People have been moving goods on the water for thousands of years.
“Physics are on our side. It’s time tested,” says Peter Stephaich, chairman and CEO of Campbell Transportation Co. Inc.
Water transportation is efficient, clean and good for the economy of the U.S., which has always been a maritime nation, he says.
“People don’t think of that now, but it’s still important, even though we’re kind of out of mind. We’re quiet. We’re small. But we move 20 million tons a year,” Stephaich says.
But while physics may be on the side of the barge and boat company, the coal market is not.
Located in the middle of the Marcellus and Utica gas reserves, it was hard for Stephaich and his board to miss the signs that gas was going to displace coal as an energy source, especially as horizontal drilling technologies started becoming commercially viable.
About five years ago, more than 80 percent of the company’s business was transporting coal.
So, in order to be proactive, Stephaich and Campbell Transportation took steps to diversify its business lines, assets and nearly 500 employees away from that exposure to the coal industry. And it was almost like creating a startup within a mature company.
“We’ve diversified from a product line perspective, a geographic perspective and a customer perspective — we’ve done all of that, and we are continuing to do that,” he says. “It’s not something that you can just turn a switch. It takes years to migrate out of that in a company like ours.”
Although it’s too soon to know whether every move was the right move, the company has grown — its net revenue is up — and Stephaich is hopeful they’ve laid the groundwork to be uniquely positioned for future opportunities in the region.
Diversifying out
Stephaich and the board members first started discussing diversification at their annual strategic planning session, working to identify where the company could potentially expand.
When you’re faced with a shrinking market, you need to find new opportunities in time to make the necessary changes.
“Fortunately our assets — boats and barges — float. We have an advantage. These things move; it’s not like a physical manufacturing facility that’s stuck somewhere,” Stephaich says.
They determined that their options were the grain and liquid markets, such as transporting oil, gas and petrochemicals.
Both, however, have their challenges. Grain market pricing is volatile, Campbell Transportation would need to build fiberglass covers for its open barges and the industry operates on the Mississippi River.
Stephaich says the company is now in its third year of operating in the grain business.
The liquid market was an even harder switch because there’s a high barrier to entry. The shippers have much higher compliance and safety requirements for transportation.
The boats and barges need to be to a certain physical standard, such as having back-up steering systems on board, which costs $250,000 per boat. The internal safety management systems are constantly audited and the training has to be stepped up.
“For you to be a new kid on the block for that type of move is very challenging, and a very expensive, slow and difficult thing to do,” Stephaich says.
