"Recycling Mentality" Uncovers Business Niche
Jun 9, 2014, 08:17 AM
November/December 1989
After making marginal profits as a waste-paper processor and broker, Channeled
Resources changed its focus and discovered success in the specialty-paper
market.
By Elise R. Browne
Elise R. Browne is managing editor of Scrap Process and Recycling.
Driving around near one of his waste-paper processing plants nearly 10 years ago, Cal Frost saw something that bothered him: A specialty-paper maker was sending its damaged rolls to be landfilled. Frost, president and owner of Channeled Resources Inc., Chicago, says his "recycling mentality" recognized there had to be an alternative to disposing of nonrepulpable paper rolls.
In finding the alternative, Frost revamped his company's structure and carved out a niche that now accounts for about 75 percent of Channeled's income. For the past five years, the company has been buying odd-lot and damaged rolls of treated papers, which are reconditioned and sold as No. 2 goods into a variety of markets.
The company also brokers waste paper and plastics, something it's been doing since its establishment 11 years ago. For the first six years of its existence, however, Channeled also processed the paper it bought and sold at one of the three plants it owned. Working with specialty papers gave the small company the opportunity to get out of the processing business, and Frost jumped at it. At the time, he says, "markets were just terrible and interest rates were high, leaving little cash to put back into the business." He soon realized "the little guy really doesn't belong in the plant business. So we closed and/or sold our plants and began to get more and more involved in this specialty-paper niche."
The little niche is a profitable one. According to Cindy Frost, sales manager, reconditioned specialty paper sell at twice the level of waste paper. But to get that higher price, there has to be a converting plant. Channeled relies on Maratech a Wassau, Wisconsin, converting company that's one-third-owned by Cal. The remainder of the company is owned by specialty-paper manufacturers. Maratech's expertise in converting specialty papers to customers' needs has helped make the company successful, says Cal.
Maratech's processing sequence goes like this: Portions of the roll that have been damaged (by such incidents as small fires, floods, and forklift accidents) are cut off for disposal or sale as waste paper (only about 50 to 60 percent of the paper handled is repulpable, and this, marketable as waste paper). The reusable part of the roll is then converted to the form required by the consumer. For example, a wax-coated or foil-laminated paper can be slit and rewound to a specific width. Then, after sheeting and packaging, it can be used as liner in food applications in which moisture- or grease- resistance is necessary. It's a process nearly identical to that used by converters of nonspecialty papers.
Most of the equipment at the Maratech operation also is similar to that used by other converters. However, there are some unique features built in to handle specialty papers. Silicone-coated paper, in particular, is "very difficult to work with," says Cal, so the proprietary equipment used to rewind, slit, and sheet rolls has been designed to work specifically with that type of paper. One of the devices used by Maratech has a patent pending.
Although Cal is reluctant to provide figures on the volume of damaged specialty figures handled through Channeled and Maratech, he does say that the company buy and sell "truckloads of odd-lot paper" and that Channeled's waste-paper operation brokers "a couple thousand tons a month."
If that waste-paper volume seems small, it's because Channeled really is a small company. Besides Cal and Cindy (who are father and daughter), Channeled employs only one other person, Joan Scullion. As office manager, she does just about everything, even some buying and selling. The three work out of a 1,200-square-foot office with no trucks and no warehouse.
Cal, who has 25 years of experience in the recycling field, likes the operation the size it is. There are advantages, for the instance, to having no warehouse: "As a broker in the waste-paper business," says Cal, "you don't need a warehouse. In fact, you don't want a warehouse because you don't want to sit around while prices go up and down. You want to buy and sell it, and that's all."
And being small is what has enabled Channeled to find its niche. "I think my story is typical of small business. We didn't have enough money to put into the types of operations that made sense, we didn't have enough time, and we didn't have enough people. I found that as a small company we could find success working in areas where we weren't trying to compete with hundreds of larger organizations with greater resources. If you really sit back and think about your business realistically your priorities become clear. In our case I believe we're too small to be effective and make a reasonable profit in volatile markets that are controlled by much larger organizations. We have tried to find our niche and concentrate our energies in that one little area. That's what we are really doing.
After making marginal profits as a waste-paper processor and broker, Channeled Resources changed its focus and discovered success in the specialty-paper market.