SUCCESS AS A BYPRODUCT
Randy Velarde, the decidedly low-key owner and president of Plaza Group, isn’t prone to hyperbole, so his explanation of the Houstonbased petrochemicals-marketing firm’s 1994 founding is revealing.
While serving as an executive at Texaco, Velarde learned that the company planned to sell most of its chemicals business to Huntsman Corp., and he approached the refiner about taking over the sales and marketing of petrochemical products from the handful of refineries whose assets weren’t included in the Huntsman sale. After two years of serving as an agent for Texaco, Velarde reached an exclusive distribution agreement with Texaco for those refineries, providing a springboard for continued growth 25 years later.
“For two years, we acted as an agent for Texaco. It was their accounts receivable, and we took it to market on their behalf. After two years, we converted that into an exclusive distribution agreement,” said Velarde. “It wasn’t an opportunity of a lifetime. It was an opportunity of 10 lifetimes.”
Amid Houston-based oil-and-gas-industry giants such as ConocoPhillips, Cheniere Energy and Occidental Petroleum, closely-held Plaza Group, is decidedly niche.
Judging by its quarter-century track record of growth and its annual revenue of about $250 million, though, the company fills a substantial void within the petroleum industry’s ecosystem. During the oil-refining process, chemical byproducts called aromatics — termed for their distinct odors — are produced. Some of these include acetone, used in products ranging from nail-polish remover and paint thinner to resins and acrylics used for glazing products; benzene, used to make Styrofoam as well as adhesives and even pharmaceuticals; toluene, which is used in floor coatings and waterproof clothing; and xylene, which is used in dyes, resins and solvents.
While the aromatics are valuable within the consumer-goods market, the sale and marketing of non-core products pulls oil companies away from principal their business of selling
fuels. And as industry players have consolidated, the resulting larger companies have eliminated staffing and resources related to the sales, marketing and transportation of such byproducts.
That’s where Plaza Group comes in.
The company purchases the aromatics produced by companies such as Total Petrochemicals, Dow, Valero and Mitsui, and then resells them to consumerproducts maker 3M, paint-maker Sherwin-Williams, drugmaker Pfizer, coatings- and adhesivesmaker Eastman, among others. Plaza Group arranges the shipments, its revenue coming from fees it charges for its services and price swings of the base product.
“We’ve become an important outsourcing marketer for companies who wish to focus their commercial resources on their base products,” Velarde said. “We take title to that product at the plant site, and we have the responsibility to transport that product by truck, rail or barge and sell it to the customer. They (the refinery) have no interest beyond that plant gate.” Finding a niche
Through the type of insider knowledge and the relationships Velarde garnered in the petroleum industry in more than two decades at Shell and Texaco, Plaza Group continues to enjoy healthy growth, as annual revenue is up about 25 percent during the past three years through a combination of organic growth and the acquisition of Dallasbased Conchemco and The Woodlands-based Truth Chemical (Plaza Group didn’t disclose what it paid for the companies.)
The company nevertheless remains a relatively small player in a global petrochemicals industry that continues to experience rising revenue. The world’s 50 largest chemicals companies generated a combined $851 billion in revenue in 2017, up 12 percent from a year earlier, with global leader BASF generating $69.2 billion alone, trade publication Chemical & Engineering News reported last July. Those 50 companies combined to generate $108.6 billion in earnings in 2017.
Still, Plaza Group has appeared to find a sweet spot when it comes to its size and scale, said Clif Baker, Houston-based commercial manager of Total Petrochemicals, a longtime supplier. He said Plaza Group distributes Total Petrochemical’s products into the paints and coatings markets and sells its chemicals to makers of pesticides and herbicides, as the aromatics are used as an inactive delivery agent for the poisons used in the products.
Baker said he works with 25 to 30 distribution firms, and that smaller companies often get bogged down because all decisions need to be approved by the owner. Larger companies, he said, often have personnel shifts that make the distribution process a challenge because of a lack of continuity.
As a result, Plaza Group has become Total Petrochemicals’ largest distributor, and the amount of product Plaza Group buys from Total Petrochemicals has jumped about five-fold within the past decade, according to Baker, who declined to disclose how much revenue Total Petrochemicals generates from sales to Plaza Group.
“The supply and demand is a fairly stable environment, but it’s a very competitive business, and, as a result, market intelligence and knowing how to price your product and building knowledgeable relationships is important,” Baker said. “One of the things I think has built our strong relationship is their willingness to take a problem and leverage into an opportunity, rather than just giving up and saying, ‘We can’t do that.’ ” Diversity option
Additionally, as a Latinoowned business (Velarde says the name “Plaza” was chosen because it means “square,” or “marketplace” in Spanish), the company has an inherent advantage if it can do its job as good as or better than its competitors.
“The refining and chemicals industry doesn’t really lend itself to any kind of typical minority, but if all of the other pieces in the relationship with a 3M work, one can close the door and lock the door (from other businesses) based on the fact that they’d like to do business with a minorityowned company,” Velarde said. He added that the company’s early 2017 acquisition of Truth Fuels, which provides smallerscale fuel distribution for portable generators for on-site events to municipalities, may provide further opportunities with local governments because of the company’s minority ownership.
Such a business wasn’t always the plan for Velarde, who grew up in Albuquerque. The son of a longtime government worker father and a stay-at-home mother, Velarde joined Shell Chemical in 1981 after graduating University of New Mexico with a degree in chemical engineering. Moving on to Texaco in 1990, Velarde continued to rise through the ranks of sales and operations management.
“Those companies had the resources to give you a great deal of training and business contacts, but honestly, I felt a lack of oxygen and suffocation working in those corporate environments, so I always had my eye out,” said Velarde, who was 33 at the time his company was founded. “I was an entrepreneur, but it was with the I’s dotted and the T’s crossed. It was a leap, but it wasn’t off a cliff.”
While the company started with four partners and about $2 million in annual revenue, Velarde bought the others out by 1996 and remains the firm’s only shareholder. Since then, the company has grown to about 30 people, which are about evenly split between sales and customer service.
“When we have an invoice that’s due on day 30, we pay it on
day 30,” said Velarde. “It’s elementary, but so many people don’t do that, and suppliers have hesitation in future dealings with those types of organizations.”
Meanwhile, the company stays lean by outsourcing just about all of its work that’s unrelated to sales or customer service, including all of its shipping and trucking duties as well as accounting, legal and public relations. The company did, however, bring in a board of advisers in 2000 and now has a seasoned board of directors that includes former Shell executives Carmine Falcone and Gene Kenyon as well as former Equistar Chemicals Chief Operating Officer Eugene Allspach and Tony Chase, chief executive of staffing and recruiting firm ChaseSource.
“He hasn’t put together an organization that’s built around his ego,” Baker said of Velarde. “He doesn’t turn a blind eye or ear to what his board says, and he gives autonomy to his people, so that they’re not afraid to make decisions.”
Given the diversified group of industries that use Plaza Group’s products, Velarde is confident in the company’s continued growth prospects. Additionally, even with the push among environmentalists for more recyclable materials to be used within consumer products, which could hinder the growth of products such as Styrofoam, Velarde downplayed the potential impact on his business.
“I am concerned about our environment, whether it be the issue of global warming, climate change or plastic litter. I’m concerned like anyone else that loves to fish in our waters,” he said, lauding the work of the chemistry-business trade group the American Chemistry Council. “What I am most encouraged about is they have, most recently, began to apply metrics to improve the environment as it relates to chemical products.”
Moving forward, Velarde has made Plaza Group a family affair, as his son Garrett joined the company about five years ago and his son Vincent joined about three years ago. While he wasn’t specific about any potential succession plans, he did indicate that he looked forward to scaling back his time with the company in order to devote more time to both community work and his alma mater.
As for lasting lessons, Velarde remains modest about his achievements and is quick to deflect praise to his co-workers and board members.
“Don’t think you’re the smartest guy in the room,” he said. “Especially if that room only has a population of one.”