By AICC Staff
December 5, 2018
For many independent converters and boxmakers, strategic partnerships have always been a way to get business done. Don’t have a digital printer? Partner with a company that does. The customer’s budget doesn’t stretch far enough to cover cross-country fulfillment? Partner with a plant in that region to run the job locally. These relationships provide a way to meet specific needs at specific times, as they arise.
An increasing number of converters are exploring a different approach. They emphasize the “strategic” nature of such partnerships by basing much of their business model on a partnership approach grounded in shared resources (both financial and operational), reduced costs, and mutually beneficial product development. As a result, these companies make strategic partnerships a vital part of their growth strategy.
“We do more than $10 million of business outside our four walls,” says Greg Tucker, Chair and CEO of Bay Cities, noting the success of his company’s partnerships. “And that is growing by leaps and bounds. Strategic partnerships are a fantastic way to drive business for any company, if you are willing to work together.”
“Strategic partnerships are a fantastic way to drive business for any company, if you are willing to work together.”
— Greg Tucker, Chair and CEO, Bay Cities
At their heart, these kinds of partnerships are similar to their one-time or as-needed counterparts, which are more common: One or more parties agree to share skills, equipment, services, and so on with another party, for the mutual benefit of everyone involved. The difference? These partnering companies are weighing benefits that extend far beyond any current job.
Jay Carman, president and CEO of Illinois-based StandFast Packaging Products Inc., recalls that his strategic partnership with a Canadian company grew out of several intersecting needs.
“Our previous plant was in Addison,” he says. “We had 90,000 square feet, gluers, die cutters. We were pretty well-equipped for printing four-color, graphics, multipass work. We had brown, flexo work, and a lot of two-pass work, with rotary die-cut and specialty glue. But we were landlocked in Addison. We were getting to the point where that was going to limit our growth.
“Because of the consolidation we’ve been seeing throughout the industry, we also were interested in strategically partnering with a corrugator, so we could have a more consistent, long-term source for our materials.”
Toronto’s Atlantic Packaging came calling, looking for partners of their own.
“They’re one of the larger corrugated companies in Canada,” Carman explains, “with paper mills, box plants, and partnerships in Québec. They have about 30 percent of the Canadian market and were looking for growth in the States through corrugated partnerships.
“We’re always open to opportunities like that. As we’ve grown, we’ve tried to acquire companies ourselves, so when they called, I knew what it was like to be on the other side of that conversation.”
StandFast decided to partner 50-50 with Atlantic Packaging. “We formed a joint venture and bought a building in Carol Stream [Ill.] to install a corrugator and move our sheet plant,” Carman says. “Atlantic runs the corrugator as a separate entity called Blackhawk Corrugated.
“We’d never been involved directly with a corrugator, so this was a step in vertical integration. We thought it was a good service model, having a full-service sheeter next to a well-equipped converter plant. It enables us to do more of what we’ve been doing, but on a larger scale and with increased capabilities.”
“Many times people figure out that someone’s a bad partner after two years, when they could have known from the beginning, if only they had asked the right questions.”
— John Perullo, president and CEO, Corrugated Synergies International
StandFast’s enhanced scale has translated into improved customer relationships. “Atlantic has given us the wherewithal to sell to larger companies than we had in the past. And our customers perceive that we’re larger and have more resources.”
Other factors helped to make the partnership an easy call for Carman’s team. “Atlantic was an especially good fit for us because they had paper mills, so we had the benefit of a mill behind us. Also, our cultures are similar. They’re privately held, and the founder and owner is very entrepreneurial. From a cultural standpoint, we’re a good fit.”
John Perullo, president and CEO of Corrugated Synergies International (CSI), has built a company on the benefits of pinpointing and establishing such “good fits” across multiple companies.
“CSI’s always believed that strategic partnerships mean more opportunity,” Perullo says. “Our business model was built around managing strategic partnerships and building them into strong vertical-integration companies.”
As an example, he points to one of CSI’s early successes, which eventually became MidCorr Packaging.
“Back in 1996–97, there were a number of sheet plants”—spread across Wisconsin, Illinois, Michigan, and Ohio—“who knew each other and had a working relationship. We brought these plants together to integrate themselves and then built a facility to supply them with the materials they were buying on the open market.”
Soon other groups sought CSI’s expertise. “They asked if we could do for them what we had done in other locations” with companies such as MidCorr, Perullo says. “If [their situation] appeared to have merits, we’d put together a business model, a list of needed equipment, labor, etc. The resulting pro forma told us whether we had enough volume for a partnership to make sense. If not, we would work to find additional local members required for a profitable partnership.” CSI’s partnership arrangements were, essentially, “a risk mitigator for each of the smaller partners that otherwise couldn’t justify buying corrugated equipment they needed,” explains Perullo. “I think many times that’s where partnerships make the most sense.”
Preparing for Partnership
Of course, not every potential strategic partnership will make sense. “Partnership is a lot like a marriage,” Perullo notes. “Sometimes divorce is the best solution.”
To avoid ending up with regrets, it pays to prepare.
For Tucker, the best first step is to partner with people you already know. “Once we know we need a strategic partnership within a certain location, we have chosen our partners based on friendships first and skills second. Our cultures have to fit. Just like our clients, people do business with people they like.”
That existing relationship is vital because “trust is key,” Tucker believes. “We can’t ram things down others’ throats. We need to find a way to get folks to understand what is required of them upfront. At the same time, you also have to remember that a partnership is a two-way street. The goal is to meld your two cultures and find the middle ground, so you can do some really great things together.”
Be aware, however, that a previous relationship can also be a stumbling block, leading to assumptions about the future based on shared past experiences.
“I know it’s obvious, but ask many questions at the beginning,” Perullo advises. “Many times, people figure out that someone’s a bad partner after two years, when they could have known from the beginning, if only they had asked the right questions.” He adds, “The more you can define legally what could potentially happen in the future—and solve for it ahead of time—the better off you are. You can’t anticipate and legally define for every possible situation, so you have to build mechanisms [into your documentation] to allow for things you can’t anticipate.”
“If your mindset is to grow—to get better, secure a source of supply, increase integration, show that you’re a bigger presence in the market — partnerships are key.”
— Jay Carman, president and CEO, StandFast Packaging Products Inc.
The best-laid partnership agreements still may not prepare you for every eventuality. If the partnership proves untenable, Perullo says, “Plan in your documentation for an easy, seamless way to end the partnership if it isn’t working.”
Working Through the Kinks
Of course, even the most successful strategic partnerships face challenges.
“Speed to market is a pillar of ours,” Tucker points out, “so our suppliers and partners need to be very fast. Our clients are some of the most demanding creatures on the planet. If we can’t react, we lose business.”
It has sometimes been a challenge to bring Bay Cities’ partners on board. “Honestly, changing the mindset of our partners—who have had to develop processes that can turn on a dime—has not been an easy task. They are formidable companies, yet they’ve had to learn how to become much faster.”
Perullo adds, “One challenge for us—and I can see this extending out to any converters that are trying to manage partnerships—is that you’re dealing with multiple entrepreneurs. Lots of these businesses were launched by people who had a strong vision and pushed to bring that vision to life. So, they’re used to being in control. With multiple partners, you end up with more people than you need who want to control the situation.” He advises building in solutions for this when creating the partnership.
When challenges do arise, seek solutions together.
“Many years ago, we were working with a large cosmetics company here on the West Coast,” Tucker recalls. “They were launching over two to three new products a week, and we were jumping through hoops to design, manufacture, and ship everything on time. It was the perfect account for us, as we really are built for this kind of speed. But we needed some help with distribution across the country, so we worked to find a like-minded partner. We chose a company that was spot-on with their equipment mix, quality standards, location, and costs. However, when it came to processing orders quickly and managing production, it all fell apart. We ended up being late on the first few jobs, which did not go over well with our client.
“We could have just stepped away from our partner at that point; after all, they didn’t live up to their side of the agreement. We didn’t do that. We all took a deep breath and then figured out how to work together to share best practices and set our expectations together. We ended up running the heck out of that business.”
Bringing Out the Best
Sharing best practices, while driving one another on to improved performance, will help deliver the full benefits of long-term strategic partnerships. “Strategic partnerships force you to get better and to learn,” Carman says. “They give you a fresh perspective and expose you to a wider variety of experiences. As a result, you learn how to do things better—everything from hiring to streamlining your processes.
“If your mindset is to grow—to get better, secure a source of supply, increase integration, show that you’re a bigger presence in the market—partnerships are key,” he says.
“I think these kinds of partnerships are only going to grow. Companies like ours should partner more. Look at the cost of equipment, real-estate costs, land. Partnerships may enable you to share resources, design, production. You have to really consider them. In fact, I recommend that you consider them. With the right partner, you can open a lot more doors.”
Robert Bittner is a Michigan-based freelance journalist and a frequent contributor to BoxScore. He can be reached at firstname.lastname@example.org.