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 user 2009-04-28 at 12:08:13 pm Views: 49
  • #21963
    Cartridge rebuilder fills out
    Kroger contract forces overhaul to meet demand for printer units
    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.
    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
    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.,

    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.

    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
    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.”