7500 Boone Avenue North
Company Perspectives:
Mocon is a leading global provider of gas analysis systems designed t o assess materials and processes.
Mocon, Inc., is a Minneapolis-based company that provides gas detecti on, analysis, and control products and services for a wide variety of industries, including chemical, electronics, food and beverage, life sciences, oil and gas, paints and coatings, pharmaceuticals, plastic s, and vision care. Mocon's instruments measure the rate at which oxy gen, carbon dioxide, water vapor, and other molecules leak through pa ckaging, thereby helping determine the shelf life of a product. Moreo ver, Mocon is able to help clients calculate the cost-effective thick ness of packaging material needed to achieve a certain shelf life. Ot her products include instruments to sort, weigh, and move pharmaceuti cal tablets and capsules. In addition to its Minnesota headquarters, the company maintains facilities in Lyons, Colorado, and Round Rock, Texas. About 50 international distributors sell the products, which c an be found in more than 60 countries. Mocon is a public company list ed on the NASDAQ.
1950s Origins
The man behind the founding of Mocon was Howard (Les) Demorest. Born in Tacoma, Washington, in 1921, Demorest served in the Navy during Wo rld War II and later moved to Minnesota to study physics at the Unive rsity of Minnesota. After graduating, he stayed in the area to become involved in heart valve research at the Minneapolis Veterans Medical Center. He then went to work for General Mills, Inc., in Minneapolis , taking a position in the applied sciences division. In 1957 he bega n working on the infrared H2O technology that would be at the heart o f his first permeation instrument. After five years of effort he had developed a viable device, which he called the Infra-Red Diffusometer .
The Infra-Red Diffusometer was the world's first dynamic instrument f or measuring trace amounts of moisture permeating through barrier fil ms, an important aspect in the development of packaging materials. Th e instrument worked by using a heated saturated salt solution to esta blish a condition of 90 percent relative humidity at 100 degrees Fare nheit on one side of a film and a condition of 0 percent relative hum idity at 100 degrees Farenheit on the other side using a stream of wa rm dry air. When the source of dry air was cut off, vapor from the mo ist side of the film was drawn to the dry side. The rate at which thi s occurred was sensed by an infrared detector and provided the water vapor transmission rate (WVTR), which became a baseline value that al lowed films to be compared in terms of their ability to serve as a mo isture barrier.
As Demorest's research was about to bear fruit in the early 1960s, Ge neral Mills sold its applied sciences division, prompting many of the unit scientists to strike out on their own and start companies. Demo rest was one of them. Frugal by nature, he was able to start Demorest Instruments in the basement of his home in 1963. He spent another tw o years developing the Infra-Red Diffusometer before putting the devi ce on the market in 1966. He also incorporated his business as Modern Controls, Inc., and made the first use of the name Mocon.
Demorest took Modern Controls public in 1968, making an initial offer ing of stock over the counter in Minneapolis. Soon the young company began developing a second product, the Ox-Tran 100, to measure the pe rmeation of oxygen through flexible materials, an important considera tion in the food packaging industry. Ox-Tran made use of a Hersch cel l, an oxygen analyzer invented by Paul Hersch in the late 1950s. It e mployed a pair of electrodes immersed in an electrolytic fluid, such as potassium hydroxide. It was the hydroxide ions that was measured m oving from one side of a barrier film to the other, where a lead anod e was located. The lead then reacted to form lead oxide producing an electric current that was proportional to the oxygen concentration of the sample gas. In this way the oxygen transfer rate of a barrier fi lm could be determined. Ox-Tran became available for sale in 1971.
NASDAQ Listing in the Late 1970s
In 1975 Modern Controls introduced the first multi-cell permeation in struments: the Permatran-W, which measured WVTR, and the Ox-Tran 10/5 0, which measured oxygen transfer. Two years later the company introd uced the first Pac Guard CO2 leak detector. Used in production line q uality assurance, the device could quickly detect weak heat seals, la rge leaks, or even small pin holes in finished products. In 1979 Mode rn Controls began to offer its first high speed check weigher for the pharmaceutical industry, the Vericap 1200. In that year it also bega n to import a head space analyzer (the Mocon/Toray LC-700F), used to measure the amount of air space surrounding a product in a package. A lso of note in the 1970s, the company moved its headquarters from Min neapolis to Elk River, Minnesota, in 1978 and a year later its stock gained a listing on the NASDAQ.
Modern Controls introduced the Ox-Tran Twin and Vericap 1800 products in 1981 and also opened a standard testing laboratory to offer perme ation testing services. The company unveiled a carbon dioxide transmi ssion measuring system, the Permatran C-IV, in 1982, which found a re ady market with soft drink bottlers, who were replacing glass contain ers with plastic to eliminate the expense of recycling, cleaning, and sterilization. The one drawback with plastic, however, was how quick ly carbon dioxide passed through its walls, leaving the soda "flat." Permatran C-IV helped bottlers to create plastic containers that coul d better contain carbonated beverages.
Modern Controls made a misstep in the early 1980s when it attempted t o diversify its business mix by becoming involved in the manufacture of flat-panel computer displays. The bid failed and the company soon returned its focus to its profitable niche in package testing. In 198 3 Modern Controls introduced the world's first computerized permeatio n instrument, the Ox-Tran 1000. A year later it brought out the AB-1 (AB standing for Automatic Balance). Originally developed for the pha rmaceutical industry to weigh and sort tablets and capsules, the inst rument found other application weighing individual pieces or parts. I n 1985 an improved version, the AB-2, was introduced, as was Vericap 2110, an upgrade of the Vericap 1800. In that same year, Modern Contr ols began offering a new permeation instrument called Multi-Tran, whi ch tested permeability of such gases as nitrogen, argon, helium, and hydrogen.
Modern Controls continued to fill out its product lines during the se cond half of the 1980s. After the 1986 acquisition of the Winzen Rese arch film thickness division, it introduced the Profiler product line of film thickness gauges. In 1987 the first Ox-Tran models capable o f determining precise relative humidity were put on the market. A yea r later the first precise WVTR test system, the Permatran-W, was also offered. Modern Control closed out the decade by adding improved Ox- Tran and Profiler models, as well as introducing a leak and burst tes ter, SKYE, and the PG-1 carbon dioxide head space analyzer. Also of n ote during the decade was the 1988 retirement of Les Demorest, who wa s replaced by Bill Mayer. The elder Demorest continued to serve on th e board of directors until 1996. He died of emphysema in 1999 at the age of 78. He and Mayer had known each other from their days at Gener al Mills.
As Modern Controls entered the 1990s, permeation products accounted f or about 70 percent of revenues, while gauging products accounted for another 15 percent. Revenues in 1989 approached $10 million and net income topped $2.1 million. The company's pattern of increasi ng sales and income continued until 1992, when Modern Controls encoun tered a serious drop in international business, which by this point a ccounted for about 40 percent of revenues. Sales to Germany and Japan were cut in half, resulting in two straight years of declining reven ues and income before Modern Controls was able to regain its momentum . Nevertheless, the company was able to continue to pay shareholders a dividend.
Modern Controls also continued to bring out new models of proven prod ucts in the early 1990s. In 1991 it introduced the Ox-Tran 2/20, the first modular unit in the line, and the SKYE 2000, an improved leak a nd burst tester. Further offerings in 1991 included Veritab, a high-s peed device to check and weigh tablets for the pharmaceutical industr y, and Aromatram, an instrument that determined the transmission rate s of organic vapors and gases, including menthol, d-limonene, and pro pane. In 1992 Modern Controls introduced its first modular WVTR test system, the Permatran-W model 3/30. Also in 1992, the company brought out the HS-751, used to determine the amount of oxygen in the head s pace of a package.
After dipping as low as $10.4 million in 1993, sales began to cre ep up in 1994 and 1995, then began to accelerate in 1996 as exports b egan to rebound despite continued softness in orders from Japan and G ermany. The company was well-positioned to enjoy strong growth during the second half of the 1990s. It had plenty of cash on hand to pay f or acquisitions and was also excited about the potential of a new pro cess the company was developing, Transorption, which allowed it to co nduct permeation tests on substances other than film, such as layers of paint or circuit boards. Moreover, Modern Controls was able to use this new technology to take advantage of a corporate trend to outsou rce testing, providing it with customers in industries it had never s erved before. The Transorption technology was a major part of the com pany's new Consulting & Developmental Services unit.
Sales in 1996 increased to a record $14.8 million while net incom e topped $3 million for the first time in company history. Busine ss continued to grow in 1997, as revenues improved 15 percent to more than $17 million and net income 21 percent to $3.7 million. To keep pace with demand, Modern Controls in 1997 expanded its sales force and made changes in its geographic distribution to better serve the markets for its products.
Sales did not improve as expected in 1998, however. Revenues slipped to $15.1 million, although Modern Controls was able to produce ne t income of $2.3 million, a healthy 15 percent return. Long in th e market for acquisitions the company was finally able put some of it s cash to use by completing a pair of acquisitions. Modern Controls b ought Austin, Texas-based Microanalytics Instrumentation Corporation in early 1998. At the close of the year it picked up Boston-area Lab Connections, Inc. The addition of these analytical instrument compani es provided Modern Controls with technology in chromatography and mas s spectrometry, and opened up new marketplaces for the company, such as chemical analysis, drug discovery, aroma/odor studies, and life sc iences.
For years the company had been informally known as Mocon, and in May 1999 Modern Controls formally changed its name to Mocon Inc. Business also rebounded, as the company recorded sales of $17 million and net income of $2.9 million. Mocon's performance was also recogni zed by Forbes magazine, which ranked the company 177 on its an nual list of 200 Best Small Companies in America.
Son of Founder Takes Charge in 2000s
In April 2000 Mayer retired and was replaced as CEO and chairman by t he son of Les Demorest, Robert L. Demorest, who for the prior several years had served as Mocon's president. He took charge of a company t hat was in solid shape. In 2000 it recorded its 20th consecutive year of profitability, with sales improving to $17.3 million and net income to $3.3 million. It was also well-positioned for continued growth, as the consulting business continued to gain credibility in the marketplace, and the technology acquired through acquisition was being used to improve older products and spur renewed sales in them. In addition, Mocon improved the software interface on some of its ins truments to increase speed and accuracy.
Mocon completed another acquisition in 2001, paying $3.6 million for Questar Baseline Industries Inc. of Lyons, Colorado, from Questar Corporation. Baseline offered gas analysis and monitoring instrument s for use in the oil and gas exploration, industrial hygiene and safe ty, and other applications. The addition of Baseline technology bolst ered the gas detection and chromatography business it had added in pr evious acquisitions. Despite difficult economic conditions in 2001, M ocon continued to prosper, increasing revenues to $19.3 million a nd net income to $3.4 million.
Mocon also made additions to its product lines in the early 2000s. It began selling the first Permatran-W WVTR instrument in 2002 and offe red the Ox-Tran 702 in 2003. Mocon also acquired the Vaculok product line of vacuum-insulated panels in December 2003 but soon thought bet ter of venturing too far afield from its core gas detection and measu rement businesses and sold the Vaculok assets in July 2005. Another a cquisition, the purchase of Lippke GmbH in Germany in January 2004, w as more in keeping with Mocon's successful business model. For more t han three decades Lippke had been Mocon's main European distributor. Its addition greatly enhanced Mocon's sales and service capabilities in Europe and could also be used to import new products to the U.S. m arket.
After hovering in the $19 million sales range for three years, Mo con enjoyed a surge in 2004 and for the first time topped the $25 million mark in sales, along with $2.4 million in net income. Mo reover, its operations in Texas, Colorado, and Minnesota were all reo rganized to operate more efficiently. Mocon continued to spend money on research and development to spur growth organically. New products included hand-held analyzers that found a receptive market in the foo d and beverage industry. In addition, Mocon still had sufficient mone y on hand to make strategic acquisitions. The company, a dominant pla yer it its niche market, was clearly well placed to enjoy ongoing gro wth.
Principal Subsidiaries: Microanalytics Instrumentation Corpora tion; Lab Connections, Inc.; Baseline-Mocon, Inc.; Mocon FSC, Inc.; P aul Lippke Handels-GmbH Prozess-und Laborsysteme (Germany).
Principal Competitors: Agilent Technologies, Inc.; O.I. Corpor ation; PerkinElmer, Inc.
Comment about this article, ask questions, or add new information about this topic: