LINPAC adapts to needs of changing market (PRW article)
Mike Arrowsmith interview with David Eldridge, PRW editor:
LINPAC Group, the UK’s biggest plastics processor with £1.1bn turnover and 9,000 employees worldwide, is near the end of a transition that has been led by Mike Arrowsmith, who joined as group chief executive in May 2005. Speaking to PRW, Arrowsmith explained what the changes have meant to the company, which was acquired by Montagu Private Equity in 2004.
“One of the most fundamental changes in the business over the past two years has been to engage more fully with our customers to better understand their requirements and work with them on specific solutions to their needs,” he said.
Five years ago, there was a “point of sale approach” in the company, he said, in which manufacturing was the primary focus and there was little engagement in developing the relationship with the customer. This was typified in the materials handling business, in which there were three separate divisions. Now, following its merger with Allibert, it is an integrated business which not only manufactures returnable transit packaging (RTP) crates, but also makes them RFID-enabled and has the capability to track them through the supply chain.
Arrowsmith previously headed logistics company Tibbett & Britten, so it is not surprising that working with customers on their supply chain is a key focus of attention. He cites the group’s new LinCare programme; pioneered by the food packaging division in which staff at all levels engage with the customer to deliver superior service levels. For example warehouse staff will visit customers to address the particular delivery needs of a customer.
This refocusing within LINPAC Group has been carried out at the same time that acquisitions have boosted some areas and non-core businesses have been sold, such as LINPAC Automotive components. Arrowsmith describes the Allibert merger as “extremely successful”, but will there be more divestments in the group?
“I’m very comfortable with the shape of the business as it stands today. There are no plans to divest any major parts of the group,” he said, adding there is “still some tidying up to do around the edges”.
The group now comprises five businesses: LINPAC Allibert; LINPAC Plastics (food packaging); LINPAC Industrial (warehouse storage systems, street furniture, recycling bins, agricultural products and metal decoration); Ropak Packaging (rigid plastics packaging in North America); and Viscount Plastics (industrial packaging and materials handling in Asia-Pacific).
LINPAC Group is one of many plastics companies to have moved into the ownership of a private equity group in recent years. So are there are strictures in being owned by Montagu Private Equity?
Arrowsmith replied: “Value creation comes from positioning a company to deliver results, whether the company is publicly or privately owned.
“Since joining LINPAC, not once have I felt we have been capital constrained in any way.”
Investment has been made across the group. In China, a major operation for producing plastic pails outside Shanghai is soon to be joined by the start-up of a PVC stretch film plant.
At its French operation, LINPAC Plastics has introduced 7-layer film extrusion technology to produce barrier lidding film for meat packs, intended as a move up the value chain.
Investment in the UK over the past year has been more than £12m across all businesses. There has been new extrusion capacity put in at different operations, including a new polypropylene extruder at the Featherstone facility.
A major programme of automation has also taken place at Featherstone. This has included robots installed for in-line padding of trays.
Box:
LINPAC Plastics started trials on bioplastic PLA packaging two years ago and has thoroughly evaluated any technical issues and its market potential.
“We stand ready to serve that market, but very few of our customers at the moment want it,” said Mike Arrowsmith, LINPAC Group chief executive.
Trials were carried out with retailers in which PLA was used for packaging of organic fruit and vegetables, and also some meat products. But even this premium market segment does not currently feel able to support the higher prices of PLA packaging, it was found.
“Until consumers are in a position to pay a premium for packaging, I don’t currently see a mass market for organic packs,” said Arrowsmith.
LINPAC Plastics is instead going down the route of recycled content in packaging, and Arrowsmith said he was “delighted” to see plans for new capacity to produce food grade recycled PET in the UK.
With the packaging business, LINPAC Plastics, contributing 47% of the group’s turnover, the growing public focus on the environmental impact of packaging is a hot topic. For this reason, it has active lightweighting programmes in place and is increasing the use of recycled raw materials.
“We have a responsibility to ensure we minimise packaging,” said Arrowsmith.
One example of lightweighting is pizza discs, in which LINPAC has changed formulations and succeeded in reducing weight by 20%.
LINPAC is, of course, already very familiar with recycling, with a major operation that lays claim to being the UK’s largest recycler of PE and PP. Arrowsmith said it works with its retail customers to divert waste from landfill.
A major programme it has carried out for a supermarket chain has seen LINPAC take back old rigid RTP crates, regrind and wash the polymer and then make new products for the customer. These new crates have folding sides, giving yet another environmental benefit by allowing more to be transported in the return journey.