Q4 08

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.

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.

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

Pickle economics

George ChaseChief Executive Officer

4th Quarter 2008 Vol. 10, Issue #4

888.556.3304amerimulch.com

Contact Us:

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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.

You can refuse the entire shipment; however, this is not always the most practical option.

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:

Always take pictures

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.

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.

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!

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Procedure to Follow For damaged FreightBy Rocky HatfieldInside Sales

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:

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.

No amount of increase in sales volume can be made to be profitable if you’re selling price is lower than your total costs.

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.

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.

Continue taking pictures of any damage revealed during unloading. Check angle and lighting for best pictures.

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Pickle economics (continued)

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* Fast Company Magazine #73 Dec. 2003 “The Wal-Mart You Don’t Know” By Charles Fishman

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.

“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 responsi-bilities 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.

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amerimulch’s associate aPPreciation dayAmerimulch 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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Mary Higgins, Steve Moeller and Jim OrosAmerimulch is happy to welcome three new members to its team.

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I N T RO D U C I N G

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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 quick-ly 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.

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 Rotochop-per MC266. Then we re-ran that wood through a 1.25” screen in the same ma-

maximize your ProFit on each ton oF wood aVailaBleBy: Vince Hundt, Company Co-FounderRotochopper, Inc.

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Industry Partners

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 FuelElectricity - Combined heat and power Natural Gas – if the gas is treatedCompressed gas for motor vehicle fuel

The business model is driven by tipping

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renewaBle energy From organic rec ycling

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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 compa-ny, 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.

By: Tom Kurtz, Kurtz Bros.

Customer Spotlight

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 re-tail 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.

Earth ‘n Wood

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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.

Happy Holidays!

Amerimulch™ NewsVol. 10, Issue #4

Fourth Quarter 2008Published by

ChromaScape, Inc.

2055 Enterprise ParkwayTwinsburg, OH 4408�© 2008, all rights reserved.888.556.3304 amerimulch.com

EQUIPMENT FOR SALEAmerimulch 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 motorPrice: $25,000.00 used mid 1990Price: $35,000.00 used late 1990

For more information please contact Joni at 573-378-8222. 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.

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.

For a complete line of used equipment, please visit Amerimulch.com