Absorption Corp. faces growing pains

“Overnight” success took years

by Christopher Key

 

Four years ago, Absorption Corp. of Bellingham had a big celebration when they turned their first profit. They are now posting 25-30 percent gains almost every quarter in the face of an otherwise staggering economy.

“We’re an overnight success story that took 11 years,” said Sean Dooley, vice president for marketing.

It all began with an idea borrowed from Europe: use sludge from pulp mills to make small pet bedding. It’s a win-win situation that takes waste that would ordinarily end up in landfills and uses it to produce a product that is far superior to the more traditional wood shavings.

Gordon Ellis is chairman of International Absorbents (IA), the Canadian parent company of Absorption Corp. He built the Bellingham facility and turned the keys over to someone else to run the operation. That turned out to be less than ideal. There was a proxy fight in 1990 and Ellis took charge. In the process, Ellis learned a valuable lesson: the large corporate mentality doesn’t work well in a small corporate environment.

After what he describes as three years of “living at the plant,” Ellis, “with a lot of help from the Bellingham guys,” was able to turn the operation around and establish the basis for the company’s current success. The core product that is at the heart of that success is CareFresh, a bedding product used for hamsters, guinea pigs, and birds. It controls odor better and is healthier for animals than wood shavings.

You would think that an environmentally friendly product that is superior to the competition would be a quick success.

“The recycled nature of the product,” said Ellis, “is not a big factor in our sales. People pay lip service to environmentally friendly products but won’t pay extra for them. All other factors considered, they will buy the environmentally friendly product if it is the same price. Until we got our volume to certain levels, we couldn’t compete price-wise. It’s like banging your head against the wall.”

Once that critical mass was achieved, however, sales of CareFresh went into orbit and have remained there. It doesn’t hurt that the big-box retailers like Petco and PetSmart have started using the product in their animal cages.

“It’s a recession-proof market,” said Ellis. “Veterinarians and people with pets will take care of them regardless of the economy. Pets are seen as an affordable luxury.”

The patented manufacturing process takes a pulp mill by-product that contains material with fibers too short to be used in paper manufacturing. It contains a lot of impurities, such as sand and bark. Absorption Corp. then breaks down the material even further and mixes it with water to form a slurry. It is further cleaned until it resembles something like wet, thick blotting paper.

Then, the material is broken into a particulate state prior to drying. This drying process requires a great deal of natural gas. Nothing is added during the process and no bleaching is required. The product goes straight from the dryer into the package.

Ellis located the plant in Bellingham to take advantage of an abundance of raw materials generated by Georgia-Pacific (G-P) and to lower shipping costs. The vast majority of the company’s product is sold in the US. Eighty percent of its stockholders are Americans.

The G-P pulp mill has since shut down and 85-90 percent of Absorption’s raw material now comes from Canada. Demand for the company’s product is such that the original facility can’t handle it all and Absorption is now manufacturing at four facilities scattered around the county with warehousing and offices at two more locations. This is not, to put it mildly, the most efficient way to operate.

What the company needs to consolidate is a parcel of land that will accommodate a 120,000 square foot facility. It must have a reliable water supply, all-weather roads, railroad access, high-pressure natural gas and sufficient electrical power. That combination has proved elusive, although the company wants to remain in Whatcom County.

Power at affordable rates is one of the key issues since the company uses large amounts of natural gas and electricity in the manufacturing process. The company is taking that as a starting point and working back from there.

Absorption Corp. not only needs to consolidate its operations, but needs to diversify if it is to sustain its phenomenal growth. IA chairman Gordon Ellis believes that CareFresh can double its current market share and will then begin to level out. By that time, some other products will be coming into their own.

Chief among these is hydro mulch, that bright green stuff that is sprayed along highway berms and in areas burned by forest fires. It is mixed with grass seed in order to help the seed germinate and take root faster. Absorption Corp. makes it by taking another waste wood product and grinding it into miniscule fibers. It is then dried, colored and packaged. The process requires the same basic hardware as CareFresh, thereby taking advantage of manufacturing efficiency. Absorption Corp. is already producing hydro mulch in volumes comparable to CareFresh.

The company continues to explore the market for kitty litter, but needs to be able to produce at a competitive price.

An alliance was recently formed with a European company that produces premium pet food for smaller pets such as hamsters and guinea pigs. Absorption Corp. is distributing their product in North America while they are distributing CareFresh in Europe.

“We have to have a broader base in order to protect our core product,” said Absorption president Doug Ellis. “We must expand into multiple products or we will get eaten. We have to find synergies in raw material handling, manufacturing and labor. Alternate income streams are a must.”

One thing is clear: Absorption Corp. will not put all its eggs in the Whatcom County basket. Cost factors in shipping to the huge east coast market have company executives looking at locations in Georgia. There is an abundance of raw material from pulp mills in that area as well as lower labor costs.

Current company estimates indicate that both raw material availability and production capacity in Whatcom County will be tapped out in one to two years if growth remains at present levels. It is an exciting and challenging time for the company, but Doug Ellis says the company needs support to remain in Whatcom County.

“There seems to be a lack of understanding in Whatcom County,” he said, “that primary industrial jobs have a higher spinoff rate than any other; that is, they support more ancillary businesses.”

Company officials are playing their cards close to the chest when it comes to rumored purchases of suitable property “north of the airport.” Their bottom line, however, remains the same: “We want to stay.”