When I tried to broker a deal with Jeff Bezos

How does an entire city economy go from zero to one, or in this case, from 1.0 to 2.0? What is the infrastructure required to make that jump and what does the migration look like? Here are a few observations and reflections from the time I tried to get Jeff Bezos to invest in my hometown.

In July of 2020, the Washington Post wrote an article on my hometown of Wisconsin Rapids titled ‘A Warning From Wisconsin, which highlighted the closure of the paper mill that has served as the foundation of the local economy for nearly a century.

As noted in the article, the coated paper industry was in decline long before the Coronavirus pandemic.  The writing has been on the wall for traditional paper suppliers for years as digital media caused a decrease in the demand for high end paper.  I would often speak with friends and family that were/are connected to the Wisconsin Rapids mill operation about the options that existed to try and reinvent itself or innovate.  It posed a few really interesting question that I couldn’t stop thinking about.  

Is the paper industry really dead?

How does an entire city economy go from zero to one, or in this case, from 1.0 to 2.0? 

What is the infrastructure required to make that jump and what does the migration look like?

I’ll preface this with the obvious. I’m not an economist, nor a politician, nor a millwright. But I was curious, so I decided to dig into these questions a bit more to try and come up with a plan to save the paper industry in central Wisconsin. 

Alas,  I failed. However, what I've concluded is that this game is far from over and with a little bit of ingenuity and strategic guidance from the right partner, there's a real and profitable opportunity to get the paper machines rolling again in Wisconsin Rapids.

This was my plan, how I failed, what I learned, and what I think should happen next.

Box it up!

One idea that I was always really optimistic about was the role of paper, specifically corrugated cardboard, to produce boxes for shipping.  Online sales and e-commerce weren’t slowing down, and revenues skyrocketed through the earlier phases of the pandemic.  In the second quarter of 2020, Amazon’s online revenues were up 47% and almost 220% YoY.  

I went deep to learn about Amazon’s sustainable packaging initiatives to more cost effectively package to product size, as well as their distribution centre strategy and investment in automation and robotics.  Additionally, Amazon acquired Whole Foods, a major purchaser of paper bags for grocery and delivery purposes.  They’re also experimenting with interactive packaging to strengthen their value proposition to sellers and engage buyers.

On the paper side of the equation, I spent some time learning about the major players like International Paper, and the unit economics and supplier deals that these companies have in place with high volume e-commerce companies.

Additionally, I noticed that Amazon was making direct investments in the region for delivery and distribution, so it didn’t seem farfetched to propose a vertically integrated solution to own the end to end supply chain.  

So that’s what I did to Jeff Bezos and Amazon’s COO.  And sure enough, they agreed to a meeting.  

The result?

I shared everything I had learned about Amazon’s distribution and packaging business. We were able to pull in Verso’s leadership team, as well as local government to help reinforce the message around the opportunity; However, in the end, a deal never materialised. I was asked to step aside for reasons of confidentiality; However, my best guess as to why a deal didn’t make sense for either side really came down to three details: 1. Money, 2. Policy, and 3. Timing.

It takes paper to make paper.

The two machines in the Wisconsin Rapids mill are currently set up to produce 570,000 tons of coated paper each year. My estimate based on their public financials and market conditions was that it’d cost roughly $200M to acquire and turn the operation into a box producing manufacturer. Even for companies like Walmart or Amazon that are cash rich, that’s a big pill to swallow.For what it’s worth, I do think it would be hilarious to see Jeff Bezos in a forest trying to take down a few acres of lumber in a flannel jacket.

nom nom eating GIF by Laff

Policy slows progress

The Wisconsin Rapids mill closing coincided with the 2020 elections, so each side was angling for their position on a proposed solution in a very influential part of the country during a hotly contested election cycle. There needs to be a better, more agile forum to share feedback or ideas on how to improve their community outside of election windows. In any case, it really does highlight how important our local elections are to drive change, as well as how  critical it is that individuals who are local in the community lead that charge and strategy.  They know their business better than anyone, and having someone remote (like a Swedish mill) or even someone like me that thinks Amazon could be a good idea isn’t living in the day to day operations and could be totally off. 

Timing is everything.

It took several of Verso’s other mills years to successfully convert to machines that can produce corrugated cardboard.  Mill operators were either strategic or lucky (maybe both), and they hit the window at which e-commerce and same day shipping became the norm.  Even mill operators like Nine Dragons Paper, which owns the Biron mill near Rapids struggled to make the conversion to cardboard, and they now have a head start in the region.

In the case of the Wisconsin Rapids mill, the foresight required to retrofit coated paper machines to cardboard was probably written on some whiteboard in a boardroom in Wisconsin Rapids but never materialised for one reason or another. Rapids might have missed the first window with the macroshift to ecommerce, but I’m convinced they can reinvent themselves with the right partners in place.

Currently, Amazon is doing some pretty remarkable things to make shipping and packaging more efficient, intelligent, and environmentally safe. The fact that the Wisconsin Rapids Mill sits in proximity to all of these shipping and distribution centers, not to mention in the backyard of some of the largest retail organizations like Target, Kohls, Best Buy, and Sears, all with real shipping needs and an increasing shift to online shopping leads me to believe that this opportunity will only grow with time.

Closing thoughts

Recently, it was announced that the Verso Mill sold to Swedish company, BillerudKorsnäs.  The CEO of BillerudKorsnäs, Christoph Michalski, hasn’t committed to any plans regarding the Wisconsin Rapids Mill; However, it does appear that there’s interest from the local Timber Professionals Cooperative to acquire and keep the Wisconsin Rapids Mill operating in Wisconsin Rapids. In either case, I’m hoping for the best for the community I call home, as well as the leaders in the community that are working hard to find a solution.  

Heck, who knows. Maybe Bezos will read this and reconsider :) 

On Wisconsin! 

Justin Vandehey

Entrepreneur & Podcaster

Justin Vandehey leads partnerships and business development for Culture Amp, the industry leader in employee engagement solutions. Culture Amp acquired the company he cofounded, Disco, which Justin grew from $0 to seven figures in ARR (and profitable).