Winpak Heat Seal grew by focusing on flexible packaging covers
It's a cliché that businesses today need to specialize to be successful. But the field Tim Johnson works in is so esoteric, when he talks about it, you almost feel like you're in a Jerry Seinfeld skit.
Did you ever wonder who makes the foil lids found on many yogurt containers? Or the lids on those little coffee-creams they serve in restaurants? Or the foil liners on peanut butter jars?
Probably not. But chances are that Johnson, vice-president and general manager of Winpak Heat Seal, has had a hand in producing all of them.
"Not many people think about lids. But they are very important," said Johnson, president of Vaudreuil-Dorion-based Winpak Heat Seal.
"If a lid doesn't stick, the product will spill during shipping," Johnson said. "And if it sticks too well, then you can't peel it off and you have to cut through."
Though the lid industry is about as unglamorous an industry as you can find, for Johnson, it's been lucrative. In the five years since he took over Winpak Heat Seal, sales at the Winpak Ltd. subsidiary, have more than tripled to about $100 million, making it one of the company's top-producing divisions.
And since Johnson's compensation and bonuses are tied to the bottom line, he's done well too.
It's a been a long road for the American born certified public accountant who came to Winpak Heat seal after a string of packaging industry jobs.
When he took over as the division's vice-president and general manager in 2000, parent company Win Pak Ltd., which trades on the TSE, was digesting the acquisition of Heat Seal Packaging, as it was then known.
"Our first step was to put together a three-year strategic plan, so we knew where we wanted to go," Johnson said.
Winpak Heat Seal had a good reputation, customer list and lots of potential, but was operating in a fragmented market. Johnson's first priority was to build market share.
During the past two years Winpak Heat Seal invested $23 million to double plant capacity, and another $26 million to acquire competitor Webcote.
The company's state of the-art facility now has the ability to print, die-cut, and custom laminate base stock of foil, film and paper. Johnson estimates Winpak Heat Seal has about a 60 per cent share of the North American yogurt lid market.
According to Ugo Mazarollo, whose family owned Heat Seal Packaging before it was bought out, the deal brought the new subsidiary all the advantages of being part of a large integrated operation.
"They injected a lot of capital and they managed to increase revenues substantially, " said Ugo, Mazzarolo, who is now general manager at M&N Plastics, in Tampa Florida.
Winpak Heat Seal also benefited from a long-term trend toward individual servings, for a variety of products ranging from fruit salads, to deserts. That's because if a client sells its product in one large container, it needs only one lid. But if it packs its product into six small containers, it needs six lids.
But it hasn't all been easy, Winpak Heat Seal operates in a competitive market, said one industry expert.
"Since NAFTA went into effect there has been a fundamental realignment in the industry," said Alan Robinson, president of the Packaging Association of Canada. "There used to be many companies that produced a wide range of products for the (domestic) market, but today most only concentrate on one or two lines."
According to Robinson, Canadian packaging firms have done well by producing products that require only short runs, or those that have a higher quality and value added components. These lines are often not worth the trouble for large U.S. players.
Despite his success, Johnson is till going strong. He's currently assessing a variety of expansion opportunities, especially in Europe.
Johnson is also taking a hard look at the pharmaceutical sector. The foil that Winpak Heat Seal produces is ideal for use as liner for individually packaged drugs. And with an aging population popping ever more pills, Johnson would like to ride the growth cycle.
"We have a great base here," said Johnson. "Now all we have to do is to figure out how we are going to build on it."
Sidebar: Dealing with the dollar's downturn
The strength of the dollar has hit Canadian companies hard, especially those that operate in a North American context like Winpak Heat Seal.
"Eighty percent of our sales are in U.S. dollars," said Tim Johnson, the company's president. "So when the currency moves it can have a big effect."
Winpak Heat Seal has long benefited from the cheap dollar, which makes labor rates much more attractive here than in the U.S.
Company managers use a rule of thumb when rating labor cost. If a worker in their Quebec plant makes $14 an hour, a worker doing the same job in the Illinois plant also typically makes about $14, but in U.S. dollars. So when the U.S. currency fell from $1.58 Canadian to $1.37, Win Pak Heat Seal's labor cost advantage fell by almost 15 per cent.
Alan Robinson, president of the Packaging Association of Canada denies that Canadian packaging companies have been getting a free ride on their cheap labor.
"Packaging is very technology driven, and the bar is being raised all the time," Robinson said. "Companies that don't invest in their plant and equipment simply won't make the grade."
Fortunately for Win Pak Heat Seal, much of the raw materials that go into its lids are priced in U.S. dollars, so it was not hurt as badly as many Canadian manufacturers, though profits did take a hit.
Photo caption: According to Tim Johnson, making a yogurt and coffee cream lids is tricky. If the glue is too sticky the cap won't open, and if it isn't, the container could open during transportation.
|© 2004 Peter Diekmeyer Communications Inc.|