Dallas-based Pavestone Co. is the fastest growing player in one of few concrete segments to exhibit real growth in the 1990s: dry cast landscape products. What other category this decade, after all, could spawn a niche company with centralized management, 500+ employees; sales in excess of $100 million; 11 new or overhauled operations, each valued at up to $10 million and all privately financed; 30-state presence; and preferred-supplier status with a retailer no less than Home Depot?

Pavestone appears capable of realizing two ideals closely linked in big business, but elusive in concrete production-category domination and branding. Its positioning is due in part to the fact that mixing and molding concrete and delivering finished products are only part of the equation. "We are fast becoming a distribution company that happens to manufacture some of the products we distribute," explains Pavestone Chairman Robert Schlegel. "With extensive distribution, we can leverage new products into the stream and have immediate exposure to millions of customers."

Through strong retail presence and solid following of contractors, specifiers and landscape architects, privately held Pavestone has emerged as the dominant player in concrete paving stones, segmental retaining wall block and, most recently, erosion control units. Its sales have increased more than ten-fold during the 1990s, from about $10 million early on to a projected $120 million at the close. As landscape units have become staples in concrete masonry this decade (note "A code of their own" box, page 35), Pavestone has proved itself the category bellwether.

Setting the trend The U.S. boom in concrete masonry landscape units was seeded in the late 1970s, with paving stones surfacing in engineered markets and residential applications. Specifiers and buyers were catching on to a paving alternative that had been commercialized in Canada and, since at least the 1950s, was mainstream practice in Western Europe. Domestic development of segmental retaining wall units followed paving stones, with both products becoming widely available in the 1980s, although not always locally sourced.

Pavestone led the charge into the next decade, along with a few large competitors and many smaller companies. From a Dallas base, with one Arizona and two Texas plants, it took the lead by recognizing a rapidly changing market. "We couldn't weather business cycles and support modern facilities with our traditional customer base and distribution channels," notes Pavestone Executive Vice President Bobby Staten. "The distribution system needed work and our company and products needed more exposure. We sought to experiment with do-it-yourself retailers, and in 1991 were able to set up an 11-store pilot with a skeptical Home Depot buyer."

The pilot entailed designing merchandise displays and ensuring ample stock on hand or rapid replenishment. Shoppers' response prompted Home Depot to commit to a full fledged concrete landscape product program.

In retail, Pavestone hasn't looked back since: Between Home Depot, Payless Cashways, Wal-Mart and other big box home improvement and general merchandise accounts, it has a presence in more than 1,700 stores. Such distribution, Schlegel and Staten note, affords leverage and exposure few concrete entities can claim. It is likewise impetus to enter the Spring season, for example, with upwards of $20 million of inventory. That quantity represents potentially more dry cast landscape product than was shipped for the entire U.S. market in a single year as recently as 1990.

The 1980s infancy for paving stones had Pavestone and its contemporaries basing their business plans mainly on commercial work, according to Staten. Considerable sales and engineering efforts could be directed at individual projects - a cost variable that disappeared as more conventional concrete masonry producers began to eye the market. The addition of segmental retaining wall units and advent of broad retail distribution rapidly changed Pavestone and its competitors' modus operandi.

Marketing structure With the business model for dry cast landscape products radically different now than 10 years ago, Schlegel notes, success hinges on an ability to sequence production of pavers, retaining wall block and other units such that three Pavestone business divisions are served: Retail, Commercial and Contractor Vendor. Retail accounts for more than 50 percent of sales and necessitates the massive inventory across 11 operations for product delivery in a March through July window. Like other vendors supplying major retailers, Pavestone has established electronic data interface (EDI) links with individual stores or centralized buying offices, thus automating ordering, billing, stock status reporting, and related inventory management functions.

In addition to EDI, the company is quickly establishing an Intranet for offices and plants and expanding its Internet site, www.pavestone.com, for corporate image and marketing. With options that include specification guides and product or installer directories, electronic media also stand to benefit Commercial customers, primarily large contractors and installers, and Contractor Vendors, mostly smaller contractors and landscape product dealers. Customers in both divisions must be served throughout the year, and require a greater number of specialty products - typically on shorter lead times than what are encountered with retail customers' programmed purchases. Both groups of customers account for much of Pavestone's higher margin, value-added products, including proprietary Quartex granite-face units, plus new "tumbled" stones and block.

A fourth marketing division, Erosion Control, was established in 1998 around the HydroPave brand. Pavestone launched it with the securing of worldwide licensing rights to an articulated concrete block system, Conlock. Production of the grid-type unit, cast in 12 Yen 16 in. and 12 Yen 18 in. sizes, 4 or 8 in. thick, started at the flagship Grapevine, Texas, plant and has been broadened to other operations. The company is also licensing Conlock production.

Market development will entail a strategy different from Retail, Commercial or Contractor Vendor customers, as HydroPave/Conlock is earmarked more for engineered municipal and related applications. Nevertheless, Pavestone sees tremendous potential in the erosion control market, especially factoring channel lining, river or lake embankment protection and pervious pavement applications. The Conlock program characterizes an opportunism and dexterity that supports a parallel Bobby Staten has drawn between Pavestone and the cheetah (note "Call of the wild" box, page 33).

Building brand Production capability, distribution and product depth have Pavestone positioned to forge a concrete brand few others can emulate. Pavestone spans the Sun Belt, lower Great Plains, and Rocky Mountains. With 13 product machines - 11 Masa, two Omag - it has an annual capacity, measured in 4 Yen 8 in. paving stone equivalents, well in excess of 100 million square feet. While that figure includes retaining wall and erosion control products, it lends perspective to how much Pavestone dominates the concrete masonry landscape category: Washington, D.C.-based Interlocking Concrete Pavement Institute estimates the U.S. paving stone market at about 320 million square feet.

Pavestone also enjoys licensing agreements and territories that align it with some of the most marketable concrete masonry names: Uni, Anchor Wall and Risi among them. The company has a sales force of 75 representatives, each equipped with a pick-up truck to transport samples, displays and support materials. In addition to merchandising, Pavestone representatives offer Retail customers assistance with do-it-yourself clinics and staff sales training. Commercial and Contractor Vendor accounts, on the other hand, are afforded greater product selection than available at retail, and have sales representatives to assist in box lunch presentations, local trade shows, and support functions.

"A hybrid management system allows us to serve customers across four management divisions," says Bob Schlegel. "In operations, we are decentralized, and general managers have P&L responsibility. But in sales and marketing, we are very centralized."

That economizes merchandising and marketing material development, co-op advertising with retailers, and national specifier-targeted advertising, he adds. Centralization is further reflected in the recent opening of the Pavestone Company University. The Grapevine facility is set up for company-wide production, sales and marketing, and management training. The University indicates the importance Pavestone attaches to staff development, Schlegel contends. With landscape and erosion control products not typical of other concrete segments, the company often has to look outside the industry for talent, especially on the management side. Pavestone includes engineers and MBA graduates in its pool of plant or sales management prospective hires.

The producer is eyeing up to six new operations over the next two to three years, according to Schlegel, with sales approaching $200 million. While future plant locations or acquisition possibilities have not been disclosed, the company has no operations in coastal states other than Louisiana and Texas. Market growth and a quest for better service to customers in coastal regions will invariably change that as Pavestone approaches a third decade in business along with the new millennium.

The cheetah has become a Pavestone Co. icon, as evidenced in paintings, figures and hide-motif carpeting at the Dallas headquarters. While the spirit might have been a fixture all along, the comparison between the cheetah and management mindset was validated in 1996. During a segment on fast-growth entities, producers shooting a CNBC news segment posed management this question: Is Pavestone a gazelle company?

"I think we're more like a cheetah. Both animals move fast, but one [the gazelle] runs away from opportunity, the other [the cheetah] chases it," answered Pavestone Executive Vice President Bobby Staten. The "gazelle" series continues on the cable network, with candidate profile companies typically exhibiting annual growth in the three-digit percentage range.

1980 Founded by Robert Schlegel and partner; breaks ground on Grapevine, Texas, plant; secures Uni product licensing

1983 Opens Houston plant

1986 Opens Phoenix plant

1987 Expands Grapevine and Phoenix plants

1988 Opens sales offices in California; Oklahoma; and Austin and San Antonio, Texas

1990 Realigns marketing structure to serve Commercial accounts, previously representing more than 90 percent of business, and a new customer base, Contractor Vendor

1991 Adds Retail marketing division on the heels of a pilot program with Home Depot; secures Anchor Wall Systems license

1992 Adds splitting equipment to Grapevine and Phoenix plants, enabling retaining wall unit production; expands Retail division with Payless Cashways program

1993 In a joint venture, opens Colorado branch

1994 Builds second plant at Grapevine; acquires Barbour Pavers of Independence, Mo.; signs $25 million equipment contract with CTI Inc.,/Masa AG for four plants; acquires partner's stake in Colorado branch

1995 Acquires early entrant in paver production, Cincinnati's Interpave Corp.; enters erosion control market with the completion of its first channel lining project; expands Contractor Vendor base; broadens corporate scope with 401K plan and employee manual Launches major overhaul or expansion of Cincinnati, Houston, Denver, Grapevine and Phoenix operations

1996 Acquires Lafayette, La.-based Keystone, specializing in wet cast landscape products; adds 400+ Contractor Vendors; expands Retail foothold, surpassing 700-outlet mark

1997 Acquires production assets of Las Vegas' Tri-Delta, with plans for new office and plant; begins work on a $5-million New Orleans plant; installs initial tumbling equipment for paver and wall units; surpasses Unilock as North America's largest concrete landscape product source

1998 Establishes fourth marketing division, HydroPave, specializing in a licensed erosion control unit, Conlock; expands or upgrades Cincinnati, Denver, Houston, Missouri plants

1999 Opens Chattanooga, Tenn., and San Marcos, Texas, plants

Pavestone Co. has realized much of its growth during a decade whose construction-business cycle has seen near record lows (1991) and perpetual peaks (1994 and each successive year). The valley and peaks for concrete masonry producers have perhaps been even more pronounced, owing to diminished opportunities in traditional wall markets, but expanded business in architectural block and landscaping units. The advent of dry cast landscape products from the 1980s into the 1990s has been strong enough for even the U.S. Census Bureau to recognize a new concrete masonry industry segment.

While evident to U.S. industry observers in the early 1980s, the emergence of paving stones and segmental retaining wall units was underscored in the Department of Commerce/Bureau of the Census' 1992 Census of Manufactures. Finalized in 1995, the document showed that within the industry Concrete Block & Brick - Standard Industrial Classification Code 3271, a new seven-digit subcategory and subcode - Concrete pavers (including ride, interlocking, etc.)/32710 34 - had been added since the 1987 Census of Manufactures. (The Census Bureau compiles the documents on five-year cycles, adding industry shipments and sales on a yearly basis.)

The addition of 32710 34-Concrete pavers signifies a category with sufficient sales volume for Census staff to set off separately from conventional gray block products. The 1992 document reported a conservative figure of $104.5 million in annual paver shipments, presumably not including other landscaping units. The soon to be published 1997 Census of Manufactures will likely reflect the dramatic sales growth pavers have shown since 1992, while potentially creating a new seven-digit subcode for segmental retaining wall units. Also, over the next five years, the Census will switch from the four-digit 3271 code for Concrete Block & Brick (and 3272/Precast Concrete and 3273/Ready Mixed Concrete) to three new main codes and industry designations: 32732/Ready-Mix Concrete Manufacturing; 32733/Concrete Pipe, Brick & Block Manufacturing; and 32739/Other Concrete Product Manufacturing. These will fall under the North American Industry Classification System, allowing the governments of the U.S., Canada and Mexico to more uniformly measure economic development.

As Census Bureau staff has revised codes to more accurately reflect the make up of concrete masonry production, the Interlocking Concrete Pavement Institute has reported strong market development among its members, with annual shipments of paving stones surpassing 300 million square feet. ICPI represents Pavestone, many of its competitors, and paving unit installers and contractors, along with industry suppliers. Like Pavestone, many ICPI producers are also involved in segmental retaining wall units and other specialty concrete landscape products.