Elcan Industries- Moving Mountains (Of Metal Powder)

Steve Melito: Welcome to New York State Manufacturing Now, the podcast that’s powered by AS9100d. I’m your host, Steve Melito, and today we are here with Russ Grotto of Elcan Industries. Russ, welcome to the podcast.

Russ Grotto: Thanks for having me on, Steve. It’s been a while in the making so I’m glad we’re able to finally sit down, discuss some sieving, screening, toll processing, whatever else comes up.

Steve Melito: Excellent. I’m looking forward to it. So, to get started, what is the Elcan Industries story? How did you get started, and how long have you been around?

Russ Grotto: Sure. So the owner, Bob, is actually my dad. He worked in a textile mill up until the early ’90s where he left, ended up getting bought out. He was too young to retire, so he started prospecting businesses. And he came across the existing company that was just Elcan for it. Elcan had followed all these German manufacturers of special specialty chemicals into the US, and then started selling them tumbler screeners for that. So Bob saw the idea and was like, ” Hey, there isn’t demand for this advanced screening technology in the US. I’m going to buy this company and then start growing at it.” So he bought the company in 1993, thinking he bought it with goodwill, and it turned out that everyone hated Elcan and hated the guy who owned it before that. The guy had no spare parts, no technicians, no sales, and he was kind of just like a fly- by- night thing, where he’d sell you the machine and you’d never hear from him again. So all of a sudden, this whole business idea that he had got off on an awful foot. So he went back through and started contacting all the old companies that he had done business with previously, and started stocking all the spare parts, all the technicians and everything in the US. So he was able to become, rather than a sales rep, more of an agent for this company where he did everything out of the US. Companies no longer had to wait to hear back from Germany. Because companies in the US obviously want to deal with companies in the US, and no one wants to wait 12 hours, especially with some German manufacturers, you could be waiting weeks to get a response. In the kind of way that business is done in the US, that doesn’t fly. So that was how we got started, just selling these advanced tumbler screening systems. That’s kind of, if you’re not as experienced in screening, it’s more like a hula hoop motion screening, where the machine uses a finesse approach to guide particles through the hole. It was really, really successful in his super- absorbance industries, hollow glass spheres, glass beads, and a lot of other specialty chemical products and that business was really, really good. He finally got it off the ground, and then 2001 after 9/ 11, everything came crashing down. And there was no machine sales whatsoever. No one was buying any capital equipment. So this is actually going to cover, I know you were going to ask some of the success stories. So in 2001, we wrote an article about this, so Alcoa came to us and said, ” Hey, we don’t want to buy any of your machines. We want you guys to screen the product for us and this was a foreign concept to us. We’d never done this before. We only had area to do testing, but it started. So they started sending us in aluminum powder by the truckload, and it was a little hairy at first. We’d never processed aluminum powder at 325 mesh, 44 microns, but we did. And it got off the ground and got going. And we actually ended up doing 7 million pounds of aluminum powder for Alcoa at 44 micron, 325 mesh. And that was our first kind of step into the toll processing and what it allowed us to realize is that, ” Hey, these machines are a lot more capable than we thought we that they were.” Because we only knew from the manufacturer what these machines could do. We didn’t have any hands- on experience running products with other customers for that. So it allowed us to start getting more and more insight. We ended up, over the years picking up a few new technologies for screening that we work with, where key has always been identifying foreign technologies that are different and bringing them to the US. So we did that. And as that continued to grow, our capabilities continued to grow. The demand for our screening abilities continued to grow as well. So in 2015, we actually worked with a Japanese manufacturer of screening equipment to work together to release our own new machine, which is called the Hi Sifter. And that’s the same system we sell right now, along with, we use it downstairs in our toll processing plant as well. So the business is split 50- 50 right now between machinery sales, and then the other side of the business is toll processing, where we actually run these machines for companies. So companies are able to kind of test, drive and use this equipment to get their product out, and do it on a long term scale. So some companies will never buy machinery and just keep toll processing, but other companies will say, ” Hey, if I’m going to spend this much extra money on one of your advanced screeners, I want to run a truckload on it to prove that it’s going to be able to work for my product.” And 99% of the time it does work for that, because we’ve had the experience with their product and we already have the knowledge to get it run. So it’s kind of more like a longer term proving out method, but most other machinery sales companies can only run small scale trials. So we’re able to have the advantage where if a company says, ” I want to run 40,000 pounds. If you guys are so confident, that should be no problem.” And our response is always, ” Yes, that is no problem. Send in a full truckload, we’ll happily be able to run it to you guys to demonstrate our capabilities.” And that way the customer knows that they’re running on the highest possible machinery, highest performing machinery available on the marketplace as well. So that’s kind of where we are now. We move to Tuckahoe in 2012, so our new facility is 20,000 square foot, all for the toll processing. And then we stock all the spare parts and still support the machines out of this facility as well.

Steve Melito: So what are the spare parts that typically go on machines that, back in 1993, people were asking for?

Russ Grotto: Thankfully now there’s not as many spare parts. A lot of these screening machines use what they call anti- blinding devices, where it’s either balls or different methods, where if you have a screening machine, sometimes the screen itself can get clogged up. And they use methods to clean out inside the screen area. Screening companies, a lot of their revenues are based off of spare parts for that. It’s kind of like the HP printer model, where they give you the machine for cheap because down the road you’re going to sell so many screens, so many gaskets, so many other components for it that you make all your money back and our philosophy has been the exact opposite. It’s sell high- quality foreign equipment that doesn’t require maintenance. If you’re buying a BMW or a Aston Martin, or whatever it may be, you shouldn’t have to take that car into the shop all the time, should be ready to run. You paid all the extra money. And that’s been our philosophy forever. So as we’ve moved on to these newer technologies, we’ve made it a strict point when we’re working with the manufacturer that let’s spend the extra money upfront, use the higher quality materials, pay more for the gaskets, pay more for high quality screen cloth. That way the machines don’t break down. Our technicians are able to stay here, and the customer doesn’t have to worry about their production going down, because we are do not want to be a spare parts provider. So we stock all the necessary spare parts downstairs, but thankfully most of them sit in that room and collect dust until we have to clean it off and ship it out if the event does come. We’ve been able to successfully kind of pivot away from being a spare parts business into saying, ” Let’s take the extra time, sell high quality equipment that doesn’t require all the spare parts,” because that means the companies have downtime and they’re not running their machine so they’re not making money. And that’s the last thing we want for our customers.

Steve Melito: Good, good. So let’s talk about the service part. Now, toll processing may be a term that some of our listeners aren’t familiar with, but it’s essentially kind of like contract manufacturing, right? You’re performing a service for somebody using your equipment.

Russ Grotto: Yeah. It’s exactly that. So we do the toll processing/ contract manufacturing. People get confused, obviously, all the time. We get calls for people trying to pay their E-ZPass.

Steve Melito: Sure. Toll booths, right? Yeah.

Russ Grotto: They see “Toll processing New York” and they think that. So that’s how we at least know that the SEO is working for targeting them. But yeah, so downstairs most of what we offer is advanced screening for companies that need to separate powders out into very fine, or even if it’s course we can do, but into very fine and tight size ranges. It’s a lot of-

Steve Melito: So who would need to do that besides, say, Alcoa? What are some markets that you serve?

Russ Grotto: So, our biggest market is by far metal powders in additive manufacturing/ 3D printing for that. 3D printing industry is relatively new. And it turned out that, hey, they came out and set the size ranges for the powder. It needs to be between 45 and 15 microns. And no other screening technology in the world can sit at those sizes. And we had already had a machine designed. So we’re able to successfully screen these powders for companies in a single pass. And all of a sudden that powder, when you’re doing titanium powder and you’re doing nickel powder, isn’t worth 20 cents a pound, it’s worth $200 a pound. So when we’re able to offer these companies 10% more yield, if you’re doing that across a million pounds, all of a sudden you’re making millions and millions of more dollars. So it’s easier to justify. So for stuff like that, we don’t necessarily toll process, because it’s all aerospace and defense. But there’s a million other companies that are traders of powder, that import powders and then sell powders in the US, that use us as almost like a middleman where they send the powders directly to us, we’ll screen them, we’ll repackage them and then ship them out. So screening for glass and ceramics industry is huge. We do a lot of graphite powder here as well for micro circuits and other industries, advanced electronics industries. Like that as well has been huge for us. Some of the other services we offer aside from screening, we do repackaging. So companies have stuff in a bulk bag that needs to be packaged out in a 25 pound bag instead, we offer that. We offer electromagnetic separation for a company. So say, I did a project with a company last year that made a face cream. And it was down on one of their plants in Brazil. And for some reason one of the workers in Brazil broke a steel wire brush into the product. So this face cream, all of a sudden, had steel wire inside of the product for that. And they couldn’t sell any of the product, but they found us online, saw that we had this very high powered electromagnet and sent us the powder. And we were able to remove 99. 99% of this steel contamination, and make it a usable product again.

Russ Grotto: For these companies. So companies find us, a lot of the time, on an as- needed basis. And then they’ll find us just through natural organic searches on Google and stuff like that and we’re able to help them through that. So, in terms of powders, it’s mainly metal powders, glass ceramics, graphite, but there’s countless other industries that we do here as well. Just we stay away from the hazardous and those kinds of materials as well from our facility, just to protect the safety of our workers and the people around us as well.

Steve Melito: Sure. Now you mentioned aerospace and I think defense. Are you AS9100d certified? Do you have to get into that?

Russ Grotto: No, so for the aerospace and defense, no one is tolling the powder, so everything is done in- house. So for that it’s all smaller scale testing that we’ll do to sell them equipment. Screening at 10 and 15 micron, if you think about one piece of your hair, the diameter of one piece of hair is 80 microns. So we’re screening powders that are eight times as fine as that at a successful level. So a lot of this stuff, when you’re leveling off in the 3D printer, it doesn’t level right unless it really hits the specific size range for that. So we’re able to get these machines sold for these companies, and then all of a sudden this is what’s going into the stuff that’s going into aircraft carriers and planes, and all these other high tech applications.

Steve Melito: Now how do you keep workers safe with all those tiny particles, I’m going to guess, in the air, at least as part of the process.

Russ Grotto: So our commitment to quality and cleanliness is, like, the biggest thing we do here. We always say no matter how advanced our technologies and how experienced we are, if people walk into a dirty plant, they’re not going to feel comfortable sending their valuable powders there. A lot of the companies we work with are smaller companies where what they’re sending to Elcan could be their revenue for the entire year. And we need to make sure that they feel comfortable with it, and that our employees feel comfortable as well. The entire plant, thankfully it’s our third time moving. So we moved here in 2012 and we took all the mistakes that we made when we built our first two plants and said, ” All right, how do we make this as optimal as possible?” The plant has multiple bag houses that run along the entire plant. Thankfully, with advanced systems we use, all the gaskets and everything are high quality. So there’s no powder leaking out of the machines, like you see with a lot of other screening systems. The only place of dust is really where you put the feed material into the machine using a screw feeder or an auger. And all of that has dust collection directly attached to it. All of our workers do have respirators that they’re mandatory to wear around. Same thing with all the other PPE as well, to protect. And then we go through, again, every day and clean down the entire plant. So at the end of every day everyone shuts down 15 minutes early. We go through, clean out the entire plant as well, clean out the bag houses. Not that they collect a lot of dust, just to be extra safe for that. And then start all over the next day for that. So everything needs to be wiped down with alcohol and the whole nine yards, just to ensure the product cleanliness. And then the plants, the bays themselves, are designed with floor- to- ceiling walls so that no powder’s going from one bay into the next bay. It’s all contained right within that area for that.

Steve Melito: Wow. So what happens to the waste, the things that don’t pass through the screen?

Russ Grotto: Everything we take in, we take back out. The waste product that gets generated, which will either be the oversize or under- size, the off grade stuff ships back for that. We do work with other scrap companies like that to say, because a lot of the time the company says, ” Hey, I don’t have a use for this powder. Do you know someone that wants it?” So we’ve been able to grow our network to say, ” Hey, I do have a guy that’ll take that powder for that.” It’s off grade, or it could have some contamination in it and that’s why they sent us to it in the first place. So we’re able to link up our customers with other service providers like us. The most common thing that happens is, someone screens powder at 325 mesh. If 50% of that powder comes off as oversized, then we work with milling companies that we can send that powder to and they’ll re- mill down the oversized to make it all less than again. And then we’ll rescreen it for them again. So that way all of a sudden their 50% recovery goes up to 95% recovery. And it’s all being done on high quality systems, so they can have confidence in their powder for that. So yeah, it’s either the company ships it back or we’ll sell it, we’ll have the company set them up with a buyer, or they’ll just say, ” Hey, let’s mill this and get as much product out of it as possible” for that. So we’ve been setting up relationships with all these companies.

Steve Melito: And you’ve built some good ones by the sound of it. Now, in terms of marketing and sales, you mentioned SEO, which is search engine optimization. How do you find most of your customers? Do you still go to trade shows and do so all that kind of stuff?

Russ Grotto: So, that’s been a real point of contention within our company. Bob the owner slash my dad, old school, loves going to trade shows, having a big booth for that, doing these big dinners and stuff. And as I’ve kind of come in, I’ve toned us back a lot on that. Trade shows are good, but what we’ve seen is that trade shows is salespeople talking to salespeople. It’s not like it used to be 20 years ago for that and it’s certainly not like it is over in Germany, or other trade shows in Europe where companies and employees bring their entire families to the trade shows for that. It’s just a different environment nowadays. So we’ve cut back, we do do trade shows, just so people know we still exist. Most of our advertising efforts are put into Google and saying, ” Hey, if someone’s searching…”We compete with a lot bigger companies than us. So if someone’s Googling screening machines, then they’re likely not the right company for us. But if someone’s Googling ” How to screen aluminum powder at 44 microns,”my job’s to make sure that they find us for that application. So a lot of the stuff we do is blog posts, organic content on Google. The other side of that, that we do a lot here, is instead of waiting for companies to find us, we’ve started this proactive approach where we have someone full- time who goes online and identifies companies that could be potential customers for us. Instead of waiting for the day that they go on Google and find us, his job is to find out the person, find out who the right guy is, call them on the phone, figure out the email address, or do whatever else is necessary to get in contact with that person. So that’s been our new approach is this proactive approach. Because yeah, people will find us online, but in my opinion it’s not fast enough. And there’s never enough. You can’t force someone to go onto Google. But if you’re in their face, whether it be from Greg, one of our sales people, going out and visiting customers, or us just finding a company, calling them up and saying, ” Hey, this is what we do, is that interesting to you?” And 80% of the time they say no. But that 20% of the time then, you just found a customer that you would never be able to deal with before, or who had no idea who you were and we were on the cover of Powder Bulk Engineering magazine in February for some of the advanced applications we’ve been doing. But otherwise, yeah, everything we have been doing, it’s all online content.

Steve Melito: Do you have a lot of long- term customers that come back year after year?

Russ Grotto: Yeah, so that’s what we’ve been working on, especially for the toll processing. Because the tolling is somewhat cyclical, but if you can establish a strong base of customers where you know that this company is good to send a truckload every month for that, it makes covering the overhead a lot easier for that. So we have a good amount of long- term customers where it’s like, ” Hey, we know every single month a truckload from this company is coming in.” But our goal is to have as many of those companies, because if you have enough of those companies that you can fill up the plant, then all of a sudden you’re looking at building a new plant to help facilitate it and that’s how you really get the company to grow. Because a lot of these companies will find us and it’s a one- time job. We’re finding what we like to call the anchor tenant. Someone that you know it might not be a ton of money, but it’s money that’s there, it’s continuous, and you can count on for it. At the end of the day that’s all we’re trying to find is more companies that are anchor tenants that send out powders consistently and the good thing is, as the world’s become more legal, I guess, a lot of these big companies have been adverse to buying new equipment. Because when you buy a piece of machinery, you take on a lot of liability to run that machinery. And then you have to hire an employee to run it, and you have to pay the healthcare for that employee. Then you have to pay someone to supervise, and it gets into this, it becomes a lot more expensive and companies have realized that ” Hey, even if I buy a screening machine, I’m never going to be able to run it as good as those guys at Elcan. So why not just pay them to run it, ensure that we’re getting the highest quality of product possible, and that way we don’t have to be tied up or capitally committed to a piece of equipment that we don’t necessarily know how to run the right way.”

Steve Melito: Makes really good sense. So, in terms of your own workforce, how many people do you have working there, and where do they come from? What kind of skills do they need to have?

Russ Grotto: So right now we’re up to 22 employees. 20 of them are at our Tuckahoe facility in New York, and then we actually are in the process of getting set up another facility down in Gastonia, North Carolina. That’s more long- term for that. But as the demand has grown for tolling, we’re super residential, so we don’t have any rail access, we can’t do bulk truck unloading. So we’re kind of limited by our geography. A lot of the stuff for tolling comes down to the trucking rates as well. So we’re kind of focused up here. We do have, the salespeople are obviously trained, and then the technicians and stuff downstairs, we typically get from trade schools and stuff like that. Otherwise, we’re big on just hiring local. Friends of friends, family members of people that have worked with Bob since the inception of the company for that and we’re big on just treating employees right. We figured out that, ” Hey, if you pay employees a little bit of extra money, give them good bonuses, that they’re going to take what you do a lot more personally for that.” Because we’re small, so it’s only 20, 22 people, it’s not this big corporation. So the employees recognize that what they’re doing has a direct effect on the ability and the growth of the company. And they take it personally too. And we’ve been able to kind of foster that sense of, not to sound cliche, but almost family for that where, hey, everyone knows that everything each person is doing has a direct effect on the bottom line and Elcan, being me and Bob are the first people to say, ” Hey, come the end of the year you guys, the employees, are going to be the first ones to see that money” as well. And we kind of created this environment where it is, we’re all in this together type deal. And a lot of these employees have been with the company for over 10 years. We’re big on spending the extra time to train someone and train them right. And give them the opportunity to learn rather than just being like, ” Hey, this guy’s not working out, let’s firing him.” Anyone can fire someone. We’re big on teaching people the right way to work. And it ends up, in the long term, with them being a lot more committed to Elcan and caring a lot more about the job that they’re doing.

Steve Melito: Now, you’ve got a very capital intensive operation. You’ve got some high quality workers. Have you received any assistance over the years from New York state? Have they helped you to move, or helped you in any kind of way?

Russ Grotto: No, we have not, unfortunately. We haven’t really had the need as much for that. We did look into some stuff. So, like before the 2016 election, there was no manufacturing at all. No one was sending us anything at that point. We considered it. But no, we’ve kind of been able to just do it on our own for that. There’s a lot of companies, like I said to you before, especially with this stuff going on with COVID-19, there’s a lot of companies that need that funding more than we do for that. And I don’t think it’s right for us, in terms of state loans, to be applying for a lot of that stuff, because there’s small startups and stuff that need that money in order to get off the ground. And thankfully Bob, before I came in, did all the legwork, so I’m not stepping into a startup. The company’s been around for almost 30 years now for that. So no, we have not taken any money from the state. We are looking at some stuff for the COVID- 19, just because, I don’t know, this is weird and nothing like this has, obviously, ever happened. And we’ve been experiencing major drop- offs and delays and stuff like that, from stuff that’s no fault of anyone. It’s no one’s fault. It’s just stuff that happened. And now the truckers don’t want to deliver to our area because, we’re so close to New Rochelle. And plants don’t have people to load the trucks, and so on and so forth. And it’s been this whole downstream delay for everything, to say the least.

Steve Melito: Yeah, it’s tough. So this question may have been easier to answer before COVID- 19, but where do you see the business five years from now? I mean, if you can look beyond what’s happening right now.

Russ Grotto: Yeah, so of course it happens when we started off to probably what’s our best year in the company’s history. Of course in March then everything starts to fall off and drop dead. But I don’t know, sometimes you get challenged in ways like that and we view it as, “Hey, let’s turn this into a positive.” I think our growth is really going to be on the toll processing side. And we have a unique technology that we’re the only ones that have. And seeing is that we help manufacture that technology as well we’re able to keep a leg up in the industry. All the companies we compete with selling screening services, screening machines, do not do toll processing. We’re the only ones that actually use the same equipment that we sell. So all the other toll processors are buying standard vibratory equipment and then trying to run it. And it’s like running on a 1970s Ford when you’re going against a 2015 new Ferrari, whatever it may be. So I think the toll processing, combined with what I said before is a lot more companies are averse to buying equipment now for that. So the machine sales will be the machine sales, and those will come and go with the seasons. But in terms of toll processing, I think you’re going to start to see a lot more outsourcing of projects by these big, whether it be chemical manufacturers or metal powder companies, or wherever it may be. And hopefully, if we’re able to get in contact with the right people and advertise ourselves the right way, when people do go looking for that service when the time comes for that, that they’re able to find us. So, like I said, we’re opening a new facility in Gastonia. My goal for my life for the company is to open two more facilities after that, and kind of strategically locate them throughout the US. The need for fine sieving isn’t going anywhere. That’s just the nature of the beast for it. If anything, it’s only going to get finer and finer as time goes on. And we’ve kind of already positioned ourselves to be the guys when it comes to fine screening. So hopefully as all these circuit boards and whatever, the applications get smaller and smaller, the requirements for the powder get smaller and smaller as well. And I think we already had been positioned for that. We kind of saw it once 3D printing came along, that we are already in the right place at the right time for the market. So our goal is, right now, to kind of continue with that and look ahead and develop and find new markets that have a need for this as the need for these markets gets finer and finer. It might not be three or four years until the graphene market even starts to develop. But it’s a market like that that requires really fine materials. And if you’re able to look ahead and say, “Hey, if we can get our foot in the door with some of these companies that are really small right now, if this market does explode, then in five, 10 years we’re going to be the people that they rely on.” So we never turn anyone away. One of our big things we do, if they only have two pounds of powder, that’s fine for us. We’re willing to take the time and test on that, because two pounds, a lot of the times we see, if it works, turns into a box. And then it turns into a skip. And then all of a sudden you get a half truckload and then a truckload, and stuff like that. So we’re really big on working closely with developing and small businesses, to almost hold their hand and get them into the process for that, and help them grow. We have a lot of patience with companies and that ends up leading to a lot longer- term as well. So I see a lot, and hopefully limitless growth in the toll processing side of things. The machinery, it can only get so fine. Screen cloth right now is only manufactured down to five micron, but below that there’s not much more room to go. So I don’t know if we’ve reached our market cap for that or not. Hopefully we haven’t. But I think in the next five years, definitely tolling, tolling, tolling is where we see ourself growing.

Steve Melito: All right, good. Time will tell. And it sounds like things are going really well at Elcan Industries. Russ Grotto, thank you so much for your time here today. We’ve enjoyed having a chance to talk to you. I’ve learned a lot, and I’ve appreciated what you’ve taught me. So listen, if you’re out there and you’re wondering, ” Could I get onto this podcast? Do I have a story to tell?” What I can tell you is reach out to us here at FuzeHub, let us know. We would like to talk to you. We’re looking for interesting people with interesting technologies to talk to for the podcast and moreover, if you are a manufacturer, inventor, or entrepreneur who is in need of assistance, FuzeHub is here to help. We are the statewide Manufacturing Extension Partnership Center for New York state. So no matter where you are in New York, we’d like to talk to you. Easiest way to do that is to visit our website, www. FuzeHub. com, look for the solutions program link, and remember to request an expert consultation. And then you and I will probably have a conversation about what’s going on at your company and how, hopefully, New York state can help. So on behalf of New York State Manufacturing, Now, I’m your host, Steve Melito, signing off.