The man with a plan

Quarter-to-quarter investor expectations can dramatically shorten long-term strategic planning, forcing companies interested in the long view to rein in their horizon. In 1990, having hit a wall in its growth, Berry Plastics laid out a new plan that fundamentally rejected the business world’s shortsightedness, and set out to chart the packaging company’s course for the next century. That’s right, a 100-year plan.

Ira Boots, chairman and CEO of packaging giant Berry Plastics, addresses CMAI’s World Petrochemical Conference (March 24-25; Houston, TX). Since Boots began working for Berry in 1978, sales have shot up from $4 million to more than $4 billion. Through acquisition and organic growth, packaging supplier Berry Plastics has amassed a full suite of processing technologies, including injection molding, blowmolding, extrusion, and thermoforming.

Asked if the company initially drew up a 10- or 20-year plan that was simply expanded upon, Berry chairman and CEO Ira Boots has an emphatic reply. “It’s a 100-year plan, and we have 80 more to go,” Boots says. “We think that is quite unique in the world and it has been exceptionally good for our company to be able to have that kind of plan. At first Wall Street was very skeptical, but now after 20 years, they’ve converted.”

In addition to the light, Wall Street has undoubtedly seen the money when it comes to Berry’s strategy. When Boots and his colleagues laid out the next century for the company in 1990, annual sales came in at $57 million; in the most recent year, proforma sales registered $4.1 billion, a gaudy compound annual growth rate (CAGR) of 24%. That expanded revenue has also gone to its bottom line, with adjusted EBITDA (earnings before income, taxes, depreciation, and amortization) over that same stretch expanding at a CAGR of 23%.

Part of that geometric growth is directly attributable to an aggressive acquisition strategy that has led Berry to push through 29 deals, with backing from various private equity partners, including Goldman Sachs, Graham Partners, and Apollo. Most recently it acquired the flexible packaging giant Pliant, making film and sheeting Berry’s largest business, with annual sales of $2 billion. That’s followed by injection molding ($1.3 billion), blowmolding ($400 million), and thermoforming ($300 million).

Guiding principles
In addition to its 100-year plan, Berry operates under a set of business principles that the company will “never violate or change,” according to Boots. One of those is a product mix of everyday items that truly are recession proof. Estimating that the average consumer touches Berry products 30 times a day, Boots says, “We don’t like Beanie Babies, and we don’t like dotcoms—we don’t like faddish things.”

The company also emphasizes the “new,” both in its products and its technology. Boots says that every year, 25%-33% of its sales come from new products. This is necessary because as a product ages, customers expect to pay less, assuming that the processor has streamlined production, raised efficiency, and driven production costs lower.

In terms of new technology, Berry actually increased equipment investments during the recent downturn, with 2008 and 2009 its largest ever for capital expenditures. “Berry Plastics prides itself in searching for and securing world-class technology,” Boots says. “Our customer base demands that we take them to leading-edge technologies.”

The company also has focused its energy on the North American market—“our playground,” as Boots puts it—with 67 manufacturing sites. “As other manufacturers or suppliers have abandoned the North American geographic region for lower costs, either in labor or materials, we think that circle is beginning to close,” Boots says.

Going green
Calls for heightened environmental consciousness are pervasive right now, but the sustainability push is particularly strong within packaging, and Berry has responded. In addition to using bioplastics and postconsumer and postindustrial recycled resin in its packaging, Berry’s most impactful environmental effort has likely come from simply using less plastic. In each of the last three years, Berry has processed 5% less plastic as a company. To achieve that reduction, Berry has utilized downgauging, introduced scrap to internal layers, and used fillers, among other strategies. To satisfy its scrap needs, Berry has actually become a large purchaser of postconsumer and postindustrial scrap.

Berry’s far-reaching North American presence has also shortened the supply lines of its customers, reducing its own and its customers’ carbon footprints. “The education and savvy of our customers mean they fully understand the benefits of having manufacturing facilities very close in proximity to their filling locations,” Boots says, “and this trend is strong and it’s very real. There just aren’t a lot of reasons to [ship packaging great distances]—at some point that surely was cost efficient but it’s not carbon efficient at all.”

By all accounts, Berry should be a household name, known by consumers that use its ubiquitous household products, but the fact that it isn’t doesn’t faze Boots. “I like to say we’re like a song writer; we write all the songs, but Tim McGraw sings them.” —Tony Deligio

Berry at a glance
$4.1 billion in sales
81 manufacturing sites
14 million ft² of manufacturing
16,630 employees
16,000 customers
29 acquisitions
67 North American sites