrow. n
Water is essential to our everyday lives, providing safe and 107
Energy & Power
212 Resources Corporation Portable Problem Solvers Produced by Matt Duncan & Written by Molly Cohen In the early 1980s, Jim Schleiffarth and Bob Waits were acquaintances in St. Louis, Mo. Bob was an architect and the Director of Small Business Development for the County, while Jim was leading his third-generation family industrial equipment sales business. Jim developed a filtration technology to recover salable oil from crude oil tank bottoms and decided to create a service
108 | USBusinessExecutive Winter/Spring 2010
company. Bob wrote the business plan with Jim to raise funds and was so excited about the business that he left his job to start Tracker Services with Jim. Tracker grew to provide services at refineries and petro-chemical plants throughout the country. Later, that company was sold to Waste Management, Inc. and Jim and Bob went different directions with the new owner.
Fast forward to early 2000 and Jim was the president of Vacom LLC. He had developed patented enhancements to an evaporative process for industrial wastewater treatment. His customers – Toyota, International Paper, AisenWarner and others – were using this equipment in large plants to achieve zero-discharge goals and complete water recycling from contaminated wastewater. Jim decided to return to his roots in oil and gas services by purchasing the Vacom patents and starting a new company, H2Oil Recovery Services. He teamed up with Bob once again, and with Mike Zumwalt as CFO, raised investor funds to build a reclamation plant featuring his evaporative system in West Texas in 2006. That plant proved successful and was the basis for creating a transportable version of Jim’s evaporative system (called “PODs”), which evolved into a new service company that, under the name 212 Resources, focused on processing contaminated natural gas flowback and produced water – creating clean, distilled water to conserve and protect the aquifer associated with drilling. Presently 212 Resources (named because “212” is the temperature of steam) has 55 employees and is expanding operations in Wyoming and Colorado. “We are considering
opportunities in the Marcellus Shale and Canada," Waits shares. "We will have five operating PODs by the middle of the year." Proven Unique Technology The patents Jim Schleiffarth developed and brought from Vacom eliminate the two key drawbacks of evaporation: scaling and fouling. To avoid scaling (the deposit of minerals on the heating elements when converting from liquid to steam), the design removes the process step of “flashing” to steam away from the heat exchanger to a separate “disengagement vessel.” Fouling is stopped by operating at significantly higher than normal flow rates to create a turbulent flow that “scours” the heat exchanger. Both process advances are patented and were proven prior to application in oil and gas, with over 10 years operating experience in numerous industrial applications such as Toyota’s zero-discharge plant in Jackson, Tenn., where oily emulsions from metal processing are separated with the distilled water used as make-up in Toyota’s boilers (which eliminates scaling) and the concentrated oils are blended for fuel. In 212’s Wyoming application, the processed water was
110 | USBusinessExecutive Winter/Spring 2010
granted the only permit variance in history as a substitute for “fresh” water to be used in the highly sensitive “surface-hole” phase of drilling unprotected through the aquifer. The Colorado application, on the other hand, discharges directly to a trout stream and had to pass the difficult Whole Effluent Toxicity (WET) test to demonstrate it could sustain life. 212’s distilled water was actually too clean for direct discharge and the company had to appropriately add minerals and oxygen to sustain life. Transportable Capabilities When its six components are assembled into an operating unit (40- by 60feet), the POD has 3,000 barrels, or 120,000 gallons per day of throughput capability. The PODs include a highbred Mechanical Vapor Recompression (MVR) evaporator, plus a multi-effect distillation column. Together, these key, patented technologies remove all constituents, including difficult alcohols, from drilling waste water. While not small, the PODs are transportable and flexible in their setup. “We moved from one site in Wyoming to another, disassembling the unit, moving 20 miles, reassembling it and were operating 10 days later,” explains Waits. The transportable system’s capacity and ability to handle any range of inlet material has proven very appealing to the industry. Competing systems cannot handle higher inlet Total Dissolved Solids (TDS) and cannot concentrate to as high a saturation level (300,000 mg/L) on the residue side. According to Waits, the POD’s processing capability is a “real sweet spot” for customers. Grouping pods to handle larger quantities is actually cheaper for customers on a per barrel basis. Substantially larger systems can be built on site for permanent operations. Business Challenges 212 Resources has survived the economic downturn with tight cost management and maintaining high quality standards in its services. As many in the oil and gas industry, the company understands the cyclic nature of the market but works to expand into areas of sensitive environmental needs and to assist the industry in protecting and conserving the aquifer – something everyone can agree on. The company has been able to obtain some very unique operating permits. While agency activities have, on
occasion, taken much longer than anticipated, 212 Resources believes that with over 100,000,000 gallons of processed water meeting stringent standards future permitting will not require the long waiting periods as the company enter fields for future operations. 212 also faces the changing financing market common to many businesses today. “How we structure the deals and balance between equity and debt to build more PODs will obviously be a challenge over time,” Waits observes. The Next Revolution Despite these challenges, 212 is already onto the next task; currently, the company sees a big future in brine management – the heavy concentration of salts and minerals resulting from distilled water. “The oil industry pays for brine and there are other post-treatment steps that can bring values in alternative uses,” Waits says. 212 Resources is working hard to expand operations as it seeks water management challenges in a global market, with solutions including portable and fixed facilities. “Within our niche we are an important entity, and we plan to keep growing,” Waits says. n
Energy & Power
Fueling a Better Tomorrow Produced by Matt Duncan & Written by Kellie Ducharme For AP Innovations (API), an engineering and consultant company with just eight full-time employees, a small business can mean a big level of success. The firm began in May 2000 under the leadership of co-owner Mike Shook, and has since amassed into a $25 million-per-year operation. API specializes in providing technical consulting and engineering services to the food industry (specifically concentrating on rice, soybean and vegetable oil processing plants) and, as of the past few years, the biofuels industry. As such, the company designs food/fuel production facilities, for which it also designs equipment. API teams up with its sister company AP Fabrication (APF) to construct and install the machinery and plants. APF was also incorporated in 2000, and today it has more than 20 laborers. “We learned that the specialized equipment we found throughout the world could be used by U.S. manufacturers
112 | USBusinessExecutive Winter/Spring 2010
and processors to improve their efficiency or reduce their capital costs of installations,” the company states, explaining API’s benefits to customers. “With the world political climates and the cost of oil and fossil fuels, AP Innovations was actively recruited in the biodiesel industry, where they have now built numerous plants,” continues the statement on API's value-added services. Though API is based in Arkansas, its work is spread across the world. “About half of our business has been overseas,” explains Shook. “Most of our overseas work is food processing stuff, rice mills, and food crushing plants.” Energy and the Economy In the U.S., however, is where API is a leader in energy production design. “We’ve built as many biodiesel plants as anybody in the United States, at least 18 of them,” explains Shook, who believes that API has an edge over its competition. “I think a percentage of the plants we put up
have a higher run rate than the rest of the energy plants in America, because they are multifaceted,” he shares.
In the U.S. plants, Shook says that designing around government policy can be one of the most complicated challenges. But the most pressing difficulty is the current economic crisis, which has forced API to cut back significantly since 2008. API and APF had a combined 80 employees before in the downturn, and now the two companies have less than 30 combined. “Last year was terrible,” says Shook, who explains that API has explored new ways to remain successful. “We have to diversify more just to stay in business.” The firm’s biofeuls division is the result of that diversification, and now accounts for almost half of API’s annual revenue. API considers biofuel a step toward alternative energy and environmental sustainability. Stook emphasizes the necessity of trend-setting government policy on reducing fuel emissions through alternative energy sources, such as biofuel. “It’s important to set an energy policy that includes renewable fuels and to stick to it,” he shares, remembering back to 2008 when gas prices had skyrocketed and millions of Americans were calling for alternative fuels. “I think we’ve lost our focus, people seem to be happy that gas is $4 a gallon, because it used to be $5.40, and don’t perceive there’s a problem anymore.” “There’s always new designs coming out in renewable energy that going to make [plants] more efficient, that’s why we need to kickstart these things because the efficiencies will improve the more we build,” he says, while acknowledging that his business level would skyrocket if biofuels became more commonly used. Based on API’s forward-thinking approach, Stook confidently predicts growth and prosperity as AP Innovations embarks on a new decade. “I think we’re back on the upswing again,” he shares. “I think it’s turning around.” n
Energy & Power
Hitting Gold for Resources Reclamation Produced by Matt Duncan & Written by Kellie Ducharme Dan Cowart began Aaron Oil in 1981, before the oil recycling movement exploded in the mid1990s. And, as an experienced oil recycling and petroleum reclamation company, Aaron Oil remains a leader of technological advancements and research in the energy sector's sustainability movement, as well as an example for other companies to follow. “I started this company alone, and it ended up growing,” Cowart marvels. “Today we have 116 employees and do business across the country.” With annual revenue of nearly $50 million, the Mobile, Ala.-based company has become a formidable force in its industry. Aaron is doing business in most of the 50 states and has satellite offices in New Orleans, La.; Houston, Texas; Birmingham, Ala.; and Berwick Morgan City, La. Cowart has spent much of his life in the oil industry, and gradually worked himself into a position where he could successfully establish Aaron. “I started driving a used oil collection truck when I was 16, so I’ve been in the industry for a long time and I’ve come up through the ranks ... I basically have done every job that you can do in the business,” he reminisces, understanding that his experience has strengthened his leadership abilities. “Knowing that I can approach the business from a lot of different perspectives and really understand, having been there and done that, has helped me when I am talking to a project manager, a tank cleaner, a driver, or I am talking to anybody related to our industry.” Beyond Cowart's experience, Aaron Oil’s key assets are its technological edge and extensive research program. “We probably use more technology [than our competitors],” explains Cowart. “Our systems and products, we’ve developed them ourselves to help manage our business and keep costs under control - we have everything from GPS 114 | USBusinessExecutive Winter/Spring 2010
units on all of our trucks to automated processes on our plants.” Cowart uses its technological innovations to keep track of its projects and products, so the company, client and any other third party can be informed of a project’s progress with real-time accuracy. “We track everything, we call it cradle-to-grave tracking. We track everything from the time it’s picked up to the time it goes to its end market.” Capitalizing on the Research Market Not only staying busy in the Aaron Oil offices, Cowart is also the current president of the International Used Oil Research Institute, a non-profit that seeks to advance the reclamation of oil in order to preserve untapped resources. Since Aaron Oil is so closely linked with the Institute, it has worked on several commissions and research projects for it. “We end up doing a lot of research on technologies, and we’ve developed a number of processes that deal with everything from extruding product from solids to better
used oil processing technologies,” Cowart explains. In the past, his company has done research using microwaves to break emulsion “and really got some interesting results out of it.” Aaron Oil has also experimented with liquid carbon dioxide to increase the purity of used oil.
“We’re not trying to be the biggest company; we’re just continuing to work on establishing the right standards and the right process technologies,” Cowart continues.
“What is interesting in the used oil industry today is the fact that … there isn’t any single technology that is used by everybody,” explains Cowart. “There’s almost a race today for somebody to establish operating standards that would lead the industry, and that’s Aaron Oil’s focus.
As a leader in research, Aaron Oil’s chances of guiding the industry’s policy and growth are large, as long as it can overcome some of the industry’s most difficult challenges.
“That’s what we do more than anything else.”
Energy & Power Prospering Despite Setbacks “Our challenges, as I look out ahead, are what kind of terrorist issues we'll deal with over the next five to 10
years, and how that could impact the price of oil and the economy,” shares Cowart, who is always looking ahead. “Of course, the economy is a big factor for us as well. If our financial systems can’t recover and get strong again, it’s going to be something that slows the whole economy down [because], if you can’t get money to add to capital and continue to grow the business, it’s going to affect us in a real negative way.” Despite the possible challenges looming in the future, Aaron Oil is flourishing. In addition to its regular research contracts, the company has more transportation projects and tank cleaning operations on the slate than ever. “An expanding company like ours, we are constantly having capital projects going on,” Cowart says. “At the beginning of 2009 we had that major drop in the price of oil that set everybody back as far as topline growth,” Cowart continues. “But we’ve continued to grow in volumes, and we probably grew more in volume in 2009 than any other year in our history.” Never one to let opportunity go to waste, Cowart expects 2010 to be Aaron Oil’s largest year ever for both growth in revenue and volume, as the company and economy as a whole recover from the 2009 recession. The recycling of natural resources is critical to the nation, Cowart believes. The researching of best management practices and processes remain a major challenge for the oil industry. And Aaron Oil is committed to solving these challenges for future generations. n
116 | USBusinessExecutive Winter/Spring 2010
The Illinois Oil and Gas Association Representing the Midwest’s Energy Supplier Produced by Matt Duncan & Written by Molly Cohen Although there is debate over the exact date the organization was officially started, Illinois Oil and Gas Association executive director Brad Richards suggests that it was in 1944 when energy producers first recognized the region
needed coordination and representation. “The first oil discovery occurred in the early 1900s in the shale of Illinois’ eastern region, then in the late 1930s major oil companies entered our basin, in part because of
Energy & Power production rationing in other states,” Richards summarizes. “They needed oil for wartime purposes, so they did largescale seismic exploration in the basin and identified large structures to drill.” These companies drilled thousands of wells and production in Illinois went from producing five or 10 million barrels annually to around 140 million barrels a year at the region’s peak, according to Richards. “In response to this tremendous surge of production, [the Illinois Oil and Gas Association, or IOGA] was formed,” Richards explains. And that surge has only increased, as the original cable tool-type drilling in the shallow parts of the Illinois basin extended to production that now occurs at 3,000 to 4,000 feet. For this reason, among many others, IOGA exists to help regulate and act for the industry. Roller-coaster History The Illinois basin, in which IOGA’s Mt. Vernon headquarters is located, has a turbulent history, marked by distinct periods of production increases and declines. “In the history of the basin we had an initial peak after the first commercial oil was discovered, and then the next peak when the big companies came in the late ’30s and used seismic to identify large structures in the deeper part of the basin,” Richards reflects. “This was followed by a secondary peak in production sparked in the ’50s and ’60s with the advent of large-scale waterflooding, and then finally a peak in the late ’70s and early ’80s that was price induced as a result of the Arab oil embargo,” he continues. The production peaks usually associate with an advancement of technology. “We think there could be another peak, albeit a smaller one, specifically with horizontal drilling and enhanced oil recovery technology spurred by higher oil prices,” Richards hopes. These production fluctuations have a huge impact on IOGA’s role in the region; the association’s activity rises and falls with the production levels. “It always results in a burden for the association, because the more active the industry is the more conflicts will arise, and some regulations have to be developed in response,” says Richards, who notes in the ’70s and ’80s an entire rewriting and restructuring of the regulatory framework took place. For those affected by these factors, membership in IOGA is relatively available to those interested. “Most of our members are operators, producers, or affiliated companies, but membership isn’t really restricted in any way,” says Richards. “It is available to folks who want to support the industry, because that’s our reason for existence — to deal with government relations and acting as a voice of the industry.” However, membership is restricted to only those participating in conscientious practices. “We have had a few 118 | USBusinessExecutive Winter/Spring 2010
companies we declined to accept since they aren’t doing the right things,” Richards admits. IOGA members can get as deeply involved in the association as they choose. “If you want to be a member and pay dues and be supportive of the association strictly in that way, no problem,” Richards explains. “But if you want to be more than a supporter in that way, we encourage active members to serve on our board of directors.” IOGA’s goal is to give its members the opportunity to participate, if they want, without waiting for years and hoping for a formal invitation. “Those who participate may eventually serve on the Executive Committee of nine members that make decisions on the guidance for the organization as a whole,” says Richards. Open to All IOGA tries to provide all necessary support for its members, from representation in Washington, D.C., to training. “One of the things that we recognize as an association that represents a small industry, is that our members have limited access to new technologies and advances, so our association emphasizes training and technology advancement through workshops, seminars and at our membership meetings,” Richards says. IOGA tries to keep its members up-to-date with the wider world of extraction technology, and allows exhibitors to showcase at the association’s annual meeting. “It’s more of a trade show, a convention if you will,” Richards explains. “We have about 650 people attend our annual meeting and we had about 65 exhibitors. We build our meeting around our trade show and technical presentation.” Richards can pinpoint several particularly effective technologies from the last couple of years that have been showcased. “The emphasis for us in recent years is trying to extract more oil from areas where we know it exists. So enhanced oil recovery has made a big change. Our largest operators are all trying enhanced oil recovery using CO2 or polymer type floods. That’s the type of technology we want to introduce to the basin to increase production.” Another important newer technology is horizontal drilling. “In Illinois, the emphasis is on drilling horizontal wells into partially depleted reservoirs; our members apply the technology to exploit known resources in our region,” Richards explains. To assist the association’s smaller operators, IOGA also presents technology to improve efficiency in operation. “We talk about ways to optimize our current operation — that can be things as simple as chemical programs to prevent well failures, or larger issues,” says Richards. Currently, IOGA is focused on increasing safety training in its region. “We’re trying to promote the STEPS Safety Network; it’s a nationally recognized safety training initiative and we just established an Illinois chapter,”
Richards recounts. Many IOGA members rely entirely on the association for safety information. “We just completed a study, and of the 4,200 people employed in our industry in Illinois half of them are self-employed or sole proprietortype individuals,” says Richards. “We are very much dominated by small business, and those are the type of folks we want to reach out to for sharing safety information and other resources.” Classic Concerns Since its founding, IOGA has faced many of the industry’s most controversial challenges, issues common to many states such as creating regulations to protect the companies and community equally. “We didn’t have spacing requirements, so you had people drilling wells on town lots and derricks stacked against each other,” Richards reflects. “You had the initial organization of the regulatory framework, but shortly after it evolved into many of the issues you have 70 years later. Today the overriding concerns are land issues and access, particularly in areas where minerals have been severed. And, of course, taxation is a topic of interest. Our association has fought against higher taxes, particularly a severance tax.” Industry economics always provide a topic for IOGA. “You can’t be in this industry and not be interested in the market and price of oil,” says Richards. “We don’t spend too much time on it directly as an association, because there is not a lot we can do about it, but we have speakers come in and discuss industry forecasting to help prepare our members for the future.” IOGA wants to help its people make smart
“It’s more of a trade show, a convention if you will,” Illinois Oil and Gas Association Executive Director Brad Richards explains. “We have about 650 people attend our annual meeting and we had about 65 exhibitors. We build our meeting around our trade show and technical presentation.”
decisions and expose them to expert opinions. “Again, we try to focus on the things we can control, but give people perspectives on where we might be headed,” Richards clarifies. Like the rest of the oil industry, IOGA is buzzing with trepidation regarding the nation’s changing energy
initiatives. “We are a little skeptical and not impressed with the proposed carbon legislation,” Richards explains. “We find ourselves sometimes at odds with green initiatives, as the point we try to make is we cannot turn our back on domestic production and, like it or not, we’re going to need to rely on oil as a primary energy source for decades to come.” Future Considerations In response to all of these growing issues, IOGA recently took the initiative to do something it has never done before: an economic study of its Illinois basin. “We spent considerable money that we obtained through a grant from the Illinois Petroleum Resources Board – an industry-funded program – to hire a consulting firm from the University of Chicago and use a laboratory from the University of Illinois to conduct this study, and the results were surprising,” Richards prefaces. In past years, Illinois has put a lot of effort into saving the coal industry, and rightfully so. But, “in Illinois we have about 3,000 people in the coal industry and about 40 percent more in the oil industry, yet we’ve never had a nickel from the state for our industry,” says Richards in disbelief. He explains that in the oil industry, the 4,200 people working in the Illinois basin are creating wealth. “When you produce oil you are creating wealth - wealth and economic activity that does not exist until the oil is produced and sold to a refiner. So the 4,200 people directly employed by our industry help create and support more than 10,000 additional jobs in Illinois,” says Richards. All of these thoughts are in some way informed by the way Richards took to join IOGA. “I’ve been here for seven years, but I’m actually a geologist by training with bachelor’s and master’s degrees,” he says. “And it’s a great job; I apply skills that I never thought I would use because I wear a lot of different hats. One day I can be in Springfield lobbying about an issue and the next week I’m in the office writing a newsletter and trying to remember grammar lessons. And then perhaps the next week the focus is on putting together the annual meeting, talking to vendors and caterers.” Richards says the Illinois basin’s size and distinctive history make it a great area to represent. “The reason we’re still out there drilling is we have many smaller fields with upward of 20 separate pay zones,” he says. “They may not all occur at the same time, but we have 20 different producing zones. And without those, we’d probably be done.” However, with IOGA as its supportive association the oil drillers of the Illinois basin are in good hands. Richards, and the rest of the IOGA members, are passionate about their region’s resources and have the teamwork and determination to keep the basin profitable, informed and rallied for many years to come. n 119
Energy & Power
Pioneer Oil Company Inc. Establishing a Self-Sufficient Energy Alternative Produced by Matt Duncan & Written by Molly Cohen As a fourth generation oilman, Donald E. Jones Jr.’s blood has been in the Illinois oil basin since his great grandfather moved there from the Oklahoma wells in 1937. “I’ve been in the industry all my life, I got my education in my dad’s pickup truck,” he says. And it was in 1972 that Jones, after completing a trade school for welders, joined his father in founding Pioneer Oil Company Inc., an oil and natural gas producing company that works in Illinois, northwestern Oklahoma, western Kansas, Kentucky and Indiana. Continuing in the family tradition, Jones’ sons Mark and Brent have joined the company as the vice president of finance and engineering and the vice president of operations, respectively. Having this management is important, as over the last 38 years Pioneer has expanded its services immensely. “We produce oil and natural gas, we have a drilling company called Pioneer Oil Field Services LLC, and we have a stimulation company called Franklin Well Services Inc.,” Jones shares. Employees with Experience Currently Pioneer’s 140 employees work out of its Lawrenceville, Ill., office, from which the company focuses on managing horizontal drilling teams. “We don’t have everything here, but we have a lot of it,” says Jones. Pioneer subcontracts the trucking, cased hole logging and open hole logging services. And for horizontal drilling, it hires directional professionals. As for in-house employees, Pioneer’s most recent hiring tactic is picking up personnel that have received early retirement from other oil and natural gas companies in the area. “We’ve got about six people here that came from those 120 | USBusinessExecutive Winter/Spring 2010
companies, and they are seasoned, well-schooled, so we bring them in here, pay them well and let them work at their leisure,” says Jones. “If they want to work 30 hours per week or 60 hours per week it’s up to them.” These seasoned professionals are an important addition to Pioneer’s employee base. “When you have somebody who’s been in the field for 30 years and has been all over the world and done all different things, you listen to them and it’s amazing the knowledge they bring to us,” Jones acknowledges. These knowledgeable individuals are also useful since the industry is struggling to find and keep recent graduates. “Our industry is so cyclical, and instead of going for 10 years they go for three or four,” says Jones. “Everyone thinks they can make a career out of it but aren’t willing to stay when the downturn comes.” In addition to the cyclical nature of the industry, people new to the oil and natural gas drilling business may have reservations about the potential dangers associated with rigs. But, Pioneer works hard to make its rigs safer for employees. “We have full-time safety people; we do everything we can to bring down the injuries,” Jones promises.
And Pioneer has experience working in tightly monitored safety situations. “We drilled wells for Duke Energy, and they said if we had three recordable injuries we would be let go,” Jones remembers. “That includes if you even need a band aid. And we didn’t lose the job.” The Next Energy Alternative While safety is of the utmost importance to Pioneer’s management, it is an issue they can play a role in fixing.
Energy & Power
122 | USBusinessExecutive Winter/Spring 2010
The other greatest challenge is government intervention, explains Jones, and that is a little bit out of his control. “I’m concerned about possibilities of windfall tax and tax fracturing,” Jones admits. “The perception in America is that oil men are corrupt and oil men are taking advantage of the American public.” However, Jones is supportive of the government’s push for new or alternative technologies. “Our reliance on foreign sources has hurt this country immensely,” he says. “We should have done this 30 years ago, back when the embargo came along in 1973, we should have started right then having energy independence when the Department of Energy was created.” Jones is passionate about focusing on using natural gas as an opportunity to span between fossil fuels until something different is efficiently implemented. “We have the biggest opportunity now with natural gas … but I don’t know why it doesn’t sink into politicians,” he wonders. While he waits for the rest of the country to catch on to his natural gas powered plan, Jones positions Pioneer to be ready with a natural gas supply. Most recently Pioneer has been harvesting cold methane. “We’re developing a field in Crawford County, Ill., that’s taking the methane out of the coals,” he shares.
Based on his philosophy that natural gas is going to be an influential energy source in the near future, Jones’ plan for the company’s future growth and investments is based on unconventional reservoirs. “It depends on if the administration will let us, but we want to take this company from 20-percent natural gas production to about 50-percent,” Jones shares. To do this, Pioneer will expand its methane removal from coal beyond Illinois to Indiana and other states as well. And Pioneer is continuing with its horizontal drilling through its latest conquest of two horizontal wells beneath the University of Southern Indiana. This job is the perfect example of how horizontal drilling is changing the field. Without this technique, Pioneer could not get to these wells without interrupting the campus. Additionally, “with the horizontal you can run it right across the top of the old reservoirs and glean what oil is left,” Jones explains. With Jones’ foresight and realistic view of the country’s energy alternatives, plus the company’s seasoned and cautious employees, Pioneer Oil Company remains poised at the forefront of the nation’s energy industry. n
Energy & Power
Brookston Resources Inc.
Seeing the Oil Industry’s Big Picture Produced by Matt Duncan & Written by Molly Cohen Brookston Resources Inc. of Evansville, Ill., is a small company doing big things, and working under the radar to prove that size doesn’t matter. Brookston is an oil field monitoring and research company whose work affects thousands of lives every day. Jim Brooker co-founded Brookston Resources in 1996. The company is part of the vast energy industry, but Brookston Resources’ niche is in the exploration and production fields, where it uses advanced technology to extract oil within the Illinois basin. Picturing the Potential “We shoot 3-D seismic [imaging], we use modern geographical information system (GIS) mapping techniques, we use a software called Petra that incorporates seismic well information and generates maps in the oil reserve search,” says Brooker. With only 15 employees, Brookston Resources subcontracts all of its drilling to rig companies and makes $15 million in annual revenue. Brookston applied this means of extraction within a reservoir called the aux vases where it successfully found oil. “The beauty of it is, this is probably the largest single producing reservoir in the Illinois basin, and our technique is largely applicable across the entire area and we’ve only worked in a five square mile area thus far; it’s a paradigm change for us,” says Brooker. While first being utilized in Illinois, this front-edge technology has the potential to change oil drilling techniques across the nation. “We anticipate this technology to improve the industry, as 124 | USBusinessExecutive Winter/Spring 2010
those things working together make this a very unique area of the country.” Facing the Forks in the Road No matter how unique he considers Brookston’s operating area, however, Brooker understands the need to think outside its niche. He understands the need for alternative energy sources and supports research into that sector. While Brookston may be innovative in the oil industry, the company still has challenges to face. “Trying to project individual cash flow for projects when so many of the equation variables are unknown is a challenge; there’s always the uncertainty of whether you’re going to ever make it,” says Brooker. “That uncertainty makes it difficult to quantify the validity of a risk decision. I’m a petroleum engineer; I’m used to tracking quantified things so it becomes very difficult in a future full of unknowns.” Knowing the challenges of a finite industry, Brooker has also diversified Brookston into exploring alternative energy sources. “I view it in a positive way, I know how hard oil is to find,” says Brooker. “I don’t think alternative energies need to be sold with the possibility of global warming and climate change. I think it can be sold simply on the fact that it is very difficult to find oil and there is definitely a finite supply. I think everyone in the oil business understands the need for alternative energies.” drilling in between fields or in wide open areas is a risky proposition,” says Brooker. “Now we can image what’s underneath before we drill, what a fantastic thing.” A dry hole costs $100,000, but to shoot a square mile in 3-D is only $60,000. “These things we’re looking for are only 80 to 100 acres in size and in a square mile you might see two or three of them, so it’s proven to be very economic for us,” says Brooker. Oiling the Wheels of Community Brooker fully appreciates the unique financial situation in the area surrounding the Illinois basin. Being in Brookston Resources’ industry is relatively inexpensive and a small operator can make an impact since the area is not a place for big, publically traded companies to be built. “This is a great place to be, all of our oil is hauled right here to Mount Vernon, Ind., and it’s used to power the tractors and combines on these farms that feed this nation,” says Brooker. “We have a self-sustained deal here where we’re making the oil that is making the food that feeds our people. We have a very diverse economy within an hour radius of Evansville, Ind. — we have manufacturing, we have oil, we have coal, we have great agriculture — and all
Brooker also advises toward focusing alternative energy research on long-term solutions. “We’ve seen subsidies of technologies that won’t survive in the marketplace, and if something won’t work in the marketplace it won’t be around for long as people are always on to the next hottest thing. So while fundamental research into alternatives is good, I don’t think subsidizing the production of nonmarket competitive technologies has any future,” he says. In the next few years, Brooker hopes to use his positive attitude toward ongoing research to expand Brookston Resources by 10 to 20 percent each year, taking advantage of available resources while searching out new outlets as he does not see the energy issue getting fixed very quickly. “There’s no easy solution to the problems we have and we don’t envy anybody in the position to make decisions so I’m not overly critical of any of our politicians,” he says. “Oil is a miraculous liquid and it’s very hard to envision what could replace it.” But, as long as Brookston Resources continues to innovatively navigate the research field, the company and a hope for future alternatives will continue to thrive. n
Energy & Power
Royal Drilling and Producing Inc. They Know The Drill
Produced by Matt Duncan & Written by Molly Cohen Jim Cantrell has been in the oil industry since 1970, when he bought and maintained some old oil wells while going
left the business.” Consequently, the brothers shut down two of the rotaries. “In about 1992 or 1993, my brother left
to school. Five years later, Cantrell joined his father and brother producing oil in the Illinois basin. “I’m actually a third-generation oilman,” says Cantrell. “It’s part of our livelihood and part of our blood.”
the industry and went off on another adventure, so I’ve scaled everything back to concentrate on production, and that’s where I stand today,” says Cantrell. Labor Search
The family company, Royal Drilling and Producing Inc., originally started as a contractor company. “In the early 1980s we ran two rotaries and two service rigs along with our production,” Cantrell explains. “Then, when the oil industry collapsed in 1985 or 1986, my father retired and
Royal Drilling now has 10 employees and annual revenue of $1 million (disregarding 2008). “We’re trying to stay abreast of the new technologies, and we’re exploring for new barrels in the basin all the time,” says Cantrell. Although Cantrell is the sole owner of the firm, Royal Drilling
126 | USBusinessExecutive Winter/Spring 2010
continues to function as a family company. “My son is a geologist, educated in the seismic and geophysical areas, so we’re pushing into that sector for exploration within the oil basin, and that’s all done in-house,” Cantrell explains. Royal Drilling uses subcontractors to supplement its in-house activities. “We subcontract our drilling and use various other operators in the basin, like service companies," says Cantrell. “We have our own equipment, but we also subcontract that stuff out.” Like other companies in the industry, Royal Drilling faces tough issues regarding labor. “Skilled labor is very difficult to come by and we struggle with how to manage our wages and benefits,” says Cantrell. “Labor is always a difficult situation and a hot topic of discussion, specifically, how to manage our people and compensate them correctly.” This issue creates a conundrum for oil business owners finding it hard to keep qualified employees. “Younger people leave the industry or don’t come to the industry, especially in the Illinois basin, where we’re all mom-andpop companies,” says Cantrell, who sees other industries gobbling up young, aggressive talent that the oil industry desperately needs. External Challenges
Besides the internal labor struggles, the oil industry also fights legislature and a challenging political climate. “That’s the big challenge, to get this political environment more favorable,” Cantrell explains. “That will allow us to bring in outside capital to stimulate activity. Our cost has done nothing but escalate, but in the near future there’s going to be two big challenges in my industry: One is funding and the other is labor. We need the political environment to cool so we can deal with these situations.” Contrary to what an outsider might think, Cantrell supports the search for alternative energy options. “Alternative energy is the thing of the future, it’s what we’re going to have to do; fossil fuels are a limited supply, so the cost of our energy is going to grow every year,” Cantrell predicts. But Cantrell does not think the country is ready to go green. “The political arm is trying to drive us to green prematurely, when we’re not ready economically, nationwide. The challenge is making the transition. It's not that the transition won’t be made, just how will it happen,” Cantrell wonders. In addition to the rocky political scene, Royal Industry also battles the economy. “In the last two years we put an awful lot of money into the geophysical world through software and data acquisition, but now we’re not making any investments because of the economy,” says Cantrell. “We, along with most, are trying to wait this thing out, especially since we need to know what the tax implications are going to be before we spend sizable dollars.” Cantrell hopes that in two to five years the economy will be more stable and Royal Drilling will be growing. “I’m very hopeful that we’re going to be as strong or stronger than we are now; we want to grow and we want to increase our production,” he says. For the time being, Royal Drilling is doing its best to maintain its profitability in this economic setting. “We’re out doing exploratory work as fast as we can, and we don’t promote a lot of outside help,” Cantrell shares. “We do as much as we can internally and own the largest percentage of our wells as possible. But in the next couple of years I hope we can be aggressive enough to double our production, that would be my dream.” Always operating with an eye to the future, Cantrell has a message for the entire oil industry: “We need to try the best that we can to keep our companies abreast of the energy situation and policies of the U.S. We want to try and keep as much young aggressive blood in the industry as possible, that’s really our future. That’s probably the biggest focus that we need to push from the local industry standpoint.” And with Royal Drilling’s experience in the industry, defined goals, and openness to alternative energy, the company will always have a place furthering the wellfare of the United States’ energy sector. n 127
Energy & Power
The Independent Oil and Gas Association of Pennsylvania
Increasing Outreach in a Burgeoning Region Produced by Matt Duncan & Written by Molly Cohen One of the original board members of the Independent Oil and Gas Association of Pennsylvania (IOGA PA), Louis D. D’Amico has seen the organization’s dramatic changes through the years. IOGA PA was founded in 1981, D’Amico says, and “at the time we were getting into the Natural Gas Policy Act, seeing the switch from a totally regulated natural gas market to a more diversified and deregulated marketplace. There were a lot of issues out there for gas producers that we felt needed to be addressed.” Now, nearly 30 years later, IOGA PA has grown to 520 member companies (much of that growth being seen in the last decade).
In response, prices dropped and the oil and gas industry nationwide lost somewhere between three quarters of a million and one-and-a-quarter million jobs, according to D’Amico’s approximation. “Now we thought we were on the verge of a sound pricing environment, but the economy is so poor that it’s hindering pricing,” says D’Amico. Companies in the industry are
And D’Amico is the right man to provide IOGA PA with perspective. D’Amico was born and raised near Wexford, Penn., where the organization is headquartered; he’s been in the oil and gas industry for years and has personal insight into the state’s history. “In the last five to seven years, Pennsylvania has been the third most active drilling state in the country,” he says. “Given that, our reserves are quite low. These are marginal wells we’re drilling, nobody gets rich drilling gas wells, but you do make a decent living out of it and that was the foundation of our industry.” The recent Marcellus Shale discovery in the region, however, has greatly increased Pennsylvania’s natural gas abilities, and has the potential to create nearly 100,000 jobs and billions in revenue for the state in the near future. “We’ve gone from a situation where we were never going to be a major player in the natural gas supply for the nation to the biggest location for natural gas here in the Continental United States,” D’Amico explains. A Cyclical Industry With the rising and falling of the economy affecting oil and gas prices, the Pennsylvania industry goes through cycles. “We’ve been through the late ’70s to mid ’80s, when we went through a huge boom of natural gas drilling here,” D’Amico remembers. “Then probably in 1982 we were at a high point, when we suddenly had a major gas oversupply.” 128 | USBusinessExecutive Winter/Spring 2010
finding, just like in the early ’80s, that they are victims of their own success. “In the early ’80s a lot of money was invested and a lot of wells drilled, over 5,000 drilling rigs in the country,” says D’Amico. “Then we developed a lot of reserves and an oversupply of gas developed.”
The industry is going through the same thing with the Marcellus Shale plays. “The Marcellus Shale in Pennsylvania is one of the largest plays, but the Barnett Shale in Texas, the Haynesville Shale in Louisiana, and the Fayetteville Shale in Arkansas all have an impact on supply,” says D’Amico. Pennsylvania has another area of competition. “The Rocky Mountain Express Pipeline brings gas from the Rocky Mountains areas to the East Coast, so we found that an unexpected 1.8 billion cubic feet a day of gas comes into our area that we have to compete with,” D’Amico says. Feeding a Resurgence with Information After the Marcellus Shale discovery, drilling spread quickly throughout Pennsylvania. Local communities were confused and concerned over what the drilling means to their health and the environment. “The natural gas industry has done a very poor job of getting our message out to the public, so that’s what we’re really focusing on here in Pennsylvania,” D’Amico explains. To counter the confusion and make the industry more accessible to concerned people, IOGA PA quickly expanded from D’Amico and a “poor, overworked secretary” to D’Amico, “the poor, overworked secretary, a members services director who is even more overworked and a communications director who gets more overworked every day,” chuckles D’Amico. This team set out to innovate with communication and membership, offering internal and external services unavailable prior to the increased activity in Pennsylvania’s natural gas sector. For starters, they created a circuit of town hall-type meetings in the sprouting drilling communities. “We’ve had public outreach meetings in 17 counties,” D’Amico shares, adding that “many of those counties never had natural gas production before and all of a sudden they’re seeing drilling rigs. Concerns have risen because people don’t understand the industry; so we focus on educating areas where there hasn’t been activity in the past.” D’Amico joins industry representatives in giving an overview of the industry — “Oil and gas 101, per say, and then we answer questions,” D’Amico explains. Questions tend to focus on leases. “They want to understand what the lease means, what they can expect and the impact drilling will have on the land surface,” says D’Amico. “But the major concern is the effect on water supply.” Most drilling areas are rural, where people rely on wells for water supply; they want to make sure drilling will not do anything to damage their water.
mislead the public on what actually happens in the oil and gas industry,” D’Amico contends. “It’s a huge job to show the public the facts and point them in the direction of independent information sources.” The Penn State Cooperative Extension and Outreach program was originally designed to educate landowners on drilling impacts, and the program has been enormously popular state-wide. “They’ve had extensive programs across the state on leasing and oil and gas,” D’Amico explains. “Being an independent group, they have credibility that the industry does not. The Penn State presentations have gone a long way toward making the citizens of the Commonwealth more comfortable with our activities.” Seeing the increased need for technical and tactical meetings – 700 industry representatives attended IOGA PA’s 2009 annual meeting, almost double from 2008 – D’Amico has plans for further public outreach. The organization brings in speakers on everything from the environment to economics, releases a regular newsletter, and is looking to create more of an informational hub through its Web site and newer social networking methods such as Twitter, Facebook and YouTube. Also thinking toward the industry’s future, IOGA PA will implement programs such as educational seminars in local schools inspired by the work of groups such as the Ohio Oil and Gas Association, which launched its own Oil and Gas Energy Education Program to distribute energy resource materials and industry safety information to high schools. Part of an industry faced with new technological opportunities, legislative challenges and many valid questions, the Independent Oil and Gas Association of Pennsylvania is poised to assist its members and communities through every means necessary. “Getting through the really tough time in our industry, it’s great to have some positive challenges and potential successes,” says D’Amico. “People hear what we’re saying, and that’s always a good thing.” IOGA PA is also excited about the prospect of a potential merger with the Pennsylvania Oil and Gas Association. The Board of Directors of each association has approved a merger plan and new bylaws for the combined organization. Over the next month the plan will be placed before the memberships of the two associations for discussion. “We are quite positive on the prospects of merging these two associations into one larger and more effective entity,” states D’Amico. “The new combined association will have even more resources to achieve the industry’s goals.” n
“The problem is some people out there deliberately 129
Energy & Power
Small Company, Big Plans Produced by Matt Duncan & Written by Molly Cohen Stan Berdell had been in the oil and gas production industry for five years when he struck out on his own and founded BLX Inc., an oil and natural gas drilling and production company in western Pennsylvania. “I started this company in 1989 and I’m still its president, with no other partners,” he says proudly. BLX does most of its drilling in the Armstrong, Indiana, Butler and Clarion counties of Pennsylvania, with additional work in the outskirts of Pittsburgh, such as Westmoreland
ever-changing industry. The energy production industry is constantly updated with new drilling techniques, new energy sources and new explorations of fresh drilling locations. “Instead of shutting out these things, we try to jump on the bandwagon and go,” Berdell explains. For example, BLX is eyeing the possibilities offered by horizontal drilling, a specialty many companies are becoming proficient in, for future company development. “We have to keep pace to figure out ways to get it done, and horizontal drilling appears to be the way to go,” he says. “There are some bigger companies around here trying it out, so we’ll see how it goes for them and then decide if it’s for us.” Being a smaller operator creates its own set of hurdles to overcome. The company had trouble in the past getting its upper Devonian wells drilled, and that led BLX into moving into the Marcellus shale work, which required major acquisitions on the company’s part. “One day we decided to get our own rigs and drill our own Marcellus wells,” says Berdell. BLX now owns 12 Marcellus wells, but still needs to service them with the help of outside companies. It uses subcontractor companies for land work, location building and pipeline work. “The only equipment we own are drills … we sub everything else out,” Berdell explains. Even with this system in place it has been tough for smaller companies competing because of the interest in the shale play by larger publicly held companies and the money and competition they bring to the table.
and Alleghany counties. The company’s 15 employees oversee work at each individual location – a strength that Berdell believes sets his company apart from its competitors. “We have a more personal approach to leasing and land owner development,” he says. “We have experience in all phases of producing wells, like shallow oil wells to deep Marcellus, so we do it all.” Running with the Big Dogs Although BLX is experienced in many different types of wells, Berdell’s biggest challenge is keeping pace in an 130 | USBusinessExecutive Winter/Spring 2010
BLX’s biggest challenge is in expanding its acreage so the company can acquire new drilling plots, which have become more expensive since the economic decline. BLX took a hit when acreage prices went up and natural gas prices dropped, Berdell explains. “A lot of our product was hedged, but those ended and it’s hard to get good pricing after that. We’re selling for $3 and $4. We lost about two-thirds of our revenue just because of price.” Water is also a cost issue for BLX. The company uses a mixture of water from creeks, rivers and municipal sources that is then pumped into a well with various chemicals for
132 | USBusinessExecutive Winter/Spring 2010
product extraction, and what flows back to the surface from pressure created by the well is known as frac water. And it is costly to withdraw the water and then pay to process the frac through existing treatment facilities. “My costs are around $6 or $7 per barrel,” says Berdell. The frac water process has become exponentially more complicated over the past decade. A vertical well uses one million gallons of frac water. Horizontal wells use three to four million. And the portable treatment unit at the well site at present will only treat 100 barrels per day. “Before all this shale stuff and large volumes of water were used, you just called the treatment plant and brought your water over, it was simple,” Berdell remembers. “But not anymore; now treatment facilities are overwhelmed with water and we have to make an appointment. If we miss that appointment, we lose it.” For these reasons, BLX is working on technologies to reuse the water, partnering with CWM Environmental Inc. Seeking Another Alternative While BLX is struggling with these individual challenges, it also faces a larger, industry-wide difficulty. Oil and gas production companies across the nation are now defending their products from alternative energy initiatives. “I’m all for conservation, but we have a lot of good clean energy in natural gas compared to burning fossil fuels,” Berdell says. While he is not worried about alternative energies, like wind power and ethanol, taking his market share, Berdell is concerned with the effect these technologies have on the country, visibly and mentally. “They’re not cost effective, and if you stick a windmill up every hundred feet it changes the landscape. They do make noise and the aesthetics of the place are ruined.” Berdell sees alternative energies as a “feel good story for the government.”He does agree with funding to develop new energy options, but thinks natural gas is a better choice than other options. “We’ve got it here already, we can develop it and develop more ways to use it,” he insists. According to Berdell, natural gas is a cheaper, more efficient alternative, especially for the automotive industry. “No one understands how easy it is to burn natural gas for your vehicle. You fill it up how you normally do. You can fill your tank for $15 with natural gas. And it burns cleaner and offers more horsepower.”
Energy & Power However, some see natural gas as an ominous development for the energy industry. “We have a public relations problem with natural gas, these guys in alternative energies have distorted facts and some try to paint themselves better than us,” says Berdell. “We have to combat that with actual facts; we’re slowly gaining ground with ads.” Keeping the Opportunities Flowing BLX’s revenue has shown damage from day-to-day business battles, alternative energy initiatives and the country’s weak economy. “Our revenue is around $10 million, but it has dropped significantly from a year ago,” Berdell admits. However, Berdell has devised a new plan that will increase the company’s revenue, and help nearby oil and gas production companies, as well. “We’re working with a company out of New Mexico on a facility that will clean up frac water,” Berdell shares. One of the company’s well sites in Butler County is home to the new plant. BLX takes frac water from its shale wells and cleans it to the point where it can be reused or discharged. “It’s the only system in Pennsylvania we know of that takes all the chemicals out of the water, and we’re pretty excited about it,” says Berdell. BLX is currently running the plant and hopes to construct additional plants in the area. The decontamination plant can clean about 85 percent of the frac water and does so onsite. “So if you have 100 barrels you can clean 85 of them and only have to get rid of 15,” Berdell simplifies. This water treatment program is a venture with another company, a local water lab. BLX and its partner company both have employees running the plant. “We’re sort of taking turns, plus we’re getting some help from the manufacturer Altela Inc.,” says Berdell. There is one major problem with the water treatment plants, and that is volume. “We can handle about 2,500 barrels per day, so we’re going to try and get that up and running, but we have to keep working on the technology to take it to the next level,” says Berdell. He believes the water decontamination process can be sped up. Once it goes through the process, the water emerges distilled. However, the water does not need to be at the distilled level to be used for fracing. “You just need it to be at creek water level to be reused,” Berdell explains. “So we’re hoping to get that process developed.” Entrepreneurial Spirit Besides the water decontamination system, Berdell plans to continue developing and drilling wells. However, as certain drill technologies become outdated there may be a time when 134 | USBusinessExecutive Winter/Spring 2010
it pulls out of the drilling sector and focuses on production. “Overall, we’re going to increase the wells we drill each year, like we’ve always done, and look for new ventures that would benefit BLX,” Berdell says. As a natural optimist, Berdell believes this is the perfect time to be expanding. “Being small has its advantages, but it also has drawbacks. Sometimes we can’t move as fast as we’d like. Still, I think there’s no place to go but up right now,” he says. “We’re at the lowest we can go.” Berdell projects a gradual climb out of the country’s current economic hole. “I think it’s going to get better, it has to, so I think the American spirit will rise and things will start rolling again,” says Berdell. “Plants will start opening. They may not be as big and luxurious, but I think people will become entrepreneurs again.” Berdell’s goal is to move with the industry and keep pace with everyone “in our own little way, in our own corner of the world.” Luckily, Berdell has the natural ability to think ahead of the pack, like with his water decontamination plan. “I just love what I do,” he says, exhibiting how passion, incomparable foresight and years of drilling experience can be the fuel that will propel a company such as BLX to the forefront of the energy production industry. n
Turm Oil Inc.
Going with the Flow in Pennsylvania Produced by Matt Duncan & Written by Molly Cohen “My dad [Turm Chairman A.H. “Mike” Forbes Jr.] … started working for one of the biggest oil families here in Pittsburgh in ’59,” explains Dickson “Deke” Forbes, CEO of Turm Oil Inc. of Butler, Pa. “Dad was their chief geologist for years, and we still work for them now.” Forbes has been with Turm Oil, a gas and oil exploration and production company founded in 1978, since 1993, working alongside his father and two brothers, Daniel A. (EVP) and Douglas N. (President). Forbes works primarily on the business side, while his father and brothers work in the field. “Between the four of us we have in excess of 100 years of experience,” he says. Digging in Their Own Backyard With its history and experience, Turm Oil’s work extends beyond the usual exploration and production of many comparable gas and oil companies. “We also do consulting geology and completion, we have a water trucking division … we’re pretty much a soup-to-nuts company,” Forbes summarizes. The company initiates new ventures through leasing, puts blocks of acreage together, then gets financing from industry partners (usually) and starts the field work, including surveying and permitting. Once the rig moves onsite, Turm Oil keeps some of its 15 employees in the field. Once the well is finished, Turm Oil employees build the production facility. “We also have many subcontractors we use, like the frac crew, cementing crew, and rig,” Forbes shares. In total, the company operates 500 or 600 wells owned outright or through joint ventures. Turm Oil is also sometimes subcontracted to manage another company’s wells. “We do the management, marketing, hedging and distribution of proceeds,” says Forbes of the company’s responsibilities. Most of Turm Oil’s wells are spread out in Pennsylvania within driving distance from its Butler office. However, it also has a spread in Michigan. “We’ve been dabbling up there on and off for a couple of years, and we’re heading back up there again,” says Forbes.
This strong local presence is one of Turm Oil’s greatest strengths. From the company’s continuing work in the same areas, it has accumulated a “huge database of information that Dad saved, starting with his earliest wells,” touts Forbes. “Our first floor is loaded with maps and logs and completion reports.” And that strong suit carries over to the communities near Turm Oil wells. In 2007 Turm Oil began shale work out in a “little teeny town” in northeastern Pennsylvania, and stayed out there for two years. “When we got there, it was on the down and out, but between us and our subcontractors, and a few other companies and their subcontractors, that place was booming,” Forbes remembers. “By the time we left, there were lines at gas stations and the hotels were full. This is just a microcosm of what could happen across the whole state.” Perhaps similar cities will rejuvenate as Turm Oil continues working its traditional shallow infill developments. These wells are 3,000 to 5,000 feet, with a small amount of water necessary for stimulation. Initially, “we were hired by another firm to do some work on the eastern side of the state and stayed to drill the Marcellus wells, both vertical and horizontal, all successful,” explains Forbes. 135
Energy & Power However, the Marcellus shale presents a challenge. Once frac water is used to drill a well, it has to be properly cleaned before it can be reused or disposed. Since the rule of thumb, according to Forbes, is 1 million to 3 or 4 million gallons of water for Marcellus shale, compared to traditional fracs that use 50,000 to 100,000 gallons, the increase is bottlenecked at the water disposal plants. “In the old days, more plants could process the water, but now many of them have begun to turn away oil and gas fluids,” laments Forbes. “So trucks are often lined up for five or six hours for one load of water!” In addition to the water cleaning issues, Turm Oil and similar companies face increased pressure from environmental agencies. “The combination of new technology, new environmental issues, and a huge influx of manpower has essentially created a perfect storm,” says Forbes, who believes that adding more regulations inhibits the country from becoming more independent energy-wise. Forbes suggests that the government support the opportunity available in Pennsylvania with the current play, since the financial and production results create a huge trickledown effect benefitting farmers, suppliers, restaurants, hotels, gas stations, and countless other businesses.“So we’ve seen some positives, but the government as a whole does not seem to be encouraging or facilitating this huge windfall,” Forbes bemoans. In addition, threats of increased taxes have been whispering through Pennsylvania. “But in Pennsylvania taxes would be damaging to our industry, because this shale play is in its infancy,” says Forbes. “I heard a speaker opine the other day, Don’t tax the golden goose before its starts laying eggs.’
Also smaller companies that own stripper wells [lower production wells] would be devastated,” Forbes projects. Fueling Tradition But even as the threat of taxes looms, Forbes still says he has confidence in his industry, despite the increased push toward alternative energies. “I certainly think there’s a place for that type of thing and [I think] we need to continue exploring. But at this point, there’s no super alternative.” While Forbes thinks that getting help from alternative energies, like solar and wind power, is a good way to lighten the load, he does not see hydrocarbons disappearing overnight. Especially since the alternative energies rely on hydrocarbons as a backup power source. “I read an article a few months back … that the maximum amount of energy that we can replace with currently available alternative technologies is 10 percent of our demand, and if that’s the case, we have to develop what we have available to us here and now,” Forbes suggests. Forbes will take his own advice as Turm Oil begins its next step in the industry. There are plans to continue developing shallow wells, and to continue working in shale with three larger E&P companies. Turm Oil will also continue to operate oil projects in Michigan. The company has stayed busy and grown during the downturn. At the beginning of the shale expansion it was hard to get equipment, but a few months later people were pounding on Turm Oil’s door for work. “We had to tighten the belt a little bit like anyone else, but we must have been in the right place at the right time because we’ve been doing just fine,” Forbes reflects. Forbes realizes that there are new challenges every day, but also new opportunities for Turm Oil. “We have to balance them,” he adds. “All of us involved in [this] industry love the excitement of it.” Forbes also is cognizant that no matter what types of alternative energies come along in the near future, there will still be a need for exploration and production companies like Turm Oil to secure fossil fuels. “We are in our 32nd year … we have alot going on, and we’re going to keep growing,” he says optimistically. n
136 | USBusinessExecutive Winter/Spring 2010
Penneco Oil Company
Bringing Old Traditions to a New Location Produced by Matt Duncan & Written by Molly Cohen Penneco Oil Company’s business history dates back to the early ’50s, but the exploration and production company was not incorporated until 1979, when the company went
through a restructuring period. Penneco currently has 60 employees and holdings in Pennsylvania, West Virginia, Utah, Michigan and Oklahoma. But, despite the company’s growth, Penneco is still a family-style company, according to president Terry Jacobs. “My father, brother and I were involved in the founding. Now my brother’s sons have joined us,” he says. Jacobs was a controller for the Pittsburgh Steelers prior to working at Penneco, headquartered in Delmont, Penn. “I was more of a business manager; I signed players and tried out kickers,” he says. “But a lot of it had to do with daily operations and getting the records ready for the auditors. It was much more than just numbers.” Jacobs implements many of the skills he utilized as a controller for the Steelers with Penneco’s business strategy. “In Appalachia, you have to be a smart operator to make money, and I think we’ve developed a good screening process for evaluating prospects,” says Jacobs. “We have extremely good conventional oil wells and gas wells, and I attribute that to our ability to screen prospects affectively.” Thanks to the company’s screening ability, Penneco’s gross annual revenue is more than $100 million. What Recession? Penneco was one of the principal companies involved in Utah’s Covenant Oil Field discovery in 2004. “That’s been a big focus for us, so we’ve been participating in the development of that area since then, though we’re 137
138 | USBusinessExecutive Winter/Spring 2010
also looking for other oil fields,” says Jacobs. Penneco is also developing its natural gas resources. “We’re looking for more Marcellus shale acreage and we’re testing in Rhinestreet shale,” Jacobs shares. “In Utah we’re looking at the Navajo sandstone as one of our principal formations.” In addition to Penneco’s wholly owned wells, the company also collaborates with other companies on projects. “We have a lot of companies we joint venture with, I think about 25 percent of our production is from joint ventures,” Jacobs shares. Penneco’s successful business ventures have assured that the impact of the economic decline in the economy hasn’t significantly affected the company’s capital budget. “The only variable that could affect our capital spending is if we can’t get a good price for our product,” says Jacobs. “We’re set on hedging for 2010, but we’re still looking for good pricing for 2011 through 2013.” Penneco has not cutback any of its activities because of the country’s economic situation, Jacobs touts. “We really haven’t. It all just depends what your revenues are. Our hedges are such that we get more than $8 for our gas, that’s a pretty good price.” And since Penneco has not suffered from cost increases, “we’re in pretty good position,” Jacobs
declares. Staying Off the Bandwagon Although Penneco is in a pretty comfortable situation, it faces an impending battle against alternative energy sources. As the current market and administration continues to push renewable energy, Jacobs isn’t sold. “It’s just too inefficient. For example, when the wind doesn’t blow, the wind turbines don’t work. They’re down 25 percent of the time anyway from mechanical problems.” And alternative energy sources still rely on fossil fuels. “If you sign a contract to power the electric grid, you have to supply that power, no matter what, so the wind power companies use natural gas turbines as a backup,” he says. A shift to alternative energy is a risky move according to Jacobs. “There are companies that have been searching for alternative energies for years, and we still don’t have it. Even if they found something, there’s nothing that bridges alternative energy and fossil fuels. We don’t have the infrastructure or the money to build that bridge,” he states. Jacobs plans to continue to do what works for Penneco rather than jump on the renewable energy bandwagon. “I think we’re sticking with conventional fossil fuels,” says
Energy & Power
Jacobs. “We think that’s the way the country will get its fuel for a number of years still. What’s out there now for alternative energies is either very costly, inefficient or can’t be built without a government subsidy, so I think we’re going to be using fossil fuel for a long time.” A Man with a Plan While Penneco is sticking to the country’s tried and true energy sources, the company still has issues and challenges. “We’re trying to increase our oil production, so we’re trying to go to different places to do it,” Jacobs shares. In order to accomplish this goal, tough decisions have been made recently at Penneco, according to Jacobs. “We’ve decided to exit the Appalachian basin. The competition for land in Pennsylvania is difficult and we’re trying to increase our percentage of daily oil production, so we have to move out of this area to do that.” Penneco hopes other companies in the area will purchase some of the company’s land. “Eventually we’ll draw ourselves out of local prospects and things like that. We may be able to farm out prospects to some of these players who’ve purchased leases or signed leases for the Marcellus primarily,” Jacobs explains. A major issue for Penneco is maintaining its great gas price 140 | USBusinessExecutive Winter/Spring 2010
that has kept the company profitable during the economic recession. “We’re looking for a window to put some hedges into 2011, 2012 and 2013 … we’re just waiting for the price to make those hedges go forward,” Jacobs admits. Penneco has a plan for its future ventures, which lean toward acquisitions. “We’re going to drill the conventional reserves we have in Pennsylvania until those are dried up,” Jacobs shares. “If Marcellus is successful, we’re going to get involved in that since we have lots of acreage in Marcellus. We’re also waiting to see how Rhinestreet turns out.” Penneco is a traditional company that’s family owned and operated. Penneco produces a product that has encouraged the growth of America throughout the country’s history. Jacobs also sees the more advanced side of the industry, taking into consideration the importance of location and various changing technologies. The combination of old school principles and modern aspects solidify Penneco’s place in the industry as one of America’s most respected domestic energy resources. n
The Louisiana Oil and Gas Association
Dedicated to Clean Distribution of Resources Produced by Matt Duncan & Written by Molly Cohen Don Briggs began his career in the oil industry service sector during his college years, working for a Owen Drilling Company. After graduation he continued working there until 1968, when he started his own piping supply company. For the next 23 years, Briggs made a name for himself in the industry as a passionate businessman, building a conglomerate of companies that still supplied oil and gas producers.
Milestones to Memberships It took about four years for LOGA to gain respect and a sizable membership; Briggs memorializes those initial years in milestones. In 1994 LOGA sued Richard Ieyoub,
In 1991, however, Briggs grew angry about problematic legislation from Baton Rouge. One issue in particular, the Naturally Occurring Radioactive Materials (NORM), drew his full attention. “I was in the rental tool business so I bought a lot of used pipe,” says Briggs. “But once they came up with the NORM issue, the pipe became more expensive and I had problems getting rid of the radioactive material, which was just a hoax.” Briggs decided to do something about his concerns, so he went to Baton Rouge to straighten it out. In the end Briggs lost that fight, “But I wouldn’t lose it today if it came up again,” he says. This incident sparked Briggs’ idea to start an organization that would fight for education and representation of the oil industry, and thus the Louisiana Oil and Gas Association (LOGA) formed. “In 1992 a group of guys and me each put up $5,000,” remembers Briggs, who still holds the title of LOGA President. “I said I would get the association started for a couple months and then hire somebody, but I never left.” 141
Energy & Power the attorney general of the state of Louisiana. “We took them all the way to the Supreme Court,” says Briggs. “Ieyoub hired a bunch of bounty-hunting trial lawyers to go after the oil industry for environmental damages, but it was illegal.” The case was reheard a second time in the Supreme Court, and in the end LOGA won what became known as the Meredith Decision. That milestone was important for LOGA and the oil industry in Louisiana. “A lot of people joined the association afterward because they saw what we were doing,” says Briggs. LOGA’s next milestone occurred in 2000 when Briggs bought Gov. Jimmy Davis’ former home, which is next door to the governor’s mansion and overlooks the capital. “That was another milestone because the home is a beautiful office, but we can also have fundraisers here,” Briggs explains. “It helps your influence when you can support legislators by having functions and fundraisers for them in a very legitimate, healthy atmosphere.” These early milestones led to an influx of members from all over the country. “A big shot of our membership is out of state — Dallas, Houston, Ft. Worth, Denver, a lot of the companies that join us because of our advocacy,” says Briggs. “They see the value in someone fighting for them.” Part of what these companies value is LOGA’s commitment to information distribution. Briggs sends a news e-mail to his members every morning full of clips that pertain to any oil, gas, or politics issues in the state, and if exploring other young, sharp and progressive approaches such as Twitter. “We highlight any particular issues that are important, we look at the issues, and we gather the members on the phone,” says Briggs. “People join us because of our advocacy.” Issues in Focus, a Focus on Issues One of Briggs ongoing battles is what he calls “legacy law suits,” an issue that has only escalated during the past decade. At one point, large chunks of Louisiana land were owned by numerous oil companies including Shell, Texaco, Chevron and Mobile. Over time the land was sold between the oil companies, but some was also was sold to people not involved in the industry. In 2000, a court ruled in favor of a landowner who had someone testify that a salt water disposal pit might have the potential to contaminate the local water source. “When they made that ruling it became the blood in the water for a small group of plaintiff lawyers to go after the gas industry claiming environmental damages had occurred, when what we were practicing was legal at the time,” says Briggs. As the pattern took hold, every oil company that owned 142 | USBusinessExecutive Winter/Spring 2010
a piece of land at any point in time, dating back to 1921, was sued on environmental charges. “There are over 200 suits, probably around 1,500 defendants, and every one of those defendants is an oilman,” Briggs says. This has created trepidation among investors, cost the region rig development, and LOGA is actively campaigning to introduce legislation to remedy the situation. Indeed, promoting the clean practices of the industry is of paramount important to LOGA. Another of Briggs’ current focuses is building natural gas fueling stations in Lafayette, “and when we do, we’ll get some of the fleet owners to convert,” he foresees. “You’ve got ambulances, AT&T, garbage trucks and school buses [that can take advantage of natural gas].” In northern Louisiana, oil companies are working together to build fueling stations to convert their own vehicles. “Our oil companies and gas companies are working in those areas, so you have to start converting somewhere. We’re bringing in all the players and saying, ‘Come on guys this is what we’re doing,’” says Briggs. As Briggs points out, “We’re not the oil industry anymore; 25 percent of the wells are drilling for oil and 75 percent are drilling for natural gas. So we need to build an infrastructure, we need to start converting our own vehicles and we need to start pushing it as an industry.” And LOGA is extending this agenda even beyond the board of directors meetings, etc. “We have an education center, we have a video and animated explanations; we give a lot of talks on all of this, introducing people to natural gas as the fuel of the future.” It is in taking a clear stand and openly communicating where the organization and its members stand that LOGA exhibits its strength. This rapid response allows people to feel a part of something, whether they are down the road or hundreds of miles away. “One of the things I learned is you never lie, you always shoot straight, and if you do that, you never have to wonder what you said or how you handle your business,” says Briggs. “I’ve made a strong policy in my business that we are ethically squeaky clean, because you never compromise yourself and your association … everyone knows where I stand on issues and where LOGA stands.” And, like one of the pillars of the many grand halls in which Briggs represents his industry, the Louisiana Oil & Gas Association stands to supports its community in fighting for rights and planning future initiatives. n
Focusing a Natural (Gas) Expansion Produced by Matt Duncan & Written by Molly Cohen In the search for alternative sources of energy, natural gas is often overlooked for more unconventional sources like wind and solar power. However, Charles T. Goodson, Chairman, CEO and President of Petroquest Energy, feels that natural gas is the best. Headquartered in Lafayette, La., Petroquest has two regional offices – one in Tulsa, Okla., and the other in Houston, Texas – and the company has expanded from its beginning in onshore drilling in coastal south Louisiana in 1985.
a very content, happy staff,” he says. Goodson believes all three office locations offer employees a positive lifestyle environment. “Secondly, we’re a growing company, so the work environment is one that is proactive, where employees can control their destiny, get experience and not feel they
“The Gulf Coast is a great cash flow vehicle for us; we allocate approximately 50 percent of the cash flow generated from this basin to fund our expansion into our long-life, repeatable shale resource plays,” explains Goodson. Utilizing this strategy, Petroquest was able to expand into east Texas in 2003, and followed that up with multiple leasehold acquisitions in Oklahoma in 2004 and 2006, and finally in late 2007 entered the Fayetteville Shale trend in Arkansas. “We made a goal by the end of 2008 to have 75 percent of our reserves and 50 of our production sourced from resource assets, and we were able to achieve that goal,” Goodson proudly recalls. Goodson says Petroquest Energy has separated itself from its competitors for several reasons.“We’ve taken those core strengths of engineering, geology/geophysics, land and accounting to build an organization that is a survivor. I think our strengths are [also] operational, with a great staff of employees – we get tremendous support from within the organization.” Happy Employees Goodson does not have a hard time keeping staff. “I think that the work environment here is excellent, and we have
are in a dead-end environment.” Many of Petroquest’s employees have been with the company for a long time. “When we went public, the guy who rang the bell was my first employee,” Goodson reveals. “He’s been with me since 1985, and we talk every day. For people that want it, this company can offer a lifetime of employment.” Additionally, Petroquest Energy does not have a hard time 143
Energy & Power finding specialists, such as engineers, who are in high demand. Goodson offers advice into the fine balance of conditions that result in content employees: “Even if you pay someone very well they will atrophy and move on if they aren’t doing anything. On the other hand, if you kill somebody with an excessive workload, it’s very stressful and they won’t stick around either,” says Goodson. With these circumstances in mind, Petroquest prides itself on providing appropriately challenging work conditions for employees. Natural Gas + Auto Industry = True Love Goodson is comfortable with the company’s niche, as he sees natural gas as the next major energy source. “It has been a somewhat bumpy road for natural gas, but I feel that for the next 30 to 50 years natural gas will be the dominant growing source of energy,” he predicts. “I think wind and solar [energy] are going to look dramatically different five to10 years from now. And I think other sources will come to the forefront that will derail wind and solar. What you won’t derail, in my mind, is an industry that provides a cheap source of clean domestic energy, like natural gas.” Major potential for natural gas is in how it may benefit the auto industry, and Goodson believes it has already started making its impact. He sees benefits already underway in the industrial sector, “The big fleets already use it and the infrastructure won’t be difficult to put in across the country. It won’t take very long for someone to realize they can fill up a vehicle with natural gas for $0.75 versus $2.50,” he says. Onward and Upward Currently, Petroquest has two major projects in motion to capitalize on. “The Woodford shale is in the Arkoma Basin, which covers about a million acres in a fairly developed area,” says Goodson. “And we’re the company that has performed the best within this trend. Our 30-day initial production rates are approximately 30-percent better than our closest competition.” The company sees double digit returns from its Woodford shale assets for the foreseeable future. “Second to that is our east Texas business, where we have a relationship with Chevron,” Goodson shares. “We haven’t made a development plan for the Haynesville/Bossier yet, but that will come within the next six months. We’re looking at amazing reserve potential in a well bore. These wells can essentially be staggering from the flow rates, the production, and the reserves.” But not to be overlooked is the company’s work along the Gulf of Mexico. This has historically been the company’s cash cow. “That’s what let us build the most liquidity, when others were not able to,” says Goodson. In total, Petroquest has approximately 900 144 | USBusinessExecutive Winter/Spring 2010
wells. However, “We are not a Gulf Coast, Gulf of Mexico company anymore,” considers Goodson. “We used that as a catalyst to grow our resource plays, but we really are a long-life company focused on the next generation of gas supplies in the lower 48 states. We have a very vibrant inventory, and even though we’re a growth company we’re well capitalized.” With Goodson’s aggressive goals and foresight, Petroquest Energy will continue to expand within the natural gas industry, up and throughout the continental U.S., and will further contribute to the country’s future energy solution. n
Pumping Both Oil and Enthusiasm Produced by Matt Duncan & Written by Molly Cohen Mark Peach became enamored with the oil industry as a child. “We had wells being drilled on our farm when I was 11 years old that fascinated me, and I used to go down there and sit on those rigs and drive those old drillers nuts asking them what they were doing,” says Peach. That curiosity continued to resonate within Peach, who in high school pumped wells for oil producers at $75 per month for each well, and who as an adult founded MAP Oil in 1978. Now Peach’s oil drilling and producing company conducts work in Illinois and Indiana with nine full-time employees. Creating Opportunities As the name suggests, MAP Oil is primarily involved in crude oil. However, the company does offer some additional services. “We’ve associated with some companies out of Texas that came here in the last few years looking for coal methane gas wells,” Peach explains. “We oversee that for them, but we just do the day-to-day operations for gas.” For the most part, however, MAP Oil remains active in the oil sector, overseeing projects that often take advantage of positive subcontractor relationships. “We subcontract the fracking and acidizing companies and the drilling rig on the hole and the spudder, but we have our own tank trucks
and pulling machine and the roustabout labor,” says Peach, who admits it’s a costly industry on a day-to-day basis, but one he understands and one that continues to keep his attention in the best way. Even off the oil field Peach is passionate about the industry. “I’ve gotten more politically involved in this business in the last few years; I try to educate people,” he says. One of Peach’s current concerns is the focus on wind energy. “It’s funny; one thing our President said was that he would spend several billion dollars to get wind energy doubled. But wind energy is two percent of this country’s energy, so, you spent all that money for two more percent,” he explains. “Is this cost effective?” Peach believes he knows how to better spend that money. “Give the oil industry $2.2 billion and let them drill offshore and gave them tax incentives. There’s so much we can do for oil, but I feel like oil has become a four-letter word. That’s one reason why I try to show people we’re on the American side, we’re not the enemy, we’re here to try to make this country more efficient,” he says. Peach also explains how drilling creates jobs: “It’s like 100 or some people that associate with one drilling rig. A lot of
Energy & Power
people don’t understand how the oil field can employ,” he says, adding that legislation must change to promote this growth. “We’ve never had a true energy department in this country, but that’s what we need.” Old Problems, New Solutions Change in the industry isn’t restricted to Capitol Hill, however. The year 2009 showed a change in MAP Oil’s drilling techniques. “We drilled our first horizontal well this year,” Peach explains. “We went into an old, plugged out field. It’s got about a 10-foot oil leg on top of 50 feet of water, and we ran a 1,400-foot horizontal leg through part of this old field. It’s been over a year now and it still makes about 40 barrels a day. It told me how much oil we have left in old fields if the technology is there to help. Horizontal drilling has been in Texas and Oklahoma for quite a few years, but here we deal in smaller zones and have found we can be successful with the technology running on top of an oil leg and do real well.” This discovery solidified Peach’s belief that wind energy is not the solution. “That’s not the answer to get us off foreign dependency,” he says. “We need to focus on more of what we have available – coal, oil and natural gas. If we focus on those, we could gain independence.”
146 | USBusinessExecutive Winter/Spring 2010
Another of Peach’s concerns is the changing administration. “I think the administration we have scared a lot of people because of tax horror stories,” he says. “That’s really slowed this business down. Investors lost so much in the stock market that the investing group is not what we once had. We cannot lose the tax breaks dealing with intangibles and depletion costs.” Like the rest of the oil industry, Peach is also in need of fresh talent. “I don’t know if it’s the Nintendo kids we’re faced with or if it’s that they don’t want to be outside in the elements, but no young kids are coming onto the oil fields,” he worries. To fight this problem, Peach said the members of the Indiana Oil and Gas Association created a scholarship fund for “young people getting involved in petroleum geology or engineering. This year we awarded a $4,000 scholarship to a young man in Posey County. He is going to Purdue to become a geologist.” As it faces these future challenges, MAP Oil continues to spread friendly messages from the oil fields to energy officials. Employing new technologies and a can-do attitude, MAP Oil is showing how an independent oil company can establish a pattern of success. n