Company invests $21.2 million to expand facility in Strasburg, expects 300 employees

What does it take to run a paper products company? And why would one invest and decide to grow in Virginia?

INVEST recently sat down with Philip Rundle, CEO of paper towel and tissue products producer Mercury Paper Inc. In April, the company announced that it would invest $21.2 million to expand its two-year-old facility in Strasburg, located in the Shenandoah Valley just a few miles from the Virginia Inland Port. The firm’s Chinese parent company, Sinar Mas Group, is one of the world’s leading pulp and paper companies. In Virginia, Mercury creates paper brands and sells its products to retail outlets, hotels and restaurants across the country.

Rundle, from South Africa, talks with INVEST about why Mercury chose Virginia, his company’s commitment to the environment, and relives his childhood in South Africa.

1. You wanted this facility to be in North America. Of all the places you could’ve gone, why choose Virginia?

Virginia wanted our business more than any state we went to. They were more pro-business than anybody we had worked with and were more entrepreneurial in the way they looked at bringing in business to the state. And they want to create jobs for people in Virginia. We probably worked with four or five states, and when we review the entire process, it’s obvious that Virginia absolutely walked away with our project in every aspect.

2. How important were incentives in your decision?

The incentives they’ve given us have been part of our choice to locate here, absolutely. But you have to look beyond incentives. For example, I can pick up the phone any time of the day and call VEDP officials, and they’ll pick up the phone and talk to me. I have them all on my cell phone.

3. In terms of your distribution network, what makes your Virginia location more strategic than if it were in another part of the East Coast?

Seventy percent of the U.S. population is located east of the Rockies, and much of it is on the East Coast. In our business, we must be located in the center of the population density to be successful. Our location is within major truck and railroad networks, providing us with strategic distribution coverage within a 500-mile radius to major cities in the Northeast and Midwest, both of which are key markets for us. Virginia provides Mercury Paper with the infrastructure we need to achieve distribution excellence on the East Coast. 

4. Plus, you’re 12 miles from the Virginia Inland Port.

Yes. Once our raw materials land in Norfolk, it gets put onto the rail system and goes to the Virginia Inland Port. That helps keep containers and trucks off the road. It takes two days between arriving in Norfolk and getting to our facility, and we don’t notice it at all. For distribution out into the rest of the country, we are situated perfectly in Northern Virginia, with access to the Virginia Inland Port, highways, and Dulles Airport.

5. How is the labor force in Virginia?

We were able to pick up experienced people that we might not have picked up if the economy wasn’t where it was today. I hate to put that out there, but it’s a matter of fact. We have found an exceptionally hard-working and talented labor force. People get up in the morning and want to come to work.  And the people here are exceptionally loyal; they have wonderful family values and they want to build careers. Some of them have worked at companies up here for 15 or 20 years.

6. You grew up in a South African mining community. What was that like?

I told my parents at a very young age that I didn’t want to live there or work as a miner. I was forever looking for opportunities as a young boy … selling tires and glass bottles to make money so that I could have better toys. The schools in the area provided a feeder system for the mines. I eventually convinced my parents that I needed an academic education versus a technical one, and I enrolled into a private boarding school.

7. What do you think of CNBC’s latest ranking of the best states for business? Virginia was No. 2.

   Well, I think CNBC got it wrong. It should be No. 1.

BONUS CONTENT

Mercury Paper CEO Philip Rundle talked extensively with INVEST, answering more questions than we were able to print in our magazine. Here are a few other questions we asked the leader of the Strasburg paper products company, from its use of technology to its environmental stewardship.

How has technology changed your business?
It’s huge. Years back, a lot of this was mechanically inclined connections. Everything is now server controlled and fully automated. It makes for better and faster and more reliable machines. There are fewer breakdowns, machines are a lot faster so our efficiencies are a lot higher and we’re getting more product per hour than we ever would have obtained 10 years ago.

How has the Virginia Economic Development Partnership helped your business?
If I put a call through to Secretary of Commerce and Trade James Cheng right now, he’d return a phone call within the hour. They’ve helped us tremendously in partnering with training and support of our programs so that we can develop our management and operational staff. We’ve also been able to develop some really good partnerships with the community and gain local and state support for our operation.

Speaking of sustainability, you replant trees to ensure that you’re replenishing your raw materials. What else?
I am exceptionally passionate about corporate social responsibility. It’s something I think about every day of my life and it’s something I drive through this organization. We will be prone to attacks occasionally because there’s a huge misunderstanding of what paper companies do. We are not a pulp-making or tissue-making facility. We are the cleanest part of this process. We operate with these goals for sustainability: environmentally sustainable operations, conservation that protects biodiversity, and improving community standards of living to help alleviate poverty. Knowing that we have positive community stewardship, I can go to bed peacefully at night.

How have the overall economic woes affected your business?

To be blunt, it has not affected us. We’ve doubled our business from June 2009 to June 2010. Consumers have changed the way they’ve shopped: They’re more value-conscious, and this is a commodity product. And we are giving them a premium product at a value price. 

Mercury Paper CEO Philip Rundle’s Six “Be’s” for Being a Great Leader

Be Passionate: Have passion for everything you do in life. If you’re not passionate, you’re just going to get up in the morning, go to work and come home.

Be Positive: Be exceptionally positive about everything. Every challenge to me is an opportunity. I don’t see an obstacle in my life.

Be Adaptable: Adapt to every situation that life throws at you.

Be Charismatic: If employees don’t like you as a person, they won’t like you as a boss. You have to charm others to earn their respect.

Be a Motivator: I can invest in million-dollar machines, but without motivated people, I cannot operate our business. Without them trusting me and me trusting them, we have no basis for success.

Be Ambitious: Understand where you want to go in life and how fast you want to get there.

Trends

After a continuous drop from the fourth quarter of 2007 to the first quarter of 2009, followed by a slight pick-up in the second quarter of 2009, FDI (foreign direct investment) inflows have remained practically unchanged, at a low level, for the last three quarters.  Inflows to most of the major recipient countries remained much lower than those in the quarterly average of 2007.

This is the case for Canada, Japan, the Netherlands, the Russian Federation, Spain, Switzerland and the United States, among others, where FDI inflows dropped significantly during the fourth quarter of 2009.

As the world economy is slowly recovering from the crisis, an improvement in TNCs' (transactional corporations) business environment is on the way as shown by various surveys.  TNCs may be returning to more ambitious international investment programs. This is evidenced, in particular, by the marked pick-up in the value of cross-border M&As during the first quarter of 2010, which practically doubled, although from a low level, as compared to the previous period. 

Available data, however, suggest that there is no clear dynamic for FDI flows in the coming quarter. M&As, which were a primary driver of FDI flows for the balance of 2010 in the past years, posted a solid gain in the first quarter of 2010 pointing to a potential rise in FDI flows for the quarter. However, the slight drop in the number of greenfield projects shows that TNCs still remain very cautious in their international investment programs.”

Source:  UNCTAD “Global Investment Trends Monitor”, No. 3, 26 April 2010

Regulation Update

“Virginia Improves Business Incentives”

During the 2010 legislative session, the General Assembly passed a number of important bills that provide for new incentive programs and improve existing ones.  Through the Governor Robert McDonnell’s Jobs and Opportunity Agenda, Virginia stands ready to assist businesses that create new jobs in the Commonwealth.

Governor McDonnell sponsored a new Green Jobs Tax Credit that the General Assembly passed with overwhelming support.  This new tax credit provides for a tax credit of $2,500 for each qualifying new job in the renewable and alternative energy sector.  This credit is claimed over five years ($500/year) and an individual company may claim credits for up to 350 jobs—worth a total of $875,000!  This initiative is part of Governor McDonnell’s efforts to make Virginia the energy capital of the East Coast and is one of many investments the Commonwealth of Virginia is making in companies in the clean energy sector.

The General Assembly also created a new Small Business Jobs Grant program to support small businesses growing in Virginia.  This new program is designed for businesses with fewer than 250 employees and provides for grants ranging from $500 to $2,000 for each qualifying new full-time job created.  Companies must create at least five new jobs and may receive grants under this program for up to 50 new jobs.  This new program will provided much-needed support to Virginia’s new and existing small businesses to help them grow during these challenging economic times.

Last, a popular existing program was improved during the recent General Assembly session.  The Major Business Facility Jobs Tax Credit was enhanced this year to allow more companies to qualify for it and to make the credit more generous.  Now, this tax credit allows any company that creates at least 50 new jobs (or 25 if the jobs are located in a high unemployment area or an enterprise zone) to claim a $1,000 tax credit.  Further, the General Assembly will allow the credit to be claimed over two years ($500/year) instead of three years ($333/year) through 2012.

The recent General Assembly session also provided new funding for the Virginia Small Business Financing Authority’s loan guarantee program, additional funding for the Governor’s Opportunity Fund, pilot funds for a shell building program for new wetlabs and many other economic development initiatives.  Please contact VEDP’s Division of International Investment and Trade to learn how these programs can help your company grow in Virginia.