Evonik keeps innovating, growing

John Reid Blackwell | Richmond Times-Dispatch

HOPEWELL —One of the many humorous quips that Reinhold Brand likes to tell about the company he works for, Evonik Industries, is that it is in the “parent happiness business.”

The Germany-based specialty chemical maker’s numerous products include super-absorbents for diapers.

“They keep babies dry and let parents sleep and be happy,” said Brand, an Evonik senior vice president and general manager of the company’s consumer specialties division in North America. The business unit has a manufacturing plant and a research center in Hopewell that together employ about 235 people.

In late February, Evonik announced that it would invest $15 million to open a new business and innovation center in Chesterfield County. The expansion is expected to add 50 jobs over five years as the company beefs up its research.

Research and development is central to the company’s business because its product lines include not just those parent happiness-producing diaper absorbents but specialty chemicals that shoppers would not see on store shelves but that make a wide variety of products function better.

Brand, a 30-year veteran of the company, can tick off product after product that has some kind of improved performance because of Evonik’s specialty chemicals.

Some of the company’s products are used to make polyurethane foams for soft mattresses and insulation for buildings and refrigerators. Other chemicals do the opposite and work as de-foaming agents.

Some are used in toothpaste, shampoo and cosmetics. Some help make building materials resistant to water, while others help farmers use less pesticide on their crops by making spray droplets spread more efficiently on plants.

“The automobile you drive has at least 60 parts that our chemistry is essential for,” said Brand, who holds a doctorate in organic chemistry.

The Hopewell plant, a complex of manufacturing and office buildings on East Randolph Road, produces the chemicals that go into those products.

About 25 percent of the company’s sales come from technologies and product innovations that were developed no more than five years ago, Brand said. About 2,500 of Evonik’s 33,000 global employees work in R&D, at 35 locations around the world.

One of those R&D centers resides not far from the local manufacturing plant, in an unassuming building on Sixth Avenue in Hopewell where about 130 people work, including a research staff.

About 10 years ago, the company relocated some of its research and administrative operations to Hopewell from its other U.S. offices. The move was aimed in part at cutting costs, but it also was intended to help improve communications among the business, technical and manufacturing operations, Brand said.

Employment in U.S. manufacturing has been on a long decline, largely due to such trends as technological innovations that replace labor. The recession of 2008 and 2009 also delivered a blow to U.S. manufacturing employment. But Brand said Evonik was able to grow its business through the recession, and its employment in Hopewell is up about 20 percent since the recession ended.

“Our business is less cyclical” than some other manufacturing, he said. Also, certain global “mega-trends,” such as the growth of consumer markets in Asia, continue to support demand. In the developed world, including the U.S., consumers still rely on household products such as fabric softeners that contain the company’s chemicals.

In a downturn, “maybe people trade down to value brands,” he said. “But we are basically in all these brands.”

The company hashad a presence in Hopewell since 1980, when it was Goldschmidt Chemical Corp. A series of mergers and acquisitions by the German parent company led to the name change to Evonik.

The parent company reported in March that its markets were “tougher than anticipated” in 2013, with slow growth in North America and Europe putting pressure on prices, but global volumes increased. The company reported a higher profit for 2013 than the year before, mainly because of the divestiture of a business unit. It said it expects sales to rise slightly this year.

Because of the importance of product innovation in driving future sales, the German parent company said it has increased its research and development spending by about 9 percent a year since 2009. With a larger staff locally and the expectation to add more in the future, Brand said the company has outgrown the Sixth Avenue office.

“That building is too small for us, and we had to make a decision,” he said. The company needed a new research site, and it considered moving the R&D operations to New Jersey or Indiana.

“All in all, we had good reasons to stay where we are now in Virginia instead of moving everybody, which would most likely cause a lot of attrition,” Brand said.

Also, the company found a good home for what it calls its new “business innovation center,” a 93,000-square-foot building in the Chesterfield County Airport Industrial Park that will double the size of its local R&D.

The building was formerly the home of a Philip Morris USA product research subsidiary. Philip Morris’ parent company, Altria Group Inc., put the building up for sale in 2009 after consolidating some of its local offices.

About 130 of Evonik’s current employees will move from the Hopewell office to the new site, which the company plans to renovate and open in about a year, and 50 jobs will be added over five years.

Evonik’s expansion represents growth in an industry cluster that local economic development officials have been targeting: advanced manufacturing.

In their search for new investments in that industry, economic development officials are looking overseas. Evonik is one of about 150 internationally owned companies based in 30 countries that have a business presence in the Richmond region, according to research by the Greater Richmond Partnership, a regional economic development organization.

German companies represent the largest cohort of international firms with local operations, said Gregory Wingfield, the partnership’s president and CEO.

A team of local economic development officials is attending a trade show in Germany this week to recruit companies to the area.

Since 2004, international companies have announced 418 new investments or expansions of existing operations in the region that the partnership serves. Those investments amounted to about $3.8 billion and created about 25,000 jobs, the partnership said.

“Over time, what we have seen is that we have had more international investment made in this area,” Wingfield said. The trend has been for those projects to be more capital-intensive and creating fewer jobs than would have been created a decade ago or more, signaling that companies investing in the region are relying more on technology and equipment for productivity gains rather than manpower.

Brett Vassey, president and CEO of the Virginia Manufacturers Association, said he, too, is expecting to see European companies look to make U.S. investments as the domestic economy rebounds. He said Evonik’s investment in R&D here is a coup for Virginia because it means the company is more likely to look to this region for future expansions.

“I think we are going to see more in the future,” he said. “That is our anticipation from them and more European companies in general.”

Investments by German companies in particular have come in waves over the past 30 years, Vassey said. The chemical manufacturing sector, which employs about 15,000 people in Virginia, is in a growth phase now, driven in part by lower natural gas costs, he said.

“Companies are looking at investing in technology to be more competitive and productive,” he said. “They are trying to be more innovative with their workforce. They are being more creative about the type of individuals and the skill sets that they bring on board.”

Brand said the new business and innovation center in Chesterfield will not only double the company’s laboratory space but also enable it to do different types of research.

“We will not only do development and technical adoption, but we will do all the chemical research,” he said. “This requires a different type of laboratory.”

“We are getting much deeper into science here,” Brand said. The 50 new jobs will be mainly for people with technical training in chemistry and engineering.

“We have great universities here to support that,” he said.

Evonik also is focusing its research on how to develop its products for use in new markets, one of them being the oil and gas industry. The research staff is working on ways to use its products to help drilling equipment run more efficiently without overheating and with less environmental impact.

“We want to replace an old 1950s product with a new product that is biodegradable but performs the same way,” said Dennis Parrish, a technology manager at the research center. Some of the same chemistry that applies to making household products can be used in oil and gas mining, he said.

“Our businesses can be 50 years old in some cases, but we keep innovating,” he said.

For example, Evonik researchers develop the chemicals that go into paper to make soft tissues. Specifically, the company’s products put the softness into soft tissues.

“A layperson would not know how much technology goes into a simple tissue,” Brand said.

And the company’s products also go into lotions and sunscreen to make them feel smooth on the skin. That’s where Brand likes to deliver another quip. He told the people gathered in February for the company’s announcement of its expansion that they should think about that when they go to the beach.

“When you use sunscreen and you feel that smooth, silky feeling on your skin,” he said, “think about Hopewell.”

Copyright Richmond Times-Dispatch.  Used by permission.