FORESTS FOR SALE American Can's marketing strategy: lots of little lots.
By - John Paul Newport Jr.

(FORTUNE Magazine) – AMERICAN CAN has a packaging problem. The company, which has diversified into consumer goods and financial services, would dearly love to bundle some half- million acres of timberland it owns into one big parcel, sell it quickly, and be done with the forest products business. But these days virtually no one is snatching up Paul Bunyanesque tracts of 100,000 acres or more. So American Can has dispatched a vice president, Mark H. Friedman, 44, to peddle the forests in small retail parcels -- 250 acres and up -- to whoever can slap down the cash. As part of a 1981 corporate restructuring, American Can sold off most of its forest products division to James River Corp. But the timberlands didn't appeal to James River, and may have been beyond its financial reach. American Can tried without luck to find another buyer for the land -- half in the South, half around the Great Lakes -- which it values at $220 million. Finally a consultant, William Sizemore of Tallassee, Alabama, saw the forest for the trees: ''It struck me that larger tracts were undesirable even to the people who could afford them, but the smaller tracts were selling well.'' He calculates that a 100,000-acre tract now brings 44% less than its theoretical peak price in 1981, whereas a 10,000-acre unit will move today at a mere 10% discount. ''More people can afford the smaller-size packages,'' he explains. On Sizemore's advice American Can last fall divided the land into 11,000-acre lots for sale, and in March it decided to sell even smaller parcels. In 25 transactions so far, the company has sold or placed under contract 54,000 acres for $33 million -- a take that analysts consider superb, given the market. To find prospective buyers, Friedman circulates at forestry conferences and sends letters to local citizens identified by American Can's staff. The biggest buyer -- 23,000 acres for $16.9 million in two transactions -- has been Gulf States Paper, a private firm in Tuscaloosa, Alabama. The Delaney family of Mobile, which owns real estate there, bought land next to existing properties as an investment. And for $120,000, Kelly Mosley, 82, a retired Southern Bell vice president, bought a 120-acre Alabama forest, mostly to keep someone else from buying it and then straying onto Mosley's land next door to hunt. American Can doesn't expect to sell all of its timberland this way -- there probably aren't enough small-time buyers in the woods. Friedman thinks that pension funds will start investing big in timber -- perhaps as much as $1 billion in the next five years -- and that the market has hit bottom. But even British financier Sir James Goldsmith, who has been buying stock in U.S. forest products companies, seems uninterested in the estimated seven million to ten million acres of timberland actively for sale in the U.S. today. Some security analysts who track forest product stocks think most sellers are overestimating potential buyers' willingness to wait 30 years or so for trees to grow so that they can realize the full value from their investment. According to this view, the asking price for forests will have to fall. American Can's small-package solution seems to be beating the game for now. But for those who might want to buy a parcel or two, it might be wise to wait.