Business: Paper Profits

Six years ago had President Alexander (“Sandy”) Calder of Union Bag & Paper Corp. asked his stockholders to split their stock four-for-one, they probably would have balked. The price of their shares was down to $5 and such a split would have reduced their stock certificates to shinplasters. But last week his stockholders had only applause for Sandy Calder. They gladly voted to split their stock four-for-one and their new stock was traded at prices upwards of $18, for in five years Recovery and Sandy Calder—but mostly Mr. Calder—had boosted the value of their shares around 1,500%.

Sandy Calder is spectacularly lucky. At golf for example, he has five times made holes in one, once with his opening shot in a tournament at Great Barrington, Mass, before a gallery of 300. Sandy Calder’s luck is not limited to golf—he has made a huge success out of everything he has touched. Fourth of six brothers, he was born in New York City 51 years ago. At 25 he went to work as a salesman in the wood pulp & paper firm of Perkins-Goodwin Co. where his older brother Lou already had a job. Three years later Union Bag & Paper, biggest U. S. bagmaker, offered him $40 a week to come to them. After a month he was fired in an economy drive. But the Calder luck came through on schedule—an older salesman retired before Sandy’s notice was up and he regained his job. He has justified it ever since, in the beginning by bagging Union’s biggest bag account, F. W. Woolworth Co., and lately by lifting the company out of the worst jam in its 68-year history.

The paper bag was still a not very efficient novelty in 1869 when Union was started by a group of bagmakers solely to monopolize early bag-machine patents for leasing. By 1900 Union had expanded into a $27,000,000 manufacturing trust, sold 4,000,000,000 bags, 80% of the U, S, total, But Union’s profits dwindled steadily from $1,500,000 in 1899 to $43,000 in 1912, In 1913 a new president was installed—John S, Riegel, head of Riegel Bag & Paper Co, Mr, Riegel jerked Union’s profits to $365,000 in 1914, In 1916 Union and Riegel Bag merged, and in 1920, the company netted $3,300,000 on sales of 6,000,000,000 bags (U. S. total: 20,000,000,000).

Meanwhile Union had missed two industrial revolutions in its business: 1) from easily-torn sulphite bags to sulphate bags (made of tough tan papers called “Kraft” by the trade); 2) from expensive northern spruce to cheap southern pine for paper pulp. After the War when every competitor was moving south to use cheap slash pine, Union still sat in a sleepy, War-fattened lethargy. In 1928 it was so grossly out of line that it actually built a sulphate mill in the spruce forests of Tacoma. Next year this white elephant was shut down at a loss of $2,060,000. Meanwhile Union lost money steadily in all the boom years. In 1929 it lost $750,000. In 1930, it sold less than a sixth of the 33,000,000,000 U. S. bags.

Next year, when the presidency fell vacant, the disgruntled directors put Salesman Sandy Calder in the job on six-months’ probation. He cut salaries and expenses $100,000 at once, shifted to imported pulp, at year’s end had a neat $112,500 profit. A price war next year produced a deficit again, but since then Union has enjoyed steady profits. However, to take the drastic steps needed to catch up with the bag revolution, Sandy Calder needed control of the company. He and Brother Lou Calder, now president of Perkins-Goodwin, bought Union common stock steadily at its 1932 low of $5.50. In January 1934 they had control and headed south to Savannah, Ga. to build one of the world’s biggest paper plants.

Savannah’s potent Citizens & Southern National Bank, anxious to lure big business to Georgia, lent Union $1,000,000 outright. From other banks $1,500,000 was obtained. Union stockholders bought enough $30 shares of Union common stock to provide an additional $1,500,000 needed. Union’s Savannah plant started operation in July 1936 and Union has now caught up fully with the paper revolution. Last year it made 7,000,000,000 of the U. S. total of 50,000,000,000 paper bags. Its $10,800,000 bag sales were 13% of the U. S. gross of $80,000,000 and its profits totted up to $387,000. And last week as his stockholders voted to split their shares and also issue $7,000,000 in convertible debentures. President Calder was able to estimate that earnings in the third quarter alone this year will be $500,000, to announce that in eight months earnings were already $984,000.