"I regarded it as one of the greatest advances in packaging since the introduction of bubble wrap, in 1960," Swartz says. "The big sales feature is that Puff Pac bags weigh very little and displace almost no area, so you can get more payload into a truck or freight car. And it's a very clean package with a huge edge on the environmental side."
Swartz, now 65, was on the verge of retiring until he saw Puff Pac. Instead, he became vice-president of technology, bringing with him 40 key patents in the field of heat-sealing plastic film, the technology at the heart of Puff Pac's potential.
For president and CEO, the company turned to Henry Saltiel, another Canadian. Saltiel had been a senior Xerox manager before starting a residential-construction company in British Columbia. He was still running that business successfully when a Puff Pac principal showed him a prototype of the double-chambered bag. Here was a product, Saltiel thought, that could make it big in the packaging world. Intrigued by the challenge, he came aboard.
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Saltiel could envision the inflatable-gift-wrap side of the company becoming a $30-million business in five years. The bags came in three sizes, and just like regular Mylar balloons, they could carry designs for Christmas, Valentine's Day, Mother's Day, birthdays, and more.
The smallest of the trio, which could accept items up to 10 inches long -- a paperback, say -- could be produced for about 28¢, sold to distributors for 57¢, and retailed for $2.29. The largest bag, a 21-incher, would retail at $4.99. Al Trotter's marketing surveys found "zero price resistance," he says, at those levels. And across the board the bags offered Puff Pac gross margins of 40% or more.
But in the long term, the serious money was on the industrial side. Sales of so-called interior packaging materials, Puff Pac's prime market, are estimated at $2 billion a year in the United States, and more overseas. Interior materials are used by companies that ship products requiring cushioning protection during transport, everything from electronic devices and engine parts to glassware.
In the United States, this area of packaging is dominated by about a dozen big suppliers, including the likes of Dow Chemical and Sealed Air Corp., which invented and makes bubble wrap. Puff Pac represented a radical departure in the way shippers did business, and it would be going up against giants. But its unique advantage was its timing.
"Ten years ago I would have said that Puff Pac is a nice little oddity that would never go anywhere, because shippers wouldn't pay the price for it -- it might cost a little more," says industry consultant Alfred H. McKinlay, who spent 27 years as a packaging engineer with General Electric. "But the pressure to reduce packaging waste is so intense now that a lot of companies will definitely consider using Puff Pac."
In a formal market analysis, McKinlay estimated "conservatively" that Puff Pac industrial bags could achieve a sales volume of $200 million, provided the company manufactured quality products and marketed them intelligently. He saw opportunities for the company to make protective packaging for small electronic and mechanical devices, small instruments and other fragile items, and spare parts.
To Pharo and Trotter, however, the industrial possibilities seemed endless. They envisioned air-cushion bags for everything from wine bottles to sporting goods. With Henry Swartz's patented heat-sealing technologies, they were already crafting plans for bags up to 10 feet wide, and others of various shapes. One idea was a 12-sleeved bag for china dishes. "Movers would love it," Trotter says.
Addressing one industrial concern, Pharo was already tinkering with fluted and quilted bags -- the plastic-pouch equivalent of a double-hulled oil tanker. If one chamber was punctured, the others would still do the job.
By 1990 Puff Pac was operating from an industrial park in Valencia, 25 miles north of L.A. Demand for inflatable gift wrap was strong -- 1989 sales hit $1.6 million. But the company's challenges were only beginning.
Its strategy called for subcontracting the production work. The single-chambered gift wrap could be manufactured on any machine that made plastic bags. Lots of companies did that kind of work.
Mass production of a double-chambered bag, however, required a sophisticated, computerized fabricating unit, capable of moving sheets of film along a conveyer at precise speeds and controlling the temperatures of the heat-sealing units that melded the plastic together. A machine like that would cost about $500,000, and none existed.
Puff Pac didn't anticipate spending anything to gear up to manufacture. It wanted to husband its resources for product development, marketing, and patenting, while making the first double-chambered bags by hand. "We had made thousands of them like that, doing tests," Pharo says. "It's not as efficient, but we were prepared to make the first 500,000 or so by hand, until we sold enough to get the money to buy a machine."
Enter Mantae America Inc., a Korea-based company that was already supplying Puff Pac with single-chamber gift wrap. Mantae proposed to do all the double-chamber work -- it would buy two machines and handle all the manufacturing. Puff Pac accepted.
But things didn't go as planned, as things often don't. The machines, designed by Pharo and an engineering team, weren't delivered until November 1990, three months late. And then Mantae compounded matters by failing to meet its production promises. Unable to get enough bags on time, Puff Pac was forced to turn down Christmas orders totaling $1.5 million. It finished 1990 with sales of $543,000 and a net loss of $1.9 million.
