When Ira Boots pulled back the curtain on Berry Plastics Corp., it didn't reveal the Wizard of Oz but it did show a Japanese philosophy that's helped his firm grow from less than $60 million in sales to more than $4 billion in 20 years.
Berry Chairman and CEO Boots talked about the Evansville, Ind.-based firm's philosophy and acquisition strategy at the World Petrochemical Conference in Houston. One of the world's largest plastic packaging makers, Berry stands among North America's top 10 in four separate processing categories injection molding, film and sheet, thermoforming and blow molding according to Plastics News rankings.
The Japanese principle embraced by Berry is ho Ãª suru which translates into encircle the enemy with aggression. It was used by Japanese equipment maker Komatsu as it repositioned itself in order to compete with Caterpillar and other rivals.
That philosophy was included when Berry created an ambitious 100-year business plan in 1990. At that time, the firm had annual sales of $57 million, but, according to Boots, larger companies would swoop in and take business away from us.
We had to find a way to be able to compete with these on larger global companies, he said at the March 24-25 conference, hosted by Houston-based Chemical Market Associates Inc.
Berry management then set down the 100-year plan, along with six principles from which the firm never would deviate. Around that same time, Berry also made the crucial decision to partner with private equity to reach its growth goals. The firm now is 71 percent owned by private equity firm Apollo Management LP of New York.
Acquisitions came fast and furious. Berry reached $500 million in sales by 2003 and $1 billion by 2005. In the first 20 years of its 100-year plan, Berry has averaged 24 percent compounded annual sales growth and 23 percent compounded annual growth in earnings before interest, taxes, depreciation and amortization, which hit almost $670 million in 2009.
Its most recent mega-deal occurred last year, when it added $1.1 billion in annual sales by acquiring Pliant Corp., a major packaging firm which had been operating in bankruptcy.
Berry now has made 29 acquisitions during the course of its history. Boots said companies acquired by Berry often are fully dissolved into the company within 18 months. We're not a nation of islands we take a one-team approach, he said.
While Berry has 16,000 customers, many of its competitors have only 100-200. He said Berry's approach is to build whatever the customer wants. Deep knowledge of its competitors also has helped it stay ahead.
We know what [our competitors] eat in the morning and what they're thinking about in the evening, Boots said.
Berry employs almost 17,000 at 81 manufacturing sites including 68 in North America. Our playground is North America, and we're going to take care of all the customers in the region, he said.
In addition to 13 foreign sites, Berry has partnered with supply companies in China, Mexico, Canada, Saudi Arabia, Pakistan, India and Belgium. Berry also takes a straightforward approach to its product mix, which includes containers, drink cups, housewares and flexible film.
We make products people use every day not Beanie Babies or dot-coms, nothing faddish, Boots explained. We get asked how we make money on margarine bowls, since it's such a commodity product. When we look at a bowl we see a penny and we're going to make lots of pennies.
Sustainability efforts also are on Berry's radar screen, prompting it to reduce resin use by 5 percent in recent years while making the same amount of goods. With average product life cycles of three to four years and at least 25 percent of sales coming from new products each year, Berry officials can't afford to coast.
We write the songs, but we're not the ones who sing them, Boots said. But we smile knowing those are our products.
I joined the company in 1978 when our sales were $4 million. Now I can stand here at $4 billion and say our approach works.
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