With consolidation changing the folding carton industry almost daily, companies must go beyond quality and service to eat its piece of the profit pie. Some firms focus on the traditional methods, such as on-time delivery, while others bolster the bankbooks with the objectives of the day, like strategic acquisitions.
The Mentor plant uses its existing equipment, two 51-inch, six-color and seven-color Mitsubishi carton presses, to produce multi-color miniflute containers.
Caraustar, a 100-plus plant giant in the packaging industry, opts for both the traditional and aggressive growth strategies. The company is responsible for a major percentage of all acquisitions in the custom packaging sector since 1990, and has put new twists on old themes by adapting new industry protocol to its existing equipment. What then, is its recipe for success?
A Little Rhubarb
As Caraustar began its acquisition strategy, each plant it bought kept its original identity. Good for them, bad for a company trying to become a well-known top 10 player in the industry. When Caraustar acquired five folding carton plants from Tenneco Packaging two years ago, the Tenneco name was not available for long-term use.
The company decided it was best to make image changes, so last January, the company developed a new logo and dropped the 'Industries' tag from its moniker while it reorganized into four operating groups: the Mill Group, Custom Packaging Group, Industrial and Consumer Products Group, and Recovered Fiber Group.
"That was all part of our new branding campaign," says Tony Petrelli, vice president of marketing and business development, who manages the internal group that designed the "star" logo and corporate identity. "That has been especially important in the folding carton market, which is very fragmented. We needed to become a well-known entity and be seen as a company that is growing, not waiting around to be acquired."
The Custom Packaging Group focuses on niche consumer markets, emphasizing innovation and product development. It operates numerous contract packaging and manufacturing facilities, a specialty corrugated facility, a rigid box plant, and 15 folding carton facilities that manufacture paperboard packaging for the firm's major markets, some of which are pharmaceutical and healthcare, candy and confectionery, specialty dry foods, toys and sporting goods, pet foods, and household and hardware.
"We needed to become a well-known entity and be seen as a company that is growing, not waiting around to be acquired" - T. Petrelli
The Mentor, Ohio facility, originally a Tenneco Packaging plant, is an essential ingredient in Caraustar's growth strategy. The plant covers western Pennsylvania, New York, Ohio, Indiana, and Kentucky. Previously concentrating on toys and sporting goods, it has turned its focus to area jobs in its market such as prepared food and candy. The attrition in the toy industry was due to the closure of domestic toy manufacturing plants, which moved to the Orient looking for low-cost manufacturing.
Manufacturing and converting recycled folding boxboard is the largest market for the company. In the last 25 years, the paperboard market grew at a clip of 1.4 percent yearly, though demand has softened a bit in the last five years. An additional specialty of the Mentor plant is successfully producing direct print miniflute for a variety of applications like basketballs, candy for club stores and heavy-duty equipment such as pistons and shock absorbers.
Petrelli calls the miniflute containers "fluted folding cartons." By using miniflute, the consumer brands company can promote product line extensions and eliminate the corrugated shipper, combining the folding carton and corrugated container into one, says Jon Steadman, operations manager.
Direct print in the miniflute market is booming. Steadman feels this is where the market is heading, since business has picked up within that segment in the last year. In fact, now 50 percent of everything the Mentor plant quotes and 10 percent of everything it ships is miniflute.
The plant, a direct competitor of the corrugated lithographic laminating market, took baby steps when first beginning direct print in 1997. It did nothing too difficult, just basic one- and two-color print jobs. The company is using its existing equipment - two 51-inch six-color and seven-color Mitsubishi carton presses with tower coating - to produce high quality, multi-color cartons, but the gripper system, cylinders or the major parts of the presses were not originally intended to run fluted material.
One specialty of the Mentor plant is successfully producing direct print miniflute for various applications like basketballs, candy for club stores, and heavy-duty equipment such as pistons and shock absorbers.
Miniflute sheets are fed from the back end, with all the offset printing done at various stations before coming out at the coating end. Though this process eliminates litho-lamination, Steadman admits some challenges exist in damaging the equipment by working at too high a caliber range for too long.
"On a Mitsubishi press, the caliber ranges are .010 to .040 inches," he says. "If you work at the upper extremes for excess periods of time, you are asking for excess wear and tear."
Onlookers can stand anywhere on the plant floor and see all of the processes proceeding around the U-shaped production area from printing to diecutting, finished goods storage, and then out the door. The plant recently added a special room for the baler to assist in recycling.
Equipment includes three Bobst diecutters and seven folder-gluers from Bobst, Jagenberg and International; two Bobst 130 ER blankers; one Bobst 56-inch 142 that strips offline; a new Cortron platemaker step and repeat machine; a plate saver and cleaner from Fugi; and a carton packer.
Steadman prefers to store primarily raw materials like paper roll stock in the plant's on site 50,000-square-foot warehouse, in addition to two warehouses off site. He generally keeps one week of board inventory. "I would rather store raw materials than finished goods," he says. "We have grown tremendously and done an excellent job of reducing our finished goods."
The plant runs about 18,000 tons annually, which is about 1,500 tons/month for a variety of customers with exacting demands. Above the scheduling board is the "10 Commandments of Good Business," a list of rules for customer service which the company strictly adheres to.
"They are the ones keeping us employed, so they are always right," Steadman says. "I want to understand their businesses and what it is exactly they are asking us for."
The plant prides itself on meeting the challenges of any customer, including one who needed many cartons within a stringent time shortage.
"The customer said we had to have cartons ready the next day at 5 p.m. when they were jumping on a plane to go to a trade fair," Steadman says. "Although it was a short notice order, we knew it was very important to them. However, they still didn't have the final designs done yet.
"The next day, they had the designs to us at 11 a.m., and we had the cartons done for them to pick up on their way to the plane. This is not a common occurrence, but we met their demands and made it happen."
Both Steadman and Petrelli say the plant wouldn't be able to perform like it does without the continued willingness of employees to try something different. As general manager of the plant from 1993 to 1995, Petrelli says workers have always had that mentality, whether it's producing packaging with a window for candy makers, or inserting a coupon into the two to five million containers the group produces monthly for a food storage bag company.
"I have never been at a plant with employees that have such a 'can-do' attitude," Steadman says. "Although in the last 10 years, they have worked with many different general managers and production managers, the plant has continued to be successful because the employees know their jobs and they do them well."
Not Yet Full
When Steadman joined Caraustar in 1993, the plant did $14 million in annual sales; now, it has the potential to do $28 to $30 million without a weekend shift. Nearly 130 employees work in three eight-hour shifts, only five days a week.
Where does it go from here? Petrelli says long-term plans involve promoting value-added packaging solutions while distancing the company from its competitors.
"This is not about price, and we want the customers to understand that," he says. "We want the reputation as the most creative supplier of choice, the one to go to for product development and for customers to know we are financially stable and a substantial player in the marketplace."
An avid reader of trade journals and other publications, Steadman says the company will continue to travel down unfamiliar avenues of opportunity. The industry is now in the process of source reduction in packaging, forcing the company in competition with bags and stand-up pouches. But Caraustar does not back down.
"If our paperboard competitor can produce something, then we can," Petrelli says. "If it is another material like plastic or flexible packaging, the only questions are how and when. There is more capacity right now than demand, and companies that are innovative, creative and understand the customer's merchandising environment, they are the ones that will survive."