FPC makes big entry in tissue by targeting high-quality jumbo roll market

FPC Tissue in Chile appeared somewhat surprisingly on the tissue scene a couple years ago. Here’s the story of where the company came from, how it is approaching the business, and where it may be going.
By Hugh O’Brian

“Make no little plans; they have no magic to stir men's blood and probably of themselves will not be realized. Make big plans; aim high in hope and work.” This quote is attributed to the American architect Daniel Burnham, the man who designed the famous Flatiron Building in New York City, the beautiful Union Station Railway building in Washington DC, and the Beaux Arts-inspired San Francisco Civic Center, among many others.

In some ways, the decision in 2013 by the Chilean paper producer FPC to enter the soft tissue paper business is a good example of Burnham’s encouragement to make big plans. Previously, FPC’s activities in the paper sector were centered around production of packaging paper grades such as corrugated medium, gypsum-wall paper and white-top liner, based mainly on recycled fiber. These grades were, and still are, made at FPC paper mill in Concepcion, Chile, located about one hour flying time south of Santiago.

The reasons that led FPC and its owners, the Izquierdo family, to think big about getting into tissue are based on a series of events over the past 10 years or so. The CEO of FPC Tissue is Roberto Izquierdo and his brother Eduardo, who joined FPC in 2012, is a director of the company and very involved in the manufacturing operations. Holding a doctorate degree in Mechanical Engineering from The University of Michigan in the USA, Eduardo clearly plays an important role to keep things moving on various fronts. When asked what his real job is, he says: “I do what I can. I like machines.”

Fish meal to forestry, and then paper

Regarding the company history, Eduardo picks up the story. “It essentially began with my grandfather Roberto who started a business producing fish meal, used for livestock feed, in the 1950s. A little later in the 1960s my father, who is also named Roberto, completed his studies in forest engineering and began his career. After working in various positions at several forestry companies, he decided to start a forestry plantation operation in 1985.”

In 1995 that company, Forestal Quilpolemu which is located 100 km from the paper mill in the footsteps of the coastal mountain range, bought Forestal y Papelera Concepcion, otherwise known as FPC. FPC was then a newsprint paper mill that was running a single, second-hand machine that had been moved from Sweden. Newsprint was successfully produced there until 2005, when the economics suddenly changed dramatically due to an energy shock that sent electricity prices soaring in Chile. In 2007 the company was forced to shut down the machine because the cost of electricity used to make the newsprint had, incredibly, risen higher than the sales price of newsprint.

Sensing that packaging paper might have a better future than any printing grade like newsprint, the machine was then converted to make corrugating medium for boxes, using OCC (old corrugated containers) as the source of fiber. Originally making 50,000 tons per year after the conversion, a further 2013 rebuild to allow production of white-top liner raised capacity to about 100,000 tons. Although this was a good business, primarily based on boxes used for exports of fruits, salmon and wine, FPC also began exploring other possible avenues for growth.

Tissue future looked bright

“Early in 2013,” continues Eduardo, “when we were negotiating with Valmet for the white-top liner rebuild we had some conversations about the future of paper and what more we could do in this industry. We then worked together on a market analysis and came to the conclusion that there was an interesting opportunity for us to enter the tissue sector.”

The NTT technology, which at that point had only been installed at one mill in the world, was discussed and it was thought that it might allow FPC to produce a quality that would set it apart in the market. “We identified a niche we felt we could fill,” explains Eduardo. “This was based on demand from tissue converters worldwide who were looking for a steady supply of high-quality paper, in the form of jumbo rolls. That was lacking in the market because even if they could, sometimes, get high-quality paper the supply stream was very inconsistent. They simply weren’t able to count on it for the long term.”

This finding applied both to independent converters, who do not produce their own paper supply, as well as many integrated tissue companies that do make conventional tissue, but do not have the capability to produce premium grades. So the business idea was to make NTT high-bulk, high-softness paper to export in jumbo rolls to converters who wanted high quality. FPC also took the strategic decision to enter the tissue converting market, but in a very small way, so that it could gain hands-on experience in converting NTT paper.

Big decision to adopt new technology

Although FPC could have entered the tissue business based on a conventional tissue machine, it instead made the bolder decision to go with the new NTT concept. And once it had made that decision, it wasted no time in putting it into action. After finishing the white-top liner rebuild on the packaging machine, FPC immediately started digging for the new tissue mill. With a budget of USD 135 million the project included the first “double-width” NTT machine at 5.5 m wide, plus converting and packaging equipment, as well as the infrastructure and civil works.

The FPC Tissue administrative organization is surprisingly small, with just 17 employees, including sales, HR and the operators. Even though many of the basic functions such as purchasing, utilities and logistics are shared with the FPC sister company, the small group has certainly been moving at a quick pace.

“Yes,” says Eduardo, “we’ve been running a fast race for the past few years. Usually, in most projects, you finish the engineering before you start digging. But since we were on an accelerated timescale, we were doing both engineering and digging in parallel. We made some small mistakes in the process, but at the end of the day it has worked out fine as it helped us gain precious time.” An item which complicated the project is the fact that Chile lies on an active earthquake zone, meaning the project required building additional support structures in the mill to withstand shakes that may occur.

In June 2015 the NTT machine started up, producing jumbo rolls for export. And, six months later, in December 2015 FPC Tissue began selling converted products on the retail market. There are three main retailer chains that dominate in Chile: Lider/Walmart, Jumbo and Unimarc. Initially, says Eduardo, it took time to build the sales channels and gain traction. “It was a slow process getting acceptance of our paper, both for the jumbo rolls going to converters, as well as finished products going to the Chilean retailers. It was an entirely new grade for many people, and unlike the brown paper or packaging market, where you send a sample and the customer rapidly decides if they want it or not, with tissue it takes much longer. There are many more people are involved in the decision process.”

Took time, but softness got attention

But with time, and by working closely with the converters and the retailers, FPC has been successful at building up its new tissue business. A key positive attribute that has helped enormously is the excellent softness they have achieved. With a measurement of 101 on the Emtec Tissue Softness Analyzer instrument, Eduardo says that this puts FPC’s paper on par with the best TAD grades.

The high softness combined with superior bulk have clearly helped it get the attention of its main target group, independent converters. Presently FPC has long-term contracts of three years or more with converters in both the United States and in Europe. And interest has been rising rapidly, Eduardo says, following the announcement by Sofidel that it would install NTT machines in both Europe and the United States.

Softness is clearly something that Eduardo and his team feel they can develop even more as they go along. “I think at this point we are still just scratching the surface when it comes to what we can do with softness on the machine. The developments that are being made in belt design give us lots of tools to make even greater improvements. In addition, the mix of fibers we are using are a great advantage for softness as well. The combination allows us to make softness it’s even very acceptable for facial tissue grades, in spite of the fact that we are not using chemical softeners.”

The NTT configuration allows the mill to swing between the textured mode and the conventional mode quite rapidly. However, FPC says its strategy is to run nearly 100% in the textured mode and as of late 2016 it was pretty well on target as it was producing less than 5% of its tonnage in the conventional mode.

A surprising pioneer

Today FPC Tissue, a newcomer in the business that is located in a fairly remote location on the west coast of South America, finds itself in the position as the preeminent supplier of high-bulk, high-softness NTT jumbo tissue rolls. Due to the intricacies of ocean cargo shipping rates, the company says that transport to the main markets of North America and Europe is really quite cost-effective. With good relations now built with many converters, and more on the way, it seems like FPC Tissue has discovered a nice niche which it will be developing even further in the years to come.

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