The article was initially published by Kevin Kemper in Columbus Business First.
In an ultra-competitive industry that closely tracks the ups and downs of the nation’s economy, adding capabilities through acquisition can sometimes be the best way to grow.
That’s the strategy a Central Ohio box manufacturer is taking, hoping it pays off as the region’s shipping and logistics industry expands over the coming decade.
Columbus-based Jet Container Co. in February acquired crosstown fulfillment company Dismas Distribution Services. Leaders of the two operations say their businesses together should complement each other’s capabilities leading to greater revenue in an industry where it’s difficult to stand out.
“We thought it would be great synergy,” Jet President Mike Schmitt said.
Jet, a second-generation, corrugated package design and manufacturing business, purchased Blacklick-based Dismas in February.
Dismas is a fulfillment company that specializes in handwork required in the assembly, packaging, and shipping of retail products.
Jet bought Dismas from Lazear Capital Partners Ltd., a Columbus finance and advisory firm. Schmitt would not disclose financial terms, but said the deal included the Dismas name, facilities, assets, and clients.
The purchase greatly expanded Jet Container’s capabilities, Schmitt said, because now the box company can handle a customer’s order from the package design phase all the way through shipping.
And just one month after acquisition, Schmitt said Jet began realizing efficiencies.
Jet’s client base comprises primarily of publishing companies, pharmaceutical firms, printers, and manufacturers, Schmitt said.
Shortly after the merger, a publishing client contracted with Jet for a run of cardboard point-of-purchase displays for grocery stores.
Historically, Jet has stuck to just designing and running the displays, leaving assembly to a third-party fulfillment center or the end user. With the acquisition, however, Jet was able to provide end-to-end services from the design phase through complete fulfillment, said Dismas President Joe Servick.
“Jet designed the corrugated stands and then we built the displays, put the product in (the displays) and then shipped them across the country,” Servick said. “It was a win for the ultimate customer because they had only one vendor they had to work with.”
That kind of collaboration is what the two companies are hoping will become second nature. Already, Servick said the two firms are in talks with a client that needs specially designed boxes for baked goods it plans to ship cross country.
Servick said he’s hoping Dismas will be able to take care of the fulfillment end while Jet designs and manufactures the boxes.
“Our major goals now are learning to dance with a new partner and …. growing the business to become more efficient and more effective,” Servick said.
For the time being, the two companies’ business models will remain the same. Dismas will continue using its own name and each company will continue operations in separate facilities but share clients whenever possible.
After working in the box manufacturing business for a number of years, Joe Schmitt, Mike’s father, started Jet in 1977. Over the years, the pull of the family business led Mike and his three brothers to join.
Mike was the first to do so 19 years ago, he said, followed by Steve Schmitt, Mark Schmitt and J.T. Schmitt.
When both the Schmitt parents, Joe and MaryAnne, died in 2001 the brothers took over the company, each becoming owners and taking on distinct roles.
While Mike Schmitt holds the title of president, he said he doesn’t tell his brothers what to do. He acts more as the company’s sales manager, he said.
“Somebody has to be president to sign the checks,” Mike said.
Mark, meanwhile, is the company’s CFO, Steve acts as the general manager and J.T. is in charge of operations.
Then, as now, the Schmittts have been focused on efficiency and growth.
A few years after taking over, the brothers decided to expand operations by investing $4 million in new plant equipment. The result was a 46 percent increase in sales in 2003.
Buying Dismas is a continuation of that growth, which the brothers have been trying to do for some time.
“We almost made a deal with another company a few years ago,” Mark said.
It wasn’t a good fit, however, so Jet held off until it found Dismas.
Beyond taking advantage of each other’s customers, Schmitt and Servick say the two companies are now in an ideal situation to capitalize on the region’s growing logistics industry.
Columbus is already a center for shipping and logistics because it is a one day’s drive to nearly half the population and manufacturing capacity of the U.S. and Canada. That’s only expected to increase this year when rail company Norfolk Southern Corp. completes its high- capacity Heartland Corridor rail line.
The Heartland line runs across Virginia, southern West Virginia and north from Columbus to Chicago. When finished, Norfolk Southern claims freight in containers moving in double-stack trains will be able to shave off about 200 miles and up to a day’s transit time between the East Coast and the Midwest.
That’s all good news for Jet, especially because its expansion comes just as the corrugated industry is entering a period of slow growth, said Brian O’Banion, vice president of the Elk Grove Village, Ill.-based Fibre Box Association, an industry trade group.
“Foreseeable growth over the next three to five years is 2 percent annually,” O’Banion said. “It’s a mature market.”
Most metropolitan regions have at least a dozen or more box manufacturers providing service. There hasn’t been much regional consolidation because, beyond 150 miles, shipping costs overtake the efficiencies gained, Steve Schmitt said.
“There are probably 35 or 36 box companies calling on the Columbus market,” Steve Schmitt said.
In a broad sense, the corrugated packaging industry has suffered just as every other industry has during the recession, O’Banion said.
“The dollar value of industry shipments grew about 15 percent from 2003 to 2008, but it fell off a cliff just before the fourth quarter of 2008 just like everywhere else,” O’Banion said. “We’re thinking we’ll be down 8 percent in shipments for 2009.”
The industry shipped approximately $25.77 billion in boxes in 2008, association research shows. While industry results for 2009 have not yet been compiled, the decline predicted by O’Banion is spot-on to Jet’s experience.
After years of double digit revenue growth driven by efficiencies and new equipment, Jet’s revenue dropped by 10 percent in 2009, Mark Schmitt said.
“We took a shift off in December and had to lay off four,” Steve Schmitt said. “We just added two back, so we’re cautiously optimistic.”
Jet Container Co.
- Business: Corrugated box design and manufacturing
- Based: Columbus
- President: Michael Schmitt
- Owners: Michael Schmitt, Stephen Schmitt, Mark Schmitt, J.T. Schmitt
- Total employees: 55
- 2009 revenue: $9.9 million
- Website: jetcontainer.com
Jet Distribution Services LLC DBA Dismas Distribution Services
- Business: Packaging fulfillment company specializing in� assembly, inspection, packing and shipment
- Based: Blacklick
- President: Joe Servick
- Total employees: 25 to 50, depending on the season
- 2009 revenue: WND
- Website: dismas.net