To support steady sales growth for the next decade after two already in Petaluma, medical research products supplier Labcon plans to build a distribution facility at the south end of the city this year and has snapped up among the city’s last sizable chunks of industrial land.
Construction is set to begin in mid-April on a 40,000-square-foot warehouse virtually butting up against the Steris Health sterlization center which Labcon helped bring to Petaluma two years ago. Labcon bought the former Stero foodservice equipment manufacturing facility property at 3200 Lakeville Highway and had it retrofitted with shielding for the high-energy beam that kills microbes in sealed packaging that passes through.
When completed, the new Labcon warehouse will have an automated conveyor system to bring the company’s sterilized pipette tips and other products in from the Steris facility through an enclosed passage a few feet through the walls of the two buildings.
“It saves us two cycles of handling,” said Jim Happ, president of Labcon North America.
He estimates 10 percent labor savings from skipping the loading pallets onto trucks bound for the Steris facility then the unloading pallets on return. Six or seven employees will staff the facility initially.
Labcon is the largest consumer of industrial sterilization in Northern California. The life science sector contributes about $6.5 billion to the combined $60 billion economies of Sonoma, Marin, Napa and Solano counties, according to a 2014 study by Robert Eyler, a Sonoma State University economics professor, for Novato-based North Bay Life Science Alliance.
With completion of the $5.5 million Petaluma warehouse, Labcon is projected to pick up 30,000 more square feet of production floor space at the 120,000-square-foot Petaluma main facility a few doors down at 3700 Lakeville Highway. The distribution center is set to be open early next year.
“We’re packed to the gills with product to ship domestically and overseas,” said Happ. “And we have more direct sales through the internet. Those sales are on a small-box and -case scale, so it takes a different kind of distribution center.”
Direct sales may be of the 10-packs typically sold through distributors or they may be smaller, such as packs of one or two.
“Some are in places in the middle of nowhere, where they do not have access to distribution centers, don’t have trucks delivering to them,” Happ said.
The direct-sales business has barely gotten off the ground for Labcon. It does some internet marketing and advertising of direct sales via trade catalogs. The dozen salespeople traveling the country to support distribution sales offers the direct option for companies that don’t use distributors.
Annual sales are in the hundreds of thousands of dollars, compared with the $37 million in total revenue last year, Happ said. But direct dollars may grow to millions.
“We would like to double it each year for the next 10 years,” Happ said.
Labcon continues to benefit from continuing demand for medical care and new treatments. The industry is set to grow by 4 percent in revenue this year. Because 35 percent of production is exported, that has helped Labcon even during U.S. economic downturns.
Last year, Labcon revenue grew by 9 percent. Over the last 25 years, revenue growth has averaged 6 percent annually.
To keep that growth continuing, the company needs room to grow, and the availability of industrial space and land is running out in Petaluma and Sonoma County. Around the beginning of March, Labcon purchased 12 acres next to the future Labcon building, on Cader Lane.