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Q&A: Tethys CEO Steve Winter–the man behind the proposed bottled beverage manufacturing plant (the largest in North America)


Skagit Valley Herald, Mount Vernon, Wash.

Steve Winter, CEO of Tethys Enterprises, Inc.

Posted: Sunday, December 9, 2012 2:00 am

By Mark Stayton

Q: Could you start by telling me a little about yourself?

A: Sure. I graduated from Snohomish High School. My undergraduate degree is in electronic engineering — I went to DeVry University. I graduated from the University of Washington with an MBA. I’ve been in high tech industry for nearly my entire career, nearly 38 years. I left a company I worked for for 30 years in 2007 and decided to pursue some entrepreneurial things. One of the projects that I got involved in was developing this business concept.

I’m married, I have six children of my own and four step children. I’ve lived in Washington State virtually all my life, except for three years in Europe and four years in college

I was born in Arlington, and live in Smokey Point, not too far from Lakewood High School.

Q: Many people in the public have not had a chance to hear directly from you about your plans for the Tethys bottling plant. How would you describe the project to these people?

A: When I left Intermec in 2007, my primary objective was to start a business in Washington State, in this region, that would create manufacturing jobs and would do it in a sustainable way, and sustainable in two perspectives.

The first is that the jobs would not easily be outsourced, they would be sustainable manufacturing jobs. The second part of it is that the industry itself would be sustainable, that we would make substantial improvements in the environmental performance of the company and the industry. And, also sustainable in that, for the company, there would be an economic advantage in being here. You’ve got to have all of those elements or you don’t have a sustainable business model. You’ve got to be sustainable environmentally, sustainable in the marketplace and sustainable in resource supply.

So, I started doing some research. I spent a lot of time talking to government officials and business development people, industry experts, and ran into some folks who later became my partners. (We talked) about business development models and what they saw as the capabilities of the region, and how they did business development. And one of the things I realized was that the typical economic development model relies on quality of life and tax incentives to bring industries into a region. And we thought that there had to be sustainable advantage, so we built a model for researching what the Northwest had to offer that could be applied to an industry that would give them economic advantage, so that you wouldn’t have to offer substantial incentives outside of the economic advantage that you could offer them by just locating here. So there wouldn’t have to be tax incentives and all those other things.

So we started researching everything, from natural resources, infrastructure, demographics, education levels, available land and lots of other elements, to basically do an inventory of what we had here in the Northwest. And then we did a SWOT analysis on industries. We said: what are the strengths, weaknesses, opportunities, threats associated with these many of these different industries? What are their economic drivers, and how can we match what we found that the Northwest has with industries that have similar needs and economic dependencies. And that’s where we landed on beverage bottling manufacturing as a really good match.

So we began to investigate that, and fortunately it was also a good match for my background because at Intermec I provided solutions to the beverage manufacturers and my largest customers were Coke and Pepsi, along with virtually all of the other bottlers. So I had a lot of understanding of that industry, and so it kind of was a natural fit for us that we saw a really good opportunity to bring beverage manufacturing here, and it was a good fit for my background.

Q: We understand that this would be a much larger beverage bottling plant than the industry standard. How big is your planned plant, and what about its business model will make it successful in this industry?

A: At its full buildout — its actual final size will depend on the site we can figure — if the site is available to support it, we’d like to do a full buildout of about 1 million square feet. The average beverage manufacturing plant is more like 150,000, 250,000 square feet. We would like to do 45 to 60 manufacturing lines. The average plant is probably four to 20 lines. The main reason why we think we can accomplish that is because of transportation.

There’s two primary issues with building a plant of that size. One is transportation. The reason is because your served market needs to be substantially larger than what you can reach by truck. With trucks you can go about 400 miles, which means basically you can cover Washington state, part of Oregon and maybe into Idaho. That’s a fairly small demographic area, and you couldn’t justify a megaplant based on that. In order to build a larger plant, we have to have a transportation method that will get us a farther economic distance, and that’s rail. So with rail, we can increase that by four, four-and-a-half times. Instead of going 400 miles, we can increase that to 1,600 miles or more. So we have to have a site that has on-side rail capacity, we need to be able to back a train onto our property and be able to load and stage that train, and then have that train leave our facility.

The second thing, of course, that’s really important is having a source of water that can support a megaplant, which is where we asked for five million gallons of water a day. Now that is an absolute maximum. We’re not likely to use that much, and quite frankly, we hope to be efficient enough to not need to use that much, but that gives us a maximum capacity. We’re probably going to use somewhere around 2.5 to 3 million gallons a day at full buildout, but it depends on how successful we are at getting customers.

So we needed to have the water, and we needed to have the rail transportation. Those are absolutely both key. We’ve been on the search for those two things, you know, get the water source and find a site that can sustain rail transportation.

One of the concepts behind this is that we can basically eliminate a lot of the warehouse space that you normally need in manufacturing, because we use the rail, we’ll use the trains as our warehouse. So we will be staging product on trains and sending them out in as near real time as we possibly can. It’s part of the efficiency equation that justifies building a plant of this size. If we can build and stage product in real time on these trains, and send them out to locations were the demand is, the economics work for it.

Q: What are you going to be manufacturing there?

A: So for a plant this size, we will have to be able to manufacture virtually all of the beverage product lines, so canned and bottled beverages, which would include sodas, brewed teas and coffees, that you would be able to put in a bottle or can. Flavored waters, energy drinks, virtually anything that you would be able to find on a beverage shelf.

Q: How many jobs will come directly from plant operations, and at what pay scale?

A: Our conservative estimate is around 500 jobs, and that assumes a single-shift operation. This plant is likely to operate multiple shifts, but in a single shift operation, about 500 employees. The average wage in the industry is around $41,000 a year, that’s the U.S. average for beverage manufacturing.

Q: How are you and your company qualified to undertake this project successfully?

A: How am I qualified? Well, I have an MBA. I’ve been in business for 40 years. I have relationships with beverage manufacturers across the United States and across the world. I am an expert in logistics and in transportation, and manufacturing. The company I ran was a manufacturer. I have good connections to fundraising, so the ability to get the capital, and I have the local understanding and expertise. And I’ve run a New York Stock Exchange-listed company — I’ve run a large public company of about $1 billion.

So, what was the second part of your question?

Mark: Your company.

A: My company. So what I started to assemble is a set of partners with specific expertise in finance and business development and real estate development and we’re all local people, so we have, you know, an understanding of, and an appreciation and love for this region. But we also individually have expertise that’s necessary to make a project like this go forward. And we have the ability to bring on additional people as we need them to bring in additional expertise. I’ve run companies with 3,000 employees, so, it was a global company. So I know how to hire people, bring in the talent that I need to do the job and get it done.

Q: What are Tethys’ long-term plans for the plant?

A: Our long-term plans for the plant is for it to be a contract manufacturer. What that means is that we will be bottling beverages for multiple manufacturers. The huge advantage that we will have is the ability to instantaneously produce product for the entire western United States. So when a company wants to do a brand introduction, they can come to one company — to our company — and have us manufacture a product for the entire western United States. So the ability to control distribution and merchandising for their brands is a huge advantage that we can offer for them.

Does Tethys plan to develop the site for itself?

We plan to develop the site and operate it. Now — as you know — once you build something, people will sometimes come to you and give you an offer. That may be an eventuality, but it’s not our plan. My background is manufacturing — that’s what I like to do — and so our intention is to build and grow the business here at home.

Q: What hurdles still remain in getting this project done?

A: Well, we need to think about where we are. We’re at the end of the beginning, OK? The beginning is all about ID’ing a site and doing the spade work necessary to get the support of local officials and help people understand what we’re trying to do.

Having met this milestone now of ID’ing at least 30 acres, we’re now entering the feasibility stage. That will take us about a year. And what is the feasibility? It’s the period in which we determine several things. Is the site actually suitable for what we want to accomplish? Can we put the rail on it? Can the rail provide the capacity that we’re looking for? Can the site sustain the size plant that we’re looking for? What are the environmental impacts? What are the transportation impacts?

We’ll be doing lots and lots of geological studies, environmental studies ourselves to prove to ourselves if the site is suitable. So that will take a year. We’ll also be doing design. So you know, designs have to be tailored to the site. Getting the final site lined up is really important to begin to do the design. So design and feasibility — about a year.

Then we’ll move into the permitting stage. That’s where we will submit our permits and go through the permitting process, which means we will have to do SEPA (State Environmental Policy Act) reviews and permit applications, and we’ll have to do additional studies; transportation impact studies and other studies for the county and for the city. So that’ll take about a year. And then we’ll start construction, and construction will probably take 12 to 18 months. So it’s about a three-and-a-half to four-year process to get to an actually producing facility from this point in time.

Q: What progress has Tethys made since the contract with Anacortes was struck? What have you guys been doing in the last two years or so?

A: The main thing we’ve been doing is identifying the site. We’ve actually evaluated a couple of sites and gone through substantial discussions on those sites. And some of those discussions and evaluations were unsuccessful. So we identified this site about nine months ago and have been basically going through the process of determining whether or not it would meet our needs and whether or not we could assemble the property necessary to make it work. So it’s all been about getting a site.

Q: If you could compare this to the proposal for a bottling plant in Everett — why was that one turned down by the city, and is this any different?

A: The concept has evolved a bit, although it’s relatively similar to what we had proposed in Everett. We’re still talking about a contract manufacturing facility, we’re still talking about a beverage manufacturing facility, we’re still talking about the needs that we have for water and for rail.

So Anacortes invited us to come up to their community because they felt they had the water and they had the availability of rail that could potentially meet our needs. So we’ve been working with Anacortes. We had a very similar proposal in Everett. Everett, quite frankly, had marginal land with regard to size, so the facility in Everett would not have been as large, ultimately. Most of the sites down there were in kind of the 35- to 40-acre range, which really limited our ability to do rail transportation. So the promise of having greater land was one of the things that was attractive up here.

The other thing, of course, was that we’re an investor-led company. So we wanted access, we wanted to have a commitment that we were going to get water if we built the facility. So that’s why we have asked for a contract, a supply contract. Not rights to the community’s water, but a commitment from the water supply system to supply us with water. Everett wanted to tie that commitment to a specific number of jobs. And we were not able to reach an agreement on the language of that, plus there were many other contractual issues, and ultimately, we just couldn’t reach an agreement on contract terms.

Q: What would you say are some common misconceptions about the project?

A: Number one is it’s a water bottling plant. It seems like no matter how hard we try to explain that that is not the situation, we can’t get past that. The second misconception, I think, is that we are a front for some company. And we are definitely not a front for some other company.

We are, you know, local guys who have developed a partnership, that have a commitment to area and have a dream, you know, the typical entrepreneurial dream. That we saw an opportunity in an industry that was not being filled, with a very creative idea, and we want to pursue that creative idea to fill that market opportunity. So, we are not a front for any company.

I think another misconception is that the water we will use will have an impact on things like fish or is related to other water issues in the region. Because we’re getting water from the Anacortes supply system, which has an allocation, and because it’s river water — not basin water or aquifer water — it really doesn’t have an impact on the other water issues in the region.

You know, we’ve been called vulture capitalists and other kinds of things. I think there’s a concern that we might be New York bankers or something like that, and again, we’re just local guys with business experience and a dream. And we’ve been funding this all with our own money and our own efforts.

Q: Lastly, is there anything else you’d like to say about the project or the process?

A: Sure. I think that a key thing to understand about the project is that this will be a model for the beverage industry going forward. That this plant will be the most efficient plant in the world at beverage manufacturing. And efficient from multiple perspectives. From an environmental perspective, it will have the lowest waste water of any plant in the world. It will have one of the highest energy efficiencies of any plant in the world. It will have the lowest carbon footprint of any plant in the world, because we’re using primarily rail transportation verses truck. So it will be a model, and Anacortes and Skagit County will be the repository of the new model for efficient and effective manufacturing of beverages.

It’ll also produce far more jobs than the 500. And why is that? Because a plant of this size will be a center of gravity for the industry. It will start to attract suppliers, contractors, customers will open up offices, open up facilities, build locations in the county. So it will create a substantial number of beneficial additional jobs that support this manufacturing in the entire county. So the county will benefit hugely from this, ultimately.

I think the other thing is that we are committed to doing this in a responsible way. Working with the community and understand what their concerns are, to address those concerns. Because we’re neighbors, we live in this area. Our reputations are tied up around our living in and working in this area. So it’s important to us that we do this in a very responsible way and in an interactive way with the community.

But ultimately, it will diversify the economy substantially in Skagit County, with an industry that’s pretty recession resistant. We might lower our consumption of beverages a little bit when a recession hits, but it’s about 4 or 5 percent compared to other industries that might drop by 15, 20, 30, 40 percent. It diversifies the economy with a recession-resistant kind of product, and it produces a huge multiplier in additional jobs.

Q: I guess one last question from me: You talked earlier about using a more environmentally friendly bottle. Can you tell me a little more about that?

A: Sure, so there are biodegradable plastics that are being developed in multiple varieties, and some of those are now being introduced into the marketplace. Our manufacturing plant — because it’s going to be a brand new plant with all the latest equipment — will be able to use these biodegradable bottles, biodegradable plastics, and that would be our primary container for plastic bottles. We’re going to also be doing cans — nobody seems to remember the fact that we’ll also be doing cans — but where we do plastic bottles, we’ll be using these biodegradable bottles.

The benefit of those is that, you know, current plastics, once they get into a landfill, they stay in their current form for hundreds of years. These biodegradable plastics — once they get into an aerobic environment — will break down in, depending on the product, somewhere between 90 days and nine months. They’re also still fully recyclable. So plastic bottles are recycled at the highest rate of any other product. About 40 percent of the bottles get recycled — believe it or not — that’s the highest of any product. Cans are the only thing that comes close to it.

But, you know, we humans don’t always operate in the most efficient way with regard to recycling. We throw things in the environment. So where that happens, we want to make sure that that doesn’t have a permanent impact. So using these biodegradable bottles is kind of a cornerstone of what we’re going to be doing.

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