Pope and Talbot, Inc.

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Pope and Talbot, Inc.

1500 S.W. First Avenue
Portland, Oregon 97201
U.S.A.
(503) 228–9161

Public Company
Incorporated: 1852 as Puget Mill Company
Employees: 3,100
Sales: $628.9 million
SICs: 2421 Sawmills & Planing Mills General; 2611 Pulp Mills; 2676 Sanitary Paper Products

Pope and Talbot, Inc., is one of America’s oldest and most successful wood–fiber products companies. The firm makes and markets wood pulp, softwood lumber, consumer tissue, and disposable diaper products. Pope and Talbot serves a variety of markets, including the housing industry, newsprint manufacturers, printing and writing paper manufacturers, supermarkets, mass merchandisers, food and drug distributing firms, and drugstores. The company’s Ultra Thin disposable diaper has become one of the leading products in the consumer tissues market.

Andrew Jackson Pope and Frederick Talbot, two ambitious young men from Maine, arrived in San Francisco on December 1, 1849, after a grueling 51–day journey around South America on a number of different steam ships. Although they were exhausted when they stepped ashore, the excitement of San Francisco, which had grown from a population of 6,000 to 20,000 in just six months, overwhelmed the two Easterners. Pope and Talbot immediately recognized the potential for starting a new business, and on the following day, they joined with partners Lucius Sanborn and J. P. Keller to establish a company to operate barges in San Francisco bay.

A short two months later, the partners were able not only to pay for the cost of their new barges and boats, but also to turn a profit of more than $800. After buying out Sanborn’s interest, Pope, Talbot, and Keller decided to enter the lumber business. A number of disastrous fires in San Francisco had convinced the partners that demand for lumber would remain high. Soon they opened a lumber yard and began transporting consignments of the product from one area to another. A stroke of good fortune occurred when Frederick Talbot’s older brother, W. C. Talbot, arrived in California with his brig, the Oriental. A large, sea–worthy vessel, the Oriental provided the firm with a greater range of transport. When Frederick Talbot decided to permanently return to the East Coast and open a business in New York, his older brother replaced him as a partner in the company.

For a short time, the partners shipped lumber from Maine to California through arrangements with Pope’s relatives. They found this impractical as a long–term strategy, however, especially given the enormous demand for lumber in and around the San Francisco area. They built their own mill in the Oregon Territory on Puget Sound, on a site that Native Americans called Teekalet, or “Brightness of the Noonday Sun”; settlers renamed it Port Gamble. By 1853 the partners’ mill was producing nearly 2,000 board feet of lumber per day. Four years later production had jumped to a total of eight million board feet for the year, and the company was known as the largest and most successful business on Puget Sound.

The late 1850s brought an Indian war, a gold rush that destabilized the labor market, and a short period of overproduction as a result of new lumber mills established on Puget Sound. Yet the mill at Port Gamble, now called the Puget Mill Company, continued to prosper. In response to a growing demand for lumber during and after the Civil War, the Puget Mill Company added new equipment and began to acquire smaller mills in the area, including important mills on Camano Island and Port Ludlow. By 1879 the company was producing more than 200,000 board feet per day and nearly 70 million feet per year.

As the nineteenth century progressed, leadership of the firm changed hands. J. P. Keller died in June 1862, and was replaced as a partner of the firm by mill superintendent Cyrus Walker. Andrew Pope died in September 1878, and Captain Talbot in August 1881. William H. Talbot, the son of Captain Talbot, had been groomed by his father in every aspect of the lumber business, and when the elder Talbot died, the son quickly became the driving force behind the company, relying heavily on Cyrus Walker’s 28 years of experience in the mill. In 1882 the total capacity of all the Puget Mill operations amounted to 99,000,000 board feet of lumber per year. In 1885 the number of cargoes of lumber shipped from the mill at Port Gamble alone reached 49; by 1888, the number had risen to 78. The company also owned one of the largest shipping fleets for the transportation of its lumber, with fourteen ships carrying lumber to customers in Japan, Hawaii, Australia, South America, China, Korea, India, and South Africa. During this same period, the Puget Mill Company was also purchasing enormous tracts of timberland in order to maintain a reliable source of wood for its mills; by 1892, the firm reported ownership of 186,000 acres.

During the 1890s and the years immediately following the turn of the century, Puget Mill Company expanded its marketing operations and opened three new offices in San Francisco. The development of railroad traffic heralded even greater prosperity for the company, since it transformed the isolated state of Washington into America’s largest distributor of lumber. As timberlands in Wisconsin, Michigan, and Minnesota were depleted, demand for Washington’s lumber skyrocketed. The number of mills in Washington had grown from 46 in 1870 to 310 by 1890. By 1906 there were more than 900 lumber mills in the state producing 4,305,000,000 board feet of lumber.

Beginning in 1907, however, the Puget Mill Company suffered a series of setbacks. When the state of Washington levied a tax increase on the acreage of timberland held by the company, Puget Mill’s extensive holdings nearly became a liability. In addition, equipment used in the company’s mills had become antiquated, and Puget Mill’s operations were running inefficiently. In 1908 the company sold the last of its aging fleet of schooners, once the largest lumber armada on the West Coast. The company joined an organization that chartered the tonnage for shipment, thus relieving Puget Mill Company of the burden of maintaining its own fleet. By the end of World War I, the company had grown large, diverse, and somewhat cumbersome, with some 15 corporations under the direct management of Puget Mill. Labor unrest, which occurred throughout the Northwest region during this time, affected all of the company’s holdings.

In July 1925, William Talbot, exhausted and in ill health, decided to sell Puget Mill Company to the Charles R. McCormick Lumber Company. McCormick, a native of Michigan, had arrived in Portland, Oregon, in 1901. He renovated a dilapidated millsite at St. Helens on the Columbia River, and from there he created a lumber empire that grew to become one of the largest on the Pacific Coast. McCormick purchased all of Puget Mill Company, including mills and timberlands, at a price of $15,000,000. Talbot, known as a shrewd businessman, made McCormick agree to build a new mill at Port Gamble, with Puget Mill Company holding a mortgage on all the mills, timberlands, and logging camps operated by McCormick.

From the beginning of the takeover, McCormick’s management team made serious errors and miscalculations. Modernizations and improvements at Port Ludlow and St. Helens, as well as the new mill at Port Gamble, were plagued by cost overruns. McCormick soon faced rising interest rates, amortization payments, and annual taxes of more than $1 million. As his debts steadily increased, McCormick devised a strategy of expansion, hiring a larger sales staff and increasing production. Costs continued to outrun revenues, however, and by the start of the Depression in 1930 the company had posted a loss of $858,587. The company’s situation only worsened with the economic problems brought on by the Depression.

After William Talbot died, George Pope, Sr., assumed the position of president of Puget Mill Company and began to pressure McCormick to resign. When McCormick’s expansion strategy failed to revitalize the company, he vacated his position in December 1931. Pope was then elected chairman of the board of Charles R. McCormick Lumber Company, with the intention of protecting the interests of the Puget Mill Company. He immediately appointed managers who exemplified his own financially conservative viewpoint, and began to reduce the debt incurred by McCormick. By 1937 all the bank loans and a significant portion of the mortgage bonds were retired. In 1938 the Puget Mill Company brought a suit of foreclosure against the Charles R. McCormick Lumber Company. Unable to pay its obligations of over $7 million, the McCormick Company was forced to cede all of its holdings to the owners of Puget Mill. The principals of the foreclosure suit, George Pope, Sr.; George Pope, Jr.; Frederic C. Talbot; and Talbot Walker, all descendants of the original owners, reacquired the company their forefathers had labored to build.

George Pope, Sr., became president of the company, which was renamed Pope & Talbot, Inc. Before any analysis and reorganization of the lumber operations and steamship activities could take place, however, World War II began. George Pope, Sr., became chairman of the board, allowing his son, George Pope, Jr., to assume the position of president and deal with the demands of the war years.

Pope & Talbot mills operated at full capacity during the entire war. The company produced lumber for panel bridges used in the invasion of Europe, tent poles, and Signal Corps material for communication lines. Company lumber was used for the construction of naval housing, and the company’s fleet of steamships made vital contributions to the American war effort. Pope & Talbot vessels transported the supplies necessary for waging war in every area of conflict, and stopped at ports including Murmansk, Bizerte, Salerno, Guadalcanal, and Okinawa. The company also suffered casualties: four ships were sunk during the war, including the S.S. West Ivis, which lost its entire crew. During the height of worldwide hostilities, Pope & Talbot was responsible for more than 75 ships. The war helped improve the financial position of the company, which was one of the three largest lumber producers in the entire Northwest by the end of the war.

The future appeared especially promising for the company’s steamship operations during the postwar years: industry along the Pacific Coast needed large quantities of bulk materials, while the East Coast needed lumber and other products from the western United States. However, volatile labor relations plagued the company. In 1948 a three–month strike by dock workers cost the firm more than $1,250,000, and a series of strikes in 1954 caused Pope & Talbot to lose a significant portion of its steamship cargoes. By 1958 the company was down to one shipping route, and another year of strikes in the maritime industry during 1959 brought its vessels to a standstill. Competition from the railroad industry also began to take business away from shipping. As a result, in 1963 Pope & Talbot decided to terminate shipping operations by selling the four remaining vessels in its once–proud fleet.

In contrast to its shipping activities, the company’s lumber operations were highly successful. Having purchased a large tract of timberland near Oakridge, Oregon, in 1946, management assured itself of adequate timber holdings for the foreseeable future. By 1950 the company owned over one billion board feet of timber ready for cutting, and during the next decade it opened new mills in the United States and Canada. Pope & Talbot also implemented a diversification strategy which included building a particleboard plant, a veneer mill, and a wood treatment facility, and in 1961 the company purchased a plywood plant. These moves brought the company closer to fulfilling its goal of a fully integrated wood products program.

In 1963 George Pope, Jr., resigned as president of the company and was replaced by Cyrus T. Walker, a descendant of one of the company’s early partners. In 1966 Pope & Talbot reported that its lumber division provided 61.6 percent of its revenues, plywood 13.9 percent, veneer 7.1 percent, particleboard 6.2 percent, and hardboard 6.2 percent. Net earnings increased from $717,000 in 1965 to $1,203,000 in 1966. In 1968 sales increased an astronomical 73 percent over the previous year, totaling $3,025,238. The company’s success lay in the fact that management was moving quickly to take advantage of growing markets for new wood products. In 1969 the firm continued its expansion strategy by purchasing another mill in Canada, procuring cutting rights to more than a million acres of timberland in Canada, and constructing a new log utilization plant.

The company changed leadership in 1971 when Cyrus Walker retired and the fourth generation of Popes and Talbots assumed control. Peter T. Pope was elected chairman of the board, and Guy B. Pope was appointed president and chief operating officer. Under their tenure, the firm continued to grow. In 1972 Pope & Talbot was listed on the New York Stock Exchange, and the following year the company surpassed $100 million in revenues. When the housing and construction industry was hit hard by a recession during the mid–1970s, Pope & Talbot made plans to enter the pulp and paper industry, which would allow the company to utilize all of the yield from its timberlands. Consequently, in March 1978, the firm invested $24 million in a joint venture with American Can Company to operate a bleached kraft pulp mill near Halsey, Oregon.

During the 1980s, Pope & Talbot insulated itself as much as possible from the cyclical nature of the housing and construction industry. The pulp mill at Halsey took the company into a entirely new, and highly profitable, direction. Pulp is made from softwood chips, hardwood chips, and sawdust, and is used to manufacture newspaper and printing and writing grade paper.

Soon the company had major contracts throughout the Pacific Northwest to sell its pulp. Not content with just pulp production, Pope & Talbot began to diversify into the consumer products market by either acquiring or building diaper and tissue plants. By the early 1990s, Pope & Talbot listed two tissue plants and six diaper plants as part of its holdings. Manufacturing an entire line of napkins, paper towels, and facial and bath tissues from 100 percent recycled paper for private label customers became highly profitable. The Ultra Thin disposable diaper developed into the company’s most lucrative product. By 1993 Pope and Talbot’s wood products were bringing in approximately 48 percent of revenues, while its pulp, tissue, and diaper products were generating 52 percent.

Throughout its history, Pope & Talbot has demonstrated the ability to divest itself of unprofitable operations and diversify into growing, productive markets. Led by new generations of Popes and Talbots, the company is heading into the future with strong leadership and the expectation of continued prosperity.