Union Camp Corporation

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Union Camp Corporation

1600 Valley Road
Wayne, New Jersey 07470
U.S.A.
(201) 628-2000
Fax: (201) 628-2722

Public Company
Incorporated: 1956 as Union Bag-Camp Paper Corporation
Employees: 21,200
Sales: $2.84 billion
Stock Exchanges: New York Pacific

Union Camp Corporation manufactures a diverse range of products. Though historically associated with paper products, particularly paper bags, Union Camp is in addition a major producer of other packaging products, building materials, and chemicals. Mills at Savannah, Georgia, and at Prattville, Alabama, make unbleached paper and paperboard. Union Camp converts about two-thirds of its unbleached production into packaging materials and sells the rest to other companies. Mills at Franklin, Virginia, and at Eastover, South Carolina, make bleached paper and paperboard. Most of this is sold to others for producing printing and writing paper, envelopes, folding cartons, and business forms. Union Camp also makes its own folding cartons, plastic bags, and school supplies. For the construction industry, Union Camp produces southern pine lumber, plywood, and particleboard. Several Union Camp plants refine pulping by-products into chemicals, including turpentine, fatty acids, and fragrance and flavor ingredients.

Union Camp’s roots can be traced to the Union Paper Bag Machine Company, formed in 1861 as a holding company whose goal was to monopolize patent rights on bag-making machinery and make money by licensing other companies to make bags. Francis Wolle, who in 1851 had invented the first paper-bag-making machine, was one of Union’s partners. In the early 1870s Wheeler, Fisher & Company of Chicago, a Union licensee, was the undisputed industry leader in paper bags. In 1874 Union Bag & Paper Company was formed by the merger of Wheeler, Fisher and six other companies operating under Union Paper Bag Machine licenses, with Wheeler as president. In 1899, Union Paper Bag Machine Company and Union Bag & Paper combined to form the new Union Bag & Paper Company. The new $27 million manufacturing giant threatening to eliminate all competition in paper bags. Under President L.G. Fisher, Union made four billion bags, accounting for 80% of the paper bags sold in the United States.

Union stagnated through the next decade. Profit dropped steadily from $1.5 million in 1899 to $43,000 in 1912. Stockholders’ committees complained of a complicated and top-heavy financial structure and of stock watering and market rigging. This led to a change in management. In 1913 John S. Riegel of Riegel Bag & Paper Company, which had cooperated with Union in the past, was named president of Union. Riegel reorganized the company, and by 1914 profit was up but only to $365,000. Union’s financial situation was such that recapitalization became necessary. Thus, Union Bag & Paper Company merged with Riegel Bag in 1916 and was renamed Union Bag & Paper Corporation. By 1920, between Riegel’s work and increased war time demand, Union’s profit was up to $3.3 million on sales of six billion bags, about one-third of which were sold in the United States.

Three revolutions in the industry affected Union between 1910 and 1930. The first, the trend toward fancy packaging, began around 1910, before which paper bags were usually unadorned. Union took full advantage of this trend and became a pioneer in custom bags at a time when people were just beginning to judge products by their packages.

The second revolution was the switch from sulfite pulp to sulfate pulp. According to legend, a Swedish worker accidentally treated some pulp with alkali instead of the acid intended. The result was a coarse brown paper that was much stronger than the greyish acid-treated paper. The new paper was called kraft, meaning strength in Swedish. This led to the third revolution, the shift from northern spruce to southern pine. Before 1911, southern pine had been used primarily for turpentine and railroad ties. That year, however, a man named Ed Mayo discovered that commercial sulfate pulp could be made from it. Because southern pine was much cheaper than northern spruce, the entire bag and wrapping-paper industry began to move south.

Union’s response was mixed. As early as 1915 it was buying kraft in small amounts, but it was then mixed with sulfite. War profits had lulled Union management into a dangerous state of complacency, and the company was still making sulfite through 1927. In 1928 Union built a sulfate mill in Tacoma, Washington, while most of its major competitors had already moved south to take advantage of the much cheaper sulfate there. Union was forced to close the Tacoma mill the following year, losing about $2 million.

Having already disposed of its woodlands in Canada and Wisconsin, Union was left without any pulpwood reserves. It was therefore forced to rely on paper purchased from other companies and pulp imported from Scandinavia. Union’s direction at this point seemed to be away from integrated manufacturing, toward conversion of others’ materials. While the rest of the economy was booming, Union recorded deficits for five straight years beginning in 1926. Of the 33 billion bags sold in the United States in 1930, Union sold less than one-sixth.

Alexander (Sandy) Calder’s presidency began in 1931. Calder had been with the company since 1913, working in sales, and had made his mark by securing the company’s largest bag account, the F.W. Woolworth Company. In 1927 Calder had convinced Union to stop producing imitation kraft by combining sulfate and sulfite paper. When he became president in 1931 following Charles McMillen’s resignation, Calder immediately cut wages and salaries by $100,000, the net result of which was its first profit in years. Other cuts followed, including cancellation of the costly Scandinavian pulp contract and renegotiation of the power rate at Union’s Hudson Falls, New York, plant. A price war in 1932 led to another year’s deficit, but Union was on its way back to profitability.

During the Depression Union continued to operate at capacity. Nevertheless, with stock prices at their lowest in 1930, Calder and his brother Lou Calder began buying up Union common stock, and by early 1934 they had majority control. This meant that Calder could move more boldly in his quest to catch up with the rest of the paper industry. Most importantly, he was able to finally move Union south. Construction on the Savannah, Georgia, pulp and paper mill began in 1935, and by mid-1936, the mill and the first papermaking machines were ready. Union and the third industry revolution had finally caught up with each other.

By 1938 Savannah had a modern bag plant and four huge papermaking machines. The mill ran seven days a week, three shifts a day, and could turn a tree into paper bags in 12 hours. This greatly increased production capacity enabled Union to expand into production of specialty bags, for example for coffee and sugar, and heavy-duty multi-wall shipping sacks, and for kraft board used for corrugated boxes. The availability of tremendous pine resources near Savannah also compensated for the loss of the small remaining Scandinavian pulp shipments that were cut off by the hazards of shipment early in World War II.

By the onset of World War II, Union was one of the foremost low-cost, integrated producers of heavy-paper products. It had closed or sold its older, less efficient plants, including those in Chicago and Los Angeles, and most of its shipping was done by water routes, less expensive than land shipment. The effects of the war on Union were not drastic. A labor shortage in the Savannah area brought about some increased costs. Unlike other industries, particularly metal, the paper industry did not increase its capacity substantially over that of peace time. Conversion of plants for the production of war necessities was not as necessary in paper as it was for metal products. The only other negative effect on Union was increased transportation costs.

The postwar period was prosperous for Union. A large box factory with two corrugating machines was built at Savannah in 1947. Box factories in Chicago and in Trenton, New Jersey, were also purchased that year. This new emphasis on boxes helped produce steady sales growth. By 1951, Union owned or leased over 700,000 acres of woodlands, which provided about two-thirds of its required pulp. Union encouraged tree farming in its supply area and started a forestry education program. The company also began to sell tall oil, a by-product of the wood-cooking process. It was used to make paint, varnish, other oils, ink, and linoleum.

In 1956 Union Bag & Paper Corporation merged with Camp Manufacturing Company. The new company was called Union Bag-Camp Paper Corporation. Alexander Calder was named chairman. Camp Manufacturing grew out of a Franklin, Virginia, lumber mill operated by the Camp family. Manufacturing had been continuous at that site since the 1850s. Camp Manufacturing itself was 70 years old at the time of the merger, and it owned 240,000 acres of southeast timberlands. The merger brought Union into the field of bleached kraft paper, which is used for printing, fine paper, and consumer goods packaging. The combined company was organized into four major divisions: Union Bag and Paper, Union Board and Box, Union Chemical, and Camp.

In the years following the merger, Union Bag-Camp Paper sought to continue its expansion, acquiring Allied Container Corporation in 1957, Universal Paper Bag Company in 1958, and Highland Container Company in 1959. Some obstacles to this expansion existed, however. The Federal Trade Commission (FTC) challenged the merger between Union and Camp, as well as the combined company’s subsequent acquisitions. The FTC charged that these moves illegally eliminated competition and concentrated manufacturing faculties and sales of liner-board and corrugating material. Union Bag-Camp Paper was forced to sell six plants when the case was finally settled in 1965.

Union was also hurt by a grocery-bag price war during these years. Prior to 1956, the grocery-bag market had been dominated by Union Bag, Crown Zellerbach, and Georgia-Pacific. By the late 1950s, however, smaller companies such as Gulf States Paper became very aggressive, reducing prices so much that they lured away long-time Union accounts. By early 1963, the price of grocery bags was just over half what it had been in 1957. Large-size sacks actually sold for less than the price of the paper they were made from, causing company managers to joke that profits would be better if the machines ran backwards, turning bags into kraft paper. Union’s size and diversity enabled it to outlast the smaller companies, and in 1963, grocery bag prices began to rise again.

Under President Alexander (Sox) Calder Jr., son of the former president, Union Bag-Camp Paper showed a willingness to invest more money in its facilities than most of its competitors did, totaling nearly $140 million in capital expenditures between 1956 and 1962. One result of this action was the growth of the Savannah mill to be the largest of its type in the world, with a daily output of 2,400 tons of unbleached kraft paper and board. The company was able to get one-quarter of its wood at 10% to 15% below market cost because it now controlled nearly 1.2 million acres of woodland around Savannah and 300,000 acres more near the Franklin, Virginia, mill.

Through the 1960s the company’s sales grew slowly but steadily, and it continued to collect land and companies, including River-Raisin Paper Company in 1960; Write Right Manufacturing Company, a school-supply and stationary producer, in 1961; and Nelio Chemicals, Inc., in 1964. The second half of the 1960s brought a surge of diversification to the company. In acknowledgement of its diverse nature, Union Bag-Camp Paper Corporation changed its name to Union Camp Corporation in 1966. A key move was the 1968 acquisition of Moore-Handley Inc., a chain of hardware and building supply stores in the Southeast, which provided a convenient way to market Union Camp’s growing plywood and building products output. Union Camp also branched into real estate, in 1969, buying a 75% interest in Branigar Organization, a Chicago-based development group. Union began to exploit the valuable mineral resources in the land it controlled, forming Titianium Enterprises, a joint venture with American Cyanamid. The 1968 takeover of Pak-All Products, Inc. by Union brought it into the manufacture of all-plastic products for the first time.

By 1971 the nonpaper business segments accounted for 30% of Union’s earnings. The 1970 acquisition of 60% of Tekton Corporation, a housing construction company, added to Union’s involvement in real estate. In 1971 a joint venture was formed with Anglo-American Clays Corporation to investigate kaolin deposits on Union land. Under Samuel Kinney, elected president in 1972, Union increasingly sought to get more out of its vast land holdings than merely trees. The company began to develop “super interchanges” along Interstate 95 in Georgia and South Carolina. Called Oasis Villages, these areas contained golf courses, campgrounds and shops, in addition to the usual gas stations and motels. By leasing these areas to businesses, Union could earn $15,000 a year per acre, while it only earned about $5 a year per acre of trees.

In 1973 Union donated 50,000 acres of Virginia swampland to the Nature Conservancy, a nonprofit land-preservation group. The land is part of the Great Dismal Swamp that covers 250,000 acres straddling the border between Virginia and North Carolina. Union’s acreage there was heavily wooded but did not show much commercial promise. The contribution allowed the company to deduct in excess of $12 million from its taxable earnings. This was the largest gift the Nature Conservancy had ever received, and the land, once partially owned by George Washington, was turned over to the Interior Department, to be operated as a wildlife refuge.

The industry suffered through the recession of the mid-1970s, during which the demand for both paper and lumber fell sharply. As the industry had been steadily adding production capacity, most paper and forestry companies found themselves in a bind, with production costs rising and paper prices falling. Union, however, had accumulated huge amounts of timber from its own land holdings over the previous few years. It was then in a position to save considerably by using this banked wood, while most other companies had already exhausted their supplies of cheap wood. Next Union began to harvest its 500,000 acres of southern pine, another cheap source of wood, which it had begun planting 25 years earlier. These inexpensive supplies helped Union out-earn most of its major competitors.

In 1976 Union Camp’s sales exceeded $1 billion for the first time, at a time when most other paper companies were struggling. This was Union’s reward for keeping facilities modern and for treating land as a financial asset rather than just a lumber source. While most of its competitors’ machines were more than 20 years old, Union’s averaged 11 years, and its kraft paper machines could shift easily from box-making to bag-making as market conditions indicated. Land was sold or leased if that transaction would be more profitable than timber production. That year Union Camp stood as the industry’s lowest-cost producer, and its earnings over the last decade had grown twice as fast as the industry’s average.

Weak prices for unbleached paper and board, plus production problems at some plants, made 1977 a slow year for Union Camp. The Moore-Handley stores had their best year, however, and overall the company’s sales rose only slightly less than usual. The last few years of the decade saw sales continue to climb steadily, and several new plants were opened or acquired, including those at Houston and San Antonio, Texas, and at Kansas City, Missouri.

Through the early 1980s, Union Camp continued to pour hundreds of millions of dollars in capital into its facilities to maintain its high level of production efficiency. While the industry’s operating rate dropped to 85.5% of capacity for 1982, Union’s rate fell only to 90%. Under chairman Peter McLaughlin, the company drastically reduced its use of fossil fuels and by 1984 was generating two-thirds of its own energy needs, primarily using wood waste and spent pulping liquors as fuel. Union vastly increased its chemicals operations with the 1982 purchase of Bush Boake Allen, makers of fragrance and flavor chemicals.

In 1984 the sale of the Moore-Handley business was completed, reaffirming the company’s commitment to its core paper, packaging, and chemicals businesses. The same year, production began at the huge new mill in Eastover, South Carolina. Profits in 1985, however, were only about half of the previous year’s. Reasons for this included an extremely strong dollar, falling paper prices, increasing white-paper production capacity, and competition from foreign companies. This was followed, however, by several years of excellent profits, 1989’s being triple the earnings of the off-year of 1985. Because of the $1.4 billion capital investment during this period, Union Camp’s production rose by 17%, and its mills produced in general first-quality business paper at a much better rate than the industry as a whole. The company ended the 1980s by recording new highs in sales and earnings.

Union Camp’s history is one of growth through emphasis on efficient and low-cost production, which is reflected in its long-standing policy of liberal investment in its facilities and careful attention to the value of its properties. Because of these strengths, Union Camp’s chances for further growth and diversification seem secure in spite of the volatility of the forest products industry. The relationship between the paper industry and growing fields that rely heavily on computers, and therefore mountains of white paper, also holds promise for its future.

Principal Subsidiaries

Branitek Inc.; Branigar Organization, Inc.; Sherwood & James Advertising, Inc.; Translates Properties, Inc.; Bush Boake Allen Ltd. (U.K.); Cartonajes Union, S.A. (Spain, 81%).