by Peter Fretty, Contributing Author
Converters thrive in the marketplace by finding creative
and competitive ways to rethink the traditional box.
There is little doubt that thinking beyond or outside the box is one of the most overused clichés in the business world. However, it is literally this approach that is keeping most independent box manufacturers in business.
Even as the marketplace starts rebounding, the pressure will still exist for the remaining firms to be increasingly competitive and creative, explains Stuart Sutley, a principal of the planning and development counselors Capstone Partners LLC.
"Every type of manufacturer has pressures from its customers to add more value without increasing the cost. It is how firms respond that will ultimately determine their fate. The firms that will come out on top will be the ones that can handle all of the customer's packaging and shipping requirements," Sutley says. "The sooner that independents realize that the market is not going to come back and that it has truly changed, the better. You cannot sit back and wait. You need to be proactive and make the changes necessary to your operations."
Steve Young, president of the Association of Independent Corrugated Converters, agrees. "The way that manufacturing is evolving, there is now too much box capacity in the country, which has definitely driven pricing down," he says. "Being successful really means developing the relationship with the customer base and understanding what areas are problem areas."
This is really a matter of rethinking and using sales intelligence, Young explains. "If something solves the problem for a customer, the independent needs to consider it. You need to look at what you can actually do for the customer and make money at it. Looking at every aspect and being creative will only make businesses better in the long haul."
Forming Partnerships
While the experts suggest that box makers need to be a one-stop shop to survive, this does not mean that every plant needs to have all the capabilities under one roof. Instead, Sutley suggests that proactive independents work diligently to find true partners in their geographic area that can effectively support them.
"If they go to their customer and they say they want their product wrapped in foam, individually packaged and subsequently boxed and placed on a pallet, this should not be scary - independents should view this as an opportunity," Sutley says. "Produce what you are good at and establish partnerships that provide the additional products. The key is making sure that this is all transparent to the final customer since they do not want to have to deal with all the issues."
Of course, having a complete menu of products and services sounds great in theory, but the downside is that there can be a loss of control. The way around this is making sure that there is far more than just a supplier-customer relationship between parties - the relationship needs to be very strategic in nature.
"You need to have a level of understanding and comfort with one another. For instance, you need to know each other's weaknesses and be open with one another," Sutley says. "You do not want to open up more problems than the market is presenting on its own and not meet the commitments you are making to your customer. This way, all the customer needs to know is that you are going to get it done."
According to Young, partnerships of this nature also make companies less susceptible to Internet bidding and commodity pricing because companies realize the additional value is there. "It is much more difficult to replace a supplier that is performing multiple tasks than one that is simply providing a box," Young says. "You need to make yourself indispensable."
Another type of partnership that is rapidly growing includes the trend where groups are buying into a piece of equipment. In these instances, all of the companies own the piece together and get to make use of the new technology, but spread the risk according to actual use. "Independents can say it is theirs, but not have the entire risk," Sutley says. "It is a win-win."
Capitalizing on Intellectual Property
Finding itself in a world where a box is more than just a box, Lake Forest, Ill.-based Colbert Packaging Corp. decided to branch out from being a traditional folding carton manufacturer. The first step was putting the people in place who understood creativity and intellectual property. The main staff members Colbert has added are in the area of research and design, design and engineering, customer service and sales to help get new products developed and out into the market.
Considering the people aspect first was a very smart move, according to Young. "If a business has long focused on a specific product and is deciding to add an unconventional product or service outside their core offering, they need to make sure that they have the people in place with the expertise that can make the venture a success," he says. "Not doing so can actually be detrimental to a packaging producer. The goal needs to be creating a seamless solution."
According to Colbert executive vice president Jim Hamilton, after hiring people who understood and thrived upon the intellectual property aspect, the goal was to identify areas where Colbert could provide value-added that would truly benefit the customer and lock in the business. In some cases this involved combining paper and paperboard, paperboard and corrugated or paperboard and plastic. "We just wanted to get outside of the mainstream," Hamilton says.
Colbert then started a multi-million dollar division called Colbert Flexographic Packaging, also in Lake Forest, that offered narrow web printing and cartons. "We knew that we would be able to one day expand out into other areas," he says. "That day has come. We are now doing labels, plastic substrates, et cetera - all under the flexographic banner."
The result of its directional shift is quite evident in its latest product offering, which includes the PharmaDial®. In November, Colbert received the consumer products safety commission award of "F=1" meaning that the product is child resistant. "We obviously went through some exhaustive testing," Hamilton says.
For the non-pharmaceutical industry, Colbert has developed a blister guard tear resistant theft proof package that is designed to make the product difficult to break into. "The target market is going after the clamshell products that are commonly in all the big box retailers," he says. The third is a Zip-Sert, which is a carton that has a package insert embedded into a side panel of a corrugated carton.
All of the new products have been introduced at packaging expos - something that Colbert never would have considered in the past. "Since we are working to distinguish ourselves through creativity, we are seeing the need and benefit of displaying our products in these arenas."
Creative product development is definitely a growing segment for Colbert, and the firm has no intention of turning back - even if the traditional box market picks back up. "We have a large investment in this area and plan to continue being more proactive in designing new products," he says.
The biggest challenge has been tweaking products into a category that the market will accept. "We have gone through a lot of testing and it is a true learning process," he says. "Gearing towards market acceptance cannot be taken lightly." Finding the correct strategic companies - both in customers and partners - also is challenging.
While Colbert continues to market through publications, direct mail and a direct sales force, it also has developed a few partnerships and continues to look for new partners. For instance, Colbert works with Andersen Packaging in Rockford, Ill. for the PharmaDial, and also has a marketing agreement in place for the blister guard with Peacock Engineering in Itasca, Ill.
"We have learned that there is a whole world out there outside making traditional folding cartons," Hamilton says. "We are poised for some very solid growth. As a company in its 40th year of private ownership, we definitely have a good future ahead of us. Part of this is that we are creative and that we do not take any business for granted."
Honing in on Logistics Services
Taking the full menu approach to heart, Ayer, Mass.-based corrugated box manufacturer Horn Packaging has long produced wooden crates and foam cushioning, but it has recently decided to add logistics services, including inventory management, fulfillment and distribution, to its mix.
"We recognized that many firms do not have the space or personnel to manage. We have a large warehouse and many years of experience managing the logistics between our own divisions, including truck scheduling and inventory management," president Peter Hamilton says. "While it may be unconventional for the typical box maker, it is a natural fit for us. We may as well take our knowledge and provide it as a value-add for our customer."
Customers thus far have responded favorable. "Since we already have their box business and in many cases we were already setting up their boxes, this is just going one step further," he says. "We are looking to be a strategic partner with our customer. It is a very natural extension. Fortunately, these services fit within our existing abilities so it did not require an extensive investment."
Since the corrugated industry has been stagnant in recent years, having logistics in-house has given Horn's existing direct sales force a new tool to add to its arsenal. "Having multiple ways to serve the customer gives us a way to move away from price being the only issue - customers find value in service," Hamilton says. "For example, a box customer just called wanting 50 bags of peanuts. While everyone sells peanuts, not many can get them to the customer on a JIT basis. This ensures that we compete favorably in the market regardless of the market status."
Plastic Producer Now Paperboard Friendly
Those in the box business do not need to be afraid of plastic, according to Dan Ahern, Transparent Container Corp. marketing manager. The Berkley, Ill.-based firm, which specializes in making plastic inserts or windows for folding cartons, has ventured into the arena of creating plastic folding cartons using PVC and RF scoring.
After getting its start making round plastic containers, Transparent started supplying paperboard packagers with the clear lids for the tops of greeting card boxes. "Folding cartons were just a natural extension of what we do," Ahern says. "However this should not be seen as a threat to traditional paperboard packagers."
While Transparent currently does not have any formal partnerships with paperboard packagers to supply them with plastic folding cartons, Ahern foresees this type of relationship unfolding in coming months. Since Transparent considers paperboard packagers a valuable part of its client base, its intention is not to lose this. Instead, the firm hopes to build upon the relationship. "There is a lot that we can do together," he says.
According to Ahern, the industry is going to see more folding cartons go clear primarily because consumers want to see the product inside the box. "We can now do things that were not possible with the traditional paperboard and how we decorate that plastic will also continue to evolve."
For instance, Transparent can frost areas, make some areas clear while others are opaque and essentially make the product appear more dimensional rather than being just a billboard. "Designers need to get used to using this as a substrate," Ahern says.
(Reprinted from the January 2004 issue, Paperboard Packaging. All Rights Reserved.)