If you have resigned to thinking your company’s fortunes will never change for the better, you might take inspiration from Oak Creek Wood Products (OCWP). The Wisconsin-based operation is a unique example of how quickly a pallet company can reinvent itself when it places the right bets.
Pre-COVID, the Oak Creek, Wisconsin-based pallet supplier was just another small fish in a giant pond with around 25 employees, struggling to hold its position in the ultra-competitive recycled pallet market. Today, it spans 780 employees just in Mexico alone, as it has expanded domestically and internationally, having pivoted from commodity recycling to more complex and higher-value custom pallets and industrial packaging.
The company’s sales have grown from $3 million pre-COVID to $15 million in 2021 and now $20 million annually on block pallets alone, cruising toward $30 million overall. Buoyed by domestic and Mexican expansion, EPAL certification, and features such as IoT technology for pallets, the company intends to hit $50 million by the end of 2025. This success story starts with the pallet market being hammered by the COVID-19 pandemic.
Sometimes Disruption Can Be Positive
It is not an understatement to say that COVID-19 supercharged Oak Creek’s growth trajectory. “We were just another average recycler,” recalled Rafael Guerrero, the company’s president. “It seemed like we were stagnant for a lot of years. We couldn’t find our niche and were too small to really even penetrate the market.”
At the time, Oak Creek sold mainly through larger companies. “My mentality was, I produce, they sell,” he explained. The office staff was minimal, including Rafael, his wife Anni Guerrero, and one other staff member.
While the pallet recycling operation had always provided a steady, albeit modest, cash flow, much of Guerrero’s focus and energy had been devoted to his other business importing fresh produce from Mexico. However, the unpredictability of agriculture—”one frost, and you lose everything”—and the logistical challenges brought on by COVID-19 forced a major shift. It became increasingly difficult to import because of COVID-related restrictions, and he found himself losing “money upon money.” It was a pivotal moment.
“I told my wife, ‘I’m going to just focus on pallets and forget the produce completely and see what I can do.’ That’s when it all started,” Guerrero said.
The shift paid off quickly. In 2020, the company transitioned to producing new pallets and saw its revenue surge from $3 million to $15 million in just one year, fueled by national pallet shortages. Guerrero credited this success to new partnerships, including one with H&S (later acquired by Kamps). “We got rid of dismantlers and added resaws,” he said. “Suddenly, we were shipping new pallets as far as Seattle and Southern California.”
As business boomed, Guerrero recognized the need to expand. In 2021, Oak Creek acquired Slinger, Wisconsin-based JFF Wood Products. “Mark Wolf, the owner, used to say, ‘One day you’re going to buy me up,’” Guerrero recalled. “That day came, and I bought JFF for $5 million. Honestly, I was scared—I didn’t know how I was going to pay it off.” But Guerrero’s fears proved unfounded. With two strong years that followed, he managed to eliminate the debt.
The acquisition brought more than just milling equipment and an 800-pallet-capacity Kiln-direct dry kiln. It also gave Oak Creek an outlet for its wood byproducts. “Mark’s main thing was mulch, and we were generating so much wood waste ourselves. It just made sense,” Guerrero explained. Experienced JFF employees were retained, helping Oak Creek get up to speed on the grinding and heavy equipment requirements of producing wood fiber. Meanwhile, the underutilized 25,000-square-foot facility was turned into a pallet production operation. Before long, around 30 employees were onsite building new pallets.
The shift to new pallets included a focus on custom block-style products driven by demand from industries such as glass and canning. The complexity of block pallet production was a considerable challenge, and Guerrero spent long hours on the production floor “to make sure we got it right.” Despite the steep learning curve, block pallets have quickly become a cornerstone of the business, now accounting for $20 million in annual revenue.
‘We’ll Never Rent a Pallet Again’
While customers were eager to buy block pallets when the rental giants fell short in supply, would it prove to be just a short-term windfall that would end once the shortage ended? It turned out to be a gamble that paid off for Oak Creek.
“We came in and took some business from them, and a lot of people never went back,” Guerrero observed. “They were left with a really bad taste in their mouth.” One major customer told him, ‘We’ll never rent a pallet ever again.’
Given his considerable mechanical engineering expertise and to cut costs, Guerrero built his own nailing machines by retrofitting existing machines/frames. He graduated with an engineering degree from the Milwaukee School of Engineering. At the company’s other domestic locations in Wisconsin and Austin, Texas, as well as in Mexico, the company hand nails custom pallets “typically on five or six hand nailing stations” fed to a PRS stacker.
Oak Creek subsequently made a strategic move to achieve EPAL certification to boost its block pallet business. The daunting process took about seven months to complete. “It was like nothing we’ve ever done before,” he reflected, noting the tight tolerances for fasteners and lumber. “At first, I didn’t think we would be able to do it, to be honest.”
Guerrero had contacts in Germany and made a trip to see how they were doing EPAL pallets. “It was quite impressive how they do EPALs and just pallets in general,” he said, “the level of sophistication they have. The machinery, the automation, it’s amazing.”
They went to Düsseldorf to visit EPAL headquarters and find out more about the certification process. There was nothing in the way of handholding or hands-on consulting, according to Guerrero. They were simply given a book to study. Subsequently, he quipped, whenever they had a question, they were always given the same response, ‘The answer is in the book.’
“When I look back at that moment, I think that approach was the best way to do it,” he reflected. “It took seven months, but we learned a lot. Now when we roll out EPAL 2, 3 and 4, and the others, it is going to be easy. We have already made the investments and have everything dialed in.” The company imports blocks from Euroblock.
OCWP is already enjoying the benefits of the EPAL certification, with a healthy order file and interest ranging from coast to coast and from Canada to Mexico. The distances involved can make cost-effective freight challenging, but Guerrero is looking at ways to partner with other manufacturers to move production closer to longer-distance customers. “We’re working with a couple of people where we might do something creative like manage an EPAL program for them.”
Mexican Expansion: “Put Your Name on It”
OCWP has strategically expanded its operations into Mexico, projecting it to be a $30 million business in the near future. The Mexican foray began in 2023, partnering with Guerrero Pallets, a company owned by Marcos, Rafael’s brother, to establish a facility in León, Guanajuato.
The move was prompted by a request from a U.S. customer, a major farm equipment manufacturer. At first, Rafael was apprehensive about moving into the Mexican market. He felt that he didn’t know it well enough and was still smarting from the disappointment of his ill-fated produce business.
The concerns proved to be unfounded. “Because I had all the knowledge from bringing stuff across the border and knowing how that worked, it turned out to be easy for us to start getting business down there,” he reflected. The Mexican operation was mainly focused on multinational companies, with that operation undergoing a similar transformation trajectory to what Oak Creek had experienced in the U.S.
“We went from being a complete recycler to getting into more new pallets,” he said. The company has expanded to 300,000 square feet of covered space across several buildings. Recently, Oak Creek formed a strategic alliance with Grupo Lyrba, a prominent player in Mexico’s recycling industry. This collaboration operates across eight key locations: Ramos Arizpe, San Luis Potosí, León, Silao, Toluca, Mérida, Cancún and Chetumal. The company handles the recycling of various materials for leading companies including: GM, Chrysler and Stellantis.
With over 5,000 employees, Grupo Lyrba excels at handling recycled material streams such as cardboard, metal and plastic. Aware of the reputation that OCWP was already building in Mexico, the recycler reached out to OCWP for help.
Additionally, a recent regulatory change in Mexico has banned the burning of wood waste, creating a disposal problem for scrap wood. To meet this need, Oak Creek has brought two Vermeer grinders to its Mexican operations. As it turns out, there is a strong demand for wood chips from the Mexican pulp and paper industry.
While the recovered pallets were previously sold to small recyclers, OCWP leveraged its relationships to work with larger customers. The business has already grown from 6,000 pallets per week to 30,000 units.
A Henry Ford Approach to Crating, Embracing IoT Technology
The company takes on complex crates that other companies might shy away from doing. Guerrero said he is a big fan of Henry Ford’s approach, how he broke down the assembly of the car into a “million pieces” to achieve standardization, efficiency and large-scale coordination. Oftentimes, at the beginning, Guerrero noted, it can take too long to build a crate, but OCWP sticks with it until they get it right.
The company has a dedicated 10,000-foot building for building crates at the Oak Creek location. “We’re still in the infancy of this part of the business, and I ultimately want to do more of that,” he said. “But I think we’re doing a good job, and we are bringing in steady business.” It also is growing its crate business at its Texas and Mexican locations.
On the crating side of the business, the company partners with corrugated suppliers for solutions such as gaylord bins attached to pallets. Partnership is a key tactic that the company has used for everything from packaging solutions to technology. It has partnered with a UK-based company to have the capability to supply pallet sensors and monitoring solutions for several customers that have expressed interest in such technology. These sensors are capable of monitoring temperature and humidity.
Guerrero explained, “Our partners in the UK, they do it for us. But just being able to partner up with this company that can do all these things was very critical for some of the customers. That’s what they are looking for, and we want to listen to them.”
RFID readers can be installed at a company location to eliminate problems with customers ordering more loads of pallets when they already had full loads staged in their yard. They can simply check their dashboard to determine whether or not they have pallets on hand. This is a technology solution that OCWP is in the process of discussing with a number of customers, although it has not been deployed in a facility yet.
Positioning for Private Equity Participation and Finding the Right Partner
Guerrero noted that OCWP has always had minimal debt, and when it did well during the COVID-19 pandemic, it put the money back into the business. That strategy enabled it to emerge stronger on the other side. With growth, however, the company is transitioning from self-financing.
“We were all self-financed, although I thought I was going to die in the process,” Guerrero laughed. “But certainly you can only get so far, and now we are in the process of partnering with private equity. That’s the direction we are going because we have some other pretty cool projects where we need (financial) support.”
Bringing on a CFO and changing its processes were critical to making the company more attractive to private investors. It was a process, Guerrero noted, that took some time. “I was not much involved in the negotiations, per se, but I knew what I wanted,” he said. He wasn’t looking for the type of relationship where the private equity provider would be looking to sell in three to five years. “Our mindset is that we’re not selling. We’re not going anywhere.”
Guerrero doesn’t see an immediate finish line in sight. “I don’t think money is the ultimate goal here,” Guerrero concluded. “It’s more growth and bringing technology and innovation to the pallet sector.”
