Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010 - (Page E10)

Page E10 CRAIN’S DETROIT BUSINESS May 3, 2010 25 Companies to Watch: Manufacturing Plastipak bottles plan for global growth Plastipak Holdings Inc. Location: Plymouth Local employees: 700 Global employees: 4,800 2009 revenue: $1.9 billion Founded: 1967 CEO and founder: William C. Young Why it’s one to watch Learned how to get large. ucked away in a nondescript stretch of Ann Arbor Road in Plymouth lies the global headquarters of Plastipak Holdings Inc., a company born and bred locally that has grown since its 1967 founding into a multibillion-dollar global supplier of plastic bottles for consumer products. Plastipak employs about 700 locally and 4,800 around the world, with businesses that touch nearly every area of plastics manufacturing. Plastipak Packaging Inc. is the company’s bottle-making engine. Other holdings include a shipping company called Whiteline Express Ltd.; a business, called Clean Tech Inc., that recycles more than 2 billion bottles annually; and a bottle manufacturing affiliate in Luxembourg called LuxPET A.G./S.A. Put together, the businesses generated $1.9 billion in 2009 revenue, said CFO Michael Plotzke. Plastipak is the No. 1 supplier of blow-molded plastic bottles to Pepsico Inc., while also supplying customers including Procter & Gamble T Co. and Kraft Foods Inc. “We’ve been very fortunate where we’ve been able to develop close relationships with many companies in the industries we serve, and they’ve acted as consolidators,” said William C. Young, CEO of Plastipak Holdings. “As they’ve grown, we’ve grown. As they moved and wantYoung ed to be in other locations, we did such.” But the company’s founding purpose was simple. In the early 1960s, Young’s father, William P. Young, wanted to get water bottled by the local distillery purchased by his family in 1956, Ann Arbor-based Absopure Water Co., onto the shelves of grocery stores. So he acquired a small blowmold plastics manufacturer in Ohio and began manufacturing plastic bottles for Absopure. Then, the plastics industry exploded. William C. Young partnered with his father and founded Plastipak Packaging in 1967. The company’s first manufactured blow-molded jugs for water companies and, later, milk companies. After five years of running the business, the Young family sold both Plastipak and Absopure to Beatrice Foods Co. in 1973. Young said the deal was an opportunity for a larger player to invest in and build the business. He remained on board and managed the companies as divisions of Beatrice, overseeing Plastipak’s growth from about $5 million in revenue when it was sold to about $50 million when the family reacquired Absopure and Plastipak in 1982. Then the company’s growth truly took hold. “In the 1980s, our growth was really driven by our consumer-products companies, who continued to expand their markets,” said Plotzke. “Liquid detergent just exploded when it hit the market in the early ’80s, and today we’re the exclusive supplier of liquid-detergent bottles to Procter & Gamble.” As P&G and its other consumerproducts and food companies expanded their product lines, Plastipak followed by setting up new bottle manufacturing locations or reaching new areas through acquisitions. By the mid-1990s, Plastipak made its first move overseas into Brazil to supply AmBev — now a part of the Belgium-based beverage juggernaut Anheuser-Busch InBev — with plastic pre-forms for beverage bottles. Pre-forms are the test-tube-shaped plastic precursors of finished bottles. Manufacturers make pre-forms and ship them to bottlers, which blow-mold them into the needed bottle shapes and fill them. Plotzke said the beverage packaging industry in Brazil had oper- ated on that model, whereas in the United States and elsewhere in the world, finished bottles were shipped to bottlers. Plastipak has been producing and supplying pre-forms to bottlers in Brazil for 14 years, but the trend only recently has begun to gain momentum in the United States, Plotzke said. “That’s what you’re seeing more and more today in our industry, and we’re one of the leading suppliers of pre-forms in the world,” he said. In the 1990s, the company expanded into Europe, a move that fueled much of Plastipak’s revenue growth. The company acquired Luxembourg-based LuxPET, which generated about $75 million in revenue at the time of the 2005 deal. In 2008, Plastipak acquired Italybased Europa Preforme S.r.l. and Preforme Sud S.r.l. — renamed Plastipak Italia S.r.l. — which generated about $200 million in revenue at the time. The company also expanded its reach in Europe by opening plants as its customers introduced new consumer and food and beverage products throughout the continent. Plastipak now has 27 operations in nine countries, including its most recently opened plant in Romania. “A lot of our customers want us to be global, they want us to be growing with them globally, and that’s where a lot of this growth has come from,” Plotzke said. The company also has grown in the United States, opening new production facilities from the ground up, which Plotzke said is a key to Plastipak’s stability. “We’ve really grown, and all the U.S. growth has been organic, and that’s really been a secret to our success, frankly,” he said. “A lot of our competitors have made acquisitions, and they’ve had a tough time integrating, and you’ve got other issues that can be problematic.” Plasitpak has financed much of its growth with bond proceeds, from both public and private sales. For example, Plastipak raised about $1.5 billion in public and private debt from 1989 through 2007, helping increase revenue from $68 million in 1984 to $1.6 billion in 2007. Ed Schmidt, a vice president and senior analyst covering Plastipak for Moody’s Investors Service, said Plastipak customers such as P&G and Pepsi seek stable suppliers they can rely on as they grow, “and the reason for that is that you’ve had a lot of bankruptcies in the industry, and you have some operators that are not so stable. “The thing you have to remember about this industry … is that it’s a very fragmented industry. Even at their size, they are a leading player in the industry and they do have some long-standing relationships with their customers.” — Ryan Beene Plex takes on software giants with focus on manufacturing hen a small company takes on an industry packed with giants, it helps to have focus. That’s what Mark Symonds, president of Auburn Hills-based Plex Systems Inc., believes. W Plex’s operations management software for manufacturers competes with industry heavies like Microsoft and Oracle. But Symonds said that’s not a handicap. “The giant guys have to serve TESTING ENGINEERS & CONSULTANTS, INC. • • • • • • • Building and Infrastructure Environmental Services Geotechnical Services Indoor Air Quality Asbestos/Lead/Mold Construction Materials Testing Safety Training 1-800-835-2654 email: tec@tectest.com www.testingengineers.com Offices in: Ann Arbor, Detroit & Troy A Certified WBE/DBB Engineering Client Success everybody — retailers, restaurants, banks insurance companies, as well as manufacturers,” he said. “We focus on manufacturers, so we have a much deeper, richer product for manufacturers without all the clutter of those other feaSymonds tures. “And we’re more nimble. All of the enhancements we make to the products appeal to the manufacturers. The knocks I’ve heard on our competitors is that they focus on other vertical (industries) and are leaving manufacturers behind.” That’s a mistake, Symonds said. “Manufacturing is still the third-largest segment of the economy,” he said. “A lot of people don’t realize that because they see the headlines. But the industry is going to grow as more manufacturers realize that you can compete from the U.S., but you need technology, automation, innovation.” Plex’s growth proves the potential in the industry. The company ended 2001 with $4 million in revenue. Thanks to a revamp of its prod- Plex Systems Inc. Location: Auburn Hills Local employees: 132 Global employees: 148 2009 revenue: $26 million Founded: 1995 by Robert Beatty CEO and president: Mark Symonds Why it’s one to watch Sticks to its manufacturing niche. Looking toward an IPO. ucts and a renewed emphasis on sales and marketing, the company finished 2009 with $26 million in revenue and has its sights on an initial public offering in 2011 or 2012. Symonds said Plex is shooting for a 20 percent increase in revenue this year. “The company was founded by engineers who were focused on building the absolute best product in the world but didn’t rally value sales and marketing,” Symonds said. “So we grew slowly in the early years.” By 1999-2000, Plex was established in its market but needed to tweak the product. “We were doing individual systems for custom manufacturers, and in 1999-2000, the team said, ‘There really has to be a better way,’ ” Symonds said. “That’s when the team came up with the idea of software as a service. The team came up with Plex Online, which made it much easier to sell and manage the software. There was one copy of the source code. We manage everything, and customers just connect to it over the Internet.” In 2007, the company changed its pricing structure from an upfront payment to a subscription model, a move Symonds said was intended to make Plex’s product accessible to customers that were interested despite the then-worsening economy. “Instead of paying, say, $1 million up front, a customer might pay $50,000 every month,” he said. “Even in 2007, cash was king, especially among manufacturers. We felt we could get a competitive edge by jumping to a subscription model.” For the company to have an IPO, there’s just one requirement: “We need to continue our growth throughout 2010 and early 2011 — that’s it,” Symonds said. “We feel we have the best product, and to get it out there and have more people learn about it, I think an IPO would give us the funding to really increase our geographic scope and pursue vertical industries.” — Nancy Kaffer  http://www.testingengineers.com http://www.testingengineers.com

Table of Contents for the Digital Edition of Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010

Crain's Detroit Business 25th Anniversary
Looking Forward
25 Companies to Watch
25 Mainstays
25 People Then and Now
25 Scandals and Dubious Deeds.
25 Philanthropic Gifts
25 Newsmakers of the Year
25 Big Stories
25 Innovations
25 Gone But Not Forgotten
Health Care
Defense
Suppliers
The Internet and Communication
Energy
Finance
Signs of the Times

Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010

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