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Entwined

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Entwined

It’s how a family grew its business and resurrected a Tar Heel industry.
by Frank Maley

Outside Duplin Winery, rain is crawling across the coastal plain toward Rose Hill. Inside, David Fussell retreats from a brightly lit gift shop into a dark room where grapes once passed into their afterlife. These days, it’s a classroom for growers and wine lovers. Tables and chairs face a big-screen TV and stage. Display cases tell the history of winemaking in North Carolina. Next door is a restaurant that offers live entertainment, including dinner theater.

All this is for show, a marketing tool. The wine sold here is made a few blocks away, just outside the town limits in a cluster of no-nonsense metal buildings that a sign identifies only as a “federal bonded winery.” With tank capacity to produce 750,000 gallons a year, Duplin Wine Cellars Inc. is the largest winery in the Southeast. It’s also the biggest muscadine winery in the world.

Fussell, 63, is eager to show a new video about the company’s history. Duplin, which opened in 1975 and is the oldest operating winery in the state, bottled its millionth case last year. It sold 176,000 cases, reaping $8 million revenue. But the tape doesn’t tell the whole story. Not hardly. His mother had warned him not to open a winery. So had his grandmother. His wife wondered if he had lost his mind. “You can’t do that,” she’d told him. “We’ll be run out of town.”

His sons started the winery in a warehouse behind D.J. Fussell Sr.’s general store in Rose Hill.

Back then, even selling wine was illegal in Duplin County. Making it would enrage preachers, prohibitionists and prigs. People sent hate mail. Some told his family they were going to hell. His oldest son, now company president, fought with other kids over where his kin would spend eternity.

But Fussell held firm in his belief it was the right thing to do. Before going public with his plan, he had prayed over it three months and searched Scripture for clues. One day, he knelt in his study, clasped his hands and tried again. This time, he believes, the Lord answered. No burning bush or blinding light, not even a voice, just thoughts running through his head.

 

“David, go on and do it.”

“Why, God?”

“Because it’s going to help people.”

“What do you mean it’s going to help people?”

“Just trust me. It’s going to help people.”

A little wine, the Bible says, is good for the belly. Muscadine wine, medical research says, is even better, rich in compounds that help prevent cancer and heart disease —which nobody knew then. But before the winery could help anyone, David Fussell would have to go through his own hell, one born of bad breaks, bad decisions and brain chemistry. Things reached the point where, for a time, he could not pluck up the courage to crawl out of bed and go to work.

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Truth be told, it was Dan’s idea to start a winery, just as it had been his to start growing grapes. Fussell and his older brother had long wanted a farm, so in 1972 they bought 132 acres with $4,000 of savings and a $52,000 federal loan. Dan, a carpenter, researched what to grow. State agriculture officials were pitching muscadines. Word was that a New York winery was paying $350 a ton. Over the next three years, the Fussells poured about $30,000 into a 10-acre vineyard.

But muscadines glutted the market, tumbling to $150 a ton. The Fussells didn’t have winery contracts and, as their first harvest approached in 1975, realized they might not have a market. Profits from tobacco, hogs and other products couldn’t cover the loss. Starting a winery seemed the only way to avoid losing the farm.

Before Prohibition, the native grape had made North Carolina the nation’s top wine-producing state and Edgecombe County native Paul Garrett’s Virginia Dare the best-selling brand. But the industry hadn’t bounced back with repeal. There were 25 Tar Heel wineries at the turn of the century, but only 12 remained in 1947. All had closed by 1950. Another, built in the mid-’50s to provide Onslow County growers a market, closed in 1968. To stimulate new wineries, the legislature in 1972 cut the state tax on native table wine from 60 cents to 5 cents a gallon. That same year, one opened near Edenton but would shut in 1980 after its principal owner died.

So it wasn’t exactly a booming business the Fussells were getting into. Tastes had changed. People preferred wine from European vinifera grapes, like those from California. And there was their neighbors’ opposition to what would come to be called “the factory of liquid sin.” A Methodist lay speaker, Fussell would have to quit his job as assistant headmaster of Harrells Christian Academy and resign as president of the local Full Gospel Business Men’s Fellowship chapter.

"I went to bed for three months and pulled the covers over my head. I was severely depressed."

The town board wouldn’t give them a permit, so their daddy — a local home builder, merchant and county commissioner — persuaded a friend, state Sen. Harold Hardison, to push through a bill to get around that. With a state permit, what Fussell had taken as God’s blessing and a promise to their mother that they wouldn’t open on Sundays, he and his brother set out to become the Ernest and Julio Gallo of muscadine wines.

Their dad — D.J. — let them use the warehouse behind his general store as their winery. They still had a problem: They did not know how to make wine. As Methodists, they had taken an annual pledge not to drink alcohol — though Fussell admits he had broken it a few times. They visited the winery that had closed in ’68 and the one still open and did research in grocery stores, seeing what was being sold, getting ideas for labeling and buying some to sample.

In ’75, they made enough, about 250 bottles, to experiment with, stomping grapes in a 5-gallon pail until Dan built a crusher. The next year, they sold more than 400 cases, could have sold more and increased production. They sold the farm in ’78, and Fussell bought his brother’s share of the winery. In ’83, the company borrowed $500,000 to build its current winery. It sold 47,000 cases in ’84 but was heading for trouble. It wouldn’t reach that volume again until 2001.

The state scrapped the preferential tax rate in 1985, which raised the price of Duplin wine in North Carolina, its only market. Distributors also had told Fussell that out-of-state wineries were pressuring them to keep Duplin off store shelves. His response was Southland Estate Winery Inc., which, despite its name, was essentially a big store along Interstate 95 near Selma. It could sell the wine Duplin made to passing motorists. Shares were sold, and Southland went public in 1986, with Fussell as president.

“Running Duplin plus all of this, he was just a tremendously busy guy,” says his wife, Ann, who also was on the Southland board. “He did not have any fun at all. He worked. That’s all he did.” Duplin poured about $360,000 — every dollar it could spare — into Southland and was its largest stockholder, but it owned only a third of the shares. “He didn’t get control,” his father recalls, “which was a mistake.”

Soon after the store opened in 1987, some board members grew suspicious of his motives, Fussell says. They wanted Southland to build its own winery and, later that year, elected someone else president. Sales were low. Worry kept him up at night. Both businesses, he feared, were doomed. He might also lose his house, which he had used as collateral when he bought out his brother. Dan was going through a divorce, and his wife wanted her share of the money Fussell still owed. Their father bought the note, which kept a roof over Fussell’s head.

But that couldn’t keep the black dog from the door. “I could see him getting sicker by the minute,” his wife recalls. “He was just overwhelmed with all this guilt. And the more he got sick, the more I got angry. I’m going, like, ‘Don’t these people see what they’re doing to him? If they only knew how much this guy has worked and struggled with this.’” He skipped Thanksgiving dinner that year — “I wasn’t that thankful” — then stopped going to work. “I went to bed for three months and pulled the covers over my head, basically. I was severely depressed.”

He wanted to close the winery, which his dad thought was a good idea. Ann wouldn’t let them. Though she had been against opening it, they had been through too much together since then, she and this man she had married when he was 20 and she 19. They had been high-school sweethearts, and she had followed him to East Carolina University, earning a bachelor’s in elementary education in 1964, the same year he completed his master’s in school administration.

But her efforts to keep Duplin alive to give him something to come back to only made him more depressed. “You’re ashamed that you’re not man enough to face these problems and shake them off. It got to be a spiritual battle in my mind. I was not worthy: My wife would be better off if I was gone and she could remarry somebody a lot better than me. You get to thinking all kinds of funny, crazy thoughts when you’re depressed that you shouldn’t be thinking.”

Fretting he might kill himself, she feared leaving him alone, taking him to his mother’s house in the morning and, after working all day at the winery, picking him up at night. If he got up during the night, she did, too. Dave Jr. came home from ECU weekends to watch him so she could get some sleep. “Sometimes,” she recalls, “you were really angry because you were the one getting up and going. And look at him: He’s sitting in the bed. But you knew he was too sick to say anything to him. If I wanted to yell, I didn’t. I’d go and pray.”

"The health issue has made all the difference in the world, both in sales and also acceptance."

After a few months, she found a doctor who prescribed Dilantin, used to combat epileptic seizures. Within a few days, Fussell was thinking more positively. She gave him small tasks to keep his mind off his troubles and build confidence. In February 1988, he went back to work but still struggled with depression — and still thought the winery was a goner. “I even went to our banks and told them, ‘We can’t pay you.’ I said, ‘Foreclose on us.’ They said, ‘No, we don’t want it. You stay there and make as many payments as you can.’ That’s when we started selling 30 cents-a-gallon wine. We sold off all of our big tanks, anything that was of value.”

To bring in more money, Fussell — who had earned a doctorate in education in 1974 — got a job with the school system teaching academically gifted children. He handled the winery’s finances while his wife ran it. Within a year, he was off Dilantin. After Dave Jr. got his bachelor’s in economics in 1990, he took over, and she taught fourth grade. Southland filed for bankruptcy in 1991. Duplin struggled on.

Since the age of 7, Dave Jr. had spent a lot of time at the winery, working in the bottling room with a handful of people, including relatives. But working someplace isn’t the same as running it. He struggled to keep the winery going with one employee. It sold about 5,600 cases his first year, grossing $150,000, losing $32,000. “We would bottle some wines. Then we would work up here selling it to people. And I’d visit a distributor maybe once a year, not knowing what to do, where to go. Didn’t have much direction.”

Hiring another employee freed him to pay more visits to distributors. He began building relationships. He’s good at it, better than his father, who is the first to admit it: “I couldn’t talk with those folks. My first delivery was to Raleigh, and we took our hog trailer and washed the manure off of it and put the wine cases on it. And when I went to the distributor, they laughed at me. We were on different wavelengths. I was not a golfer. I was not a partyer. I was not a man about town. Dave Jr. is. He wines and dines them. And it takes that kind of thing.”

Though Fussell can be as charming, he has an edge to him. He was elected a county commissioner in 2004, but he’s not the politician his father was, says Larry Howard, who has been on the board with both. “His daddy was shrewd. His daddy knew how to go about getting what he wanted. He wasn’t as aggressive as David is.” For his part, Fussell admits he has become more assertive — a trait he says could have been a real asset earlier in his career.

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He returned to Duplin full time in 1994. Things were improving, but the winery had yet to have a profitable year. In ’95, 60 Minutes aired a report that said substances in wine can raise the level of the good cholesterol that prevents heart attack and stroke. Suddenly wine was a health food. Duplin made its first profit that year and has been profitable since. Subsequent studies have shown that muscadine wine has more of those compounds than other wines. “The health issue has made all the difference in the world, both in sales and also acceptance. We have a lot of folks who drink a little Duplin wine every day religiously for their health purposes. I don’t see as much animosity now.”

In 1997, the Fussells started Resveratrol Inc. — named after a substance abundant in muscadine wine — to make and market health-care products, including a dietary supplement and skin creams, derived from grapes. It isn’t profitable yet, but Fussell thinks it has tremendous potential.

Dave Jr., 38, became president of the winery in 2004. Fussell says his three sons — Patrick, 36, runs the vineyard; Jonathan, 30, heads retail operations — are calling the shots, but he still gives advice, solicited or not. “If he won’t like it, we don’t let him know about it,” Dave Jr. says. “We do it anyway. But if he says we’re going to do something, then there ain’t no way of stopping it.” The family owns 62% of the company — Fussell’s 27% is the largest share — and growers who were paid in stock when Duplin couldn’t pay cash own most of the rest.

The family has a 37-acre vineyard on a 70-acre farm it bought in ’96, but Duplin gets almost all its grapes from 43 contract growers in three states. It has about 35 full-time employees, and sales are expected to push 200,000 cases this year. Duplin still isn’t well-known outside the state, but it moved into South Carolina six years ago, Virginia and Georgia in 2004 and Tennessee earlier this year.

Since it was founded, there has been a renaissance in Tar Heel winemaking, especially since growers have shown vinifera can be cultivated in the Piedmont and mountains. With 53 wineries — five opened last year, with 10 more expected by the end of this year — the state ranks 12th in wine and 10th in grape production. “Last year, all the North Carolina grapes were not consumed,” Fussell says. “A lot of them went unharvested on the vines. Plus this year, we’ve got a lot more going in the ground. And the market hasn’t increased that much. So it’s scary to me because I’ve seen farmers hurt.”

To some extent, he has himself to blame for the growth. Not only did he pave the way, but he has been generous in sharing what experience has taught him. “I’ve been in his office when vinifera winery owners called him, and they’re not calling to ask him how his day was,” says Randy Drew, who is making a video about the industry’s resurgence for the North Carolina Wine & Grape Council. “They’re wanting information.”

It’s only fair he is generous with his time. Others have been generous to him, especially his dad, who at 92 still holds the mortgage on the winery’s gift shop-restaurant complex. “Don’t ever lend money to your sons,” Fussell jokes, “because they won’t pay you back. We owe him approximately $1.3 million today, with accumulated interest.”

“Well, you probably owe $2 million,” his father replies.

The winery is Duplin County’s biggest tourist attraction, according to Woody Brinson, the executive director of the county’s economic-development commission. Fussell estimates it drew 75,000 visitors last year — including church groups. Dave Jr. hopes to put a vineyard and perhaps a hotel, farmer’s market and champagne cellar within sight of I-40 to lure passersby. “The whole deal for us is to try to get folks to come to Rose Hill and have a good time at the winery and leave with a couple of bottles and then when they get home continue buying a couple of bottles.”

But the winery still doesn’t get top billing in its hometown. Signs welcoming visitors and banners along its streets proclaim it the home of the world’s largest frying pan, a monument to the region’s poultry industry. Why no signs proclaiming Rose Hill the home of the world’s largest muscadine winery? “I don’t think politically, right yet, it’s the right thing to do,” Fussell says. “But the time will come. The time will come.”

Developer is able to fill in the blanks

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People – April 2006

Developer is able to fill in the blanks
By Chris Roush

David A. Spetrino Jr. always liked to build things. As a kid, it was tree forts in his Dumfries, Va., backyard. When he finished one, he would tear it down and try a new design. In high school, he was a carpenter’s helper in nearby Dale City, framing houses. While attending Radford University, he shifted gears and got a real-estate license. Even then, he bought and renovated houses for rentals, and during summers, he would build barns.

Today, Spetrino, 34, is president and owner of Plantation Building Corp. in Wilmington. The company, which specializes in condo and other residential construction, should top revenue of $28 million in 2006, up from $25 million last year.

Todd Toconis, who owns Town & Country Real Estate in Wilmington, says Spetrino is fueling the redevelopment of downtown. “He specializes in taking vacant lots in the inner city and putting them back into productive use. It’s the best use of our space with the growth that’s hitting the coast.”

It took Spetrino time to find his way back into construction. After graduating in 1992 with a degree in operations management, he wanted to stay in Radford, so he opened DazTech, which made T-shirts and jerseys for fraternities and sports teams. “I was making money, but it wasn’t what I set out to do.”

In 1997, he sold DazTech and began looking for a place to open a construction business. Once he settled on Wilmington, he and partner Dave Nathans started Plantation Building. Nathans, 10 years older, had a contracting business, Cornerstone Restorations. One of their first projects was the restoration of Graystone Inn, a bed and breakfast.

The son of a teacher and a Vietnam War Navy veteran who is a security consultant for the CIA, Spetrino says his views on development were formed while he was in high school. He got bored with “seeing house after house go up that all looked the same.” In 2004, Spetrino bought out Nathans. Plantation, which has 25 employees, no longer renovates older homes.

In late 2004, he finished Brooklyn House, a new building designed to look like a 1920s hotel. It has two stores and 24 lofts and flats. After that, Spetrino says, “I felt like I could do anything.” In November, Plantation broke ground on another downtown condo project. Also in the works are nine town houses in the historic district and another project near the waterfront. “Downtown just has a vibe to it now.”

His other focus is his own home. He excavated a parking lot in the historic district, and workers found a fireplace and ceramic pottery. He will build on top of the site so it won’t be ruined. “I’ve always lived in renovated homes or spec houses, so this will be truly my home.”

Charlotte companies slip south of border

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Tar Heel Tattler – April 2006

Charlotte companies slip south of border

By Frank Maley

Charlotte recruiters know well the warm feeling of slipping their hands into pockets of other cities and pulling out corporate headquarters, offices or factories. But lately, they’ve been reminded too often how awful it feels to have their own pockets picked. And to make matters worse, the beneficiaries have been the city’s economic- development partners.

In February, Sharonview Federal Credit Union opened its new home in Lancaster County, S.C., just over the state line from where it was founded in 1955. Since November 2004, at least four other Queen City companies have announced similar moves. “There has been some talk that the South Carolina counties are actively recruiting up here in North Carolina, which we do not believe is the case,” says Angie Lawry, vice president of community relations for the Charlotte Regional Partnership, an economic-development group for 12 counties in North Carolina and four in South Carolina.

The Inspiration Network, a Charlotte-based Christian broadcaster, plans to move, taking at least 250 jobs, to Lancaster County in 2008. South Carolina officials were helpful but didn’t initiate contact, says John Roos, the network’s vice president of corporate communications and research. What attracted it was 93 acres of reasonably priced land five miles from the interstate loop around Charlotte. State incentives merely sweetened the deal, Roos says. Charlotte has a hard time competing because cheap land is scarce and it can offer incentives only for additional hires, while South Carolina can count existing jobs that move as new.

Normally, the Charlotte partnership wouldn’t care if a company moves over the state line, as long as it doesn’t move out of the region. But suspicion about South Carolina has grown loud enough that the partnership commissioned a study on why companies are moving, what beyond income-tax revenue the state loses and what, if anything, should be done about it. “It becomes an issue when it threatens to tear the region apart, and we don’t want that to happen,” Lawry says. That’s because the Palmetto State counties push the region’s population past 2 million and its work force to more than 1 million.

Ideas being floated include special North Carolina incentives to keep companies in Charlotte, persuading South Carolina to block incentives for companies moving from Charlotte to a neighboring county and cooperative ventures in which the states share incentive expenses and tax revenue. “We are missing the opportunity — North and South Carolina — if we’re spending our time fighting to retain existing businesses,” says Bob Morgan, president of the Charlotte Chamber of Commerce. “What if we were working together to apply those resources toward the attraction of new business that would be beneficial to the entire region?”

Bank finally gets on track with NASCAR

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Sports

Bank finally gets on track with NASCAR
By Chris Roush

In 1977, when H.A. “Humpy” Wheeler was general manager of Charlotte Motor Speedway, it received its first loan from Charlotte-based NCNB Corp. The racetrack used the $2.2 million to add 10,000 seats, 17 VIP suites and a new press box — and quickly repaid the loan with ticket proceeds. “When the money started coming in, the banks smelled it,” Wheeler recalls. “They have a good way of doing that. We had managed to make enough money by then to show them that we were on the move, and they began to understand our business.”

Speed ahead nearly 30 years. Wheeler is president and chief operating officer of Speedway Motorsports Inc., the Concord-based company that owns what is now Lowe’s Motor Speedway and five other tracks that hold NASCAR races. After acquiring dozens of other banks, NCNB is now Bank of America Corp., the country’s second-largest bank in assets.

Despite its North Carolina roots and long relationship with the racetrack, Bank of America didn’t rev up its NASCAR relationship until last June. That’s when it signed a five-year deal to put its name on a 500-mile race there, beginning this October, and become an offi-cial sponsor at four of Speedway’s other five tracks. In late February, the bank inked a similar pact with Daytona Beach, Fla.-based International Speedway Corp., the other major NASCAR track owner. It also has agreed to sponsor a pre-race TV show this season on NBC and TNT.

Decades after other national companies such as Coca-Cola and Procter & Gamble plunged into NASCAR, the bank plans to spend millions using stock-car racing to attract more customers. Putting its name on what will be the Bank of America 500 is costing an estimated $2 million a year. Sources say it’s spending millions more on advertising during NASCAR races.

But some question whether BofA already has been lapped by the field. By sitting on the side-lines for 20 years, it missed the growth spurt when NASCAR-related merchandise sales increased tenfold and races were started in New Hampshire and California, among other locales. NASCAR’s new eight-year, $4 billion TV deal, announced in December, was less than analysts had expected and caused the share price of Wheeler’s company to fall.

“The question is, what took them so long?” says Larry DeGaris, director of the Center for Sports Sponsorship at James Madison University in Harrisonburg, Va. “NASCAR still has a certain amount of bigotry against it that’s not rooted in fact. There is enough demographic data about the sport that has come out that should have caught people’s attention.”

Financial-services companies have always put their primary sports-marketing focus on golf and tennis, sports favored by upscale customers. BofA had recognized part of NASCAR’s growth potential as early as 1993 when it set up a division to manage money for professional athletes such as driver Jeff Gordon. “What corporate America is waking up to is that there are a lot of people who like nothing better than to spend the weekend at a track,” says Paul Swangard, a University of Oregon professor who teaches sports marketing.

Racetrack owners for years had approached BofA and other banks about sponsorship deals without getting much interest. Wheeler thinks he knows why. “The tracks tended to be underfunded, and banks don’t like underfunded things.” In 2001, the Concord track finally struck a six-figure deal — with RBC Centura, which has a Canadian parent — to be its official bank.

Wheeler attributes BofA’s changed mindset about NASCAR to one person — corporate marketing executive Cathy Bessant, who has been leading Charlotte’s efforts to win the NASCAR Hall of Fame. A Michigan native who grew up around racing, she became the bank’s top marketing executive in 2001. “What Cathy saw is what those of us in the business knew, that those people in the grandstands are working people and they have checking accounts and borrow money and they pay it back,” Wheeler says. The bank declined to comment about its NASCAR strategy.

Also pushing BofA to understand the benefits of NASCAR marketing was its $35 billion acquisition last year of MBNA. The credit-card company has had its name on a race at the Dover, Del., track for years, sponsored a car and issued cards adorned with current and former drivers such as Dale Earnhardt, Tony Stewart and Bill Elliott.

BofA also has seen success in its other sports-marketing ventures. It is the official bank of Little League and Major League Baseball and sponsors the Bank of America Colonial golf tournament in Texas every year. It’s also an Olympic sponsor, and studies have shown that people are 33% more likely to bank with a company that supports Olympic athletes. All told, the bank spends an estimated $80 million a year on sports marketing.

According to market research, NASCAR fans are twice as likely as nonfans to purchase sponsors’ products and services — 72% do. On average, they also have a higher income than the U.S. population. For example, 22% of NASCAR fans have an annual income between $50,000 and $75,000, compared with 18% of the U.S. population.

BofA will use its sponsorship at the Concord track to set up hospitality tents and court more business, Wheeler says. He expects the bank to add brochures about the race in its local branches and install ATMs around the speedway as well. “Just their name on the event is going to take this up another step. It’s about as prestigious as you can get from a sponsor standpoint.” There will also be BofA signs throughout the track — and at the other speedways.

But just writing a check to NASCAR doesn’t guarantee a return for any sponsor. For its marketing to be successful, BofA needs to develop a unified theme focused on the experience of the fan, DeGaris says. That means coming up with promotions such as sweepstakes or coupons that will make fans want to bank at its branches. “They know that they will be successful. They are approaching the sport in a very deliberate way and creating assets.”

As for Wheeler, he believes that the banking industry fully understands the benefits of doing business with NASCAR. His company has a $250 million credit facility from a consortium of banks. The lead lender: Bank of America.

A lot of hot air

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A lot of hot air

 

As it rises from the dewy earth at dawn, a hot-air balloon slips the bonds of science to become poetry. But first, in a birth that melds art, craftsmanship and technology, it must rise from fiber, fabric and wood on a factory floor. That’s the role of FireFly Balloons Inc. in Statesville.

The 18-employee company is one of the nation’s largest balloon makers — it has only three or four competitors — with a production goal of 100 balloons this year. They will range from as tall as a five-story building to double that size. Many will be classically round, in rainbow hues. Others will be shaped to an owner’s fancy, such as the one for an evangelist that depicts Jesus. “When they inflated it, it was on a foggy day and, as it came up, it looked like Christ rising from the clouds,” General Sales Manager Jack Ponticelli says.

The company was started 34 years ago in Charlotte, then moved to a chicken farm in Iredell County. It changed hands in 1982, moved to Statesville and became Balloon Works. In 2005, a Statesville-based holding company, Dawson Asset Man- agement Inc., bought it. One thing hasn’t changed. “Everything’s done by hand,” says Ponticelli, a balloonist, former jet mechanic and one of the company’s principals.

Balloons are stitched from a closely woven polyester coated with a flexible acrylic sealant to make it airtight. If the balloon requires graphics, the design is projected onto the fabric as it hangs on a wall at the 28,000-square-foot factory, then traced in chalk, cut and appliquéd onto the shell. As many as 36 gores, or sections, are stitched into a large balloon.

Safety is paramount. One innovation developed here is the use of ropes stitched into channels in the skin of a balloon. That relieves stress on the fabric — in other designs, the entire shell is under stress — and prevents rips or tears from spreading. Hanging beneath the balloons are traditional wicker baskets crafted of reed and rattan.

A balloon usually takes two to six weeks to build, depending on complexity. The Jesus model took about a year and cost the customer more than $100,000. Most are cheaper — about $30,000. Who buys them? Hobbyists, balloon racers, businesses that sell hot-air balloon rides and companies seeking an aerial bill- board — Re/Max, Hardees and Michelin among them.

The final step — the freedom of the air. “It’s not where you’re going but how you’re going to get there. It’s the most basic form of aviation,” Ponticelli says. “You fly with the wind.”

$5.5 million gets you a giant fixer-upper

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Tar Heel Tattler – April 2006

$5.5 million gets you a giant fixer-upper

Long, long ago — at least in cybertime — there was the dot-com boom. Five years after it went bust, its echo is producing the ultimate handyman’s dream. It’s 23,000 square feet, and the two-lane bowling alley is nice on days when the tennis court is damp.

The Tuscan-style abode in north Raleigh doesn’t challenge the 175,000 square feet of Asheville’s Biltmore House, the nation’s largest private home, for sheer volume. But this one is for sale. The house recently was the largest on the market in North Carolina. The asking price of $5.5 million is modest but comes with some small print: The buyer has to finish the house.

“It’s a dream interrupted,” says David Rutledge, president of The Rutledge Team, the Raleigh real-estate company selling the house. The dream belongs to Michael Le, chief executive of International IT Services, a software-development company founded in 2001 just after the boom began to fade. It has prospered anyway, partly by shifting work to China, Australia and Le’s native Vietnam. But that means he spends much of his time away from Raleigh. That leaves the house — work halted in 2003, when the exterior was about 95% done — more than he wants to juggle.

It has three floors, with the bottom devoted to recreation — the bowling alley and a 50-foot-long swimming pool. There are 11 bedrooms and 101/2 baths. The 20 rooms include a 42-by-24 living room. The outdoor kitchen is connected to the main house by a covered walkway. The interior is at the drywall stage. It’s on 10 wooded acres about 10 minutes from downtown.

Because it has not been finished, financing might require a bridge or construction loan. Then again — listen up, dot-com survivors — cash would be just fine.

By Edward Martin

Corrections

The largest-employers list in the February issue had Hickory-based Alex Lee Inc.’s headquarters in another city.

You don’t change a lot converting to his system

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People – March 2006

You don’t change a lot converting to his system
By Kathy Brown

Call Bruce Thomas a driving force behind buses, tractor- trailers and other heavy-equipment vehicles. He has marketed them or technology for them more than 25 years. His latest product — a bypass-filtration system that he says will allow tractor-trailers to go 360,000 miles between oil changes — could put him in the fast lane.

The system, which costs roughly $1,000 to buy and install, filters much smaller particles of grit and other contaminants from motor oil than conventional filters, extending an engine’s life and improving its fuel efficiency about 3%. It also means the oil can be used longer. Tractor-trailers typically need oil changes every 15,000 miles — 10 a year at nearly $130 each.

Thomas, CEO of High Point-based CleanTechnics International Inc., says the system will save about $1,400 in operating costs per truck the first year and $2,400 annually after that. The four-employee company had sales of $220,000 in 2005. He anticipates $4 million this year.

Matthews-based Harris Teeter has been trying out the system on five trucks since last summer. “These test results have shown me that the CleanTechnics International’s filter extends service intervals well beyond what was thought possible,” says Mike Ellis, the grocery chain’s maintenance supervisor. Clinton-based Sampson-Bladen Oil Co., which distributes petroleum products, also is testing it.

CleanTechnics, started in April 2004, is the latest venture for Thomas, 51. After getting a bachelor’s in religion from Washington & Lee University in 1977, the High Point native took a job in charter-flight sales with Greensboro-based Atlantic Aero so he could focus on his love of flying. He was training to be a commercial pilot until going into sales at Thomas Built Buses, the High Point company his great-grandfather founded in 1916. He was commercial-sales manager when he left in 1986.

Four years as a stockbroker followed, then Digital Recorders, at the time based in Durham, hired him as vice president of sales and marketing for equipment that announces stops on bus routes. He left in 1998 for a similar job with NextBus, a California startup that used global-positioning satellites to let passengers know when buses would arrive. In 2002 he bought Artisans’ Guild, a small High Point furniture company.

He heard about a Austrian company that had developed a new filter system and bought the nonAustrian sales, manufacturing and distribution rights, plus an option to buy the rest of the company by 2008. Thomas plans to move manufacturing to North Carolina.

He’s pushing the system at a time when cost increases have pushed fleet managers to seek ways to cut expenses. “The stars and moons are in proper alignment.”

“Then Jim Black pulled all these shenanigans,” Sinsheimer says. “A lot of my Democrat friends don’t understand why I’m doing this. Good government is more important than party loyalty.”

State wants company’s jobs, not its business

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Tar Heel Tattler – March 2006

State wants company’s jobs, not its business
By Frank Maley

When a company offers to create 900 well-paying jobs, it’s usually a no-brainer for the state Commerce Department. Officials craft an incentive package to cinch the deal and rush to get it signed before another state ups the ante.

But it’s not so simple when the company offering to create the jobs is Lincolnshire, Ill.-based Hewitt Associates Inc., a human-resources outsourcing and consulting company. Hewitt makes money — about $2.8 billion in revenue in 2005 — mostly by persuading companies to get rid of HR and other employees and let it do their work. Which means that adding 900 jobs to the 600 in Hewitt’s Charlotte office could have happened by eliminating more jobs among its Tar Heel clients. Case in point: Hewitt won a contract with Charlotte-based Wachovia last year to provide payroll and other services. The bank eliminated at least 219 jobs and says Hewitt hired 168 of those it let go to do the work. Hewitt wouldn’t say.

The state’s solution: Offer Hewitt a package that could total $8 million but ask it not to do business — or much business, anyway — in North Carolina. The state wrote into the deal that most new jobs must replace out-of-state jobs. But it allowed 135 hires for work previously done in North Carolina by clients to count toward the 900 that Hewitt needs to max out its incentives. The state, in essence, will be paying to keep those jobs, says Don Hobart, general counsel for the Department of Commerce. “That type of outsourcing is likely to occur anyway, and if you don’t have some provision that encourages the maintenance of those jobs in North Carolina, then they’re simply going to be going somewhere else.”

Hewitt will spend at least $8 million on expansion but could get more than that in incentives, thanks to side deals worth $377,000 with the city and Mecklenburg County. Though a company spokesman says it doesn’t plan to use all 135 of its slots for replacing in-state jobs, it can. And nothing prevents Hewitt from winning more business from Tar Heel clients. It just wouldn’t count toward the 900 jobs it needs to get the full $8 million.

Without the deal, Hobart says, North Carolina might have lost those jobs altogether. Many are portable, and Hewitt was considering expansion in three other states. “This is a net gain to North Carolina,” Hobart says.

She runs a couple of shell companies

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People – March 2006

She runs a couple of shell companies
By Joe Rauch

Houston Peanuts, the salted-in-the-shell goobers bagged by Dublin-based Peanut Processors Inc., have been sold in nearly every Major League ballpark sometime or another the past 30 years. But in the middle of the 2001 season, they were dropped from the most famous of all — Yankee Stadium.

It wasn’t shocking, says Rhee Sutton, who had taken over the year before as president of Peanut Processors and another family business, Southern Peanut Co. “They’re not into salted peanuts in the Northeast. They prefer roasted.” That preference didn’t extend, however, to one high-profile Yankee fan: Mayor Rudolph Giuliani.

Sutton found out about it one day when she returned to her office from lunch. “His office was on the line and wanted seven cases of peanuts. I sold them to him.”

He’s not the only fan. Sutton’s peanuts are sold, under its Houston or private labels, in about 40% of Major League Baseball and National Football League stadiums and about half of the basketball and football venues of Atlantic Coast Conference schools, including UNC Chapel Hill and N.C. State. Her father, Houston Brisson, preceded her as president and got the sports sales started.

Southern Peanut was founded in 1946 by her grandfather, Daniel Brisson. It buys peanuts from farmers and sells them to processors to turn into peanut butter, roasted nuts and ballpark peanuts. It sells 96% of what it buys to Peanut Processors, which her father began in 1961. Together, the companies employ about 100 and generate more than $40 million a year in revenue.

Sutton, 55, didn’t start out planning to work for the family business. In 1970, she earned her associate degree at Peace College in Raleigh and transferred to Carolina, where she planned to become a pharmacist. After three years, she lost interest and quit college.

She moved to Wilmington and wed. When the marriage ended in 1986, she moved back to Dublin and started working for the family business. It will remain family-operated at least one more generation, Sutton says. Son Hunter, 27, who earned a bachelor’s in business in 2001 from Southern Methodist University in Dallas, is being groomed for the top job. “He does everything right now. He’s learning the business, too.”

Scrumtious: Retailer gets into another gear

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Sports

Scrumtious: Retailer gets into another gear
By Chris Roush

A 1995 Inc. magazine article questioned whether Mike Moylan, CEO of Hillsborough-based soccer-equipment retailer Sports Endeavors Inc., had put his passion for the game above his stewardship of the business. The Fan Versus the Businessman detailed how Sports Endeavors, which Moylan and other family members started in 1984, had ridden catalog and Internet sales to become the country’s top soccer retailer. But it faced a threat from Durham-based TSI Soccer Corp., which Inc. hinted was being operated by a savvier businessman, Evan Jones.

Inc. got the fan part right. Moylan is a fan and former player, good enough when he played at a Durham high school to be recruited as a college athlete before accepting an academic scholarship at Georgetown University, where he played while earning a business degree. And Sports Endeavors’ lobby is a soccer shrine: It displays autographed jerseys from top players such as France’s Zinedine Zidane, Great Britain’s David Beckham and Brazil’s Renaldo and a ball autographed by retired superstar Pele. Nearly all its employees still play the sport.

But just because Moylan is a fan doesn’t mean he isn’t a businessman. As Paul Harvey would say, here is the rest of the story. TSI Soccer was acquired by New York-based retailer Delia’s in 1997 for about $7 million – not a bad deal for Jones. In January 2001, Delia’s decided to sell TSI. Sports Endeavors was a willing buyer – as long as Delia’s kept the ailing retail soccer stores. "We acquired our largest competitor without meeting anyone," says Brendan Moylan, the company’s chief operating officer and the CEO’s younger brother. "It was all done by fax and voice mail." The Moylans won’t say how much they paid, but Delia’s eventually recorded a $5.8 million charge.

Bottom line: Sports Endeavors remains the nation’s largest seller of soccer equipment, doing it Moylan’s way, which mixes salesmanship with promotion of the sport. Moreover, that acquisition allowed Sports Endeavors to expand its team business, selling jerseys and equipment to youth soccer organizations such as Raleigh’s Capital Area Soccer League. "TSI had been very successful in team sales, which we had not focused on," Brendan Moylan says.

So when it came time for their latest expansion – again into a niche sport – it made sense that the Moylans looked for a business run by a fanatic much like themselves. Last summer, Sports Endeavors acquired Birmingham, Ala.-based 365, which sells rugby equipment online, but decided to keep founder Bernard Frei, a Brit, in charge. "His true passion is the growth of rugby in the United States," Brendan Moylan says.

Frei had started the business in 1998 and had sponsored the U.S. rugby team during the 1999 World Cup. He also ventured into soccer, launching an online store in February 2001. Frei’s rugby business featured an online store at www.worldrugbyshop.com, with estimated 2004 sales of $6 million, and a news site at www.rugbyrugby.com.

After the deal closed, the Moylans kept all of the marketing and creative direction of the rugby operations in Birmingham under Frei’s leadership, but order processing and shipping was moved to North Carolina. Frei says he was having difficulty keeping up with his two warehouses in Alabama, so he was happy to hand off that business to Sports Endeavors.

But he also was attracted to the Moylans. "We had several people come to us in the past, and one is a lot bigger than Sports Endeavors, but what stood out were Mike and Brendan. They brought a wealth of mail-order skills." They helped introduce a World Rugby Shop catalog last fall. It was sent to about 175,000 potential customers.

The business already is well-known among rugby players. "Their supply of officially licensed products is certainly exhaustive, while many other rugby-related sites are more likely to feature only a few brands," says Jimmy Ivory, a former University of Wyoming player who helped coach a rugby team at East Chapel Hill High School the past two years. "World Rugby Shop is generally more of a venue for individual players and fans than a team supplier, though they do sell team gear."

The brothers actually had used a similar strategy a decade earlier when they founded Great Atlantic Lacrosse, whose president is former UNC player Chad Watson, another fan/promoter. Along with soccer, Brendan Moylan says, rug-by and lacrosse are "community-based sports, and people are very passionate about these sports."

Focusing on sports with a cultlike following among players and fans has worked for Sports Endeavors. Revenue has increased from $15 million in 1992 to more than $150 million in 2005. Its 80,000-square-foot warehouse – a former furniture factory on U.S. 70 – ships 15,000 to 20,000 orders per day and stocks more than 18,000 items. And the company, which has 190 full-time and 350 part-time employees, is on target to double revenue by 2008 – a goal established by its senior management. "You want more wins than losses and to put some good numbers on the board," Moylan says.

The brothers think there are good business reasons to expect their rugby and lacrosse sales to grow. The Washington, D.C.-based Sporting Goods Manufacturers Association estimates that U.S. high-school lacrosse teams tripled to 1,721 between 1990 and 2001, and the 16-team USA Rugby Super League is adding franchises in Charlotte and St. Louis for the 2006 season. The brothers also believe that they can continue to expand the core soccer business by playing to an underserved part of the U.S. market. Although Sports Endeavors distributes a Spanish version of the Eurosport catalog, it has not targeted the growing soccer-crazy Hispanic market in the U.S.

The company also has considered opening brick-and-mortar stores, Brendan Moylan says, "but we would have to find a partner before we consider that. It’s not to rule it out. It’s just not something we understand." Sports Endeavors does a brisk walk-up business at its warehouse, as players from around the country make pilgrimages when they’re nearby.

Moylan, watching two customers walk out with bags full of soccer equipment, knows there are more people to reach. "There are still vast pockets of the country where the game is not played competitively. It’s definitely not a saturated market." The fan in him still can’t understand why.