By Graeme Rodden, Executive Editor, Pulp & Paper International magazine
BRUSSELS,
March 22, 2011
(RISI) -
Working under the principle of ‘build it and they will come' from the movie, Field of Dreams, FutureMark Paper found the right customers at the right time for its line of publication papers.
Already given a headstart from previous mill owner Myllykoski's foresight in building a state-of-the-art deinking plant, FutureMark has grown its "green" business by leaps and bounds, especially in the last half of 2010. Other factors such as an increase in paper prices and the closure of some possible competitors have also helped.
In the words of Stephen Silver, president and CEO, sustainability has evolved from "tree huggers" to a Fortune 500 necessity. The timing could not have been better for FutureMark, which began life as an urban mill in Alsip, IL, bordering on the southwest side of Chicago. The mill was opened in 1968 by the Chicago Sun-Times newspaper organization as a recycled newsprint producer. After going through a few owners, the mill was bought out of bankruptcy in 2000 by Finnish-based Myllykoski, which folded it into its US subsidiary, Madison Paper Company.
In 2002, Myllykoski invested $200 million in the deinking plant. It also refit the mill's lone paper machine to produce coated paper, CGW No. 5 (Pulp & Paper, December 2002, p. 30). However, in 2007, Myllykoski decided to put the mill up for sale.
Enter Watermill, a private equity fund based in Lexington, MA, which has been in business about 30 years. It specializes in industrial businesses that have financial problems, but have features that provide the potential for good turnaround opportunities. Besides its pulp and paper experience, Watermill also has investments in metals-related businesses.
In the Alsip mill, Watermill saw an opportunity to push the "green" angle, but push it as it has not been pushed before. Therefore, in November 2009, Watermill bought the mill and renamed it FutureMark Paper Company and focused on developing a "green strategy". It was, as Silver says, to be a "pure play for green paper."
The strategy was based on consumer trends and the fact that about one third of the mill's business was already green oriented from customers such as Dell, Staples and American cooking guru Rachael Ray. Reader's Digest decided to use FutureMark's paper in Rachael Ray's new cooking magazine that was launched in 2007 and now has a monthly circulation of more than 1.5 million.
In hindsight, the strategy may appear to be a no-brainer, but Silver adds, at the time, there was still a question mark about the quality and desirability of recycled paper, particularly for the applications that FutureMark planned.
Another question mark was whether the big paper users really cared about the green aspect. Were they just talking the talk and not walking the walk?
Silver and his team realized the mill's approach to marketing had to change. "When we took over, there was no marketing piece describing the benefits of using our paper. The deeper we dug, the better our story sounded, from emissions to water and chemical use," Silver says.
The Fortune 500 companies changed too, with change being mandated from the top down. "Green" was (and is) in and FutureMark was in a position to benefit from this. In less than a year since purchase, its order backlog went from two weeks to 15-16 weeks. "We are winning major new accounts from environmentally-mined minded customers," Silver says. The market was ready for a solution to help companies improve their sustainability position."
New customers gained in 2010 include Home Depot, Walmart and Macy's, Office Max, DIRECT and the in-flight magazine for American Eagle . "We picked up 50 significant accounts in 2010 that equal more than 50% of our capacity."
Silver explains that over the years, "Corporate America has gone through a series of fundamental changes about what a good manager should be doing, from affirmative action to Six Sigma quality data. Now, carbon footprint and sustainability are important and companies are looking for help. We tell them the story of what we do, not just about the paper.
"Fear of making the wrong choices drives a lot of decisions," Silver adds. "We had to neutralize this fear. This meant marketing the solution directly to upper management, in addition to the paper buyer."
Before FutureMark took over, most sales efforts were left to brokers. "Sometimes, we did not know the customers," Silver says. "We started looking at who our earliest green end-customers were and then looked at other companies in the same industry. It went from there."
FutureMark still uses brokers, but it went to all its brokers and explained why its paper was different from a virgin sheet and why that was important. It is an opportunity for them to offer a differentiated product and win new customers.
Silver claims that FutureMark makes the "greenest coated paper possible. The number of motivated green companies is still growing rapidly and if we can get our message across, it will move down the executive chain to the paper buyers to look at us and evaluate our paper. We have all the environmental benefits with no sacrifice (e.g., cost, quality)."
Silver says there is another important benefit in finding the right customers. He believes that these companies are motivated to buy environmentally friendly paper and will be more loyal. "Our advantage was that we found customers who cared. We were the only ones in North America to be able to produce this type of sheet in the short-term." Thus, the analogy to the Field of Dreams.
FutureMark's paper contains 90% recycled fiber, of which 30% is post-consumer waste. There are three main products:
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Future Connection, satin or gloss, 40-70 lb basis weight, 76 and 80 brightness;
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Future Choice, 45-70 lb basis weight, 82 brightness;
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Future ReMark, C1S label paper, 60 lb, used for such applications as soup cans, paint containers and other consumer products.
The label and Future Choice grades are still developing, Silver adds. The majority of production is still Future Connection. However, Silver says that Future Choice is growing by "leaps and bounds." The company is also looking at producing paper for pressure sensitive labels and digital printing presses.
Change of thinking needed
The mill produces about 90,000 tons/yr of deinked pulp. The mill's yield from its secondary fiber is about 80%. Chinese competition has forced FutureMark to accept lower quality secondary fiber. However, supply is not an issue. Silver says there is not much competition for a couple of reasons. Exports have driven the cost up too high for some (particularly lower-grade papers such as tissue and, newsprint). And, the higher amount of contaminants in the fiber means many less sophisticated deinking plants cannot remove them economically.
Silver says the volume of paper made from secondary fiber in the US is actually now falling. because some lower-end newsprint mills have closed and no new recycled mills have been built over the past two years in the US. He believes high waste paper prices, driven primarily by rapidly growing Chinese demand, is the main cause.
"There is no investment in recycled capacity. The US paper industry is missing a sea change in consumer demand."
He adds that for 20 years the US focused on collecting waste to recycle so that now, about 65% of waste paper is recycled. "But, we are not focusing on the best use of what we collect. We set up a collection system for China. We need to start thinking that secondary fiber is not trash but a precious raw material and, if customers' demand for higher recycled content is valued, then how do we meet demand in the future or do we leave it to foreign competitors?"
Part II of this story can be read in the next issue of the Environmental Matters newsletter
