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July 2001: Volume 43, Number 7

Part 2, ResinTech’s Mike Gottlieb Goes Mobile
by Carlos David Mogollón, WC&P Executive Editor

The following is a continuation of our interview with ResinTech founder and president, Michael Gottlieb:

WC&P: Talk to me about the team you've assembled?

Gottlieb: Our tech reps are as much a part of our technical team as anybody. You'll know all their names because they've all had articles published in your magazine. They're all recognized technologists in the field. They weren't when they started with ResinTech, but they became that way because of our training program. We don't let them go out in the field and sell. We train them in our laboratory and our factory about ion exchange and applications of ion exchange before we let them sell. Then we put them on a short leash to get them over a hurdle. It takes about two years, I think, before they're really competent to stand on their own in the field and we support them for those two years. During that time, they're encouraged to study and learn ion exchange technology. At the end of that time, what we've done is to produce what I think is the finest field sales selling force in the ion exchange industry in the world. Then you have our support group here, our laboratory, our technical support group. I don't want to go into details of what we do, but we have sophisticated software that I authored that marries theoretical models with real-world data of ion exchange so that we can predict the performance of a resin. Not just a new resin, but a resin that comes out of our lab having been tested for a customer. An anion resin, for example, as it ages, it changes its nature from a strong base resin that may not be fully strong base even after a brief amount of time. How will that resin perform compared to the engineering notes of a brand new resin? We have software that will tell you and can actually generate engineering notes for a resin that's been tested in our lab and compare it to a brand new resin on your particular application. But again, that's been made a productivity item. It's something where we enter the data and press a button as much as when you rent a car at the airline counter, they press a button or a computer key and out comes a generated contract. We do the same thing with computer generated performance notes, not just for virgin new resins in an application but for the customer's resins after the fact. People who use our resins find our technical support after the fact is without parallel.

WC&P: Do you see some of the things you're doing with respect to that technical support reflected as trends in the industry that others are trying to achieve as well?

Gottlieb: No, because it's a very expensive way to sell. And if you're going to sell into big customers, you can't afford to do this.

WC&P: And the reason you're able to do it is what?

Gottlieb: When I left Sybron, I chose to start a small, niche-oriented company. And I picked my niches carefully, the ones where I wanted to play. When I started ResinTech, I started it for myself. I wanted to make my own career where I could be the master of my own destiny. And I chose a field where I felt my knowledge in ion exchange would add strength to the product line and allow me to compete with bigger companies like Rohm & Haas.

WC&P: What are some of those niche markets that you're specializing in? In other words, where does ResinTech do the majority of its business?

Gottlieb: Where service is a substantial portion of the sale. The smaller companies. The regional ion exchange companies. Service ion exchange. The water doctors. People who keep small industrial boilers running. They don't have laboratories. They don't have technical support. They're too small. They're one- and two-man companies. They can send a resin sample into ResinTech and we analyze it. And when we give them they're information back, we give them as much technology as any of their competition is going to see.

WC&P: I don't know if this is a customer of yours but would an example be, for instance, Jim Hunt, who's on WC&P's Technical Review Committee and who a year or two ago bought a PEDI operation, DI Water, in the Boston area?

Gottlieb: Exactly. And yes, he is.

WC&P: You mentioned in the beginning that, when you launched ResinTech, you'd worked out some manufacturing agreements overseas to produce resins to your specifications. Where does your resin come from?

Gottlieb: It comes from source plants that are toll manufacturers for ResinTech.

WC&P: I mean what countries, for instance?

Gottlieb: I'm not going to discuss our specific locations. I will tell you I have been to all continents in the world several times, visiting source or potential source manufacturers including India, China or Europe. Now I don't want to cloud an issue and want to be very specific. None of our resins are synthesized here in a ResinTech-owned piece of equipment. A lot of our resin is synthesized not in this hemisphere. Having said that, all of our resin goes through our QC process. Part of the manufacturing is the QC. It isn't available for sale until it passes through quality control, as it does with any manufacturing company. All of the quality control work is done under our control. We do the testing here and it doesn't get put into general inventory until it goes through QC. Most of our lab people are devoted to quality control -- routine lab samples of incoming merchandise before we put it out. We're an NLQ, nuclear level quality certification lab. And in that is an approval program that I'm told is equivalent to ISO 9000. That quality assurance program involves quarantining product before it goes through QC. We supply resins to the highest standards of anybody in the world and we do it on a routine basis here.

WC&P: You mentioned China, you mentioned India, you mentioned Europe -- you're not just doing business in the United States. Can you tell me a little bit in percentages the amount of business you do here vs. overseas?

Gottlieb: Most of our business is in the U.S.

WC&P: Most being?

Gottlieb: Most being as much of an answer as you're going to get. Let me interject that I'm always concerned that people give away too much in discussion. During one of the papers I was presenting over in Cambridge, England, a competitor asked what was the flow rate during the process I was talking about. I said I didn't mention it and I'm not going to. What he said was he wasn't asking about our process; he was really asking a question about our actual test protocol, which is a fair question to ask. So, I sometimes become paranoid about divulging things.

WC&P: Where are you seeing growth areas looking at domestic vs. international markets?

Gottlieb: Actual business is growing only because we've gained recognition on a world level and also we were fortunate to hire somebody to head up our international division three years ago. He started out running, did a credible job the first year and has made tremendous strides each year since, so our business is growing there.

WC&P: Who is your international manager.

Gottlieb: Joe Avilla. He was formerly with Sybron.

WC&P: Where have you put your focus in this arena? Are there certain regions or countries that seem more attractive for one reason or another for you? Are there macroeconomic issues that filter in here?

Gottlieb: Our sales overseas are too diffuse at this time to give you a real answer, a meaningful answer. Let's just say we have a lot of opportunities and we are taking advantage of those that make more sense for us in the long term. We're hopefully not going after something just because it's there.

WC&P: How do the economic swings to and fro affect your business?

Gottlieb: They haven't.

WC&P: Is that because of the growth pattern you're in somewhat insulates you?

Gottlieb: Yeah. We're so small and the service niches don’t tend to get hurt quite as much. They're small entrepreneurs.

WC&P: As the commodity niches?

Gottlieb: Yes, the entrepreneurs scramble and find new customers because they lose 20 percent of their business and their wives and kids have to eat 20 percent less food. They scramble. They work harder. And we work harder with them. But, again, it's not that we're wonderful and the rest of the world isn't. We're a smaller company than most of our competitors, so for us to continue growing is not something a larger company is going to necessarily react to in fear. The niches we serve are a lot smaller. They're nice for us.

WC&P: How about U.S. sales? Frank DeSilva is the director, correct?

Gottlieb: Correct. Frank was my first "professional" employee.

WC&P: By that you mean?

Gottlieb: I mean his ponytail… heh, heh.

WC&P: He doesn't have a ponytail.

Gottlieb: No, he hasn't had it since the day before he began working for us.

WC&P: Our ad rep John Miller when he was in Florida just before the WQA show in Orlando visited him and showed us pictures from Frank's office. We loved it.

Gottlieb: The little redesigned garage with the surfboard museum in it?

WC&P: Oh, yes. That's an awesome thing. Where do you see directions heading in the U.S.? Everyone has seemed to be focused on the decline in the last six months. You're insulated here as well because of the niche markets you spoke about?

Gottlieb: Yeah, because our guys work hard. All of our sales people are partners. They're compensated based on -- and I want to point out -- a very easy to calculate profit.

WC&P: Have their been any areas where you've seen any signs of economic change at all?

Gottlieb: They're in markets that we don't really play in that much.

WC&P: For instance?

Gottlieb: Power plants, pulp paper mill -- we hear two things: One, prices are getting lower; and two, quality is getting lower. Three, now, we hear that prices are going up in those commodities markets because it got to the point where everybody took out all their profits and started to take away quality. Then the customers are reacting by paying more now for better quality. But we don't do much in those markets except when we're invited in because of technical issues more often than not through one of our regional water treatment companies.

You'd asked earlier about my sales people and mentioned Frank DeSilva. Frank's got a master's degree in environmental engineering from New Jersey Institute of Technology. Dick Chmielewski, whose our West Coast regional manager, has got also a master's degree in chemical engineering from NJIT.

WC&P: Do you just go to New Jersey Institute of Technology to do your hiring?

Gottlieb: Not really. I'm a graduate. Coincidentally, about a month ago, I was appointed to the advisory board of the New Jersey Institute of Technology's School of Engineering.

WC&P: Congratulations. Talk to me a bit if you could about what's going on in the ion exchange industry in general.

Gottlieb: The ion exchange industry in general is suffering the results of commodification of an industry about 20 years ago when this industry took a tremendous change in direction… or I should say a tremendous change was forced on this industry. Is it OK to mention a competitor's name?

WC&P: Yes.

Gottlieb: Well, Purolite, when they started their business, they're strategy was to sell at lower prices and I think the bigger companies like Rohm & Haas and Dow and Sybron were caught flat-footed with Purolite's initial success. They had very high costs of marketing. Rohm & Haas basically taught the industry how to do ion exchange. Most of my ion exchange technology came from reading literature from Rohm & Haas, discussions with Rohm & Haas employees or ex-employees…

WC&P: The Amber Hi-Lites series.

Gottlieb: Amber Hi-Lites, Robert Kunin's book. Sally Fisher, Frank McGarvey, Robert Kunin -- they all came from Rohm & Haas. They were ion exchange at Rohm & Haas. Today, Fisher is the owner of Puricons, McGarvey is now a retired consultant -- I used to work with him at Sybron -- and Kunin is a retired consultant. They're still there. They're still active. I can still tell you the phone number of the old Rohm & Haas Ion Exchange Group. It's (215) 592-3246. It was Dick Heatherington's phone number. Every time I see him, I tell him that number. But I called it so many times, I can't forget it. Here, we have Carl Galletti in the Midwest; he's a chemist that came from Dupont. We have Bill Herrera has been in ion exchange for about 25 years -- I first met him when he worked for Continental -- and Bill works partially for us; he's a rep, not a complete employee.

WC&P: I was talking with him at WQA about what he's got going on. He used to be with Alamo Water Refiners…

Gottlieb: Correct. And now we also have Bill Koebel; he came to us from Betz; he's a chemical engineer. Larry Gottlieb was our northeast regional manager and is a mechanical engineer. Bill is now doing that and Larry is running our cartridge business now.

WC&P: And that's still under the Aries name?

Gottlieb: You know, I know what goes into all the different things, but the names of all the new cartridges and even the name of the division sometimes escapes me. If you ask me what the performance of the resins were and flow rate, I could answer those questions better than what the formal name of the division is. Inside, we call it the Aries division.

WC&P: What type of markets would those cartridges be sold into; for example, what would it be used in anyway? Are we talking carwashes, etc.?

Gottlieb: No, you're talking about everything from small production plants, pilot plants, laboratories…

WC&P: Metal finishing?

Gottlieb: Metal finishing for the small jeweler. He needs deionized water to make better palladium plating on your wife's engagement ring. They'll use cartridges. Every laboratory when they need deionized water to wash glassware -- or just to dilute a sample, make a titration, mix up a solution -- they'll have small demineralizers. When yo get into large companies, every one that has a demineralizer has a lab where they do some testing. What do you think they use for deionized water in that lab? A cartridge demineralizer. Carwashes will use portable exchange tanks, which we now also sell. We also sell activated carbon. Along the way, our business has grown vertically because of the nature of our marketing. We have excellent distributor relationships and they're based sometimes on us sitting down with our distributors and deciding who is or isn't our customer and who is or isn't their customer, based on service.

WC&P: You mentioned activated carbon. Can you expand on that?

Gottlieb: We sell activated carbon and we also produce acid-washed activated carbon. And we also distribute these.

WC&P: Is this with the company that Dick Chmielewski identified and Jeff went out and looked at?

Gottlieb: No, that was a cartridge company. But Ken Ciaccio -- I didn’t mention him -- he's our product manager for activated carbon and is a chemical engineer located out in California.

WC&P: What acquisition did that involve?

Gottlieb: Nobody. My son Jeffrey. I was turning down an order. Somebody tried to buy carbon from us because I had solved a problem for them, involving an anion resin. It really wasn't the anion resin. It was a competitor's resin. I was with one of our distributors as a technical support person and went into a plant where they were told by one of my distributors competitors that there was an anion resin problem. I looked at the equipment and told the fellow honestly that the problem was that his cation resin was running out ahead of the anion. And when this happened, the silica leakage would increase because you now had a high pH coming through the anion resin. And we found that there were four bags of resin on the flour that they had never put into the cation system. You actually could tell because it was a two-train system. By looking at the two trains, you could see a difference in the height in the two cation vessels -- one which was working and one that wasn't.

WC&P: How did this relate to activated carbon?

Gottlieb: Well, the guy was so happy or thrilled that I took one look and solved his problem that he had to buy something from me. I kept telling him that he wasn't my customer, but the client who brought me in was. He says, "Well, I have to buy something." I said, "You don't need anything. It was a technical call. I solved the problem. I did my job. We're outta here." He says, "No, I got to buy something. What about carbon? Do you sell carbon?" I say, "No, we don't sell carbon." Got home and there was an order for carbon, so I said to my son Jeff, who was in the office with me at the time -- now, he's a half mile away -- "Send this in to the distributor and tell him to place the order." He did that and the distributor said, "No, just go ahead and sell it direct," which we didn't want to do. Once you do that, you run the possibility of a distributor saying, "Hey, you took away my customer." We didn't want to do that either. So, I said, "You know what, send this to another of our distributors who we know does sell carbon. And just tell them to send it and invoice it and let the customer know why he's getting an invoice from somebody he didn't send the order to." I was kind of annoyed. Well, Jeffrey -- turns out -- spoke to our other distributor who sold us the carbon, Jeffrey sold it to the customer and a couple years later I walked into the Calgon Carbon hospitality suite and found out everybody there knew who I was because we were selling multiple truckloads of activated carbon. And it really goes back to something that was done by my kids and not by me. I'm very proud of them. The one thing I know about ResinTech is it's not a one-man show. I mean I've got a team. Our sales people are top drawer. My own children are part of that team and they're top drawer. They've all done and brought things into the business that have helped it just to grow. And I'm also proud that our sales people are very well compensated.

WC&P: About now is the point in interviews where we switch somewhat into industry issues. You mentioned earlier the commodification of the industry. Can you elaborate more on that and what followed?

Gottlieb: When the bottom got taken out of the market, you had for about five or 10 years Dow and Rohm & Haas and Sybron all suffering terribly. Then, one day, they realized what was happening and they got sharp. They cut out their selling forces, they cut out their technical support groups and they started competing with Purolite. So today, you have an industry that's commodified. Probably 80 percent of the market is commodity selling, but now everybody is geared up for commodity. I think Purolite is suffering because of it. Rohm & Haas and Dow are, of course, the largest and have the lowest cost manufacturing. They're selling on price and I think they've taken back a lot. These are niches where we're not very active, but what I hear is they've taken back a lot. But they're also not making a lot of money selling at very low prices.

WC&P: i.e., margins?

Gottlieb: Well, then they got caught into this war where they were taking out quality as well. And now, customers are starting to pay more because the customer realizes they were being too greedy. Thus, I think the industry is starting to become healthier again.

WC&P: That somewhat benefits you in the long run being a niche provider?

Gottlieb: The effect was we had to lower our prices as well. Today, I sell at far lower prices than I did 10 years ago. The really big discounting is when you get into large orders, people who buy a truckload of resin at a time. That’s where the market is. They ended up getting what they paid for and now they’re saying they want better. And they’re paying more for it. So, you’ve seen the industry go into a downward spiral. As a result, you saw consolidation. Sybron had to close down their manufacturing plant because they could get it cheaper from Dow. Dow is now making their anion resins for them. Sybron Chemicals itself was bought up by Bayer. I don’t know what’s going to happen there now. I know that Purolite is reportedly raising prices. This is the first time in a long time. So are Dow and Rohm & Haas.

WC&P: A lot of that is driven by sustained higher fuel costs isn’t it?

Gottlieb: Yeah, but also people are saying, "I don’t want a high water-retention cation resin that won’t last more than a couple of years."

WC&P: I have a couple of quick questions I want to get to still. One, my experience as an editor with WC&P is that in working with different industry niches, the ion exchange people are often the most competitive that you see.

Gottlieb: The authors?

WC&P: No, the ion exchange market. The rivalries between the companies and the people are more pronounced than in other industry segments. That may be more telling to comments you made earlier in the interview when you didn’t want to mention certain things. Talk to me about that. At the same time, get all you guys together into the same room and you’re having more fun than anybody else at these shows often. There’s an odd sort of rivalry yet respect that goes on between you all.

Gottlieb: Yeah. I don’t know. You see other industry segments as well. I can’t respond to how better or worse we are as friends because I don’t have your overview. But I know that when I started to compete with Rohm & Haas 30 years ago, I felt terrible that I was competing with people like Bob Kunin, Dick Heatherington, Don Downing. These were guys who were like uncles to me. They were people whose brains I used to pick. Rohm & Haas really is an excellent company. It’s really done a lot to help the industry and, unfortunately, at its expense. It bothers me to some extent. But after I was competing with them, sometimes I would see from -- I won’t mention a name -- one of the guys I used to look up to a competitor’s attitude that I suddenly had become a low-life. Now, yes, I was now a competitor, but this is a guy who phone number I still remember 30 years later. On the one hand, he was a guy who was still an uncle to me. On the other hand, he was a guy who no longer liked me. Well, if you see us in a room and everything’s social, maybe the dislike goes away and we can kibbutz about the old days. A lot of us came from the same roots, you know. Maybe that’s it. Rohm & Haas, like Permutit, trained a lot of people in the equipment business. In fact, the guy that started L.A. Water came from Permutit, so did the guy who started Graver and so did the person who started Cochran. They all came from Permutit. Of Rohm & Haas’ people, McGarvey ended up at Sybron. And then Sybron spawned Purolite. It spawned ResinTech. The first guy from Mitsubishi came from Sybron also. In fact, the first guy from one of the Indian companies also came from Sybron. So, yeah, we all have similar roots. Maybe that’s what we go back to. I could sit back with these guys and talk about the old days at the marle pit at Sybron. They used to mine greensand at Sybron. That's what they call the mine where they mine the greensand. That’s how it got started.

WC&P: The other issue that I wanted to talk about was the whole salt efficiency issue and California Senate Bill 1006’s second phase and what that’s going to do to the industry. At this point, it seems as if we’ve talked about the reengineering that’s going to be required, but now it’s getting down to push and shove because the timeframe to meet that second deadline is fast approaching.

Gottlieb: First of all, they can do it. Second of all, I wouldn’t want to start out being that guy who first makes that equipment that does it because who’s going to buy my softener at twice the price of somebody else’s when I can tell them I’m using 99 percent of the salt. My salt efficiency is over 5,000 grains per pound. It could be 5,500 grains per pound. I think 5,700 is the ultimate. I would say you can probably get very close to that number with today’s technology. But, and I wanna go back 30 years or 35 years ago when I was a kid hanging out at Dairy Queen late at night and I heard one of my friends say, "I heard Detroit has a car that runs 100 miles per gallon but the big gas companies don’t want them to put them out. I heard they got transmissions that’ll get 80 miles to the gallon, but the big companies don’t want to put it out." That was mallarkey then and it’s mallarkey now. The same thing happens with salt efficiency. It’s not that people aren’t saying that, but it was always the same factories. Today, we have cars that are as fast as they were in the ‘60s and they get twice the gas mileage. But you’re paying a lot more for them because 35 years ago gas was 18 cents a gallon. Nobody was going to pay $500 more for a $2,000 car to give you a transmission that would give you 30 percent more mileage. And they weren’t going to pay for a carburetor -- $100, $200 or $300 more -- again on a $2,000 car. But now that cars are $20,000 and gas is $1.50 or more a gallon, all of a sudden we have this technology. This is not new. They knew how to make these transmissions 35 years ago. It was always economics. When there is a reason, a compelling reason that everybody has to do this, then it’ll be a competitive industry. But right now, if you make a softener and it will give 5,600 grains per pound of salt and you’ll be the only one doing it -- you’ll also go out of business. That’s because you’ll be making the most expensive softener on the market and nobody’s going to buy it. Why? So they can have the pleasure… Maybe some of the actors in Hollywood will buy it. Who else is going to buy it? But when everybody has to, then it’ll be different. When you make that thing and you can make 100,000 units a year, suddenly your development costs are covered by volume. Now, you’re buying your parts in volume and all of a sudden you can deliver it very close to today’s costs. If I had to tell you where we’ll be at some point in the future, I think probably water softeners will cost 30 or 50 percent more than today -- or now more than that -- and they will have those kinds of efficiencies. And they will be more complex, but not so much more complex as today’s cars are. If you look under the hood of a car today, you could never change your own sparkplugs. You can’t reach around and do it. But you take a 1956 Chevy, you could hide your wife under the hood -- there was that much room. You see all this big empty space with a little motor. Now, you can’t find the motor for all the other things. Well, the new softeners, if and when they’re developed, they’ll have state-of-the-art controllers, they’ll have second distributors… Or they’ll have simple ways to solve the problems that these devices would solve them today. And they may not cost any more. But there will be a lot of work in the development of those products and somebody has to pay for it. And the customers aren’t going to pay for it, not when they can go down to Joe’s down the street and buy something for half the price. So, I think it’s economics and the law. As long as the laws don’t force us to do it, then we’re all in the same boat competing with each other. I have no more to say on that issue because it’s a complex one. It involves more than just economics. It involves legal issues. When the government says you have to do it, then it’ll get done. I don’t know how big the market is in California. It may not warrant that much work and you may see everybody in California walking around with dirty clothing and poorly washed bodies.

WC&P: It also does go to the sense -- particularly in the West -- of water availability. If you’re sitting in Wisconsin next to the Great Lakes or Ohio next to the Ohio River, water isn’t as big an issue. But out here where water equates to growth and your ability to have a 100-year assured water supply determines that, then salt and water efficiency do become a factor. Correct?

Gottlieb: Yes.

WC&P: That’s why California always seems to be the focal point for issues as they relate to these regulations and what may continue to drive them in the future as far as water recycling and reuse and groundwater injection, etc.

Gottlieb: Sure, but look there are things government can do. Right now, they have municipal water supply problems. And they have nitrates and other things in the water they want to get rid of… But you have to use salt-regenerated resins to do it. If you use reverse osmosis membranes, what’ll you do with the 30 percent of the water you’re wasting that now has all the impurities concentrated in it. RO isn’t a good solution. At least with ion exchange, you can concentrate them to a much smaller amount. Now, with ion exchange, what do you do with all that salt? They have these things where they have salt discharge pipes that will run all the way to the ocean ultimately. The ocean can absorb nitrates because there’s a lot of things that can use nitrates as a nutrient. But those salt lines are terribly expensive. One of the things government can do is decide to make them not terribly expensive. Kind of like how we tax gasoline and cigarettes to pay for some things. There are some things we shouldn’t tax. We should make them more readily available. For example, the roads. Yes, there are toll roads, but a lot of our city streets we have no tolls paid. They’re very expensive.

WC&P: There’s a federal tax on telephone lines that we all pay on our bills that’s been in existence since the late 1800s. Now, it’s going to change everything over to optics. You're probably thinking, "Let’s not go down that road." But your idea is effectively that government can make it less expensive.

Gottlieb: Yes, government can make it less expensive. And, if they did that, it would help industry. Then industry could produce product that would perform the way people wanted at a reasonable cost. If they had even a municipal discharge for salt would be a tremendous inconvenience and add a lot of cost to the industry, but it would be better than legislating an industry out of business.

WC&P: Is that a good place to stop?

Gottlieb: I think so.