The Sky is the Limit

A wise Jedi master once said, “Try not. Do or do not. There is no try.” Neil Gloger has embraced this advice, drawing on it as he established InterGroup International Ltd. in 2006 and again as the company grappled with the effects of the Great Recession. In doing so, he affirmed the wisdom in the statement of a second philosopher, Friedrich Nietzsche: “What does not destroy me makes me stronger.”

TOUGH TIMES

InterGroup International, a Euclid, Ohio-based recycler of post-industrial plastics, had 28 employees in October of 2008. By the end of that year, the economic downturn that began in the fourth quarter of 2008 necessitated a staff reduction. By December of 2008, the company had only five employees, Gloger says. “January and February (of 2009) were particularly brutal,” he recalls. “We probably shipped 130 or 140 loads of material in October of 2008 and, in January and February of 2009, we shipped five and six loads, respectively.”

He continues, “By the first week of March, we made a decision that we were either going to thrive or we were going to close. I hired a couple of salespeople and pushed everybody out onto the road. We picked up some really nice market share over the ensuing months and had a very strong finish to ’09 and it has continued into this year.”

This renewed effort enabled InterGroup to begin rehiring employees in the second quarter of 2009, but it wasn’t easy getting to that point, and Gloger says he considers it one of his greatest accomplishments as a business owner.

“It took an incredible amount of hard work from our staff, but most importantly from our vendors and customers,” he says. Suppliers were understanding when InterGroup paid in 40 or 45 days rather than the customary 30 days, according to Gloger, and continued shipping material to the company. He adds, “Many of our customers continued to buy material even though they didn’t really need it because we treated them fairly when the economy was pumping along.”

The recession was not the fledgling company’s first brush with hardship. An earlier test came just as InterGroup International had expanded to include plastics processing as well as the trading services it originally offered. A fire broke out in the company’s 40,000-square-foot building in Warren, Ohio, destroying the facility as well as the company’s inventory. Gloger describes the incident as a defining moment for the company. He told Inc. magazine, which interviewed him after InterGroup ranked on the Inc. 500 earlier this year, “I’m proud to say that during that experience, we didn’t miss one pickup. We had to reroute deliveries, but we didn’t turn a single truck away. I told my employees, ‘Now, we’re just going to have to work a little harder.’ Once that decision was made, it supercharged our growth and made us even more focused and determined.”

That attitude is just one of the factors behind InterGroup’s success.

SUCCESS SECRETS

The recession was as much a source of opportunity for InterGroup as it was a trial. “We were able to take advantage of some weakness on the part of our competitors because of the recession and have been able to gain market share in flexible packaging and building and construction,” Gloger says.

The company buys material from generators in the flexible packaging, building and construction and housewares industries as well as from the personal hygiene industry. It sells its recycled plastics primarily to the building and construction, lawn and garden and industrial packaging sectors.

Gloger says the company moves some 5 million pounds of plastics per month, processing a “good majority” of this material. Sales for this past October jumped to 9 million pounds, he says. The company, which ranked 239th on the Inc. 500, reports 2009 revenue of $3.2 million and a three-year growth rate of 1,285 percent. InterGroup is on track to realize sales revenue in excess of $8 million for fiscal 2010, Gloger adds.

InterGroup strives to meet its material buyers’ quality expectations, therefore, Gloger says, the company identifies the most practical, attainable end market for the various materials it handles, which include PP (polypropylene), rigid PVC (polyvinyl chloride), ABS (acrylonitrile butadiene styrene) and nylon.

“When we identify accounts, there are several things we identify as potentially positive aspects of whether we want to bring the material in. One of them is that we are able to strata the quality,” Gloger says. “Most people view quality as ‘the best.’ But really the definition of quality is that a product meets or exceeds the specifications that it is meant to fulfill.”

For instance, Gloger says, the company may pick up PP from medical devices or food-grade packaging manufacturers. Because of the stringent quality requirements in these sectors, not all recycled material is suitable for closed-loop use; therefore, InterGroup pursues consuming markets with less stringent specifications, such as manufacturers of totes and buckets in the case of PP. Instead of trying to upgrade incoming material, he says, “in some ways we actually try to downgrade [material] because we want to make sure we meet customers’ quality objectives.” However, Gloger says some plastics and polymers don’t allow for this kind of quality stratification, making them more difficult to work with. “We are able to do that in the polymer classes that we are concentrating on.”

While InterGroup will handle nearly any post-industrial plastic scrap that it is offered, Gloger says the company only deals in full-truckload shipments, though those loads can be made up of a range of plastics, as long as they are source separated. “That’s one of our market strengths,” he says, and an attribute that helps distinguish InterGroup International from its competitors. “Many companies in our industry will only take full-truckload quantities of the same item.”

The company also differentiates itself in its approach to the plastics recycling business outside of the processing realm. “We understand the business that we are in,” Gloger says. “We understand our metrics. We understand the marketplace, both on the buy side and on the sell side. And we make a concerted effort to make sure that our vendors and our customers have an understanding of that marketplace as well, both from a financial and service perspective as well as from an educational one.”

Part of that process entails implementing training and education programs with vendors that detail the company’s expectations as well as the services it provides. InterGroup backs up this approach by providing great service and timely payment, Gloger says, as well as a quality product.

GROWTH MINDED AND GOAL ORIENTED

The company’s approach to the business of plastics recycling also entails closely monitoring receivables and the credit it extends to customers, Gloger says. “We have a set of risk metrics that we look at constantly to determine which customers are qualified for the amount of credit that is needed to service their accounts. We have had some instances where we have had to work through payment issues,” he continues, “but, for the most part, we have really gone unscathed through the whole Great Recession.”

Gloger says InterGroup will nearly triple its business in 2010 after doubling in 2009, which he describes as “probably the worst year in the history of American business.”

InterGroup’s rapid growth since its establishment in 2006 could potentially lead to trouble for the company if not managed well, Gloger says, resulting in a cash flow problem. He gives the example of a new account for which the company has to be able to float almost $3 million at any one time. “That can stress any small business, especially one in their fourth or fifth year of business,” he says. “We spend a fair amount of time negotiating terms and working with our bank. Certainly, you can have all else right in your business—great customer service, your pricing and margins can be right—but if you don’t have support from your bank for cash flow, it is difficult to grow.”

The company plans to continue its track record of growth in the years to come, Gloger says, and has its sights set on going public. “Our goal in the next three years is to either become a public company or to be acquired by one,” he says. “In order to achieve that goal, we have to be at a certain size to be attractive. And we have to have demonstrated strong administrative and management ability that we understand how money works within a business. We try not to leave anything to chance.”

Gloger says such a move would provide the company with the access to capital it needs to meet its business goals. “Some of those underlying goals are establishing recycling centers throughout the manufacturing areas of North America to meet the needs of customers and vendors and to be able to purchase on an ongoing basis newer technology so that we can reclaim more and more,” he says. “You can’t do any of that without access to capital.”

By going public or being acquired by a public company, Gloger also could offer InterGroup’s long-term employees a stake in the company. “From an ownership perspective, it’s really a great thing to have everyone in your organization work as if they own a part of it, and it’s a hard thing to do if you don’t have a structure that allows you to do that,” he says.

While Gloger says access to capital and cash flow are his primary concerns these days, he doesn’t appear to be afraid to aim high when it comes to InterGroup International’s goals for the years to come. “We always shoot for the moon, because if we miss, we still end up among the stars. That philosophy has served us very well.”

The author is managing editor of Recycling Today and can be contacted at dtoto@gie.net.