November/December 1999
Making 100-percent recycled paperboard has made the Newark Group Inc. an international conglomerate. But the firm’s goal is to serve its customers like a neighborhood business.
By Robert L. Reid
Robert L. Reid is managing editor of Scrap.
Which sounds more like a small company?
A firm in which the general manager’s wife (who doesn’t even work for the company) goes to the plant on a Sunday afternoon to help get production started for a major customer when she can’t reach her husband on the golf course?
Or one that has more than 4,000 employees at 60-plus locations in the United States, Canada, Spain, and France; handles roughly 2.6 million tons of recovered paper a year; and enjoys $800 million in annual sales?
Actually, both scenarios describe the same firm—the Newark Group Inc. (Cranford, N.J.), a leading manufacturer of 100-percent recycled paperboard whose corporate slogan promises “the resources of a large company with the speed of a small company.”
How does the firm make its large/small philosophy work? Through its decentralized management system that enables an entrepreneurial spirit to thrive in its corporate structure, which combines paperboard mills with scrap paper processing facilities, brokerage offices, and conversion plants, says Fred von Zuben, president and CEO.
The true story about the general manager’s wife illustrates the Newark Group’s entrepreneurial culture. The executive in question operates the firm’s tube and core plant in Jacksonville, Fla., “as if it were his own business,” von Zuben says—even to the point where his wife was ready call in the plant superintendent and foreman to start the machinery and get product out to the customer.
Such is life in a large/small company like the Newark Group.
United by Paper
The Newark Group itself is relatively young—23 years old—though its roots go back to the Newark Mill in Newark, N.J., founded in 1912. One of the founders held the first U.S. patent for making recycled paperboard from recovered newsprint.
It was another Newark Mill employee—Edward Mullen—who formed the current Newark Group in 1976 by consolidating several independent operations. The firm continued to acquire mills, packing plants, and converting facilities throughout the 1970s, 1980s, and 1990s, ultimately leading to the current privately held paperboard giant that operates in four countries.
Today, the Newark Group has four key divisions:
- recycled fibers, which encompasses 14 packing plants across the United States, plus administrative, sales, and brokerage offices;
- paperboard mills, which operates 22 papermaking machines at 15 sites that produce 1.4 million tons of 100-percent recycled paperboard annually, reportedly making the Newark Group the largest producer of its kind in the United States;
- BCI Book Covers, whose six sites primarily produce laminated paperboard. This division is “North America’s largest supplier of heavyweight paperboard for the stationery, loose-leaf, game board, and book publishing industries,” the company asserts; and
- Newark Paperboard Products, whose 19 locations (including one in British Columbia) manufacture tubes, cores, and allied products for paper, film, fabric, and tape manufacturers, as well as the construction industry.
Also, the Newark Group’s international operations—which account for about 15 percent of its annual sales—include two paperboard mills and three converting plants in Spain, plus one converting plant in France.
The company’s work force consists of 3,500 hourly employees (roughly half of them union) and 800 salaried employees at facilities ranging in size from a 15-person packing plant in Newark, Calif., to a 250-person paperboard mill in Milwaukee, von Zuben says.
Though this diverse corporate empire exists primarily to produce paperboard and related products, it all starts with recovered paper. For a closer look at the company, we toured two of its facilities in New England—North Shore Recycled Fibers, a paper packer in Salem, Mass., and Haverhill Paperboard Corp., a recycled paperboard mill in Bradford, Mass.
Here’s what we found.
Controlling One’s Destiny
Seagulls swirl above the 44,000-square-foot North Shore Recycled Fibers packing plant, located less than a mile from the Atlantic coastline. During the workday, the seagulls’ screeches are joined by the sounds of trucks, forklifts, front-end loaders, and conveyors, along with the rustle and whoosh of great quantities of paper being dumped, sorted, and baled—between 1,500 and 2,000 tons a month, says Johnny Gold, senior vice president of the recycled fibers division. (Gold’s family started North Shore in 1916 and sold it to the future Newark Group in 1973.)
Inside the North Shore plant, incoming recovered paper begins its recycling journey in a large, open room with three conveyors. The left conveyor carries material such as mixed office paper up to a sorting line. There, the stream is separated into sorted office paper and mixed material. The sorted paper is dumped onto the middle conveyor, which feeds it into the plant’s baler. The remaining mixed paper heads for the conveyor on the right, which sends it to waiting trucks. Then, the mixed paper travels roughly 40 miles north to the Haverhill mill for reuse as paperboard feedstock.
The Newark Group used to purchase a great deal of recovered paper for its mills from processors, Gold says, but that buying approach proved problematic when high demand made it difficult to source paper. While the firm still purchases a small percentage from outside processors, the bulk of its recovered fiber is collected by its recycled fibers division. “We made sure our destiny was in our own hands,” Gold says. “We can guarantee that the Newark Group mills will have a supply through thick and thin.”
The recycled fibers division, which is divided into five geographic regions, operates packing plants that range in size from 20,000 to 60,000 square feet and handle from 1,200 to 5,000 tons a month. All plants have at least one baler, with the larger sites having two or three, usually from the same manufacturer so spare parts can be interchanged.
Of the roughly 2.6 million tons of paper the Newark Group collects annually, about 40 to 45 percent is OCC, 20 to 25 percent is residential mix (ONP, OMG, kraft bags, and so on, collected via curbside programs), and about 30 percent is deinking material such as white ledger, sorted office paper, and pulp substitutes.
Though some paper is collected strictly for external sale—such as hard white shavings and envelopes—there’s almost no recovered paper grade that the Newark Group refuses to take. “We’re in this business 100 percent, which means we have to handle everything,” Gold states.
Unfortunately, that “everything” includes a lot of plastic, glass, and other commingled recyclables the company must take as part of its municipal contracts, Gold notes. While much of that material is a real headache, the firm is looking for economical ways to recycle those products as well—for instance, turning glass into sand for road bedding, filtration systems, and other uses.
Most Newark Group packing plants send about half of their recovered paper to the company’s mills, selling the remaining 50 percent. All told, the packing plants supply roughly 20 percent of the feedstock needed by the firm’s mills. About 80 percent of this material doesn’t actually pass through a recycled fibers division plant. Instead, the division purchases the fiber and arranges for its transportation directly to the mills, Gold explains.
For instance, the Newark Group gets much of its OCC from what it calls “off-the-ground” pickups for which more than 100 tractor trailers are on the road at any given time, collecting baled OCC from major accounts such as grocery store or retail chains. The company gets about 60 percent of its recovered paper from 10 to 15 major national contracts, Gold notes.
On a local level, each of the recycled fibers division’s five regions has its own fleet of trucks that collects material from neighboring businesses or municipal collection programs. In some cases, the Newark Group contracts with local haulers to collect material and bring it to one of its packing plants or mills.
Though the company has active scale traffic in its western and southern regions, there’s little of that activity in the Northeast, perhaps because of the harsher weather, Gold suggests. There are also minor regional variations in the paper mixes available at each location, and even the occasional quirky work schedule. For instance, don’t expect to find anybody working late at the North Shore plant on Oct. 31. That’s Halloween, and it’s such a major holiday in Salem—famed for its 17th-century witch trials—that North Shore closes early so its employees can escape the crowds and traffic.
New Paper From Old
Built in 1902 along the Merrimack River, the Newark Group’s Haverhill Paperboard mill operates two papermaking machines that each stretch some 350 feet, turning out 400 tons of uncoated paperboard a day. The mill runs 24 hours a day, seven days a week, with roughly 140 employees working three shifts.
Haverhill makes its paper from a furnish of about 40 percent OCC, 30 to 40 percent residential mix, 10 to 20 percent double-lined kraft cuttings, and 10 percent mixed paper, explains Gold. These are churned together in a hydrapulper—essentially a giant blender. The resulting “stock” is then cleaned and screened to remove contaminants such as staples, metal, glass, and sand. The screening cylinders have holes as small as 0.000016 of an inch in diameter to allow clean paper fibers to pass through while leaving the contaminants behind—a process that recovers about 96 percent of the fibers, notes Barry Jensen, vice president of the eastern paperboard mills division, which includes Haverhill and three other mills in Massachusetts and New York.
Next, the fibers are refined, formed, and pressed into a sheet of recycled paperboard that must be carried along on a felt conveyor because the paper’s water content is still too great for it to stand up on its own. After additional pressing and traveling around a series of steam-filled dryers, excess water is evaporated and the now-stable sheet moves through the calendering process—a stack of rollers—to enhance its smoothness, or finish.
The resulting reel of paper is then transferred to a core, weighed, and labeled. The roll must also be checked for defects or contaminants, which can be cut out and the roll spliced back together. Usually, only two such splices are permitted in a 6-ton roll, notes John Hazard, Haverhill’s plant manager. A special machine then flips the enormous rolls on end for stacking and storage before shipment to customers. Customers can also request paperboard that’s precut into sheets and shrinkwrapped.
About a quarter of the firm’s paperboard is used by its own converting operations—BCI Book Covers and Newark Paperboard Products—while the remaining three-fourths is sold to independent converters around the world. Ultimately, the company’s paperboard is turned into boxes for numerous well-known brands of detergent, toothpaste, aluminum foil, golf balls, and other consumer or industrial products.
Making Industry Experts
Internally, the Newark Group thrives because “we know our numbers,” Gold says, noting that manufacturing costs, labor costs, electricity costs, material handling costs, and other numbers are reviewed monthly. “We understand what monthly production we need to break even and to be profitable,” he notes. “It’s been a major help for us.”
He also attributes the company’s success to that entrepreneurial spirit mentioned earlier. When he served as general manager of North Shore Recycled Fibers from 1985-1995, Gold says he never felt the corporate vise squeezing him from company headquarters in New Jersey.
So long as he followed all environmental, safety, and other workplace-related laws, and communicated financial information regularly to the head office, Gold felt free to run the business as he saw fit. “When it was a question of trading,” he explains, “corporate never got involved. They let us trade, let us make deals.”
As a corporate executive himself now, Gold gives a similar freedom to his general managers. For example, the North Shore site runs a nicely profitable document destruction business, though most of the company’s other packing plants aren’t in that line of business at all. At some facilities, the operations people are only involved in running the plant, while at others they might also buy paper.
This freedom also carries definite responsibilities, though—such as understanding the paper industry. “So many companies hire people today and put them in paper sales jobs who don’t have any experience in paper mills or packing plants,” Gold says. “They just trade paper like any commodity—they don’t know A from B, coated from uncoated.”
But at Newark, most of the paper dealers must spend several months or even years working in both a company mill and a packing plant before they ever go out to purchase or sell their first load of paper.
“They have to understand recovered paper, they have to understand the paper recovery business,” says Gold, who—despite his pedigree as grandson of North Shore’s founder—began his career at the Newark Group in a mill. So he expects no less from the people he hires. “They’re going to know what they’re dealing,” he asserts. “They’re going to know quality issues. They’re going to understand what a mill needs and what it doesn’t need, where the problems are.”
They also need to understand what Newark needs—clean paper.
“It’s the job of our sales people to bring in clean paper that doesn’t require a lot of picking and sorting,” Gold stresses. “Most of the material can go right into the baler.”
Once the buyers and sellers have the requisite knowledge, though, the Newark Group isn’t interested in holding their hands. Sure, the salespeople have to let their manager know what accounts they’ll be visiting and what material they’re seeking. But beyond that, “we want them to go out on their own. We want them to have the freedom and entrepreneurship to be successful,” Gold says.
Fred von Zuben credits the Newark Group’s low turnover to its decentralized management and entrepreneurial spirit. The two factors “go a long way to attracting the right kind of people,” he says, adding that “once they’re attracted to the situation, I think they find it a good place to work and they don’t leave.”
It doesn’t hurt, of course, that the company offers competitive salaries, full medical and dental coverage, a 401(k) with company match, and a strong emphasis on training for safety, health, and environmental concerns. The latter, in particular, has led to a “dramatic decline” in accident and injury rates and workers’ comp cases, says Gold.
There’s even a much-coveted “Golden Guard” award given annually to the Newark Group site with the best safety and health record, he points out.
Staying Focused
The recovered paper industry is an ever-changing world, Gold knows. During the 1980s, for instance, the recycled fibers division exported as much as 80 percent of the paper it recovered. Today, the ratio has reversed, with at least 80 percent staying in the United States. The quality of exported material has increased, though, so the revenue remains good, Gold adds.
Likewise, laser-printed paper used to mean an automatic rejection 15 years ago. But now paper mills have learned how to use laser paper, “so nobody says anything about it,” he notes.
Volatility in paper markets has always been a constant. But Gold sees the fluctuations getting worse—in part, he believes, because so many traders today don’t really understand the industry.
That’s a shame, he feels, because recovered paper is a great industry to be in. That’s why he and other Newark Group executives remain active in ISRI, the American Forest & Paper Association (Washington, D.C.), the Paper Recycling Coalition (Washington, D.C.), and the 100% Recycled Paperboard Alliance Inc., which unites leading North American recycled paperboard manufacturers in a campaign to increase consumer awareness of the environmental benefits of recycled paperboard products. “We believe that if you’re going to be in this industry, don’t let others make decisions for you,” Gold says. “So our people are going to take a very active role in industry issues.”
As for the future, the Newark Group likes the position it’s in—supplying its own mills and serving a diverse customer base in which its largest customer represents less than 3 percent of its annual sales. “We pride ourselves on the fact that we have many thousands of customers,” von Zuben says. “We serve almost 40 distinct industries and no single customer is an overwhelming part of our business.”
And while the company reached its current size in part through acquisitions, don’t expect it to go on a buying spree anytime soon or start branching out into radically new directions. “We’re going to stay in the business we know and do well in,” von Zuben states. “We aren’t looking for pure volume—we’re looking for value-added production.” •