Monday, January 11, 2010

Altria’s plays major role in Richmond area’s economic life

If you've spotted a new computer in a school office in Richmond, grumbled about the midafternoon jam at the Bells Road exit or wondered about those "Dippers & Smokers" fliers around town, you've run across Altria Group Inc.'s footprint.

The nation's No. 1 tobacco company makes all its cigarettes -- 150 billion a year -- in Richmond. Its headquarters are here, and so are the labs where it designs new products, such as the tipless Black & Mild cigarillo and the new Marlboro Blend 54 in its dark-green box -- and where scores of Richmonders, intrigued by the fliers, have taken up its invitations to earn money by participating in tobacco-consumer studies.

Standing at 160 on the Fortune 500 list of large companies, among Richmond-area firms only Dominion Resources Inc., at 157, is larger.

"Looking at just Philip Morris USA, its employees and the complex visible from Interstate 95, one sees just the tip of the iceberg," said Roy Pearson, a business professor emeritus at the College of William and Mary.

It's a big tip:

About 5,700 people work in Altria factories, offices and laboratories in the Richmond area. The company ranked seventh among private-sector employers in the region.

They take home more than $710 million a year in pay.

Some of them place some $840 million a year in orders for goods or services from Virginia companies. Others buy some 17 million pounds of tobacco a year from 400 Virginia growers -- about $30 million a year.

And more than 250 of them pitched in last autumn at Huguenot High School to paint murals, create a butterfly garden and freshman class courtyard, and even remodel the teachers' lounge. A dozen took time last month to move 235 company computers into the Richmond Public Schools warehouse, to be shipped out to schools across the city.

"It really matters to me -- I'm a product of Richmond Public Schools," said Immanuel Sutherland, who moved from Altria's procurement services to run its volunteer programs four years ago.

Altria and its people -- who also number some 5,700 Virginia retirees -- have helped shape Richmond for decades.

Richmond was a center of the nation's aluminum business because Reynolds Metals got its start making foil for cigarette packs. The area's newest corporate citizen, MeadWestvaco, numbers Altria among its biggest customers.

The company buys paper, filters, cellophane, packaging material and printing plates mainly from local firms. Local firms service and maintain machinery for the company, do data-processing work and provide health-care services for employees.

Pearson said computer models of the local economy and surveys of where the company and its employees buy goods show every Altria job generates more than one job with Virginia suppliers. There's a ripple effect as those suppliers buy goods and services locally, too.

All in all, each Altria job generates 2.9 more jobs in Virginia, mostly in the Richmond area, Pearson said.

Doing business with Altria has changed the way Jewett Machine Manufacturing Co. works.

For years, the South Richmond company made precision machine parts for the cigarette factory. Now, Jewett is involved in bigger and more complex engineering tasks.

"The work for us has sort of shifted from manufacturing parts and aiding their engineering groups to actually designing and building turnkey systems in a whole different arena, the noncigarette arena," said Bryce Jewett, Jewett Machine's president. Jewett employs about 100 people at its locations on Maury Street and Mechanicsville Turnpike.

. . .

Tobacco products other than cigarettes are now an important part of Altria. Altria is investing $100 million in its York County factory, where it makes snus, a Swedish-style smokeless tobacco that is starting to make a splash in the United States.

Its $11.7 billion purchase of U.S. Smokeless Tobacco last year and $2.9 billion acquisition of cigar-maker John Middleton in 2007 brought about a dozen executives to the area.

Altria's two-year-old, $350 million research center in the downtown Virginia BioTechnology Research Park, where some 100 Ph.D's work, now handles the development of cigars and smokeless-tobacco products as well as cigarettes. A total of 500 people work there, the Virginia BioTechnology Research Partnership Authority says.

Over the past several months, marketing experts from U.S. Smokeless' Copenhagen division worked with the local scientists, who gained their expertise with flavoring tobacco at Philip Morris USA, to figure out how to get just the right wintergreen flavor into Copenhagen's snuff -- creating Copenhagen's fifth new product in 187 years.

But the push into smokeless tobacco and cigars came on the heels of a major split. The company, then based in New York, carved off its Kraft Foods and Miller beer businesses. Then, it spun off Philip Morris International, the independent New York-based company that makes and sells Marlboro and other Philip Morris brands overseas.

After the split, Altria's Philip Morris USA unit decided to make all of its cigarettes in Richmond, closing a North Carolina plant. The consolidation meant a $230 million investment in the Richmond Manufacturing Center next to I-95 in South Richmond.

Still, the business is under pressure.

"Philip Morris used to be nearly all of our business," said Stephen Young, chief executive officer of Mundet Inc., which makes the paper that is wrapped around filters, as well as packaging for cigarettes, at its Colonial Heights plant.

Now Altria accounts for about 40 percent of the company's sales.

As the industry has consolidated and cigarette sales continue to slide, "we have felt the need to diversify our product range and customer base and have looked to expand into nontobacco printed packaging."

Still, though Altria accounts for a smaller part of Mundet's business, Richmond accounts for a larger share of Altria's operations than it used to. Even before consolidating all its U.S. cigarette manufacturing here, Philip Morris USA moved its headquarters to Henrico County in 2003, and some 270 people came from its headquarters on Manhattan's Park Avenue. Altria itself moved to the landmark Reynolds Metals building in the county in 2008.

. . .

For company spokesman David Sylvia, moving from New York meant suddenly finding three extra hours a day. Without the long train ride from Park Avenue to the Connecticut suburbs, there was more time to spend with his four young children and a lower cost of living that made it easy giving up the old pickup he used to drive to the train station. He has bought two cars here since he moved.

Taking the kids to art classes at the Visual Arts Workshop, he saw a strong fiber-arts program that reminded him of his father, working in the now-shuttered velvet-textile industry of his Stonington, Conn., hometown -- and before long Sylvia found himself on the board of the nonprofit, involved it its efforts to reach into the Richmond public schools.

Time to look around and get to know a different kind of place than New York reminded the one-time altar boy of something else about Stonington:

"It was the kind of place where everybody knew everybody and if you were down on your luck, people would lend a hand to help out," he said.

The volunteer work he'd done as a Providence College student and the participation of his Henrico church, St. Bridget's Catholic, in the CARITAS program for the homeless led him to join the board of the interfaith group. It also has led him to do his share of pot-washing and meal-serving when it is St. Bridgit's turn to feed and provide a safe, warm bed.

"They're very active," said David J.L. Fisk, executive director of the Richmond Symphony, where Altria sponsors the Masterworks series through which the orchestra is seeking a new music director.

"Financially, they contribute over $100,000 to the symphony," he said, adding that support comes from the very top all the way through the company. That's in addition to helping finance CenterStage, now the symphony's home, as well as the Arts Fund and CultureWorks.

"Employees are members of the symphony chorus, they are parents of members of the youth orchestra, volunteers with the Richmond Symphony Orchestra League," he said. "They've been major supporters of the cultural scene and of downtown."

Altria is a big donor to the city schools, on the order of $2 million a year, targeting math and science education, trying to keep middle school students on track, and helping high schoolers get ready for college.

The company also pays for things donors don't always think of, such as computers for classrooms and training for teachers. But just as important, said Richmond Superintendent Yvonne W. Brandon, is that Altria volunteers are regularly in the schools: tutoring, mentoring and helping fix things.

"They show up," she said.

Richmond Times-Dispatch

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