In 2002, Malcolm Eaton Enterprises installed a tissue converting line to fulfill state contracts. Now it is growing further through the launch of its own brand, Spirit bathroom tissue, which has begun appearing on store shelves in mid-America.
Hugh O'Brian
Spirit Paper is the name of a new, and very small, supplier of tissue rolls which was created in 2006 by a not-for-profit organization called Malcolm Eaton Enterprises (MEE) in Freeport, Illinois, USA. Located about 11/2 hours northwest of Chicago near the Wisconsin border, MEE is quite a bit older, having been founded in 1966 with the aim of providing work and activities for disabled people with varying levels of mental aptitude and social skills.
Over the years, MEE has built up an organization that today includes a staff of about 60 employees as well as around 125 disabled “consumers”, which is the term used for the individuals who are being helped by the program.Until it entered the tissue converting business in 2002 MEE did not make anything itself but, instead, many of the tasks done in the organization were fairly basic sub-contracting services such as packing and re-packing, machining and finishing work provided to other manufacturers in the area. These included automobile parts manufacturers, tool companies, plastic wares makers and numerous other companies in need of manual labor.
JOBS LEAVING TOWN, SELF SUFFICIENCY NEEDED. In the 1990s, MEE started looking for ways to increase its independence and self sufficiency. A key driver was the fact that many of the local companies that had outsourced work to the MEE agency began to leave the area in search of lower labor cost areas and countries.
Realizing that these types of outsourced jobs would be fewer, and the threat that this trend posed to the disabled individuals, the agency began to search for other activities to generate revenue and provide work for their ‘consumers’ and to ensure the financial future of the organization.
Tim Cook, who has been with MEE for 16 years and is now Spirit Paper’s director of manufacturing, has been very involved from day one in the move to tissue converting. “We decided that, if we wanted to secure the future of our operations and the work opportunities for our people, the best thing was for us to actually manufacture something. If we were manufacturing products we had much better control of the entire process and, therefore, our revenues. This was very important in allowing us to control our destiny rather than being dependent on getting small jobs from other manufacturers.”
Thus, says Cook, in 2001 MEE began the project which would eventually turn into Spirit Paper. This was begun by examining the State of Illinois’ purchasing list of all the goods and services that the state buys, including quantities, prices and specifications. MEE studied the list and then set about analyzing each of the items to see what might be a good fit for MEE.
FOUR MAIN CRITERIA POINTED TO TISSUE. The project team, a small group that included Cook, Director of Finance Harold Anderson and Executive Director Sue Swanson had four main aims or criteria that it was considering in trying to find the right product for MEE to make. These were:
1) Items that had a bigger potential customer universe than just the State of Illinois. While the state contract would be an important starting point, the group wanted something that it could expand further as well.
2) A product longevity that would not be replaced with new technology for the foreseeable future.
3) State contracts initially worth around $1 million or more so it could justify the needed investment in manufacturing equipment.
4) Something that would provide a lot of ‘consumer hours’, on the order of 18-20,000 hours of work for the MEE people annually. In other words it had to be rather labor intensive, since the mandate of MEE is to provide work activity for these disabled individuals.
STATE OF ILLINOIS WAS SUPPORTIVE. “After further research and analysis,” continues Cook, “we went down to Springfield, the state capital, to talk with the Central Management Services people who are responsible for buying and procurement. They buy bathroom tissue for state facilities such as prisons, highway rest areas, public buildings, etc. They initially were very excited about our proposal and they liked the story and the idea, until they heard that we had not actually produced any tissue yet! Then they got a little less enthusiastic and told us to come back the next year when we actually had installed the equipment and were fully ready to supply them.”
After a few more rounds of discussions with the State, and giving assurances that the contracts would be fulfilled, MEE decided to install a Perini Model 716B Compact Rewinder. It went in during mid-November 2002 and by December 1st, 2002 MEE was producing 1-ply and 2-ply unwrapped toilet tissue rolls which were wound and cut on the Perini line. Rolls and packs were then manually boxed by the workers for shipment to the various state entities.
TWO-STEP PROCESS: STATE CONTRACTS, THEN RETAIL. As mentioned earlier, the initial project team had the foresight to realize that depending solely on state contracts was perhaps not the best long-term business strategy.
Thus after a few years of making bathroom tissue for the state, MEE began to look for further growth and revenue.
Even though the quantity supplied to the state was growing each year, the management team wanted to explore other opportunities.
“Most of the managers here come from manufacturing companies so we have that as our background,” explains Anderson. “We know that a growing business is a strong business. Also we don’t want to be always asking other people or organizations for support and chasing grants. Thus we saw this move into manufacturing as a way to improve our cash flow and our independence. With the state business runing well, we knew it was time to look at the retail side of things as we have a good story that we thought would appeal to the retailers.”
SPIRIT PAPER LAUNCHED IN 2006. After discussing various names and scenarios with a local marketing company in the Freeport area, the name of Spirit Paper was decided in 2005 and the Spirit brand was launched in 2006 under the guidance of Cook and Julia Hilliger, director of communications and marketing. But it was not as simple as that.
Cook describes the sequence of events: “As we were proceeding with our plan to enter the retail business, we went to visit the regional office of a large nationwide supermarket chain called SuperValu. We told them our story, and made the pitch for their business based on good products at a competitive price, which at the same time supports disabled individuals. They loved the story! But they also told us rather bluntly that serving the retail business was more complicated than simply having a good product, a good price and a good story. In fact, they said we would not get anywhere without a strong sales and marketing organization which could support the business.”
This is where a firm called Acosta Sales & Marketing Company came into the picture. Spirit, making only one product, was far too small to be able to pay the high overhead of employing a large sales force. In fact, even getting in the door to see the category buyers at various retail chains was a daunting challenge.
Acosta could help in this respect. The company acts as the sales and marketing organization for numerous consumer products that are manufactured by other companies. Thus, by contracting Acosta to essentially be its sales force, Spirit Paper got access to the retail category buyers in a wide region of the upper Midwest and is now selling to supermarkets and chains from St. Louis to Minneapolis.The Spirit brand includes two formats of bathroom tissue, both using 100% virgin fiber.
The Spirit Elite product is 2-ply, 410 sheet count, embossed white tissue packaged in either four packs or 12 packs. The Spirit 1-ply product is a 1100 sheet count, white tissue poly bagged in single rolls or 4 packs.
REVENUES GROWING AT IMPRESSIVE RATE. Since the start, the MEE tissue business has doubled from about $1million in revenue or about 25,000 cases in 2003 to $2 million or 50,000 cases in 2007. Tissue jumbo roll tonnage used in 2007 amounted to around 200 tons per month.
But the big growth is coming in 2008 when retail stores carrying the Spirit tissue brand will jump to approximately 350-400, from just over 100 during most of 2007. Clearly this large increase in distribution channels will generate more sales, with Anderson and Cook estimating that revenue could again double in 2008 to perhaps $4 million or even more.
The Spirit Paper story is a good one and obviously a successful one so far. Where the company will go in the future is hard to say, but clearly the aim of growing the independent retail business has been achieved. One bottleneck to further growth might be in the packaging, wrapping and palletizing area, where the company does not want to get too automated since its entire reason for being is to provide labor opportunities for disabled persons. The company has lots of room on the site for growth so perhaps a large winder will one day be located there, with more disabled people engaged to handle the boxing tasks.