Dunn Paper came out of nowhere last year, at least with respect to the tissue industry, when it bought five mills from Clearwater Paper, of which four make specially tissue products. This took the Company’s turnover from US$75 million to about US$330 million. We recently sat down with Dunn’s CEO Brent Earnshaw, who has very deep experience in the specialty paper business, as well as a doctorate degree in paper technology.
Hugh O’Brian
It’s maybe no big surprise that Brent Earnshaw today owns a fair chunk of a paper company. Owning some sort of business was always in his plan. “For a long time I always wanted to own a business. In fact, it could’ve been a barbershop. It was simply on my bucket list. As it turns out, I’m a minor owner of what is now a fairly big paper company. I’m OK with that,” he says with a smile.
Considering his background in paper technology, as well as his long experience in numerous technical, production, sales and marketing positions in various paper mills, it seems like Dunn Paper is probably a much better fit than a barbershop. Here’s how it happened.
Following a series of upward career moves, Brent was general manager in the 1990s at the James River Port Huron, Michigan, paper mill which was subsequently spun off to Crown Vantage. Unfortunately, that mill and company went bankrupt in 2003 and as the creditors were pondering the future, says Brent, “I told them I would be interested in buying it. We, meaning myself and the management team, thought it had a future.”
As it turned out, in September 2003 the mill went through an auction process, but Brent’s management buyout team lost the auction. “However,” he continues, “the guy who won it stepped out. So we partnered with a private equity firm that was ready to help us. The mill was down for 11 days and during that time we got the deal done. We then started up and never looked back. It was a crazy time.”
DUNN NAME AND LIGHTHOUSE MADE SENSE. The original mill which dates back to 1924 was built by the Dunn family, and had very important roots in the community of Port Huron. Even though it was sold by the Dunns in 1967, it continued to be referred to as the Dunn mill. Once the new management bought the mill, they decided to restore the Dunn name and were then discussing how to position it and what logo to use. As an indication of things to come, specifically watching costs and being pragmatic, says Brent, when the question of a logo came up he saw things very simply.
“We were discussing branding agencies and perhaps spending $50,000 to come up with a logo. Instead, I looked out the window in Port Huron across to the lighthouse that’s been there since 1825 and said ‘Let’s use a lighthouse as our logo. It’s a point of reference; it’s rock solid; and it shows where are we are going.’ Everyone agreed. So that’s what we did.”
THE OLD DUNN AND THE NEW DUNN. Previous to the 2014 purchase of the Clearwater specialty products business, Dunn Paper had about 170 employees and $75 million annual turnover, mainly making food packaging for quick service restaurants, as well as flexible packaging and labels or release papers. This includes sandwich wraps and small bags below 40 g/m², and even down to 30 g and under, with very few competitors in the market, says Brent. Critically, all is sold on order-by-order basis, with no stocks. A key focus area is MG papers, and also clay-coated lightweight packaging papers.
FOCUS ON VERY FEW KEY AREAS. As far as what works for Dunn, Brent says that an overriding philosophy has been to focus on a few big things. “We feel, as a starting point, that you can’t get the company objectives and values fully down into an organization unless the senior leadership begins with just a few fundamental things. We have always only focused on a few areas, and this has been key to our success, I believe. So when we get together as a senior team we’re only talking about a very few things, and building actions and plans around them. We are doing the same with the new, expanded company.”
BUSINESS DEVELOPMENT IS CRITICAL. The first factor is business development. Brent says that an important thing to understand about the specialty paper business is that it has a natural churn or turnover of clients. “We may, unfortunately, lose some orders. We don’t take it personally because we know will find new orders to replace them. At our Port Huron mill, we have four paper machines but we only operate three at a time. We don’t have to run them all the time, but when we do run them we should be making products that are valuable and important to our customers. We refuse to spend time making products that don’t give fair value to our assets and resour-ces. That’s the business development or product development premise at Dunn and it’s very powerful.”
“In fact we have data which proves that if we get very busy and don’t dedicate time to product development, it doesn’t hurt us immediately. But six months down the road we have a big hole in our order book which hurts like crazy. So we don’t do that anymore; we’ve learned.”
As with most companies, he continues, business development and machine trials can lead to tension between the operations, sales and technical departments. “But it’s a healthy tension, which is needed and my role is, if they ever need me, to raise the debate to a higher level and let a solution fall out. I can tell you: 99% of the time I never need to take any active involvement.”
FIBER PROCESSING EXPERTISE AS WELL. Another key focus area concerns wood fibers. “The innovative use of fiber is a huge part of our business. We are very flexible at using both virgin and recycled fibers from a wide variety of sources to get the functionality required in our specialty grades. Supporting this strategy, we have spent years and significant capital developing the formulas, equipment capabilities and know-how to use a wide va-riety of fibers.”
Dunn is financially strong, continues Brent, so it can afford to make those investments, “leading to a positive upward spiral for us, compared to competitors that are simply too weak financially. We have continuously reinvested, both to serve our customers as well as to ensure we are a stable employer for our 600 plus employees. It works quite well, frankly.”
OVERALL OPERATING EFFICIENCIES. The final key focus area is called “operating efficiencies”. Operating efficiencies, Brent explains, means turning more bad into good, than good to bad. Purchasing is a good example. Dunn never buys anything without getting multiple bids. Another is: Never run a paper machine if there isn’t an order for the paper. ”When we first started, it happened quite often that machines were running without orders, but never now.”
Based on these key points, Dunn has built a good business around its one paper mill. The team, then, wanted to take it further. “We felt that we could take these simple but successful values we had implemented in our single Port Huron Mill and use them more widely. Thus the specialty products acquisition provided a very clear alignment with Dunn’s business. The people fit us very well too. The acquired business was previously part of Cellu Tissue, which was culturally and operationally very similar to Dunn. So many of our values were already there at the mills we just acquired. It was a perfect fit, and the effort needed to integrate them has been minimal. So instead of spending a lot of time, and perhaps frustration, trying to create a set of common operating principles, we have built on the many things we have in common. We have outstanding plant leaders and the integration of the new mills has gone smoothly.”
THE OFFICELESS PAPER COMPANY. While many words have been written about the paperless office, Brent’s group could be called an officeless paper company.
“What is very different about us compared to many other $300 to $500 million paper companies is that we don’t have a headquarters. We have our management team all over the country; so there’s no office but we manage that very effectively and efficiently. We meet on the phone once a week, and get together face-to-face once a month with very specific objectives. And I can tell you, it does work. I don’t think that other companies, which are all held within the same four walls, are able to make decisions as effectively. As a team we are visiting each of our six mills every month and a half, where we have operational meetings. And in every meeting we find value, with clear follow-up to make sure things get done.”
WORKHORSES FOR THE LONG RUN. As for the future, Brent has some ideas about how he’d like this story to play out in the long run.
“Our machines are not the fastest, the newest nor the biggest, but they are the workhorses that can make the short orders that other companies are not interested in making. That’s how we eat every day. And it doesn’t matter if it’s MG specialties or tissue; it’s the same philosophy. You have to be small and nimble in our business, otherwise you go out of business. Overall we are confident we are building up a nice solid specialty paper company that we hope is going to be here for a long time.” Just like that lighthouse back in Port Huron. *