Georgia-Pacific's acquisition of Fort James, completed in December, created the largest manufacturer in paper towels, bath tissues and paper napkins in the U.S. and Europe. It also gave Georgia-Pacific the Dixie brand, U.S. leader in disposable plates and cups. While Procter & Gamble Co.'s Charmin and Bounty are leading brands in, respectively, bath tissue and paper towels in the U.S., Georgia-Pacific's bevy of No. 2, 3 and 4 tissue and paper towels combined brands gives it the overall lead.
Speaking at the Goldman Sachs Consumer Products Conference this month, Mr. Correll said: "Our strategy has to be one of share maintenance and profit improvement. I am interested in ... shifting the mix so we sell more of the high-priced brands, but I don't have any interest at all in share growth."
One of the key benefits of the merger, Mr. Correll said, is that two of the fiercest competitors in the paper business will no longer compete against each other. The combined company controls the bulk of the lowest-production-cost tissue mills in the U.S., mainly in Wisconsin, but Georgia-Pacific has no intention to use that advantage to undercut competitors on price. Mr. Correll said he plans to shift funds away from price promotion that had been used heavily by both companies to increase profitability.
"I would expect prices to go up," Mr. Correll said. Georgia-Pacific and Fort James had not followed price increases by P&G while the companies awaited approval of their deal by the U.S. Justice Department, which took five months. During that time, P&G raised prices on bath tissue and paper towels about 4%.
Mr. Correll doesn't plan to increase ad spending this year from last year's combined $70 million by the two companies, but he does vow greater emphasis on brands, particularly the Brawny paper towel and Quilted Northern bath tissue brands acquired from Fort James, which will occupy the top tier in the "good, better, best" system Georgia-Pacific is adopting.
From January through September 2000, Quilted Northern had $11 million in spending, Dixie had $1.6 million and Brawny had nothing (after spending $17 million in 1999).
"We plan to be a heavy advertiser," Mr. Correll said in an interview. "This is a business that will support advertising." He added that he's happy with the work both of Publicis Groupe's Fallon Worldwide, New York, which has handled Georgia-Pacific's corporate branding effort in addition to Angel Soft and Sparkle, as well as that of Omnicom Group's DDB Worldwide, New York, agency for Brawny, Quilted Northern and Dixie.
Fort James "did not understand the power of the brands they had," Mr. Correll said. "They were concentrating entirely on growing the private label and the club [store] business and not growing their brands. Northern bathroom tissue is a 100-year-old brand next year. There are only five brands in North America that are 100 years old, and Northern is one of them. And nobody knew it."
One exception at Fort James was the Dixie brand, which Mr. Correll said was the only brand in its category to advertise. It spent about $1.6 million from January through September 2000 and has launched several product improvements in recent years. Dixie had projected to spend $10 million on its new Rinse and ReUse tableware product, but it still hasn't rolled out the product nationally.
Brawny and Quilted Northern, will get the bulk of media advertising in the new company, Mr. Correll said, though old Georgia-Pacific brands Sparkle and Angel Soft, which will occupy the middle tier in quality, will continue to get some support. Nascar-related promotions will be a key feature in marketing for Sparkle and Dixie.
One problem for Brawny and Quilted Northern has been that they were premium-priced without being premium quality. Mr. Correll said that while the former Fort James brands were priced higher than Georgia-Pacific's Sparkle and Angel Soft, they weren't any better. He is planning fiber and process improvements for Brawny and Quilted Northern to close the quality gap with P&G's Bounty and Charmin, but added, "that will take some time."