I caught up with Jay Willie, Executive Director of the Independent Carton Group (ICG) just before he struck out for one of the groups quarterly meetings. The ICG has an interesting business model and long history so I began the interview with that line of questions.
Karstedt Partners – What is the ICG?
Jay Willie – The Independent Carton Group (ICG) is an association of independently owned and operated folding carton companies. None of our members are affiliated with a major paper mill. Our mission is to help member companies competitively compete with the vertically integrated companies. We have three programs to help accomplish this mission; a purchasing program, a supplier assurance program and quarterly business meetings.
Karstedt Partners – Before we get to the nuts and bolts of the association, tell us how the association began.
Jay Willie – Heads of the original five companies met at Kennedy Airport in 1982 to discuss how they could help each other if one of them had a catastrophe occur at one of their facilities. These original member companies were Dee Paper Box, Zumbiel Packaging, Curtis Packaging, Lebanon Packaging and Harvard Packaging. As part of their agreement they began a tradition of best practice and technology sharing that continues today. In 1991 the association hired its first staff that included Andy Willie, recently retired from Curtis Packaging, as its first Executive Director.
Karstedt Partners – So in the following years the association began offering members more services, can you take us through that phase of growth?
Jay Willie – Through the early 90s Andy began evaluating how member companies purchased offset printing plates from various vendors. This first effort in volume pricing provided all members with a means to purchase plates in volume (by using their group consumption) that offered price advantages they could not gain individually. With this success to build on in 1999 the group created the ICG Purchasing Program, which now covers consumables that include paperboard, ink and even die tooling, printing presses and die cutters. We even have a program with Staples to offer office supplies to our members. To give you an example of our purchasing volume the ICG is the largest purchaser of paperboard from Clearwater Paper. In essence, the ICG is the purchasing arm for our members so they have a lot more leverage in negotiation contracts with vendors. Another benefit of the program is that it gives our members access to long-term raw material contracts that reduce the risk of interruption in the event of a paper shortage.
Karstedt Partners – What do you see as some of the major concerns facing your member companies?
Jay Willie – Our members are very concerned with maintaining margins. The economic conditions and competitive landscape have put a lot of pressure on carton converters. For example, the decrease in paperboard capacity in the US is creating an increase in board prices. The entire industry is faced with how to absorb or pass on these increases to the customer. They are also finding it more and more difficult to find qualified skilled labor on the manufacturing side. Fewer young people are getting into manufacturing related job tracks.
Karstedt Partners – How do you see the outlook for the carton market and for your members?
Jay Willie – Everyone is hoping for the economy to get better, assuming that occurs we see many of our members diversifying their product and service offerings. Many are adding new technologies to their manufacturing facilities that allow them to offer more value added products. Many members are expanding outside of their historic niche offerings to offer more full service capabilities to their customers. This can include offering product inserts along with the cartons.
We are also seeing more companies being purchased by private equity firms. As family owned companies look at succession planning many are offered the added option of private equity purchases, which were not such a viable option just a few years ago.
Karstedt Partners – Where do you see opportunities in the carton sector?
Jay Willie – As I mentioned earlier, I see a lot of opportunity for our members in expanding their product and service offerings. Adding more options in coatings and die cutting as well as new graphic features are being done as members reach outside of their niche offerings. I see the industry taking advantage of the green movement with the strength and “greenness” of paperboard packaging.
This article was originally posted on WhatTheyThink.com on 4/11/13.Continue reading
For the first few weeks of we featured articles focused on the corrugated packaging sector. For the next few weeks we will be focusing on the folding carton sector and will post interviews with Ben Markens of the Paperboard Packaging Council and Jay Willie of the Independent Carton Group.
To help us introduce the various packaging sectors to the growing WhatTheyThink Labels & Packaging readership we asked PRIMIR if we could pull excerpts from their 2012 study that Karstedt Partners was commissioned to write titled Packaging: Evaluation of Vertical Markets & Key Applications. This study was unique to many industry studies in that it looked at the force being placed on Brand Owners, the originator of packaging orders. Taking this focus a step further the study looked in-depth at the major vertical markets of food, beverage, household, personal care and healthcare to see what will be driving packaging demand in these verticals and thus driving the supply chain. Following are some of what we brought to PRIMIR members surrounding the folding carton sector. The full table of contents for the report can be downloaded here.
The growth in the folding carton sector is projected to mirror that of consumer products growing at a rate that matches GDP.
Insights From Converter Interviews
The research team conducted over 180 interviews with constituents all through the packaging supply chain. Following are some excerpts from those interviews with folding carton converters.
The folding carton converters indicated that they are considering moving between flexo and offset printing processes over the next five years. Discussions indicated even movement in-and-out of each process. Both sides of these movements claim high investments and prepress costs are detrimental for flexo adoption and the lower overall operating and finishing costs of flexo over offset on the opposite side.
Carton manufacturers say they need to more effectively manage production orders that are shrinking in size and increasing in frequency. They are actively seeking solutions that allow them to produce more orders while maintaining overall production volumes. This is not simply obtained by purchasing presses that have quick changeovers. This plan moves a bottleneck from one process step to another. Carton converters are searching for solutions that truly transform their operations for the better.
In discussions with a carton manufacturer who recently installed a highly automated large format sheet fed press, he states that one of the major challenges he faces is feeding the press jobs and clearing the table after it. By this he means that prepress has to have fresh printing plates ready throughout the production day, and pallets of board have to be continually loaded into the feeder to assure the press does not have to wait for raw materials. As soon as the press needs to wait for input materials, efficiency and profitability are erased. On the output end, he notes, the bottleneck soon shifts to the die cutting process, which is tuned for fewer changeovers and more volume.
Another area of wasted time and resources is the practice of maintaining inventories of finished goods for customers. In speaking with converters of all types over the years, this practice is seen as a ‘necessary evil’ that customers need and converters provide. Most say it has gotten a lot better, but it still is a major drain on profits for both the converter and ultimately the customer as well. JIT was offering relief to this practice but in reality it has marginal success. Converters still manage inventories for customers opting for ‘just-in time’ deliveries rather than ‘just-in time’ manufacturing.
For most carton manufacturers, quality is a given, there is no discussion about cutting quality to gain productivity or flexibility. The quality standpoint is one of the reasons they tend to stick with technologies they know as reliable. As mentioned earlier, there are mixed messages regarding carton press preferences shifting from offset-to-flexo to take advantage of inline processing available in narrow and mid-web flexo presses for cartons. Converters familiar with flexo printing have a first-hand understanding of the quality of high definition flexo and what is required to produce flexo quality printing. Converters that have little or no first-hand experience with flexo, believe that the cost and learning curves are too steep to make a viable transition. Suppliers interested in bringing flexo presses to the carton segment have to overcome significant inertia, which includes solid ROI data to substantiate the advantages of such systems.
Interest in digital printing is high, but participation is limited… This is not to say that carton manufacturers are not interested in digital printing, on the contrary, interest in new press offerings at drupa 2012 was high among carton converters. This segment eagerly awaits a solution that offers an alternative to running orders on equipment that is not equipped to manage them consistently and effectively.
However, digital solutions bring on a similar series of process issues, most notably what happens after printing, when coating, die cutting and folding and gluing is needed. The issue of die cutting is addressed by digital die cutting that uses lasers and special creasing methodologies. This was shown at drupa 2012 as well as other new technologies that show promise in helping to alleviate these production bottlenecks.
The interviewed carton converters believe that their customers are more ‘value-oriented’ than ‘volume-oriented,’ by a 2 to 1 margin. Sixty percent say their customers would pay a premium for products or services that address unmet needs. This corresponds to the brand owners’ response. Specifically, folding carton packaging provides the most value to their brands. Overall, 72% of brand owners say they will pay more for products or services that satisfy their unmet needs.
As part of the study Karstedt Partners interviewed 122 Brand Owners in multiple vertical sectors as well as 60 converters and industry leaders to compile comprehensive trending information that will be affecting buying decisions for the next few years. For more on the study and to become a member of PRIMIR visit them at http://www.primir.org.