The Company That Turned a Small Tennessee Town Into ‘Pencil City’ Still Holds On

In the 1950s, the small town of Shelbyville, Tenn., was home to a half-dozen pencil manufacturers, prompting then-Gov. Buford Ellington to declare it “Pencil City.”

The nickname has stuck, but for the most part, the industry has not. Today, the last business standing is Musgrave Pencil Company, which has found a way to adapt to changing times.

Becoming ‘Pencil City’

The Musgrave factory sits on West Lane Street in Shelbyville. Inside, it smells like some combination of sawdust, graphite, wood glue and paint. Wood slats get fitted with leads, freshly cut pencils tumble out of shaping machines, and painted pencils pile high in hoppers and storage bins. It’s a busy, noisy place.

The company started in 1916, when James Raford Musgrave began cutting wood slats from the Tennessee red cedar that was abundant in Shelbyville at the time. He shipped those slats to Europe, where they were made into pencils. Then, he thought: Why not just make the pencils himself? So he traveled to Europe and bartered some of his slats for pencil-making machines.

By 1923, Musgrave was the first manufacturer of complete pencils in the South. A decade later, Empire Pencil Company relocated to Shelbyville from New York.

“It signaled the beginning of the term ‘Pencil City,’ ” says Al Simmons, a Shelbyville native and president of the Bedford County Historical Society. “Big expansion at that time — another big company coming in.”

Musgrave actually helped Empire set up shop across the street, and the two companies even shared a bookkeeper for a time. Then others popped up, including National Pencil Company and U.S. Pencil and Stationery Company, which operated right next door to Musgrave. Soon, a whole industry would spring up in the area.

Simmons says that for decades, the pencil industry was a reliable source of jobs.

“A few years back, you’d still see a few notices in the paper, where people worked at Empire or Musgrave and retired after 45 years of experience,” he recalls. “It was a good place to work, good steady income … and they were loyal to each other.”

The End Of The Boom

But by the 1990s, cheaper imported pencils had entered the market, and manufacturing had begun to move overseas. One by one, the pencil factories were sold off or shut down.

Musgrave saw its share of hard times, including layoffs and across-the-board salary cuts. But the company survived, until eventually it was the only one left.

Part of that survival meant rethinking their entire business — including the raw materials.

Except for a few specialty orders, the wood that gets made into Musgrave pencils is no longer Tennessee red cedar. Decades ago, the cost got too high — thanks in part to demand from furniture makers — so Musgrave started sourcing their wood from a company in California.

But in order to cut costs,
that
company moved their factories to Tianjin, China. Most of what they process for Musgrave is basswood, which grows in Asia. But not all.

“Some of it originates in California and Washington State, and some in China,” says Henry Hulan, the founder’s grandson and Musgrave’s former president.

In other words, wood that gets harvested in the U.S., is sent to China to be cut into slats and is sent back to the U.S. for Musgrave’s pencils.

“I think the average person would think that’s a little weird,” I tell Hulan.

“Yes … they would.”

Finding a Niche

Thanks to competitive shipping rates, this arrangement is cost-effective. But even with adjustments to their supply chain, Musgrave still can’t compete with imported pencils on price.

Sitting in his office up on the second floor, Hulan explains that Chinese-made pencils are significantly less expensive — “probably about 50 percent” cheaper.

But to achieve that low price, Chinese companies have to make
a lot
of pencils.

“If your company wants a custom pencil, and you want a hundred gross,” Hulan explains. “You’re not going to be able to get a hundred gross from China.”

So Musgrave has been able to find a sweet spot in the market filling these kinds of smaller orders and supplying retailers who want a made-in-the-USA product. Their clients include school systems, Home Depot and Lowe’s, and even the White House gift shop.

Musgrave is now one of only four pencil manufacturers left in the United States, and the only one in “Pencil City.” But Hulan remains optimistic.

“Slowly and slowly, we’re back to where we’re fairly busy now,” he says. “Knock on wood.”