Bernie Kamps has been an industry leader for decades and is one of the most recognizable figures in the pallet business. He has built one of the largest pallet companies in the country and is ready to hand over leadership to a seasoned team including his two sons, Mitchell, who will take over as CEO, and Justin, who is vice president of northern operations.
Pallet Enterprise: How did you know it was time to start the retirement process? What have you done to be ready for this day?
Bernie Kamps: Everything is about a plan and a goal. The idea of succession planning is very, very important. And we have been working on this for a long time. When we decided to sell some stock to private equity, I wanted to make sure that I had a really good team in place so that I could eventually walk away knowing the company is in a strong position. This is my 50th year in the pallet industry. I started right out of high school in 1973 and have been working full-time ever since.
Pallet Enterprise: What was the spark that really got you into the pallet sector?
Bernie Kamps: I started out hauling wood shavings to farmers and horse stables as my after school job. When Waste Management bought my father’s & uncle’s garbage hauling business, I bought the wood shavings side. From the furniture factories and other industries, I started hauling trash into the landfills and recycling corrugated. While at the landfill, I would see all these wooden pallets. Next thing you know I’m repairing them in the landfill. I offered the bulldozer operator 50 cents for every pallet he did not crush and would set aside for me that I could use. He said to me, ‘Kid, they pay me to bring them in and you want to pay me to take them out. I’ll do that deal every day.’
I had to load 120 heavy GMAs by hand, and that’s when the pallets were made with 3/4 inch deck boards and 1-3/4 inch stringers. It was hard work, but I started making a whole lot more money doing that than I did hauling wood shavings and trash. And that led me to eventually going to the grocery chains and some of the industrial distribution centers and manufacturers that were throwing these pallets away and working deals with them. Eventually, I put semi-trailers in their yards and rented a building for sorting and repair. The business has just grown from there.
My team and I grew the company to 1,300 employees over a few decades. Four years ago, after the private equity investment, we added 3,000 employees through acquisitions of some phenomenal, like-minded, companies. We are now 4,300 team members strong.
Pallet Enterprise: Who is taking over key leadership positions?
Bernie Kamps: I’ll move to executive chairman and will still be a board member. I will be available to help with some acquisitions once in a while and some strategic planning. My son, Mitchell, will become the CEO of the company. And we hired a new executive named Kevin Bailey over a year ago with express purpose of making him our president. He’s been our COO, and he is going to be the company president and COO. Kevin came from Haworth, a large furniture company in West Michigan. He also previously worked in management at General Motors and Peterbilt. Kevin joined Kamps because he saw that we are poised for growth having become well over a billion dollar company and heading to be a North American leader in the pallet industry. We saw the wisdom of bringing in someone with executive level experience at a multi-billion dollar company to help guide us through the next growth phase.
The executive team is doing phenomenal work. My son, Justin, is running a broad portfolio of facilities as vice president of operations. We have Nick Schaller running many plants in the South and Kyle Lane in Texas. The company has grown so large that it is exciting to see this 6-person executive team just build everything out and integrate it all together. They have been running the company for the last 2-3 years. As the company has grown, we have been able to advance people from within, giving them new challenges and new opportunities.
Pallet Enterprise: What are some of your plans for retirement?
Bernie Kamps: Well, I love the idea of still being in touch with the business as executive chairman and still being on the board and involved.
I’ve already begun my charitable and philanthropic work where my goal is to put something in place so that the bulk of the wealth that I have generated will be able to be given away over my lifetime and beyond. That’s been very rewarding. The Lord has blessed me spiritually and monetarily, and I need to utilize these resources to help worthy causes, especially Christian schools.
Pallet Enterprise: It’s been a crazy last 2-3 years in the pallet sector. Going from unforeseen highs to more realistic prices and slumping sales. What do you think occurred over the past few years? Where do you see the pallet industry now and going in the near future?
Bernie Kamps: I think there’s been a reset without a doubt. We hate to go through it, but I think it was needed. The environment during the pandemic was artificial, and pallet companies were making tremendous amounts of money. Prices have dropped recently, and everyone is trying to guard their margins. The industry has gone back to more normal levels of profitability.
Looking forward, I think we’re going to feel the recession a little bit longer in the early part of 2024. In the long-term, I think the industry is going to be fine. I do see as housing comes up and as there’s some pressure put on flooring and on grade lumber, you’re going to see the lumber prices coming right back up. Also, there’s been some sawmills that have closed down. They got hit hard, and there’s going to be a shortage of lumber going forward because of it. So, I see in 2024-2025, hardwood lumber prices rising again. Then, I think you are going to see the pallet business in really good shape again with stable pricing and margins.
Pallet Enterprise: For a while it seemed like big players were adding a new acquisition every few months, now that activity has come to a trickle. Where are we in the whole M&A cycle?
Bernie Kamps: We’re still buying some companies, but a lot less than a few years ago when the market was hotter, and interest rates were lower. We are still buying selectively and filling in gaps in our network. We have done some greenfield operations too. They are cheaper to do, but they just take longer and require more human resources capital. Getting new people trained and up to speed is difficult.
I think you will see the M&A activity rebound and more acquisitions announced next year and beyond; especially when interest rates are lower and investment capital gets cheaper. But I don’t believe it will be as hot as it was in 2020-2022. Those three years were just wild. A race to the top.
Pallet Enterprise: Yeah, the pallet market was doing so well. There were probably 50-100 companies that were blue chip operators. And you all wanted to have enough in your portfolio in the right areas of the country.
Bernie Kamps: Yes, we knew we had to have them. Everybody was thinking the same thing. We all had the same idea to quickly build out nationally. We are very excited to add the capabilities of the good operators that we acquired. Many of those key managers have been promoted as we have grown. A person who was running one plant is now running three. Someone who was running multiple plants is now over an entire region.
The last year or so our focus has been on integrating companies that we acquired into our culture and systems. We are integrating everything from HR to computer systems to safety teams and a focus on continuous improvement. We are using best practices and KPI scorecards to improve.
Pallet Enterprise: You spoke about how prices have come back down. But labor and automation costs remain elevated. What are you seeing in terms of cost pressures?
Bernie Kamps: Pallet prices haven’t fallen all the way down to where they were before the pandemic. I don’t think they ever will because labor cost remains high. That labor cost is never going back down, never ever, to where it was. I believe this is true for other industries too. Just look at the automotive strike. They had to pay more for labor and now are just going to raise the price of cars.
Pallet Enterprise: One of the other things we talked earlier is the importance of strategic succession planning. What are recommendations that you have for effectively handing control off to the next generation?
Bernie Kamps: You’ve got to plan ahead. You need to be talking to your kids or your top talented people, whoever’s going to be buying the company. And if you’re going to go outside for funding, you’ve got to let them know what you’re planning. First, I think you need to plan way out front. If you wait too long, you’re going to frustrate your kids or the management team. They’re eager; they’re ready. So, if you stonewall them, you can discourage them, and you might not have the time to bring them up to speed fast enough.
My philosophy has always been to delegate as much as possible. Give opportunities and responsibilities in a way that helps them. You’re giving them new challenges a little bit at a time instead of one day just turning the whole company or large responsibilities over to the next generation when they may not be ready for it.
Pallet Enterprise: What’s the long-term plan for Kamps Pallets?
Bernie Kamps: I see our company staying the course focusing on growth. We are already one of the largest pallet companies in the North America. We may even be the largest new pallet manufacturer. I believe that in time Kamps will be global.
Pallet Enterprise: You said something interesting that your company is growing its new pallet capabilities. Obviously, the acquisition of John Rock was really big. When I first think about Kamps, I see it as more of a major recycler or pallet services company. Are you saying that you have an eye to be a much larger new pallet manufacturer as well?
Bernie Kamps: When we bought John Rock, a lot of people in the industry with raised eyebrows couldn’t believe what we did. People didn’t realize that we were already selling a lot of new pallets around the country. We are servicing customers with whatever pallet they need, and in some cases, what they truly needed was new pallets. We are a full service operator because we want to be able to service the customer in every way possible.
The John Rock sawmills in the Mid-Atlantic region can supply a lot of lumber, and when we face another lumber shortage, these plants can supply many Kamps facilities. Our recycled facilities can also provide recycled boards & lumber to John Rock and to our other new pallet manufacturing plants as well.
Pallet Enterprise: Looking at the pallet industry, what are a handful of changes that you see coming over the next two to five years? What are things that not only your company is aware of and working on, what are things you think any smart pallet operator needs to be aware of?
Bernie Kamps: Because of the cost of labor, we have pushed so hard into automation and mechanization. John Rock has its own set of robots and other automation. We have installed large & small Urban Sawmill lines. That technology really is a game changer. The reason for that is because it reduces labor costs. With one man on a bandsaw and one man on a chop saw their net cost per board is much higher than ours, and we’re going to be able to produce 30 to 50,000 boards a day or per shift in each plant.
Smaller operators may say that their facility and equipment costs are lower. But they have to deal constantly with turnover and training. I don’t think people realize how expensive turnover is. Reducing net labor cost is the key. We love harvesting the ‘Urban Forest.’
