This story is a condensed version from Connect Business Magazine.
Can a former Wall Street lawyer find happiness running a small Minnesota business? That may sound like the story line for a television series, but it’s real life for Herb Kahler, the lawyer who owns and operates Crown Fixtures, Inc., in Winnebago. “We’re happy to be back in Minnesota,” said Kahler, who left Wall Street to join a large conglomerate, then became something of a roving executive for the company. His assignments included a 14 year stint with one of the company’s subsidiaries in Minneapolis. Now he’s back as a go-it-alone entrepreneur.
Crown is Minnesota’s only manufacturer of custom-built walk-in coolers and freezers. It specializes in designing and building these insulated units for supermarkets, convenience stores, restaurants, clubs and food processors, including mega-bakers and pizza-makers.
Kahler forsook his perks, renounced life as a corporate cog and bought Crown in 1990. Since then, sales have doubled and Crown has added 60 workers to the 20 he inherited at Winnebago. He thinks sales will double again in the next five years, but the “Now Hiring” sign in front of his plant isn’t going to attract enough workers to deal with that growth.
Other Winnebago-based companies display similar signs, but with the unemployment rate near 2 percent in Faribault County, the area labor pool is drying up. “Everybody’s having the same severe problem, not finding the number of employees they’d like to have,” Kahler said. “People might be willing to move here for jobs, but they can’t because they can’t find decent housing.” He feels it’s a mistake for area towns to seek new industry until adequate, affordable housing is available. “They need to coordinate the infrastructure with their desires for community development,” he said.
“We’re now looking for another location to supplement this plant, not replace it, to increase our capacity. My strong first choice was to expand this facility, but we’ve had an extremely difficult time finding adequate labor to support our growth,” he said.
Kahler’s search for a supplemental plant may end in Bowling Green, KY, partly because the company has found new markets in the south, southeast and east under his guidance, and partly because of Bowling Green’s access to interstate highways leading in all directions. “If you look at a map of interstate highways, that area is very centrally located. There’s good highway access to New York, New England, to the Middle Atlantic area and back to the Midwest,” he said. “When we decided we couldn’t expand in Winnebago, we looked at where our markets are growing and it’s definitely east.”
Perhaps more important than geography is the deeper pool of labor. “Unemployment rates are substantially greater than here, so there is available labor at the type of rates that this industry pays,” Kahler said. (Wages at the Crown plant Winnebago average from $7 to $8 hourly.) Now that Crown no longer builds unique store fixtures, it no longer needs skilled cabinet makers. “Normally we can have a new employee productive within a couple of weeks in one operation. Then we cross-train them so they have more skills,” he said. The company teaches employees to cut dimensional lumber, do basic metalworking involving simple cuts and bends, and assemble panels which are then insulated with urethane. The panels and doors are shipped on pallets. Final assembly of the units takes place where they are installed, a task generally arranged by the customers or refrigeration contractors.
In this era of standardization, where one convenience store or supermarket seems identical to the next, it’s easy to assume that the market for custom-built units might be shrinking. But the reverse seems true, according to Kahler.
Part of Crown’s rapid growth since 1990 stems from retailers experimenting with store layouts and formats, a tendency that fits Crown’s niche. “With the exception of a few chains, almost every grocery store seems to have some variation, so custom installations are attractive to them,” Kahler said. “Stores are often having to compete on the basis of new facilities or major remodelings. Facilities and new formats are a major method of competing and this has generated greater growth for us.” Some, like Wal Mart, Kmart and Target, are building “Super Centers,” combining large discount department stores with supermarkets, creating a need for large expanses of walk-in coolers and freezers. But even Wal Mart, which Kahler describes as a “master of standardizing,” has only a “limited number of standard designs” for walk-in coolers or freezers.
There are three basic kinds of these units reach-in, step-in and walk-in. Crown focuses on the walk-in units, which generally are at least six feet deep. Convenience store customers who see a longline of coolers with milk, juice, soft drinks and other products behind glass doors may perceive these as reach-ins. But they’re really walk-ins because the retailer keeps additional product behind what’s displayed. Employees can step inside from behind to restock shelves, according to Kahler. If you look closely at a door or frame, you’re apt to spot the Crown logo.
In Plymouth, where Crown maintains its design and engineering staff, half a dozen skilled CAD (computer-aided design) software operators custom-design units in a variety of sizes and shapes. Crown began using CAD in 1990 on a limited basis, but now designs all its units this way. “That’s been a major investment, to develop customized programs to allow us to deal with as much variety as we do,” he said. “That’s been a real challenge, because most CAD programs don’t handle the multiplicity of conditions we run into.”
While Crown capitalized on the spurt of remodeling and new construction by food and convenience retailers, it also primed part of its growth by placing its products with manufacturer’s representatives outside the company’s historic trade area. “In 1990 our business was almost all in the Upper Midwest (Iowa, Minnesota, Wisconsin, Illinois and Michigan) but it’s changing rapidly. The majority of our product is being shipped out of the Upper Midwest. We consciously made an effort to grow the business through geographic expansion by adding representatives in new markets,” Kahler said. These independent representatives, who generally handle product lines which complement Crown’s, generate the bulk of Crown’s sales.
With a background ranging from law to deal-making to roving executive, Kahler feels he’s brought “enthusiasm and a can-do attitude” to Crown. “I’ve been fortunate that my experience and formal training exposed me to a number of techniques that help businesses to perform better,” he said. (Chief among these: Planning and financial discipline.) But he emphasizes that Crown’s success stems primarily from the people who were there when he bought the business. “We inherited a group of dedicated, knowledgeable key people and have added to that group as we’ve grown,” he said. “Our success has come from blending our talents, experience and knowledge as we work together as a team.”
Five years from now, Kahler looks forward to “being along for the ride” as Crown grows to be “twice the size it is today.” We expect the business to grow and the only limit on growth in Winnebago is an adequate labor supply.”
©1997 Connect Business Magazine