Trenstar recently raised $62 million. The Carlyle Group was the lead investor.
Tale of the Tap
forbes.com
Entrepreneurs
David Armstrong, 07.21.03
Crying in his beer after getting canned, Gregory Cronin found the answer to his next venture.
Pooling reusable storage units isn't exactly a revolutionary idea. Companies have been sharing such containers as mail bins and pallets for years. But Gregory Cronin may be the first to have applied the principle to beer kegs, buying them up and charging brewers each time they fill and ship them. It's his job to track all those 5- and 13-gallon stainless steel containers, which he does electronically from a database in the U.K., keeping tabs on mostly British beer for a unit of a South African transportation company (on which he has an option on a 3% stake, valuable if it goes public one day).
Huntington, N.Y.-bred Cronin knows about nudging objects around the world. At his last job he turned a low-tech U.S. spinoff of a Swedish shipping company into Viewlocity, quadrupling sales to $40 million by giving customers like Ryder and DHL a Web-based, real-time view of where their trucks and packages were at any time. After the tech market crash killed a planned public offering, Cronin turned to private equity. After challenging the new owners when they ordered layoffs, Cronin himself was shown the door.
But a new idea took shape a few months later, while he was consulting for Trencor, a transportation outfit based in Capetown. The South African company needed new markets for Trenstar, a U.S. unit created out of the merger of its technology division with a Denver keg-management company. Cronin eyed Scottish Courage, Britain's largest brewery (Kronenbourg, John Smith's and Foster's beers), which was experimenting with radio-frequency tags on kegs that could be scanned to display the contents, point of origin and destination of the barrels. Other brewers in the U.K. were also grappling with distribution inefficiencies; most still delivered their own kegs directly to customers--losing 5% or so of the barrels in the process. Moreover, many labels were pouring capital into going global and couldn't wait to get shipping containers off their books.
Why not pool kegs on an epic scale? Brewers would pay $2 to $7.50 per keg, depending on the size, but would see their transportation costs drop 20% to 40%; trucks run by separate delivery companies, armed with Trenstar scanning technology, would pick up empty kegs and deliver them to the nearest brewery, with no need to sort them by company or brand.
Today Trenstar controls 42% of all kegs in the U.K., but at a steep price. Last year it paid $105 million for 3 million kegs of Scottish Courage and Carlsberg-Tetley, the number three brewer (Carlsberg and Calders). A deal to buy another 1.4 million kegs from a major U.K. brewer Cronin declines to name is expected any day. Trenstar has also invested $4.5 million in scanners, at $2,000 to $4,000 each, and millions of $2.50 tags--all financed through loans from Lloyds TSB and the Royal Bank of Scotland, carrying annual interest rates of 4% to 6%.
Cronin sees potential applications for other industries--hospital equipment and containers for chemicals and food. Trenstar already has a pilot contract with Goodyear to pool the aluminum containers used to move synthetic rubber for tires from the likes of Dow and DuPont to the tiremaking plants. All well and good--except that he hasn't quite got the beer business down yet. Last year Trenstar lost $3.4 million on sales of $24 million. |
