Top Flexible Packaging Converters — Cornerstones of Success

It’s an understatement to say Ampac Packaging LLC has had a successful first nine years of business. The flexible packaging converter grew from an offshoot of another business entity into a company with three main operating units—Ampac Flexibles, Retail Products, and Security Products—and 11 manufacturing facilities with approximately 80 presses. Its workforce is 815 employees strong and the company grosses more than $200 million in annual sales.

Ampac capitalized on a flourishing industry, specializing in serving the food, beverage, pharmaceutical, specialty retailers, and medical markets. Such a customer base has put the company in perfect position for further expansion, if market predictions are correct.

According to a study called “Converted Flexible Packaging,” published this past January by The Freedonia Group, the demand for converted flexible packaging is projected to increase more than 4 percent per year to $14.4 billion by 2009. Of the three main market segments expected to grow by more than 3-6 percent annually—pouches, food, and non-food—Ampac converts flexible packaging for all of them.

A brief history of growth

Ampac Packaging, at the beginning, concentrated its production efforts on performance films, security bags, and retail plastic shopping bags. As a fledgling company, Ampac earned sales of $20 million, with 208 employees and one manufacturing facility.

The company’s reputation as a quality manufacturer of retail specialty shopping bags grew and so did its sales. Ampac’s growth, which outpaced the industry, provided a springboard from which to seek acquisitions and product line extensions that would complement the core business.

By 2001, the company had quadrupled its size to $80 million in annual sales, with 440 employees. It had added a second manufacturing facility and had expanded its production into paper retail specialty shopping bags. The growth was achieved both organically and via three acquisitions that were made during that time.

Not content to rest on its laurels, Ampac continued on an aggressive growth plan. By the end of 2005, an additional five companies had been purchased, bringing the acquisition total to eight companies in seven years. The most recent acquisitions—Kapak Corp. and Flexicon, Inc.—have allowed Ampac to extend its strong foothold as a leading provider of flexible packaging structures and pouches for food, pharmaceutical, and medical applications.

Last year, Ampac crossed the $200 million mark in annual revenues—$185 million in flexible packaging sales—achieving growth figures of 20 percent annually over the past eight years.

In the global arena, Ampac Packaging has sought opportunities in what many in the flexible packaging industry deem as one of its biggest threats—globalization. “The biggest threat to North American flexible packaging companies is our preoccupation with imports as a threat to our industry, rather than seeing globalization as an opportunity,” said John Baumann, president and chief executive officer, Ampac Packaging. “We will never legislate health into our industry through tariffs and protectionism. We need to focus our effort on breaking down the international barriers that prevent us from competing in the global markets.”

Ampac opened the first of two Asian manufacturing facilities in 2002 and an additional one earlier this year. Also, at the start of 2006, Ampac established its new European headquarters just outside of London. This establishment enables the company to bring its bag manufacturing to the European retail sector and its packaging technologies to food, beverage, and pharmaceutical/medical companies located in that part of the world.

Exercises in innovation

Ampac’s business sense has been one key to its success and growth. Others include flexibility and innovation in packaging and printing capabilities, and a commitment to its customers.

The company uses both gravure and flexographic processes, and prints on a wide range of materials—all of which depends on the business unit. Ampac Flexibles—Converted Products provides flexible packaging solutions using up to 10-color flexographic and 8-color, two-sided gravure printing, solvent and solventless laminations, and a wide variety of custom and stock pre-made pouch designs with laser scoring, fitments, and reclosable zippers/sliders. The business unit prints primarily on polyester. Additional materials include nylon, metallized oriented polypropylene, specialty high-barrier coated films, and paper.

Ampac Flexibles—Performance Films manufactures more than 200 custom and proprietary film blends designed to meet its customers’ specialty film packaging requirements. Its mono- to nine-layer, custom-blended coextruded blown structures are designed to meet film packaging requirements, including extended shelf life, product protection, flavor/aroma, and more. Ampac recently combined efforts with The Dow Chemical Company to become North America’s first provider of wide-web, coextruded blown films containing Dow’s Saran® resins. These Saran-based film structures target high oxygen barrier applications, which are subjected to high moisture—65 percent relative humidity and higher.

The Retail Products unit offers a single-source solution for plastic and paper shopping and merchandise bags. It prints low- and high-density polyethylene and up to 70 lb. bleached and unbleached kraft paper.

The Security Products Division offers currency bags, deposit bags, cash control bags, gaming products, and poly mailers. In addition to manufacturing expertise, the company provides other key services including store-door delivery, summary billing, on-line ordering, EDI access, and stocking programs.

While the expertise of the different units has contributed to the company’s success, Ampac would be nowhere without dedication to its customers and the high-grade, inventive packaging that results. “Our operating philosophy is built on four cornerstones—quality, customer service, innovation, and people,” Baumann said. “We pride ourselves in our customer service and on-time delivery record. We also feel that we provide quality materials and packages that are second-to-none. We will do whatever it takes to make sure what leaves our facility is the very best possible product.”

This approach has led to industry awards for the Ampac’s packaging innovation. Ampac recently earned the 2006 Flexible Packaging Association Highest Achievement Award and the 2005 Gold DuPont Award for Packaging.

Challenges come with success

The flexible packaging industry faces mounting financial pressures from increases in the cost of oil and other energy sources, health care for employees, and raw materials. Converting companies try to absorb the price jumps and maintain their profit margins, while their customers look for ways to keep the cost of packaging down.

Converters need to take time to educate brand owners on the importance of maintaining costs and qualtiy, Baumann said. “You can sometimes find purchasing departments working at cross purposes to production. The purchasing function is motivated to obtain the lowest price,” he said. “On the other hand, the person in charge of manufacturing wants the best packaging possible, because typically that results in less production waste and better product out the door. When the purchasing decision is based on price only, manufacturing frequently ends up throwing away a significantly higher dollar amount than what purchasing saved by going the cheapest route. The challenge is to educate purchasing departments and company management so that they understand that the lowest price does not necessarily mean the lowest total cost impact to their company.”

Innovation, packaging capabilities, customer service—this is an end result of dedicated employs, Baumann said. “None of [this] would be possible, however, without the right people managing these functions,” he said. “You can go out and buy all sorts of assets, but without the right people in place, you are going to fail. We believe we have the best team in the business. I can’t stress enough how much our people have contributed to our success.” pP