Only a few years ago Paul “Hoop” Roche was one of the processors we highlighted in our annual Notable Processors feature. But last autumn his firm, Erie Plastics, was forced to file for Chapter 11 bankruptcy protection.
Citing a loss of business from P&G as the primary source of Erie’s problems, Roche’s love of the industry is nonetheless undiminished. Indeed, Roche formed Roche Management Group, a consulting company, and with it hopes to help other molders design strategic business plans, execute good business practices, and avoid the problems that sank Erie.
MPW: What was the key to Erie’s growth after you bought the company in 1991?
Roche: Differentiation. There were so many people in the custom molding business and entering the business, that the space was becoming very crowded. We wanted to be differentiated, not be just another molder. Our focus was on process improvement.
A lot of customers came to us saying they were not happy with their current suppliers. We made it our goal to be reliable and make quality parts.
“Hoop” Roche officially joined Erie Plastics in 1972 as a full-time sales engineer, but actually began working there when he was 15 years old in 1960. In 1991 he acquired the company and turned it into a major supplier of packaging components to several Fortune 100 companies. Contact him at [email protected].
We also focused on public relations. A lot of molders tended to like to hide, and wouldn’t let visitors into their plants. But that didn’t seem like that much fun to me. I don’t get why they wanted to hide. We tried to make our floor very aesthetically appealing to visitors. We bought a really large building and made it state of the art. First impressions are key, and we wanted to create a buzz, show that we’re high-tech, clean, and have excellent quality.
We also focused on major customers. We had a change in management in the early ‘80s when my brothers and I stepped in. At that time we had about 150 customers, some fewer than 1000 parts a year. We decided we had to focus on our largest customers, and get more volume from our major accounts. That became a very successful strategy for us.
Additionally, we hired our first industrial designer in the 1980s. People told us that customers wouldn’t pay for that service. But we found that not to be true, and we developed the ability to take a product from concept to production. That was the leading edge in that area at the time.
MPW: What changed over the years?
Roche: Well, those strategies worked for us for about 30 years. P&G became one of our biggest customers, but we didn’t see that as a negative. We always took the perspective that P&G was different. They had many different products and many geographies, so we felt comfortable being a major supplier to them. However, a dose of healthy skepticism would have been wise. We didn’t change but the way the people buy changed.
MPW: Do you regret putting so many eggs in the P&G basket?
Roche: I don’t regret having that big of a relationship with P&G, but I was disappointed with how they handled the relationship in the end. You used to get treated well if you were a major supplier. Then they went to the automotive model. The predatory purchasing mentality will either drive your good suppliers out of business or you’ll be dealing with the gigantic Nypros or Berrys or Rexams. Those companies are of the size to have leverage with the P&Gs of the world.
The whole mentality of a contract has changed to something that’s not binding, but rather is just a suggestion.
MPW: What would you have done differently?
Roche: My goal was to get to $100 million in sales. What I should have done differently was, after we got to $100 million, we should have kept the pressure on sales. We had the volume to match the capacity, so we didn’t keep up the pressure on sales. Some companies have the philosophy of overselling. We never tried to oversell. I’m not completely on board with that strategy (of overselling), but you never know what will happen to a job.
Again, a healthy skepticism is probably wise. If you oversell and have more work than you can do, then you can be selective. You can tell the lesser customers to go somewhere else.
MPW: What lessons did you learn from your experience?
Roche: I learned that fast growth—30-40% annually—really stretches an organization. It becomes a different type of company. When you get to the next tier, you have to watch your management team. You have to size your management capacity as well, not just your press capacity or plant capacity. Some managers are very good at managing a $25 million-a-year facility but can’t handle a $50 million-a-year plant. You can’t allow your company to grow beyond your management team’s ability to manage the growth.
The other thing is you have to be extremely careful in how you invest. We had invested a lot in a proprietary program, the Pop & Shake, but the amount of investment that was required to develop the concept became a burden. It didn’t cause what happened, but was one element added to all the others. There’s a new conventional wisdom in custom molding that you have to have a proprietary product. However, you have to be careful about over-investing in the niche as well. Most custom molders aren’t good at the type of marketing, distributing, and selling that having a proprietary product takes. It requires a totally different mentality, a different management model.
MPW: What did you lose sleep over before you sold Erie?
Roche: All the people that worked for me, and trying to save the ship and the jobs. My whole focus became trying to stay in business and not lose any more jobs. I’m old school. I’d been with the company for 49 years. I grew up in this business, so that’s different than if you’re a serial entrepreneur whose goal is to jump from one startup to another. When it’s been your life’s work, you tend to try a little harder to save what you’ve helped build over all those years.
MPW: What was your greatest achievement at Erie?
Roche: We wanted to get to $100 million in annual sales, be the biggest of the small molders, and we did it. And we did all that through organic growth, while building a reputation as one of the best in the industry in the packaging space. We also had a reputation for honesty and integrity, quality and reliability, and I’m proud of that.
MPW: What advice do you have for custom molders today?
Roche: They really need to diversify—markets, customers, and capabilities. Never quit selling. Find something you’re good at and go for it. Recognize when it’s time to get out. People like me fall in love with what they do and it’s hard to get out. Fundamentally, down the road there won’t be as many molders as there are even today. So they should look at it seriously and if they can get out, they should. They need to consider, “Is this going to get better or can I get out now?” Their futures lie in the answer to that question. —[email protected]