Mohawk Fine Papers Inc. has been busy of late. Following its acquisition of IP Fine Papers, the company has been working to integrate its portfolio and its operations. At the same time, it has continued its pursuit of environmentally friendly solutions and products that serve the digital market. WhatTheyThink spoke with Tom O'Connor, Jr., CEO, the third generation of the O'Connor family to head up the company, to find out how post-acquisition integration is going and what else the company is doing as it continues its push toward growth.
WTT: Mr. O'Connor, thanks so much for speaking with us. For the last decade or so, I have been following your announcements, particularly those involving your digital products and your environmental activities, and am interested to learn more about your strategies moving forward. Over the last few years, there have been quite a few changes at Mohawk. Can you give us an overview of the company as it stands today, including number of employees, number of mills and paper lines, and approximate annual revenues?
TOC: We have just under 800 employees and generate just north of $300 million in annual revenues. We have two manufacturing plants in New York, and one manufacturing plant in Hamilton Ohio. We also have a one million square foot converting and distribution center in Saybrook, Ohio. In total we have six paper machines.
WTT: That's a pretty impressive sales per employee number. That works out to be about $375,000 in sales per employee.
TOC: People feel they have ownership in what happens here. We work hard to engage our work force and have lots of people that that have been with us for many years. In the old days, three years ago, average tenure was probably over 25 years, but since the acquisitions, it is harder to measure that accurately.
WTT: You have made a number of acquisitions. Can you talk about the strategy behind them and how they fit together?
TOC: The primary acquisition we made was IP Fine Papers. There was very little grade overlap. Strathmore, in particular, was very interesting to us since we had limited identity offerings at the time and Strathmore is the nation's leading brand in that category. We did sell Superfine Writing, but without cotton fiber papers, we were not seen as a serious player in that market. So the portfolios blended well -- unlike some other recent mill consolidations. In addition to the writing grades, we were attracted by the brands. Strathmore had tremendous brand recognition with printers and designers, although it had been somewhat under-promoted for several years. The challenge we continue to have is rebuilding the brand and building up volume, which we have been moderately successful in doing.
WTT: You also picked up the Beckett line, right?
TOC: Yes, we actually picked up four families of grades, Strathmore, Beckett, Via and BriteHue. We have worked our way through most of those grades to redesign and relaunch them. Beckett has a good brand name and we have been able to grow those grades pretty well over the last couple years. They are a little more regional, better known in the Midwest, but they also have a tremendous name in Europe. The acquisition of IP Fine Papers allowed us branch out with brands in writing papers, expand the opportunities for the Beckett grades and improve our geographic reach. The Beckett grade lines are beautiful, well-made premium papers with a focus on color. They have very loyal users and good brand equity. I should also say that success with the Strathmore and Beckett grades was very dependent on our successful integration of the Beckett Mill in Ohio. Happily, the integration in Ohio has gone very smoothly. We have a lot of good people in Ohio that came with the acquisition. We have not transplanted a lot of our own people there. For the most part, we kept the management in place. It has been a bit of a challenge for them to adapt to our culture, which is different than what they were used to; we are not a $24 billion company. But we have made a lot of headway. For instance, we negotiated a union contract in Ohio this year. When we looked at what IP was charging employees for healthcare, it was more than we ask of our employees in New York, so we cut their healthcare costs in half without being asked. We wanted everyone on an even footing. Those kinds of things have slowly affected how people feel, and though two and a half years isn't a long time, I think our new employees feel very comfortable within our organization.
WTT: Let's talk a little bit about your environmental strategies.
TOC: We have always had a focus on the environment; it is an important part of our company culture. In 2003 we began buying a small amount of wind power, 10-15% of our needs. When we made the announcement to let people know, we were astounded at the response we got from the marketplace. We were doing it anyway. It was the right thing to do. But having met with that type of market response, we have taken it to a new level. We are now 100% wind power at all of our facilities. We have also started producing carbon neutral products. We buy third party certified verifiable emission reduction credits, or VERs. These credits are tied to a specific project. In our case, we contributed funds to a landfill project in Illinois that would not be possible without our contribution. We get credits because the methane from the landfill is now burned to create energy rather than being simply flared off. I believe that as a company, you have to make a commitment to the environment. As part of that commitment, we are in the EPA Climate Leaders Program and are committed to reducing our carbon emissions by 10% over the next couple of years. We are making capital investments to reduce our own carbon emissions as well as buying VERs. The environmental movement has a lot of traction right now, and that is a very good thing. I tell my people that it is okay to make green being green. We have always been committed, and now there is actually some kind of payback. When you go back even 20 years ago to the Clean Air and Clean Water Acts, we always told our environmental people we wanted to be a minimum of five years ahead of the curve, and we have maintained that position. Being green is not only good for the world but good for business.
WTT: Mohawk has also been a leader in the provision of digital papers, since the digital color presses first came to market in the mid-1990s. What's new in that arena?
TOC: We continue to enhance our digital line, as well as our support for designers and print service providers to help them understand the best types of papers for their digital projects. We are especially excited about our recently launched Digital Guide, which can be downloaded from our web site. This educational booklet has an At-a-Glance digital paper guide that is a matrix of our various paper types aligned with the digital printing equipment families on the market, so that for each equipment family, for example the Canon CLC Series or HP Indigo presses, designers can quickly identify which paper types they should choose for a given project. It also offers a digital printing primer and talks about our position on sustainability. We are getting great response to the piece, and our team did a terrific job putting it together. On a related note, as part of our ongoing work to support the design community, we also launched an interactive paper specification tool at Strathmore.com that allows designers to specify the various components of a stationery design program — letterhead, envelopes, business cards,—and to quickly understand environmental and other attributes of various papers, to piece together a program with the right components for their needs. It feeds right into our sampling program, so that once they have assembled the components, they can easily order samples for use with their clients.
WTT: Pundits are already calling drupa 2008 the inkjet drupa. What is Mohawk doing relative to inkjet substrates?
TOC: I think there will be some fundamental changes in the printing industry over the next few years, and one of them is going to be inkjet. If you believe what Frank Romano and other experts are saying, in four to five years, high speed inkjet is going to be the new wave in commercial print. We saw some of that at the last drupa, but the quality was not there. Going forward, though, quality will improve and this is the technology that will begin to take over. We think that it is important to develop papers that can work cross platform, like our Inxwell papers. We don't want to have an entirely separate inkjet inventory, so we need those cross platform solutions that are suitable for inkjet, offset, and dry and liquid toner. I would love to have that on the shelf ready to go if and when production inkjet really becomes the mainstream digital color technology.
WTT: Speaking of drupa, I assume Mohawk will be there.
TOC: We will be in the paper hall with all the global paper companies and we hope that this will raise our profile significantly. We already have a good profile internationally, and we have been at the last two drupas, but in the U.S. Pavilion. The significance for us in 2008 is that we have been given a position in the paper hall, where we will be promoting our digital papers in particular.
WTT: Can you talk about where you plan to take Mohawk in the future, from a strategic perspective?
TOC: We are a private company, and we are committed to growing and to innovation. Are there more acquisitions in our future? There could be. The opportunities are getting few and far between in terms of what would be an attractive acquisition for us. Much of our focus over the next couple of years will be on innovation, because as I said, I think there will be some fundamental changes in the printing industry and we plan to be there with solutions. We try to have a variety of projects in development all the time and like to have things on the shelf ready to go so we can stay ahead of the curve as new markets develop. Like almost every industry today, the life cycle of products is just not what it used to be.
WTT: Mr. O'Connor, thank you for sharing your insight. We look forward to seeing Mohawk at Graph Expo and drupa 2008. Is there anything else you would like to add before we close?
TOC: We are a company that is committed to its people. We like to think that everyone in our company has a feeling of ownership. I don't like to think of us as a paper company; I like to think of us as a technology company, inspired by innovation, following the trends but staying ahead of the curve. That is what we are about. We enjoy doing it, have done so since our family took over the mill in 1931, and we hope to be doing it for a long time to come.