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April 2002: Volume 44, Number 4

Part 2, Cruisin’ with Krudico’s Kruse
by Carlos David Mogollón, WC&P Executive Editor

The following is a continuation of our interview with Gary Kruse, president of Krudico Inc., of Auburn, Iowa:

Kruse: Well, it’s going to be quite a drastic problem. For example, I have a 100-acre recreational farm, with my own pond and other stuff in it. Just for curiosity, about three months ago, I drove around and counted 74 hog confinement buildings within a mile and a half of my farm. And these would house anywhere from 200 to 4,000 hogs each. So, when they empty their lagoons, they have about a 10-day little portfolio -- five days in the spring, five days in the fall -- between harvest and planting where they can spread this stuff. But, you don’t want to be anywhere near the area then. It just absolutely reeks.

WC&P: Yeah, another paper I worked at was in Richmond, Ind., and right outside there about 10-15 miles toward Hagerstown was a big veal operation. Since they would feed the calves milk all the time, it would give them diarrhea -- and they would spray out the manure over the farm fields nearby. Within five miles, you could smell it. The other aspect of this, though, is that the problem for water remains whether there’s going to be runoff or other contamination such that the wells are infiltrated. Some of the things you’re doing are to prevent that.

Kruse: That is correct. We are getting quite a problem, within the state of Iowa, of having lagoons spill or a line breaking, with raw sewage running into the creeks or rivers, polluting them for quite a few miles. Naturally, in our area, that water goes right down to Des Moines. So, it is getting to be quite a problem.

WC&P: This would also be the same problem in Nebraska or many of the other states where you’re operating, correct?

Kruse: Well, in Nebraska, you’ve got a whole other situation where the Ogalalla aquifer there is very shallow and it’s sand (see www-ne.cr.usgs.gov). So, it would actually be more drastic for them because it’s going to leach down into the groundwater much faster than in Iowa where we have bedrock.

WC&P: What about say Missouri or the other surrounding states?

Kruse: Missouri has had quite a few problems over the past 15 years already. You mentioned Tyson before. With all its poultry operations, the farmers have been spreading the manure on the fields. And that has pretty much contaminated all the shallow wells within the states of Missouri and Arkansas.

WC&P: The breadth of that issue is fairly wide. I imagine you’re getting calls from far and wide on nitrate issues. How far away are you working on projects like that?

Kruse: I’ve put in several in California. I’m working with the city of Payson, Ariz., on nitrates. I’ve been to Tucson, because they had a problem, about a year and a half ago. It’s pretty much general.

WC&P: You mentioned the Paiute tribe (see http://thecity.sfsu.edu/~mandell/plpt.html) and the arsenic problem there. In Iowa and Nebraska, there are other reservations. Do you work with other Indian tribes? Are there any tricks of the trade there?

Kruse: Not really. Again, it’s engineers that are calling us. Now, the Paiutes are right out of Sharps, Nev., and that would be two 600,000 gallon a day systems that they are designing. I just designed a couple systems for an engineer in Canada that are right outside of Winnipeg -- and those are both for reservations. And then there’s one for a company in Montana for a reservation in North Dakota. But, they searched us out on the web, rather than vice versa.

WC&P: Do they have different regulatory issues you have to be mindful of because it’s a reservation?

Kruse: Not really. No.

WC&P: Now, how is it that -- you mentioned Iowa is No. 1 for your market -- Canada is No. 2?

Kruse: I’ve got some very good jobbers up there that have marketed product for us.

WC&P: Who are they?

Kruse: That’s Well Water Clinic Inc. It’s Water Clinic now.

WC&P: How long have you been associated with them?

Kruse: Since 1985. Started out selling them a chlorinator I was manufacturing and the chlorine to go with it. For a while, they were doing almost 30 percent of our business -- that and other companies from overseas. But we were exporting about 30 percent. That has dropped down as different technologies are now being used.

WC&P: Winnipeg is in Manitoba isn’t it?

Kruse: Well, they’re in Saskatoon, but they do handle Manitoba, B.C. (British Columbia) and Alberta.

WC&P: I’ve been up through B.C. It’s gorgeous country up there.

Kruse: Fantastic.

WC&P: We were on our way up to Alaska. A friend of mine and I went up and worked in the salmon industry up there for one summer together. And his comment as we were driving up to Prince Rupert was: “The scenery just doesn’t stop getting better.”

Kruse: Right. I plan on getting up there fishing this spring.

WC&P: Tell me about, if you could, some of the issues you confront in that addressing arsenic involves working with a lot of regulatory agencies. How do you handle that? What sort of challenges are there? And what advantages are there?

Kruse: Really, I haven’t had much problem with any of the agencies at this point. If there is a situation, I usually call them up and ask for their directives so I’m not bumping heads with them. I haven’t had any problems with anybody.

WC&P: If anything, it sounds as if the interplay may help generate business because of some of the issues they’re dealing with and your expertise you garner in such projects.

Kruse: That is correct.

WC&P: What are some of your prominent dealers, the ones that are tried and true, dedicated forever?

Kruse: Oh, I’ve had some dealers who’ve been with me for 30-something years. You really appreciate them. I’ve got a lot of little dealers within the state who’ve sold my product for ever since Hector was a pup.

WC&P: Are there any you’d like to mention that you wind up doing some unique work with?

Kruse: Helburt, Iowa, and Templeton, Iowa, both with populations of probably 300-350 people. They've both been on top of our sales charts for years. But it's amazing. Everybody thinks again that you have to have a large population to sell product. These guys don't. They'll sell for a 40-50 mile radius.

WC&P: How do you work with them? How do you help make them successful?

Kruse: They are pretty well self-starters. It's hard to explain. They just know people, the talk to people and they treat people well. And they've just grown a tremendous clientele.

WC&P: Who are the people you work with in those towns?

Kruse: Well, Bernie Reislemann is the one at Helburt Hardware and, then, Glenn Reislemann at Templeton.

WC&P: Where did you earn the background for this? Did you go to college and study anything technical for it?

Kruse: Not really. I went to college. I went to Concordia Teachers College in Seward, Neb., and the University of Nebraska. My major was biology, so that gave me a little head start over some people. But I never graduated. I had three years of college.

WC&P: When you're looking for employees, what are some of the things you're looking for? Since you don't have a degree, I'd imagine you're not necessarily looking at that so much as what a person can offer based on experience.

Kruse: Attitude is a big thing I look for in employees, as well as skills. We're very fortunate in that we have people that are good at computers that have been on board with us and a lot of my help are ex-farmers or part-time farmers. So, they not only have good work habits, they know mechanics. If I need something worked on, serviced or installed, all I have to say is go to it -- and they do. The skill's been honed into them.

WC&P: Who are your competitors? Who do you compete against? I imagine you're not too interested in going into a major city and signing up a lot of POU/POE customers as much as concentrating on rural areas.

Kruse: Right. My competition, if you want to call them that because I get along pretty well with all of them, would be like Mid-America out of Illinois, DuPage out of Chicago, Woods Bros. out of Lincoln, Neb., QSP out of Laverne, Minn., and then, of course, the national brands, the EcoWaters and Culligans, etc.

WC&P: How do you position yourself against those guys? I assume that because it's such a small industry that you're friends with them as well.

Kruse: That's true. We do a lot of small hardware stores, we do appliance stores, we do plumbing repair shops, pump and well service dealers. A lot of these, the others don't try and entice to sell their products. They'll go in with a franchise and give them x amount of counties or territories to sell their products. We just go into small towns and get people and train them.

WC&P: When we talk about some of the companies that you're against, the other side would be vendors. Who are some of your vendors? Who are your suppliers and how do you develop relationships with them?

Kruse: Oh, again, a lot of times they've heard of us or one of our salespeople have stopped in and called on them. Roberts Pump and Supply over in Grand Island, Neb., does a fabulous job. SMT in Hayes, Kan., does a good job for us -- just getting started with us.

WC&P: Do you source product with some of the better known names in the industry as well? For instance, a Sta-Rite, a Clack, a Pentair or Osmonics?

Kruse: We buy a lot of our components from Park International, Structural Fiber, the old Matt-Son, which is now Alamo; some from DuPage; yes, some from Clack; Great Lakes International out of Racine, Wis. We source out a lot of products there. And we do some private labeling. We private label products for Iron-Out Pro-Products. And we do some for Automated Pure Water down in Florida.

WC&P: I'm not familiar with Automated Pure...

Kruse: They make a little in-line chlorinator down there. Look in your Buyer's Guide. He's got a couple ads in there.

WC&P: There's so many out there, it's hard to keep track of them all. So, Iron-Out and Automated Pure produce product that's private labeled for you?

Kruse: I produce product that's private labeled for them. And then I have several large Culligan operations that I produce product for also, but they use our name. We don't private label it.

WC&P: These would be such as?

Kruse: Corporate offices, down in Florida and other places.

WC&P: Such as John Packard out of Minnetonka, Minn. He's the biggest independent Culligan dealer. He owns the Culligan dealership out here in Tucson and in Phoenix as well.

Kruse: We sell a little up there, but I'm not sure.

WC&P: What are growth rates in your various business segments? What are areas where you're seeing growth if you look at how it's split up, say in residential vs. commercial vs. industrial vs. municipal markets?

Kruse: Well, for myself and a lot of the other OEMs and valve manufacturers, they've seen a decrease in sales over the last 24 months in residential due to the economy. I think we've held pretty well strong, but have noticed a bit of a drop there. Again, going back to the municipal and other larger installations, a lot of that is grants from the government and the recession hasn't hurt that. In fact, most of the money is in a program for three and five years down the road. So, instead of seeing a drop-off there, we've seen a noticeable increase.

WC&P: What about industrial areas?

Kruse: That has slowed off somewhat. Again, the recession is starting to hurt some of those.

WC&P: How have you handled the recession?

Kruse: We haven't had a problem. We've shown 25-30 percent growth over the last three years, each year.

WC&P: You're anticipating that's going to continue?

Kruse: That's correct. We've got several projects lined up for 2002 and some going into 2003 already.

WC&P: What about in terms of products? Where have you had the most growth in recent years?

Kruse: Again, it would be in municipalities. I think one of the biggest growths for the industry has been point-of-use, but we're not that strong in point-of-use.

WC&P: Point-of-use makes up again what percentage?

Kruse: For our business, I'd say it makes up probably 2.5 percent.

WC&P: In point-of-entry, though, you guys do well?

Kruse: Yes.

WC&P: Is there a percentage you can offer there?

Kruse: That would be, again, the 50 percent we talked about earlier.

WC&P: What about trends in the industry and challenges you may see? You mentioned the recession and somewhat of a drop-off there in some areas. Are there other issues that come up for you, whether those are regulatory, intra-industry issues as far as competition between the big boys and the mid-level manufacturers -- anything else you can think of?

Kruse: Not really. Regulatory used to be more than a problem than I think it is at the present time because I think the government is starting to work with our industry. I think the Water Quality Association has done a fabulous job in that regard in meeting with the EPAs and the states, etc.

WC&P: Well, Iowa is known as being one of the strictest states. It's Iowa, Wisconson, Massachusetts and California that are most often mentioned at least.

Kruse: Right. Iowa was the first one that passed a law that you should have certified equipment if you were making a health claim. And, ironically, they did a few things in their book. One was that if you had bacteria in your water, you should use a UV light or chlorination. However, nobody ever certified one, so it was illegal to sell them.

WC&P: How long ago was this?

Kruse: Oh, it was in the early '80s and it's still in effect right now. Although, the did grandfather in just a couple years ago finally, with chlorination, that it will kill bacteria.

WC&P: That's good because it's been pretty much with respect to UV in the last five years that that's also been confirmed by some of the studies. Some of the people on our Technical Review Committee have worked on that over at Clancy Environmental in Vermont. What about some of the other issues? Septic systems, for instance, is another. And I believe that's going to be a hot topic at the WQA convention in New Orleans as well. We've got, I know, a "Water Matters" column in our April issue that discusses it from NSF International's perspective.

Kruse: Fifteen or 20 years ago, there was a study at the University of Wisconsin on septic tanks and systems. At that time, I thought at that time that they had it pretty well put to rest, but evidently it's coming back up as a new issue again.

WC&P: Do you run into the problem occasionally?

Kruse: Very seldom.

WC&P: Even though you work in a lot of rural areas where septic systems may be predominant?

Kruse: Right, I may get five calls a year: "Can I put regeneration water from my softener into my septic tank?" But that's about all.

WC&P: In the last couple years, we've had Jack Lorenzen and his son, Rich, over in Nebraska, talking about nitrates affecting home sales because of a HUD requirement for financing. Have you run into that issue?

Kruse: Oh, yeah. That gives me quite a few sales. If it's over the 10 milligrams per liter then they can't sell the house unless it's treated. And we do sell a fair amount in Nebraska just because of that problem right around where Jack's at. And I do know Jack -- known him for near 25 years.

WC&P: Probably old friends.

Kruse: That's true.

WC&P: What are other issues such as when you look at say -- for instance, you were on the Education Committee for the WQA -- that you see evolving there? They're talking, for instance, now about the possibility of starting a Bottled Water Section. And there's the ongoing position between dealers and manufacturers within the WQA, not to mention its expansion internationally. What are some of the issues you see there and what's your view on them?

Kruse: Oh, I don't really have a lot of controversy on that. I will say, though, that 20 years ago, when they started selling bottled water, I thought they were crazy. I didn't know who would ever buy water. And, now, I buy it.

WC&P: Do you do work for any bottling plants?

Kruse: No.

WC&P: What about internationally? What sort of things might you be doing there?

Kruse: A few years ago, there was an article written about our company by WC&P about some of our international work. We'd sponsored the Mount Everest expedition one year -- provided them with all the water utensils for drinking.

WC&P: How did you get involved with that?

Kruse: We did research and came up with a product to handle what was called the guinea worm in Africa.

WC&P: Bill Gates donated some $28 million to help eradicate it a couple years ago, as I recall.

Kruse: In fact, my granddaughter, at Christmas, had me help her with a research project on that very topic.

WC&P: For high school, a science fair?

Kruse: Right.

WC&P: How did the Mount Everest expedition figure into the guinea worm?

Kruse: It's entirely separate. It's just some things we'd done over the past few years at that time.

WC&P: This was an expedition that went up to the top of Mount Everest.

Kruse: It was about '92 or '94, someplace in there.

WC&P: So, it wasn't that tragic one in '96 where a few people died because of some accident near the top.

Kruse: No.

WC&P: The accident was completely unrelated to water we should point out. Was that interesting getting involved in that?

Kruse: It was. That's take the dullness out of it. One thing about this business, if you want to, you can always find something new every day.

WC&P: True. What did you do for them on that expedition?

Kruse: I supplied product as a donation for them. They were looking for ways to finance the expedition. Another project we've been involved in, mentioned in that article, was a Catholic orphanage down in Mexico. The father had had a triple bypass and, after he got out of the hospital, he formed an orphanage in the middle of nowhere. The only water supply they had was coming out of a little canal. They had a little over 200 kids at the orphanage. They had almost 100 percent dysentery. And that included the sisters that were running the orphanage with Father Norman. We donated a chlorinator for them to disinfect the water and, the following year, we donated some point-of-use iodinated products. The father wrote me that, within two weeks, 90 percent of the dysentery was gone and, at the end of 30 days, it had been eradicated. He said, "You don't know how happy those sisters are."

WC&P: We can only imagine. It makes life a lot more comfortable.

Kruse: You bet. I'd hate to have to clean up after 200 kids with dysentery.

WC&P: Or suffering from it yourself.

Kruse: Right.

WC&P: In your business and how this has evolved, what are some of the challenges you've had to overcome? What are some of the lessons you've learned that you might be able to offer to other water treatment businesses hoping to achieve what you have and your level of success?

Kruse: Well, if anybody was going to startup now, I'd say the finances would be the hardest thing to overcome. You can find the product. The next thing would be education. You'd have to educate yourself so that you aren't making fraudulent claims. And I think the industry has cleaned itself up well in the past few years. Financing would be probably one of the hardest issues for somebody new coming into the business. I see that. Every once in a while, somebody will come in and say, "Gary, I want to get into this business." They think it's the egg from the golden goose; it's real simple. And, all of a sudden, they're in it for 90 days and they've sold one product and it's to their brother...

WC&P: And he wants it for free -- or close to it.

Kruse: Yeah, right on. Friends and relations, you should never sell to them because you're going to have the most problems there.

WC&P: So how does a company overcome some of these financing issues?

Kruse: I was fortunate. Starting back in the '60s, it didn't take as much money in those days. And we could just basically evolve the cash flow so that finally you could get debt free.

WC&P: I understand that, at the end of this year, Household Finance is getting out of financing in-home sales that would include water treatment equipment. Does that affect you in any way?

Kruse: No, most of my dealers are from small towns. They just go to their local bank and get them to write up paper if they need it.

WC&P: What do you see as the future for your company? Your son will be taking the helm in a few years. You're preparing it for him. Where do you see him being able to take the company?

Kruse: I think what his direction will be, again, is more into municipalities. He'll probably slow down on the point-of-entry/point-of-use products.

WC&P: Is that good or bad?

Kruse: I think that's good. It's a whole niche in our industry that very few people, per se, are into. There are some big runners like USFilter and, in Iowa, Thorpe Engineering. But, when we go to bid for a city, normally there are only two or three companies that will have product for it. We may have 10 competitors bidding, but they'll be bidding all the same product, possibly USFilter. Eight of them will be bidding that. So, there's very little competition in it.

WC&P: Does success count on the experience you've got, the resume you've built up, the relationships you've developed? What is it?

Kruse: That is about 90 percent of it. Because the first three or four years, engineering firms that have the final say on this, would not let us bid because we didn't have a good enough background. Once we got past that, now, they're asking us to bid.

WC&P: What about as far as your dealer network? The target audience for WC&P has always been the independent dealer. What would you say to them about the industry and lessons you've learned?

Kruse: Study. That's the main thing I think they can do. And don't be scared of the niche markets. Don't be scared of the nitrate reduction and the nitrate and the uranium. Just study it so you know what you've got and work with people that you can trust.

WC&P: Do you have do some of the certifications for water specialists at the WQA?

Kruse: I was one of the first ones way back when the first Mid-Year was in Tucson. I think that was the first year certification was available.

WC&P: What's your level?

Kruse: I was a Level III. But I dropped that last year because it really didn't make any difference where I'm going. I'm semi-retired. No one cared if a manufacturer was a CWS-V or a CWS-I.

WC&P: Do you encourage it among your employees?

Kruse: I did for a while. We don't right now, primarily because of the level we're working at with the industry.

WC&P: But, for someone just starting out, this is something you might recommend as proving beneficial to them?

Kruse: That would be a good place to start.

WC&P: Any closing comments on anything we may have left out?

Kruse: Not really. I will say it's been 30-some years of absolute fun. I've enjoyed it immensely.

WC&P: Can't meet better people anywhere, right?

Kruse: That's for sure.

###

Next month in this column, read our interview with Mike Kopacz, who is executive vice president of Erie Water Treatment Controls, a Division of Aquion Partners, L.P., of Oak Grove Village, Ill.