byline: Tim Thornton

In 2017, Southwest Virginia had one big economic development homerun. Bristol’s new American Merchant bath towel factory promises to create 405 jobs.

Most of the region, by comparison, recorded a number of smaller expansions and new businesses that are expected to result in about the same number of total jobs as the Bristol factory.

All new jobs are welcome in the region, as is more support from the state.

“Virginia doesn’t have one big economy. It’s really a collection of distinct regional economies,” says Stephen Moret, president and CEO of the Virginia Economic Development Partnership. “One of the things that we have focused on since my first day here has been to begin to lay out a strategy to position rural Virginia for growth.”

Rural areas generally are in economic decline across the country, he notes. Southwest Virginia’s troubles are compounded because of the shrinking coal industry. (Coal jobs have been trending down since the 1920s, with upward swings around 1950 and 1980. According to the U.S. Energy Information Administration, 2,417 coal miners were working in Virginia in 2016.)

“Obviously, the region has had some struggles economically with the downturn in coal mining,” says Jonathan Belcher, executive director of the Virginia Coalfield Economic Development Authority. “There has been some improvement in that, actually, in that past 12 months or so. So, that has certainly helped, but we’re putting forth a very extensive effort to try to do what we can to improve the economy in the area.”

For VCEDA, which serves Virginia’s seven coalfield counties and Norton, 2017 was “a year of many projects but smaller job numbers,” Belcher says. The agency he leads recorded 23 new projects and expansions in its service area. Those promise to create 402 full-time jobs.

“We’ve been doing a lot more assistance to entrepreneurs and small businesses than we ever have in the past,” he says. “It was a really active year, and 2018 has started out the same way.”

The $15,000 Seed Capital Matching Grants that VCEDA awarded to the Well Coffee Shop in Tazewell and Sugar Hill Brewing Co. in St. Paul were typical. The $188,000 grant VCEDA contributed toward a zipline at Breaks Interstate Park was larger than most. “Having said that,” Belcher says, “we’re still focused on recruiting larger projects to the area as well.”

Beth Doughty, a member of the VEDP’s Committee on Business Development and Marketing, says there’s nothing wrong with supporting small businesses with small grants. They can be valuable economic development tools.

“You have to stop thinking of economic development as buffalos, as only big stuff counts,” says Doughty, who is executive director of the Roanoke Regional Partnership. “In that realm, you’re going to be disappointed more than you’re going to be excited … Economic development — we say it’s spinning plates; it’s not a silver bullet. You’ve got a lot of plates spinning in economic development, so that’s another plate you’ve got to keep spinning. And I think spinning plates is responsible economic development.”

Working with small businesses doesn’t preclude trying to attract those big deals. Belcher points out that the coalfields are already home to three significant data centers, high-tech businesses some people may not associate with Virginia’s mountains.

“Ask people what they know about Bristol, what they know about Southwest Virginia, and the answer is going to almost always be: ‘It’s very rural. It’s in the mountains. There’s a lot of agriculture.’ That’s all they know,” says Bristol Mayor Kevin Mumpower. “That’s everybody’s perception. They don’t realize we’re centrally located. We’ve got a huge interstate and train transportation infrastructure. We’ve got these universities close by. Nobody realizes that within a 30- to 45-minute drive, we touch 300,000 people.”

Even so, Moret says, Southwest Virginia and the rest of rural Virginia need more tools.

“We need to extend broadband access to the rural areas. Some of the biggest growth opportunities we have are in the IT sector,” he says. “While we do generally have broadband in the business areas, the fact that we don’t have it generally in the last mile in many of the residential areas makes it less attractive to young professionals.”

Mumpower puts some of the blame on shortsightedness and competition within the region. “We’ve been not proactive and not working as a regional team to bring interest to this region,” he says. “Everybody’s been working in their small cocoon, chasing these small little leads or waiting for the state to tell them something. You can’t do that. If you sit around and wait, sit on your hands and think manna from heaven is going to fall in your lap one day, it’s never going to happen. So the approach now is, ‘Guys, look. You’ve got to be proactive. It’s got to be a team effort.’”

Mumpower’s vision includes cross-border cooperation with Tennessee communities. The economy flows back and forth across the state line, so Mumpower believes cooperation should, too.

Moret agrees. “One of the things that we’re going to be increasingly aggressive about is border region economic development efforts,” he says. Virginia will always be the VEDP’s primary concern, of course, but economics cross political boundaries.

“I think it’s changing. We’re starting to talk about it in those terms,” Mumpower says. “We’re actually changing the mindset. We’ve got the right mentality now. We’ve got the right people on both sides of the line kind of thinking the same way.”

The next change Mumpower wants to see is in the type of business the commonwealth and localities are willing to support. He’s looking for a company that’s developing the next big thing, something on the cutting edge.

“This region has never thought that way,” Mumpower says. “You better jump on the train while they’re still building the train or you’re going to miss it … That comes with a little bit more risk because all new products are risky.”
Moret came to the VEDP in January 2017.  Mumpower says he’s already seen a difference. The state, including VEDP,  did well in the Bristol factory deal, in Mumpower’s opinion.

“The big takeaway for me,” he says, “is we’ve got a state agency now that really understands what Southwest Virginia has got to offer. We’re more than a couple mountain ranges and valley. We’ve got good infrastructure; we’ve got good buildings. We’ve got good skill sets. So I think Moret and that new VEDP and the folks looking at the economic development of the state understand that Southwest Virginia has a lot to offer.”

For his part, Moret says Virginia needs to compete harder. “The reality is that in the current economic climate, there are not enough quality economic development projects for most rural communities in America to grow,” he says. “So for us to be successful in rural Virginia, and Southwest Virginia in particular, we have to be considerably more effective than other states in our economic development efforts. We need to be more aggressive than them.”

Southwest Virginia’s recent deals

1 Company has headquarters in another country                Source: Virginia Economic Development Partnership, 2017

When the Ball Corp.’s beverage packaging plant closed in 2016, it marked the end of 45 years of operation under three owners.

More than 200 people were employed there in July 2015, when the closing was announced. So, when American Merchant decided in December to make bath towels in the old factory, it was big news. The plant is expected to employ more than 400 people when it is running at capacity.

“That’s a big number,” says Bristol Mayor Kevin Mumpower. “You’ve really only got two or three companies here that even approach that kind of number … That would be one of the top five manufacturers in Southwest Virginia with 400 people. So that’s a big deal.”

Stephen Moret, president and CEO of the Virginia Economic Development Partnership, says the indirect jobs resulting from the plant’s reopening could push the impact “somewhere north of 600 jobs.”

“The vast majority of our small businesses get nearly all their sales from their local community, so if major employers close, it hurts them,” Moret says. “If new employers come to town or existing employers expand, it really helps them in a meaningful way. So that ripple effect really is real.”

Robert Burton, the chairman of American Merchant, says the company plans to have equipment in place by October, to operate trial runs through December and to begin production in January. The goal is to run three shifts, six days a week, with one day set aside for repair and maintenance.

“We want to move fast,” Burton says. “The earlier we can get it going, the better off the group will be.” He says the timetable is “aggressive, but we feel it’s achievable.”

American Merchant is a subsidiary of Merchant House International, a Hong Kong-based company that trades on the Australian Securities Exchange. The Bristol manufacturing plant will be its first in the U.S. The company plans to invest $19.9 million in the facility.

The project’s incentive package includes a $300,000 grant from the Commonwealth’s Opportunity Fund and $590,000 from the Tobacco Region Opportunity Fund. The company also is eligible for grants and other assistance from the Virginia Enterprise Zone Program, the Appalachian Regional Commission and the Virginia Jobs Investment Program. 

That may seem like a lot of investment in a company’s first venture into a new sector, but Burton says he and American Merchant’s parent company know the field. “We’re obviously involved in the textile sector,” he says. “We have a wholly owned facility in southern China that manufactures kitchen towels.”

That factory concentrates on decorating and printing, but Burton says he’s familiar with weaving factories from his time as a buyer.

“I’ve been to every major towel manufacturer, probably, in the world,” he says. “So I’m familiar with the process and how towels are made. I probably was involved in about $60 million worth of purchasing or more of towels on an annual basis, as bath towels. So, we feel we have the knowledge of the sector to be successful.”

Even so, some people may wonder about the wisdom of backing a textile manufacturer anywhere in the United States.

“A lot of people are asking why come back to America to make this,” Burton says. Indeed, many textile plants throughout the Southeast fled to Central America or Asia in search of cheap labor. American Merchant is turning to machines instead. “We’re looking at a lot of automation wherever we can automate,” Burton says. “We’re bringing in state-of-the-art equipment throughout the manufacturing process.”

American Merchant considered a number of potential locations, mostly in the Southeast, according to Burton. One big requirement was to be near where yarn is spun, he says, and yarn is spun near where cotton is grown.

“I think everything really came together,” Burton says. “This was a place that wanted us. They had a history of manufacturing, and it was in the right location … It was a great facility in terms of size, space, location and we had a tremendous amount of support both from local and state officials. That kind of put it over the top for us.”