You're in a hurry, but that is your life's usual pace. There are errands to run, kids to pick up and haul to soccer practice and drama rehearsal and, later this evening, meetings to attend. How do you and your family find time to eat while on the run?
More than half of all food in North America is consumed outside the home — with that rate rising 2 percent a year. And companies that manufacture food-service products, both plastic and paper, are racing to keep up.
``We offer two things to the marketplace,'' said Richard Wambold, executive vice president of Specialty and Consumer Products for Tenneco Packaging in Deerfield, Ill. ``We make in excess of 80 new products every year, principally plastic, to meet end-user needs.''
Also key to Tenneco's place in the food-service supply chain is providing value for distributors, he said. When the firm witnessed a consolidation trend among food-service distributors four years ago, it responded in kind, targeting Mobil's Plastics Division and Amoco Foam Products Co. for acquisition.
``They make the right products and source in the right way to be cost-efficient for distributors,'' Wambold said of Mobil Plastics and Amoco Foam. ``We can provide a broad line of products, and the distributor will not have to do business with seven other suppliers.''
Sweetheart Cup Co.'s vice president and general manager for the food-service business unit, Marguerite Davis, agreed with that assessment.
``We have a strong customer base and we appeal to our customers with more than one cup,'' she said. ``If they buy more than one, we consolidate their purchase and they have fewer people to deal with.''
Many watching the food-service market say supply and distribution chains have been merging at incredible rates, touting national prices, service and consistency to consumers. In recent years, mergers and acquisitions have become a way of life for majors like Tenneco.
In January, Fonda Group Inc., which makes paper plates and napkins, announced plans to merge with Sweetheart, a firm that evenly divides its business between paper and plastic. Another paper-plastic coupling took place when Chinet Co.—a name synonymous with upscale paper plates—last year purchased Nyman Manufacturing Co., a cup thermoformer.
Berry Plastics Corp., which injection molds souvenir cups, and Waddington North America Inc., now parent to several plastic cup and cutlery suppliers, are two more firms that gradually have appropriated a bigger piece of the food-service pie through acquisition.
In late 1996, then-James River Corp. of Richmond, Va., and Phoenix-based WinCup Holdings Inc. wrapped up their quid-pro-quo swap of Handi-Kup expanded polystyrene foam cups for injection molded cutlery. Then last year James River followed that deal by buying Fort Howard Corp. of Green Bay, Wis., resulting in more paper products and a new name: Fort James Corp.
The WinCup trade pushed Fort James out front in U.S. cutlery sales to commercial and institutional establishments, according to Jeff Evans, Dixie business manager for cutlery in Norwalk, Conn. Though several firms vie for first place in cutlery sales, the segment is no small potato: Estimates for the total North American market—retail included—run from $400 million to $1 billion-plus.
Many manufacturers and packaging analysts, like Dan Khoshaba of New York-based B.T. Alex Brown, believe the supply and distribution squeeze is not over.
``Excluding PET, the [food packaging] market is very fragmented,'' Khoshaba said. ``There are hundreds of small players on every continent. Efficient companies make acquisitions.''
``The underlying factors continue to be there,'' agreed Rick Norment, president of the Foodservice & Packaging Institute Inc. of Arlington, Va. ``If a company distributes to one end user, it's better for the manufacturer in terms of service, economies of scale and building market share. They are more aware of internal costs in the system.''
For the firms on the consolidation side, the tack translates into fewer suppliers, a focus on just-in-time delivery, economies of scale—such as lower resin prices—and a breadth of product line. But, food-service companies on the outside looking in at the shake-up see a benefit in remaining stable.
``There's a lot of dislocation in mergers and acquisitions,'' Clear Shield National Inc. President Denis Davidson said. ``Smaller customers prefer fewer vendors to have fewer products. They want a specialist in products. There is a role for multimaterial and single-material companies.''
The Wheeling, Ill., all-plastics unit of Envirodyne Industries Inc. injection molds cutlery, extrudes straws and thermoforms plates.
Although one-stop shopping can be a boon to distributors, it is a logistical nightmare for companies to process paper, plastic and foam, said Basem Atallah, president and chief operating officer at Polar Plastics Inc. in Mooresville, N.C.
``They have to be produced at different plants and there are warehousing issues,'' said Atallah, whose firm produces PP and PS cups, cutlery, containers and plates. ``With a wide product line, companies reach a point of no return on how much they can ship to a distributor at one time.''
Smaller, regional outfits contend that proximity to customers often is more important than supplying products made from different materials. Brian Kane, who buys wrapped cutlery for Applebee's restaurants, said he picks its suppliers, including Clear Shield and Dispos-O-Plastics Inc. of Fountain Inn, S.C., for reasons of price and location.
Still, said Sweetheart's Davis, ``With more innovation and advanced technology, smaller companies are finding it harder to compete. The companies that offer more services and innovations, like Sweetheart, Tenneco and Fort James, will get bigger and stronger by buying up small, regional, focused companies.''
Sweetheart of Owings Mills, Md., with sales of $886 million for fiscal 1997, is completing due diligence to become part of $252 million-a-year Fonda, based in St. Albans, Vt. Though half of its business is plastics—with food-service figuring sizably into that—Sweetheart sees its market strength in being able to supply both plastic and paper. Its thermoformed food-service sales of $223 million include about $50 million in EPS foam dinnerware; laminated paper cups bring in another $90 million or so; it also looms large in paper products, cutlery and straws.
Multimaterial giant Tenneco also believes that adding materials not only fortifies the customer base, but creates more-efficient distribution channels.
No. 1 in North America in thermoformed products, with $923.6 million in related sales, Tenneco uses EPS for cups, bowls and plates; oriented PS for delicatessen and bakery containers; and polypropylene for microwaveable products. It also makes dual ovenable items from crystallized PET and pressed paperboard; cooking and serving trays from aluminum; and plates and cup carriers from molded fiber.
As players in a commodity-driven market, food-service packaging providers need to stay on top of what technological advancements are being made in materials and applications and where the market will swing.
But defining an industry that uses—per FPI data—2.3 million tons of paper, 850,000 tons of plastic, 466,000 tons of foam and 3,900 tons of aluminum can be a formidable task. Overall, the market for such products—now a $9.7 billion business—has risen 2-3 percent a year, responding to population growth and roughly following the gross national product, said FPI's Norment.
``There are huge fundamental changes, trends that affect the industry that have [affected] and will [continue to ] affect exactly where our customers are,'' Wambold said.
One huge trend currently sweeping the food-service segment is home-meal replacement, said Roger Kurinsky, vice president and general manager of the Ivex Packaging Corp.'s consumer packaging division in Lincolnshire, Ill. Kurinsky defines home-meal replacement as any kind of carry-out—from a supermarket deli, bakery or salad bar, to stores like Boston Market—and, for the most part, those items are packaged in plastic, for purposes of clarity.
Statistics show home-meal replacement has skyrocketed in the 1990s, as people find they have less time to do more things. Driving growth in the segment is a rise in the number of two-income families and single parents, who see fast food and take-out as convenient substitutes for the time-consuming tasks of shopping and cooking.
Plus, as disposable income has swelled with the economy, disposable food-service products have fared well.
``In 1990, 75 percent of households made a weekly trip to the supermarket for food,'' said Tenneco's Wambold. ``In 1996, the number had decreased to 56 percent. This tells us that households don't use the weekly trips to supermarkets as the principle vehicle to feed the family.''
``You can't cook for two at a lower price than a carry-home dinner,'' said Kent Johansson, president of OMV USA Machine Division in Genoa City, Wis., which makes thermoforming machines for cups and other packaging.
Phoenix-based WinCup's vice president of sales and marketing, Rich Hunsinger, said his company also is focused on the high-growth areas of take-out, fast food and home-meal replacement, and continues to realign its products to fit the market.
Like its chief rival, Dart Container Corp., WinCup's mainstay products are steam-chest molded EPS cups and containers and thermoformed lids. Both firms also make their own EPS bead, WinCup through its StyroChem. subsidiary. In a backward-integration move, WinCup bought StyroChem in 1996.
Standard & Poor's pegs the U.S. EPS cup and container market at roughly $600 million. Significant among those products are hinged containers—mostly made from EPS—which FPI's Norment said grew 4.4 percent in 1997 over 1996.
Freedonia Group Inc. of Cleveland said EPS demand for cups and clamshells will increase from 363 million pounds in 1996 to 405 million pounds in 2001.
Home-meal replacements have resulted in plastics growing at a faster rate than paper in the food-service market, according to B.T. Alex Brown's Khoshaba.