Prepared for good luck

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Midland Davis, a 128-year-old family scrap business, has adapted and diversified to meet the changing needs of its customers.

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October 22, 2020

Photos courtesy of Howell Photographic Arts LLC
Midland Davis’ co-owners and officers include, from left, Eric, Michael, Marty, Laura and Mitch Davis.

The recycling industry has faced challenges and changes in recent years: China implemented the National Sword Policy in 2018, recovered paper prices declined to near all-time lows in 2019 and all businesses have had to adapt to work through a global pandemic this year. Uncertainty has been a common theme in the scrap recycling industry in recent history.

With more than a century of business under its belt, Midland Davis is very familiar with adapting to change and uncertainty. The company has survived the Great Depression, World War I, the 1918 flu pandemic, World War II, Vietnam, 9/11 and the Great Recession to name a few cultural milestones in its history, evolving to meet the needs of its changing and expanding customer base.

After immigrating to the U.S. from Lithuania, Louis Livingston started Levinstein & Co., the company that would become Midland Davis, in 1892 in Davenport, Iowa, with a focus on collecting and selling scrap metal. Since then, Livingston’s business has continued to grow as a family-focused scrap business. Today, the business has its home base in Moline, Illinois, and brothers Mitch and Marty Davis serve as fourth-generation owners, and Marty’s three kids—Eric, Laura and Michael Davis—comprise the fifth generation leading in the business.

Midland Davis has focused on recycling scrap metal for most of its history, yet Marty says the company has been unafraid to take on opportunities to sell new things and offer new services. The company has ventured into processing wood pallets, supplying new steel, operating a car wash and providing brokerage and freight services.

Taking chances

For many years, Marty says Midland Davis’ focus on processing scrap iron was “quite good.” He says that business was primarily driven by the fact that Moline served as home to many farming equipment giants, such as International Harvester and John Deere.

But things got tough during the farming crisis in the 1980s. International Harvester went out of business, and that was Midland Davis’ single biggest customer. Marty says the scrap company recognized that it was leaning too heavily on the farm equipment makers nearby. “That’s when we really realized we really needed to get more diversified than just handling scrap iron in Moline, Illinois,” he says.

So, the company ventured into paper recycling. Midland Davis acquired a small paper recycling business in 1986 that handled about 150 tons per month. Within a short time, Marty says Midland Davis took that 150 tons to 800 tons per month and then to 1,200 tons per month.

“The timing was good because a lot of corrugated and a lot of paper went to the landfill [in the ’80s],” he says. “We just had to convince customers to separate it from the landfill and, at the very worst, they would save on landfill fees. And, if the market warranted, they would get paid for their corrugated. That was a win-win, and we grew from that.”

Today, paper recycling has grown to be Midland Davis’ focus. “We’re a very different company than what Mitch and I graduated into,” Marty says, adding that the company plans to continue to look for new materials to process and new services to offer. He says diversifying beyond paper recycling could be essential in the future as the world uses less paper.

In recent history at Midland Davis, taking chances recycling different commodities and offering new services occurs a bit more frequently than in the past. Mitch says diversifying a business is always a gamble—the company has had successes and failures.

Midland Davis executives say some common themes can be found among its more successful diversification efforts. For one, diversification works best if the new product or service is needed, Eric says.

“If you see there’s a niche not filled and you can make money, that’s what leads to diversifying in something,” he says.

Eric adds that it is important to pay attention to what’s going on in the surrounding market. When Midland Davis decided to venture into recycling wood pallets in the 1990s, he says no other businesses were offering that service. The company was willing to take a risk and provide a niche service others weren’t providing.

Laura says it also helps to hire experts when diversifying. When the company decided to launch a brokerage division in 2005, she says the business hired Leonard Zeid, who had 15 years of brokerage experience at that point, to lead that new division. “We don’t have ego in that sense. We hire experts,” she says.

And sometimes, Midland Davis’ successful diversification efforts have come down to a combination of preparation and luck, Marty says.

“There is a lot of luck involved in things,” he says. “I play a lot of golf. It’s pretty lucky if I hit something and it bounces into the fairway. That’s good luck. ‘The more I practice, the luckier I get’ is a common phrase among golfers. Luck is being prepared when opportunity presents itself.”

 

Breaking into brokerage

Opportunity presented itself to Midland Davis in the mid-2000s as the company built its own brokerage division. Zeid, who had done business with Midland in the past, approached Marty and his team in 2005 to see whether the company would be interested in developing its own brokerage business.

“Midland was a customer of mine in the past,” Zeid says. “We started by having conversations about exploring brokerage because everything that they did at that time went through brokers. So, I said, ‘Why don’t you bring me on and let me develop a brokerage business for you? We’ll start with your tons and we’ll grow from there.’ [They] decided that they would take a shot at it and see how the first year went.”

With the brokerage division, Marty and Zeid say Midland Davis started off as its “own best customer,” but they did not intend for things to stay that way. And it didn’t stay that way for long. Within a year, the company had to add more customer service representatives to serve the brokerage division.

Since starting the division 15 years ago, Midland Davis’ brokerage division operates offices in St. Louis, Milwaukee and in St. Catharines, Ontario. The company also opened a brokerage operation in Muskogee, Oklahoma, after it hired Lisa Bailey to its team in August.

Midland Davis’ brokerage division is somewhat unique in that it focuses on domestic rather than export markets.

“‘The more I practice, the luckier I get’ is a common phrase among golfers. Luck is being prepared when opportunity presents itself.” – Marty Davis, president, Midland Davis

“We’ve always concentrated on the domestic markets as opposed to export markets, believing that when export markets get really strong, the domestic mills still need fiber,” Zeid says. “We want to be here to supply them. When things go the other way, and the export markets fall away and tons are being pushed back to the United States, we hope that we’ve earned a position with the mill where it just becomes a question of pricing and not a question of giving up an order.”

In addition, Zeid says the brokerage division isn’t limited to one commodity or focus. While it started with recovered fiber, the company has expanded to broker plastics and other commodities on occasion.

Today, Marty says brokerage is a big part of what Midland Davis does in terms of tonnage and number of people employed.

Offering freight

Midland Davis also operates MDX Freight LLC, a subsidiary that offers freight services. Before adding MDX, Zeid says Marty’s son Michael “laid the groundwork” for the division.

When Michael began his career at Midland Davis in 2010, he focused on logistics and transportation. “He helped us figure out how to really track the business, develop schedules and start looking at the numbers. He laid a good foundation for us,” Zeid says.

Then about four years ago, the company had the opportunity to start up MDX Freight LLC, a third-party logistics firm based in St. Louis, to better control its freight services.

Eric says Midland Davis is its own best customer when it comes to the freight division, but he says the company doesn’t want things to stay that way.

“Most of our freight business is within the recycling industry,” he says. “We might do freight for some of the places we ship paper to, but our freight division will manage paper mill products, or we may ship cardboard to a mill that makes linerboard or giant rolls of paper to ship out. We’ll manage the freight to where it needs to go.”

Zeid says having a freight division also has helped improve service in the brokerage division.

“We realize the key to service is getting loads picked up and delivered on time. That’s why we invested in the freight group—to make sure we had control of the majority of our loads. We want to make sure we know where the trucks are, when they’re supposed to be there and know when they don’t show we can do something about it,” he says. “Developing a freight component to our business has added to our ability to serve our suppliers and customers on a better basis.”

Family focused

Although the commodities processed and services offered have evolved at Midland Davis, the family leading the business has never changed. To date, five generations of the Livingston family have worked at the scrap business. Marty’s kids all chose to work for the family business, with his daughter, Laura, joining most recently six years ago to help as a controller with her accounting background.

When multiple generations of a family work for a business, occasional family feuds may arise. But with Midland Davis, Mitch says there have been no “scuffles” in its 128-year history. “That’s probably one of the areas many family businesses struggle with,” he adds.

What’s kept the peace among the Davis family members is that “just the right amount of cooks [are] in the kitchen,” Eric says, noting that he’s heard of some family businesses having too many family members in charge.

Checking ego at the door is also a philosophy at Midland Davis, Marty says. “There is no place for somebody’s ego to get involved.”

Mitch says all the Davises working at the company have their niche. “It does make a difference that everyone has a defined job and sticks to that,” he says. “Everybody has had a specific function and specific job to do instead of everybody thinking they’re the boss.”

Marty adds that most family members have had to do tough jobs, as well. “The worst job I had at Midland was working summer vacation,” he says. “We used to have an aluminum sweat furnace. I was working at the sweat furnace where you melted aluminum with iron attached, and you had to rake out the iron. On a hot, 90-degree day, it felt cool to go into the 90-degree weather. So, nobody here goofs off. No family person takes a three-hour lunch; we all work here.”

Working through uncertainty

Uncertainty has been a common theme in the company’s history and in the recycling industry, particularly this year, yet Marty says Midland Davis has reacted “pretty well” to the crazy marketplace for commodities.

Markets for recovered paper boomed in spring amid the shutdowns and spike in demand for paper products, he says. “We had some brokerage customers that we paid premiums that were unheard of,” he says. “We had some paper mills who said their traditional source of paper supply disappeared, and fortunately they called us to help, and we were able to help.”

But in summer, things slowed down as businesses opened up. Steel scrap markets also have been weak, Marty says, and prices throughout the summer were lower than they had been at the start of the year.

Despite the unpredictability caused in part by the pandemic, he says Midland Davis wants to continue to look for new avenues for growth. “We’re not going to shy away from opportunities, but we’re being careful,” Marty says.

Michael adds that the company is “keeping [its] eyes open” for diversification that can help its customers.

However, Laura says, “Even if we look outside recycling [to grow], and as we move into freight more, I think our hearts will lie in recycling.”

The author is managing editor of Recycling Today and can be reached by email at msmalley@gie.net.