Rolling out a new image: A longtime recycler makes green a selling point

The Record (Hackensack N.J.) (MCT) - After 50 years of turning old paper into toilet tissue, paper towels and napkins, Marcal Paper Mills is making a $30 million bet on green.

The 76-year-old recycler and manufacturer, which emerged from bankruptcy protection 10 months ago, is gambling that increasingly environment-conscious consumers will buy more Marcal products if they know the goods are made of 100 percent recycled material.

The company has rebranded the entire Marcal product range with the green message and launched a nationwide promotional campaign and product improvement effort that CEO Tim Spring calls the company's biggest ever. The aim is to break out of Marcal's existing market, largely in the Northeast, and create a national brand.

Marcal, of Elmwood Park, N.J., recycled paper long before it became a mainstream cause, but has never before made conservation the central element of the company's brand image.

The bold, pricey move comes 27 months after the company filed for bankruptcy reorganization, blaming a 40 percent, or $10 million, increase in energy costs. Eighteen months later, a Texas-based group of investment funds bought Marcal's assets and created a new company, Marcal Paper Mills Inc. LLC.

Spring, 47, a turnaround specialist in consumer package goods who was hired by the funds in June, said Marcal has "never been healthier."

"The good news about toilet paper, I can successfully say, is it's recession-proof," he said.

Company revenue, about $400 million at present, is growing in the "low single digits" annually, said Spring, adding that he has increased the workforce by 150 to about 900, about the same as before the bankruptcy.

The green campaign, he said, grew out of focus groups in which consumer interest spiked at the mention of environment-friendly paper.

"They said, 'If you can provide me with a product that meets my performance needs, that is strong and efficient and doesn't kill trees, I'm very interested,'" Spring said. "We've been saving trees since 1950. So we're not jumping on the bandwagon; the bandwagon has finally come to Marcal."

The campaign includes a new brand name _ Small Steps _ and improvements to the company's 25 products. Some are stronger and more absorbent, and facial and bath tissues are softer, without reducing the 100 percent recycled content, Spring said.

But such a major redesign is not without risks.

Last month, for instance, PepsiCo abandoned a radical new design for its Tropicana brand and said it would return to the old version after consumers complained. Some said that with the new packaging they couldn't differentiate between the company's different types of juice. And Coke's disastrous effort to sell New Coke in the 1980s is the stuff of business lore.

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Mike Bzik, assistant store manager at the Pathmark in Elmwood Park, said the new Marcal designs have left some consumers confused since the store started stocking both old and new brands a few weeks ago.

"I don't believe that the customers have quite yet associated this with their old, familiar brand," he said.

He also wondered how much traction the green theme would have in the recession. "In today's economy, I think price overcomes most issues," he said.

But Spring says that unlike the makers of some environment-friendly products, Marcal isn't asking consumers to pay more to go green. The company's products are priced the same as in the past _ slightly below the median price of competing brands, he said.

Visually, however, the change from the past is radical.

Gone is the chunky lettering and red, white and blue color scheme, replaced by bright yellows and greens and a picture of a sun-bathed, flower-filled meadow. An oak tree stands prominently at the center of each package, bearing the words "Help us save 1 million trees" _ the number saved, the company says, if all the nation's consumers used Marcal paper towels for a week.

The brand name Small Steps suggests that consumers can help the environment with a modest gesture _ such as buying recycled paper products. The company will promote the brand with a national TV and print campaign that ramps up on April 1 to tie in with Earth Day three weeks later.

Spring said that the branding has already prompted Kroger's, the national supermarket chain, to take Marcal products for the first time.

Marcal, with a market share of only a few percent, is ranked in the top five brands by sales in supermarkets, mass merchandise outlets and drugstores, ahead of other recycled paper manufacturers such as Seventh Generation.

About half a dozen companies sell 100 percent recycled paper products, according to a 2006 study by the Washington-based Natural Resources Defense Council. The council urged consumers to avoid name brands such as Bounty, Scott and Kleenex, which it said don't use recycled fiber.

Gwynne Rogers, health and sustainability director at The Natural Marketing Institute, a Harleysville, Pa.-based green consulting firm, said consumers clearly have become more interested in green products, especially in the last two years.

Yet Rogers, whose firm has worked for Marcal in the past but not on the Small Steps campaign, was skeptical that "such a complete brand reposition" is right for Marcal.

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"What we hear from consumers is that environment matters," Rogers said.

"But it can't come at the expense of anything else. They won't sacrifice price. For the most part, they won't sacrifice softness or absorbency."

A recent online survey by consumer trends specialist GK Roper Consulting of New York showed growing consumer interest in buying environment-friendly products, tempered, however, by the down economy.

"American consumers may be turning the corner when it comes to environmental action," the consultant's report said, adding: "albeit slowly."

The change could prove a boon for Marcal, which has relied on recycled paper for most of its existence.

The company, which was founded by an Italian immigrant in 1932, began recycling in the 1940s as a solution to wartime pulp shortages. The strategy helped make Marcal one of the biggest manufacturers in North Jersey.

But in November 2006, led by the third generation of the Marcalus family, the company foundered. Its bankruptcy filing reported company debts of $156 million and assets of $100 million.

Even with bankruptcy protection, the company continued to struggle. An interested investor, New York-based Apollo Capital Management LP, backed out when Marcal failed to meet sales and other financial targets. After that, the company was put up for sale.

The eventual buyer, a group of funds affiliated with Dallas-based hedge fund Highland Capital Management LP, paid $164 million, but did so reluctantly. It was owed tens of millions of dollars by Marcal for past loans, and no other buyers had stepped forward. The Marcalus family is no longer connected to the company.

Spring said the investors aren't involved in running the company except to set financial targets. Instead, he said, his management has shaped a three-pronged turnaround strategy, which includes improving relations with suppliers to help Marcal cut supply costs.

The company also is working with the New Jersey Manufacturing Extension Program to cut production costs through worker training and improved efficiency. Finances have also been helped by a dramatic fall in the price of recycled paper, from more than $100 a ton last summer to one-tenth of that by the year's end.

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© 2009, North Jersey Media Group Inc.