By Len Prazych
©2012 Corrugated Today
• Steve, was it always your intent to join the family business?
No, it was not at all my intention to join the family business. When I went away to college, I never wanted to come back to Flint. I wanted to do my own thing and be my own man. I went to Michigan State for a couple of years and then transferred to the University of Colorado, where I graduated with a degree in Geology. I ended up working for Schlumberger, an oil field service company in Houston that was a contractor for oil companies drilling exploratory on•shore and offshore wells. After a year and a half, I went to work for an oil company and did exploration geology. I did that for six years. In the mid 1980s, my father’s health declined and the family’s companies were growing. I was also becoming disillusioned with the oil business. We had three children at the time, my wife and I were from Michigan, and we were homesick. I approached my father and brothers and expressed my desire to come home and get into the family business but I didn’t want to do it unless there was an opportunity for me. There was indeed an opportunity and the family was thrilled with my decision, so I came back and started in April 1987, on the engineering side of the business. These were the early years of the quality management systems and since I had a management background, my first job was to set up the quality management systems in our organization.
• Landaal Packaging is a poster child for getting knocked down and picking itself back up and thriving in a difficult and competitive market.What are the top three lessons you learned from the experience?
No. 1 is diversification. Don’t keep all your eggs in one basket and don’t rely on one industry for your customer base. Fifteen years ago, the automotive industry represented 80% of our business. Now it’s 35%. Managing the balance sheet is No. 2, and No. 3 is cash is king. I’ve also discovered that through the process of being knocked down and picking ourselves back up that business is counterintuitive. When things are going well, a lot of the problems and challenges are hidden. This is the time that you need to become leaner because the cycle is going to come around again. In the good times, you need to prepare for the bad times and in the bad times you need to be doing things to prepare for the good times.
• The past two years have been very strong for the company. Why?
The automotive industry has come back since the bankruptcy of GM. Car and truck sales have been strong and this has increased our business. A second thing is that other large customers of ours are also doing very well. For example, we supply products to Dow AgroScience, the division of Dow Corp. that provides pesticides and herbicides. We’ve designed special board to create a liner combination that is specific to their needs and their product lines.They cannot have a failure because the fines for failure and even misprinting the carton are severe. The quality has to be there and when they are ready to fill their orders, they must have our boxes. Our company’s ability to focus on this level of quality and service has allowed us to maintain and grow in an organization like that and this is our differentiator. Dow can certainly go out and get a cheaper box, but they require quality and consistency from their suppliers.
• At the Spring 2011 AICC meeting, your nephew Bob Landaal gave a riveting presentation about the company’s successes and setbacks, many of which were the result of the U.S. automotive industry crash. Are you confident in the auto industry’s ability to stay solvent?
Yes. I don’t see any other conveyances that are going to take over for cars and trucks any time soon. They are still a very critical industry in our country and Detroit is still the home of the automotive industry. Our automotive focus is typically on the aftermarket side of the business, that is, we don’t sell boxes for use inside the assembly plant. Our boxes hold the products that are shipped to the automaker’s dealership networks.
Landaal Packaging is heavily diversified. Is diversification a “must” in the corrugated industry today in order to be profitable?
I think diversification is key because if anything happens to one of the industries in which you have customers, it’s not a deathblow or something that will cripple your organization. Diversity is a safeguard in maintaining the longevity and sustainability of your organization. As far as profitability goes, well that’s the end result of running your business well. We don’t go into a customer thinking that we will take their business and not be profitable. Profitability is what you’re in business to achieve.We focus on providing value to the customer and the result of that is profitability.
• What’s the next step for the company?
In terms of new markets, we’ve adopted a ‘green’ product line called Green Cell Foam, which is a 100% biodegradable product made from corn that competes with polystyrene for shipping coolers and has great shock and absorbency features. It’s great for food, pharmaceuticals, and chocolates. We’re not only selling the box, we’re selling the application as well. This is a value-added product. It’s not mainstreamed yet but it’s growing. Customers say they want to be ‘green’ and use biodegradable alternatives, but they don’t want to pay a big premium for it. We’ve also purchased the U.S. rights for POPTECH, which is a quick setup corrugated display technology. Typically the setup for displays is time-consuming and complex. POPTECH makes it fast and easy.We can design,manufacture and ship the product from the same location. To help support this business, we’ve purchased digital printers, a new cutting table and a flatbed diecutter. We’ve also developed partnerships with outside vendors until we feel confident that this will be a solid product line for us and that it can support additional capital investment. For 50 years we’ve been a manufacturer and fulfillment company for the industrial side of the business. Now we’re moving to the retail side.
• Are industry suppliers serving your needs?
Yes, but the technology is changing so quickly, especially in the graphics area, that it’s a challenge to keep up. Right now, everyone seems to be waiting for a high speed digital printer. We’re currently looking for a digital printer that has an infeed section that keeps the sheet flat while it’s printing. The vacuum systems on some machines aren’t strong enough to keep corrugated sheets flat so they need to be taped down, which slows production. If you’re not keeping your sheets flat, you’re not where you need to be.
• In terms of growth, how large do you want Landaal Packaging to be?
Right now,we’re a $35-$40 million company. We have a target to be a $50 million company by 2016 and I think we’ll be able to get there. Beyond that, we’re looking to the next generation of the family, the third generation, for the sustainability of the company over the next 15 years. We now have a five-year strategic plan and we’re starting to put some models together on what that’s going to look like and how we’re going to get there. We’ve also hired a three-person advisory board comprised of retired people from high-powered companies that we’ve tasked with helping us with our plans. What do we need to do to get to $75 million and then $100 million? It may involve moving beyond this marketplace or doing a merger or acquisition into some other geographical areas in order to grow. We’re looking at all of this.
• As the owner of an independent company, what are your thoughts about the consolidation of the corrugated industry?
I think overall, it’s really been good because it has stabilized the industry. Everyone knows that the bigger companies have not been making money for the last 10 years and that consolidation has allowed them to be profitable again. From an independent’s standpoint, we’ve had more linerboard price stability than we’ve had in years. It’s always tough for independents like us to go to our customers every six months to talk about pricing. When you’re talking about that, you’re usually not talking about value. Consolidations and closures have also created great opportunities for used equipment. I bought a Miehle flatbed diecutter for $10,000, and I put another $20,000 into upgrades and I now have a great diecutter for about $30,000.So consolidation has been good. We’ve had adequate supply and price stability in the last few years that we haven’t seen in quite some time. Now I can concentrate on providing value-added services to my customers.
By Len Prazych