The Domtar Century: And why it’s the next 100 years, not the last
By Scott Robertson
Domtar is celebrating 100 years of operation at its Kingsport paper mill in 2016. The year-long commemoration features monthly events designed to highlight the successful partnership between the company and the city in which it has thrived. Yet while the public is enjoying the celebration of a stable past – a celebration that to date has included the donation and planting of 100 trees by the company to the city and the full funding of five years of a $5,000 scholarship – the company is working behind the scenes to completely reinvent itself.
To understand where Domtar is going, one must first know where it has been, and the centennial celebration presents just such an opportunity. The Kingsport mill was built and opened in 1916 as the Kingsport Pulp Company. For the next hundred years it milled paper, with occasional ownership changes. Mead, Willamette, Weyerhauser and Domtar have all operated the facility for periods. Willamette invested $475 million to update the mill in 2002, and Domtar acquired it in 2007. For all that time, the mill has made paper from wood pulp chips. For the better part of the century, that was all that needed to be said.
At some point, the owners realized they could create their own energy from the process, so the plant currently produces two products, paper and electricity. But energy is just the beginning of how the mill, like the company, is diversifying its outputs.
Diversification isn’t a luxury or a lark for paper companies, Bill MacPherson, Kingsport mill manager says. It’s a necessity. “You can’t sustain a 3 percent to 4 percent decline (which is the current norm in the paper business). You have to replace that.” As the paperless society has continued to advance, companies like Domtar have had to shift their thinking in ways the founders of the Kingsport Pulp Company would never have been able to comprehend.
“We’re so much more than just a paper company,” says MacPherson. “Here in Kingsport we think of ourselves as paper, but really, internally, we think of the organization as being about reinventing and innovating our way to new products.”
The key to monetizing that mindset is the fact that Domtar’s raw material, wood pulp, is capable of producing a far more diverse range of marketable chemical products than has previously been considered. From the obvious products such as specialty papers, to the more innovative offerings including absorbent material for diapers, to the sublime, including nanotechnology products with a myriad of uses, the application of biochemistry in new and creative ways is producing potential revenue streams to replace what the paper market is losing.
“We have the physical plant, the assets, and what we do that’s special and unique is that we gather enormous quantities of cellulose or wood fiber cost efficiently,” MacPherson says. “We process it in a biochemical way in a pulp mill and make pulp. But the side streams, the sugars, the liquors, the other things – you can make products out of those.
“We love paper,” MacPherson says. “It’s an outcome of what we do here every day. With the reality of the world, though, electronic substitution means our world is changing. So it’s important we stay ahead of that change, and we’re going to innovate our way there.”
It wasn’t that long ago that paper sales generated 90-95 percent of Domtar’s revenue. Today, that number is down to 64 percent (52 percent communication paper and 12 percent specialty paper), with pulp sales contributing 18 percent and personal care products bringing in almost one of every six dollars.
The personal care line is the growth engine for the company right now. Between adult incontinence products and baby diapers, Domtar shipped almost 4 billion units of product last year.
Domtar creates from wood pulp a product known as fluff pulp. That product is used as the absorbent material in diapers. Because of its scale and efficiencies in wood pulp the company can be very competitive in both the adult and baby diaper markets.
Earlier this year, the company idled its largest paper machine, the Ashdown 64 in Arkansas, and is now refitting that machine to create fluff pulp. Part of the paper production that had been happening at Ashdown will now be shifted to Kingsport, says Tom Howard, vice president, government affairs. “We still have to manufacture white paper. We have obligations to our customers across the footprint of North America, so we depend on the remaining paper machines at the remaining mills to meet those obligations.” That’s good news for the Model City operation because it will bring stability to a mill that would otherwise be more directly affected by the decline in the paper market.
In the longer term, MacPherson is looking for products that will allow the Kingsport Mill to create products beyond paper and electricity. “Kingsport is one of the last two or three thoroughbred paper machines with the technology and cost efficiencies to be a long-term survivor in the paper market,” he says. “But even in Kingsport, biomaterials like nanocrystalline cellulose (NCC), lignin and other things are opening the possibilities of bolt-on technologies that can bring in revenue streams.”
Lignin, the substance that acts as a bonding agent in wood, could well be one example of a biochemical product usable in the creation of consumer goods. “Lignin is nature’s glue and it’s pretty strong,” he says. “It’s biodegradable, so when you see trash bags blown out of film made of lignin – bags that will dissolve in a landfill – that’s exciting stuff.”
Before MacPherson arrived in Kingsport, he was part of the team that built the world’s largest pre-commercial NCC production facility for Domtar. “Globally, there was about two pounds a day of this special NCC material made out of trees, out of fiber,” he says. “It has amazing properties that scientists are now starting to utilize. You’ve heard, ‘if you build it, they will come?’ Well, we built a plant to start making 1,000 pounds a day of this proprietary, fascinating substance.”
Howard says NCC is already moving to market. “Schlumberger (pronounced Schlum-ber-zhay’) Technologies is using it as a drilling fluid additive. They’re an equivalent of Halliburton in terms of providing services and equipment to the drilling industry. That is just one market we have identified. Other markets are on the horizon and we’re working to develop those markets as fast as we can.”
The final piece of the diversification puzzle is the human element. A diversified company needs biochemists and engineers that a paper company didn’t. “Being located in Kingsport allows us to attract talent,” MacPherson says. “We have physical plant equipment, but our competitors at other mills have largely the same equipment. What will differentiate us is our workforce. We want to attract people who already have good jobs. If we’re going to succeed, we are going to have to outcompete in the talent end of the business.”
So you’ll forgive MacPherson if he seems a bit distracted at the rest of this year’s centennial celebration events. He’s already thinking ahead. “We’re talking about our first 100 years,” MacPherson says, “but we’re really looking forward to the next 100 years.”