Employee-owned Pacific Regeneration
Technologies (PRT) has quietly grown to become the largest container seedling
producer in North America
PRT recently announced that it plans to
build a seedling nursery in Nevada and contract a cold storage facility in
Oregon to increase their presence in the western seedling market. The Oregon
storage facility will put the company’s completed products close to customers in
the Pacific Northwest, providing for convenient deliveries during the planting
By Paul MacDonald
Regeneration Technologies (PRT) had an interesting road show for investors when
the company was raising capital for the PRT Forest Regeneration Income Fund a
few years back. One of the company’s founders, Ev Van Eerden, handed out small
spruce and pine seedlings to the hard-to-impress market analysts and pension
fund managers attending the PRT presentations in various business centers. In
the end, the hard-nosed business types at the meetings were won over by the
company’s good news story—it’s all about growing trees— and PRT was successful
in raising millions of dollars for its expansion.
PRT’s earnest and refreshing approach was, and
is, a true reflection of the employee-owned company. But that does not take away
from the fact that it has quietly grown over the past ten years to the point
that it is now the largest container seedling producer in North America. In
2002, the company produced over 130 million seedlings from its 13 nurseries.
Last spring, PRT produced its billionth seedling.
Quick Start and Still Expanding
The company had humble beginnings. It was started as a result of a decision by
the British Columbia government to get out of the business There is a huge
potential for containerized seedlings—which PRT specializes in—in the U.S. Less
than 10 percent of seedlings in the U.S. are grown in containers, bare-root
being the method of choice. of growing seedlings in the late-1980s. The
quickly-formed PRT won the resulting bid, and six nurseries were sold to the
company. Heading up PRT and the buyout effort were long-time silviculture branch
managers Charlie Johnson and Ev Van Eerden, along with managers of most of the
nurseries. Since then, the company has expanded its operations.
It recently constructed a seedling nursery in
Nevada, and a cold storage facility in Oregon. On January 8, 2004, the company
purchased a 28-acre nursery near Portland, Ore., with over 350,000 square feet
of greenhouse space, plus cold storage and processing buildings. And it is
investigating the purchase of a 20-acre site in the Pahrump valley, a region
west of Las Vegas. John Kitchen, who recently took over from Ev Van Eeerden as
company president and CEO, noted that the expansion is part of the company’s
strategic plan for growth and that a Nevada location offers strong benefits.
“Nevada offers unique climatic advantages for high quality and cost effective
seedling production. Nevada’s high sunlight hours and excellent business
environment provide a great location for container seedling production.
The Oregon storage facility will put our
finished products in close proximity to major customers in the Pacific
Northwest, providing for convenient deliveries during planting season.” The
company said it intends to construct growing facilities at the Nevada site, with
an initial production capacity of 750,000 seedlings. “We will carefully ramp up
production as we develop the facility to take advantage of the climate, and
build on the experience gathered during the last two years of testing,”
commented Kitchen. The cold storage facility is located in Medford, Ore.
Opportunities and Challenges of Western
The Western U.S. is the logical place for expansion. Only about 8 percent of
PRT’s seedling production, or about 10 million trees, currently goes into the
U.S. That represents a very small portion of a very big market. But it is a
market that needs to be handled cautiously, Kitchen notes. “We have some good
customer relationships and we would like to build on those.” The seedling
situation in the U.S. is quite different from other areas where PRT operates.
The majority of seedlings are still grown by
the big forest companies, such as Weyerhaeuser and International Paper.
Governments, mainly through state nurseries, are also major players. In recent
years, large corporations have become focused on so-called “core competencies.”
They take a hard look at what business they are really in, and as a result,
often contract out, sell or break off other operations.
An example would be Georgia-Pacific, which will
be separating its consumer products and packaging business, and its building
products and distribution business into two publicly traded companies. As part
of this re-evaluation, G-P merged its timber operations with Plum Creek Timber
Company. Another trend is the development of timber investment corporations,
like John Hancock.
These trends could pay off for PRT if forest
companies come to the conclusion that their core competencies are in producing
lumber and paper, and decide to exit the tree growing business. Growing
seedlings does not have to be part of their business, says Kitchen. “I can’t say
that we are seeing that kind of thinking quite yet, but I think we will see it.
There have been rumblings.” Kitchen is quick to add that companies, such as
Weyerhaeuser, have long-established seedling programs. And just as it took a
number of years for companies in other areas to decide to contract out seedling
production, it will likely take years for U.S. companies to make that move.
But when they do, the market is huge.
Advantages of Container-Grown Seedlings
There is also a huge potential for container-grown seedlings, which is a
specialty of PRT and pretty much all that the company produces. Forestry markets
in other countries have made a gradual move to container-grown seedlings, while
the U.S. grows less than 10 percent of its seedlings in con-tainers—bare-root
still being the preferred method. Kitchen and his colleagues at PRT believe they
have a good story to tell to American companies about containerized seedlings.
The containerized approach produces more
consistent, and higher quality, seedlings. The future, they believe, lies in
growing seedlings in containers. “That’s the wave that we would like to be on in
the market here because we know how the containerized seedlings system works.
Our approach is to position ourselves as a player in that market and help that
move to containerized seedlings happen.”
Further driving this move toward containerized
seedlings, Kitchen believes, are the quality control programs in place at the
forestry operations of American companies. The companies are involved in
improvement programs, cross fertilizing different trees, and carrying out
research and development into what are the best seeds. “As that value
increases,” explains Kitchen, “the whole delivery system becomes more important.
You’re going to want the entire system to work really well. “As the companies
strive to achieve better results with higher quality and more highly developed
seeds, they are perhaps going to want to look at containerized seedlings as part
of the process of delivering a better product that will have a higher survival
While more expansion beyond the site in Nevada is likely to come, Kitchen as new
CEO makes the point that the company’s overall emphasis will be on providing
service to existing customers. “I believe it’s important in a downturn to do a
good job with your existing customers. We want to position ourselves for the
future, but we also want to make sure we are doing the right things for
customers today.” They supply seedlings to many leading forest companies, and
want to make sure that these customers are kept happy. The forest companies, all
of whom are now facing financial pressures due to mediocre markets, are looking
for new and more efficient ways of growing trees, planting trees and managing
forests. In some situations, PRT acts as consultant to their clients, offering
advice on what type of seedling might work best in certain growing conditions.
When it comes to growing trees, local knowledge is king and everything is
site-specific. Having a nursery in a region is important, as is having
Research and Development
Kitchen notes that there is always going to be room for improvement in growing
seedlings since it involves an evolving area—biology—and sometimes unpredictable
factors—weather and agriculture. Kitchen sees his role as the CEO of PRT as that
of someone who will continue to lead the move to innovate and create value for
customers. Creating value means they have to invest in areas where the payback
is sometimes not certain. He cites research work that they are currently doing
in hardwoods. While it is not adding to the company’s bottom line, it positions
the company as a source of information, and perhaps partnering, for their
customers down the road. “Our focus is to stay positioned properly through this
downturn. We don’t want to cut all the research and development, or the people
that we are going to need. We need to protect our core. “And I think our company
and our people have a role to play in helping the industry get its message out
about reforestation. There is a lot of misinformation out there.”
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