WSJ article about Kodak processing cow bones for photographic film gel.
January 18, 1999
Company Grinds Cow Remains,
But Keeps Costs Close to the Bone
By ALEC KLEIN
Staff Reporter of THE WALL STREET JOURNAL
PEABODY, Mass. -- The stench of death rises from 16-foot-high piles of cow
bones chopped up into popcorn-size nuggets. Frank T. Angelakis, perched on
a catwalk, grabs a fistful, rubs the pieces between his fingers and grimaces.
"Not the best stuff," Mr. Angelakis says. "It's hard enough. Not porous. But it
feels greasy."
This place of decay is actually part of Eastman Kodak
Co., which quietly turns the stuff of marrow into
memories. Here, Mr. Angelakis is known as the Bone
Man. Or Bonehead. His real title is bone-quality
coordinator, and he is in charge of making sure
everything is rock solid with the 80 million pounds of
bovine skeleton that Kodak buys annually from
slaughterhouses. The company turns the bones into
gelatin used to manufacture film.
Who knew that bones were used in film? "I hadn't a
clue," says Paula Lerner, a professional photographer
in Boston.
It's unusual that such a plant could continue to exist
at Kodak which, like many firms, has learned to contract out functions that
aren't a picture-perfect fit. Already, Kodak has farmed out its cafeteria and
plant-security operations, and may do the same with its painting and
sheet-metal divisions. The company has also seriously considered selling the
bone works, known as Eastman Gelatine Corp. To survive, the ivy-covered
plant is learning to cut costs as close to the bone as possible.
"This is probably the biggest leadership challenge I've had," says Eastman
Gelatine's general manager, Wayne C. Jones. "We've scratched and clawed for
pennies." Kodak is requiring plant management to find double-digit cost savings
annually, which it did -- barely -- with a 10% cut last year. About 20% of its
work force, or 50 people, have been laid off. Overall, Kodak has eliminated
more than 10,000 employees and slashed about $730 million in costs to be
more competitive and improve the bottom line. But pressure is on to slash
more. Last week, the company's stock slid when its fourth-quarter earnings
fell short of expectations.
The bone plant is feeling it from all sides. The average market price of cow
bone, the plant's raw material, has risen 25% in the past two years to about
$400 a ton, driven by soaring demand for gelatin, now used in everything from
yogurt to vitamin-pill gel caps. There's something of a "frenzy for cattle bone,"
says Michael Rempe, vice president of byproducts at Excel Corp. of Wichita,
Kan., a major beef processor.
Kodak Founder George Eastman founded the plant in 1930 to have better
control over the gel-making. He had nearly been ruined after buying a batch of
bones from cattle fed with mustard seed, causing his gel to overexpose the
film before pictures were taken.
Today, in this remote corner of Kodak's international empire, 400 miles from
headquarters in Rochester, N.Y., the goateed Mr. Angelakis contemplates
bovine economies in his cramped, fluorescent-lit office. Longhorns graze on
his computer screen-saver. A femur sticks out of a coffee cup. He jots notes
on cow stationery. "I'm not obsessed," he insists.
When the slaughterhouse deliveries arrive by rail in Peabody, just a few feet
from his office, the bone chips click along a conveyor belt to bubbling vats of
hydrochloric acid. There, the bone percolates for a week to remove calcium
and phosphate minerals, which are sold as feed and fertilizer. It is then soaked
in a murky lime solution for about eight weeks, where it liquefies and is
pumped through a series of water tanks and filters, transforming into a syrupy
state before it is cooled, like Jell-O in the refrigerator. Then it is dried, ground
into a powder and trucked to Kodak headquarters, where it is mixed with other
chemicals to create a photo-sensitive emulsion on strips of film.
It is a complicated process that can be slowed down by a screwy bone. (Not
all bones are created equal. Male is better than female; young is better than old;
longer is better than short; drier is better than wet.) To keep them coming in as
bone-dry as possible, Mr. Angelakis, who monitors for grease, sinew and other
unwanted remnants, is pushing reluctant suppliers into buying expensive
machinery that precleans the bone before it is shipped. If the suppliers deliver
greasy bones, which cost more to process, he exacts financial penalties.
Two years ago, for example, Mr. Angelakis devised an incentive program for
Kodak's main bone supplier, Monfort Inc. of Greeley, Colo. If Monfort doesn't
meet quality goals such as reducing grease and delivering nuggets of the right
size, it pays Kodak a penalty of up to tens of thousands of dollars. If the
supplier meets the goals, it gets a bonus of a similar amount. In the first year,
Monfort paid a penalty, which encouraged the supplier to get a better
centrifuge -- a piece of equipment that can cost up to $250,000 -- to remove
grease.
Every quarter, Mr. Angelakis flies to Colorado and uses an overhead projector
to show Monfort officials the bone-quality performance of its various plants,
ranked on such measures as moisture levels and the yield of bone per head of
cattle. "I'm trying to motivate everybody to be at the top," he says. Beyond
bragging rights and cash incentives, the winner gets a wood plaque with brass
plates. "It's like the heavyweight belt," Mr. Angelakis says.
The bone-to-gelatin process once created a lot of waste -- about two million to
three million pounds of crusty, mushy residue at the bottom of kettles that had
to be thrown away each year. But as there is money to be made in bones, there
is money to be made in sludge. Alarmed by the rising costs of disposal, Mr.
Jones, the plant manager, came up with what he calls his "garbage-to-gold
strategy" -- pumping the muck out of the kettles by machine and turning it into
edible gel that could be sold to food makers. For reasons that churn the
stomach, this sort of gel needs to be less pure than the kind used in film.
The result: The plant was able to add about 20% to gel production and sell it to
third parties. Now the plant has refined the process enough that it can use
more than half of the recycled gel for making film. "It went from a liability to
an advantage," Mr. Jones says.
Such gains were fine, but the bone works was still bedeviled by rising bone
prices. The number of slaughterers equipped to produce chips was limited, and
as demand for bone rose, "they had us," says Mr. Jones. "We couldn't say no.
We'd just say, 'How much?' "
But a year ago, he hired a consultant who found a company that handled dead
cows and wasn't selling bone: Anamax Corp., a food-waste recycling business
in Green Bay, Wis. Kodak taught Anamax how to separate cattle meat from
bone, clean it and sell it at a lower price than current suppliers, thus giving the
plant leverage with its other bone dealers. Most of them agreed to price cuts
late in the year.
As for other attempts to diversify sourcing, Kodak was able to grow
genetically engineered bone in the lab -- but it proved too expensive. Pig bones
are too greasy, chicken bones too small. "People say, 'Why can't you just use
rat tails?' " says Mr. Jones. "But there's not enough of them."
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