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Profiles

Cedarstone Industry

By Eric Peterson | Nov 15, 2021

Brewing & Distilling Bioscience & Medical Cannabis & Hemp Food & Beverage Industrial & Equipment Supply Chain Texas

Company Details

Location

Houston, Texas

Founded

1992

Ownership Type

Private

Employees

20

Products

Stainless steel tanks and vessels

The contract manufacturer of stainless-steel vessels and tanks differentiates its products by way of customization and integration.

Beginning with stainless steel vessels for breweries and other beverage manufacturers, Cedarstone Industry has expanded into a wide range of markets in the years since. "We've been doing projects for GE Healthcare, Anheuser-Busch, Coca-Cola -- a lot of big people," says Clay Estrada, the company's chief business development officer.

Cedarstone got its start when a Chinese parent company spun the operation off as a standalone business. "We're an independent, American-owned branch," says Estrada. "What makes us special, though, is we're not just a vessel builder and an OEM manufacturer, we're custom OEM. If people want to move a manway, if they want to add additional ports, that kind of stuff, that we can do."

While Cedarstone still manufactures its stainless vessels and tanks at its former parent's factory in China, the company customizes and finishes its products at its 13,000-square-foot facility in Houston. In Estrada's eyes, the model offers the best of both worlds.

"We integrate the motors, pumps, and chillers -- all of the electronics are American brands," says Estrada. "We build the controls right here in our UL-listed shop. We use Nema 4X controllers, Siemens logic modules, and we're able to control everything with the vessel: the agitation, vacuum pressure, pumps, motors, all that kind of good stuff."

The customization and integration capabilities are big differentiators. "Anybody can sell a vessel, but when you start integrating it with controls, that's when you step above the rest of the competition," says Estrada. "A lot of these people are just buyers and resellers. Of course, we're manufacturers, so we can do more than buy and resell. We can make and shape, we can change dimensions, and do a lot of things. But really what makes us special is that we integrate the vessel with controls. Whatever process you're trying to do -- you need automation and want valves to open and close, you want an alarm to go off when a process is done, you want to crash the temperature and have it drop over time, or you want to have an agitation cycle when other processes are done -- we can do all of that."

Diversification beyond beverage wasn't necessarily part of the original strategy. "We really respond to what's happening in the marketplace, because our clients will tell us what they need," says Estrada. "We started getting special requests for pressure vessels, for which we have a special certification. We can make ASME tanks. We also have 3-A design, which is normally used in dairy."

Customer demand was also how Cedarstone started supplying customers in the CBD space circa 2019. "We had a few requests for crystallization reactors, which turned into CBD processing," says Estrada. "As soon as we got into that market, we skyrocketed."

For CBD and other industries, Cedarstone manufactures its products with GMP and EU GMP standards in mind. "GMP and EU GMP, it's all about traceability," says Estrada. "We put together a controller that can have the number of levels of users, so owner, management, operator, warehouse personnel all have different levels of access and capability within the unit, and you can also trace everything that needs to be traced."

Many observers say the Food & Drug Administration will make GMP a requirement for CBD makers. "It's not an if, it's a when," says Estrada. "You'll already be ready for it with our equipment, so you won't have to worry."

Noting that sales are not dominated by any single industry or geography (exports are about 20 percent of sales), Estrada says 2020 "was a very big year for us" for CBD extraction equipment, followed by some retrenchment in 2021.

"Since these sales cycles are 12 to 18 months, all of a sudden this year we experienced a little bit of a dip," he notes. "I expect it to perk back up. Demand is still fairly strong. Right now, the marketplace still has quite a bit of inventory. Once the supply chain and everything levels out and demand picks up, we'll be right back where we were."

Estrada says he sees the ebb and flow of various industries in incoming orders. "Last year, it was really big systems for CBD. There's a little bit of a hold right now due to the drop in price for distillate," he notes. In 2021, "You're seeing a bunch of small manufacturers pop up needing mixers for all different types of applications."

He adds, "These capital purchases are tied to the economy. So if the economy's up, you'll see people investing in their companies, and when their 401(k)s are down, they do not. You'll see a slowdown, or you'll see them gravitate to smaller vessels. That's what we're seeing right now: a big increase in very small vessels."

Challenges: "The shipping is the biggest challenge without a question, because it's unregulated," says Estrada, noting he's seen the cost for a container from China to Houston increase from $5,000 to $21,000 as lead times jumped by about six weeks. "The ports are super busy, they don't track and tell you where all this stuff is -- it gets there when it gets there -- and it drives people crazy."

His forecast for 2022? "We think it's plateaued and it's going to get better from here going forward," says Estrada. "Eventually, the market corrects itself and you have people in the government going, 'Why is the supply chain so stressed right now?' . . . It affects everybody."

Photos courtesy Cedarstone Industry

Opportunities: Equipment for CBD and other hemp-derived compounds. "We're still in the infancy stage of this whole green boom," says Estrada. "We're still figuring out legislation state by state. It's going to go federal at some point, and it's going to be a huge boom. People don't invest in uncertainty, but once there's certainty, they'll drop dollars. We haven't even seen the mushroom cloud yet. It's coming. It's going to get real big. At that point, that's when you're going to see such value that pharma will take it over."

Food and pharmaceutical manufacturing are also promising verticals for Cedarstone. "We've really grown in those markets," he says. "It never goes away."

Cedarstone has also gone into contract manufacturing using its own equipment. "We just put together a cosmetic factory onsite here," says Estrada. "We're going to do white labeling for people. . . . We've also got a CBD extraction booth and a processor's license."

Needs: "What we need is good talent," says Estrada. "What we can't find is good process engineers, because they're sought after."

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