Cellynne looks to create its own wave of change in the US market

The planned installation of its first paper machine, combined with a new focus on the consumer sector, means that Florida-based Cellynne Holdings may help stimulate an increase in private label tissue products on the American market. It will be interesting to see how consumers respond.

Hugh O’Brian

Cellynne, the Florida-based tissue converter, is still a small player in the world’s biggest tissue market, the USA. However, its rapid growth over the past 10 years, and the recent announcement of plans to install a new paper machine next year, mean that the company will be one to watch in the coming years.

Traditionally focused almost exclusively on the ‘away-from-home’ (AFH) segment, Cellynne has recently been targeting more of its products for the ‘at-home’ (AH) or consumer sector. Thus today, in 2005, the company has about 75% of its business in AFH, while 25% is in consumer. This is a big swing from only two years ago when the balance was 90% AFH and 10% consumer.

You can expect the trend to continue.

“We want to rebalance our sales so that we are about 50% AFH and 50% consumer,” says executive vice president Marc Allegre. “We are confident that we can grow in the private label or retailer brand sector which will help us to build sales in the consumer field.”

The new paper machine is an important part of the strategy. Cellynne today uses over 60,000 tons per year of tissue at its three converting plants in Haines City, Florida, Green Bay, Wisconsin, and Las Vegas, Nevada. However, it presently has no papermaking capacity at all, meaning it is entirely dependent on jumbo rolls purchased from mills around the world.

When the first paper machine is up and running it will be making about 30-35,000 tons per year, depending on the grade. This, says company president Patrice Minguez, will give Cellynne much greater control of its raw material, the jumbo rolls. “This paper machine is a key to our future. It gives us much greater power to move in the PL business. It will also give us control over costs.”

SECOND PM ALREADY PLANNED. Minguez says that Cellynne is not planning to add any new converting equipment until they have completely covered their paper needs. So the strategy is to get the first PM started in April 2006 and thereafter to start moving on a second PM which, when running up to speed, would then mean that Cellynne would be a net seller of paper rather than buying 100% as it is now.

Cellynne got started, like many tissue converters, in a roundabout way. Minguez and Allegre, both originally from France, are today the sole owners of the company, with Minguez having a larger share than Allegre Minguez, now 41 years old, was working in the 1980s on the Caribbean island of Guadeloupe with a distributor of white paper, such as computer printout paper and forms, and office supplies. One day one of his customers asked if Minguez could also deliver tissue paper as he was having a hard time finding suppliers. One thing led to another and pretty soon Minguez was importing center pull toweling and jumbo roll tissue (JRT) from Mölnlycke, the Swedish company which has subsequently become SCA Tissue. A few years later, in 1988, he was in Miami visiting a friend who was in the restaurant business. This friend complained about the inefficiency and time consuming process of refilling small toilet rolls and hand towel dispensers. “Right then,” says Minguez, “I could see this business in front of me. Why not bring this industrial-size tissue business such as JRT and center pull towel to the USA? Back then it was a very minor part of the AFH offering. So I left Guadeloupe and moved to Miami.” There he formed Cellynne as an importer and distributor of jumbo roll tissue for the North American commercial markets. The company is named after his daughter, Celine, though the spelling is different since the corporate name ‘Celine’ was already registered in Florida by another company. At this point Marc Allegre, 47, came into the picture. A lawyer, from Marseille in the south of France, he had come to New York in the early 1980s and made his way to Miami where he was working in the restaurant business. Through a common friend he met Minguez and the team of Minguez and Allegre was formed.

STARTED PRODUCING WHEN IMPORTS GOT TOUGH. At first the company was operating primarily as an importer of finished tissue products, with product initially coming mainly from Europe. But it was not entirely easy to find reliable suppliers, so in 1991 Cellynne bought its first piece of converting machinery, a second-hand rewinder, and began its move from a trader to a manufacturer.

The first manufacturing site was in downtown Miami but the company soon moved to Orlando, in 1992, to accommodate its expansion. The company continued to grow with several new operations, most notably the Green Bay and Las Vegas converting plants, being opened in 1995 and 1996 respectively. In 1997 the various operations were consolidated under the name Cellynne Holdings. Along the way, Cellynne also created a tissue dispenser business which it has kept to this day.

Today Cellynne Holdings has about 200 employees although this figure can go up or down depending on contract work.

The headquarters and main plant is now in Haines City, Florida, about 45 minutes south of Orlando. The buildings in Haines City cover 180,000 square feet while the Green Bay plant covers 65,000 square feet and the Las Vegas facility 64,000 square feet.

SURFING THE WAVE CREATED BY SCOTT. As far as market development, a big break came in the early 1990s when Scott Paper decided to push jumbo roll tissue for the AFH sector. “Like us and some of our first customers,” explains Minguez, “Scott Paper also realized that there was market demand for bigger size units for tissue and toweling. Thus Scott began pushing the jumbo roll tissue and center pull towel concepts.”

Scott was then the biggest tissue producer in the USA, so when it put its marketing dollars and power behind the new idea, Cellynne was able to benefit from the market demand that resulted. “We just surfed the wave that Scott had created,” says Allegre, “and what had been a niche market started developing at a fast pace.”

NEW PM EXPECTED TO START IN APRIL 2006. The move into papermaking will be a big jump for the company but Minguez and Allegre don’t seem to be too worried about the risk. With a budgeted cost for the PM 1 project set at USD 30 million, financing has been arranged through traditional bank loans, says Allegre.

As Cellynne has grown to a turnover in USD 80 million in 2005, the paper machine has become easier to finance. “Now we are big enough to get loans for such a project. Although we have been thinking about a paper machine for many years we wouldn’t have been considered for such a big financing package a couple of years ago.”

In contrast to the early days when they bought cheap, second-hand machinery, Cellynne is now buying some of the most modern machines in the world. For example, the new paper machine will be supplied by Metso, which is often seen as the world leader.

Another example is the F1 roll wrapping line that was recently supplied by KPL Packaging S.p.A., which is the first one of its kind put into service in the world. Allegre explains more about the move up in the quality of machines used. “When we were starting the company we had to be extremely careful with spending. We also did not have the volume to justify highly-automated, high-productivity machines. So we cut corners. But we now see that was not a very good idea, since you always end up paying for that later. Now our philosophy is to go for the highest quality and value that we can find on the market. We think this is reflected in the tissue products we offer as well.”

For the future, Allegre says Cellynne is still aiming to be a niche player, although they are widening their horizons to fill gaps that they perceive in the market. The targets will be the Southeast and Southwest regions of the USA. The Green Bay plant will still be an important part of the company but it will continue to work mostly with contract converting for other companies. “We want to grow our market where there is little competition. We feel that the Southeast USA market offers good opportunities and the Southwest is quite similar as well.”

WILL EUROPEAN EXPERIENCE HAPPEN IN USA? Looking at the European model, where private label has taken such a very high share of the market based on high-quality product, Allegre says he is confident that PL will soon take off in the USA as well. “We are targeting private label and we feel we will be rapidly successful in this sector. We think that the high level of consolidation that has come about following the mergers and acquisitions over the past decade means that the retailers want alternatives to the big brands. The top 5 producers control more than 75% of the production. Thus the industry consolidation caused this imbalance between the big 5 and the rest, and this has opened a window of opportunity for us. Clearly there should be room for a medium sized player in this new business cycle in North America.”

For starters, Cellynne already has Wal-Mart, the world’s biggest retailer, as a customer. Although it is only buying AFH tissue at this point for use in its own store facilities, Minguez is confident that Wal-Mart will one day be selling Cellynne-made tissue products on its shelves. “They want options to the big guys and we feel we can provide the right quality at the right price.”

So it seems as if the two guys from France are set to surf some more waves in the US tissue market. Only this time they won’t simply be riding those created by someone else.

If all goes according to their plan, they will be the ones making the big new waves.•

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