Two giants serving the retail sector keep their eye on PE

Chicago — Polyethylene is kind of a big deal for Novolex and Kroger Co.

Hartsville, S.C.-based Novolex is one of North America's largest plastic bag makers. Cincinnati-based Kroger is one of the largest grocery chains in the United States. Executives with both companies spoke at the Global Plastics Summit 2016 about the PE market.

“I'm always asked what resin is going to do, and I always say it's going to change,” Novolex Chairman and CEO Stan Bikulege said. “It's important to communicate that to our customers. We can have two massive entities on either side, and we can't be the one to hold things up.”

Large amounts of new PE capacity are set to come online in North America, and that should be a good thing for Novolex and other processors, according to Bikulege.

“Raw materials are giving us an opportunity to grow in North America and compete globally,” he said. “Hopefully, we can benefit from that.”

High density PE is one of Kroger's largest purchases, according to global category sourcing leader Brian Soder. The firm — which operates almost 2,800 supermarkets and almost 800 convenience stores in 35 states — leverages its HDPE purchases for dairy bottles and other products and also uses suppliers in different areas, he said. This practice allows Kroger to minimize risk if a resin shortage occurs.

Novolex was known as Hilex Poly in 2012 when it was acquired by Chicago private equity firm Wind Point Partners. Since then the firm has made five acquisitions, most recently buying Heritage Bag Co. in April. Novolex employs 6,100 at 43 North American plants and sells to 2,500 customers.

Novolex had sales of $2.3 billion in 2015, including plastics, paper and other products. Its plastic products include retail bags, can liners and bags for produce and health care.

The Heritage deal made Novolex North America's seventh largest film and sheet producers, with estimated plastics sales of $1.2 billion, according to Plastics News estimates. Bikulege described Wind Point as “a phenomenal partner.”

“Sometimes you hear negative things about how [private equity firms] can act, but we've been able to grow our business and help people,” he added.

Kroger and Novolex both also have made sustainability a focus of their PE operations. Novolex recycles more than 20 million pounds of used bags every year at its plant in North Vernon, Ind. “We need to have a sustainable future and look for better ways of manufacturing,” Bikulege said. “And we have to continue to educate people about the recycling process.”

Soder explained that Kroger has considered moving from rigid to flexible packaging in some applications and also has looked into downgauging. “It's something we've looked at for sustainability,” he said. “Anytime you can reduce resin, that's huge. It's also a cost advantage.”

Products where Kroger has considered a packaging switch include broth and laundry detergent. “Whatever the consumer wants, we're willing to look at,” Soder said.

Bikulege also is focused on job creation at Novolex, especially after seeing the steel industry decimated in his native Pittsburgh.

“We need to create jobs through new products and research and development,” he said. “We can make products that are cheaper, more recyclable and more user-friendly. We have opportunities to do amazing things.”

The Global Plastics Summit was held Sept. 28-30 in Chicago.