LINCOLNSHIRE, ILL. (Nov. 2, 3:45 p.m. ET) — Whether it's making another blockbuster purchase or shedding an ill-fitting business unit, the packaging industry is well-versed in the art of acquisitions and divestitures.
Experts from two companies — Kevin Kwilinski, president and CEO of Portola Packaging Inc., and Curt Begle, president of Berry Plastic Corp.'s Rigid Closed-Top Division — shared their success strategies at Plastics Caps & Closures 2012, held Sept. 18-19 in Lincolnshire.
“Really, what [divestitures] mean for us is, “How do we focus?' And once you're focused, you figure out what doesn't make sense anymore,” Kwilinski said.
After emerging from prepackaged Chapter 11 bankruptcy protection in 2008, Naperville, Ill.-based Portola has adopted a dogma of focus and lean manufacturing.
In three years, the company has gone from 1,100 employees down to 700 through manufacturing optimization and rationalization. Officials have zeroed in on key businesses — ones where Portola has a strategic advantage and a “right to win,” Kwilinski said.
In June, Portola exited the cosmetics market — shuttering its Portola Tech division, closing the associated plants in Rhode Island and China and liquidating the assets.
The cosmetics business depends on short runs, frequent product changes and lots of tooling investment — all things Portola isn't good at, Kwilinski said.
Shedding Portola Tech simplifies the business. It also allows Portola to invest in its core business of compression molded, tamper-evident caps, and continue to improve efficiency, which will lead to a higher return on investment, he said.
Portola is a low-cost supplier with some unique offerings, but instead of offering a “solution to every problem,” the company aims to offer the best solution for specific needs, he said.
“It's all about us focusing on what we can win at and making sure that all the resources we have are focused on that key objective,” he added.
That's not to say that Portola doesn't pursue acquisitions. In 2010, the company purchased Integra-Seal Industries LLC of Kingsport, Tenn., a small molder of tamper-evident closures. Integra-seal was a competitor with a less-efficient manufacturing base, according to Kwilinski, and Portola was able to integrate the newly acquired products into its own manufacturing platform.
“It's really about knowing who you are … and making sure that acquisition is going to support the ultimate goal that you're trying to achieve,” he said.
Berry, meanwhile, is known for its taste for diverse acquisitions. The packaging powerhouse has completed 30 acquisitions since 1998 — 10 of those in the last five years — and has looked at 115 potential deals in the last 12 months, Begle said.
Considering that some of acquisitions involved multiple businesses, Berry has faced a number of challenges trying to make it all fit, Begle said, adding that for Berry, the most important thing is “staying core to what we are.”
When looking at an acquisition, Berry considers several key areas: the company's customer base, products, end markets, geographic location, competitive advantages and, most importantly, its people.
“From our standpoint, we find that to be the most critical,” he said. “We can buy all the best machines in the world, have the best product lines, have the best customers, but if we don't have people on the other end of the line … [if] they aren't committed to the company, [if] they aren't committed to the excellence that goes out the door, then it's all going to fail,” he said.
Berry has pre- and post-acquisition strategies for preserving and cultivating talent. They identify the most influential and valuable employees, along with those critical people who are most at risk of leaving, and figure out how to make them a part of the new business model.
There's a big focus on communicating “the Berry story” — the company's vision, its history, its strategy, products and manufacturing platform, and employee success stories — along with clearing up misconceptions. On closing day, Berry already has a management team in place ready to tell that story and answer questions, Begle said.
Since most Berry employees have been on both sides of the M&A fence, they can sympathize with employees of newly acquired companies, he added. “Everybody kind of knows what you're going through, what your anxieties are, what questions you have, and we're able to head that off at the start.”
Being open and honest, and honoring commitments, is vital, he said. “If you say you're going to do something, you better well do it because you're going to lose all credibility with the people and that's probably not going to be a winning strategy long-term.”
Their stories may be different, but both Berry and Portola officials understand the importance of keeping everyone on point.
Each company employs a uniform information technology system across its plants so they're all on the same page.
All of Portola's employees have completed lean-manufacturing training and 70 percent of them have participated in “lean events” during the last few years, ingraining the practice in the company's culture, Kwilinski said.
Portola sets long-term goals with defined results for every department. Employee's objectives tie into these overarching goals, keeping the entire company focused.
Berry relies on teamwork and its “gung-ho” culture to make integrations seamless, according to Begle. The company has 900 teams across its 82 plants, focused on everything from website design to quality control, he said.
Employees are held to specific and tangible goals, and complete evaluations and surveys are done every two years, he said.
Berry also has plant ambassadors — peer-selected employees who travel to plants and see how things are going. It's a way of fostering company culture and reaching all of the company's more than 150,000 employees.
Both companies are optimistic about the path they're on.
“It took us a few years to get our feet under us,” Kwilinski said. “But now that we've done it we have … an opportunity to go grow the business and we're very excited about what the future holds for us.”
It's an exciting time to be in the industry and there's plenty of opportunity for consolidation, Begle said, adding that Berry is “looking forward to continuing on the path of growth and bringing more and more people into our business.”