Learn how Lodge Cast Iron is cooking up innovation and growth after 100+ years of business. NCMM Managing Director Doug Farren has a conversation with Mark Kelly, PR and Ad Manager at Lodge.
Transcription
How does a 120-year-old company in the middle market continue to grow in a mature industry? Come hear what they're cooking up at Lodge Cast Iron.
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Welcome to The Market that Moves America-- a podcast from the National Center for the Middle Market which will educate you about the challenges facing mid-sized companies and help you take advantage of new opportunities.
This is Doug Farren, managing director of the National Center for the Middle Market. Thanks for joining me today on our podcast series, The Market That Moves America. Really pleased today to be with Mark Kelly from Lodge Cast Iron, and we're going to talk a little bit about their company, some of the things that they're doing-- what could be considered a fairly mature market cookware industry-- and just some other innovative things, as a mid-sized business, that Lodge is doing. So, Mark, welcome to the discussion today.
Thanks, Doug. It's good to be with you.
So let's just start out, Mark. Tell us a little bit about the history of Lodge Cast Iron. Just how it was founded and some of the early success that it's had over the years?
The company was founded by Joseph Lodge. His family was originally from England, and he's an interesting character. He had been in South Pittsburgh working with some other foundries but he kept searching for something else. And he literally traveled all over the Western hemisphere and he came back and he started what, at that time, was called The Blacklock Foundry.
He named it after the rector at the local Episcopal church-- also, his first name was Joseph Blacklock-- and the foundry was about a mile north of where our current foundry is. In 1910, it burned-- in April of 1910. And they bought land, and started construction, and we were back in full production by October of that year. And the company was restarted-- or reincorporated as The Lodge Manufacturing Company and that's been our name ever since.
Early success was really primarily cookware but they made a variety of other products-- pipes and things of that nature. But, really, we found our niche with cookware. And for many decades we were strictly a southern brand but the name "Lodge" was quickly recognized because there wasn't another foundry on our scale. There were a lot more cast iron manufacturers in the country but in the south The Lodge quickly dominated that market and we've been in that position ever since.
Very interesting. So who are your primary customers? Are you looking at kind of high-end kitchens? Campers? Outdoorsman? All of the above? What is the market that you go after?
It's a mixed bag. We go to three different markets-- gourmet or kitchen-- gourmet and kitchen, excuse me, outdoor, and restaurants, and institutions. Gourmet and kitchens is still the lion's share of our business, although we've made real inroads in the restaurant business.
We actually were the first ones to come out with a fajita griddle and some other griddle serving pieces. But in 2008, we started a line of mini servers in different shapes-- round, oval, rectangular, and divided rectangular-- and they were very popular with chefs because they were perfect for appetizers and desserts. And then May of 2014, we re-released those, as they're treated to be highly rust resistant, which is-- as you can imagine-- is the bugbear in the restaurant industry. You still have to maintain the seasoning, or the natural nonstick, but the rust issue is always up at the top of the mind of chefs, and that business has just exploded.
I haven't been in one city in the country where I haven't had a meal or appetizer served in those pieces. And it's pretty cool to be in Seattle, or San Francisco, or New York-- in fact, one time I was in New York-- I kind of got geeked out because it was a pretty high-end restaurant-- I had an appetizer in our round piece. So that's fastly growing. But our core market is homes, and campers, and that kind of thing. But really, home cooks has just exploded and we thank that largely in part to TV exposure on Food Network, PBS shows, and Gordon Ramsey uses a lot of our products on all four of his shows.
Interesting. So you kind of just took us through a little bit about the cast iron cookware industry itself-- fairly niche-- but as you have continued to grow as a company, some of these lines that you mentioned-- where do you see future growth? And how does your company's ability to continuously innovate play into that? And how does it drive growth for Lodge?
You know, that's been a key component for us, Doug. We've always innovated, whether it was improving the equipment in the foundry, which is really the reason we've been able to exist so long. But we really see a lot of growth in the Pacific Rim. We have a distributor in Japan, South Korea. And this is a highly under-reported story-- the rich in Chinese do not buy anything made in China. So we have two web site dealers and we're in high-end gourmet stores in Shanghai and Beijing.
We're also in Australia and New Zealand, and those markets continue to grow. South Korea is a really interesting market. They have a long-term cast iron culture. They really revere not only the cookware, but also the quality of our products. And Japan continues to grow. In fact, last year, through our partner, we developed two cookbooks with Oxmoor House, which is a division of Time. We have a Lodge Cast Iron cookbook and Lodge Cast Iron Nation, and last year we released a Japanese version of Lodge Cast Iron Nation. And now we're working to put together a Japanese version of an outdoor cookbook we've re-released through Skyhorse press.
In the Lodge Cast Iron cookbook and the Lone Star Dutch Oven Society cookbook, we're working with a German publishing company to have those translated into German, so it's a really interesting dynamic. But overall, people really respect Lodge and the family orientation to the way we run business. But more importantly, American manufacturing is highly revered all over the world.
Sure. Yeah. Something that has been in discussion quite a bit about returning to some of those legacy roots. This success that you described, I think has recently driven some of your expansion. I know you've recently opened a new distribution center and I think a new foundry is underway. Tell us a little bit about those projects, and kind of how it's impacted Lodge, and what you see there in the future.
Yeah. It's been a real amazing development. When I started with the company 12 and 1/2 years ago, we had 185 employees, and now we have over 400, which is-- I mean, we're in a town of 3,300 people in a county of 25,000 people. But the thing that really kicked everything off-- we started foundry seasoning in 2002. Again, that's a natural nonstick process. We won a Good Housekeeping Good Buy award and that quickly moved us from being a strictly regional manufacturer to a national manufacturer. Business kept growing but in the fall of 2010-- and the fall was our busiest quarter-- sales just went off the chart, just really jumped way up and our quality assurance manager went to our CEO and they were crying and then we were going over the numbers and we were crying.
[LAUGHS]
Just amazing thing to see how much we have grown. And the most remarkable thing is we've had all this growth without any commercial advertising or consumer advertising. So we did some forecasting and we did an expansion in our foundry in which we added another production line, which increased production 50%. But, very quickly, sales actually jump to 90%. So [LAUGHS] we looked around again and we built a new foundry and it's going to be completed by the end of the year. We'll have two production lines and it will increase our production capacity 75%.
So in a matter of four years, we will have increased our production capacity 125%, which for any manufacturer-- particularly our cookware manufacturer-- is pretty amazing. And we're real excited, but we can only grow so much because we're a family business and we don't do an IPO or anything like that. So we have to be very careful with the volume we increase just because of the overall financing. But we're real excited about things. We have a lot of new products in the development process-- both cast iron and accessories. And based on what we've seen in the international markets, we really feel good about the future.
That's great. You know, as you think about, particularly, a foundry and some of these innovation processes, I know corporate social responsibility is really big for your company. How does Lodge focus on things like recycling, and clean energy, and just being a good corporate citizen for Pittsburgh, Tennessee and the other places that you're located?
You know, foundries have always been recyclers. We recycle virtually everything. We recycle 50 tons of cardboard every year, we use steel shot for cleaning the cookware, we recycle that. There is some other iron that we make in another process to clean-- we've always done that-- but in recent years, we've switched from Styrofoam peanuts to thick corrugate paper. We print with strictly soybean oil on our packaging.
We are very focused on energy consumption. In fact, the Obama administration had a Green Star Initiative in 2011 and it was a five year program to reduce energy consumption by 20%, and we were able to do that, initially, in five months. And the biggest thing that we were able to do there is our furnaces-- they melt metal at 2,800 degrees. So we went back and looked at how low we could take that in the hours when we're not operating, and they were able to take it to just above 1,000 degrees. So just doing that on a daily basis was a huge energy saving.
Of course, we have motion sensitive lighting in the hallways and everybody turns off their computers at night, which some people don't like to do, but those screens on all night long really burn a lot of energy. But we also recycle diesel fuel, we recycle the seasoning oil. The sand that we use for the sand casting, we use that time and time again until we can no longer use it and then we either donate it to communities to line landfills or sell it to contractors to use in the mortar for bricks and concrete and that type of thing. But overall, the thing that just is truly remarkable to me-- in '92, we switched from coke fired cupolas-- which, as you know, produces a lot of air pollution-- to induction furnaces, which moved us from being a heavy producer of pollution to a very low producer of that. And it not only did that, but it also made us more efficient in the manufacturing process in that we can accurately monitor the temperature of the molten metal as it's being processed to pour into the sand cast molds.
So do you feel like there's a lot of pressure on your leadership team to continue making those types of improvements? Or do you think it's just something-- it sounds like it's more, just, built into your culture and values.
Doug, when we've switched from the coke fired cupolas to the induction furnaces, we really couldn't do that. I mean, we couldn't afford to do that.
Sure.
But the management and the board decided to do it. We live in a remarkably beautiful area of the world. We all live there, we hike there, hunt, fish, all the things you want to do. And couple of years ago, I was taking a picture from the mountain looking down on our foundry and took a picture for our green statement, and it was an early spring and I was just-- how cool can that be? All you see is this building. You don't see anything emitted but some steam. But it just goes totally against what people think is a foundry. But the family and the board, which is made up of family, they're just truly committed to having a great work environment and a great place for people to live and work.
That's great. I want to ask you, kind of, a two part question. And you touched upon this a little bit when you were talking about some of the challenges with high growth. I mean, certainly it's an exciting time for sure. But not only the financing, but I wanted to talk to you about your workforce. As a growing mid-sized business, do you encounter challenges with actually finding the right workers to fill positions? And how big of an issue is that for Lodge as it continues to grow along this path? And then my second part of that question is for your current employees, what are the things that really keep them there? Why are they so engaged and loyal to being an employee at Lodge?
It's a really interesting dynamic. We're pretty traditional. And as far as applications, people came to the office and that was only a day or so week. And two years ago, we switched to having people fill out applications online. We recruit pretty heavily on social media and talking about the good opportunity in our area. Other than the Tennessee Valley Authority, which is kind of a quasi-governmental agency, our benefits and pay are equal and, in some instances, actually better. So there are not a lot of really good opportunities in our area but when people see that and get connected with it they realize it's a good place to be.
But it's always going to be an issue because I feel like an old grandpa at 63. There's just a lot of people-- younger folks that may not want to work hard. It is a 10 hour shift but when you look at the pay scale, the health benefits package, and the 401(k), if you're interested in a great career-- and a lot of people coming through the pike are very interested in that. And we say we are a family business and a lot of people say that, but we are a family business. Everybody's treated like a member of the family.
You could walk through and talk to any employee. If someone passes away in a family, the management's there before you can count it-- before you even realize it, so. They're always in the foundry talking to the workers. Our CEO, he comes around on the anniversary of your hire and on your birthday, says, hello, and congratulates you. Again, when family need us there, the managers are there with us. You know, we tell these stories and a lot of people think we're making it up but everybody in there can tell you the same thing. Some people wouldn't understand this. It's not just the bottom line, it's family.
Sure. Now that's interesting. So following up on this idea of family-- I believe that it's the fifth generation of the Lodge family? Is that correct?
It is the fifth generation. Our senior vice president of sales is a fifth generation member, and then we have another one. Bob Kellerman, is our-- he's soon to retire-- he's our CEO emeritus. His son, Robert Kellerman, is on our product development team. And those are the two family members there but we may have some in the future.
The board and the family has done a really good job getting the fifth generation family members-- and they're dispersed all over the country-- getting them up to South Pittsburgh for shareholders meetings. Last year was our 120th anniversary. They really made a big effort to get them there, have them engaged with who and what the company is. And there's actually a committee of fifth generation people-- it's kind of like an alumni association-- to let them know what's going on and communicate with them on a regular basis. So it's just getting people to know how successful we are. You know, for decades we were doing OK but now we're far surpassing that and the family needs to know that.
Yeah. And for that type of growth and success, it's kind of rare, actually, to get to the fourth and fifth generation. Has the family ever considered making acquisitions? Or, you mentioned an IPO earlier. I mean, is that something that's ever discussed? Or is there really an interest right now-- and maybe in the immediate future-- just to keep the family-oriented nature of ownership?
We've never heard names but we heard through the years that there had been some interested in buying the company. But the family and the board just isn't interested in that at all. And that's because they don't want to lose focus on the employees, the quality of the product, and how important it is to our community.
There's an online magazine called The Bitter Southerner-- it's not The Upset Southerner. It was going to be a cocktail magazine but has since become a social conscious magazine. And they did a story on us called "The Lucky Dogs of South Pittsburgh," and the editor and the guy who wrote the story-- Chuck Reece-- he really nailed the family aspect of things. He interviewed a family member and broached that subject and she said, kind of indignantly, yep. It's come up but it's never going to happen.
And the Lucky Dog is a little cast iron dog. And Bob Kellerman, who I mentioned a minute ago, if you meet him and he gets engaged with you, he gives you a Lucky Dog and says you're a member of the Lucky Dog Society. But those things are highly prized. And sometimes people will come up and they don't see Bob, they get upset that they didn't get a Lucky Dog, but you have to meet Bob to get one.
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Well, shifting gears a little bit. Do you ever encounter any issues with government restrictions, or regulations, or things that might present challenges for your business? I mean, this is kind of a common theme that we hear across the other mid-sized companies in various industries and locations across the US is that, a lot of times, regulations aren't really thought of with the middle market in mind. So smaller businesses are usually exempt from them and much larger companies have the type of resources that can kind of work through those things. Do you ever encounter those types of challenges either at the federal, state, or local level?
It's interesting. A lot of times when people want to know about our environmental records I'll send them to talk to people on the state level and they always had glowing remarks about Lodge. You know, you do get these things and sometimes you're scratching your head, but we do meet those needs. But in a lot of instances, we've already done what the regulations want us to do. And sometimes they come in and we have to design new equipment to make it work. But it's just part of our ethos to be socially and environmentally responsible and we preach that every day.
One of the more impactful things we have now is-- when I first got there, the foundry was really dusty. It's still somewhat dusty but over the conveyor belt from where the sand cast molds fall down and go down a conveyor belt. There are hoods over there, over those conveyor belts, and then there's a pipe that sucks up the steam and the dust, and it's sucked out to behind the foundry, and it's put in receptacles. So we've really worked hard to do that. We'll never be like a pharmaceutical environment or some high tech environment where you're making a circuit board and that kind of thing, but it's a much cleaner environment than it used to be. And as I said a minute ago, in most instances when the regulations come out, they've either thought about it or have already done it. But that doesn't mean you're always going to be ahead of the curve ball.
Right. Well, Mark, those are all the questions I have for you today. I want to thank you for your time. This has been a really fascinating discussion. And we want to thank you for sharing a little bit of the secrets behind the success of a Lodge Cast Iron. And certainly as we see with other similar mid-sized companies across the US, I mean, you're doing a lot of things that are very unique and also are-- it's not always about just the bottom line, as you said. It's about employees and community and having really, really good products. So we want to commend you and the company for that and really just thank you again for your time with us today.
Oh, you're more than welcome. I've always enjoyed talking to people. And our story is unique but as you can imagine, we enjoy telling-- or as people in our area say-- well, brag about about ourselves.
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It's a great story and we're all very proud of it.
Oh, that's great. Yeah. You have every right to brag, so. Well, thanks a lot and have a great day.
OK. You too. Take care.
All right. Thanks, Mark. Thank you for listening to The Market that Moves America podcast. You can find us on iTunes, Stitcher, Google Play, and where podcasts are generally found. To learn more about the middle market and our center, please visit our website site at www.middlemarketcenter.org.
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