LUDINGTON — Through decades of growth by acquisitions around the world, foam products manufacturer FloraCraft Corp. remains dedicated to keeping jobs and growth in its home community.
The company’s success over the past eight decades has come steadily through mergers and acquisitions that expanded the company’s floral and craft product lines.
“This little company is doing such incredibly innovative things up here in Northwestern Michigan in a small manufacturing town and still keeping U.S. workers in place,” FloraCraft CEO Eric Erwin told MiBiz. “It makes you feel good.”
Formerly known as Foliage Co. of America, the manufacturer was founded in Ludington after World War II. After serving in the U.S. Army and a stint in the R&D department of The Dow Chemical Co., current owner and chairman Lee Schoenherr, a nephew of one of the company’s co-founders, came home with a vision to develop the family business.
In Schoenherr’s time away from the company, he discovered Styrofoam, which was being manufactured by Dow Chemical to be used mainly as a buoyancy device for ships, according to Erwin.
“Lee had discovered a couple of these pieces of Styrofoam that were being made there and he used to stick the stems that he was staining for different florists right into the Styrofoam,” Erwin said. “It was in that moment of inspiration that he realized that this was a product for florists and started fabricating and creating different shapes (of polystyrene foam) and selling it to different florists throughout the country.”
With that inspiration, Schoenherr charted a path for the company to grow via expansion opportunities outside of Ludington. Schoenherr bought the business from his uncle in 1973 and, over the next two decades, aggressively expanded its domestic floral manufacturing operations. The company went on to acquire competitors in Ohio, Arkansas, Pennsylvania, Illinois, Minnesota, New Jersey and Indiana.
In 1990, CustomFoam Crafts and Foliage Co. merged into a new company renamed FloraCraft to better position its standing in both the floral and craft industries. The company continued its M&A growth strategy under the FloraCraft banner to become one of the leading U.S. foam fabricators for the craft and floral industries.
“While we will continue to develop our craft products from Ludington as we grow through innovation, we will also grow through acquisition and the general intention is to manage those businesses from Ludington, even though they may be located in other areas of the United States or even in the world,” Erwin said.
Today, all FloraCraft products are manufactured in Michigan. Although Erwin would not disclose the family-owned company’s exact annual revenues, he said U.S. domestic market revenue falls between $60 million and $100 million with compound annual growth rates in the “high single-digits.”
The company buys polystyrene, a plastic with a relatively low melting point. It then heats the material, which is blown into either an extruded rod or extruded billet that has the appearance of “a giant railroad tie,” Erwin said.
From there, the material is shaped, cut and packed as foam balls or cones that line craft supply shops at Christmastime, or the bricks of green foam that are used in floral arrangements.
More than 98 percent of the company’s foam fabrication scrap material is collected and reused in other FloraCraft products or sold to companies that utilize recycled materials, according to Erwin.
A majority of FloraCraft products are shipped straight from Ludington to more than 20,000 retail stores including Walmart, Michael’s, Hobby Lobby and JOANN. The company also operates facilities in Arkansas, California and Mexico.
At an industry event in late 2019, Society of American Florists CEO Kate Penn charted some of the unprecedented changes in the industry and the broader retail environment over the past decade, and the implications of those shifts on the floral industry. Labor, intense competition, new technologies and rising costs — including health care, tariffs and freight — are among the most significant challenges facing floral professionals today, she said in a video of the presention posted online.
By 2023, the number of retail florists is expected to fall 40 percent compared to the number operating in 2006, a decline of 8 percent from the 2017 levels.
“It’s been in the last five to eight years that we’re hearing from our members that online and mobile purchasing is consistently the fastest category for growth for retailers,” Penn said. “Because of this, the number of retail flower shops has dropped.”
However, total spending on flowers is projected to grow in the next five years, from $35.2 billion in 2017 to $44.4 billion in 2023, according to data from the U.S. Bureau of Economic Analysis. To keep up with the projected growth, FloraCraft expanded its employee base by nearly 15 percent in 2019, according to Erwin, who joined the company three years ago.
“I was recruited to come here to help develop the team and make sure that, from a succession standpoint, it can exist for generations to come,” he said, noting the company is one of the largest employers in Mason County.
In late 2019, FloraCraft announced a change in employee structure that included three new and expanded leadership positions — COO, Vice President of Fabrication/Packaging and Vice President of Extrusion — aimed at driving efficiency in the operations, Erwin said.
Internal change also goes beyond the executive offices at FloraCraft. The company has developed “FloraCraft Academy,” a two-year curriculum for line managers, supervisors, managers and junior executives that includes basic academics, management courses and guest speakers.
“The fact is if we’re going to remain a U.S. manufacturer, we’re going to have to continue to improve our efficiencies and operations, and with that is going to come some transformation from what had been lower-skilled jobs to jobs that can operate and execute higher levels of machinery, computers and robots,” he said. “We want to make sure that we’ve got that kind of leadership and the structure within the business that can support that strategy.”
For example, the company would historically hire additional seasonal employees for four or five months out of the year. Now, through the increased productivity and consistency of manufacturing automation, the company is able to adjust output more efficiently without the need for seasonal help.
“We’ve increased our permanent workers over the last year and it’s really to put us in a position so that we can add more automation to the overall business so that when we have those spikes, we can easily flex into it by running the machinery in a very efficient manner, not just your brute force labor,” Erwin said.
FloraCraft is adding a 27,000-square-foot shipping and distribution center to its 138,000-square-foot south manufacturing facility in Ludington, which will also be renovated. The new space will include a modern distribution center, eight shipping bays, new state-of-the-art equipment and expanded packaging lines, as well as space for more than 1,350 pallets and a high-bay racking system. The expansion will allow the company to increase its robotics capabilities with the addition of a new robotic case packer.
To keep up with the need for automation, the company has been making “record levels of capital investment,” Erwin said. “It’s not going to take a single worker out of my shop, but it’s going to allow us to be more productive to handle the growth and the periods of time when we really flex up and have to produce a lot more in a short period of time.”