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Mini-cast 78: NewAge Industries - An Essential ESOP

NewAge Industries is a PA-based 100% ESOP that specializes in fluid transfer, i.e., tubing and couplings etc. It provides essential COVID-19 components necessary for test kits, vaccine and therapeutics development, medical equipment such as ventilators and hospital beds, as well as Personal Protective Equipment (PPE).

CEO Ken Baker appeared on Episode 16 of The ESOP Podcast. We include an except describing New Age's path from a single shareholder distributor to an employee-owned manufacturer.

The article referenced in this podcast, "Sales are booming for Bucks manufacturer aiding coronavirus response," was written by John George and published in the Philadelphia Business Journal on April 10, 2020.


Mini-cast 78 Transcript

Announcer: 00:03 Welcome to The ESOP Mini-cast, a great way to wrap up the week.

Bret Keisling: 00:13 Hello, my friends. Thank you for listening. My name is Bret Keisling and as it says on my business cards, I'm a passionate advocate for employee ownership. I hope that you and your loved ones are doing well during these unprecedented times and I appreciate your spending a few minutes with me today. NewAge Industries is a wonderful Pennsylvania ESOP, 100% owned by its employees. They specialize in fluid transfer and in short they make all of the tubing and all the couplings to transfer fluids for numerous applications. On its website, NewAge shared that it's supplying tubing hose and single-use assemblies for COVID-19 vaccine development, diagnostic test kits, therapeutics to treat COVID-19, medical equipment such as ventilators and hospital beds, as well as personal protective equipment. Not surprisingly, during the pandemic, NewAge has gone from being a great and important ESOP to an essential ESOP. There's an article in the Philadelphia Business Journal dated April 10th and written by John George that describes the dramatic increase in sales due to a surgeon demands for its products. We'll have a link to the article in our show notes. The article describes the significant increase in business in the last few months, but it also shows that NewAge has been continuing its many years of successful growth.

Bret Keisling: 01:38 At a time when many companies, employee owned or not, are laying off or furloughing staff, NewAge is hiring. With so many sad and troubling business stories circulating about, I'm happy to see NewAge stepping up, doing what it does well and helping us all find a way out of this pandemic. I want to thank all of the employee owners at NewAge industries and all essential workers everywhere who are working tirelessly during the pandemic. Ken Baker is the CEO of NewAge. He's a passionate advocate for employee ownership in his own right. He's a co-founder and chairman of the board of the Pennsylvania Center for Employee Ownership. I'm grateful that Ken appeared on Episode 16 of The ESOP Podcast way back in January, 2018. The full episode covers NewAge Industries' origin story, it was essentially founded by Ken's father, Raymond, and it's path through second generation ownership in Ken, to now 100% employee owned in the last decade. The entire episode with Ken is very interesting and I hope you'll check it out. In this excerpt, we're going to focus from 1985 when Ken rejoined the company after several years working elsewhere 'til 2006 when the initial partial ESOP was put into place. Here's Ken Baker.

Ken Baker, CEO of NewAge Industries, speaking with Bret Keisling
Ken Baker, CEO of NewAge Industries, speaking with Bret Keisling

Ken Baker: 03:01 Back then we were just a distribution company. We'd buy and we sold tubing that we imported from Europe as well as in the United States and resold it, and things were very good. And then in 1990 things went a little bit bad for us being a distributor and we had to become a manufacturer. We really remade the company and being a manufacturer. So we, we hired an individual, Jerry Schmidt, a very talented extrusion person and he directed us to how to manufacture tubing and hose and we were off to the races. In the middle nineties. I got a brochure across my desk, which talked about employee ownership and ESOPs, and it really intrigued me because at the time we were going through TQM training, Total Quality Management training, and back then the Japanese in the early nineties and the late eighties were just kicking the American butt - car companies - with quality. And so Total Quality Management was the way that American companies could transition or transform themselves into a higher level type of manufacturing organization. And with that we hired a consultant to come in and teach us interpersonal skills, training, statistical process control training, all different types of training to bring our organization to a higher level of quality.

Bret Keisling: 04:38 And, Ken, how many employees did you have at the time?

Ken Baker: 04:42 Back then we were, we were only about 25-30 employees.

Bret Keisling: 04:50 Okay.

Ken Baker: 04:50 And so I got this brochure and I figured that if I wanted a committed workforce, a truly committed workforce and really maybe a work environment that really was kind of special in America. And I thought I would not be able to achieve that until I gave ownership. And this brochure that I got was about a two day seminar in Chicago that talked about ESOPs and how employee ownership could transform an organization and transform the idea of work. So I went out there and spent two hours and I said, this is when I get control of NewAge, this is what I'm going to do.

Ken Baker: 05:35 So at the time my brother was involved with the business, he was running another division. My father was principal shareholder. And so I had to wait my time while things happen. So over time I bought out my brother bought out my father and in 2000 I had our marketing company write a futuristic newsletter to all of the employees saying that in 2006 we would become a 30% ESOP.

Bret Keisling: 06:05 And I'm sorry, which year did you write the...

Ken Baker: 06:07 In the year 2000.

Bret Keisling: 06:08 So you said in six years, we're going to be an ESOP.

Ken Baker: 06:10 Right. Because I had to, I had to get out of debt. I felt that I wanted to get into this environment of employee ownership, because I had bought out my brother and bought out my father and I, we had just bought a building here in Southampton worth, you know, a lot of money. And so then 2006 rolls around and I was out of debt and it was time to fulfill on my promise that I made to all the employees and that's when I sold 30% of NewAge to the employees.

Bret Keisling: 06:46 Ken, let me ask a question because we often first of all, Capital Trustees does a number of transactions as you're aware, each year and a number of times - transactions are always for different reasons - but a number of times the selling shareholder wants to sell, wants to move on. It's part of the exit strategy and the selling shareholder may stick around for a few years, but it's actually at the end. This is quite the opposite. You had no intention of retiring. You weren't slowing down. You really as a business decision wanted to pass the ownership to your employees? Is that correct?

Ken Baker: 07:20 Yes. Yes. Yeah, I was in my middle fifties and I was enjoying work. I enjoyed our team members and life was good. And so I felt that this was a goal of mine. I wanted to see if employee ownership really would transform an organization and I thought that was a very interesting goal of mine.

Bret Keisling: 07:48 To all the employee owners of NewAge Industries: Congratulations on the great job your ESOP has done for many, many years. Thank you so very much for all of your efforts in helping us find a path out of the pandemic. And thank you for your leadership on being a great ESOP. Ken Baker is truly a talented, passionate, smart business executive. He is the best of the best of employee ownership and I do hope you'll visit our website and check out Episode 16 of The ESOP Podcast in our archives. If you're aware of any employee owned companies, ESOP, co-op, or collective, who are either doing well during the pandemic or in some measures, more importantly, treating their employees well even if the company's hurting right now, please send those stories to my attention. I'd love to talk about them. Other people would as well. Thank you so much for spending time with me today. Again, take care of yourself. Take care of your loved ones, and hopefully you'll join us next week on Tuesday for The ESOP Podcast. This is Bret Keisling. Have a good day.

Bitsy McCann:08:58 We'd love to hear from you! To contact us, find us on Facebook at KEISOP, LLC and on Twitter @ESOPPodcast. To reach Bret, with one "T", email, on LinkedIn at Bret Keisling, and most actively on Twitter at @EO_Bret. Again, that's one "T". This podcast has been produced by The KEISOP Group, technical assistance provided by Third Circle, Inc. and BitsyPlus Design. Original music composed by Max Keisling, archival podcast material edited and produced by Brian Keisling, and I'm Bitsy McCann.

Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.


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