April 12, 2004
From waste to wealth | An Oakfield wood products firm finds revenue growth — and new products in a variety of markets — by using 100% of each log
By Mike Woelflein
This year, Katahdin Forest Products will unveil two new product lines. The first, a line of garden furniture built from 4x4 cedar logs, is already on the market, while the second, a "mammy's bench" for a mother and a child, likely will hit stores this fall.
Neither is necessarily expected to be a blockbuster for the Oakfield-based company, which is also known as Katahdin Cedar Log Homes. The company, located about 18 miles down I-95 from Houlton, does about 60% of its business manufacturing log homes; fencing and consumer products like the new furniture lines make up the rest. Still, the new products are notable because they represent the latest step in the model that's allowed Katahdin to be successful when so many wood products companies ˆ both in Aroostook County and statewide ˆ have struggled. "Why do we stay strong and other companies appear to flounder?" David Gordon, Katahdin's president, asks. "The best description, the simplest reason, is because we come up with something new every year. That's our secret, if you will."
Since its founding more than 30 years ago, Katahdin has used northern white cedar to create log homes and fencing. Beginning in 1990, when Gordon started a second company, Cedar Ideas, across the Smyrna Road from the log-home and fencing business, the company has been adding smaller products to the mix, streamlining operations ˆ and growing. A key to that growth has been Katahdin's determination use as much of each tree it buys as possible, from 10-foot-long logs nearly a foot in diameter all the way down to a 3/8-inch thick slice of cedar. Even the smaller scraps are ground up and colored for mulch, and the sawdust is sold to area biomass generators to create electricity. Today, the company claims to use 100% of the trees and lumber it buys, creating value-added products and profits at every step.
As a result, Gordon says, production levels are higher than ever; total sales have grown at an average of eight percent in each of the past 10 years ˆ though he declines to provide specific revenue figures ˆ with the strongest growth in the log-home side of the business. "The word I keep coming back to is resourceful," says Alain Ouellette, director of economic and community development for the Caribou-based Northern Maine Development Corp. "They're probably the most resourceful bunch of people I've ever worked with. They're extremely good at identifying market opportunities, making their processes more efficient, using up every bit of the resource that they can, and turning all of the resource into revenue."
Reaching the yuppie market
David's father, Foster Gordon, started the company in 1973 with two partners and four employees. (Foster died in 1997. One partner sold his share to the others in the mid-1970s, while the other, Fred McCormick, stayed on until his retirement four years ago.) Early on, the company found challenges from the economy and from its own inexperience. "Those were turbulent times, and they almost didn't make it," says David. "I was in college, and my father used to tell me, 'Don't expect to come back here and work for me.'ˆ I could see they were struggling, and it didn't seem like a place to get started."
But in 1977, while David was working for the federal Farmer's Home Administration (now the Farm Service Agency) doing home loans for farmers out of an office in Bridgton, Foster called again, wondering if his son wanted a job in the family business. Eager for some adventure, the younger Gordon accepted the offer. They sold, David recalls, just three homes that year. "I spent all of my time just piling lumber and shaving logs, wondering what happened to my nice office," he says with a laugh. "But we picked up a couple of dealers, and things got a little better and a little better."
The basic log-home business model ˆ manufacturing components for log homes that are sold through a network of dealers ˆ hasn't changed too much since then. The company has expanded its list of available plans and options, and continued growing slowly, putting the profits back into the company. Gordon, age 49, took over as president of Katahdin in the mid-1990s. He's currently working on a new house-log production line that, when it becomes operational this summer, will operate 35% to 40% more efficiently with just two full-time employees than it does with the current staff of five.
Today, Katahdin sells about 200 homes a year through a network of about 65 dealers, who are concentrated heavily in the northeast, but spread to the Rocky Mountains, California and overseas. Its marketing effort emphasizes the natural rot- and insect-resistance of northern white cedar, a wood that grows almost exclusively in the northeastern United States and southeastern Canada. (All of the round lumber used by the company comes from within a 10-mile radius of Oakfield, and the sawn lumber comes from 21 mostly small woodlots in Maine and New Brunswick, making Katahdin an important customer for many woodlot owners.)
The company offers a wide range of homes, garages and even commercial buildings, with prices for homes ranging from $32,000 (the Woodsman, a 676-square-foot, one-bedroom cabin) to $170,000 (the Estate, with nearly 4,000 square feet of living space, four bedrooms, five bathrooms and a 736-square-foot, two-car garage). Niceties like heating, plumbing and electrical systems, foundations and kitchen cabinets are not included. The homes are built by members of the dealer network or by contractors recommended by dealers or Katahdin itself.
Last spring, Gordon spent about $50,000 upgrading and updating the company's website, www.katahdincedarloghomes.com, an exercise that paid immediate dividends. "Our hits went from 90 to 1,100 per day, thanks to our advertising and the new site," Gordon says. "It has all the tools you need to make an educated buying decision, from why cedar is better than pine to a thorough look at all the options we offer."
Potential customers can go online, punch in the number of bedrooms, baths, stories and square footage, and see a host of different plans that can fill their needs. They can even enter options and customization ideas, and then bring their plans to a local dealer or directly to Katahdin to begin the design process.
The goal is to reach end customers in what Gordon calls the "yuppie" market, which he describes as people who make at least $50,000 a year and who don't look to Wal-Mart or K-Mart for consumer goods. "It's not just income or where you shop, though," he says. "It's a lifestyle. It's people who have leisure time, who value leisure time, and who want their surroundings to look and feel a certain way. You can build loyalty with them. You can't build loyalty at Wal-Mart."
A use for waste wood
In 1990, the Gordons started Cedar Ideas, which uses lower grade and potentially waste wood ˆ "Anything," says Gordon, "that's too short, crooked or defective for our log homes" ˆ to manufacture furniture and other home goods including planters and window boxes. The division also makes components for swing sets and other kid-friendly backyard structures for Rockport-based CedarWorks Playsets, one of Cedar Ideas' first customers.
Katahdin has been a supplier to CedarWorks since the Rockport company started 20 years ago. Over the years the relationship has evolved into a mutually beneficial arrangement. Katahdin builds components, mostly in its slower winter season, and sells them to CedarWorks in the spring, before and during CedarWorks' short busy season. "We've built up a lot of trust and respect, so they're willing and able to manufacture our product ahead of time, and we know they'll deliver the quality, and on schedule," says Barrett Brown, president of CedarWorks. "They're great to work with, because they have a greater capability to operate their business according to our plan, and our needs, than a lot of companies in Maine."
For Gordon, starting Cedar Ideas was both a philosophical decision and a business one. A self-described "energy nut," Gordon lives in a cedar log home, heats with wood, and generates his own electricity with a 100-foot windmill that sits next to the house on a high ridge in Oakfield. He bought the windmill used (it used to sit in a wind farm on a California). In short, he's a believer in conserving energy and resources.
He's also a businessman. Katahdin used to be able to dump some of its waste in a landfill, but over the years that became too expensive and, eventually, impossible. Since 1990, the company has used more and more of its wood to develop more and more revenue streams.
Most of Katahdin's production buildings are even heated with wood, much of which is a by-product of the business. "It all kind of falls together," says Gordon. "Being energy efficient. Focusing on safety. Using all of the resourceˆ We just try to keep using everything we can, operating as efficiently as we can, and creating value wherever we can."
Sometimes, Gordon looks at the wood he's not using and tries to find market niches it might fit. Other times, he sees an opening in the market, then figures out how to fill it. The latter approach led to this year's 4x4-based furniture, which is being sold through existing dealers of Katahdin's homes and fencing, as well as some garden stores. "We looked at all of the plastic and vinyl furniture out there," he says. "If you put it on your deck and it's windy, it's so light it can blow away. And it tends to deteriorate rapidly in the sun. So we said, how can we address the problems with what they're selling out there, and what can we build?"
Better than vinyl?
The mammy bench, inspired by a late 1700s design that Gordon's wife saw on the Internet, represents three departures for Katahdin. It's a rocking bench, with a seat for an adult and a removable fence that creates a spot for a baby to be rocked. It's the company's first foray into indoor furniture, and it may represent a new marketing model ˆ rather than working with his network of dealers, Gordon hopes to sell it through a national baby chain that he prefers not to name.
Gordon's philosophy of diversity for his company sounds a lot like the philosophy of economic developers in Aroostook County and northern Maine: Too many towns are too reliant on a single mill, or a single industry. "If all your eggs are in one basket, and for whatever reason ˆ whether it's your fault or not ˆ the basket falls, you've lost everything," Gordon says. "If the housing market gets weak, we fall back on the fencing and small products. And vice-versa."
Next up, Gordon is eyeing a new market in fencing, where vinyl has become a difficult competitor. His answer is composite fencing, built from his mill's sawdust and recycled plastic. He hopes to build a new manufacturing facility for composite fencing within the next 18 months, somewhere within the Aroostook County federal Empowerment Zone in order to take advantage of the zone's tax and credit advantages.
The Advanced Engineered Wood Composites Center at the University of Maine is working on prototypes for the fencing, with the goal of creating a product with the same or better properties as vinyl at a lower cost. The AEWC has worked with more than 100 companies, inside and outside Maine, and Gordon even impressed the staff there when he approached them about developing the new line.
"He was clearly listening to his clients," says Habib Dagher, the center's director. "He brought his distributors and clients in here with him, so we could hear firsthand what they are looking for. Mr. Gordon is a forward-looking businessman, and that's the key to success in this economy and this environment."
As Gordon looks ahead to the next step for Katahdin, he sees some promise. He won't reveal how many workers he thinks the new operation could employ, saying, "I don't want to get a bunch of people wound up."
"But," he adds, "this is like a lot of other things we've done. It fits our pattern. We already have all the customers and distribution, so it's a matter of creating a good product."
Neither is necessarily expected to be a blockbuster for the Oakfield-based company, which is also known as Katahdin Cedar Log Homes. The company, located about 18 miles down I-95 from Houlton, does about 60% of its business manufacturing log homes; fencing and consumer products like the new furniture lines make up the rest. Still, the new products are notable because they represent the latest step in the model that's allowed Katahdin to be successful when so many wood products companies ˆ both in Aroostook County and statewide ˆ have struggled. "Why do we stay strong and other companies appear to flounder?" David Gordon, Katahdin's president, asks. "The best description, the simplest reason, is because we come up with something new every year. That's our secret, if you will."
Since its founding more than 30 years ago, Katahdin has used northern white cedar to create log homes and fencing. Beginning in 1990, when Gordon started a second company, Cedar Ideas, across the Smyrna Road from the log-home and fencing business, the company has been adding smaller products to the mix, streamlining operations ˆ and growing. A key to that growth has been Katahdin's determination use as much of each tree it buys as possible, from 10-foot-long logs nearly a foot in diameter all the way down to a 3/8-inch thick slice of cedar. Even the smaller scraps are ground up and colored for mulch, and the sawdust is sold to area biomass generators to create electricity. Today, the company claims to use 100% of the trees and lumber it buys, creating value-added products and profits at every step.
As a result, Gordon says, production levels are higher than ever; total sales have grown at an average of eight percent in each of the past 10 years ˆ though he declines to provide specific revenue figures ˆ with the strongest growth in the log-home side of the business. "The word I keep coming back to is resourceful," says Alain Ouellette, director of economic and community development for the Caribou-based Northern Maine Development Corp. "They're probably the most resourceful bunch of people I've ever worked with. They're extremely good at identifying market opportunities, making their processes more efficient, using up every bit of the resource that they can, and turning all of the resource into revenue."
Reaching the yuppie market
David's father, Foster Gordon, started the company in 1973 with two partners and four employees. (Foster died in 1997. One partner sold his share to the others in the mid-1970s, while the other, Fred McCormick, stayed on until his retirement four years ago.) Early on, the company found challenges from the economy and from its own inexperience. "Those were turbulent times, and they almost didn't make it," says David. "I was in college, and my father used to tell me, 'Don't expect to come back here and work for me.'ˆ I could see they were struggling, and it didn't seem like a place to get started."
But in 1977, while David was working for the federal Farmer's Home Administration (now the Farm Service Agency) doing home loans for farmers out of an office in Bridgton, Foster called again, wondering if his son wanted a job in the family business. Eager for some adventure, the younger Gordon accepted the offer. They sold, David recalls, just three homes that year. "I spent all of my time just piling lumber and shaving logs, wondering what happened to my nice office," he says with a laugh. "But we picked up a couple of dealers, and things got a little better and a little better."
The basic log-home business model ˆ manufacturing components for log homes that are sold through a network of dealers ˆ hasn't changed too much since then. The company has expanded its list of available plans and options, and continued growing slowly, putting the profits back into the company. Gordon, age 49, took over as president of Katahdin in the mid-1990s. He's currently working on a new house-log production line that, when it becomes operational this summer, will operate 35% to 40% more efficiently with just two full-time employees than it does with the current staff of five.
Today, Katahdin sells about 200 homes a year through a network of about 65 dealers, who are concentrated heavily in the northeast, but spread to the Rocky Mountains, California and overseas. Its marketing effort emphasizes the natural rot- and insect-resistance of northern white cedar, a wood that grows almost exclusively in the northeastern United States and southeastern Canada. (All of the round lumber used by the company comes from within a 10-mile radius of Oakfield, and the sawn lumber comes from 21 mostly small woodlots in Maine and New Brunswick, making Katahdin an important customer for many woodlot owners.)
The company offers a wide range of homes, garages and even commercial buildings, with prices for homes ranging from $32,000 (the Woodsman, a 676-square-foot, one-bedroom cabin) to $170,000 (the Estate, with nearly 4,000 square feet of living space, four bedrooms, five bathrooms and a 736-square-foot, two-car garage). Niceties like heating, plumbing and electrical systems, foundations and kitchen cabinets are not included. The homes are built by members of the dealer network or by contractors recommended by dealers or Katahdin itself.
Last spring, Gordon spent about $50,000 upgrading and updating the company's website, www.katahdincedarloghomes.com, an exercise that paid immediate dividends. "Our hits went from 90 to 1,100 per day, thanks to our advertising and the new site," Gordon says. "It has all the tools you need to make an educated buying decision, from why cedar is better than pine to a thorough look at all the options we offer."
Potential customers can go online, punch in the number of bedrooms, baths, stories and square footage, and see a host of different plans that can fill their needs. They can even enter options and customization ideas, and then bring their plans to a local dealer or directly to Katahdin to begin the design process.
The goal is to reach end customers in what Gordon calls the "yuppie" market, which he describes as people who make at least $50,000 a year and who don't look to Wal-Mart or K-Mart for consumer goods. "It's not just income or where you shop, though," he says. "It's a lifestyle. It's people who have leisure time, who value leisure time, and who want their surroundings to look and feel a certain way. You can build loyalty with them. You can't build loyalty at Wal-Mart."
A use for waste wood
In 1990, the Gordons started Cedar Ideas, which uses lower grade and potentially waste wood ˆ "Anything," says Gordon, "that's too short, crooked or defective for our log homes" ˆ to manufacture furniture and other home goods including planters and window boxes. The division also makes components for swing sets and other kid-friendly backyard structures for Rockport-based CedarWorks Playsets, one of Cedar Ideas' first customers.
Katahdin has been a supplier to CedarWorks since the Rockport company started 20 years ago. Over the years the relationship has evolved into a mutually beneficial arrangement. Katahdin builds components, mostly in its slower winter season, and sells them to CedarWorks in the spring, before and during CedarWorks' short busy season. "We've built up a lot of trust and respect, so they're willing and able to manufacture our product ahead of time, and we know they'll deliver the quality, and on schedule," says Barrett Brown, president of CedarWorks. "They're great to work with, because they have a greater capability to operate their business according to our plan, and our needs, than a lot of companies in Maine."
For Gordon, starting Cedar Ideas was both a philosophical decision and a business one. A self-described "energy nut," Gordon lives in a cedar log home, heats with wood, and generates his own electricity with a 100-foot windmill that sits next to the house on a high ridge in Oakfield. He bought the windmill used (it used to sit in a wind farm on a California). In short, he's a believer in conserving energy and resources.
He's also a businessman. Katahdin used to be able to dump some of its waste in a landfill, but over the years that became too expensive and, eventually, impossible. Since 1990, the company has used more and more of its wood to develop more and more revenue streams.
Most of Katahdin's production buildings are even heated with wood, much of which is a by-product of the business. "It all kind of falls together," says Gordon. "Being energy efficient. Focusing on safety. Using all of the resourceˆ We just try to keep using everything we can, operating as efficiently as we can, and creating value wherever we can."
Sometimes, Gordon looks at the wood he's not using and tries to find market niches it might fit. Other times, he sees an opening in the market, then figures out how to fill it. The latter approach led to this year's 4x4-based furniture, which is being sold through existing dealers of Katahdin's homes and fencing, as well as some garden stores. "We looked at all of the plastic and vinyl furniture out there," he says. "If you put it on your deck and it's windy, it's so light it can blow away. And it tends to deteriorate rapidly in the sun. So we said, how can we address the problems with what they're selling out there, and what can we build?"
Better than vinyl?
The mammy bench, inspired by a late 1700s design that Gordon's wife saw on the Internet, represents three departures for Katahdin. It's a rocking bench, with a seat for an adult and a removable fence that creates a spot for a baby to be rocked. It's the company's first foray into indoor furniture, and it may represent a new marketing model ˆ rather than working with his network of dealers, Gordon hopes to sell it through a national baby chain that he prefers not to name.
Gordon's philosophy of diversity for his company sounds a lot like the philosophy of economic developers in Aroostook County and northern Maine: Too many towns are too reliant on a single mill, or a single industry. "If all your eggs are in one basket, and for whatever reason ˆ whether it's your fault or not ˆ the basket falls, you've lost everything," Gordon says. "If the housing market gets weak, we fall back on the fencing and small products. And vice-versa."
Next up, Gordon is eyeing a new market in fencing, where vinyl has become a difficult competitor. His answer is composite fencing, built from his mill's sawdust and recycled plastic. He hopes to build a new manufacturing facility for composite fencing within the next 18 months, somewhere within the Aroostook County federal Empowerment Zone in order to take advantage of the zone's tax and credit advantages.
The Advanced Engineered Wood Composites Center at the University of Maine is working on prototypes for the fencing, with the goal of creating a product with the same or better properties as vinyl at a lower cost. The AEWC has worked with more than 100 companies, inside and outside Maine, and Gordon even impressed the staff there when he approached them about developing the new line.
"He was clearly listening to his clients," says Habib Dagher, the center's director. "He brought his distributors and clients in here with him, so we could hear firsthand what they are looking for. Mr. Gordon is a forward-looking businessman, and that's the key to success in this economy and this environment."
As Gordon looks ahead to the next step for Katahdin, he sees some promise. He won't reveal how many workers he thinks the new operation could employ, saying, "I don't want to get a bunch of people wound up."
"But," he adds, "this is like a lot of other things we've done. It fits our pattern. We already have all the customers and distribution, so it's a matter of creating a good product."
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