Solidifying its hold on the thermoformed drink-cup market, Berry Plastics Corp. is planning a massive expansion of its headquarters that will more than double the size of its thermoforming work there.
The Evansville, Ind.-based company is spending $11 million this year to add 200,000 square feet in production and warehouse space to its main campus, said James Kratochvil, executive vice president and chief financial officer. The investment will boost manufacturing for the thermoforming of drink cups, a main growth segment for Berry, Kratochvil said.
Berry entered the market for the thermoformed cups in 2001, with a 113,000-square-foot addition in Evansville. By the end of next year, Berry will have invested more than $70 million during the five-year period solely to make the cups, Krotochvil said.
Thermoformed cups are used by quick-serve restaurants and convenience stores and for catering and food distribution, Kratochvil said. The company already is a leading player in that market.
Berry also calls itself the largest U.S. provider of injection molded beverage cups, which are used as souvenir or promotional items. But thermoformed cups are growing at a much faster clip, according to the company's quarterly reports.
``We continue to make inroads in the thermoforming business,'' Kratochvil said. ``It's a highly efficient process we use to thermoform drink cups.''
Kratochvil said when the expansion is completed in late 2005, the company will have seven thermoforming lines devoted to making the beverage cups. The company also plans to add 85 employees by the end of 2005, he said. The expansion includes printing and converting equipment.
The company makes its cups from polypropylene instead of using polystyrene, like its competitors, according to Berry's 2003 annual report. The deep-draw drink cups, ranging from 22-44 ounces, are made using a post-trim thermoforming process at the Evansville plant.
A main competitor in the PP cup business is Radnor Holdings Corp. The Radnor, Pa.-based company bought Polar Plastics Inc. last year and shifted into thermoforming drink cups.
Berry's only other thermoforming plant is in Alsip, Ill., where Berry makes open-end containers, Kratochvil said. His firm has 16 manufacturing plants in the United States and Europe. Including its purchase of Landis Plastics Inc. in late 2003, Berry recorded $747 million in 2003 sales, according to Plastics News' injection molders ranking.
Berry's investment was spurred by a new financing program offered by the Ports of Indiana, a quasi-public group based in Indianapolis. The group recently broadened its program to offer leasing incentives to all Indiana-based companies, instead of only to those within 2,300 acres of Indiana port facilities, said communications and planning director Jody Peacock. The innovative program was copied from the state of Ohio, which has financed more than 250 projects with the lease arrangement, he said.
Berry is the first Indiana company to take advantage of the newly expanded program, Peacock said.
Under the plan, the state will buy the new building and lease it back to Berry, offering the company tax incentives and lower capital expenses.
The arrangement is called a synthetic lease because Berry actually takes ownership of the operation and manages it. ``It normally takes a project in excess of $10 million to make it work,'' Peacock said. ``It can be of substantial benefit.''
Berry was purchased last year by an equity fund of Goldman Sachs Capital Partners and JP Morgan Partners.