[Executive Forum] Kevin Caskey

How does a 105-year-old, family-owned business that made its fortune as one of the country’s largest importers of spices get involved in the pesticide industry? “Like so many success stories,” observes Kevin Caskey, business director — branded products, McLaughlin Gormley King (MGK), “it was a combination of good luck and hard work.”

Along with a variety of spices, MGK regularly imported plant leaves, barks and flowers from Africa, which it ground up and sold to pharmaceutical manufacturers in the United States. “A perceptive employee noticed that the shipments with dried flowers had fewer insects in them than those without the dried flowers,” Caskey says. “Being naturally curious, MGK staff members investigated what might be causing this phenomenon and they discovered the dried flowers were pyrethrum flowers, which, as pest management professionals know, have insecticidal properties.” With this discovery in 1915, MGK identified a market opportunity and began importing a variety of botanical insecticides into the United States, including pyrethrum.

In the 1920s, the company’s pesticide business continued to evolve as MGK scientist Charles Gnadinger identified how to extract pyrethrum from the flowers and standardize the pyrethrum formulations developed by the fledgling insecticide supplier. Thanks to Gnadinger’s groundbreaking work, MGK was able to offer consistently high-quality pyrethrum-based insecticides to its customers, something that had been unavailable previously. “We’ve been involved in the pest control business ever since,” Caskey says. “It’s a historic part of MGK’s business.”

But the story doesn’t end there. During World War II, when pyrethrum flowers were hard to come by, MGK developed a range of synergists that allowed the company to stretch its limited supply of pyrethrum, while providing excellent insect control, thereby complementing its pyrethrum product line. “Consequently, synergists also became a very important part of our business. Today, if you walk into a store and grab an aerosol insecticide off the shelf, it likely contains the synergist MGK 264. It’s that widely used.”

In recent years, the company has entered the professional market, expanding its product offerings to include a range of insecticides developed specifically for the pest control industry including Riptide, Bedlam, Onslaught, NyGuard, Vendetta, PyGanic Pro, Pyrocide, Exponent and VamPyre. PCT magazine recently sat down with Caskey to discuss the company’s future plans for the pest management industry.

Q: McLaughlin Gormley King is a relatively new player in the pest management industry. What was the mandate given to you by management when you were hired to develop its product offerings in 2001?

A: I was brought in to build our branded product offerings for the pest control industry and organic crop protection, which we believe offer excellent growth potential for our company. At the time I joined MGK we had seven active ingredients approved for food-area use and my mission was to maximize the value of those seven active ingredients. The centerpiece of our branded products at the time was our organically compliant pyrethrum, PyGanic, which we launched in the organic crop market in 2000. It’s still the largest product in our line, but since then we’ve added a number of additional products to the pest management market portfolio.

Q: What were some of the major issues facing the company as it considered enhancing its investment in the pest management industry?

A: In evaluating the opportunities in the professional pest control market, we looked at our previous experience in the organic agriculture market where we’ve had some success. What we discovered is we weren’t a company with too few products. In fact, the opposite was true. We had too many products to choose from. We had to decide where we were going to focus our energies and which products we weren’t going to launch, which sounds strange, but we needed to be selective because we didn’t have endless financial resources at our disposal. Based on the feedback we received from our 2003 NyGuard product launch, we began to introduce more products to take advantage of changes that were occurring in the marketplace.

For instance, at the time, chlorpyrifos was being taken off the market, which represented an opportunity for us since pest management professionals were no longer going to have the tools available to them that they once did. In addition, methyl bromide was under increasing regulatory pressure, which represented another opportunity for us. These and other developments created an opening in people’s minds to consider some new product options. Our products aren’t direct replacements for those products, but they are key components of an IPM solution for controlling the pests previously controlled with those products.

Q: What attracted you to McLaughlin Gormley King initially?

A: It’s a unique company. What makes it unique is it’s a family-owned business, but unlike many family-owned businesses, they practice open-book management. Every employee knows and understands our profitability targets and current performance at any given time, as well as our strategic vision. Every employee is on a bonus plan based on the company’s profitability. We all understand where we’re at and where we want to be at the end of the year. With that knowledge, we all participate in determining how we’re going to get there. The Branded Product Group itself is a true start-up environment within a mature business.

Q: How can a company that is more than 100 years old function like a start-up?

A Even though MGK has served the pest management industry for decades, it has been a behind-the-scenes participant. Our branded business basically started with a clean slate in this market. We have to behave like a start-up company because in the minds of the market participants we are an unknown — or barely known. We’ve tried to create a corporate culture where we never take our position in the marketplace for granted. For instance, in the past year we’ve added a mosquito misting market specialist, a national accounts manager and sales representatives in Texas and Florida to expand our pest control market presence and improve the service we provide to the industry. In addition, even though we’re well capitalized, I still try to maintain a start-up mentality within our group. We’re going to strain our internal structure until it becomes evident we need to add head count; this means constantly challenging ourselves to streamline or outsource processes so we are as efficient as possible. Our group represents 15 percent of the company’s business and MGK’s five-year plan is to more than double the size of the branded business, and we see a significant part of that growth coming from the structural pest control industry. We anticipate driving growth by continuing to make significant investments in R&D, which will result in the introduction of a number of new products in the years to come.

So, pest management professionals are going to see more and more products from MGK. What they’re going to see are products that deliver a unique benefit or solve a unique need that isn’t being met now. They’re probably not going to see a revolutionary new active ingredient or a new mode of action, but they will see products that deliver real value and are improvements on existing products that are currently in the marketplace. We plan on offering real alternatives to existing chemistry. And all of our new products will deliver a minimum of at least one unique benefit to the pest management professional. Otherwise, we won’t bring them to market.

Q: How do you plan to position MGK within the industry?

A: We’re not going to be generic players. The branded products we bring to the marketplace need to have an advantage. Sometimes the advantage is going to be large and sometimes the advantage is going to be small. We don’t have the appetite to be in the generic market. We have a research and development group that is committed to developing innovative products that offer real solutions to real problems the industry faces. And we support those R&D efforts by continuing to invest in innovation, which is going to take ongoing financial investment on our part. We may bring out a novel product that is based on generic chemistry but it’s going to deliver a unique package of benefits.

Q: How do you think MGK’s past has impacted its future?

A: Our latest initiatives really build on MGK’s historic experiences in the consumer market, which is to differentiate ourselves through improving existing chemistries. In the consumer market we’ve been mixing and matching chemistry for decades and we’re good at it. We have people that are very good at enhancing formulations, but also constantly looking for new, groundbreaking types of formulations. In the pest management industry, our preference is to introduce new and novel proprietary chemistries, so there’s some of that in our pipeline, but the centerpiece of our business is enhanced formulations of existing active ingredients that deliver specific advantages.

Q: Given the significant economic investment required to develop novel chemistry, how can MGK compete — if at all — with the major chemical companies currently serving the pest management industry?

A: It’s a challenge to compete at that level, but one of the advantages of being a family-owned business is we have the luxury of bringing products to market that don’t have to generate millions of dollars in revenue to meet a minimum return on investment for our company. As a result, our economic threshold to bring a product to market is much lower than the majors, which must see a significant financial return on any new product to make it worth their time and effort. We also have the luxury of our core business being devoted to the consumer market, so we can bring products to the pest control industry that may not have been available to pest management professionals historically. Bedlam is a great example of that. It sat on the sidelines for two years while we debated internally whether to launch it or not. Eventually, we decided to move forward because we thought it would meet a growing industry need, which it has. A large multi-national wouldn’t have likely made the same decision because they couldn’t guarantee a sufficient return on their investment. However, we could justify the development and marketing costs because our ROI “hurdle” isn’t as high as the large multi-nationals.

MGK at a Glance

Corporate Headquarters: Golden Valley, Minn.

Year Founded: 1902 by George McLaughlin, John Gormley and Samuel King

Business Type: Privately held

Market Segments Served: Professional pest management, household/consumer, animal health, plant protection, public health, organic agriculture, and OTC lawn and garden

Number of Employees: 90

Key Executives: William Gullickson Jr., chairman of the board; Steven Gullickson, president; Kevin Caskey, business director — branded products; Brad Ward, director of operations; April Umaña, marketing manager; Monica Morris, marketing specialist; Mike Burkett, national sales manager

Pest Management Product Portfolio: NyGuard IGR (pyriproxyfen), Vendetta (abamectin), VamPyre (pyrethrins), Riptide (pyrethrins), Pyrocide (dual synergized pyrethrin), Bedlam (sumithrin, MGK 264), Onslaught (esfenvalerate), Exponent (piperonyl butoxide) and PyGanic Pro (organically compliant pyrethrins)

Web site: www.mgkpro.com

State-of-the-Art Manufacturing Plant

McLaughlin Gormley King is a manufacturer and formulator of specialty chemicals with its core business in the manufacture, formulation and packaging of insecticide products. The products are manufactured in a 100,000-square-foot facility in Chaska, Minn.

Director of Manufacturing Frank Uggla, a 33-year veteran of the company, says on any given day the manufacturing plant may be producing from 10 to 15 different products in unit sizes ranging from 4-ounce bottles to tanker trucks. “That’s why I like the job,” he says. “It’s different every day.”

Each year, MGK formulates more than 150 different products for a variety of markets, including the structural pest control industry.

Roots in Pyrethrum

McLaughlin Gormley King has its roots in the pyrethrum business. But what exactly is pyrethrum? Pyrethrum is a botanical insecticide produced primarily in the flowers of Tanacetum cinerariaefolium, a species of the chrysanthemum plant family. Pyrethrum plants historically have been grown in commercial quantities in Kenya, Tanzania, Rwanda and Papua New Guinea. More recently, a company in Tasmania, Australia, began producing pyrethrum. Today, Kenya and Australia are the largest pyrethrum-producing countries in the world.

In East Africa, the mature pyrethrum flowers are picked by hand, sun dried to remove moisture, and sent to a processing plant for extraction of the active ingredient — pyrethrins, a mixture of six closely related esters. In Australia, the flowers have been bred to synchronously flower so they can be mechanically harvested. As in Africa, the flowers are sun dried and processed to extract the insecticide pyrethrum.

Pyrethrum is an ancient insecticide. The insecticidal properties of the flowers were documented in the early 1800s, but it is suspected that the flowers were used to kill insects a considerable time earlier. The first commercially available products were powders made from ground flowers and later crude oil extractions became popular. Today, the refining of crude pyrethrum extract to remove the plant material, waxes, etc., is a highly complex process resulting in a very high-grade product.

Pyrethrum has been used to control insects for decades and is non-persistent, decomposing rapidly in the environment. This rapid degradation has resulted in few known cases of insect resistance, making it an excellent choice for the control of a variety of pests.