SALT LAKE CITY - Thin margins and intense competition created ideal conditions for Huntsman Corp. to enter the packaging industry some 31/2 years ago. Today, Huntsman Packaging Corp. is a major player in a multibillion-dollar market and plans to grow even more. ``The whole industry is basically in a classic consolidation mode,'' N. Brian Stevenson, Huntsman Packaging president, said in a recent interview at his office in Salt Lake City.
The merger and acquisition mania afflicting the industry is the result of several trends. First, Stevenson said, there were some 200 competitors, and even the top three or four of those had less than $100 million in sales.
``Anyone with a garage and an extruder could get into packaging,'' Stevenson said.
Now, the costs of raw materials, technology and equipment, and the intensity of competition have driven many of the smaller companies into mergers with larger competitors, into small niches, or completely out of business.
``It's no longer an entrepreneurial business,'' he said. ``The big guys are getting bigger, and the medium companies are looking to either get bigger or merge with a competitor. And if you're a specialty player, you're looking for a place to hide.''
Second, Stevenson said, customers are getting larger and therefore want to deal with large packaging suppliers that have the resources and infrastructure to support them. The trend to reduce the vendor base also has hit packaging, leaving many smaller suppliers out in the cold.
For example, Stevenson said that at one time Frito-Lay Inc. had about 22 packaging suppliers. Now it has three or four.
Greater cost efficiency and increasingly stringent quality requirements are being driven by more expensive technology. That has put many companies in the ``sell mode.''
``This environment created a window for Huntsman to enter the market,'' Stevenson said. ``We've made six acquisitions in the last 31/2 years.''
Among those purchases were the polyethylene bakery bag manufacturing assets of Mobil Chem-ical Co., Performance Films Co. of Dallas and Princeton Packaging Co. in Kent, Wash.
Huntsman also is involved in a number of packaging joint ventures in India, China and Europe. The firm was No. 8 in a number of packaging joint ventures in India, China and Europe. The firm was No. 8 in Plastics News' 1995 ranking of North American film and sheet manufacturers, with $437 million in sales.
True to Huntsman's business nature, Huntsman Packaging is seeking still more acquisitions in the packaging industry, with a market Stevenson estimates to be worth $6 billion to $7 billion.
Stevenson said there are about a dozen packaging companies for sale now, some of which Huntsman is examining closely.
He confirmed there will be more acquisitions: "There will be more acquisitions: "There has to be more in our future."