Water disrupts the West: Will business begin to look elsewhere?

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Until we have a government that understands we’re running out of water, we’ll get nowhere in the water discussion.”

–Participant in Colorado Cleantech Industry Association, Deloitte-sponsored ‘No Water, No Energy’ seminar, Denver, July 2012

One can say this about our current level of understanding about our water future: it’s incomplete, but getting better. We’ve known for some time we’re on an unsustainable path in the West. The Bureau of Reclamation’s Colorado River Supply and Demand Study has already determined that throughout the seven-state Basin, demand exceeds supply most years. Reservoir storage, and the occasional wet years like 2011 help meet short-term demand. This fall, we’ll learn more on how the Colorado River system will stand-up to multiple supply and demand scenarios they’re modeled in the study’s final phase.

We may also see then, as our commentator suggests, whether state and local governments fully understand the scope of the challenge.

But as the gap between supply and demand from the Colorado River grows – its forecast by the Bureau to be 4 to 6 million acre-feet by mid-century, roughly one-third its entire annual volume – the long-term implication is inarguable: change is coming to the Southwest U.S. Have water today? You may not in the future – and for some the near-future. We may not be “running out,” but a radically new supply regime could transform our economy – with new water have’s-and-have not’s, new means to regulate ownership and distribution, new projects and infrastructure, and profoundly, new industry that displaces water-intensive business that simply can’t operate in the West.

How disruptive will the change be? Among the questions:

Is business ruling out the West?

Water prices are rising. Circle of Blue, a global water information resource, reports an 18 percent rise in 30 major U.S cities since 2010 – and a 7 percent increase last year alone. In south metro-Denver, in the suburbs of Phoenix and Las Vegas, in Albuquerque, they’re certain to rise more for consumers and business.

At the same time businesses are refining they way they assess water-related risk. The value of water – or the lack of it – is increasingly quantified. For businesses looking to expand or relocate here, the prospect of rising water costs and supply shortfalls may add up to trouble for economic developers in the West.

For agriculture, how little is enough?

Ag’s the biggest user of water in the West by far – three of every four gallons. As it feeds the country, agribusiness is also selling water to urban users, to energy, to developers. But for how long? When will ag begin to push back? Of course agribusiness is already stressed – Weld County farmers in northeast Colorado can attest. At what point will growing communities, or shale gas producers, be asked to find water elsewhere? Who will water growth and energy development in the West?

Can local utilities survive?

Water delivery and wastewater management in the United States is a decidedly local affair. A dizzying maze of water districts, associations, and civic authorities manage a network of over 55,000 water utilities and about 16,000 wastewater facilities. In Colorado alone, around 300 separate entities deliver water to residents and businesses.

But can the interests of local utilities dovetail with those of regional planners? Northern Water in Fort Collins, Colo., has a bright future, serving thousands of users in northeastern Colorado via a huge system of water assets including the Big Thompson and Windy Gap projects. Less than a hundred miles south, along I-25, the water future of communities like Castle Rock and Parker is far less certain – some would argue in crisis. Is there incentive for Northern to act in Parker’s interest? The governor of the state might say yes; residents of Ft. Collins, not so much. ‘Local control’ may hamper collective planning throughout the Southwest.

Also, is current water law incompatible with regional planning?

Coloradans can’t capture rain water to irrigate lawns or otherwise use the water. It’s already spoken-for. A user senior to you or me claimed a prior right, put the water to beneficial use, and therefore owns it. Furthermore, if that users stops putting the water to use, they’ll lose their right in some cases.

Arguably, there’s little incentive to conserve. Or share. Or contemplate a new conservation paradigm.

On a regional level, the Colorado River Compact, the law of the river in part, is straining under the weight of inexorable demand, of ninety years of change within the Basin. As durable and constructive as the Compact has been, questions continue to be asked about its relevancy as a blueprint for future allocation.

What’s the future of the West’s great dams?

It’s become fashionable to contemplate the decommissioning of the great dams along the Colorado River. But without them, meeting regional demand during dry periods is hard to imagine, all things remaining equal. In fact more storage is forecast to be needed by local and state planners.

The massive impoundments are also terribly inefficient. It’s estimated a million-acre feet of water evaporate from their surface every year. In today’s American West, this represents a huge amount.

Water issues: at the forefront for business in the West.

More next time on how businesses are assessing water-related risk.

(Thanks to Steven Maxwell’s TechKNOWLEDGy Strategic Group for statistics quoted here.)

A new business agenda on water

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With a slim snowpack serving only to reiterate Colorado’s long-term water challenge, its clear that reaching out to business to talk about water is increasingly important – but doing so in a meaningful way is difficult. Generally, business hasn’t been involved in the water discussion.

There’s every reason to believe they will be.

The system we rely on, the network of public providers that manage the complex web of water rights and delivery, is in flux, straining under the pressure of inexorable demand. And the scale of the challenge, of meeting growing demand for municipal and industrial water with finite or even diminishing supplies, is prompting a system-wide reassessment of how states and communities will meet their obligations.

The water landscape is changing. And business will be forced to get involved.

“Without a seat at the table,” says Jim Kuiken, SVP at global water infrastructure leader MWH, “their future will be decided for them.”

Business leaders in agriculture, energy, real estate, and manufacturing, to name a few, are engaged; their future is water-dependent and state and regional supply shortfalls are forecast in much of the West. Agriculture, especially, is in the bullseye. Ag is the largest single water – roughly 85% of current demand – and also the one dependable short-term new supply for urban users. Ag “transfers” are watering new development throughout the West.

But how long can the ag sector transfer water before its business is fundamentally changed? What impact will a diminished ag sector have on food production, on land-use, on quality of life issues in ag states and the economy at large?

The regional boom in gas and oil production is transforming America’s energy landscape. Energy development is water intensive. Large-scale gas and oil development requires more water. Other business segments will be the source – like ag. Colorado’s natural gas boom is a by-product, in part, of agricultural water. For how long?

(Developers of nuclear power face similar potential limitations. Utah recently approved a new 50,000 acre-foot diversion from the Green River for a new nuclear facility. A coalition of business and environmental voices oppose the allocation.)

When real-estate reawakens, as it will, water will replace finance as a significant barrier to growth in Colorado, Nevada, and Arizona, and other locales in the West. No-growth is real-estate’s ‘nuclear option’. How close to no-growth edicts are we in places like southeast-metro Denver and other locales? Don’t believe water can impact development? Developers of Sterling Ranch, or the Canyons, both in Douglas County, may disagree.

On the western slope in Colorado, and in communities along the River throughout the Basin, business that relies on steady, regular flows for their livelihood are attuned to the major fight developing over the future of the River. New alliances are forming to join the battle, like Protect the Flows, a coalition of business and environmental interests in western Colorado. They generally oppose new appropriations from the River, though Upper Basin interests may be entitled to more. Who’s right? Business, or, well, business that needs the water?

What impact can new corporate sustainability initiatives have on reducing demand and extending current supply? Should water replace energy conservation as the compelling ‘green’ initiative for business? If so, how?

Without a sustainable water plan – one that business supports – can the West promote its otherwise brilliant future? Or will industry rule out Colorado and the West and locate elsewhere?

Business will joining the water discussion to address these and a dozen other questions.

Search for consensus elusive in Colorado River Basin

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The tale of the Colorado River has become tangled in part because of its evolution into two distinct water realities, that of the Upper and Lower River Basins. One operates in a deficit relative to its annual water allocation, the other a surplus. Arizona, Nevada and California are managing the river in reverse, backtracking to limits long since exceeded. Some of the water belongs to the Upper Basin, its origin. Indifferent before, these headwater states now cast a wary eye not only toward the Lower Basin but to each other’s plans to develop more from the river. Self-interest is replacing the collegial attitudes of the past.

To further complicate matters, water interests within the Upper Basin states have yet to fully reconcile their differences. This is certainly the case here, in Colorado, but it is played out similarly in states like California.

I described the rising tensions in the headwater states to Rita Sudman, Executive Director of the California Water Education Foundation, who calmly replied via email, “I think most people involved in the Western water debate will agree that flexibility is the key, that the ability to trade, transfer and make new types of arrangements including different types of storage, more conservation and deals, is all part of the mix to get more water to certain users.”

In other words, welcome to the party.

California is steeled not only to rough and tumble inter-basin river tussles with states like Arizona but to the type of in-state competition simmering in Colorado. Sudman’s most recent Colorado River Project River Report outlines the embattled state of the Quantification Settlement Agreement (QSA), written to “settle California’s chronic overuse of the Colorado River” as it winds its way through a predictable litany of court challenges.

A divisive component of the QSA, one that may ring familiar to Colorado planners, involves a “water conservation/transfer agreement between Imperial Irrigation District (IID) and the San Diego County Water Authority.” IID manages water for California’s verdant Imperial Valley, which comes entirely from the Colorado River. It’s a California ag gem that shines to the tune of more than $1 billion a year in crop production.

But as with Western Slope interests here who chafe at water transfers east, there’s push-back. QSA “is not popular in the Imperial Valley, where proprietary feelings about water have always run strong and there is a belief that the QSA was foisted upon the Valley with less than favorable results.”

Michael Cohen, senior research associate with the Pacific Institute, adds, “Some people don’t want to see any water leave the valley.”

Familiar indeed. Move the conversation a thousand or so miles east, into the Rocky Mountains along the same river, change the valley reference from Imperial to Grand, and the sentiment is nearly identical.

Colorado is also hard at work to establish more modern water-sharing mechanisms. Denver Water and 40 Western Slope water suppliers recently hammered out the Colorado River Cooperative Agreement, signed in May. Among the provisions of the so-called “global” agreement is a commitment that “any new water project by Denver Water in the Colorado River Basin will be developed only in cooperation with those entities impacted by the development.” In others words, we’ll stop taking Western Slope water without asking.

What’s changed is that for the first time, Colorado faces a water supply gap: There won’t be enough to meet the needs of users, at current levels, in the near future. Collaboration is in everyone’s best interest.

But the agreement may quickly be tested.

As mentioned, Colorado and the other headwater states are entitled to more water. Colorado’s share may be as much as a million acre-feet, almost a third as much as it is using now – lots or water by any estimate.

Yet there’s a lack of consensus among officials here whether the state should aggressively pursue this water. There’s fear of a Compact “call,” where future data indicates we miscalculated, are using water earmarked for the Lower Basin and are asked to curtail use. There’s deeply rooted opposition to the prospect of more growth along the Front Range. Certainly any new supply will find its way to urban users and developers.

And there’s a fear that further west-to-east diversions of any kind will diminish business and lifestyle prospects in Colorado’s Western Slope communities. Without certainty as to how the state would move to develop more water out of the river, and despite the “global” agreement, opposition to developing the state’s remaining Compact allocation may well materialize – from within Colorado.

In California or Colorado, in the tale of the Upper and Lower Basins, the search for common ground – among basins, states, friends and neighbors – continues to be elusive.

Sterling Ranch ruling highlights Front Range water supply issues

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Colorado’s business community was reminded again last week that water threatens the region’s economic prospects. District Court Judge Paul King ruled that the Sterling Ranch development in Douglas County had not lined up sufficient long-term water supply pursuant to a 2008 statute requiring “a water supply that will be sufficient for build-out of the proposed development in terms of quality, quantity, dependability, and availability to provide a supply of water for the type of development proposed…”

Despite protests of the Denver Post, King’s decision isn’t an indictment of Sterling Ranch, but a reasonable reading of the statute.

The proposed community southwest of Denver has been lauded as a water-efficient, sustainable community of the future, but it’s also a poster child for the challenge facing the south metro area of the Front Range. Most Douglas County communities rely on non-renewable, diminishing aquifers. By DC standards, Sterling Ranch has lined-up a diverse water supply, including an agreement to buy 190 million gallons of water annually from Aurora to support the 12,000 or so homes planned for the community. King said it wasn’t enough.

Harold Smethills, the development’s managing partner, promised to move ahead. King’s decision seemed to surprise others. David Tschetter, chairman of the Colorado Association of Homebuilders, quoted in the Denver Post, suggested the ruling “will have a negative impact on development, no question…Who knows what water-usage needs are going to be 30 years from now?”

But if pressed, Tschetter would agree that Douglas County’s water problem is spooking development, King’s ruling notwithstanding. Despite membership in a loose coalition called the South Metro Water Supply Authority, most communities in DC are pursuing their own water plans. Some are faring better than others. Aurora, in a position to sell water to Smethills, may be the region’s most innovative water operator. None, arguably, have developed a comprehensive program that guarantees residents and business renewable (non-ground water), affordable, sustainable supplies – and mitigates regional concerns.

There’s a chance then that Tschetter, Smethills, and others, like those on the Douglas County Board of Commissioners, are feigning surprise. Without a plan floating around Douglas County that would satisfy a close reading of the statute, King’s ruling may be doing everyone a favor by highlighting the problem – the lack of a statewide roadmap that would provide developers a satisfactory backdrop to pursue growth. And in the case Sterling Ranch, very responsible growth.

If it’s a clarion call the developers seek, I’ll provide the amplifier: water supply issues will increasingly vex not only water-intensive businesses like ag and energy, currently in the bullseye, but the general business community. As a result, business leaders would do well to contemplate a pro-business water platform around which economic interests can rally.

Remembering Bob Schwab

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ColoradoBiz lost a meaningful part of its past this week. Former editor Bob Schwab passed away.

Born and raised in Chicago, Bob Schwab was an inveterate newspaper man turned magazine editor. If he had his druthers, he’d probably have lived a decade earlier, been a Mike Royko contemporary at theSun-Times, or Trib, and retired on a pension like those before him.

He certainly belonged. Bob was a talent, a working man’s writer and journalist who put in the time and earned the right later in life to be a columnist and editor, to have an opinion. He was passionate – and large – 6-foot-3 of irresolute blond hair and white-beard. His poetry was bare, raw but powerful. Potent. Chicago.

He arrived every morning with a paper under his arm, usually the Wall Street Journal, and made no pretense of working until he’d pored through the Journal, the Post, the Rocky, the New York Times. Unlike the self-styled media critics with whom he battled, he relished our media plurality; he was stained with ink.

We argued, owing to strong personalities, and to Bob, heartfelt differences. For him some things weren’t to be compromised. But we agreed early on that ColoradoBiz had lost its edge and that the way forward involved a commitment to great editorial. Our collaboration bore fruit. In 2006 we won the Morton Margolin Prize for Distinguished Business Reporting from the University of Denver Daniels College of Business Bob liked to remind me it was his parting gift, as he left the magazine shortly after.

Ironically, a disagreement with me over a magazine editorial compelled Bob to resign fromColoradoBiz, though I suspect he’d had enough of 21st century “journalism.” A year or so later, he was diagnosed with cancer. I wish we’d been there for him.

RIP, big fella.

American Apparel president Brad Gebhard to keynote Colorado Apparel + Lifestyle Manufacturing Summit

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Brad Gebhard, president of Los Angeles-based American Apparel, will keynote the 3rd annual Apparel + Lifestyle Manufacturing Summit next Wednesday, September 28 in Denver, Colorado at the newly remodeled McNichols Building in Civic Center park.

Gebhard appears at an interesting time not only for the American Apparel, North America’s largest apparel company, but also for the industry, said Bart Taylor, publisher of CompanyWeek, host of the event.

“The 3rd annual Summit occurs at a pivotal time for apparel and consumer product manufacturing and for local brands and communities,” Taylor said. “So many entrepreneurs want to launch lifestyle and fashion brands here, in the West. And established companies are evaluating whether domestic production is now viable. The question is, have we reached a point where today it’s possible to go ‘back to the future’ and support American industry in a meaningful way?”

American Apparel is today evaluating this question on a larger scale. The company has implemented a major reorganization after ousting it’s controversial founder, Dov Charney, and Gebhard, alongside new CEO Paula Schneider, have set the company on a new path as questions persist about AA’s ability to continue manufacturing in Los Angeles. California’s new labor laws have made that prospect increasingly challenging.

It all happens as industry players in Colorado are working hard to reconstitute supply-chain resources that would make apparel and consumer product manufacturing competitive on an international stage. Gebhard will join other company founders to discuss a blueprint for growth in Colorado and the West, and the future of American apparel manufacturing.

Apparel and consumer product designers, brands, production firms, business advocates and other community representatives are invited to attend the Summit. Industry professionals attending the Outdoor Industry Association Rendevous conference, or COILS, hosted by the Colorado Office of Outdoor Recreation, are also invited to attend. Registration fees for either event also included attendance to the Summit.

For more information or to register, click here, or contact Leslie Pera, CompanyWeek media, at lpera@companyweek.com, or 303-522-3906.

Alicia Knight Cunningham joins CompanyWeek Utah editorial team

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FOR IMMEDIATE RELEASE

SALT LAKE CITY, September 30, 2015 — CompanyWeek Media announced this week that Alicia Cunningham has joined the content development team as business writer and market ambassador.

Bart Taylor, founder and publisher of CompanyWeek, said Knight will lead local content development efforts with the aim of highlighting Utah’s growing manufacturing sector, in keeping with the editorial mission of the two-year old media franchise.

“We’re excited that Alicia will be our editorial point person in Utah, something we’ve really needed to more effectively chronicle the contributions Utah manufacturers to the regional and national economy,” Taylor said. “To have found someone with her background is of course a huge bonus.”

Cunningham graduated from Brigham Young University with a B.A. in Public Relations and a B.A. in Political Science. She also graduated from George Mason School of Law with a specialty in International Trade and is an Associate Member of the Virginia Bar. Cunningham spent many years in politics and has worked for a state party, two senators and a congressman as well as the Legislative Counsel for a major trade association. She now divides her time raising four (gorgeous!) children and working as a business and legal writer.

Taylor said Cunningham will develop editorial profiles of growing Utah manufacturers, coordinate photo shoots with the publication’s network of local photographers, and act as liaison for communications between industry and market stakeholders and relevant contacts at CompanyWeek.

Cunningham’s work debuts this week with a profile of Salem, Utah’s Bear Country Bees.

CompanyWeek is the “voice of the Rocky Mountain manufacturing economy,” focusing on companies and business leaders in Colorado and Utah shaping the modern manufacturing economy. A Utah-specific email newsletter, linked to a content hub featuring Utah businesses, is the core, digital media product. Plans are to host market-specific events in 2016.

CompanyWeek Utah was launched in cooperation with the Utah Manufacturing Association, the longstanding resource and advocate for regional manufacturers.

Contact Alicia Knight Cunningham at aliciaknightesq@yahoo.com for more information, or Bart Taylor at btaylor@companyweek.com.

How COVID-19 is Impacting Manufacturers, Part II

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In early April, CompanyWeek checked in with several manufacturers about pandemic-related impacts.

A little more than a month later, here’s part two of the series. We asked manufacturers for a quick read on how COVID-19 is impacting manufacturing.

Highlights:

  • PPE has provided a bridge for some manufacturers, though suppliers project hospital providers will return to buying from China.

  • Interest in on-demand manufacturing in consumer-related manufacturing is again heightened. Can suppliers deliver?

  • The crisis will only increase interest in 3D printing and other technology.

  • Consumer product manufacturers in sporting goods have taken a significant hit.

  • Natural and organic food brands stand to gain — at least those with momentum before the crisis.

  • Distillers and brewers face an existential threat after embracing taproom-centric strategies.

Here’s a sampling, in their own words:

Contract Manufacturing

Connie Huffa, co-founder, Fabdesigns, Agoura Hills, California
Products: Knitted fabrics

We work with many brands, individuals, and companies that want to make 3D textile products because they save almost all of the production waste that goes into landfills during the production process. What we’ve been seeing is a movement away from seasonal merchandise development and a flock toward seasonless products.

We’ve also experienced companies interested in on-demand manufacturing, which is making things when they’re ordered and not warehousing literally tons of perishable fabrics.

We’ve also been hearing rumblings of made-to-measure for years. The issues challenging the marketplace are that of fit, since fit is subjective and each individual is finicky. There are companies trying to make products to measure in virtual reality, but the challenges are vast in making sure that what the customer sees on the screen matches not only their virtual expectations, but their fit expectations. If returns are a problem now, they will likely increase with made-to-measure. Made on-demand is different and that seems more viable.

The entire manufacturing industry, including fashion, is indeed headed to a new world of buying, making, and selling. It’s about time; there’s so much waste in fashion and manufacturing industries, generally.

Christopher A. Fagnant, president, Qualtek Manufacturing, Colorado Springs
Products: Machining and tooling
We see the continued buildup of medical device and PPE safety stocks driving production demands for a long time. A potential silver lining to the COVID crisis will be the improved speed with which medical device OEMs and tier one suppliers are working to approve and validate IQ, OQ, and PQ. Historically, this has been a slow, arduous process, but the current situation has opened people’s eyes to the inefficiencies inherent in “the way we have always done it.”

We don’t see massive changes from how we operate today, just an imperative to execute on strategies like cross-training employees, implementing flexible machine automation, and upholding quality systems that can be applied across industry sectors. Everyone’s favorite buzzword is “pivot.” Now is our opportunity to see if we can pivot quickly enough to onboard new work and position ourselves for the 2021-22 resurgence.

Marta Miller, co-founder, Lefty Production Company, Los Angeles
Products: Contract apparel manufacturing
I definitely think we’re going to see increased demand for domestic manufacturing. In fact, we’re already seeing it from brands that have finally had enough of the heartache of producing overseas. It’s really been one problem after another for companies that rely on a Chinese supply chain.

The brands that we’ve seen perform the best during this time are the ones that have loyal direct-to-consumer businesses. These brands are not relying on brick-and-mortar stores. Brands like these need to be extremely responsive to their customers and they need to order in manageable quantities. Being in Los Angeles, we’re able to offer that to them.

And of course, a huge change in fashion is face masks everywhere. The innovation and creativity around face masks, which have suddenly become a necessary accessory, have really just begun.


Industrial & Equipment

Trent Brown, president, Masterbrands, Salt Lake City
Products: Industrial uniforms

We were able to pivot our business very quickly to medical PPE early on in this pandemic. Because we have had manufacturing here in Salt Lake for over 28 years, Masterbrands was uniquely positioned to help fill some of the shortages left by the Chinese manufacturers.

I’m a bit cynical about whether or not the medical industry will actually reshore medical PPE as I’ve been in business through several of these events and every time it’s pretty short-lived. We seem to have very short memories here in the U.S. and I expect everyone will go back to buying their PPE from China.

The hospitals turned their buying decisions over to buying groups many years ago and the buying groups have a lot at stake because buying from China allows them to mark up the goods so they can make a profit when they sell to the hospitals. Truth is that the hospitals could buy direct from U.S. manufacturers and probably pay the same without the buying groups markup.

Marcia Coulson, president, Eldon James, Denver
Products: Medical devices and components

In the last year, we opened a new 93,000-square-foot facility in Fort Collins to answer the call to reshore manufacturing of medical devices. What’s been difficult is changing the mindset of hospitals. They are very happy to buy from China if that means the lowest price for the hospital.

The challenge is we cannot manufacture in the U.S. and offer hospitals the same prices they are receiving from China. We would like to think we can automate to become more efficient, but not if we can’t get the sales volume to justify the automation.

I fear that hospitals will continue to buy from China because they are under pressure to buy the least expensive product. We need help from the government to level the playing field. Tariffs for medical devices, drugs, and bioscience products must be put into place to make Chinese products the same price as what we can manufacture in the U.S. This will prevent hospitals from falling back into buying the cheapest medical device and drug for their hospitals.

We are prepared at Eldon James and at WilMarc to scale our manufacturing to meet the demand of reshoring. We hope this is the wakeup call needed to source critical products from U.S. manufacturers.

We are very hopeful that we have felt enough pain and uncertainty caused by having our drugs, medical devices, and bioscience products manufactured in China to effect change.

Food & Beverage
Bill Capsalis, CEO, Haystack Mountain Goat Dairy, Boulder, and former president of Naturally Boulder
Products: Goat cheese

The pandemic has created incredible opportunities for natural and organic food brands as the demand for healthy nutritional products has skyrocketed. Most food manufacturers that sell at retail have seen demand for their products double or triple and their online sales have soared from 200 percent to 800 percent over plan.

The biggest challenge facing these brands today now seems to be in the supply chain and distribution network keeping up with demand. Any food brand that is shelf-stable and easily shipped is probably going to see continued sales growth online. Consumers seem to be exploring alternative products as well, including the plant-based meat options already available.

P.T. Wood, mayor of Salida, Colorado, and co-owner of Wood’s High Mountain Distillery, Salida, Colorado
Products: Distilled spirits

The biggest issue we have is that our path to market has shifted significantly. In Colorado, we’re in need of regulatory reform to enable direct-to-consumer shipping. Other states have dropped barriers to shipping direct. (Editor’s note: Five states — Arizona, Florida, Hawaii, Nebraska, and New Hampshire — currently authorize the direct shipping of spirits.)

Like craft brewers, our industry also embraced taproom strategies. As a result, with such a young industry — the majority of companies are under five years — I suspect there will be casualties. To weather weeks and weeks without that high-margin business is a challenge.

We have been able to sell bottles the whole time, much like a liquor store. Delivery and to-go cocktails are new and we are allowed to sell out of the tasting room or deliver or both as long as it is an employee of the distillery.

Consumer & Lifestyle
Brian Fruit, president, Lizard Skins, American Fork, Utah
Products: Sporting tape and accessories

Lizard Skins has not been immune to the impact of the coronavirus. We had to furlough a large percentage of our team, but were able to bring a huge part of them back with the help of the PPP.

Our cycling division is doing pretty well. We are manufacturing and packaging product for immediate sale as well as gearing up for future business. Our sports divisions are quiet. Our sales team is checking in with all our customers to see how they are doing. Most are closed but they appreciate us making the effort to check on them.

We are hopeful we will start to see some sports start up again soon.

During this time when sales have been so negatively impacted, we have worked really hard on designing and creating new products. Our pipeline of products to sell will be incredible for the second half of 2020 hopefully leading into an amazing 2021.

Lizard Skins is a financially conservative company at its core. We hate watching sales plummet, but we are still in a solid financial situation, paying our vendors and employees on time and preparing for the future.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

Where Alchemy Bicycles Manufactures

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Where: Denver, Colorado / Asia

www.alchemybicycles.com

Denver

Founded: 2008

Privately owned

Employees: 12

Industry: Consumer & Lifestyle

Products: Bicycles

Alchemy changed the game by manufacturing composite bike frames in the U.S. Growth is now driving a global supply chain.

Owner Ryan Cannizzaro founded Alchemy Bicycles in Austin, Texas, in 2008 and moved the company to Denver in 2012 to be at the epicenter of the outdoor industry boom.

The decision to move was easier than Cannizzaro’s choice to manufacture composite bike frames in U.S. At that time, it simply wasn’t done, and even today, most bike frames, composite or otherwise, are manufactured in Taiwan for the brands that control the U.S. consumer cycling spend.

That didn’t stop Cannizzaro from embarking on a journey to make composite frames in Denver. As noteworthy the production and process innovations have been, Alchemy’s commitment to local manufacturing and a Denver-based workforce have also distinguished the company.

Where Alchemy manufactures

“Denver manufacturing has stayed pretty consistent,” says Cannizaro. “The same group of guys manufacture all the road and gravel bikes and one mountain bike [out of here]. We made the first full-suspension carbon-fiber mountain bike frame in the U.S., and we still make that model here — a 27.5-inch bike that people can custom paint.”

But growth in the mountain bike category has compelled Alchemy to expand manufacturing operations outside of Denver to keep pace. “We started manufacturing mountain bikes in Asia — three of our four models are manufactured there — a complete assembly plant also managing all our inventory,” Cannizzaro explains.

“For the most part we’re building to order here,” he says. “We’re set up as a shop that manufactures to order. But we’ve been able to team up with a manufacturer in Asia that’s capable of building the exact same bike were building here.”

The factors that pushed Alchemy offshore likely resonate with other outdoor industry brands. “There were several reasons,” Cannizzaro says. “It’s more cost-effective to use a manufacturer that’s set up to build higher quantities. We would have to scale up here with tooling, equipment, and people. With carbon fiber we can compete on the tools and equipment, but it’s more difficult to compete on the labor side. To be able to produce a bicycle at the cost of somebody that’s set up in Asia to mass produce is very difficult.”

Outsourcing production, he says, hasn’t compromised quality. “On the mountain bike side, we feel very comfortable that the frame we’re getting manufactured in Asia was up to our standards — the exact frame we would make here. If doesn’t make sense for us to tool up and make the frame here for more money.”

The R&D process remains closely integrated with manufacturing in both Colorado and Asia. “You want [the frame] as light and durable as possible so the suspension platform can do all the work. We still prototype and test and ride any model that we’re not going to manufacture here, and then we go to the manufacturer in Asia and tell them how we want it built, and that’s done based on us building a prototype here, giving it to our sponsored riders, our employees — anyone that can give us feedback. Once we know exactly how we want the frame made, we have it manufactured.”

What’s next?

Alchemy’s long-term plans involve manufacturing in both Denver and Asia. “On the road and gravel side — the carbon and titanium side — the way we manufacture those bikes and the processes we use, outsourcing isn’t an option,” Cannizzaro says. “We wouldn’t build a bike that way. We put in too many man-hours, too much attention to detail, and the build process we like to use, they won’t do in Asia because it’s not cost-effective.”

He continues, “As we continue to grow with new models, we’ll also continue to look at ways to do it cost-effectively here.”

Also on Alchemy’s innovation agenda is a change in the way the company sells its bikes. “One thing we did at the beginning of the summer, that’s working out in our favor, we went to a direct-to-consumer sales channel. We thought we could control our messaging a little bit better,” says Cannizzaro. “And we feel that the bicycle industry is making that shift where consumers are more comfortable buying from a website, whether you ship it to a bike shop where it’s assembled or we just assemble it here and ship out a complete bike.”

Plus, he notes, “It was hard to fund the [account] receivables going through the channels. The retail shops expect to be financed with inventory for quite some time. We were funding it as we were growing, but our receivables were going through the roof. We just didn’t feel that for the size of the company we are, we could fund the receivables as we grow.”

Another benefit of going direct: “It also allows us to offer a better specification for the bike.”

And for Cannizzaro and Alchemy, it always comes back to the bike.

Where Azure Furniture Company Manufactures

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Where: Denver, Colorado

www.azurefurniture.com

Founded: 2012

Privately owned

Employees: 6

Industry: Consumer & Lifestyle

Products: Furniture

New owners Ricky and Bernhard Opitz eye expansion for a Colorado furniture brand built on beetle-kill pine.

Corbin Clay founded Azure in 2009 on the idea of transforming beetle-kill pine into handcrafted, heirloom-quality furniture. In early, Clay sold the business to the couple in 2019. Bernhard brings a deep manufacturing resume and big plans for growth to the respected brand, plans that include investments in Denver-based manufacturing operations and new products for commercial markets.

“It was great to find Corbin, because this company was founded on some great ideas, which also provide many options to grow from this point forward,” he says. “The brand is strong, and from the view of beetle-kill pine furniture, you can expand into other unmet needs in the industry, where wood is not used to the best of its capabilities.”

Beetle-kill furniture will continue to be a core product, primarily for the residential market, but he points to diversification as a key to continued growth for Azure. “When you talk about the other channels in the commercial worlds — offices, hotels, and restaurants — soft wood tabletops are often not the right solution. So hardwood is another direction we’re going — we call it ‘inspired’ hardwood — lumberyards would say ‘rustic’ hardwood.”

Where Azure manufactures

Azure currently manufactures in a shop in northeast Denver, but Opitz’ ambitious plans may involve expanding to a larger facility at some point. “We have this given space of 7,000 square feet, enough space to support two teams of people, four craftsman, who can drive only so much volume and not more. That’s a limit we have to start thinking about.”

Opitz says he plans to continue manufacturing in Denver, but the push into new markets will also expand the company’s material needs and supply chain. “When it comes to materials, the wood we work with, beetle-kill pine, is from a radius of maybe 150 miles round,” he says. “The other hardwoods are still U.S., but a bit farther away.”

Looking beyond wood, Opitz cites a need for Azure to source globally for the first time. “Steel will be a bigger portion of our products; more commercial furniture typically have steel bases. The steel for those products today does not come from the U.S.,” he says. “When you talk about U.S. manufacturing, there’s always a global component somewhere, but in our core [business], we want to work here, in the U.S., and we have great local partners here with whom we can really cover all the needs that we have.”

What’s next?

It seems an ideal challenge for the German-born Opitz and his wife Ricky, an artist already contemplating new furniture designs: a promising young company poised to benefit from an infusion of management experience and acumen.

Bernhard has worked for such companies as Bayer and Blue Bunny Ice Cream over the course of his diverse career. Building furniture wasn’t necessarily his preferred path, but the fit was too good to pass up.

“Manufacturing was the primary idea,” he says. “This company just appeared in the right place to build from.”