March 31, 2010
Mr. Paul Roberts
Everett City Council President
2930 Wetmore Ave, Suite 9-A
Everett, WA 98201
Dear Mr. Roberts:
Thank you for the opportunity to address your questions. For your convenience I have
copied the questions from your letter into this letter with our responses immediately
following. From our perspective, the contract drafting process is progressing nicely and
with minor effort the contract should be completed and ready for final review and
approval by the City Council on April 14th.
1. You represented that the Tethys proposal would result in over 1,000 jobs with
an average annual wage of $58,000 per year. The written material you
provided cites research “...Based on Research of Comparable Beverage
Plants in the United States, Canada and Europe.” Can you provide more
specific research, citations and/or data regarding these numbers? How does
your business model compare with a standard industry profile for bottling
facilities? How have industry trends toward increased automation and
decreased employment impacted employment numbers and wages, and how
would your proposal and business model compare to these industry trends?
Please provide data and sources to the extent possible.
Response: We are happy to provide a brief overview of the extensive research we have
conducted in the development of our business plan. While we are reluctant to reveal
specific details about our proprietary research processes and business plan
development, we will be as responsive as possible. A more thorough confidential
briefing can be provided if desired.
We analyzed data from the financial reports and public disclosures of all major players
in the beverage industry (Forms 10K, Proxy Statements, etc.); reviewed company press
releases and news stories both nationally and globally; purchased industry/trade group
research reports and reviewed their periodicals and web publications; talked with
beverage bottling and canning equipment manufacturers; searched government reports
and data bases and relied upon 30 years of manufacturing experience and service to
this industry.
The employment, wage and benefit figures provided to City Council are based upon an
estimated 850 production and logistics jobs and 190 management, administration and
production support jobs. Research data from the sources discussed above shows each
TETHYS ENTERPRISES, INC.
2722 Colby Avenue, Suite 515, Everett, WA 98201, Tel: (425) 212-4354, Fax: (360) 618-9559
automated bottling/canning line requires on average 30 workers at the wage and benefit
scales quoted per 8 hour shift to 1) receive and feed the line with raw ingredients and
packaging materials; 2) produce finished product and provide quality control and other
support functions and; 3) pull, package, store and ship finished product. This plant will
require 15 plus high speed lines to consume available water and thus require a total of
450 production and logistics workers per shift. The plant will be required to operate
three shifts per day requiring 1350 production and logistics workers in total at peak
operation. We scaled this number back by over one third to account for continuing
advances in production technology and potential economies of scale gained from a
larger operation. In addition, the plant will operate 24 hrs per day x 360 days which
means additional part time staffing will be required to cover week-ends and holidays.
We did not account for this. In short, we have taken a very conservative approach to our
employment estimates versus current industry standards and trends.
Because this will be a food grade plant, there will be a large number of professional jobs
such as industrial engineers, quality control and lab technicians, chemical engineers
maintenance mechanics, etc. Feeding this plant with the raw materials (juices, teas,
coffees, other ingredients and packaging materials) will also require a substantial supply
chain management staff (purchasing, production planning, scheduling, expediting, etc.).
Wage and benefit scales for these and all other jobs discussed were calculated based
on industry and governmental data on equivalent food grade manufacturing jobs taking
into account regional wage scale factors.
The table below provides a sample of typical single product and mixed product plant
sizes and employment figures from our research. If anything, our estimated employment
figures are conservative.
Plant
Brown Bottling
Concord Foods
Polar Corp.
Pepsi Metro
Seltzer & Rydholm
Pepsi Cola
Watson Foods
Natural County Farms
Corwin Beverage
Location
Brandon, MS
Brockton, MA
Worcester, MA
Cranston, RI
Auburn, ME
South Burlington, VT
West Haven, CT
Ellington, CT
Vancouver, WA
Size (sqft)
132,000
150,000
350,000
15,000
125,000
125,000
88,000
80,000
100,000
Employees
160
125
350
215
115
150
150
170
120
Below is a small sample of wage data research collected, in this case from the Bureau
of Labor Statistics for 2008. The table excludes wage data for occupations not planned
for this project such as sales and marketing. Benefits data are not included in the table
and typically increase wage value and payroll by 15% to 25%. It’s national data and
does not consider regional wage factors, which are higher in the Northwest.
TETHYS ENTERPRISES, INC.
2722 Colby Avenue, Suite 515, Everett, WA 98201, Tel: (425) 212-4354, Fax: (360) 618-9559
NAICS 312100 – Beverage Manufacturing
2008 Wage Estimates
SOC Code No. Occupation Title
11-0000
http://www.bls.go
v/oes/2008/may/o
es110000.htmMan
Median
Hourly
Mean Mean Annual Mean RSE
Hourly
$46.38 $51.69
$107,520
1.9 %
agement
13-0000
Business and
Financial
$29.18 $30.61
$63,670
1.9 %
17-0000
Engineering
$37.03 $37.24
$77,460
1.8 %
19-0000
Life, Physical &
Social Science
$26.07 $27.66
$57,520
1.8 %
43-0000
Office and Admin
Support
$15.19 $16.21
$33,730
1.0 %
49-0000
Maintenance &
Repair
$20.69 $21.54
$44,800
1.3 %
51-0000
Production
$15.77 $17.22
$35,810
1.7 %
53-0000
Transportation &
Materials
Movement
$14.96 $15.83
$32,930
0.9 %
2. In your presentation and written materials you represent that the facility will be
“...state of the art LEED certified...will feature the latest in clean technology
and operate from renewable hydro electric power generated on-site...” These
same documents represent that beverage companies have resolved concerns
about PET bottles and will use fully bio-degradable alternatives. However, if I
understand your proposal correctly, you do not yet have an end user. What
assurance are you prepared to provide the City that these representations will
be included in the final development and are you willing to link the sale of
water to these assurances?
TETHYS ENTERPRISES, INC.
2722 Colby Avenue, Suite 515, Everett, WA 98201, Tel: (425) 212-4354, Fax: (360) 618-9559
Response: Our stated company goal is to “incorporate renewable energy and advanced
clean tech into every project”. As an OEM beverage supplier, we must be responsive to
the needs and demands of our potential clients. As consumer driven companies, our
clients must be responsive to the demands and sensibilities of their customers, or they
will cease to exist. If you research the top 100 companies for corporate and
environmental responsibility, all major food and beverage manufacturers, including our
target customers, are represented and have a wider representation than most other
industry groups. They will demand the same capabilities from their suppliers. The City’s
best assurance that we will fulfill this vision is current market forces.
Our clients are building new facilities to LEED standards as shown in the links below.
LEED certification covers areas such as energy efficiency, indoor air quality, water
management, renewable materials use, etc. Currently the highest level of LEED
certification for a beverage manufacturing facility we know of is Silver. In order to be
attractive to our clients and competitive with their new facilities, we plan to build at a
Silver LEED certification level or higher, based on the availability of technology and
client requirements.
http://www.thecocacolacompany.com/citizenship/news20090527_leed_bottling_plant.html
http://www.psfk.com/2009/06/pepsi-opens-leed-certified-plant-in-china.html
How will we achieve this? One element is the use of renewable energy sources. We
have investigated and continue to investigate several alternatives including wind, solar,
energy recovery, tidal and hydro electric. Our research has shown for the locations we
are considering, the most promising and practical renewable energy source is hydro
electricity generated from the excess head pressure in the water main. Despite
considerable initial reticence, we have negotiated terms with the City during the last 14
months for the right to use the excess head to generate electricity. The contract
contains detailed terms and we will make a very large investment to utilize this
resource. Our intent regarding renewable energy use is clear. While other technologies
lack the same state of technology advancement, we continue to monitor wind and tidal
as potential future sources and expect to incorporate some solar into the project for
specific point applications.
Another element is power and water management. As a brand new facility, we will be
able to use the latest in water saving and energy efficient water treatment, blow
molding, sterilization, filling, capping and labeling systems. By example, new bottling
systems use significantly less power and water for things like sterilization and cleaning
than historical systems. This reduces waste water production. We are also interested in
evaluating waste water recovery with the City and other conservation measures. These
new manufacturing systems will also have the ability to use the new biodegradable
bottles, labels and caps. Some quick research on the web will show that the major
TETHYS ENTERPRISES, INC.
2722 Colby Avenue, Suite 515, Everett, WA 98201, Tel: (425) 212-4354, Fax: (360) 618-9559
beverage companies are the leaders in the implementation of this technology. The
technology is still evolving and several types of biodegradable bottles are vying for
dominance; however we are committed to providing the latest technology to our
customers to remain competitive. In addition, we will produce beverages in aluminum
cans, glass and will be evaluating new paper packaging alternatives as well as other
technologies that may evolve.
You raised the prospect of linking the water supply contract to the use of specified
technologies. We think this is problematic for several reasons. First, technology in this
field is fairly dynamic and will continue to evolve rapidly. It would be a mistake to “lock
in” a current technology. Second, the City would be embarking on an unprecedented
level of regulation that may exceed its legal authority. We are not aware of any other
example of such strict regulation, including the current industrial water user whose daily
consumption dwarfs the project we are proposing. Third, our clients would not accept
limitations on their choice of technologies or packaging. They, and by extension we
must be able to respond freely to market forces and technology development.
3. In your presentation you indicated that you did not as yet have a specific site
for the facility. Subsequently, it has come to my attention that Tethys has
expressed an interest in acquiring or purchasing the Kimberly Clark site
owned by the City. Can you confirm or correct my understanding? Can you
share more information with the City Council regarding a preferred site and
your intentions regarding the Kimberly Clark site?
Response: We evaluated several sites along the Everett river front when we developed
our business plan. Due to its proximity to the water transmission lines alongside
highway 2, the KC site owned by the City, which currently has compatible zoning, was
one such logical site. In early discussions with the City about the project and our
property needs, the City also suggested the KC property as a possible site. While far
less developed than other sites, it has some characteristics such as size and resource
proximity that make it interesting. We conveyed our interest in the site to the City over a
year ago and have checked on its status several times since then. As we drew closer to
completing the water supply contract with the City, we decided to formally reiterate our
interest in the site. Other sites remain in contention.
4. Appreciating that this is a new business venture for you and your team, what
experience have you or members of your team had regarding similar plants,
water sales, and/or bottling operations in the United States or elsewhere?
Furthermore, are there similar business models that we might examine in the
United States?
Response: Answering this question is difficult for me because I abhor self
aggrandizement, a trait my immigrant grandmother insisted on, but I will attempt to be
responsive. I have been a global manufacturing executive for 30 years. I have a
TETHYS ENTERPRISES, INC.
2722 Colby Avenue, Suite 515, Everett, WA 98201, Tel: (425) 212-4354, Fax: (360) 618-9559
Bachelor of Science degree in Electronic Engineering from DeVry University and a
Masters degree in Business Administration from UW. During my tenure, Intermec
became a $900 million company with nearly 3000 employees’ world-wide, achieved a
market capitalization of nearly $2.2 billion dollars and listing on the New York Stock
Exchange as IN. Manufacturing, remanufacturing/repair and logistics staff approached
800 employees. We built and operated over one million square feet of manufacturing
and remanufacturing/repair plants in Everett, Washington; Cincinnati, Ohio; Charlotte,
North Carolina; Cedar Rapids, Iowa; Nijmegen, The Netherlands; and Singapore. Our
products range included bar code labels, bar code printers, wireless communication
systems, hand held computers, laser scanners and more. We managed over 4000
unique Stock Keeping Units. As President and COO, all operating units of the company
reported to me.
At Intermec we served 5 primary markets segments. These were 1) food and beverage;
2) retail; 3) government/military, 4) discrete manufacturing and 5) transportation and
logistics. Food and beverage companies were our largest customers by both volume
and revenue. Each executive was expected to be an expert in at least one market
segment, requiring intimate knowledge of company operations in the segment at all
levels. Because of my tenure, I have expertise in all five market segments. Executives
were required to sponsor at least five major accounts as well. The major accounts I
sponsored over the years included companies like Pepsi/Frito Lay and Coke to name a
few. In the quest to understand our customers, I have direct personal experience
working in beverage delivery trucks, bottling operations and distribution facilities.
Since leaving Intermec I have worked in the renewable energy sector as a consultant
and started a certified built green residential construction and development company.
My current partners have specific expertise in finance, sales, marketing and research.
During the development of this business plan, I have been advised by various experts in
fields such as clean technologies, renewable energy, banking and finance, beverage
manufacturing, civil engineering, transportation and logistics, commercial development,
shorelines management, and others. With the completion of the contract and
subsequent funding of the company, I am confident I can attract the talent needed to
execute this plan, just as I attracted the staff needed to manage a global hi-tech
manufacturing firm.
As with any entrepreneurial pursuit, we strive for uniqueness therefore our business
model is somewhat unique. It combines elements such as beverage manufacturing,
economic development, environmental engineering and utility management. As a
seasoned general manager, I feel confident in my ability to lead a team of experts in
each of these areas who will execute this business plan.
When I left Intermec over 2 years ago, I determined to build a business that would
create new living wage jobs in the community, diversify our local economy, create
prosperity and outlast me. I am convinced this plan will achieve those objectives. I
TETHYS ENTERPRISES, INC.
2722 Colby Avenue, Suite 515, Everett, WA 98201, Tel: (425) 212-4354, Fax: (360) 618-9559
believe that my unique blend of experience, education, and background make me
uniquely qualified to build and operate such an enterprise.
5. As I read the draft contract, the City would provide Tethys an exclusive
reservation of 5 mgd. Are the exclusivity provisions essential to your
business model?
Response: Exclusive reservation of the resource is a fundamental requirement. Our
investments in infrastructure, property, plant and equipment will exceed $300M. No
company or investor will make investments of this magnitude without the assurance of
long term water supply availability. It would be like Boeing building an aircraft plant with
no assurance of access to a runway. The City has provided such assurance to KC for
over 60 years. Failure to deliver such assurance sends a clear message to Tethys and
its clients about the City’s intent regarding resource allocation for job growth and the
support of commerce. Even with the required exclusive reservation, the contract
contains numerous protections allowing the City to reclaim the reserve under various
conditions. We are buying water at ordinance rates. More than adequate supply exists.
No City investments or concessions are required. The City inherits all infrastructure at
contract conclusion. Protections are provided. We see no downside for the City.
6. Does Tethys presume to own, operate and manage the business park, or is it
your intention to sell the park in part or in whole to the end user(s)?
Response: As with all business plans we have a primary objective and contingency
plans. Our primary objective is to build a large scale regional contract beverage
bottling/canning operation that serves multiple bands. We would therefore own, operate
and manage the plant, the industrial park and infrastructure during the term of the
contract.
Given the length of the contract, we expect some investors or their estates may want to
sell their interests at some future date. Thus we have insisted on the provision for
assignment of the contract should we be unable to maintain majority control of the
company. Should assignment be necessary, our tenants or clients are obvious potential
candidates for future assignment as well as other investment groups.
I hope this document proves beneficial in your evaluation. We look forward to a
successful conclusion to the contract negotiation process and are eager to move
forward with the urgent task of creating employment and diversifying our local economy.
Best Regards
Steven J. Winter
CEO
TETHYS ENTERPRISES, INC.
2722 Colby Avenue, Suite 515, Everett, WA 98201, Tel: (425) 212-4354, Fax: (360) 618-9559
Tethys Enterprises, Inc.
cc: Mayor Stephanson, City Council, Debra Bryant, Jim Isles, Dave Davis, Tim Benedict
TETHYS ENTERPRISES, INC.
2722 Colby Avenue, Suite 515, Everett, WA 98201, Tel: (425) 212-4354, Fax: (360) 618-9559