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May 27, 2000

6 Min Read
The molder's dream:  Proprietary products

0600i29a.gifIn December 1999, Philip M. Clemens, ceo of International Packaging Corp. (IPC) in Fort Wayne, IN, announced that he was closing the doors of his brick-and-mortar compact disk jewel box molding facility and entering the "brave, new world" of e-commerce. 

For a decade IPC’s jewel boxes provided what every custom molder dreams of—that "great proprietary product in the sky" to level out the ups and downs of custom molding. Finding a proprietary product and building a successful business on it is an enormous challenge for a custom molder. 

The Dream Product
Clemens’ quest began early in his molding career. He founded National Plastics Corp. in 1965, and molded products for the housewares, automotive, and electronics markets. "It was the normal mix for a custom molder, but we were always looking for something special in which we had some control over margins," he says. "You know, all molds have a bungee cord or wheels attached—they can go away easily." 

In the early 1970s a customer came to NPC looking for a part to be molded for the 8-Track audio cartridge. The 8-Track was just taking off, providing an alternative to the vinyl LP. The cartridge consisted of a polystyrene case and some internal parts, including a rubber pinch roller and an acetal hub. The customer, a custom rubber molding company called Imco, wanted NPC to mold the hub. 

Clemens saw opportunity in this hub, and it was tantamount to a proprietary product. Imco owned the molds; NPC ran the molds and sold the hubs to Imco, which in turn sold to every customer that made 8-Track cartridges. 

The business grew fast, says Clemens, and NPC became the main hub supplier to Imco, which had 80 percent of the market share. Over the next few years things went so well that Clemens invested in two 32-cavity hub molds of his own. NPC’s hubs rained down onto conveyor belts, which moved parts into a box and runners into a grinder in a closed loop manufacturing system. 

Audio Cassette Evolution
However, the 8-Track would be short-lived. After about six years Dolby Sound developed an audio cassette tape that could record and play music. Soon, sales of the Philips-designed audio cassettes overtook the 8-Track. 

NPC’s hub business leveled off and then began going downhill as 8-Track sales dwindled. The new cassettes had no pinch rollers or hubs. Also, these were the days of vertical integration in manufacturing and companies that made the cassettes also made all of the plastic components. "We had no position in audio cassettes," says Clemens. "Our proprietary niche faded away, leaving us back looking for another proprietary item, the memory of that one great little hub burning in our minds." 

Enter the CD
One day in 1985 Clemens picked up an issue of Time magazine. On the cover was a picture of a Japanese man holding up a shiny little disk. Curious, Clemens read the article and said, "Aha! There is son of 8-Track!" 

After some investigating, Clemens discovered that the first compact disk maker in the U.S. was right in his own back yard. "I hot-footed it down to Terre Haute to talk to [Digital Audio Disc Corp.]," Clemens says. "They had four Meiki molding machines and lines making CDs. I decided to get in on the ground floor with them somehow." 

'We realized that we needed specialty products with controlled margins to offset the continued decline in the commodity jewel box.'

Clemens knew this was an opportunity to have a proprietary product, but it couldn’t be the CD. However, every CD was packaged in a Philips-style jewel box. That became his target. 

He was in luck. Philips had created a world standard for the CD jewel box and licensed it so the design could not be changed, but also charged no royalties to the manufacturer. 

The first thing Clemens saw was that molding jewel boxes in his custom plant would not work. The facility ran a typical five-day week, used a variety of engineering-grade materials, and mold changes were frequent. Clemens decided that jewel box molding needed a separate, dedicated facility that ran on a seven-day schedule. 

In 1986, International Packaging Corp. was formed as a sister to custom molder National Plastics Corp. The plant would do nothing but run high-volume production in stack mold systems, using automation to produce jewel boxes efficiently in a commodity environment. 

Clemens’ first order from Digital Audio Disc Corp. was for nine million jewel boxes at 25 cents each. It was a molder’s dream come true—the motherload of proprietary products. IPC began producing millions of polystyrene jewel boxes annually. 

For many years IPC was a leading jewel box supplier. It appeared to be a long-term, profitable business. But as in any industry that appears to be an attractive moneymaker, other companies began jumping in; other molders started making jewel boxes. Proprietary packaging companies entered the picture. Huge molding companies in China jumped into the fray. 

By the mid-1990s the jewel box marketplace became crowded with competitors. Oversupply in the face of declining demand pushed prices down at a time when polystyrene resin prices began to rise. This put additional profit pressures on IPC. 

"We knew by its nature that the jewel box is a commodity product and that soon the basic rules of economics would catch up," Clemens says. "We realized that we needed specialty products with controlled margins to offset the continued decline in the commodity jewel box." 

IPC began doing custom molding of specialty media packaging for several big players on the East Coast. Eventually two of the specialty packages were pulled off the market and margins dwindled further. 

IPC’s management did everything it could to keep the jewel box business viable, Clemens says. It fine-tuned the 15-machine production operation for efficiency. When that wasn’t enough, it consolidated IPC’s operations with those of NPC to cut costs even further. 

However, the "point of no return," says Clemens, was when jewel box prices hit 8.5 to 9 cents each, with material right behind at 6 to 7 cents per unit. "If we’d had a broader product mix, we would have survived," Clemens contends. 

A New Direction
Being an insightful businessman, Clemens saw an opportunity on the horizon. On Jan. 1 IPC began a new program called Plan 2000, converting its business from a brick-and-mortar molder of commodity jewel boxes to a marketer and seller of electronic media packaging via e-commerce. 

Through joint ventures and agreements with other manufacturers worldwide, IPC will provide its customers with a variety of packaging. The products will be supplied through importing, brokerage services, and a distribution network headed by Gene Hull, executive vp of sales and marketing for the company since 1986. 

Clemens sold the jewel box molds to other packaging manufacturers. He also sold some of the 300-ton presses and the auxiliary automation equipment needed to produce jewel boxes. The remaining presses were moved to NPC’s facility, where that company now operates 35 machines and serves primarily the automotive industry. 

"With the explosive growth of DVD, DVD-ROM, CD-R, and CD-RW, we hope for more opportunities," says Clemens. "I’m excited about the sales and marketing opportunities in e-commerce. We see a great future in e-commerce, but isn’t the entrepreneur always the eternal optimist?" 

Contact information
International Packaging Corp.
Fort Wayne, IN
Philip Clemens
Phone: (219) 484-9000
Fax: (219) 482-8941
Web: www.internationalpkg.com

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