PICKLE ECONOMICS

Q4 08
4th Quarter 2008 Vol. 10, Issue #4
Pickle Economics
A few years back I read an article about a disastrous
relationship between the Vlasic Pickle Company and
Wal-Mart*. I’ll give you the short version.
George Chase
Chief Executive Officer
Vlasic had a great business selling their premium brand
pickles to most major grocery chains across America.
They offered quartered sliced pickles, pickles sliced
horizontally, small jars and larger jars. Whatever your
preference was for premium kosher dill pickles, Vlasic
had a package for you. And because they offered products
that met their customer’s preferences at a fair price, they
made money.
Then one day, the Vlasic sales guy for the Wal-Mart
account was told that Wal-Mart wanted Vlasic to supply
them with unsliced pickles in a gallon jug that would
retail for $2.97. At that time Wal-Mart had 3,000 stores
and promised to move 240,000 gallons of pickles each
and every week. Even though the profit margin for Vlasic
was less than $.03 per jug, the volume was so huge, Vlasic
jumped at the opportunity.
The consumer reaction to the cheap gallon pickle jug
was better than expected. Whole fields of cucumbers
were committed to Wal-Mart business which caused
supply problems for their core business. More and more
resources were directed to Wal-Mart at the expense of
their profitable specialty business.
To complicate things further, the low priced, low profit
Wal-Mart pickles were now being bought by the same
customers who had previously bought the smaller jars of
premium priced, sliced or quartered pickles.
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The end result was Vlasic traded their unique and most
profitable product line for the low margin, high volume
Wal-Mart business. All the costs that were absorbed by
the most profitable segment of their business now had
to be shifted to the Wal-Mart business. Their cost model
had changed and there was too little margin in the
CONTINUED ON PAGE 3
Procedure to Follow for
Damaged Freight
PICKLE Economics (continued)
Wal-Mart business to cover it. Vlasic lost millions of dollars of profit and eventually filed for
bankruptcy protection.
So what lessons can we all learn from the “pickle story”? In my mind they are:
By Rocky Hatfield
Lesson #1
Inside Sales
Based on the industry we service and the several trucking companies we use, it is inevitable
that some shipments will be damaged. In an effort to protect your company, as well as
ours, we recommend the following steps be taken should your order be damaged.
1.
You can refuse the entire shipment; however, this is not always the most
practical option.
2.
In most cases you will take receipt of the product. (Example: One drum is
damaged but the rest of the shipment is fine.) In this case, it is imperative to
follow the guidelines listed below:
A.
Always take pictures
i.
You must get pictures of damaged product. It is imperative to get
pictures prior to unloading the truck to show the condition of the
product as it arrived.
ii. Continue taking pictures of any damage revealed during unloading.
Check angle and lighting for best pictures.
B.
Never throw away any product until the claim is settled
If you throw away product, we do not have a claim. The insurance
company assumes, if there is no product, the product was useable.
Therefore, you suffered no loss.
C.
Do not be quick to sign the bill of lading (BOL) or delivery receipt
Be sure the bill is clearly noted with damage to your product. We suggest
writing a statement describing the damage you saw and have the driver
sign it prior to unloading the truck. This is an acknowledgement of the
damage by an agent of the carrier. It will greatly help to expedite the claim.
D.
Notify Amerimulch Immediately
Any delay in alerting Amerimulch to damage makes it more difficult to
track the product through the shipping channels.
It is our belief that by following these steps we can recover a great percentage of the
losses. If these steps are not readily available please remember to contact Amerimulch
immediately with any questions.
It has been a pleasure providing you with our Heartland Brand colorants and we look
forward to servicing your colorant needs in 2009. May the Lord bless you abundantly
this Christmas Season!
www.amerimulch.com
As business owners or managers we have to accurately capture each and
every cost associated with running our business. The key words here are
accurate and every. Often times we tend to estimate or use average costs.
The danger is we usually tend to estimate costs too low. By using an
average cost to determine pricing it is possible to penalize good customers
while giving a price benefit to a not so good customer.
Hard costs are easier to identify and quantify. But many companies
don’t provide for unplanned maintenance costs, major equipment repair,
depreciation, insurance, overtime and other unanticipated costs. These
kinds of costs are real and need to be provided for in your pricing plan.
Lesson #2
No amount of increase in sales volume can be made to be profitable if
you’re selling price is lower than your total costs.
Lesson #3
Joe Cortez is a boxing referee in Las Vegas. Before every bout, Joe brings
the boxers to the center of the ring and after giving the final instructions,
he tells them, “Guys, you know me. I’m fair, but I’m firm.”
If we truly know our costs and properly manage those costs; and if our
expectation for profit is reasonable, then our pricing is fair.
Being firm is the hard part. We all encounter “goofy” competitors who are
pushing similar products to ours at ridiculously lower prices than ours.
Maybe they’re trying to buy market share, or move obsolete inventory, or
just steal your customers. How to react to these situations is a judgment
call that only you can make. But keep in mind that wood fiber supply is
tight, operating and material costs are up and credit is tight.
2009 could be a year in which good businesses get better and strong companies will get stronger.
Why? Because the stupid and desperate competition will not be profitable. And more
importantly, with credit being so tight, they won’t be able to borrow enough money to survive.
In the end, if our pricing is fair, if we manage our costs, if we take care of our good customers
and collect our money, we’re all going to be OK.
As we approach the end of 2008, we at Amerimulch thank you for your business and the trust
you have placed with us. We wish you the best for the Holiday Season. We hope you have time
to spend with family and friends during this special time of year. Also, don’t forget to hug your
loved ones and tell them you love them. Tomorrow is not a guarantee for any of us.
* Fast Company Magazine #73 Dec. 2003 “The Wal-Mart You Don’t Know” By Charles Fishman
I N T RO D U C I N G
Mary Higgins, Steve Moeller and Jim Oros
Amerimulch is happy to welcome three new members to its team.
Mary Higgins has joined the company as an
Accounting Technician. Mary began as a temporary
warehouse worker and proved her worth to the
company. Her responsibilities will include accounts
payable and receivable processing as well as general
day-to-day accounting activities.
“Her dedication and enthusiasm will not only be a great
value to ChromaScape Inc. but to our valued customers
and vendors as well. Her experience, knowledge and
willingness to learn will enable us to continue to provide
our customers and vendors with the highest quality of
service as we continue to grow and prosper. We could
not be more excited to have her join our team,” said Chris
Spilker, Corporate Controller of ChromaScape, Inc.
Steve Moeller has joined Amerimulch as a Bench and
Research & Development Chemist. He will be working
on all research and development projects and assisting
with all quality control testing.
Amerimulch’s Associate
Appreciation Day
Amerimulch celebrated its associate appreciation day on July 25, 2008 with
plenty of food and fun. This is an annual event to thank our associates for all
their hard work and dedication. The weather was great and everyone enjoyed
being outside.
A delicious meal of filet mignon and shrimp shish kabobs, grilled
vegetables and pasta salad was expertly prepared by Tim Carmichael,
Jr. and Danny Haviland. Initial food prep was handled by Jason Ansel,
Lonnie Brooks, Casey Jones and Matt Reedy. It was all topped off with ice cream
cones for dessert.
We played games of corn hole and bocce ball. Participants displayed their
good-natured, competitive spirit and bystanders enjoyed watching.
It was a great afternoon and a terrific way to recognize our associates’
hard work!
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“Steve is a welcome addition to the Quality Lab, Product
Development and R&D team. Product quality, R&D
projects and customer satisfaction are our primary goals,”
said Joanne Bednar, Lab and Quality Manager.
Jim Oros has joined the company in the role of Director
of Manufacturing for ChromaScape, Inc. His responsibilities will include driving the continuous improvement
of our manufacturing, safety and quality systems at both
Amerimulch and Solution Dispersions.
“We are very fortunate and pleased to add Jim to
our team. He has a strong background and diverse
experience in quality systems, manufacturing
management, materials and logistics management,
safety and project management,” said Joe Majewski,
President of ChromaScape, Inc.
Industry Partners
Maximize YOUR Profit on Each
Ton of Wood AVAILABLE
By: Vince Hundt, Company Co-Founder
Rotochopper, Inc.
Landscape mulch is getting to be a more sophisticated and complex subject every
year. Twenty years ago mulch was simply bark from trees. It was what customers
got when they asked for mulch. It was cheap and plentiful, like the diesel fuel used
to haul it. Then, in 1990 in Cleveland, Amerimulch invented the idea of colored
mulch. That changed everything.
Now you could grind different types of wood and make lovely red, brown, gold,
and black ground covers, demand grew rapidly. The supply of cheap feed stock was
quickly heading toward exhaustion. Because of the excellent price and growing
demand, mulch started to move over greater distances. Rumors of train loads
from Canada and barge loads from Louisiana were often true. Truck loads by the
thousands fanned out over great distances each April to stock retail yards and
convenience stores.
In the first decade of the 21st Century, things changed again. 9/11, the war in Iraq,
the rise of China and India and suddenly wood waste is no longer worthless wood
waste; it is valuable biomass fuel. With oil at $100 a barrel, wood fiber is worth
serious money. A cellulosic ethanol plant can make 115 gallons of 110 octane
ethanol out of one ton of wood. 30 megawatt biomass burning plants that consume
300,000 tons of wood each are popping up all over the United States (US). Huge
new wood pellet plants and briquetting plants are running 24/7 to feed a ravenous
demand in the US and Europe for less expensive and carbon neutral fuel.
Rotochopper recently compared colored mulch made in two different processes from
pallet wood. One sample was made with an 800 HP horizontal grinder that ground
the wood through a 3” screen, conveyed it directly into a trommel screen where color
was applied and then dumped directly into a second 800 HP grinder with a 1.25”
screen. The result was mulch that was as much as 60% 1/4” minus “fines”. This
mulch needed an increased amount of colorant to look good and weighed almost 500
lbs per yard. In other words, a ton of wood produced four yards of mulch and had to
be saturated with water and colorant to make a good product.
Next we took the same wood and ran it through a 4” screen in 475 HP Rotochopper MC266. Then we re-ran that wood through a 1.25” screen in the same ma-
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chine while applying water and color in the grinding chamber. The result was a
beautiful uniform product with rich color, small particle size, fines of less than 15%,
and a weight of only 320 lbs per yard. That means six yards to the ton ............50%
more saleable mulch from the same ton of wood! Less dye, less wood, less water,
less diesel fuel and more yards of mulch. Magic? No, there are very good reasons
for this result! It has to do with several patented features of the Rotochopper that
explain why it’s the premier mulch machine on the market. One is the high speed,
down-cut rotor that causes wood to escape the grinding chamber much more quickly than up-cut machines. Wood is in and out of a Rotochopper fast. Next, injecting
color and water directly into the grinding chamber is critically important. 475 HP
puts the colorant into the wood evenly and instantly. Finally, baffled screens in the
grinding chamber are the ultimate technology for proper sizing and have a lot to do
with the “Perfect In One Pass” tagline given to Rotochoppers by customers.
With wood supplies dwindling, fuel costs rising and customers demanding an ever
higher quality product, be sure to take a detailed look at all aspects of your mulch
manufacturing process; limit the miles the wood has to move and take a closer
look at your processing equipment. For additional information on Rotochopper
equipment, please contact Monte Hight at 320-548-3586 or visit them on the web
at www.rotochopper.com.
Renewable Energy from Organic Recycling
By: Tom Kurtz, Kurtz Bros.
Kurtz Bros. is a third generation family
business located in Ohio that began as a
commercial topsoil company. In the late
1970s the company began to focus on
organic recycling and mulch production. In
the early 1990s, Kurtz Bros. was one of the
pioneering companies in the colored mulch
business and eventually sold Amerimulch to
ChromaScape.
The mulch business saw moderate success
until the advent of color enhanced mulch
products in the early 1990s. It has grown
significantly since that time. Composting
became a big part of the business when
diversion of yard waste from Ohio’s landfills
was mandated in the late 80s. The composting
business model has always been a little
unique. Get paid to take it, get paid when
you sell it. But unlike the mulch business,
there are not large markets for compost
unless you are in a related business like
topsoil. The mulch business, in recent
times, has proven a little challenging as the
supply of feedstocks in Ohio has diminished
because the timber industry is depressed due
to housing and other economic factors.
A new venture that Kurtz Bros. has been
pioneering in the United States the past
several years is the biogas industry. Biogas is
created in a controlled high solids Anaerobic
Digestion (AD) process. Creating biogas
from AD has been around for decades,
primarily in the waste water industry. High
solids AD is somewhat new. Biogas is about
60% methane (natural gas being 100%).
Organic waste is broken down by bacteria
that consumes about half the solid mass and
generates biogas. This gas can be used in
several applications:
•
•
•
•
Boiler Fuel
Electricity - Combined heat and power
Natural Gas – if the gas is treated
Compressed gas for motor vehicle fuel
The business model is driven by tipping
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fees for processing the waste. Other revenue
besides the tipping and energy include the
solids (topsoil, etc.) that remain at the end of
the process, and good potential for fertilizer
value from the liquid and solids that remain.
Carbon credits and renewable energy credits
can also be monetized.
This industry has proliferated in Europe
producing renewable energy. It is primarily
driven by converting corn and other grains
into biogas. In the mid 1990s there were less
than 300 biogas plants in Germany. Today
there are almost 4,000, and growing.
Kurtz Bros. partnered with a German company, Schmack Biogas AG, to share technology
and develop the market in North America.
A new company, Schmack BioEnergy LLC,
has been created to develop this market.
The first plant constructed and operating
in the United States in cooperation with
Schmack, is in Akron, Ohio operated by
KB Compost Services Inc. Kurtz Bros. is
under contract to build a second plant in
Columbus, Ohio.
Not only is the renewable energy aspect of
the business exciting, processing organic
waste materials in a controlled system
through digestion has many environmental
benefits. Most organic wastes such as waste
water solids, food waste, animal waste, fats,
oils, grease, etc. are either land filled, land
applied, composted or incinerated. In these
processes there are always concerns with air
and water pollution. Biogas plants manage
these concerns.
As our markets and customer needs continue
to change, innovation with a renewable
energy component, makes for a good bet in
today’s economy. If you would like more
information about the biogas industry and
its opportunities you can contact Jeff Moore
at 800-527-6457 Ext. 32 for more details.
Customer Spotlight
Happy Holidays!
Amerimulch would like to thank you, our
valued customer, for making our success
possible over the past year. Your trust
and loyalty allow us to continue to
improve and bring you the highest
quality product and finest customer
service in the industry. From
our family to yours, we wish
you a joyous holiday season
and a peaceful, prosperous and
healthy New Year.
Spring will arrive before you
know it, and Amerimulch will
be here to serve all of your mulch
colorant and equipment needs.
Earth ‘n Wood
Earth ‘n Wood started its business by digging peat from the bog on the family
farm. Twenty six years later, it has evolved into one of Northeast Ohio’s largest
mulch and soil producers. Owners, Craig and Wes Snee went from producing
approximately 200 yards of material by themselves to producing well over
100,000 yards today with a staff of 50 employees.
Over the years, new outlets
were added to serve the retail and commercial markets.
Stores are located in Norton,
Akron, Hudson and the main
operation in North Canton,
Ohio where all materials
are produced and trucks are
dispatched.
Along with standard mulch, Earth ‘n Wood manufactures six different
color enriched mulches using Amerimulch’s ColorTrom coloring system, as
well as custom blended soils.
With the growing demand for raw material by burners and other producers,
finding it has become one of the biggest challenges. As the trend to “go
green” and diversion grows, recycling has become another large part of Earth
‘n Wood’s operation. In 2007, approximately 30,000 tons of waste were
diverted from the landfill and used in production of materials. With this growing
intake, a quality control staff was added to the team to ensure materials
going into final production are free of contaminants to ensure the finished
product meets industry standards.
As Earth ‘n Wood continues to grow, look for another store coming soon.
11
EQUIPMENT FOR SALE
Amerimulch Mini-Mite Colorizer Self contained, 80
cubic yards per hour production, 38 hours on colorizer,
approximately 76 hours on the Kohler diesel generator
mounted on Cleveland tandem dually axels, pintle hitch,
built-in stacking conveyor 6 yard infeed hopper, Perfect
condition. For more information please contact Matt
Cox at 406-498-3109
Rotochopper Go Bagger 250 2007 like new, $38,000,
can also rent $1,895.00/month
Contact Bob at 814-834-1464
Two Fecon Batch Colorizers 30-40 yards per hour, 80
hp diesel motor
Price: $25,000.00 used mid 1990
Price: $35,000.00 used late 1990
For more information please contact Joni at 573-3788222.
Peterson 4700B Horizontal Grinder Engine is Cat C18
(700 hp), three years old, 1,456 hours (as of 04/25/08),
magnetic head pulley, screens included - Price: $275,000
FOB Alma, GA. For additional information please call
Steve Strickland at 912-632-2800.
For a complete line of used equipment, please visit Amerimulch.com
If you know of anyone else who would like to receive the newsletter,
please contact Jennifer McCann at jenniferm@amerimulch.com and
provide their complete address.
2055 Enterprise Parkway
Twinsburg, OH 44087
© 2008, all rights reserved.
888.556.3304
amerimulch.com
Amerimulch™ News
Vol. 10, Issue #4
Fourth Quarter 2008
Published by
ChromaScape, Inc.