THE BUSINESS: Wooden-bowl manufacturer
CLOSED: July 1999
CAUSE OF DEATH: Lack of raw material
Where better to locate his wooden-bowl-making business, Mike Ronchetti figured, than the Tongass National Forest, in southeastern Alaska. After all, the 17-million-acre Tongass, which is roughly the size of West Virginia, ranks as the country's largest national forest. Its vast tracts of hemlock, cedar, and spruce offered Ronchetti's company, Alaska Forest Creations Inc., easy access to a seemingly limitless supply of wood.
Ronchetti's plan was to recycle waste wood from lumber mills into an environmentally benign, homegrown Alaskan product. He moved his 10-employee company to the hamlet of Ketchikan, deep in the Tongass forest. Blessed with government funding and utterly surrounded by trees, Ronchetti seemed destined for success. But his Alaskan venture would end unhappily -- for the strangest of reasons. "We just couldn't get the raw materials, period," he recalls.
A seasoned corporate manager, Ronchetti had pulled up stakes in Minneapolis 15 years ago and settled in Anchorage, where he was vice-president of sales and marketing for a tour company. In 1994 he sank $25,000 of his savings into the technology and other assets of a fledgling bowl-making business, which he renamed Alaska Forest Creations. It wasn't long before Ronchetti was selling bowls to small retailers all over the country. But he discovered that having bulk wood shipped to Anchorage, where the company was originally based, was costly and unreliable.
Setting up shop 800 miles to the southeast in Ketchikan promised to ease the problem, in addition to providing other benefits. The shutdown of a Ketchikan pulp mill had created a huge pool of jobless workers whom Ronchetti could hire. By relocating to the economically distressed area, his company might qualify for government aid. As it turned out, once the company did move, the state of Alaska provided a $70,000 worker-training grant. And a loan guarantee from a Ketchikan economic-development fund enabled Ronchetti to borrow $500,000 from the U.S. Department of Agriculture.
Before he'd relocated, in 1997, Ronchetti says, he thought he had another guarantee: a two-year supply of waste-wood blocks from the Louisiana-Pacific sawmill near Ketchikan. When the mill's Asian market collapsed, also in 1997, and it lost Forest Service timber contracts, however, it had to cut output sharply. Ronchetti's backup suppliers, a few small mills in the area, were caught in the same bind. They were scaling back production, too, and couldn't fill all his orders. To make matters worse, some of the hemlock the company did have on hand was cracking during the drying process.
On the marketing side the picture looked brighter. "Exquisitely crafted bowls," gushed Kitchenware News, a bimonthly trade newspaper based in Scarborough, Maine, about Ronchetti's products. After some early pricing missteps he raised the suggested retail price of the bowls to as much as $100 (for the largest size), aiming for the high end of the market. "There was definitely a niche for the product," says Robert Coviello, a housewares-marketing expert based in Rochester, N.H., and a former adviser to Ronchetti.
If orders for bowls were plentiful, the wood to make them was not. "We had major trade shows we had to commit to," recalls Ronchetti, "and we had no confidence we could meet supply needs." By early 1999 the company, which had posted $200,000 in revenues the previous year, was losing $25,000 a month. That winter brought the death knell: a freakishly heavy snowfall that largely paralyzed Ronchetti's remaining suppliers and caused his board of directors to fold the company by July.