With a new stakeholder creating a world of opportunity, the paper trade is starting to look like Harry Gould’s oyster. The man of many talents talks about Gould Paper Corporation, the state of the industry, and US Presidents.
Harry Gould Jr describes the paper industry as in a “treadmill position; running fast to a standstill”. The outspoken CEO of Gould Paper Corporation is in a good position to comment; he has been leading the company founded by his father for 43 years, and in that time it has survived some troubling economic times and has periodically surpassed the $1 billion sales figure mark. The company has gradually expanded to become a truly global organisation, with 70 offices in 31 countries worldwide.
However, with upcoming presidential elections close to home – which Gould is paying close attention to for more than one reason (see box ‘A man of many parts’ on page 63) – a world of economic upheaval and, crucially, the slide away from paper and towards digital, there are many factors at play that mean the industry is a far cry from what it was when the company was inaugurated. But while Gould believes the industry is declining, he also sees opportunities for those that have the confidence to go for it. On top of that, the company recently struck a deal that will significantly affect its future path.
From small beginnings
In 1924, President Calvin Coolidge delivered the first Presidential radio address; ‘America’s Sweetheart’ Mary Pickford continued her run as the top silent movie star; and the first-ever Winter Olympics were held in Chamonix, France. Also that year, Harry Gould Sr started what has become Gould Paper Corporation. The pulp and paper merchant has gone through many forms (see box ‘Gould: A timeline’ on page 64), growing and gathering other businesses under its wing to become a billion dollar global force.
It has been almost 90 years of steady growth – although the last five years have been somewhat volatile. “In 2007, we went past the billion dollar mark,” says Gould. “In 2008, like the rest of the world, we were affected by the Lehman Brothers fallout and went down to the $800 million range. This past year we went back into the billion level.”
As it has grown larger and larger over the decades, Gould has put itself in the perfect position to make acquisitions. Its global reach is an enviable asset, and is still increasing – most recently Gould appointed a new Market Development Manager – Brazil, based in Sao Paulo.
But it is a consolidation of a different kind that has most affected Gould’s position in the market in recent years. In April 2010, the corporation became a 51% subsidiary of Japan Pulp & Paper USA (JPP), a wholly-owned subsidiary of JPP Tokyo, with the view to JPP purchasing the remaining 49% in 2015. The combined business now exceeds the $6 billion revenue mark.
“We first considered creating a joint venture with JPP to acquire other merchants,” explains Gould. “JPP already had three locations in Mexico and a fair-sized operation in the US but I think they felt they were never able to get the kind of growth they would have liked in North America. That coupled with more than 20 years of non-growth in Japan led them to the decision to grow outside Japan.
“The call came at a time when our banks in the US were in the midst of the Lehman Brothers fallout. The banks were asking for some highly unusual and punitive things including raising interest rates to a level where here in the laser-thin distribution margin business paying that interest rate made no sense.
“So we turned the dialogue around and asked JPP: ‘Would you consider using us as the vehicle?’ After an initial shock, it took what we have been told for the Japanese is a very fast process and the deal was done.”
Gould himself is showing no signs of retirement, however, though the deal to sell Gould came earlier than he imagined.
“In a perfect world I would have liked to reach that point maybe in another five years as opposed to 2010, but I found the behaviour of some of the US banks pretty reprehensible. Everything has a moment in time when you’re dealing with forces beyond your control.”
Gould’s strategy of focusing on acquisitions is key to how he sees the current state of the paper industry. He says: “The demand and sale of paper reached a watershed level in 2007 and I don’t expect to see it come back to that level ever again. What you’re looking at is an industry that needs to be consolidated, and growth is more dependent now on getting market share. This means either acquiring competitors or taking it from competitors.
“Certainly the growth areas are the usual suspects known as the BRIC countries. There are a few others you can add to that list but even there the main impediment to growth within the industry is the heretofore unparalleled growth of electronic media. In the industry you often hear people say: ‘Oh, but look at the growth of India, China, Brazil, and Russia to a lesser degree; look at all the demand that’s got to be pent up for using paper.’
“And my question is: where is it written that the ten-year-old doesn’t go right to electronic media and skip over paper? Or that the educational system skips over paper textbooks and uses tablets, laptops or e-readers? You can just look at the 14 March announcement that the Encyclopaedia Britannica will no longer be available in a print format. It will now be updated every 20 minutes instead of annually.”
These worries must be on the minds of many people who deal in paper. Some manufacturers are still witnessing growth, but they are the lucky ones in a world where people just don’t use as much cut paper as they used to. There’s an argument that increased online shopping will increase the use of packaging paper, but Gould does not believe this will plug the gap created by the digital age.
“Will those three pieces of paper in the Amazon delivery box more than overcome the decline in newspapers? What was a nine million tonne newsprint capacity in North America is now a five million tonne capacity or less. The only way to grow I say is to acquire competitors.”
But while the digital age is having an industry-changing effect on paper consumption, there is another pressure hard at work: consumers’ focus on the environment.
“One complaint that I have registered is that the industry has done a terrible job of explaining that it plants more trees than it cuts, and that since the pollution era of the 1960s and 1970s the industry has got its act together,” he says. “Certainly in South America, North America and Europe the act has been cleaned up. There needs to be a massive campaign, because the knee-jerk reaction of consumers is that the paper industry is a despoiler. The question is, can the industry afford not to act?”
Pushing paper onwards
“For the industry the glass is always half full, never half empty,” says Gould. “When I used to attend industry conventions almost every mill executive was saying: ‘This year’s going to be different, it’s an Olympic year,’ or ‘It’s an election year’. And I would always ask: ‘How much demand for paper will this actually create?’”
This optimism certainly can’t last forever; how long can the industry hope that there will be a revival in paper consumption? To move forward, Gould has decided that a strategy of acquisitions coupled with a secure internal company structure are the keys to propping up and growing the top line, and his company is pursuing this with open arms.
He says: “By the time this goes to press JPP might have made an acquisition on their side. We made two last year here in the US and we’re looking at more, although nothing we’re ready to close on tomorrow.”
All this has become far simpler since the deal with JPP in 2010. Gould isn’t looking too fondly on what lies ahead for the US and its budget deficit issues, and even Europe’s banks with the questionable ability for companies to obtain credit. He says: “We may not be finished with the fallout in the banking sector, depending on what happens in Greece, Portugal, Spain, Ireland and maybe a few others,” but he feels his company is in a strong position with JPP.
“The interest rate levels in Japan are like no other,” he says. “Without having to deal with our consortium of banks anymore and being able to leverage on JPP’s shoulders with Japanese banks, our cost of money is very attractive. In a razor thin margin business that cannot be ignored.”
When it comes to a strong internal structure, Gould feels that his company has that firmly established. Each employee is treated individually, which will remain going forward. For example, when a team member is in difficulty, the company “comes to their aid and assistance, allowing them to survive”. Even taking into account the new culture that the merchant’s Japanese owners will bring, he is confident that Gould’s culture will continue.
“We feel it’s important to continue the culture here which is an environment that is partly structured and partly entrepreneurial. That’s served us well over the years and we’re certainly mindful of keeping that, and so are the Japanese.
“The adjustment to bringing two cultures together has been less than one would think. The wisdom is to understand the difference and not meddle or interfere. Their reaction has been, ‘you know your company, your culture; you do what you want’. East is East and West is West, and that’s exhibited in how we act. In the third quarter of last year we absorbed their Atlanta speciality paper office, for example. It’s recognition that we must know something about what we’re doing, and that their people will grow and prosper more under our umbrella while still being attuned to the Japanese culture.”
For Gould himself, the future is undecided. At some point he will have to designate someone to take the baton, and even then he may or may not carry on as senior advisor.
“At that point I’ll have to think about whether it is something I want to do or not,” he says. “Whether I walk off into the sunset at that point in mid-2015 or whether I hang around as the ‘éminence grise’, JPP and I will have to mutually determine.”
A man of many parts
There is a lot more to Harry Gould Jr than a career as a paper merchant might suggest. Take his incredible collections, for example, such as his iPod containing 38,000 songs. The most notable is his collection of memorabilia and documents signed by famous historical figures. Gould is keeping an eye on the upcoming US presidential elections not only because of his strong views on governmental matters (in 2006 he changed registration from Democratic to Independent so he could “go by the individual and not the party”), but also because he owns signed documents from all the US presidents during their term of office – apart from President Barack Obama – some of whom he has rubbed shoulders with.
“A few months ago I finally plugged one hole, which was William Henry Harrison signing as President, since he only lived in office 29 days,” says Gould. “I was bidding on it while on vacation in the South of France until five in the morning. It is one of only 12 documents that are in private hands, which excludes the Smithsonian and other museums. I’m sure I’ll have Obama represented soon, probably by the time of your next executive forum in Chicago in May.”
As well as being an avid collector, Gould has a number of interests in the film and theatre industries. Among other achievements, from 1983 to 1986 he served as CEO of Cinema Group, which co-financed films such as Flashdance, Star Trek III and Staying Alive. Gould votes on the Oscars each year as a Member of the Executive Branch of the Academy of Motion Picture Arts
and Sciences, and recently joined the board of major theatre organisation Roundabout Theatre, which, he says, “has had an extraordinary run of success, both financially and critically, in the
last 12 months”.
On top of all of all of this, Gould has served as Vice Chairman of the President’s Export Council as well as the President’s Representative to the United Nations East – West Trade Development Commission. He has served on the Board of Directors of Domtar and has been a Trustee of the American Management Association, the National Symphony Orchestra, and Colgate University. Since 1975 he has served as a Director of the New York City Housing Development Corporation, the nation’s largest multi-family housing finance agency.
Before Gould Paper’s activities exploded, he had also served for more than two decades as a Director of the New York City Chapter of the National Multiple Sclerosis Society, USO of Metropolitan New York, and the United Cerebral Palsy Research and Educational Foundation. A busy man indeed.
1924 – Harry Gould Sr founded Gould Paper Corporation as a printing paper merchant specialising in domestic and imported papers, primarily for the greeting card industry.
1940s – In 1943, Gould made its first acquisition, Reinhold Card & Paper. Throughout the decade, Gould expanded to include commercial printing, paper distribution and non-woven webs.
1950s-1960s – Gould continued to expand, and in 1969 Harry Gould Jr was appointed Chairman and CEO.
1970s-1980s – Harry Gould Jr focused on expanding the reach of Gould Paper. The company acquired six paper merchants, and established eight new divisions.
1994 – The sales group of Leslie Paper and Gould Paper consolidated to form BRW Paper, serving the Texas and Missouri commercial printing markets.
2002 – Gould North America was formed, based in Boston, focusing on the commercial printing and publishing markets. Also in 2002, Gould acquired WWF Paper Sales-UK, Town Paper, and its subsidiary, Paper Dynamix.
2003 – Throughout 2003 Harry Gould’s global vision of Gould Paper expanded through the acquisition of Salehurst-UK, which merged with WWF Paper Sales-UK. Gould International Paper & Board was formed with former employees of MAP.
2004 – Gould acquired Price & Pierce, a global pulp and paper company founded in 1869. This firmly established Gould’s European, Asian and Pacific presence, with offices in cities including Helsinki, Dubai, Singapore, Shanghai, Hong Kong, Auckland and Manila.
2006 – Gould expanded its presence in Florida through the acquisition of Southern Paper.
2010 – The controlling interest in Gould Paper Corporation was sold to Japan Pulp & Paper (JPP) – USA, a wholly-owned subsidiary of JPP Tokyo. JPP will purchase the remaining 49% equity in April 2015.
2011 – JPP and Gould Paper Corporation merged their speciality paper divisions in the US, to be known as JP-Gould Specialty Papers