Putting the “Custom” in Customer

“Design2Print” is an ambitious tagline for a company with a singular focus on customer service. Established in 1948, Southern Gravure Systems (SGS) had been a part of Reynolds Metal Co. since 1958, later becoming its wholly owned subsidiary with Alcoa’s purchase of Reynolds in 2000. The company has pursued an aggressive strategy of growth through acquisition, having rolled up 21 acquisitions, most of them independent trade shops, since 1999.

In the early- to mid-1980s, SGS recognized that a majority of the gravure cylinders it manufactured for printers were intended for relatively few consumer product companies (CPCs). Consequently, the company determined that there was a need to migrate upstream to where the value proposition for CPCs lay in brand management across various substrates and print disciplines. Previously, it had participated very little in the flexo market (the fastest-growing packaging segment at the time). With the acquisition of Wilson Engraving in the 1990s, however, the company launched itself into flexo. As a result, a majority of the acquisitions made by the Southern Graphics (neé Gravure) Systems since the mid-1990s have been trade shops with a mostly flexo, instead of gravure base.

Sold by Alcoa to Citigroup Venture Capital Equity Partners (CVC) in 2005, the company has sought to parlay its newly independent status into an “obsessive” focus on service, including an ability to identify and implement the widest range of solutions for the benefit of its customers. packagePRINTING took advantage of a recent opportunity to speak with Gary Bernier, corporate director of technology and innovation and Chris Horton, southern regional vice president for North America, Southern Graphic Systems (SGS) to discuss the company’s strategy in the wake of its sale to CVC.

pP: What has been the result of your divestiture by Alcoa?
Horton: Alcoa had been focusing more and more on its core aluminum and alumina. We were an odd duck within that business. Overall, we performed well for Alcoa and I think they got a good return when they sold us. Like Reynolds Metal Co., Alcoa supported our acquisition growth. Since the acquisition by CVC, however, we’ve [been able to step up] the pace of our growth through greenfield start ups or acquisitions in Europe and Asia.

Bernier: CVC gives us the flexibility to run our business in the way we’ve always wanted to run it—to be flexible, be able to turn on a dime to address customer needs. Alcoa backed our growth initiative for the most part in North America, but CVC sees the European and Asian markets as a perfect opportunity for us to continue to grow.

pP: Why are you expanding in that direction?
Horton: The large CPCs have gone through a series of purchasing initiatives. First, to consolidate regionally and nationally within North America; next, to consolidate globally. As they go through those key initiatives, one of the things they’re trying to do is reduce their vendor base. Once they get to a global perspective, there are very few vendors they can look at who can deliver products globally. We felt that we needed to be in a position to deliver on a global scale.

Bernier: Alcoa saw the labor rates and cost of equipment and capital overseas, in general, as prohibitive. What we need to look at are the needs of our customers. And if that means we have to be in a country they do biz in, that’s what it requires. You’ve got to be close to people to react in order to address their issues, whether that be a plating issue, a fit issue—whatever problem they may have. The name of the game is cycle-time reduction. In order to facilitate cycle time reduction, we really have to be there.

pP: With printers bringing more and more of the workflow in-house, do you ever run into conflicts?
Horton: We occasionally have conflicts with printers because printers have migrated upstream into managing their own graphics. We try to make certain when we’re dealing with a CPC that wants us to deliver a cylinder to a printer that we also work with the printer as if the printer were the customer.

Bernier: It happens constantly. Companies vertically integrate and then they spin off their various little pieces and concentrate on their core business. There are a number of printers who view their core competency as putting ink on the substrate. They buy the substrate, the ink, the prepress, and the image carrier, and they focus on printing. Others feel they can add more value to their customers if they handle all that; prepress is a business they believe helps them get business to the press. That said, there are some who do try and sell it, and those who have added prepress capabilities and gone out into the marketplace to sell those services to other printers. SGS migrated upstream because we had a really good value proposition for CPCs to help them manage their brand across multiple substrates and multiple print processes. Printers don’t like us calling on “their” customers; but we’re not selling print. We’re selling workflow solutions, digital asset management, and graphic services.

pP: How much of your overall business deals with flexo, offset, and gravure?
Bernier: In terms of image carriers, I’d say we’re about 50 percent flexo, 50 percent gravure, with very little offset. We do more than 300 million square inches per year with flexo. We have deployed some exciting technologies addressing the gravure market recently, however. Since digital flexo took off, gravure technology providers have developed workflows and equipment that permit SGS to take a lot of the cost differential out of the equation. It no longer takes 14 hours to engrave a high-quality gravure cylinder. I can use lasers and workflow methodology to get an image of the cylinder in 15 or 20 minutes. Now the end customer has an opportunity to choose according to quality or relationship with the printer and still use a competitive print process. We really don’t have a preference. Our goal is to focus on the cost differential.

Horton: Beyond that, there are more flexo shops in the packaging segment than there are gravure or offset. If I had to guess, I’d say we deal with a similar number of flexo and offset printers. Gravure would be behind both of those.