Coastal Wood Industries has found the key to success in the wood veneer market is to be agile and aggressive.
Written by Megan Santosus & Produced Kevin Patey
When people think of lumber, two characteristics that may not immediately leap to mind are adaptability and agility.
After all, the industry relies on mature trees — raw material that takes decades to grow and replenish. And while today’s modern sawmills are completely automated, the basic process of turning trees into lumber isn’t that far removed from when sawmills were powered by water.
One company that bucks the stereotype is Coastland Wood Industries, a manufacturer of wood veneers.
The Nanaimo, British Columbia-based company has survived — and thrived — by its ability to adapt in an industry that is at once dynamic and tradition-bound.
“While we have essential goals as to where we want to go, we are flexible about how we get there,” says Barry Simpson, Coastland Wood’s president and CEO.
Coastland Wood has demonstrated nimbleness throughout its history. Incorporated in 1987, Coastland Wood was founded as a private company and funded by Toronto-based investors.
From the outset, the company opted to be a non-union shop — a decision aimed to facilitate flexibility because no third-parties would be involved in management decisions.
In February 1988, with 60 employees, the company’s newly constructed mill in Nanaimo opened with single lines each for logs and veneer — very thin sheets of wood that are glued together to make a variety of products. A log line cuts and processes full-length logs that are delivered to the mill via trucks or water booms, to blocks approximately 8 ½ feet long. The blocks are then sorted, with veneer-quality material going to the veneer line for manufacturing and unsuitable blocks are chipped and sold for pulp manufacture.
“At the time the mill started in 1988,” says Simpson, “we manufactured veneer to supply the plywood industry.”
The focus on plywood was relatively short-lived. Within 10 years of Coastland Wood’s founding, the plywood industry experienced severe attrition due to a downturn in demand.
“Probably 100 plywood mills have shut down in the Pacific Northwest, since the company started,” Simpson recalls.
Coastland Wood avoided that fate due to a strategic decision made in the early 1990s, just as the plywood business was beginning to struggle.
“We changed our focus at that time to engineered lumber,” Simpson says.
Essentially, engineered lumber consists of wood materials, which are glued together to create finished products that are stronger and more consistent than natural, milled lumber products.
Coastland Wood’s engineered lumber is typically used by its customers to make products for the housing industry such as beams, floor joists and headers. Plywood — on the other hand — while used for housing, is primarily used in the industrial sector.
A large proportion Coastland Wood’s green and dry veneer is used in the manufacture of laminated veneer lumber (LVL), a type of engineered wood that’s created by gluing together several very thin layers of wood. Coastland produces other veneer grades used in different engineered wood application as well.
“If you were to look at our manufacturing process, peeling veneer off the blocks looks similar unrolling a roll of paper,” Simpson says.
The location of Coastland Wood’s mill is ideally suited to accommodate the shift LVL, Simpson says. Engineered lumber can utilize second-growth forests consisting of trees less than 140-years-old. In Coastland Wood’s case, most logs processed are approximately 70-years-old and have diameters anywhere between 4 ½ and 30 inches.
“Our mill is in the heart of second growth forests of Douglas fir trees in Coastal British Columbia, a species particularly useable in engineered lumber,” Simpson says.
Unlike many competitors, Coastland Wood buys raw materials on the open market, another strategy aimed at maintaining flexibility. Main suppliers include TimberWest, International Forest Products and Island Timberlands, but Coastland Wood has done business with dozens of others.
“We’ll buy raw materials from anybody,” Simpson says.
In 1995, Vancouver-based businessman Peter Shields bought a controlling interest in Coastland Wood. According to Simpson, Shields’ background in Western Canada injected a local perspective to Coastland Wood’s strategy that proved advantageous, compared to the previous Toronto-based majority ownership.
Within five years, Coastland Wood’s markets had grown significantly enough to enable the mill to add a second log and veneer line and a veneer drying facility in Vancouver. According to Simpson, approximately 40 percent of Coastland Wood’s products are dried in the facility. The remaining “green” products are dried by customers.
Most of Coastland’s customers run their operations with 7 to 10 days of veneer inventory.
“Our customers run just-in-time operations, so we give them products when they need them,” Simpson says.
Today, Coastland Wood still sells veneer used in plywood manufacturing, but up to 90 percent of its business is in LVL and other engineered lumber markets. With the housing market still suffering, many mills have shut down operations, a situation not uncommon in the cyclical lumber industry. Yet in its 20 years, Coastland Wood has never shut down its mill for more than a few days— a testament, Simpson says, to the company’s reputation for high-quality and reliable service.
Simpson attributes the track record to Coastland Wood’s market focus.
“We have a big advantage over integrated mills that manufacture pulp, lumber, plywood and logging and often struggle with divisional competition for capital,” Simpson says. “We’ve always been committed to re-investment in the company, we have the total support of the shareholders, and we never have a battle as to where we are going to put the money.”
Coastland Wood can’t control the supply of raw material, the exchange rate or the price of veneer — three major factors affecting business.
“We can only control our manufacturing, and we strive to have the best equipment available so we can be the lowest cost provider,” Simpson says.
While Simpson declines to provide specifics, Coastland Wood is looking in the near term to invest in equipment that will continue to improve the mill’s cost structure.
Ultimately, Simpson says, the ongoing success of Coastland Wood comes down to the employees, who now number 200. As a non-union company, Coastland Wood has worked to foster good relationships with its employees.
“As good as we can manage, we don’t make the product,” Simpson says. “We’ve worked hard with our people to make this a good place to work.”