California Cedar Products Company History

Company Perspectives:

California Cedar Products Company has been built upon generations of tradition and excellence in building strong customer relationships throughout the world, producing world class quality products, and continually innovating new manufacturing processes, new products, and new services.

Key Dates:

1856:

Berolzheimer family establishes Eagle Pencil Company in New York City.

1919:

California Cedar Products Company (CalCedar) is founded.

1927:

Charles Berolzheimer buys CalCedar.

1970:

Duraflame is acquired.

1978:

Duraflame is sold to Clorox.

1981:

Berolzheimer family reacquires Duraflame.

1995:

Charles Berolzheimer dies.

Company History:

Based in Stockton, California, the family-owned California Cedar Products Company (CalCedar) is the world's largest supplier of wooden slats used in the production of wood-cased pencils and over the years has branched into several other wood-related product lines. The company, owned by the Berolzheimer family, is comprised of four business groups. The primary product of the Pencil Products Business Unit are slats--flat blocks of wood sold to manufacturers to be made into pencils. CalCedar offers several types of slats, including Incense-cedar, the highest quality material available. The reddish-brown wood sharpens easily and is used for artist-quality pencils as well as cosmetic pencils. CalCedar's Ecoslat brand of slats is made from basswood, a less expensive material that is more suited to entry level pencils and mass market lines. ForestChoice slats target consumers that are mindful of the environment while providing the highest quality. The Incense-Cedar wood used in ForestChoice slats is harvested from a managed forest certified by the Forest Stewardship Council. Beyond standard size slats, CalCedar offers slats in a variety of sizes to create such specialty and novelty products as carpenter pencils, golf pencils, advertising pencils, and oversized pencils. CalCedar also has the capacity to manufacture pencils for customers, based on their specifications, to produce either raw, semi-finished, or fully finished pencils. Moreover, the company sells all the components of pencils, including graphite pencil cores of differing hardness and either round for standard pencils or square for carpenter pencils; wax-based color pencil cores; erasure plugs; and ferrules, the aluminum ring that fastens an eraser to the top of a pencil. CalCedar's Firelog Products Unit produces firelogs for its better known sister company Duraflame, a business that grew out of CalCedar in the late 1960s. The Consumer Products Business Unit offers such consumer wood products as the CedarPro line of Incense cedar siding, decking, and pattern products, as well as the Shastina and Frontier lines using lesser grades of woods. CalCedar's products are sold around the world. To cut costs, all of the company's milling operations are now carried out overseas, primarily in China.

Pencil-Making in 19th-Century Germany

The German ancestors of the American Berolzheimers who own CalCedar were involved for 40 years during the 1800s in the pencil-making trade in the Bavarian town of Furth, located in Western Germany, the primary source of a clay that is used to mix with graphite to produce the pencil core. The history of the pencil actually dates back to the ancient Egyptians, who used a lead disk to draw guide lines on papyrus. Over the centuries, the disk became a lead rod encased in wood. The switch to the more suitable material of graphite occurred in the mid-16th century, but there were few pure deposits in the world, so much of the graphite used in pencils was crushed in order to remove impurities and then reformed into sticks by means of a binder. It was an officer in Napoleon's army, Nicholas Jacque Conte, who first mixed ground graphite with clay, which he then fired in a kiln to produce pencil cores. Not only was the clay an excellent binder, it also allowed Conte to vary the amount he used in order to create a range of grades, from hard to soft, a method that became standard around the world.

Daniel Berolzheimer immigrated to America from Germany in 1856 and established the Eagle Pencil Company, opening a pencil shop on John Street in New York City and a nearby factory in Yonkers. It was also during this period that a number of developments in the pencil industry were taking place in the United States. A Massachusetts cabinetmaker named William Monroe invented a machine that could produce slats suitable for making pencils. The first modern pencil factory was opened in New York City in 1861 by Eberhard Faber, who also had family ties to Bavaria. In that same year, Daniel Berolzheimer's son Heinrich took over the family business and opened a massive pencil factory that encompassed an entire block on East 13th and 14th Streets in what is today's East Village section of Manhattan. While Faber became better known for its erasers, the Eagle Pencil Company became a major, worldwide force in the pencil industry. In addition to a showroom on Broadway, the Fifth Avenue of its day, the company maintained agencies around the world and owned cedar mills in Florida, Alabama, and Tennessee. In addition, Eagle patented the first mechanical pencil in 1879 and even developed an early fountain pen, which unfortunately relied on fragile glass cartridges, preventing the Berolzheimer name from becoming associated with pens as well as pencils.

Breaking Away from Family Business in 1927

One of the great-grandsons of Daniel Berolzheimer, Charles Berolzheimer, struck out on his own in the pencil business in 1927, moving west to California to buy a young firm called California Cedar Products Company, which relied on the ready availability of Incense-cedar in the forests of California and Oregon to produce both paneling and pencil slats. Eagle and other pencil manufacturers had for many years used the Eastern Red Cedar that grew in the Southeast, but because of a dwindling supply of this material many pencil companies began moving westward. Charles Berolzheimer not only had a solid background in the pencil business, he was also well educated. Fluent in seven languages, he traveled around the world making important contacts for CalCedar. He was also an innovator who pioneered new techniques in the pencil industry and was instrumental in the development of new, efficient saws and systems.

By the 1960s, when Charles Berolzheimer's two sons, Michael and Philip, were ready to become involved in the business, CalCedar had carved out a 30 percent share in the world market for pencil slats. However, the company now faced stiff new competition, specifically from Kimberly Clark Corp., a major forest-products company. CalCedar's hired management exacerbated the situation by instituting a policy requiring that customers buy some grades of cedar they did not want in order to obtain the best grade of cedar. In secret, Kimberly Clark offered to fill these orders at a reduced rate, prying away some of CalCedar's oldest customers. The younger of the two sons, Michael Berolzheimer, fresh from Harvard Business School, stepped in to troubleshoot the situation, traveling worldwide to listen to customer complaints. He then succeeded in having the controversial policy rescinded, and CalCedar thereafter undercut Kimberly Clark's prices. By 1969, not only did CalCedar repair the breach with its customers and fight off the challenge of Kimberly Clark, its aggressive stance resulted in the company increasing its market share to 50 percent, with annual sales increasing from $3 million to $10 million during this period.

Michael Berolzheimer also became involved in taking the business beyond pencil slats. CalCedar was selling some of its scrap wood locally, but a truck driver who knew that the warehouses contained a lot more scrap than could be sold in the immediate area asked if he could try selling it at gas stations and convenience stores throughout northern California. Michael enlisted his brother's support and the truck driver was given his chance. He quickly sold all of the scrap that CalCedar had available. The truck driver then approached Michael Berolzheimer with an even better idea. Showing him a fireplace log made out of sawdust and wax, the truck driver suggested that CalCedar could take advantage of its unwanted sawdust, which was being burned or carted off to landfills, to become involved in the artificial log business. In the 1960s, manmade firelogs were a minor product, with annual sales in the neighborhood of $2 million, and only a handful of regional companies were involved in the business. Nevertheless, the Berolzheimers thought it was worth a try. The first product CalCedar offered was called the California Cedar Family Log, introduced in 1968. It was far from a polished product, but in less than a year CalCedar sold 30,000 cases, enough to encourage the Berolzheimer brothers to invest $20,000 and create a separate company they named Duraflame, which was officially incorporated in July 1970. They were also influenced by a brother-in-law who conducted market research on the East Coast and told them that the large supermarket chains would make shelf space available for a firelog. While Michael worked with a Harvard marketing professor on a national plan to sell an improved version of the Family Log to supermarkets and other retailers, CalCedar engineers spent two years developing a premium processed log to assume the Duraflame name. The plan was to target the premium category of the nascent firelog industry rather than get caught up in regional price wars with the other manufacturers. As a result, Duraflame required a superior product to justify the higher price, a log capable of burning steadily for three hours. The CalCedar-engineered product fulfilled these requirements, and by 1972 Duraflame had established itself in a choice spot in the marketplace, generating sales in excess of $2 million.

Another development at CalCedar during this period was the establishment of P and M Lumber Products, Inc., the name drawn from the first letters of the company's co-owners, Philip and Michael Berolzheimer. The business operated a saw mill located at Mt. Shasta, California, milling cedar logs into pencil stock for CalCedar. Not only did this venture increase the amount of cedar slats available to CalCedar, it initiated a diversification effort at the company that led to the introduction of siding and decking products.

Early success for Duraflame led the company to produce more product than there was demand, especially during the 1974-75 recession. When the economy picked up, and with it the sale of firelogs, Duraflame was able to take advantage of its superior product to fend off competition, soon gaining a 50 percent share of the market and grossing some $15 million a year. In 1977, CalCedar, Duraflame, and other associated companies generated more than $50 million in sales, a significant improvement over the $7 million achieved in 1969. Duraflame sales accounted for about half of the $50 million. Michael was interested in launching other consumer products through the Duraflame company but met resistance from his brother. They also disagreed on other issues relating to Duraflame and as a result decided to shop the business. In July 1978, Duraflame was sold to Clorox Co. for $9 million. It appeared to be a perfect fit for Clorox, which in 1973 bought charcoal briquet maker Kingsford. (Coincidentally, Kingsford was established by automaker Henry Ford as a way to make use of his own excess saw dust and scrap created by the construction of the wooden frames of his Model T cars. Kingsford, Michigan, was where Ford located his processing plant.) Kingsford attempted briefly in the mid-1970s to enter the firelog business but was unable to develop a good enough product. Selling firelogs still made sense for Kingsford because in most markets shelf space used for its charcoal in the summer could be assumed by Duraflame logs in the winter. Nevertheless, Clorox and Kingsford were never able to make a success of Duraflame, and in 1982 the Berolzheimer family reacquired the company, which it was then able to successfully nurture into a well entrenched product.

Late 1990s and Beyond

In 1995, Charles Berolzheimer died. The company continued to maintain its place as a world leader in the pencil industry and looked to continue to grow. In 1999, CalCedar introduced the ForestChoice brand of Incense-cedar wood products. This move was in keeping with a longstanding concern for the environment as well as an appeal to socially conscious consumers. Pencils certified to come from forests managed in an environmentally suitable manner were also popular in the key European market. Also in 1999, the company expanded beyond Incense-cedar, obtaining the EcoSlat brand of basswood slats when it acquired Hudson I.C.S., in the process eliminating a significant competitor and adding market share. CalCedar also maintained its reputation for innovation, in 2000 launching a division to produce curtain-sided trailers, acting on a suggestion by two employees in response to a common problem the company had in hauling valuable Incense-cedar. In order to protect the wood, the truckers had to use heavy, unwieldy tarpaulins. What the CalCedar inventors came up with was a removable curtain-side system that solved the problem and proved so successful that it encouraged management to try marketing it.

Sister company Duraflame also continued to develop new products in order to sustain its leading position. In 2002, it introduced Open Air firelogs, formulated to burn better outdoors, produce less smoke, and emit a pleasant crackling sound. They were developed in response to the increasing popularity of outdoor fireplaces, patio fire fixtures, and Mexican style chimineas. In addition, Duraflame began to sell an orange-scented gel for lighting charcoal called Freshlight. The company received some unwanted publicity in 2003 when a dispute between the children of Philip and Michael Berolzheimer, who shared ownership of Duraflame, ended up in court, prompted by the desire of Michael Berolzheimer's children to sell their portion of the company. While the two sides worked to settle the matter privately, Duraflame continued to operate without any noticeable disruption to consumers.

In the final years of the 20th century, CalCedar faced the challenge of competing in a global marketplace. In 1998, it laid off over 100 workers, then a year later asked labor for a 9 percent reduction in pay from the Teamsters Union, which had been representing production workers since 1963. According to management, without the contribution of a pay cut to an overall plan to reduce operating costs the company would have no choice but to move its operations to Mexico. A deal was ultimately reached, but the problem of cheap overseas labor would soon result in CalCedar transferring its manufacturing operation to China. In 2003, the company closed the last of its domestic saw mill operations, another major step in making the transition to Chinese production.

Principal Competitors: Louisiana-Pacific Corporation; Lydall, Inc.; North Pacific Group, Inc.

Further Reading:

• Berolzheimer, Michael G., and David E. Gumpert, "The Financial and Emotional Sides of Selling your Company," Harvard Business Review, January-February 1980, p. 6.
• Cook, Bill, "Stockton-Based California Cedar Products May Reject Final Contract Offer," Knight Ridder/Tribune Business News, May 3, 1999.
• Fujii, Reed, "Stockton, Calif.-Based Fire Log Manufacturer Moves to Settle Ownership Dispute," Knight Ridder/Tribune Business News, March 7, 2003.
• Posner, Bruce G., "Venture Capital Discovers the Mass Market," Inc., July 1984, p. 49.

Source: International Directory of Company Histories, Vol. 58. St. James Press, 2004.

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