Why flexible packaging business is the logical next step in our company’s ongoing evolution
November 27, 2018
by FRANÇOIS OLIVIER
Started up in 1976 in Montreal by Rémi Marcoux, our company was founded in innovation, which at the time came in the form of supermarket flyers being printed in four-color process on supercalendered paper that, unlike newsprint, did not leave you hands stained.
The other innovation was doing all the prepress work and content creation for the retailers as a full-service partner, right up to delivering those flyers up to people’s doors.
This innovation-driven foundation allowed our founder to grow the company by going public and expand into offset printing and media, primarily newspaper and magazine publishing, and to grow it into a $2-billion business by 2008, which is when our founder retired.
Unfortunately for the company’s second-generation management, including myself, both core businesses that Rémi Marcoux had built up were starting to decline.
When you find yourself in a declining business, strategically you face a choice of becoming the consolidator of that business, or letting someone else do it.
So in 2013 we decided to do two things: become a consolidator in the print industry, and let other companies be consolidators in the media business.
Because running a successful public company is predicated on continued sales growth, we also started thinking about starting a new division to provide that growth, so that the third generation of the company’s leadership would in fact have a viable business to operate.
After much discussion, we decided that this new division would be the flexible packaging business.
Why flexible packaging? Being simple people, we had a simple idea that because we were pretty good at putting rolls of paper into machines and printing on them, we should also be good at taking rolls of plastic film and put ink on those.
We started out on our flexible packaging journey in 2014 with our first acquisition that took us into a very vertical market for cheese packaging products—involving very complex high-barrier seven- and nine-layer film structures—thinking that if could make it there we would be on the right path going forwards.
Between 2014 and 2017 we made several other acquisitions, building a network of six flexible packaging plants across North America, with revenues of about $300 million, or about 15 per cent of our company’s total revenues of about $2 billion at the time.
One of the things we learned about flexible packaging in that time is that you need to fully understand each vertical market in which you operate, which is why we built up a very good team of managers from the companies we acquired.
About five months ago, we were ready to make a real meaningful transformational change in the flexible packaging business by completing the acquisition of Coveris Americas—a major producer with 3,000 people and over $1 billion in revenues.
We executed on that strategy because we felt that we now had better knowledge of the industry and, more importantly, that we had team to facilitate a successful integration of those assets into TC Transcontinental.
It was a real milestone moment for us back in May of this year, as we now had some 4,000 people working for the company, a lot of new customers, and many new many new facilities—with flexible packaging now accounting for about 52 per cent of the company’s combined revenues of just over $3 billion.
In fact, this was the first time in our history that the company’s largest division was no longer the offset printing business. Our new network of packaging plants now comprises 28 locations—including three production facilities in Canada, 18 in the U.S., three in South America, and three in the rest of the world—making us one of the largest flexible packaging players in North America.
We believe that the best way to create value for our customers is to blend art, science and technology to create superior quality packaging that tells a compelling story for making good shelf appeal, runs well on the factory’s production equipment, and provides optimal product protection.
Today, we are the Number One flexible packaging company in North America for making products to package cheese—be it shredded, sliced, block, cream, Swiss, processed or whatever—dealing with all the 15 top cheese producers in North America.
Another important vertical segment for us is the pet food market—with the second-biggest share in flexible packaging and a unique product portfolio that offers the full breadth of flexible packaging: from 50-pound paper-only bags to paper-poly combinations to woven polypropylene plastic.
We are also a major supplier to the coffee industry with our poly-foil packages, as well as other consumer packaged goods, including many of those retailing at Club Stores.
Given the history of our company, we have a lot of prepress and design capabilities we can offer to our customers to give us an important competitive advantage.
Also, having over 70 extruders to blow our own film makes us even more cost-competitive and, more importantly, enables our customers to bring their product innovations to the market much faster and more efficiently.
Packaging naturally plays a big part in the whole sustainability equation because packaging’s main responsibility is to extend the shelf-life of the packaged product. Hence not enough packaging may in fact may be a worse outcome from the sustainability perspective than too much packaging.
In the food industry, 90 per cent of the environmental footprint is related to actual production of the food product and delivering it to the store, with packaging only accounting for 10 per cent. Hence, packaging that fails to protect the food product adequately will have a very negative environmental impact on sustainability.
With about a third of all food estimated to end up as waste in Canada, flexible packaging’s impact on the environment is relatively minor.
Our food industry customers continually ask us to provide more shelf-life for their products so that they don’t end up as waste, and more shelf-life by definition means more and more layers of film to protect that product, which makes in more and more difficult to recycle.
This is not to say that flexible packaging cannot be improved further from a sustainability perspective, but comparing flexible packaging to other packaging formats to protect a given product offers a more accurate picture.
If you decided to put about 60 pounds of product like cheese in glass, for example, you would need about 50 pounds of glass to do it, or six pounds of virgin PET (polyethylene terephthalate) plastic, or three pounds of aluminum pouches, or just 1.5-pound of flexible packaging.
There is also the further impact of transporting that packaging, empty or full, and the truth is that one truckload of flexible packaging is an equivalent to 15 trucks filled with rigid packaging.
The real challenge that the industry is facing lies in what the consumers do with their flexible packaging after bringing the product home and, for various reasons, the recyclability and compostability we all seek is not quite there yet.
There are many reasons for this, but even if were to make the stuff 100-percent recyclable, there is no guarantee that there is someone out there willing to recycle it, so that a 100-percent recyclable product does not end up in the landfill.
In fact, we are currently designing a 100-percent recyclable bag that we are hoping to launch in the market soon, but the question remains: Will it be recycled?
This is the challenge that the industry is facing: the challenge of shared responsibility. We have to work with the raw material suppliers like Dow to create recyclable and/or compostable packaging, but it is also important for product manufacturers to put the right information on that packaging so that consumers know how to recycle or compost the stuff properly.
The system will not work unless consumer puts the packaging in the right recycling stream, and that’s why we have to work with all different levels of government to create an infrastructure for recycling and sorting of these materials.
As a company that was heavily involved in newspaper publishing industry in the past, we were subjected to all kinds of criticism by NGOs (non-governmental organizations) and other environmentalists about deforestation and other environmental issues, and we responded by helping to build an infrastructure that has made newsprint a 100-percent recyclable product with a healthy market demand.
Naturally, we intend to do the same thing for the flexible packaging products we produce.
François Olivier is president and chief executive officer of TC Transcontinental, a Montreal-headquartered global producer of flexible packaging products and Canada’s largest commercial printer. The above text is an edited version of his keynote address delivered at the recent held Pac to the Future II – Retail Reinvented conference produced and hosted by PAC Packaging Consortium in Montreal on Sept. 25-26, 2018.