Petaluma manufacturer sees growth beyond COVID-19 spike, plans new plant

If any company could take the mantle as the busiest in Sonoma County during the past two years of the pandemic, Labcon North America could make a good case.

From a nondescript industrial building next to Lakeville Highway in Petaluma, the company has grappled with skyrocketing demand for its pipette tips, the pointed and slender devices essential for use in medical research and lab facilities.

Even past spikes with SARS and mad cow disease could not prepare the privately held company for the business triggered by COVID-19 even as its production line works 24 hours every day.

“The pandemic has been a challenge for us. We're a bad-news company because if it's bad, we're good (for business),” said Jim Happ, company president who has worked for Labcon for 30 years.

The company began in 1959 under a different name starting out as a small producer in Sausalito and moved to Sonoma County in 2004 when its business started to take off. Its parent company is Helena Laboratories of Beaumont, Texas.

Labcon has an annual revenue of more than $50 million and that should reach a level of $100 million within the next six to seven years, Happ said. That growth will likely require hiring another 100 workers as well.

Even before the pandemic struck, Labcon had prepared for a bigger expansion with a proposed 285,000-square-foot facility nearby to handle greater capacity and streamline its operations. That includes sterilizing its products within the packages through a process similar to an X-ray machine. It should open by 2025.

That growth was based on advances in medical research that have entered the marketplace or are forthcoming, such as drugs to be tailored to the specific patient based on his or her genome. Like those used with the coronavirus, Messenger RNA (mRNA) vaccines instruct cells to make a protein that will trigger an immune response to diseases are another growth area.

The coronavirus further cemented the foresight for the expansion, especially as the U.S. Defense Department in October 2021 awarded it an almost $60 million contract to increase production. The funding was part of the federal American Rescue Plan Act to boost domestic production for critical medical resources.

The contract will help Labcon increase its capacity from 100 million to 236 million pipette tips per month. Its centrifuge tube production will jump from 27 million to approximately 58 million tubes per month by October 2025.

“The industry is growing. We are never going to go backwards,” Happ said. “It is ambitious.”

Labcon is one example of local manufacturing companies that play a crucial role in diversifying the Sonoma County economy. That proved very useful during the pandemic as the hospitality industry suffered because of a lack of tourists, and it still has not recovered all of the job loss from two years ago.

These companies range from La Tortilla Factory in food production to Keysight Technologies for its high-tech measuring devices. There were 23,040 such manufacturing jobs in Sonoma County in 2020 that produced a gross regional product of $4.8 billion, according to the Sonoma County Economic Development Board.

“In many ways, when you look at what happened (from the pandemic) … manufacturing was a shield from some of the worst effects involved,” said Ethan Brown, the interim executive director for the Sonoma County Economic Development Board.

Those manufacturing jobs also tend to pay higher wages than retail and hospitality positions as well, Brown said. “Manufacturing jobs are among the few that pay what it takes to live Sonoma County,” he said.

The company stands out as a counterpoint against the offshore manufacturing trend of recent decades ― one in which management gurus preached the gospel of foreign sourcing of products for just-in-time delivery. The global supply chain disruptions brought upon with the pandemic have some policymakers, including the Biden administration, re-examining such strategies given delays in products from new cars and outdoor gear as well as national security concerns.

“We never left,” said Happ, who noted that one federal official remarked that Labcon was a “perfect company” for the Department of Defense contract. “I think we are being rewarded for our long-term vision and our decision making to keep Americans employed.”

Its raw materials used in its products also are sourced domestically such as resin that comes from Texas. It has been slowed with waits for such packaging materials as boxes and labels, but Labcon still keeps producing the medical supplies given the demand.

“I think you have to take care of your people,” Happ said. “If you don't have medical supplies, you can't take care of your people.”

The company, however, has experienced supply-chain disruptions. Like other local exporters, Labcon has been hampered by the shortage of cargo containers as it exports about 35% of its products to places such as Asia, Africa and South America.

Beyond the focus on retaining rather than outsourcing its workforce, Labcon also has stood out for its environmental commitment that started about 25 years ago. Most notably, it installed solar panels that provide about a third of the company’s power needs, which saves Labcon about $30,000 a month, he said.

Even small changes add up, such as moving from a small plastic box that previously held batches of pipette tips together to a wafer-like slender sheet that contains the assembled products.

“We just do a better job … we got rid of Styrofoam that holds the products. We built molds to make racks that are reusable thousands of times,” Happ said.

A tour of the company reveals that it is much more than a standard assembly-line operation ― beyond the workers overseeing the production of the pipettes as well as the packaging. The company is vertically integrated and has its own machine shop that resembles an advanced metal shop class. It’s a place where workers assemble heavy plates to make molds that can cost up to $100,000.

Those machinists can make up to $50 per hour and Happ dubs them as “artists of metal.” They help ensure that if mechanical problems arise along the assembly line that they can be easily fixed so Labcon does not have to wait for a third-party contractor to resolve the issue.

“We're pretty self-contained. Other people don't do this,” he said.

Labcon also employs mechanical engineers such as Hank Poppe, a recent Stanford University graduate who grew up in Sonoma County and came back to work for the company as he now commutes from San Francisco.

“We do everything,” Poppe said of his job. He had recently designed a production tool and was working to ensure that the Labcon machinists had fabricated it to the right specifications.

Its customers expect such perfection given the trend of using more robots for tests and medical trials in a process where the machine can pick up almost 400 pipette tips in one batch to handle.

“Our guys are multifaceted,” Happ said.

The company has benefited from staying in the United States and not outsourcing to a cheaper, foreign country ― a view many others are now realizing. Years ago, Happ said he went to Mexico as the company explored whether it was feasible but found “that it didn’t make any sense” for a relatively smaller company to do such outsourcing.

“We decided to stay in the United States. We have a lot of talent working here,” Happ said. “I think the human component of your company is the most valuable component because you get these people trained up and it’s not just trained on what buttons to push. But it’s actually (about) what is quality and what makes a good product.”

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.