Brothers Phillip and William Dworsky faced a barrelful of challenges in 2004 when they reacquired Consolidated Container Co., the Minneapolis business their grandfather started in 1905 to manufacture and recondition wooden barrels.
The company, which now cleans and reconditions steel and plastic drums for clients in the petroleum, chemical and coatings industries, had been sold in 1998 by their father and uncle to a Texas pallet manufacturer and reconditioner. The deal also included Consolidated's thriving business as a distributor of new containers.
In the ensuing six years, Consolidated's revenue fell from $19.1 million to $10.5 million, and by the time the Dworskys took over, it was losing upwards of $100,000 a month.
"It was a fast ride to nowhere for a family business that was nearly 100 years old," Phillip Dworsky said.
That wasn't all. The new owner had abandoned the company's lower-margin business of cleaning and reconditioning plastic containers, but continued to take damaged and stained plastic drums off the hands of major clients.
As a result, Consolidated's 12-acre property in northeast Minneapolis was awash with unwashed containers -- more than 100,000 of them -- awaiting a decision on what to do with them.
Leave us now contemplate an antidote for this depressing scenario: By the end of 2008, the Dworskys had hoisted annual revenue to $16.3 million and the company was comfortably profitable. That doesn't mean the business is immune to the economic doldrums, however: Revenue is down about 5 percent this year.
Moreover, the property has long since been freed of that unsightly collection of old plastic containers.
The brothers -- Phillip, 44, the CEO, and William, 42, the president and COO -- readily concede that theirs is not what you'd call a glamorous business, although William argues that "it's a necessity business." What qualifies them as candidates for a share of our expensive news hole, however, is the saga of how they turned the company around in little more than a year, despite limited capital and daunting hurdles.
In 1998, the merger had seemed like a solid strategy to Phillip and William, who had taken over as the third generation to run the business. Growth had slowed, equipment and facilities needed updating and capital to address those needs was limited.
What's more, Consolidated was purely a local operation and its large Twin Cities clients -- 3M, H.B. Fuller and Cargill among them -- were interested in having a single vendor service all of their facilities around the country.
Throw in the challenge of a family-owned business dealing with generation-to-generation transitional issues, and you can understand the decision to join three other drum reconditioners in a merger with the Texas company.
But a combination of absentee ownership, which changed hands twice in the ensuing six years, and a decision to raise prices to widen profit margins took a toll. Longtime clients disappeared, employee morale sagged and productivity declined. On the upside, however, the new owners did invest about $6 million in plant expansion and updated equipment.
Which made the $4.5 million price of the repurchase exceedingly attractive, considering that the Dworsky family had sold it for more than three times that amount. The brothers raised the money in just 10 days, thanks to a family friend, Uni-Systems Inc. CEO Cyril Silberman, who agreed to guarantee the loan.
It took the Dworskys just a year to erase the losses, and profit margins now match industry averages, Phillip said.
The first thing they did was change the corporate name back to Consolidated Container. "The name had a strong reputation in the industry, and customers who had left were willing to give us a second chance," Phillip said.
The return to family ownership had an impact on morale, as well: "Productivity rose 20 percent in the first year and doubled over the next three years," William said.
In addition, the Dworskys moved quickly to restore the cleaning and reconditioning of plastic drums, buying used equipment from a defunct North Carolina plastic drum manufacturer and reconditioner. It was a step aimed at both broadening Consolidated's service offering and as a step toward ridding the property of that mountain of used plastic containers.
Here's where a touch of serendipity entered the equation: About a third of those used drums were beyond reconditioning. But the North Carolina company also had equipment to grind and compact those drums for recycling, so the Dworskys added those assets to the deal.
And that was the beginning of their recycling business, which has been expanded to include milk jugs, water bottles, plastic bags, shrink wrap and aluminum cans -- not to mention 330,000 pounds of agricultural chemical containers and 17 truckloads of aluminum beverage carts that Northwest Airlines had replaced.
The payoff is a recycling gross of more than $2.5 million, 15 percent of the 2008 total and an operation that's the company's fastest-growing business.
As for the distribution of new containers, the Dworskys added sales staff and signed up distribution partners in Denver to serve the mountain region and in Winnipeg to cover Canada's western provinces. That business accounted for one-third of 2008 revenue.
All of which leaves the Dworsky brothers downright relieved about the results: "It was really hard watching what took a century to create being destroyed," William said.
Dick Youngblood • 612-673-4439 • firstname.lastname@example.org