Soaring business costs in California were driving Buck Knives to the brink. The company regained its edge by dismantling its factory--and putting it back together 1,453 miles away.
Rising out of the snow-dusted fields like a gargantuan block of Post-it notes, the Buck Knives factory in the Idaho panhandle looks for all the world like a Northwest native. From the basalt columns adorning the driveway to the moose trophy gazing implacably down on the lobby and the spectacular chandelier built of antlers, the building feels like it belongs here, where the unyielding prairie of the Columbia Plateau confronts the chill hauteur of the Selkirk Mountains.
Appearances can be deceiving, however. Depending on how you look at it, Buck Knives is a transplant, a refugee, or a pilgrim from southern California. The story of how Buck moved its knife manufacturing company from the dusty, sun-drenched hills of El Cajon to this rugged patch of Idaho turf is a case study in business relocation. If it's true that geography is destiny, then Buck's voyage demonstrates that you can shape your destiny if you're willing to redraw your geography.
A California institution
In 1999, a few months before his 39th birthday, CJ Buck received an unusual heirloom: the family business. For a guy who had spent his entire professional life working for the company, it should have been a magical moment. Buck Knives enjoyed loyal customers, great name recognition, and a tradition of quality forged by his great-grandfather, a blacksmith apprentice named Hoyt Buck who got tired of sharpening grub hoes and in 1902 decided to grind his own blades instead. After years of experimentation, Hoyt came up with a secret tempering technique that produced knives that were so sharp, and so hard, they could whack a steel bolt in two. He co-founded the company with his son, Al, in 1947. Buck's Folding Hunter, introduced in 1964, quickly became the top-selling outdoor knife in America and earned a permanent spot on the Christmas lists of Boy Scouts around the world.
From its origin in a wooden lean-to, the business had grown into a California institution with $33 million in annual sales and 260 employees cranking out more than a million knives a year. But along with the traditions, CJ inherited plenty of headaches. Margins had been sliced to the bone by low-cost Asian competitors, which left the company chronically short of cash. Energy costs, a key factor in tempering blades, were creeping up. The company's work force was experienced, but it also was expensive. "We were losing money," CJ says. "And it looked like there was no end in sight."
One of CJ's first moves after taking the reins was to revamp the company's executive staff. Working closely with his father, Chuck, Buck's chairman of the board, the new team reorganized its marketing strategy, crafting distinct messages for various sorts of customers, such as climbers, hunters, police officers, and military personnel. It streamlined the manufacturing process at Buck's sprawling plant in El Cajon, a suburb of San Diego, and began to make some low-end knives in Taiwan.
These initiatives helped boost sales and trim costs, but they weren't enough. In the spring of 2000, San Diego became the first region of California to taste the delights of energy deregulation. Electricity rates went haywire, soaring from 12 cents a kilowatt-hour to a peak of 42 cents. The spike was subsequently revealed to have been triggered by energy traders seeking to manipulate the market, but that wasn't much consolation to Buck, which consumed 300,000 kilowatt-hours every month. "The numbers were mind-boggling," says Phil Duckett, a burly Welsh engineer who is Buck's executive vice president. But the company couldn't raise prices without ceding market share to the competition.
If there was a bright spot, it was that Buck's new manufacturing process--which organized workers into small groups rather than a single assembly line--used space far more efficiently, freeing up 40,000 square feet of the company's 170,000-square-foot factory. That meant Buck could save money by moving into a smaller facility. As members of the executive team pondered new locations, they were struck by a more radical notion--getting out of California altogether.
At first, it seemed inconceivable. Buck Knives had deep roots in El Cajon. The average tenure of its employees was 15 years. Churches held services in the company cafeteria. Girl Scout troops used the training rooms for cookie distribution. Both CJ and Chuck had been born and raised in the area. Their wives, their children, their friends, their careers--their whole lives were based there. Outside the factory stood a massive boulder inlaid with a brass plaque dedicated to CJ's grandfather, Al Buck. "As this rock stands immovable and solid," the inscription read, "Al was our rock in hard times and in good times." Were they really going to move that rock?
On the other hand, deep roots don't mean much if you go out of business. Electricity bills, workers' compensation, labor costs, and taxes were high everywhere in California, not just in San Diego. The blunt truth was that something had to give. The board told CJ to discreetly explore the idea of moving out of state.
In the summer of 2000, CJ got a call from a folksy, gravel-voiced gentleman named Bob Potter, who ran economic development for Kootenai County in the Idaho panhandle. Potter is something of a legend in business recruitment circles. He has lured more than 70 companies, representing more than 4,000 jobs, to a remote corner of northern Idaho--the vast majority from California. Potter subscribes to the Orange County Business Journal, the Los Angeles Business Journal, and the Kiplinger California Letter. "I read those religiously," the 79-year-old recruiter says. "I know what's going on in California." Thanks in part to his relentless wooing, Kootenai County is now home to 54,000 jobs and is gaining new ones at a rate of about 8 percent a year--one of the fastest employment-growth rates in the nation.
