CLS: My name is Charles Sykes. Today is --

CS: July 24th.

CLS: Tuesday, July 24th. I'm with Mr. Carl South, General Manager of Sales for Damron Corporation. Mr. South, could you give me a description of Damron's business, including a description of your customers and relationships with them?

CS: We're a business-to-business firm, primarily. Our largest customer is McDonald's Corporation to whom we've been selling tea for the last 15 years. Up -- about 1995 we had 95% of the ice tea and hot tea going into the McDonald's restaurants across North America. We have since sold a portion of that business -- the ice tea portion of that business to Coca Cola, and we are now exclusively in the hot tea business. McDonald's is still one of our largest customers.

We also sell hot tea to a company called S&B Coffee in North Carolina and Stewart's Coffee which is located up here on Wrightwood. Fundamentally we take tea from different parts of the of the world. We blend it to get the attributes that we're looking for and, so to that end we can create a blend for you or you can bring your blend to us and we can duplicate it. And then, we're actually a private label house. There's not much tea that goes out of here that goes out under our label. The bulk of it goes out under the name McDonald's, under the name S&B Coffee, under the name Stewart's Coffee, etc.

Some of our customers in the past have included, Sara Lee, their Superior Coffee Company which is a subsidiary of Sara Lee. They would have us pack their tea so their tea blend, their Sara Lee branded product. We have done business with Denny's Restaurants which turned into a (inaudible) which is now back to Denny's, etc., we sold to El (inaudible).

So those are the kinds of customers that we generally solicit. We do have a retail side of the business. We recently acquired in the last two years the Best Chef brand, the hot sauces, seasonings and oils, etc, which are sold in supermarkets and other grocery chain type stores. So that's our retail entry into the market place. And that was purchased with a specific intent of getting us an entree into the retail market place. Since divesting ourselves of the ice tea business, we have been looking for alternative methods of growing the company and by invitation from the McDonald's Corporation we looked at, considered, and elected to follow an opportunity that they made available to us to create the McFlurry Spoon for them, which is a polypropoline product that is used in the McFlurry desert products that's sold at McDonald's around the world. Briefly it's soft-serve ice cream with M&M's or with swirls and then --

CLS: It was such an odd looking spoon.

CS: The opportunity there -- the creative opportunity there was that historically when you prepared these ice cream things you'd do with it a blender and a steel or aluminum cup which you would then pour into the paper cup and then hand it to the customer, give them a spoon and/or a straw. Then you would have to turn around and you had to clean the cup and you had to clean the spindle.

CLS: Like Baskin & Robbins?

CS: Like Baskin & Robbins. But if you look at our spoon, the spoon attaches directly to the motor of the McFlurry machine.

CLS: Oh, that's the reason for the hole in the top. Okay, because I said it doesn't come down into --

CS: Right, directly into the machine. That hook secures it and it runs at about 3800 RPM, swirls it and then you disconnect it from the machine, and you hand the cup, the spoon and the product to the customer. Boom, no cleaning.

So we're going to be making these going into next year. In the process of developing our, our ability to make these we realized that we're in a much, much larger market, when you're talking about plastic injection molding. There are numbers upon numbers -- there's many billions of dollars involved in it. And you can get into a niche and still not significantly reduce the market place. Obviously there's plastic injection molding involved in automobiles from fenders and dashboards to switches and knobs.

On a different front there's an amazing array of cutlery, spoons, forks, knives, all sorts of plastic devices for eating and conveying food to one's mouth, not to mention plastic plates, plastic cups, etc. Then you go over on the technical side. For example every time you go to a store and buy -- purchase a telephone, yes the telephone is plastic injection molded, but what a lot of people don't understand is that that cable that comes with the phone that connects it to the wall on either end is a little device called an RJ11 which is simply a number for the plastic piece that you stick in the wall and the other plastic piece that you stick in the phone. Every phone cable has one of those on either end, times billions upon billions of these things. So there's a lot going on out there. Of course that's a commodity product. You make virtually nothing on it but you make a billion of them and you know you start talking about some serious cash right about then. So we are also doing business with a company called Sweetheart Cup out of Owensville, Maryland and they are mentoring us in the process of going into the plastic injection molding business and they will also giving us some business. And by the way when we're through we will have reduced their cost in those areas of business their giving us several orders of magnitude. Does that answer your question?

CLS: Yes, win/win. Then given the business that you have I assume that's basically some standard recurring orders in terms of with the --

CS: That's correct. They're averaging in the vicinity of 200 million of these spoons a year. Okay and some of the products that we're looking at with Sweetheart run -- we're running in excess of 100 million units a year. So they're not very expensive. This spoon is probably three cents, okay. But you know like I said you add a couple million of them, soon you're talking about real money.

CLS: What is your -- what kind of marketing vehicles are you using in terms of attracting new customers?

CS: Um --

CLS: No, how do you market your business?

CS: How do we market our business? We come to market predominantly through shows, product shows and seminars in the sense that we do have a sales force but primarily in -- and when you're dealing in minority business most of the time the majority companies want to see the owner. They don't want to see, hi, my name is John Smith and I'm a sales rep for this -- first of all they blow him off because he's only the sales rep and secondly they blow him off because it's a small company, and thirdly they blow him off because - for a variety of reasons.

Hi, Ron.

RD: Hi. I'm sure Carl South is taking ample care of you?

CLS: Yes sir, but (inaudible).

CS: Yes (inaudible), just thought you'd like to know.

RD: Okay, so I'll just let you continue. I'll sit in for a moment if that makes some sense and I'm sure you've gone through a lot and then, --

CS: For your edification I found the problem, with the money (inaudible).

RD: Oh, thank you.

CS: We hired a bunch of people in December. I mean literally I took them out and all of a sudden it just went --

RD: I mean that's a good segway about it to the computer, IT, because it's so important. I mean I don't think any company can afford to exist right now in 2000. I thought that way since I first started Damron back in 1984, that without that without their very good accounting systems and without computer assistance it's very difficult to function especially in today's world. And I believe that small companies have additional burden because it's very difficult to have your lan systems, to stay on top of all of the technology when you're doing so many other things. You wear so many other hats. And I'm sure that's what Carl has been talking to you about.

CLS: Yeah, but he didn't want to give me a job title.

RD: I know because he serves in many functions and usually pretty well. Don't put that on tape. But, I think here, I recall having been a little bit older and working in other environments years ago when, we were working on the old 360s. And in fact I remember the old 1401. I did computer programming way back in the 60s and I recall saying when I started the company, because I basically went out to a company where we assembled the computer. I mean at that time I think we had 360K with this (inaudible).

CS: And they filled the room.

RD: But when I first started the company and I said, you know, I can now do my entire back office accounting with one person sitting on one machine, which is me of course. But where before if I were billing several companies and tracking my inventory coming in and all of that, I would have needed several people in the back office. So it's very important and we all know the importance of where it's going, they way they increase speed is where in a sense to be able to vacate, in a sense to be able to work when you're not here physically in the office. The big challenge is how to do all that.

CS: I'd like to supplement that by saying that with all the technology that we have available, you still have to have the human element and I'll tell you why. We have -- for example we're doing some business planning and we have a program that, you know, you put in the numbers and it gives you out answers. And last night he looked at the numbers and he said this is $35,000 wrong. It doesn't make sense. Now the program will do what the program does all the time over and over and over. But at some point in time there'll be a point where what we think it does and what it's doing won't quite jive and what we will end up is a result that doesn't make sense. And that's where the human element comes in and they say you look at the bottom line and you say no -- this says we're losing $35,000 and I know we're not losing $35,000. So then we go back in and we examine the steps until we find the problem. Computers will do that, but the kind of the computers that will do that for you they're a few million dollars more than the one's we're using. But the technology in general needs the human supervision to make it happen.

RD: When you say computers you're basically talking about the programming and that's one of the challenges of a small company. The small company will traditionally buy the canned programs, the, packages --

CS: Commercial packages.

RD: Commercial packages which are there and they don't have the amount of time to go in and customize that. They can of course then later do a customized printout or change back into one of the more acceptable forms like Excel or Lotus or Word document. But in essence here we don't have the time. Nor, and this is from my viewpoint very important, nor do I want to spend a lot of time on the effort of customizing. In other words our job is to produce a product, satisfy a customer. Give the customer the best product or the best service. My job is to try to reduce my expenses as much as possible in the back office so I can give it to that customer and win more customers with a competitive price.

And then also hopefully at that point have more profit or greater gross return so that I can increase employee benefits and I can grow the company. So to do that I want to keep my expenses down as much as possible. So I do view the IT section as very important in every regard from employee records, human resources, to planning, to keeping the proper accounting records. But I consider all that as a cost and not as a -- not as something that's enhancing my business. I know Carl has a marketing slant and he knows that computers can help you to track and market and from that viewpoint then, it's still a cost but it's then directly to try to --

CS: But you know one of the challenges that you have to overcome is that if you spend any time in church or, remember there's a portion of the bible that says that the Sabbath was created for man. Man wasn't created for the Sabbath. We have these systems and one of the challenges I, and the IT environment here have is I might spend 9 hours of a 12 hour day trying to make the system work, reloading software, solving a networking problem, etc.

So what we have to do is we have to remember what was created for what. The systems were created to support the business and in many cases if you let it get away from you you'll find the business supporting the doggone system, you know. And that's just not an acceptable solution. So we -- the bottom line is the software and the applications engineering have to focused on making the system invisible to the business process or at least transparent to it.

RD: Well, with all that you have discussed, are you looking for a specific issues and problems that small businesses might have or challenges they may have, and also are you looking at trying to determine what solutions exist out there to help small businesses?

CLS: Well basically my primary hook/tact this summer is to look at issues and problems, so that ideally, to determine what kind of resource should be available in the center to assist you in finding solutions. So I'm trying to get a picture essentially of what the businesses and what some of (inaudible) are, what picture of their business and what it looks like, what some of the concerns and issues are. So for instance you had mentioned in terms of selling the ice tea business and focusing on the hot tea and the plastics. What I need to get a feel for -- what I want to get a feel for, how the technology is used in your business, how do you interface with your customers? Do they primarily phone orders in, fax them in? Because when I think of large accounts say, like even the deal with Sweetheart, then sometimes that becomes a more formalized structure in terms of what a process may be, it may be EDI based, web based, or something of that sort.

RD: Well this is interesting because everything -- we're right at I believe at a point of transition and, and most companies' lives even though EDI and web ordering and communication has been there for the last few years it's really now becoming more of a matterof fact, more as a common place business tactic. Four, five years ago, as McDonalds started its EDI process, it established it where you could put orders in. You could receive -- we could receive orders and you could do invoicing through EDI. They established it though for certain size entities and so we were not required to participate in it at that level.

And our number of orders, since we send full truckloads of a product that doesn't move very much, it wasn't as practical for them to put it in there. It may have been practical but it wasn't necessary. However, I'll let Carl really address that because we obviously are seeing a lot of that and we're communicating with our customers in every imaginable way.

CS: What is happening is that the threshold, the hurdle rate to get into this process is coming down. Okay? Five years ago getting involved with EDI involved a significant knowledge of the language between the companies whereas today you send them an email, virtually. You can have it automatically send emails back and forth. So that threshold has come down.

CLS: Right, ecommerce has become a low-cost alternative.

CS: Five years ago a personal computer that sits on your desk that was running maybe an 800 megabyte hard drive and was doing the blazing 386 speed was costing you $3,000. I spent $3,000 for a 286 machine in 1987 or whatever. And the point is that today you can get a machine that is infinitely more capable -- not infinitely, 16 times maybe more capable and you can get it for 500 bucks or $400. So the net effect is now the threshold for getting in there is so much lower that they're now requiring us to meet them somewhat at the door with the capabilities, system capabilities.

CLS: Well that's kind of on the table now.

RD: Yes, and we're fulfilling our responsibilities there but they'll only increase. We're of course on a regular communication basis. Actually quite a bit of the staff probably embrace it better and quicker than, than senior management, meaning more to myself in the sense that I'm a -- I'm not resisting it but I don't spend the time going through email.

My secretary will go through, and Carl of course uses it religiously, and I'll go through when they -- when my messages pile up to be about, I don't know maybe a 100 then I'll go up and I'll check. Because I'm still a person who likes to talk on the phone. Well, actually hopefully not too much but it has to happen. I'm comfortable but I'm just not very ecstatic about sitting there typing in something.

CS: Remember that the Sabbath was created for men. To actually make him less productive in the way that he is by force feeding him on stuff he's not comfortable with is not making the business better. What it's doing is it's bogging him down trying to figure out how to make the doggone computer work. So a lot of that stuff gets done after work is over. You know he'll be hear until 9:00 playing with the computer trying to figure out how to make it do what somebody else in the organization may have been able to make it do quicker, but he was doing other things. Keeping the lights on, keeping the payroll -- okay, so the net effect is you've got to find a way to get that information into the decision maker's head without necessarily taking them away from what they're really there for. They're really there to keep the doors open. And that's why Microsoft has such a leg up because they're taking all that complexity and year after year they put more and more buffers on it. So soon you'll be able to walk in the room and say lights on, projector get file so and so, and make this presentation because it will have buffered you from all of the commands that it takes to make it happen.

RD: Well, you really can do that now if you're willing to spend the money.

CS: If you're willing to spend the money.

RD: We have that.

CS: But it has to be commercially viable.

RD: Yeah, it has to be cost beneficial. Right now I think it makes some sense for even small businesses to start using the technology more and perhaps I should use it more. We do have the capabilities. One of the difficulties -- we had a person here who's second if not first -- she's a quality person, in quality assurance and she was our basically, information technology and quality assurance person. And as we made the transition or as we are making this transition from being a tea producer to primarily a plastic injection molding or a packaging company, we had to go through the whole process where we downsized.

And so that, Carl basically had an interest in it as well as a facility for it. So we went into a process where he's the primary person here at Damron who's responsible for it but we hired -- I guess you may have mentioned we have an outside relationship on a consulting basis where we pay a person on a monthly basis, a monthly retainer with a certain number of hours to make sure that our systems are operating properly. This is a person who works with a large technically oriented company and he's African-American. And, um --

CS: His mother works here.

RD: Yes, his mother is an employee. It so happens, that's how we found out about it. You know because you do use your web, your extension to find people. But in essence here it doesn't -- it's not the best of all worlds but it does operate. There are times when we'd like to -- when the systems are down or several computers are down or they're not talking to each other on the LAN and we'd like to be able to get immediate contact to get them to working, he's traveling for his major business. Actually this person is very, very much right now considering leaving that company and developing his own company full time along with us and other people as clients.

And in fact I know a few companies that have clients like us that -- a few African-American companies even you might be interested in talking with. A couple of them are members of ABLE. But in essence here I think that this exists, like we're probably like some other companies in having outside people for certain amount of their work where it's not one of the large companies, one of the large IT companies that provide services to them.

CLS: Definitely give me contacts with (inaudible). You currently have a website?

CS: Yes.

CLS: Why?

CS: There's two reasons. One of them was that we felt that we had -- we still do, we feel that there are more people that need to know who we are and what we're doing that's going to guide more business traffic to us. The second area is in our new thrust towards the retail market we're recognizing that there is a channel to that retail market that is available to us through the Internet. It's not a huge channel and it has not generated the kind of -- it won't generate in the short term the kind of revenue flow that it would take to make it a top priority for us but it has been one of our alternative, if you will, goals on an annual basis for the last couple of years.

We need to make some changes in it, throw in a retail café or the ability to take an order with Visa and/or Master Card, that type of thing. But it's a fairly -- it's an interesting and possibly effective for us method of getting to the retail customer.

RD: I think two, three years ago it seemed like everyone -- small companies too, were being implored to place a website and they were being told that if they didn't they would miss great opportunities and would get left in the dust. I think probably -- my personal opinion is 85 to 90% of the companies have not made great use of those sites and that it is a challenging process to really do so. I think, you know, the companies who have that as their primary source of business have done okay, the Amazons, the E-Bays and the others, to a certain extent.

CS: Although they haven't made any money yet.

CLS: They haven't turned a profit yet.

RD: They haven't turned a profit, but they certainly use that as their primary means of transacting business. Some of the other larger companies that sell retail items like the Proctor & Gambles and the others, from my estimation have used it to show the breadth and the depth of their companies and their products categories. And they probably haven't made tremendous amounts of sales through that. It's probably helped them on customer relationship basis because customers can talk directly to them even though I have a feeling that that's also probably a small number of people who do a lot of talking as opposed to the masses of people.

However, we felt that we should have a website. We do have retail items. We have tea and other packages that are there. We also have the Best Chef line of retail products, which are in supermarkets. And we have not exploited that by moving those over to the extent that they should be. We found that we were not getting a lot of hits. We did not really push the website. We did not -- I did not give it a high priority because we had so many other things to do as we were transitioning. I -- the jury is still very much out from my perspective as to whether that is -- should be a high priority item.

One of the reasons is because our items generally are slow turnover items and they're not very -- they're not very expensive items. So by the time you get through -- if a person uses that -- the website in terms of buying a retail item and then he pays the shipping and handling expense, the expense and the cost of getting the product to that person I believe can almost nullify the benefit of buying it.

And you'll get some customers, but my personal idea is that you're looking for a certain item, or you're looking for a certain overall costs so that the product then make some sense to go directly to the customer. That's not to say that it couldn't be effective somewhat but I just don't know how effective it would be. And that is something here that I'm not sure of. It's certainly possible to be -- I'm certainly open if someone convinces me that we can have enough products that could be sold in that means and that we should put some effort in it and that it can be a viable revenue source then we should direct some time and energy there. But it's not -- it has not been a high priority item.

We have not put the time and energy in exploiting the site. I think it came up as a fairly decent site initially and we just have not kept it active. We haven't pushed -- we've got some inquiries, we've got some inquiries even for purchasing products, but we have not pushed it.

CS: Websites need advertisement. You know you put the website out there and then you've got to find a way to drive people to it.

CLS: Register with the search engine.

CS: Register with search engines, etc. but you also need to, you know like there's some people that have their website name across the top of their buildings. You know they have airplanes flying around with banners. The idea that people have to see it and get associated with it, otherwise it's just out there. I mean all those websites out there, they're just dying on the vine. I noticed, by the way, that you don't have any websites noted on here. I thought I'd just share that.

CLS: Okay.

CS: But this is the kind of document that should get people to go to your website. Somewhere on there it should say this is what we're presenting and there's more if you go to www.eganurbancenter.com.

RD: And it's interactive activity.

CS: And it's interactive.

RD: That to me is the most important thing.

CS: You know people fall asleep while reading this. You know it's a lot more energetic.

RD: Well, I'm -- as I said I'm unsure as to whether -- I know there are some items that are really great to be sold on the website. One of my friends has a website that's called ASOTV Plus, As Seen On TV Plus and he sells -- and there's several items, several as seen on TV websites and essentially all of the infomercial items that you see advertised on TV that have that logo and you can, you can use that logo. You can purchase through -- and he has basically done this -- he has this regular corporate job. But he's done that and developed that site and he sold, you know I won't say but you know tens and tens and tens of thousands of dollars worth of products through that web site and he has people religiously go there.

So, and most of the items there above the, the critical levels -- the amounts that we're talking about for our particular product range, you know if you see a lot of these items on as seen on TV and they're 19.95 with 4.98 for shipping or whatever, then you add a point where it's probably beneficial. That's not to say, because some people are exploiting -- I understand (inaudible) in our business is much larger retail, mail order type of coffee place, also does work and sell things on the web site. But our feeling is that you need -- there's certain categories that are much more palatable, better for this.

CLS: Before you run, cause it looks like you're heading out:

RD: Yeah, I just thought you -- probably I thought I got to the gist of the things you were asking. Okay.

CLS: I just wanted to come back because you did -- you were addressing the problems and issues in terms of business that you're facing, growth issues, etc. I wanted to capture any more comments, concerns, around that because part of it is looking at what kind of services or facilities should be available in the center to support you. Okay, and so maybe you can again address some of those issues and what kind of services you think, given say a school like DePaul where you have the College of Commerce which probably has faculty members engaged in outside consulting in various areas of business. You have the School of Computer Science which has faculty members engaged in consulting in various areas of business, as well as the graduate programs in those areas. So you have grad students and, with grad students, that means you're not looking at raw trainees, cause often they're upper level managers in other companies, etc. So ideally with those centers and that's where the expertise can be centralized and housed, and serve as a resource to you in growing and developing your business. So maybe you can address some of those issues, concerns, problems and ways - roles that you think DePaul could play in terms of helping you.

RD: Okay. I can address a couple and I'm sure Carl can because he probably can think of a lot of things that would be available, would be good if we had availability to it. I can tell you what I would hope for if there was a center available to help us as I see the company grow. Obviously the ones that would be good if there's a process where I mean we could communicate with employees by need -- especially since we'll be going to three shifts on a continuous basis.

And, it would be good if I'm able to get data at any time if want to wake up at 3:00 in the morning and get some data to find out how the production is going. So from my viewpoint here we have not installed computer related data catching processes that exist right out in the production area. And I would like to have a situation where on some sort of regular basis on seeing what the results are and they're being captured and entered, perhaps automatically.

And then I'm able to source that information at any time to see what the production is doing, see how efficient we are. So some assistance in helping to track and do that will be helpful as we grow. I think it's also going to be very important for me to be able to keep the communications open with employees if I am working, we're working at unusual hours. So to me that's very important; and then just the last item that we basically have to pay outside for now, and that is to have a center that would be helpful if we have general questions and, and if we have parts of our systems down, there might be just a resource to help us.

And that has happened here where we were able to either speak to each other or on the LAN or we had other issues. It would be good to have a resource center that might be helpful in that respect. So from my perspective the primary areas, we're using it pretty well I believe from an accounting viewpoint because we buy fairly good accounting systems and our accountant is available to help us, even though I guess it would be good, and that's probably something I need to do internally here maybe get a little bit more comfortable in being able to just to pull up data but also making sure that we have the security systems in place, fire walls in place that no one else can just call in and access our data. But anyway, from my view point a center or an area that could help to come out to do that, just look at the overall business management to make sure that, as a small company we're using the technology that's available for our price range just as effectively as a large company would be very beneficial to us.

CS: The center could fulfill that role we were discussing earlier in terms of applications in the sense that, I'm sure that nowadays secretarial schools and clerical administrative type schools are teaching some level of technology. But literally it would be useful to have someone who could come here, sit at one of our administrative desks for a week or two with the person who normally sits there and say this is how you can improve your performance of your job with the materials that you have. I don't know you probably spent $100,000 on software and hardware over the last 10 years or something like that. And again as I was sharing with you earlier, you know we might have one person who's really good with PageMaker 6.5 and that's it, okay? And you may have one person who does the email and that's really -- and we're talking about effective use. So if you were teach that in a center and then farm those young people out to the community or have people come in, learn the process, then go to another business and sit down and learn how to upgrade that business. They can then bring that back to their own company, the things that they're learning --

RD: A wide range of applications.

CS: It goes -- right and I think that that would be of tremendous value, not the least of which is when you're through the person which you are creating are very, very valuable to other corporations outside the Humboldt Park area. You know and they'd be valuable in the mainstream market and based on the community you're drawing from, they're going to be people of color, which is tremendous. Okay, so you'd be accomplishing a couple of the social roles that I suspect the grant was aimed at doing in the first place.

CLS: Should be a springboard.

CS: And then when we're through our company will be growing and there will be people and they will be multiplying the number of people out there that have the skill set to be effective in the business world.

RD: Then of course the last thing, I'm back to getting business and that is if it also can show how we can source things out on the web but through, you can purchase marketing or databases to increase our business. At least showing some of the techniques that exist, that would be great.

CLS: Thank you.

RD: Okay, thank you.

CLS: I appreciate it.

CS: Want to turn that off now?

PAL/Carl South