Branching Out

Mort Ockenfels never intended to enter the recycling business.
   You could say he backed into it 33 years ago when his trucking company secured a contract to haul used corrugated cartons for Procter & Gamble Co. To Ockenfels, all the contract meant was extra work he could offer his drivers. As far as he was concerned, he was in the trucking business.
   But trucking became more competitive, and the Ockenfels family saw the wisdom in being involved in more than one business. Paper recycling turned out to be the family’s “other” business.
   Thanks to a little serendipity and a lot of flexibility and vision, the family’s Iowa City-based City Carton Co. Inc. has grown into the largest private paper recycler in Iowa. The company, which has seven plants and 140 employees, processes about 215,000 tons of scrap annually.
   Diversification and managed growth have been essential to City Carton’s success. In the past few years, the company has spun off three businesses and moved into new offices. Its current goal is making the shift from entrepreneurial enterprise to professional corporation. City Carton will achieve that goal, says John Ockenfels, president, without sacrificing service and without growing beyond the realm of manageability.

Growing Into Recycling
The seeds for City Carton’s birth were planted in 1956 when Procter & Gamble opened a plant in Iowa City to produce health and beauty care products.
   Ockenfels Transfer, a trucking business owned by Mort Ockenfels, loaded semitrailers, then shipped them on flatcars for the company. When Procter & Gamble needed someone to handle its used corrugated cartons, it tried two different haulers but neither had the necessary capacity.
   So Procter & Gamble asked Mort if he’d be interested in bidding on the next contract for the used cartons. “He did, and that was it,” says John.
   That contract, forged in 1967, marked the birth of City Carton.
   Ockenfels Transfer used semi-trucks to pick up loads of cartons and haul them to City Carton, where they were sorted by size and quality. The trucking company would transport the scrap cartons to a recycler in Peoria, Ill., then its empty trucks would pick up products at other customers and return.
   After two years, the Peoria recycler suggested that City Carton purchase a baler so it could ship more scrap per trip. City Carton took that advice, buying a 1935 Economy 172 pit baler.
   John Ockenfels vividly remembers cleaning the pit of that machine. It was dirty, dusty work. “The incentive there was a little different,” he says, recalling a family joke. “Today we have different incentive packages, but when you’re working for your mom and dad, the incentive package runs along the line of: ‘Dinner, Saturday. You want to be here?’” Then he adds,    “The reality was that we were happy to be doing it. Almost all of us enjoyed working in the business from the start.”
In its early years, City Carton had trouble establishing business relationships. Not only did it face the challenge of being a scrap company in a rural area, far from large paper mills, but it also couldn’t supply the tonnage the mills demanded.
   “We couldn’t come in and say ‘Hey, we can sell you an extra 1,000 tons a month,’” John explains. “We could only give maybe 50 tons a month, and that might be all the paper we’d produce in one specific grade.” As a result, City Carton was limited to selling to smaller mills. “Those relationships were good,” John says, “but the prices that we were getting weren’t very attractive.”
   Despite often sluggish markets, City Carton continued to grow. In 1982, a recycling company in Cedar Falls suffered a fire that destroyed its entire plant. City Carton, which had worked with the company, agreed to run the firm’s routes while it decided whether or not to rebuild. In the end, the company decided that the loss was too great, and City Carton offered to buy what was left. It soon established a second operation in Cedar Falls.
City Carton continued to grow throughout the 1980s and 1990s, establishing a plant in Mt. Pleasant in 1984, one of its two large operations in Cedar Rapids in 1987, facilities in Davenport and Muscatine in 1995, and just last year a plant in Creston.
   In 1990, City Carton also marked an important management milestone when Mort Ockenfels decided to retire at age 65. The senior Ockenfels and his wife Marcy gave all of their children (including one brother and two sisters who don’t work in the industry) stock in the company and turned over management of the business to five sons—John, Tim, Chris, Andy, and Mark. Two years later, these five bought the remaining undistributed shares from their parents.
   Mort Ockenfels was taking somewhat of a risk when he retired. As John explains, the company was still a small business with no substantial retirement fund for Mort. “If the company failed,” John says, “he’d be in trouble in retirement.” But Mort had faith that his sons would run City Carton with vision and progress in mind. Judging by how City Carton has fared since 1990, his faith seems to have been well-founded.

Diversity Within Paper
   In 1975, Mort Ockenfels received a phone call that sent his young City Carton reeling. The call was from the Quincy, Ill., mill of Packaging Corp. of America. The mill was City Carton’s primary buyer of OCC. But the caller notified Mort that, in the bleak marketplace of the mid-1970s, the mill would no longer be buying City Carton’s paper. In that one call, the company’s entire market vanished.
   “That’s one of the first lessons we learned: Don’t wrap it all up in one market,” says John. Fortunately for City Carton, it had Ockenfels Transfer to carry it through the lean times. Still, City Carton learned not to be too dependent on one consumer, one market, or even one business. In other words, it learned the value of diversification. Since then, the company has put its diversification lesson into practice, spawning several spin-off operations.
   One of these is Document Destruction & Recycling Services (DDRS), managed by Chris Ockenfels. This operation, based in Cedar Rapids, ensures the secure destruction and recycling or disposal of primarily paper items, though it also handles other products—from clothing to CD-ROMs. The plant runs incoming material through a 100-hp shredder, then either bales the shredded scrap for recycling or ships it for disposal.
   For security reasons, DDRS employees are subject to a background check, and they are bonded and insured. Also, DDRS and City Carton don’t share employees, facilities, or equipment, and the DDRS facility is constantly under guard and video surveillance.
   Another of City Carton’s offshoots is Greenfield Energy, currently managed with the Iowa City plant by Tom Palechek. This operation, based in Iowa City, converts nonrepulpable paper and other hard-to-recycle materials—such as plastic- or wax-coated paper and paper sacks with plastic liners—into fiber fuel pellets. When burned with coal in stoker and other types of boilers, these pellets reportedly reduce heavy metal, nitrogen, and sulfur dioxide emissions. According to the firm, the pellets are an environmentally safe alternative fuel source approved by the Iowa Department of Natural Resources.
   Yet another City Carton division is EWI Equipment, based in Iowa City. This operation sells, installs, and services new, used, and rebuilt equipment for the recycling and waste industries. 
   The firm’s equipment roster covers everything from balers to fluffers to MRF systems to shredders. On the repair side, the company has qualified technicians on staff, notes Mark Ockenfels, who oversees EWI Equipment.
   Notably, City Carton’s diversification hasn’t meant branching into other scrap commodities. Iowa’s deposit laws make it difficult to collect glass and plastic containers and virtually impossible to handle used aluminum beverage cans. In Iowa, since 1978, beverage distributors have been responsible for collecting bottles and cans for beer, wine, liquor, wine coolers, soda and mineral water, and soda. While the legislation was designed to keep such containers off Iowa’s highways, it has also limited City Carton’s scrap options.
   City Carton also missed the window of opportunity to enter the ferrous scrap niche. “By the time we could have moved into that area, there were other companies near us doing it so competitively, it would have been difficult for us and them to survive,” explains John. “I’m not sure if it would have been a good deal for any of us. We have a few scrap yards in this area, and I don’t have any desire to do the scrap metal business. It’s much easier to just send everything to them.”
   Rather than bemoan its limited opportunities in other scrap niches, though, City Carton has made the most of the scrap paper market through its DDRS and Greenfield Energy divisions, as well as through related businesses like EWI Equipment.
   These diversification efforts have been a boon for the company’s bottom line and its stability. What’s more, its diversified approach hasn’t gone unnoticed in the industry—John Ockenfels has been invited twice to discuss diversification at ReMA events.

Service Before Growth
Lack of supply and stiff competition aren’t the only reasons City Carton looks carefully before it leaps into a market. Overextending resources can lead to poor service, and service has been a priority for City Carton from its first day.
   This emphasis on service, in fact, has been an Ockenfels family tradition since the start of Ockenfels Transfer, whose slogan was “The service tells, it’s Ockenfels.”
   As John notes, “When you grow up with that kind of a tagline related to your name, you understand in a hurry that it’d better be good service. We do base a lot of our decisions on service.”
   For instance, City Carton doesn’t currently seek expansion outside its current Midwest service area—though there have been offers—because doing so might stretch its resources too thin.
   “We can manage this region well with the people and the equipment we have,” John says. “But it takes a different management style and personnel to manage long distance. We’re not to that point. And I don’t anticipate doing that any time in the near future.” 
   That way, he says, City Carton can bring the best service to all suppliers, no matter how much scrap they generate.
   “We respond to all of our customers, and as long as they can generate the volume and we can figure out how to pick it up, or they can deliver it, we’ll deal with it,” he states.
   City Carton strives to establish and maintain good relationships with both its suppliers—which include municipalities—and consumers. To be sure, the company works closely with its customers. How closely? Its Muscatine plant, for one, is located inside the county transfer station.
   Economics is a big reason for that particular close relationship. As John explains, “A standalone plant doing 150 to 200 tons a month is impossible to make work on its own. But when we combine that with the tonnages we already have, with the overhead we’re already paying, it becomes more effective for us to operate it.”
   Also, notes John, such an arrangement enables City Carton to cover the residential scrap paper base as well as the industrial market.

The Employee Element
Diversification and strong customer service are certainly two keys to City Carton’s success, but John also credits the company for consistently hiring good people.
   “Working with a talented core of professionals, that has helped us run the operation,” he asserts. “Without a doubt, we couldn’t be doing what we’re doing if we didn’t have the people working for us who have the skills that they have.”
   When it comes to praising City Carton’s staff, John first gives a big nod to his four brothers. But there are other, nonfamily faces in the crowd, including Rod Stark, equipment division manager; Tom Rowland, CFO; Kaye Eckhardt, controller; Steve Klein, DDRS supervisor; Ken Meyer, Cedar Rapids plant manager; and Frank Miller, Cedar Falls plant manager. While City Carton’s employees receive enviable benefits, including paid vacation, a 401(k), and medical coverage, the benefit many employees enjoy most is the firm’s annual Christmas party.
   For two days during the holidays, City Carton takes over a local hotel. All employees can stay there for free, with access to a buffet, snacks, and the swimming pool. One evening, the company sponsors a casino night, where employees gamble with play money and spend their winnings at an auction or the “country store.”
   One year, John made the mistake of suggesting that the party be cancelled. “That was a bad move on my part,” he says. “The party’s a high morale booster for the employees. For some, it’s a very big night. It’s a nice night out in a nice hotel, and they have few expenses.”
   Such events enable City Carton to keep morale high and maintain positive relations with its employees, which help keep turnover low. The company has little trouble keeping supervisory and middle management positions filled, though finding and retaining technical help and employees to work the sorting line is more difficult, John says.
   City Carton also works with its employees to make its plants safe workplaces. The company has revamped its internal safety program to include a safety committee made up of mid-level supervisors. “I used to run the safety committee, and I came to find that I was actually part of the problem for the committee because of my last name,” says Mark Ockenfels, who oversees the firm’s safety efforts.
   The safety committee acts swiftly. One time, a truck driver backed in to an unloading bay, got out of his truck, and was bumped by a skid-steer loader that was backing up. The skid-steer operator hadn’t seen or heard the driver pull in.
   Immediately following this incident, City Carton instituted a new system. Now, the skid-steer driver controls, via remote control, the receiving room’s door as well as a stoplight next to the doorway that tells trucks when to stop and when to go.
That’s one of many changes the company has made in a renewed effort to make safety a priority. “Safety’s an ongoing process,” says Mark, stressing, “We work on it everyday, everyday, everyday.”

Toward Professional Management
Safety isn’t the only ongoing process at City Carton. Planning for the future is also a constant activity at the company.
   “We meet regularly with outside consultants to keep reviewing our future,” John says. “In addition, we’re looking at where we’re going to be as a family company. There’s always the tug-and-pull between the family and the company. So we’re constantly discussing that and how that leads us down the road.”
   Down the road has also led City Carton to new office space. But instead of moving into a new building, the company did what you might expect a scrap company to do—it recycled an old warehouse at its Iowa City facility. This structure, which had been shuttered for years, provided the right amount of space. With renovations, the building now has a comfortable waiting area, staff offices, storage area, and large conference room.
   Though City Carton has plenty of room to grow in its new offices as well as its paper recycling operations and other divisions, there’s no denying that the company is in an important phase of change.
   “We’re working very hard to move from the entrepreneurial stage into the professional management stage, and that creates some conflicts,” John notes. “We’re addressing those conflicts, making the changes we need to make, and moving on. We understand full well that that’s what we need to do.” •