Graphic Packaging on organic growth and developing a two pack carton for Kellogg’s

By Jenny Eagle contact

- Last updated on GMT

Related tags: Paperboard

Graphic Packaging creates two pack carton for Kellogg’s
New product development remains an essential component of Graphic Packaging’s organic growth strategy, according to Michael Doss, president and CEO, discussing the company’s Q4 2015 financial results.

In the craft beer market, the firm launched a litho-lam 12 pack carton for glass bottles with a craft brewing customer recently and in the food market, it worked with a frozen pizza customer to launch a line of frozen pizza at Walmart called Sasquatch Pizza.

Kellogg's Special K Fruit & Yogurt Cereal and Nutri Grain Variety Pack

This is an extra large pizza that utilizes Graphic Packaging’s heavy caliber SUS and heavy UV window.

We manufacturer two primary grades of paperboard, SUS and CRB​,” said Doss.

We convert over 80% of this coated paperboard into folding carton packaging for our CPG customers through our network of converting facilities​.

We also make folding cartons for customers from paperboard purchase from other manufacturers​.

This non-Graphic Packaging paperboard includes SBS in the U.S. and bleached recycled and SUS alternatives outside of North America​.

On the strength of the packaging side, we used heavy caliber SUS to produce a two pack carton for Kellogg's Special K Fruit & Yogurt Cereal and the Nutri Grain Variety Pack​.

In microwave cooking solutions, we launched a new pizza carton that features our proprietary MicroFlex-Q susceptor for even heating of the Gino's East of Chicago line of Deep Dish Frozen Pizzas​.”

He added, pricing and commodity inflation-deflation should offset over time.

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Our carton contracts generally contain one of two price resetting mechanisms. One is typically based on a basket of commodity inputs, while the other is typically based on open market price of paperboard​,” he said.

When we look at the RISI published pricing for our coated paperboard grades for 2015, they published $15 per ton decrease in SUS in February and a $50 per ton increase in CRB in August. As a reminder, these price adjustments generally flow through our carton contracts on an average of nine months​.”

Colorpak and Walter G. Anderson acquisitions

Graphic Packaging announced in January, it intends to acquire Colorpak and Walter G. Anderson

Colorpak operates three folding carton facilities that convert paperboard for food, beverage and consumer product markets. Its three converting facilities are located in Melbourne and Sydney, Australia, and Auckland, New Zealand.

Graphic Packaging has been operating in Australia for over two decades, serving primarily beverage customers using third-party converting partners and Colorpak has been its largest converting partner.

Its three folding carton manufacturing facilities allow us to expand our supply chain in the Australia and New Zealand food, beverage and consumer product market​s,” added Doss.

This acquisition will broaden our customer base and offer current customers a wider range of products. Colorpak is expected to contribute $4m to $6m of EBITDA in 2016, and $11m to $13m annually within 12 months to 24 months​.”

W. G. Anderson is a folding carton manufacturer with a focus on store branded food and consumer product markets. The company operates two folding carton converting facilities in Hamel, Minnesota and Newton, Iowa.

These facilities are strategically located in the Upper Midwest where many of our largest CPG customers are concentrated​,” said Doss.

Macon SUS paperboard machine

The acquisition is a continuation of our strategy to grow in attractive geographies and end markets​.”

The acquisition is expected to generate $14m of EBITDA in 2016, and $20m to $25m annually within 12 months to 24 months. Having received regulatory approval for the Walter G. Anderson acquisition, the deal is expected to close this month and Colorpak in the second quarter.

An additional project Graphic Packaging is planning to undertake in the second half of 2016 is the installation of a curtain coater and other improvements on one of its Macon SUS paperboard machines.

We installed a similar asset at our Kalamazoo CRB mill in 2014 and have been very pleased with the quality and cost reduction of the benefits of the product​,” added Doss.

The investment at the Macon mill will be approximately $30m, and will drive approximately $10m of EBITDA upon completion​.”

Related topics: Processing & Packaging

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