Iowa distributor lays groundwork for growth
Riekes Material Handling Company has a long history in the industry. Founded in 1898 as S. Riekes and Sons, the company sold glass containers, specifically milk jugs, a lucrative market in a dairy farming community. In 1938, S. Riekes and Sons expanded into material handling products and in 1961 became a distributor of Yale forklifts. In the late 1960s, the Riekes family sold the business to Alco Standard Corporation, a Fortune 500 company that was more interested in the container segment of the business.
Alco Standard sold the company’s two primary locations to two different owners. In 1984, Duncan Murphy purchased the Omaha branch which became known as Riekes Equipment Company. In 1983, the Des Moines location was purchased by Lyle Seward and was called Riekes of Iowa. In 1991, Seward sold the business to Steve Howard, whose son Tom joined him in 1994. Tom Howard, president of the company, says, “There is a misconception that Riekes in Des Moines and Riekes in Omaha are the same company.” Howard wants MHEDA members to know that the only similarities the two companies share is the word “Riekes” in their names.
Howard’s business, Riekes Material Handling Company, no longer distributes forklifts. In 1998, the forklift division was sold to Torrance Yale Material Handling in Cedar Rapids. “Our ITA number was only 1,000, which wasn’t large enough to be profitable. So we refocused our mission.” Riekes’ mission today is on general lines, systems and industrial scales, along with a focused acquisition strategy.
Refocus for Changing Times and Markets
When the Howards bought the business in 1991, they were eager to grow sales significantly. With a branch location already established in Davenport, Iowa, four additional locations were opened: Marshalltown, Iowa; Sterling, Illinois; Minneapolis, Minnesota; and Omaha, Nebraska which is headquarters for Central Scale & Material Handling, a business acquired in 1996.
The company does about $15 million in business each year, divided equally between general lines material handling products and systems work. “However,” says Howard, “We don’t have a steady flow of systems work yet, so we rely on general lines.”
A year ago, Riekes began to sell packaging supplies: stretch wrap, shrink wrap, tape, banding and glue. Howard points out that packaging is 70% consumables and 30% equipment, unlike most general lines business, which is 5% consumables and 95% capital equipment. “Even without a capital equipment budget, companies still have to buy the film for their stretch wrappers and shrink wrappers. We thought it would be a nice complement and would even out the cash flow.” Howard says it will take a couple years of momentum in the packaging business and predicts, “Things will really take off for us in 2003.”
Riekes’ largest customers are in the appliance and agricultural industries. “We can’t afford to target a specific industry, so we strive to be a ‘generalist’,” says Howard. “We go after every market we can.”
Riekes currently employs 35 people, including 12 salespeople and 2 engineers. To keep up with the change in direction toward systems, Howard is looking for engineers who have sales capability. He says, “This philosophy change has occurred during the last two years. We used to hire the best salesperson and teach them material handling. Now we want systems people who can learn sales.”
Without a large staff of in-house engineers to support the sales staff, Howard sees this change as critical to the company’s success. “As systems become more complicated, salespeople must know the specifics of engineering. Those with engineering backgrounds seem to do better in this venue.” Currently, Howard uses contract engineers for more complicated systems work.
“The challenge for us moving forward is to become a better systems house, a better systems player,” says Howard. To that end, Riekes employees attend various vendor training programs. New engineers are learning to sell by attending MHEDA’s Sales Boot Camps.
Competition presents another challenge. “There is a lot of competition from larger distributors in the larger cities surrounding us: Minneapolis, Chicago and Kansas City. Our local competitors in Iowa don’t have much systems capability, so we are knocking heads against the bigger distributors from surrounding states. To become better known as a systems house, we have to become a better systems player. We hope that our investment in employee training will pay back.”
Acquisition Strategy for Growth
Tom Howard believes that Riekes’ market share in the region has plateaued and continued growth will come from “select” acquisitions. “We plan to make some smart, targeted acquisitions in the business that we currently are in, or complementary to our existing business.” Howard wants to grow Riekes Material Handling Company by 50 percent or more over the next five years through such acquisitions.
The Howard’s criteria for acquiring a material handling company include:
- Revenue of 2 to 10 million dollars,
- Established sales department,
- Strong #2 person to stay on and run the company,
- Existing customer base.
Howard points out that Riekes is not big enough to purchase a very large company, but is looking for a small $2-10 million revenue business. The most important requirement, however, is infrastructure. “We’re not interested in buying a one or two-man shop that will shut down if the owner is no longer there. We want companies with a developed and strong sales department that is not dependent on the owner driving the revenues.” Another requirement is that the company has in place a strong employee who will stay on and run the company after it is sold.
So far, Riekes has acquired one company, Central Scale, a scale business based in Omaha, Nebraska. This acquisition was made in 1996. Since then, a number of companies have been explored, but none have fit the Howard’s criteria. “Riekes Material Handling Company has gotten to the point where internal growth is slowing down, and our market presence in Iowa is almost saturated. Continued growth will come via selected acquisitions in the Midwest.” Howard is also looking for something that will replace the revenue base of the forklift business sold in 1998.
As he looks to the future, Tom Howard is confident. Riekes has metamorphosized several times over its proud 104-year history. As he seeks new markets and new ideas, he is investing in training and growth so the tradition of excellence will continue.