March 2004: Volume 46, Number 3
G.A. Murdock`s Appelwick Makes the Grade
by Carlos David Mogoll?n, WC&P Executive Editor
Brian Appelwick, vice president of G.A. Murdock Inc., of Madison, S.D., is a third-generation water treatment professional. His grandfather, Omer, established one of the first Culligan dealerships in this rural town of 6,800 in 1949. Omer sold it to his son, Gene, in the '70s.
Brian's father launched G.A. Murdock in 1987 to purchase some assets for depreciation purposes. Brian worked at the dealership between classes at the University of Nebraska. But business was brisk, so he decided to finish up his business studies at Huron University while managing another dealership that was acquired in Huron, S.D., in 1990. That's about when the Appelwicks began gearing up G.A. Murdock as a vehicle to improve the quality of valves, fittings and other point-of-use/point-of-entry (POU/POE) water treatment accessories available on the market.
In 1992, after G.A. Murdock moved into its own 17,000-square-foot facility, things really took off, Brian said. At the Water Quality Association trade show, the company introduced its Mur-Lok RO Pal, which was designed to replace saddle valves frowned upon in most plumbing codes. It began manufacturing ball valves in 1994 as well and acted as a distributor for a number of other companies. Today, those companies include KX Industries, Watts Regulator, Pentair's Pentek (formerly Plymouth Products), GE Osmonics, Touch-Flo and Opella as well as Hanna Instruments, Dow Liquid Separations, Omnipure and Clack Corp.
One of its key product lines for 10 years was John Guest valves and fittings until G.A. Murdock introduced its own line under the Mur-Lok brand a year ago at the WQA exhibition in Las Vegas. It also introduced its own polyethylene tubing and PVC drain line. Appelwick pointed out the company hired a consultant to help develop the new lines and set up its manufacturing operation to ramp up to meet demand. That started about two years ago and, around the same time, they sold the dealerships to an employee to concentrate on G.A. Murdock.
Today, business is great, Brian said. Through the recent recession, it maintained an average annual growth rate of 15 percent. With the economy trending upward, it expects a 20 percent growth rate in 2004. He credits that to on-time deliveries and good customer service. "We take care of the customer," said Appelwick. "We try to ship about 95 percent of the orders the same day."
About 75 percent of sales are to dealers, but the company expects a 30 percent growth rate among manufacturing customers. Overall, about 85 percent of business is residential with the balance in commercial/industrial split among office coffee service, dialysis, photo processing, beverage and agricultural clients, among others. International business 'which makes up about 10 percent of sales' is strongest in Canada, accounting for half of that figure. But the recent low value of the dollar has helped sales in Europe and elsewhere as well.
Brian sees chloramines' effect on valves and fittings and potential leaks as a hot-button issue the industry will continue to face: "With the issues of the insurance companies and mold and everything else, it's probably going to be a pretty big deal."
For his full interview, go to www.wcponline.com and click on the "Executive Q&A" button.
G.A. Murdock Inc.
1200 Division Ave. S.
P.O. Box 465
Madison, SD 57042
Tel: (800) 568-7565 or (605) 256-9632
Fax: (800) 568-4301 or (605) 256-9682
Email: firstname.lastname@example.org or email@example.com
Management: Gene Appelwick, president; Brian Appelwick, vice president
Revenues: 2002/2003 growth–13%, average growth over 3 years–15%, expected 2004 growth–20%
Operations: Manufacturer of water treatment valves, fittings, connectors and tubing under the Mur-Lok™ brand, and distributor for several other water treatment companies including Pentek, Osmonics, KX Industries, Watts, Touch-Flo and Opella.
Before getting to the interview, here's some background on Appelwick's company:
And now for the interview:
WC&P: How long has G.A. Murdock been in business and how did you get started?
Appelwick: My father, Gene, actually purchased a Culligan dealership from his father back in the early '70s, which his father started—I believe—back in 1949.
WC&P: Wow, that sounds like it was one of the first ones then.
Appelwick: Yeah, it was towards then.
WC&P: What was your grandfather's name?
Appelwick: Omer Appelwick.
WC&P: And this was in South Dakota, correct?
WC&P: It had to be a very small community back then?
WC&P: So, how did all of this transition into what you do now?
Appelwick: Then, in the early '90s—1991-92—we had an idea for some improvements in point-of-use connections. We came up with a few products and went to market with them, bringing them to the WQA trade shows. And things evolved from there. We found an interest nationwide in other water conditioning dealers having a need for our products.
WC&P: At first, you had some of your own products but you were a distributor for a lot of companies, correct?
WC&P: A number of those you still work with, so which would those be?
Appelwick: We still distribute products for KX Industries, Watts Regulator, PENTEK…
WC&P: Which is the old Plymouth Products that's now a part of Pentair.
Appelwick: …Osmonics, Touch-Flo and Opella.
WC&P: That's a pretty good list. I noticed a few others on your website: Hanna Instruments, Dow, Omnipure and Clack Corp.
Appelwick: Yes, it's not huge, but it's kind of a niche market.
WC&P: Now, describe for me the mainstay products that you've had in the past prior to the newer line that was just introduced.
Appelwick: We had been distributing John Guest products for 10 years.
WC&P: Now, at the WQA trade show you unveiled the new line of Mur-Lok connectors.
Appelwick: Correct, that's our own line of polypropylene fittings.
WC&P: What made you decide to go ahead and do that?
Appelwick: Industry demand, really. There were some issues with chloramines and chlorine. We had some material degradation issues with the acetal products.
WC&P: I think we've written some articles about that.
Appelwick: Yes. And it was just overall how we were going two different ways. We wanted to expand in this industry and meet more dealer needs or the industry needs.
WC&P: So how has the product line been received?
Appelwick: Very well. We switched everyone over sales-wise and have stayed about the same as 2002. We did a conversion period and we feel this year will be a year of pretty substantial growth.
WC&P: That's kind of nice since the economy would seem to be turning around at the same time by early indications.
WC&P: Now, tell me about your geographic area, if you could.
Appelwick: As far as who we sell to?
WC&P: Who you sell to, how far and wide, your best markets, geographical concentration, etc.
Appelwick: Sure. We sell anywhere, in the continental U.S., from Washington to Florida and across the entire country. We've got a pretty strong market in Canada. And, as of late, with the dollar valuation, our international sales have been picking up in the last couple of months.
WC&P: In Europe as well?
WC&P: That's sort of ironic.
WC&P: How much of your business is overseas right now?
Appelwick: I would say in the 5 to 10 percent range.
WC&P: But, based on what you were telling me, the growth rate there might be a little higher at the moment.
Appelwick: Yes, it looks to be that.
WC&P: I would assume that, since you're in South Dakota, that Canada's a natural market for you as far as strength.
WC&P: Any idea how much of your business goes to Canada?
Appelwick: Canadian sales run about 5 percent, while other international sales add another 5 percent.
WC&P: We've already mentioned the Mur-Lok product line. Is there anything else about your company that you want to tell us about that's new?
Appelwick: Well, with the Mur-Lok™ product, we also came out with a line of polyethylene tubing and PVC drain line. Both of those have gone over very well as well.
WC&P: These are things that you're manufacturing?
Appelwick: Correct. Everything—the Mur-Lok™ product, the fittings, the tubing and the drain line—is all manufactured at our facility here.
WC&P: What all did you have to do to prepare for that—to get ramped up?
Appelwick: A lot of hard work. We utilized some outside consultants to find out what we needed to accomplish and brought them in-house to do training. We brought some additional people onboard who had some experience with plastics processing.
WC&P: Anybody notable you want to give credit to?
Appelwick: Probably nobody that anybody in water treatment would know.
WC&P: So, what is your employment now?
Appelwick: I would say we've added about five people in the last year. We've gone from about 13 to 18.
WC&P: How's the overall growth of the company progressed?
Appelwick: We've been up typically about 15 percent a year for the past, I would say, three or four years.
WC&P: Even through the last economic dip.
WC&P: Wow. What do you attribute that to?
Appelwick: Offering good products and good customer service.
WC&P: What's the philosophy of G.A. Murdock, if you would care to share it?
Appelwick: We try to take care of the customer. We try to ship about 95 percent of the orders the same day. We try to ship everything that comes in before 3 p.m. out the same day. We try to answer any technical questions that need to be answered and service the customer well.
WC&P: Have you always been located in the same facility?
Appelwick: No. Four years ago, almost five—it's working on five—we moved into a new facility, which is 17,000 square feet.
WC&P: So, that would have been 1999?
WC&P: So what was your place like before?
Appelwick: Uh, it was actually an offshoot of our other business. I don't know if we should mention Culligan.
WC&P: I was going to ask next about what happened to the dealership.
Appelwick: Where we were located was actually within our retail dealership. We just rearranged things and so forth. Two years ago, my father sold the business, the Culligan dealership, to an employee.
WC&P: Which one?
Appelwick: His name is Kurt Christensen.
WC&P: So that worked out well, it going to somebody who'd been dedicated to the business and you knew and trusted would take it over in the right way to service the customer base. That's good.
WC&P: What's a major challenge that you or your company faced and how did you overcome it?
Appelwick: I would say, four years ago when we moved into our new facility, we had not done any of our own plastic injection molding. To get involved with that and product quality products along with extrusion was a learning curve.
WC&P: You said you'd brought in some consultants. At what point did you realize that you were going to need to do that?
Appelwick: This was for our Mur-Lok™ project. We'd been manufacturing our own ball valves and other fittings for about three years. And we just knew to get a project with as many items as we needed to offer—the range of products—that we would have to have some outside help to design things and do it right the first time.
WC&P: Did you bring in new machines and rearrange things as well there?
Appelwick: Yes. We had to bring in some new machinery.
WC&P: Blow molders?
Appelwick: Yes, new injection molding machines.
WC&P: And, I imagine also, you had to develop better expertise as far as CAD/CAM for product design, too.
WC&P: It's pretty involved stuff.
WC&P: How long did it take you, from when you decided to make the move to when you unveiled the product?
Appelwick: We started doing research about 2-½ years before we launched it. And it took about a year and a half from when we really said, "OK, let's get it done."
WC&P: How did you find the consultant that helped you out?
Appelwick: We utilized a local technical person who is our plastics technical rep to recommend a person. And come to find out he's one of the top technical consultants in the world for injection molding design.
WC&P: Wow, who is he?
Appelwick: His name is John Klees.
WC&P: At first, I would have thought you might check with the Small Business Administration or one of the state agencies such as the commerce department.
Appelwick: No. I guess this person puts on seminars. The company we do a fair amount of business with is called Ashland Chemical.
WC&P: I'm familiar with it.
Appelwick: They have him come in and give seminars.
WC&P: And that's how you got matched up?
Appelwick: Correct. It was really a timing thing. He wasn't overly busy. He had some spare time and I think it turned into a lot bigger project than he was expecting.
WC&P: Well, it's nice that you can rely on almost an in-house referral for that kind of expertise.
WC&P: The type of customers that you work with primarily, is it directly to the dealers?
Appelwick: Typically, we have been selling to the dealers. Especially in the past, our main customer was the dealer. But that is starting to evolve and we're working with several manufacturers now.
WC&P: Do you work through supply houses at all? These would be plumbing or hardware/appliance type locations.
Appelwick: Yes. Somewhat, but on a limited basis.
WC&P: What sort of things are areas where you're seeing growth that look promising for you?
Appelwick: As far as in the water industry?
WC&P: Sure. Or there's something else, feel free to mention it.
Appelwick: I would say the water industry in general does look promising. I think things will take off here when the economy comes back especially. As far as other markets, the agricultural market for us has a fair amount of potential there.
WC&P: How do you define the agricultural market?
Appelwick: Chemical spray.
WC&P: From your perspective in the market, where do you see the industry going?
Appelwick: I think the water industry will continue to improve. People feel more and more concerned about their water supply. Especially from a taste aspect, chloramines seem to be becoming more of a big issue for people.
WC&P: Usually in late summer when water levels have dropped and a little extra disinfection is needed.
WC&P: Are there any specific issues, aside from chloramines, that play a part in that?
Appelwick: Offhand, I think, just in general, bottled water consumption will continue to increase. And the water dealers should reap the benefits from that in the ability to sell a drinking water system in place of bottled water. That's a much more economical solution for most consumers once they see how much they're spending to buy or have bottled water delivered.
WC&P: You mentioned doing a bit more with manufacturers, so how much of your business is in that dealer vs. manufacturer arena?
Appelwick: I would say 75 percent of our sales are coming from the dealer right now.
WC&P: And the growth rate on the industrial business would be?
Appelwick: As far as the dealer or the manufacturer?
WC&P: Excuse me. I mean the growth rate on the manufacturer direct business you're doing.
Appelwick: Well, we should see at least double digit growth on that. I would say this year, we'll probably see probably closer to 30 percent growth from the manufacturers.
WC&P: Does that require any adjustment on your part?
Appelwick: Not really. We're geared up pretty well to put out some higher volumes that we know are out there. We're just working on getting the business.
WC&P: How about the the split between commercial/industrial vs. residential?
Appelwick: I would say the majority, probably 85 percent, of it's residential.
WC&P: How are the rates of growth between those?
Appelwick: I don't know if I could give you a good number.
WC&P: My question really is which is growing at a more rapid pace? Is commercial/industrial outpacing residential?
Appelwick: No, not that I see. Our market is definitely geared toward the residential.
WC&P: How big a dealer base do you have?
Appelwick: We've got an active customer base of about 1,700.
WC&P: We also ask typically questions about revenue. What range does G.A. Murdock fall into?
Appelwick: I think we'll decline on that.
WC&P: Your percentage growth would be what then—15-20 percent?
WC&P: What was last year's specifically?
Appelwick: I believe we were up 13 percent last year and the average growth over the past three years was 15 percent.
WC&P: And this year, what are you anticipating?
Appelwick: This year, I would say we're probably anticipating closer to 20 percent.
WC&P: I imagine you're also going to have to bring on more people at that rate.
WC&P: You're in a small town. About how many people live there?
Appelwick: We have 6,800 people.
WC&P: So, how do you find good, qualified employees from a potential base that small?
Appelwick: There's a pretty good manufacturing workforce in our town, and specifically with respect to injection molding. So that does definitely help.
WC&P: What are some of the other employers there?
Appelwick: Gehl Manufacturing would be one of the big ones. They make skid steers, Bobcat-type machines. I think they're the largest employer in Madison. Then, there are also a couple of captive custom-injection molding companies.
WC&P: So all of that becomes complementary, in a sense.
WC&P: What's the area like around there topographically? South Dakota is one of the few states I've never been to.
Appelwick: It is flat. Not quite as flat as North Dakota. And I guess it's a good place to raise a family. There are a fair amount of lakes and outdoor activities. We're on the eastern side of the state by Minnesota. We're about three and a half hours from Minneapolis.
WC&P: What's your dad's involvement in the business these days?
Appelwick: He is the president and is actively involved. I'm the vice president.
WC&P: How long have you been with the business?
Appelwick: Since the beginning in 1992.
WC&P: What did you do beforehand?
Appelwick: I finished college; and then he actually bought a second Culligan dealership in another nearby town, which I ran for two years.
WC&P: Both of those were sold to Kurt?
WC&P: Where was the one your father bought?
Appelwick: The other location was in Huron, S.D.
WC&P: Where did you go to school?
Appelwick: I went to the University of Nebraska.
WC&P: Go Huskers.
Appelwick: I actually finished elsewhere. This thing got going and we got busy and I said I'll come up there to finish school at a local college and run the business.
WC&P: So, where you'd wind up getting your degree from?
Appelwick: From Huron University.
WC&P: What did you study?
Appelwick: Business administration.
WC&P: What year did you graduate?
Appelwick: 1993. I spent two and a half at Nebraska and another half a year at another college.
WC&P: I've got one question left. What's the one hot-button issue facing the industry or dealers that you think will have the most impact in the next few years?
Appelwick: On the drinking water side of it, I think probably it will be prevention of leaks on their water systems. With the issues with the insurance companies and mold and everything else, it's probably going to become a pretty big deal.
WC&P: Yes. It's already into multi-million-dollar judgments. A lot of the insurance companies won't even cover it anymore. I know I got a change in my policy and we've run articles on it elsewhere, so it's definitely a nationwide issue.
Appelwick: Sure. It's going to be a huge issue. I think that's one of the biggest concerns of dealers right now.
WC&P: And I assume that the line of products that G.A. Murdock has expanded into were designed specifically to limit that.
Appelwick: We're hoping to stop leaks.
WC&P: That will save a lot on liability. I'm sure the dealers will be happy to hear that. I think that should cover us. All done.