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 user 2009-04-28 at 12:07:30 pm Views: 46
  • #22234

    Cartridge rebuilder fills out
    Kroger contract forces overhaul to meet demand for printer units
    Aaron Knight doesn’t just remake computer ink cartridges. He remade his entire company after winning a major contract.Positioning the company to fill that contract has called for an almost $2 million investment and 19 new employees and contractors in recent months.Knight, 30, founded Cartridge City five years ago with three employees. His goal was to franchise his business model of refilling inkjet and toner cartridges and rebuilding them with new interior parts, including filters, sponges, brushes and drums. The remanufacturing process creates a better, more durable product than people get if they simply inject a fresh supply of ink into a used cartridge, he said.It was a good time to take some risks, Knight said at the time, because he was single and didn’t have children.Fast forward to today. The Fort Wayne man is married with a child. And Cartridge City employs 25, full and part time, and contracts with 25 more. First-quarter sales were more than triple sales from last year’s first three months.Revenue jumped to $600,000 in the first quarter from $246,000 in the first quarter of last year.

    The company’s 2008 sales totaled $1.2 million.
    The company is growing, but not from franchises. Knight gave up that business model because he found it challenging to meet franchisees’ business priorities and profit expectations. Instead, the local entrepreneur has built on a contract originally with 18 Scott’s Food & Pharmacy stores to strike a deal to sell his cartridges throughout Kroger Co.’s Central Division, which includes 153 grocery stores. Kroger bought Scott’s from SuperValu in 2007 for an undisclosed price.To make and deliver the quantity of cartridges needed to supply Kroger, Knight and his partners had to invest about $1.9 million in equipment, supplies and inventory.Eight silent investors own a minority share in the company. Six others, including Knight, combine for a majority share. They include Curt Brown, former president of Tower Bank, and Pat Michaels, a local attorney with Barrett & McNagny.Brown got involved in the business in late 2006 at the suggestion of some friends who’d decided to buy shares. When he realized the company hadn’t marketed itself to local businesses that could save money by buying remanufactured toner cartridges for larger printers, Brown saw opportunities to invest and to make some sales calls.“I kind of came in and rolled up my sleeves and developed the business-to-business side of Cartridge City,” he said.After two years, Brown seized another business opportunity and passed the business customers back to Knight, who was ready to handle them along with the growing retail business.

    Solid values
    Brown and his fellow investors consider Knight a “very smart” person who has solid values based in his faith. As for the business model, it was good but needed tweaking. Mostly, the company needed more cash to help reach the next level, Brown said. And closing the Kroger deal allowed the business to jump ahead about three levels, he said.“The Kroger contract is just a significant advancement for Cartridge City,” Brown said.Investors aren’t the only ones who gave Knight a leg up. The outgoing Scott’s president passed along a good word about Knight and his products during the acquisition. Kroger executives continued the contract in Scott’s stores before expanding it dramatically.Kroger spokesman John Elliott said the grocery’s contract with Cartridge City is “working very well.”“That’s another example of a best practice that we learned from Scott’s and we have carried statewide,” he said. “It could potentially go even further than Indiana. Aaron does a great job.”Cartridge City’s retail displays are being set up throughout the state, with northern Indiana completed in March. The Central Division’s Illinois stores by mid-May.

    1,500 types
    The remanufactured inkjet cartridges can be used in printers made by HP, Canon, Brother and Dell, among others. Cartridge City carries more than 1,500 cartridge types, including toner cartridges used by business printers. Prices range from $5.99 to $24.99 for inkjet cartridges and $20 to $200 for toner cartridges. Knight sells to almost 600 business clients in addition to consumers who shop at Kroger and Scott’s stores.Knight would like to add 500 retail outlets this year and expand into the Columbus, Ohio; Cincinnati; Detroit and Louisville, Ky., markets.

    Demand is strong.
    About 500 million inkjet cartridges – totaling about $10 billion – were sold in the U.S. and Canada in 2008, according to data provided by Andy Lippman, senior analyst for Newton, Mass.-based Lyra Research Inc.About 60 million – or about 12 percent – of those inkjet cartridges were remanufactured. Sales totaled about $900 million, Lippman said in an e-mail. Sales volume increased about 30 percent over the last five years.Walgreens stores also sell refurbished inkjet cartridges and provide a service that refills inkjet cartridges in more than 3,000 stores, spokeswoman Tiffani Washington said.Demand has been steady since Walgreen Co. launched the service in 1,500 stores in fall 2006, she said. Washington was unable to provide sales figures.

    The remanufactured cartridge industry has more room to grow.

    Last year, American consumers threw away about 150 million ink cartridges, both newly constructed cartridges as well as remanufactured cartridges that have exceeded their maximum life, According to Lyra data. Fewer than 10 percent of the ink cartridges sold in the U.S. were returned by consumers.Cartridge City pays $3 for each returned inkjet cartridge. Although they can’t be remade indefinitely because the electronics eventually go bad, the company doesn’t penalize consumers who turn in cartridges that can’t be used again. Only about 5 percent of returned cartridges are defective, Knight said.

    Gains in efficiency
    His employees tear apart, refill and rebuild cartridges in five bays at the company’s headquarters, 1504 Director’s Row. They recently gained 30 percent efficiency by having one person handle each cartridge from beginning to end rather than having an assembly line with each person doing the same repetitive task.Knight surveyed his 11,000-square-foot production area in late March. Shelves are stacked high with 30 days of product. He moved the company into the space on Fort Wayne’s north side two years ago.“When we first got this warehouse,” he said, “I never thought we’d be jammed in like this.”