Plastic tube maker Essel Propack Americas is better positioned to grow, having gained supply-chain efficiencies and cost savings with the consolidation of its U.S. manufacturing and warehouse into a recently expanded facility in Danville, said a top official.
“Before we weren't positioned to grow three to five years down the road,” said Ted Sojourner, regional vice president of the tubes and laminates business for the Americas. “Now we have room on the production floor where we can add capacity for both our laminated tubes, the seamless plastic tubes in our Arista business, and for warehousing as well.”
The company opened the Danville plant in 2003, primarily to make tubes for Procter & Gamble Co.'s Crest toothpaste. So far, it has expanded that site four times. Oral care accounts for 70 percent of the production of laminated tubes globally, according to Essel.
Essel Propack Americas is part of Mumbai, India-based Essel Group, which does about $2.4 billion in sales — including $300 million in the U.S. — representing roughly 33 percent of the market share for laminated tubes worldwide. It sells 4.5 billion tubes annually, about 75 percent of them laminated for toothpaste and denture adhesives. Essel operates 23 facilities in 11 countries.
The 100,000-square-foot Danville expansion boosts the size of Essel Propack's main plant to 210,000 square feet, and replaces a second Danville plant about four miles away that the firm had been leasing for printing and graphic operations and for its Arista seamless plastic tubes business, which it acquired in 2006. Essel isn't adding equipment or gaining overall square footage, but it will have more production space when the need arises, officials said.
The $10 million project includes money Essel Propack plans to use to buy the main Danville plant, which is currently owned by the Industrial Development Authority of Danville.
“We have not added capacity right now, but we've made provisions to do that in the future,” Sojourner said in a mid-April interview at the Danville plant.
“Our investments have been more on the tooling side and capabilities, but we are making plans to make a big investment in production toward the end of the year in new state-of-the-art lamination equipment.”
The new setup gives the firm the ability to grow 15-20 percent in laminate operations and 25 percent in plastic tubing, he said. For example, there are currently seven injection molding machines in the clean room where caps and closures are made, but there is room for 12, he noted.
There is also a better material flow between manufacturing, warehouse space and shipping, Sojourner said.
“In terms of the whole supply chain, conservatively we think the consolidation of everything into one place will generate 5-6 percent more efficiency in the movement of products and the management of our inventory,” he said.
“We were moving things too many times back-and-forth between the two plants, adding unnecessary costs and creating extra work in tracking materials within our own warehouse system. And sometimes, things were in the wrong place at the wrong time because of how we had to store our laminate material and the printed tubes that were waiting for caps and closures.
“One of my objectives when I joined the company 31/2 years ago was to bring everything together,” Sojourner said. “We have been focusing on continuous improvement and getting our efficiencies up and this will help that effort even more.”
He also has worked to diversify the Americas operations, including Mexico and Latin America, and push personal-care, pharmaceutical, and cosmetics products in those regions. Essel soon will be venturing into another new area — hair care, he said.
“We are working on a new application and new product development in hair care that is new to both us and to one of our customers,” he said. “That helps us internally develop competencies and capabilities to venture into new business areas.”
Sojourner said Essel has been growing globally at a 15 percent clip. The firm's U.S. sales are growing 7-9 percent annually, slightly higher than the 4-5 percent rate of the overall plastic tubing market in the U.S, he said.
Work on the Danville plant began in August and was completed in mid-April, he said. About 60 percent of the facility will be used for warehousing and offices; about 40 percent for production.
Having everything at one location — laminated tubes, seamless plastic tubes, printing and graphics, caps and closures, warehousing and all 300 employees — will improve costs and customer service times, as well as give the firm more flexibility regarding labor, which is cross-trained to operate various production equipment. “If demand spikes on one side of the business or the other, we can move people from one department to another,” he said.
The flow of raw materials and finished goods has been streamlined, including the receipt of resins and laminates, which Essel Propack Americas gets from its parent's operations in India and China. The company also stages its finished goods by customers and by high- and low-runs.
To grow the U.S. business, Essel has to make smart decisions and manage its resources, he said.
“We have to remain focused and not try to become too many things to too many people. The path forward has to be clear and directed,” Sojourner said.
“We have to find things that our customers will value down the road,” he said. “We are looking at different ways to put printing on the tube — different applications and different looks, including holograms. We are also looking at thinner laminates, different laminate structures and different packages for consumers,” he said, such as the toothpaste tubes that don't have cardboard packaging, which are catching on in Europe.”
“The biggest hot button is better graphics and artwork to distinguish yourself in the marketplace,” said Sojourner. “We can leverage our in-house graphics capabilities to develop an edge.”
He also expects oval tubes to catch on, as companies convert from jars to tubes for skin-care products and from bottles to tubes for hair-care products. “Tubes are seen as more health-conscious,” Sojourner said.
He expects plastic barrier laminate tubes to grow as well, because they maintain the tube aesthetics but “bounce back” to their original shape better than lower-cost plastic extruded tubes.
“The use of plastic barrier laminates has accelerated a lot with new packaging in the higher-end premium category in the last two years because of the perception that they are a more consumer-friendly product,” Sojourner said. “We will see further innovation and development in products and that will drive growth in the industry.”
But he doesn't expect to see much recycled content in tubes, although a few manufacturers are using recycled content. In April 2008, Essel launched Etain, a plastic packaging tube that contains up to 40 percent recycled high density polyethylene, for hair-care, skin-care, pharmaceutical and cosmetics products.
“The acceptance of recycled content in tubes has been quite slow,” Sojourner said. “There is a cost premium for it and most companies are not prepared to take on that added cost.”