Amid a tough couple of years for recycling markets, many MRF operators have resorted to raising prices, cutting materials, renegotiating contracts or even closing entirely. While consolidation continues at a fast clip throughout the waste industry, few recycling companies have been considered attractive enough for potential buyers – except Balcones Resources.
The Texas-based recycler recently sold an 80% stake to Closed Loop Partners – through the firm's private equity fund – and has plans to look for new expansion opportunities throughout the region. Co-founder and CEO Kerry Getter, staying in his post, attributes the company's successful 25-year run to principles adopted long before the latest market tumult.
“We have a pricing model that we use on every customer relationship that we’ve developed internally and we adhere to that religiously," Getter told Waste Dive. “As a result of that, we’ve been able to stay out of some traps that others have found themselves in."
The Getter family's recycling roots stretch back to the 1970s, when Kerry's father and brother started All Waste Paper Recycling in Dallas. Kerry joined the business in 1986, before it was acquired by Waste Management in 1990. He continued on for three years and then founded Balcones with his wife Becky in 1994.
While Getter said Balcones has always worked toward a finished product that exceeds specifications based on lessons learned from his father – "if you make the best quality, you’re going to be the last one that the mills shut off" – it took a tough market collapse to inspire the company's current form.
Balcones initially had around 98% of revenue tied to paper markets, so when prices plummeted in the mid-1990s the company took a serious hit. After that, Balcones diversified into new areas including document destruction, container collection service and waste flow management for large facilities. The company also developed its proprietary pricing model, which covers processing costs and other expenses from the start.
“The policies and practices that we adopted back in the mid-'90s are paying off for us now," said Getter. "Consequently we’ve been able to stay out of any real serious trouble with the markets because we don’t make commitments that we can’t keep."
With MRFs in Austin and Dallas, Texas, as well as Little Rock, Arkansas, Balcones now handles an estimated 21,000 tons per month and is often referred to as a model operator by many in the recycling industry. While Balcones holds a long-term processing contract for 60% of recyclables in "zero waste" leader Austin, Getter said he is hesitant to take things on in the name of waste diversion goals or corporate-funded efforts. At the same time, Balcones has made a point of investing in equipment for glass at a time when others are trying to drop it.
“We don’t take something in unless we’ve got a home for it and we know that we can sell it and we know that we can sell it for something greater than our processing costs."
Executing on this plan positioned Getter and his team for market drops in the Great Recession as well as post-National Sword — described by the executive as being "in many ways more painful," because of its protracted nature. Even Balcones' pricing model didn't foresee certain commodity values dropping to zero. Still, Getter said "we do not use China as a crutch" and earlier this year he was talking about expanding through acquisition.
Last year, he received a call from Closed Loop Partners CEO Ron Gonen with a different proposal. Getter and his team originally flew up to New York to meet Gonen when he launched the initiative about five years ago. They came away thinking "these guys are the future" for recycling, he said.
Apparently the feeling was mutual. "Part of the reason why we were interested in a major stake is how impressed we are with the management," Gonen told Waste Dive earlier this year.
While Balcones had been approached with offers by larger players in the past, Getter said he didn't want the company's staff to lose out in a consolidation.
"Hopefully Balcones is the platform for growth and our people in that scenario will have opportunities far beyond what they had before," he said, further describing the recent move as different from selling to "a large integrated garbage company."
Looking ahead to 2020, Balcones will be working with Closed Loop Partners to pursue new opportunities in a variety of regions. While Getter doesn't plan to disrupt business with satisfied municipal customers, he has already had promising conversations with some that are tired of hearing about China and want to learn more about alternatives.
“I think they’re on the cutting edge," he said of the company's new partners. "I certainly hope so. I’ve bet a lot on them and they’ve bet a lot on us."
Correction: A prior version of this story misidentified which Closed Loop Partners fund purchased a stake in Balcones.