Growing your business too fast is a good problem to have, but it's still a problem.
Just ask David Rhodes, global business director for Fort Wayne, Indiana-based paper straw maker Aardvark. During the past 12 months, the growing backlash against plastic straws has contributed to a 4,900 percent increase in demand for Aardvark paper straws compared with 2016, Rhodes says. The company has struggled to keep up, delaying shipments of straws for up to 12 weeks to some customers.
On Monday, Aardvark's parent company, Precision Products Group, announced a big move in hopes of solving the capacity issue: The company decided to sell Aardvark to disposable tableware manufacturer Hoffmaster Group for an undisclosed sum.
"[Hoffmaster] will be able to bring in resources to really meet the global demands," Rhodes said in an interview with Inc. Hoffmaster is developing a six-to-nine-month expansion plan to increase Aardvark's production capacity. Meanwhile, Aardvark's existing management team will remain at the company.
Aardvark's sales have been growing steadily since its launch in 2007, doubling in its first two years in business, and continuing to double on an annual basis most years since then, according to Rhodes. The company has gone from making millions of straws in 2007 to making billions in 2017, thanks largely to an uptick in public awareness around the environmental repercussions of plastic straws.
Marine life advocacy groups have led the anti-plastic campaign, making straws their primary enemy. In 2015, a marine conservation biologist and PhD student at Texas A&M University posted a YouTube video of her team removing a plastic straw from the nose of a sea turtle. The video went viral, attracting more than 30 million views.
"Sea life sees plastic straws in the ocean and it looks like an appetizer to them," Rhodes said. "The fact of the matter is, if Flipper or any other sea life eats a plastic straw, it will kill them." The viral video triggered a public outcry and since then, cities including San Francisco and Seattle have banned public straws, while New York has proposed legislation against them. Companies, including Starbucks, have followed suit and self-imposed straw bans at their establishments.
Aardvark was well positioned to take advantage of the anti-plastic straw movement, and not just because it's the only paper straw maker in the U.S. One of Precision's previous companies first began making paper straws in the 1880s and sold them until plastic straws became the norm in the 1960s. Aardvark re-engineered a new paper straw that wouldn't dissolve in a drink but that would break down in the stomach of any creature that might ingest the product.
Plastic straws cost about half a penny, while paper straws cost around 4 cents, according to a June article in Bloomberg. Today, Aardvark's main customers are food services companies, theme parks, live sports arenas, and major health care providers. Rhodes declined to name specific Aardvark clients, but said the company sells straws to large industry players that have recently announced moving to paper straws. He expects delivery time to get back on track by the end of next year. In the meantime, the limited supply of paper straws will be going to coastal markets or areas where are there are plastic straw bans already in place.
"We are giving them preferential treatment, not that Omaha isn't important," Rhodes said. "Coastal cities and island nations have a more serious issue when plastic straws hit their waterways."
While selling a rapidly growing business can be a tough decision for any owner, Precision CEO and president Dave Hooe said letting Hoffman guide Aardvark's next stage of growth was the best result for the company.
"The sale of Aardvark was viewed as positive for the business, the employees, and the shareholders," Hooe said.