This past school year, I worked as a co-op at Glatfelter in Chillicothe Ohio. Glatfelter is a paper company that is trying to adapt to the world’s decreasing demand of paper. Several factors that have been affecting Glatfelter and paper companies in general are email, PDA’s, instant messaging, etc. The market for paper around the world is almost perfectly competitive, with plain paper from one company differing very little from another. This made it very hard for paper companies such as Glatfelter to make a profit when going up against paper giants such as NewPage, MeadWestVaco, and Asia Pulp and Paper. However, in the time that I was there, Glatfelter posted a large third quarter gain for the entire company and shocked the entire pulp and paper industry. 1
Three Months Ended Nine Months Ended
September 30 September 30
In thousands 2008 2007 2008 2007
Net sales $339,822 $291,859 $965,545 $860,939
Energy sales – net 2,885 2,491 7,612 7,129
Total revenues 342,707 294,350 973,157 868,068
Costs of products sold 285,535 247,470 839,329 755,679
Gross profit 57,172 46,880 133,828 112,389
How did they do it? There are several factors that contributed to Glatfelter’s success over the past couple of years.
The first factor that contributed to the third quarter gains for 2008 was the fact that Glatfelter specialized themselves in the paper industry. Instead of just producing plain white paper, they decided to research and produce specialty papers such as carbonless, book paper, tea bags, and even paper for laminate floors. This specialization placed Glatfelter into a smaller market for many different products. Instead of offering just a few different grades of paper, they were now diversified into many smaller markets.
Secondly, over the 9 months that I was employed by Glatfelter, the costs for making paper started to skyrocket due to increasing costs of gas, oil, pulp, and even employees. Glatfelter made it a priority to run several mill-wide initiatives to decrease the input costs, thereby increasing the mill efficiency. With these initiatives, the mill was able to counteract the price increases of many of their inputs, keeping the end product at relatively the same price. As other companies had to increase the selling price of the paper, Glatfelter was able to offer the same products for less, thus increasing the revenue they were able to make.
Glatfelter has been able to make the changes necessary to adapt to the changing demand for paper in the last couple of years. However, as the demand continues to decrease, they will have to continue to cut costs to become the world choice in specialty and quality papers.
(1. Data from http://www.glatfelter.com/Files/about_us/news_events/2008%20Q3%20Earnings%20Announcement.pdf)
Caleb Kingsley
Econ 200
8:00 AM (Tues./Thurs.)
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This is very interesting to me, how was your company able to decrease it's input costs? I believe that this was/is a good strategy but I know that it is very hard for a company to do this, because most companies are constantly trying to do this to be able to sell for less than other companies in the same market, even in a prosperous market unlike the current one. I wonder if there were any small lay offs or pay decreases to increase the profit of the company. Whatever the case may be I hope that other companies can stay afloat, similar to Glatfelter, during these tough economic times. When I went to the engineering career fair a couple of weeks ago, a lot of companies were not looking to hire, but still looking for interns. This shows me that even though many companies are struggling right now, they still feel that the economy will improve, and need to develop young talent to take reigns of the company in the future. It seems to me as if companies like Glatfelter can survive these current times, then the future looks bright.
ReplyDeleteI found this post really interesting. I interviewed to co-op with glatfelter and took a tour of their plant. I learned about how they provide most of the power for the plant on their own. I was really impressed with the way they could support most of the city on the power they produce in just their plant. Despite The fact that the economy is not doing well, the company made necessary decisions to drop their dead weight and take the path that would maximize their profits.
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