ST. LOUIS - Carl J. Reis and his partners, Lawrence G. Johnson and William C. Seanor, acknowledge being lucky and say they only had to know one thing. What they knew was this: Plastic bags would soon replace paper bags.
Their luck took off in 1986, on the same rocket trajectory that traced soaring prices for paper products.
Reis, Johnson and Seanor were in a good position to understand the appeal of plastic over paper. They all were working for Mobil Chemical Co. and had years of experience at Mobil watching as markets for plastic bags grew in Europe and North America.
In 1983, Reis and Gregory M. Smith launched RS Plastech Inc., and in 1987, Seanor and Johnson joined them to form Vanguard Plastics Inc. Smith has since retired, leaving Reis, Johnson and Seanor to run the business. Vanguard bought the assets of RS Plastech in 1992, tying off loose ends of the business.
Today, Vanguard is a leader in plastic sacks. It claims to be the second-largest plastic sack manufacturer in the United States - with capacity to produce more than 12 billion retail and grocery bags a year from linear low density polyethylene and high-molecular-weight, high density PE.
The company had $155 million in sales for its June 30 fiscal year end. The firm ranked 32 in Plastics News' film and sheet ranking.
According to competitors' and analysts' estimates, Vanguard also is one of the most profitable manufacturers in an industrymarked by razor-thin margins and perilous operating conditions.
Vanguard is privately held, and its partners do not discuss profits. However, they do not work hard to deny competitors' and industry analysts' observations.
They admit to being flattered that they are viewed as successful. They are proud survivors in a business in which they have risked a lot.
``We did not start out in this business with a great deal of personal wealth,'' Seanor saidin an Aug. 31 telephone inter-view from his Dallas office.
``We used a lot of leverage [to start out] and we have grown rapidly. You don't do that by losing money. We took quite a few risks, and we continue to take them to maintain our market position,'' Seanor said.
That leading market position was Vanguard's first goal when it was founded. Seanor said he and his partners were within six months of launching the business at a perfect time. Their timing was critical to the company's success.
The firm was conceived as paper prices rose, and those prices have not dropped since.
Reis also says the co-catalysts that ensured Vanguard's success were its low cost structure and attention to quality.
While as many as 10 producers have left the grocery and retail sack business in the past eight years, Vanguard has grown to be a nationwide supplier with five plant locations.
The company began in St. Louis, where Reis was interviewed Aug. 21. Because of family ties and a strong desire not to relocate, Reis remained in St. Louis as the company expanded.
Seanor moved to Dallas when Vanguard began production at a facility there in 1989, and Johnson moved to Jacksonville, Fla., when the company began production there in 1990.
Vanguard bought a facility in Rancho Cucamonga, Calif., in 1991, and completed its national coverage with what it calls its northern plant in Richmond, Va. Production began at the Richmond facility in 1993.
Meanwhile, Vanguard outgrew its original facility in St. Louis, and moved to a larger plant in 1992. The company keeps each of its facilities up-to-date: It made equipment modifications at St. Louis in 1992 with the move to the larger plant; at Rancho Cucamonga in 1992 after the company bought the plant; and at Dallas and Jacksonville this year.
Vanguard offers customers post-consumer recycling and recycles its own industrial scrap to keep operations running efficiently and smoothly.
Reis said Vanguard keeps ahead of its competitors with a sophisticated cost accounting system designed and put into service by Seanor, plus a strenuous, but necessary, physical inventory of everything - plastic resins, bags and inks - each month at every plant.
With five plants, the company performs 60 inventories a year, Reis said.
``That keeps little problems from becoming big problems,'' he said.
While recognizing that facilities, tight cost-control policies, and effective equipment and process controls are primary contributors to the company's success, Reis said the most important contribution has come from his firm's people.
That contribution seems to begin at the top. Reis readily admits loving his job, and his sentiment is echoed by Seanor and Johnson.
Reis said the firm has had a run of luck since its inception in that increases in prices for paper products have outstripped increases in plastics prices.
His industry perspective holds that the high capital costs of entering the plastic sack business and low prices for the product during the past five years tend to deter new competitors from entering the market.
He said prices for plastic sacks are 30 percent lower than they were in 1989, while paper costs have doubled in the same period. The pricing situation should give the industry an oversold position for at least the rest of this year, according to Reis.
