In the beginning, they were separate plastic container manufacturers, all large and growing and destined to intersect.
Those blow molding companies were caught up in the full-bore mergers-and-acquisitions climate of the 1990s, when the drive to consolidate was running hot. Garelick Farms Inc. and its Franklin Plastics Inc. unit in Franklin, Mass., were among the first to move, adding large bottle players all over the country.
Then, Dallas-based conglomerate Suiza Foods Corp. swooped in and bought the company in 1997, positioning it as the base for Suiza's packaging group.
After that deal, Suiza brought in another blow molder, the Continental Plastic Containers Inc. group of the old Continental Can Co. Suiza's prominent stash of blow molders included major producers of dairy, food and beverage containers.
In a different part of the packaging galaxy, another consolidator, Reid Plastics Inc. of Arcadia, Calif., was bought by private equity firm Vestar Capital Partners III LP of New York. That company grew to become a major player in polycarbonate water containers and dairy packages, primarily on the West Coast.
Then in July 1999, the orbits collided. Vestar acquired a majority stake in Suiza's packaging group and merged it with Reid. The blockbuster deal spawned a new blow molding, roll-up giant, Consolidated Container Co. LLC, then of Irving, Texas.
That's the history, and no one could blame Consolidated for falling in love with the dream of a new company spawned by acquisition and pooling the talents of some of the industry's big names.
The new, privately owned processor held a cache of nearly 70 plants, mostly in North America. It carried a diversified portfolio of container products, with a strong array in then-prospering dairy, juice and water segments.
Reviews raving, but script needs rewrite
The idea of fusing the blow molders into a single unit brought a wave of glowing reports from analysts and insiders. Equity-firm researchers spoke of the great efficiencies and power that could be culled from the merger.
Suiza's Gregg Engles, chairman and chief executive officer, said of selling off its plastic-container business: "It is now time to reap the financial benefits to our shareholders."
Unfortunately for Consolidated, those benefits still need some reaping. The melding of three large firms - Franklin, Reid and Continental Plastic and all their satellite companies - did not synchronize into quick success, nor did the expected operating efficiencies come quickly enough.
Consolidated's new president, Stephen Macadam, now wants to create the finely tuned, blended company originally envisioned.
The former executive with Georgia-Pacific Corp. already has shaken things up. He has moved corporate headquarters to Atlanta - distancing it from its Suiza roots. He has brought in almost entirely new leadership. Perhaps most tellingly, he has worked to unify and standardize plant operations.
It is a project the company is banking will add up to dividends that had been expected by many outsiders since the company was birthed four years ago.
"It was a roll-up that had never been rolled up," Macadam said in a late February interview at his Atlanta office. "There really wasn't a lot of work being done to contribute to making this one company. It was necessary to make some big changes right away, and we're going about that task."
He is going about the work with zeal. Macadam said he decided to take the helm at Consolidated because the facilities are in good shape; it was just the management foundation that needed repair.
New corporate offices now are on one floor to foster better communications. Macadam has eschewed a corner office for a smaller location in the center of the workspace, with his door open. Eight of 13 top managers are new to Consolidated within the past year. They are starting over, at least in managing terms.
New managers see the possibilities of what Consolidated can be. Bill Duelge, senior vice president of business development for the company's dairy, water and juice unit, said the company is taking steps in a "linear progression" to become a market leader.
Duelge, who joined Consolidated last fall from a paper packager, said he has seen a conversion from a fragmented culture to one with stronger leadership and direction.
"We've shifted 85 percent of the development processes to something that didn't exist a year ago," he said. "We have the agility now to run with the gazelles and a better willingness to listen to customers. It's a new, value-based culture at Consolidated. That's what led me to join."
But Macadam said more needs to be done. Some of the management and financial battles he has fought are not over. Yet, there is the possibility of raising what could be a sleeping giant among packaging firms, he said.
When the Vestar-Suiza deal was announced in 1999, it created what is now the third-largest blow molding company in North America. Consolidated Container, with a commanding $746.5 million in annual sales, has 68 plants spread out mainly in North America.
It is also one of this continent's largest manufacturers of PET and high density polyethylene bottles and is a foremost name in PC bottles, a specialty that started at the former Reid Plastics. For HDPE alone, the company uses about 800 million pounds of resin annually, said R. Keith Brower, Consolidated's senior vice president for operations services and procurement.
In need of cohesion
When Macadam started at Consolidated, he found a company consisting of many semi-autonomous plants. Former management, led by President William Estes, let the plants run independently. While that approach fostered independent thinking and new ideas, it also sacrificed some cohesion and efficiency, said Brower, one of the few company veterans remaining in top management.
For example, Consolidated used nine different process technologies on 30 PC bottle lines, Brower said. The company had 18 different computer systems and wildly differing levels of product research, he said.
"For a while, we just flat out lost our way as a company," Brower said. "What we did was go back to the basics of manufacturing."
In addition, there was no standard communications approach for transactions, no uniform means of invoicing, quoting or customer service. "It was difficult for customers to do business with us," Macadam said. "We had no common way of doing things."
Macadam does not want to lose the entrepreneurial spirit or talent of each facility. But he wants them all to follow the same corporate values and processes.
The need for change came to a head in the spring of 2001, when the company had too many projects in its pipeline due to be launched almost simultaneously. Nine projects were started, at a cost of almost $70 million, according to a quarterly financial report issued in November 2001.
"We were in need of commercializing a bunch of products all at once," Macadam said. "We bit off more than the company could chew at one specific time."
Macadam, hired in August of that year, still has many of those products on his office shelf. They include an HDPE liquid detergent bottle that was being converted to PET. The bottle, stretch blow molded at Consolidated's Kansas City, Mo., plant, was being ramped up in the spring of 2001 with a new, clear label.
Then, there were new "to go" snack containers, a major showcase for the company. The food items were packaged in multilayer containers shaped liked triangles and cylinders. With no room for error due to an aggressive start date, the containers needed to be molded with precision so that a sleeve could be pulled over them.
There was a ketchup bottle using a new, barrier-layer PET package. There was a two-piece weed sprayer. And a polypropylene sports-drink package with a molded-in handle.
The pace quickened. Some deadlines were missed. The company ended up paying $5 million to settle contractual claims with certain customers because of shipment delays. It paid another $3 million to meet contractual obligations, according to public filings.
The result was not pretty: The company recorded a net loss of $31.2 million for 2001. Consolidated found itself in violation of financial covenants with lenders.
That's when Macadam, 42, came on board. Consolidated gained some breathing room as the banks temporarily waived their call for payments. The company engineered a new agreement that gave it some time to make changes and invest in equipment.
In January, Consolidated signed the credit agreement with several lending institutions, including Vestar, and Dallas-based Dean Foods Co., which had bought out Suiza and now owns about 45 percent of Consolidated. Vestar owns the other 55 percent.
The new agreement gave Consolidated until June 2005 to make its first major long-term debt payment. While the old agreement asked for a revenue-sapping $48 million in debt payments this year and $52 million in 2004, the new agreement frees up cash by only asking for $7 million this year and $11 million in 2004.
"We totally refinanced the company," Macadam said. "We wanted to be able to use the money now for available capital, instead of having to use it to pay down current obligations. We'll see where we are in 2005."
Macadam knows that cautious optimism is appropriate. The same holds for credit research agency Standard & Poor's. The New York firm took Consolidated off its "credit watch" list in February but continues to monitor its progress, said packaging analyst Liley Mehta.
The company continues to receive a B-minus rating from Standard & Poors, a half-step up from a grade considered by the agency as one that puts the company at risk of defaulting on its loans, added analyst Paul Vastola.
Consolidated continues to face operating challenges, and profitability remains subpar, Mehta said. Its recent problems with customer deliveries make it more difficult for Consolidated to grow its business, she added.
"They have to get operations up and running to previous levels," Mehta said. "When Consolidated was spawned, it raised a couple of questions, and integration concerns really haven't been answered. It's an uphill battle."
One former executive, speaking on condition of anonymity, said the company had unrealistic expectations when it was founded.
"They thought there would be a magical synergy between companies," the executive said. "The view was that plastics is plastics is plastics, no matter what the business. But they found that is not always the case, and a consequence is supply-chain inefficiences."
One major change is a new "manufacturing excellence program," which Macadam calls a multiyear journey for its plants. The program includes adherence to quality, safety and process standards that are common to all facilities, Brower added.
The four-tiered program builds toward such goals as better responsiveness to customers and consistent excellence, Brower said. Two-thirds of the plants have been certified on the first of the four levels. The goal is to have all plants certified on level two by the end of 2003, he said.
One non-negotiable in the company is safety, Brower said. The company's incident rate reported to the Occupational Safety and Health Administration dropped by more than half between 2001 and 2002, he said. In the first quarter of this year, the firm had sliced the rate by a further 50 percent, he said.
The company also is replacing older equipment and rebuilding product development. For the latter, Consolidated is adding 42,000 square feet to an Atlanta facility for a new engineering center. The facility is to be completed by early June and will include a materials laboratory, design studio and pilot plant capable of running five different technologies.
The facility, which will have about 25 workers, meant some hard choices. The company closed a product-testing facility in Chicago during the first quarter and moved the operation to Atlanta.
While the new Atlanta center will be slightly smaller, it also will be less bureacratic and more focused on all the company processes, Brower said. About five lines of laboratory-style production equipment will be added at the new center.
The plants are getting more attention, too. The company is adding another PC blow molding line to its Tukwila, Wash., facility and has two more machines on order there.
And Consolidated opened a new, 62,000-square-foot plant in Irapuato, Mexico, in March. The facility, with
about 30 people, will be a major producer of 5-gallon PC water bottles, a staple in Central and South America. The company has put two blow molding lines in the new plant and has another five lines at a facility in Mexico City, Brower said.
Consolidated would like to expand the Irapuato plant to add as many as five lines there, Brower said. The company already has invested about $2.5 million to start the plant.
"We have to grow internationally if we are going to hit our plan," Macadam said. With the new cash coming in, Consolidated plans about $35 million this year and next for capital expenditures.
Another project is fixing its internal systems, or lack thereof. That includes an expensive, companywide information system, one that finally puts all the plants on a similar basis.
Such processes as payroll, accounting and purchasing will be joined, Macadam said. And costs are being scrutinized everywhere.
For instance, the company found that by bringing general legal counsel in-house, it could save about 30 percent, he said.
Outsiders still are taking a wait-and-see attitude, especially the credit agencies that must report on Consolidated's public debt. New York-based Moody's Investors Service lowered Consolidated's 2003 ratings in early April to reflect its weak financial condition. The service said that was due primarily to its operating difficulties of the past and cash-flow constraints, including more than $500 million in debt.
"They've gradually improved and removed operating bottlenecks at some manufacturing facilities," said Mehta at Standard & Poor's. "But given their liquidity and cash-flow-generating abilities now, they have limitations."
But with the 180-degree differences in business processes and quality, Consolidated plans on surprising the market, Duelge said.
"We're already gaining enormous traction," he said. "We've created a fast-running machine, and we think customers will continue to pick us for the long term."