Against the Current

From the Hazardous Cargo Bulletin, April 2002

As industrial packagings have to tread water in the current flooded markets, the Bulletin looks at those that have the qualities that will take them to the swimming gala

In a universally tough economic climate, it's easy to get complacent when the competition is suffering just as much. Keeping a head above the water might be impressive as others are turning blue and drifting below the murky surface, but some companies out there are looking at their immediate environment while they tread water. They know how big the ocean is, where their competitors are swimming, and where the next piece of driftwood is floating. Some, apparent by the companies mentioned below, are even building rafts.

Those industrial packaging companies who are surviving the challenges of flooded markets and cost cutting customers have one thing in common - a cerebral and measured approach that takes into account the context of the company in a wider situation - one that is changing rapidly. Companies that know their markets well (however choppy) and their changing demands will be able to react and navigate the waves.

The bigger picture

Nearly 90 per cent of Greif Bros Corporation's sales in the past year were in North America and Europe. Weak economies in these areas have made the operating environment for industrial packaging companies challenging, but Greif has noticed some recent signs of recovery.

Remaining focused on a business plan of helping customers to better understand and control their total packagings costs, Gregory Wall, director of intermediate bulk container (IBC) operations, reports that the company has "reorganised the IBC business in North America and has assembled a strong management team to enhance responsiveness to customer needs". He continues, "Dual IBC product lines, IBCs with either rod-style or tubular cages, again give Greif the ability to meet varying preferences in the market."

"We have seen more and more companies make an in-depth analysis of their total logistics costs," says Peter Holm MØller, director of Carrimor, commenting on trends among consumers of IBCs. "The issue is not only the purchase cost of the IBC, but the whole return logistic set up," says MØller. "We are positioned for a more 'modern' approach to logistics solutions," he says, highlighting a growing customer requirement that the IBCs they have invested in come with the means of getting them back easily.

In response to this, Carrimor has teamed up with international logistics companies. "We offer a wide range of total solutions including trip rental. On top of that, a full leasing facility has been rolled out all over Europe," says MØller. Customers are also offered the opportunity to speak directly with third-party experts who can give advice on liners, fittings, leasing, tracking and trip rental. Carrimor does not charge for this service. The Denmark-based company is confident that this holistic approach is good for business.

"Production is now set up and running on a major scale. We launched our 1,000-litre IBC, which passed US and UN tests," says MØller, describing 2001, which was Carrimor's first trading year. "We confirmed and set up third-party partnerships, new products have been prototype tested and will be released in 2002 and significant contracts have been negotiated," he continues.

Stronger competition is going to continue to be a large part of the industrial packagings industry over the next year, according to MØller. "We will fit perfectly into this picture," he states. "Small overheads and strong partnerships are the way forward."

Last but not leased

It seems that IBC consumers are at present unwilling to commit to buying IBCs outright. Although a multi-trip IBC pays for itself in the long-term, many shippers are keen to rent, an option that requires less cash up-front.

GWS Finncont will be capitalising on this trend as it opens rental operations in the Nordic countries in the coming year. "Our customers' propensity to invest has weakened and at the same time customers require shorter lead times," says managing director Hans Johanson. The company can deliver IBCs from stock, while maintaining its ability to tailor the containers to customer requirements. Technical improvements have been made to the product range and, in the past three years, the plant machinery has been fully modernised in order to deliver cost efficiency and standardisation to customers.

"We are looking for growth in new market areas," Johanson explains, mentioning a recent retail agreement in Russia. The company is well positioned to serve these new markets. "Finland's geographical location, together with long experience of the Russian trade culture, offers a good possibility for Finncont to expand in the Russian market," he says.

One company that reports new customers, even in these difficult times, is Roth Werk. "We are not only producing IBCs, we are offering an entire concept with product service and special solutions," explains marketing and sales manager Jörg Martin. In response to demands for IBCs that have anti-static properties, Roth has worked with some of its biggest customers to develop the concept, the result of which will be introduced at the Interpack exhibition in Düsseldorf later this month.

Röth is also involved in trip leasing concepts and has developed the Standard Reinforced container. "That container remains a universal service provider with a huge demand on the market," says Martin. The company's flexible and capable approach to customers has allowed it to out perform the IBC market as a whole this year.

Roth has markets all over Europe - especially Germany, Benelux, France and Switzerland. At the end of 2001 it moved into Scandinavian markets through a partnership with Hannells Industrier. "Whereas Roth gains access to markets via Hannells' existing sales channels, Hannells can enhance its range of products with the addition of our entire IBC family. We make an excellent match as far as corporate structure goes." Both Hannells and Roth share a background as heritage-rich, family-owned businesses that share a commitment to quality, says Martin.

"We won't take part in self-destroying competition in the market," says Martin. Roth's focus on customers and product on top of paying attention to sales margins is the "only way for a company to grow - and even survive - long term," he explains.

"Mailbox has continued to invest in both new machinery and personnel," says Adrian Keeler, product manager, bulk container division at Mailbox Mouldings. Despite severe competition and recent projects being downsized or put on hold, Keeler reports that "ongoing product developments will result in several new products being introduced before the end of 2002."

"If overall market demand continues to decline, it follows that some of the overcapacity will have to be taken out of the equation," Keeler explains. "We have already invested in the future in terms of both machinery and personnel. Improvements in production output and efficiency, coupled with an ongoing product development to meet the ever-changing needs of our customers, will help to ensure that we remain a major player in the IBC market for many years to come."

In response to the trend towards globalisation in the industrial packagings market, which was typified by Greif's acquisition of Van Leer last year, Bonar Plastics has been tightening up relations between its companies across Europe. Low and Bonar plastics companies Rhein-Bonar, Anisa, Franca, Fusion Kunststoffen, Rotec and Metas have united under the Bonar Plastics name in order to present a united and international identity to its market.

United front

"Suppliers will be judged on the products and services they provide - especially on an international base," says Wim-Henk Stoppkotte, director of sales and marketing. "When added together, the products of all the individual Bonar sites form an impressive range which will suit almost every need of the customer."

Bonar continues to survive current economic conditions - "thanks to intensive customer contacts, new customers and new market segments such as printing inks," says Stoppkotte. Looking to the future, he says that within industry, "the service provided will become important". He expects a recovery of the market to happen later this year.

Similar investment within steel drum manufacturing companies is preparing producers for recovery. The panic of a global recession has calmed and companies are thinking of the future and their place in it.

As competition drives down steel drum prices in Japan, the Nippon Steel Drum Company (NSD)is "firmly maintaining its basic policy of providing utmost satisfaction to its customers," according to Michio Utsumi, manager of overseas affairs. This policy is supported by quick response, the development of value-added products and continuous efforts of improving its product quality and quality assurance systems.

Techno limits

"NSD is laying emphasis on expansion in the areas around the new steel drum business and is strengthening business activities in special containers, engineering and logistics," explains Utsumi. "Through these activities, NSD aims to establish an overall industrial container business structure."

As well as looking at its place in the logistics chain, NSD is also introspective - developing new areas of technology and business activities. As well as the steel drums NSD's name connotes, the company designs and makes supportive engineering tools. NSD has an active strategy of "expanding its business into the sphere surrounding the new steel drum business," demonstrated by the establishment of the Nippon Steel Drum Techno Co in 1998, which manufactures filling equipment for a myriad of containers from IBCs to containers of 10 litres or less.

"The filling system for the 200-litre drum has a number of outstanding features incorporated through NSD's experience of manufacturing and handling steel drums," says Utsumi. "NSD expects to expand its engineering business based on filling systems for various containers."

NSD has also recently developed a fully automatic leakproofness tester currently in use at each of NSD's five plants and now adopted by other drum manufacturers in Japan. The machine uses compressed air to determine whether or not leaks are present in a new drum. The tester detects leaks by measuring and processing acoustic emission (AE) signals created when the air escapes. The test is superior to conventional leak tests in all aspects of inspection speed, defect detectability and equipment cost, says Utsumi.

Meanwhile in the US, the effects of September 11 are having a 'bitter-sweet' effect on business for Skolnik Industries. "For the dangerous goods industry, the sudden focus on security and safe transport has been a boost for Skolnik sales," says chief executive officer Howard Skolnik. "More than ever, customers are questioning the reliability of their containers when in transport," he continues. "Marginal is out, reduced risk is in. Cheapest price is out, container and manufacturer integrity are in!" he says, confirming that investment in products is an important ingredient in a company's success when shipping dangerous goods.

"Our focus is on developing new solutions to shipping problems," says Skolnik. "Those companies that embrace change will see new opportunities and thrive. Those that do not change will slowly wither."

Globalisation has also turned into a positive factor in Skolnik's alternatively independent approach to business. "Once threatened by 'global domination' of global contracts, these worldwide companies have gone from being agile and responsive to lumbering and cold spirited. The corporate culture cannot offer the personal relationships that container buyers have known for decades and, thus, the independent companies are seeing large companies revert to regional purchasing preferences," says Skolnik.

Offering similarly "unique" containers geared towards the transport of dangerous goods, plastics drum manufacturer Francis Ward Ltd is reporting some pick-up in 2002, following "a very difficult fourth quarter".

Pachmas is continuing to drive costs down on its range of steel drums. "The market demand for low costs (a global effort to reduce packaging costs) does knows no limitations," says Nathan Josman, vice-president, marketing of the Israel-based company.

"Our company implemented a policy of reduction of manpower costs, decided to stop several activities with marginal profits and introduced a new aggressive purchasing policy," says Josman. "Our customers are increasing export efforts, so they try to cut out packaging costs all the time. They increased their efforts to import drums, but this activity is difficult since our prices are very competitive."

Peter Collard, general manager of plastics drums producer Polimoon, sees the market as "already over capacity". The company is keeping its position in the market by taking costs out of the business. At the same time Collard says that Polimoon is "maintaining and gaining market share through service - not surrendering volume on price".

The secret of Polimoon's strength in the market comes from "being prepared to offer customer variations, for example closures, packaging, lead times, payment by euro, to name a few". This strength will no doubt aid the company in the "major role" it expects to be taking in the predicted rationalisation among European plastics drum manufacturers.

Flexible IBC (FIBC) manufacturers are also experiencing the "pressure on prices" brought about by the economic slowdown. Turkish manufacturer Unsa Ambalaj has markets in the US, Benelux, Germany, France, UK, Italy and Spain, organised from a central point in Istanbul.

"Thanks to our global organisation, we are able to supply big international groups by decreasing their packaging, logistic and communication costs by serving them centrally from our headquarters," explains Can Sezer, sales and marketing manager. Despite tough competition, to which Sezer expects some smaller companies will fall casualty, he reports that "Unsa is continuing to grow in capacity and we are expanding our coverage worldwide."

Fibre - keeps you running smooth

"Continuous product innovation has kept Fibrestar at the forefront of the industry," says Chris Ascott, Fibrestar sales and marketing manager. As the global economy slows, new products are keeping the fibre drum manufacturers busy. "Too often, recession stifles investment, restricting the opportunity to take advantage of any upturn. Conversely, the product development and plant automation has continued at pace within Fibrestar's Manchester base."

"New mono-material products such as Ro-Con - the 'square-round' all-fibre drum - are being launched to provide answers to the latest European waste directives," says Ascott. "A new and enhanced 'Clean Drum Process' has been introduced in response to the increasing demand for improved cleanliness within the pharmaceutical and fine chemicals sector."

Ascott is aware of his product's role outside of the factory, and uses this knowledge to improve and promote fibre drums. "Only by appreciating the entire requirements (filling, handling, logistics and disposal) can we identify opportunities to remove cost from the supply chain. Here our proactive approach has provided significant benefits and savings for our customer base."

Fibrestar, in common with many of the companies detailed above, represents a company balancing a macroscopic knowledge of the industry with a sound internal structure. At times when profit margins are compromised, companies must focus on the integrity of their products and the environment in which they function.

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