Industry aims to emulate self-funded marketing programs pioneered for agricultural products

By: Bob Tita, The Wall Street Journal

Original article here: http://www.wsj.com/articles/paper-markers-promotional-campaign-takes-page-from-farmers-1436400116

Manufacturers of building products, paper and cardboard are trying to recast consumers’ negative perceptions about their industries by tapping into to a federal marketing program used primarily by producers of agricultural commodities.

The paper and packaging industry on Wednesday kicked off its campaign with a series of commercials and print advertisements aimed at reminding consumers how often they use paper and cardboard in their daily lives. The campaign, featuring the slogan “How Life Unfolds,” is being bankrolled with a 35-cent-a-ton fee on paper products that most U.S. manufacturers must pay for at least five years. The fee is expected to generate about $25 million a year.

The effort is what’s known as a checkoff program, modeled on farm-product campaigns begun in the 1960s that have produced such memorable slogans as the beef industry’s “It’s What’s for Dinner,” “The Other White Meat” for the nation’s pork producers, and the dairy sector’s “Got Milk?”

Under government rules, the industry-guided marketing fees can be levied only if companies in the relevant industry approve them through a referendum. For agriculture programs, the U.S. Department of Agriculture functions as a referee, requiring eligible companies to pay and approving messaging to prevent disparaging ads aimed at competing industries and products.

The Agriculture Department oversees fee programs for about 20 commodity industries. The hardwood-lumber industry is seeking a USDA checkoff, while producers of concrete blocks are attempting to establish one that would be run by the Commerce Department. The Energy Department oversees a 17-year-old program for propane that funds research and development and workforce training.

Some companies have complained that checkoff fees are effectively a tax and that the Agricultural Department’s content rules stifle free speech. With the paper-industry program, 85% of the companies eligible to pay the fee—which collectively account for 95% of the industry’s annual output—voted in favor of it, according to the Paper and Packaging Board, the industry group that manages the program. Companies producing less than 100,000 tons annually are exempted from the fee.

“We needed to do something holistic across the whole industry,” saidJohn Williams, chief executive of Montreal-based paper company Domtar Corp. and chairman of the paper board. “On its own, Domtar wouldn’t have much success telling its story.”

Domtar specializes in uncoated paper typically used in printers and copy machines, a market where sales volumes have been falling 3% to 5% a year as consumers chose to pay bills online or adopt other paperless options.

Paper-industry executives are stressing the idea that paper can be recycled, and that falling demand for paper, rather than reducing consumption of forests, merely gives the owners of managed timberlands incentives to sell their land for housing subdivisions, shopping centers or golf courses.

“The corrugated box is strong; it’s light; and it’s made of reusable material. That story just hasn’t gotten out there,” said Steven Voorhees, chief executive of Richmond, Va.-based WestRock Co., which makes containerboard for corrugated boxes.

Producers of softwood lumber used in construction framing adopted a checkoff a few years ago. Now, the hardwood industry, which produces oak and maple lumber, is awaiting the Agriculture Department’s approval to vote on a marketing fee to counter increasing use of man-made composite materials like laminates for flooring, doors and other parts of new homes.

Harry Kaiser, professor of applied economics and management at Cornell University, who has researched checkoff programs since the late 1980s, says those that have been in place for years typically generate returns that exceed the investment.

“They do increase demand for the product,” he said. The paper industry’s campaign “won’t turn the paper industry around by itself,” he said, but likely will have “marginally positive effects.”

Write to Bob Tita at robert.tita@wsj.com