Industrial sales 230 8,500 17,000
Net sales 2,032 15,675 33,250(after returns and discounts)
Cost of goods sold 1,363 9,092 19,285
GROSS PROFIT $669 $6,584 $13,965
Other revenues $27 $1,465 $1,889(licensing, royalties, machinery)
EXPENSES 1991 1992 1993
Salaries and benefits $426 $1,075 $1,800
General and administrative 749 1,050 2,000
Marketing and promotion 331 600 1,000
Sales commissions 244 1,568 2,660
Research and development 59 627 998
Depreciation 180 650 1,400
NET INCOME (LOSS) ($1,293) $2,479 $5,997
Before interest and taxes
WHAT THE EXPERTS SAY
COMPETITOR
BILL ARMSTRONG
Technical-development manager, Sealed Air Corp., in Saddlebrook, N.J., a $450-million company that manufactures bubble wrap, foam cushioning, and other packaging materials
In this market, customers start with performance. What will give them the packaging protection they need for the length of time required by their distribution channels? Then they look at the cost of materials, at labor and shipping costs, and at the damage rate. Then they start thinking about the environmental side -- disposability at the other end. Normally, those other factors will prevail. To make the protection more disposable doesn't do any good if you break more products. So those factors are all weighed together, and to lean on one or two of them alone and assume you can make a major impact on the packaging market is, I think, a little naïve.
How do you inflate these things in a fast-moving production operation? Who blows them up? Do you need to dry the air? Those are real issues when you're trying to replace things like polystyrene peanuts, which you just dump into a box. The ability of the packers to understand this operation is critical. They want simplicity.
And what about shipping at high altitude? Bubble wrap isn't inflated; it just traps the air -- and the bubbles look very good in Denver. Puff Pac bags, though, are under positive internal pressure. When atmospheric pressure drops, as in the cargo hold of an aircraft, those balloons might expand.
There is an appeal to this inflatable-package concept, and I think there probably are market niches that the company can tap. But a lot of Puff Pac's selling points involve things other than the product itself -- environmental concerns, for instance -- and the product must come first.
OBSERVER
GREG ERICKSON
Editor-in-chief of Packaging Magazine, a monthly trade journal headquartered in Des Plaines, Ill.
Whenever you can eliminate layers of packaging material without excessively lessening the protective quality of the packaging, you are doing yourself and the environment a favor. But there is a fine line between trying to eliminate unnecessary packaging and making sure you'll still protect the product being shipped. First and foremost, Puff Pac's bags must perform well.
The product's environmental edge is not all that clear. When it comes to determining which materials are environmentally friendly or unfriendly, you really have to dig far deeper than this story could go. Great strides have been made to recycle bubble wraps and foam peanuts, and some manufacturers have been advising their customers to reuse these materials when shipping products themselves. Plus, some of the materials that seem environmentally burdensome still provide the most efficient form of packaging yet devised. This is a difficult and complex issue.
I also would question Puff Pac's cost-effectiveness. Long after all packaging materials become recyclable, people are still going to be looking for value for their dollar. Everybody is trying to reduce costs, and what people want is a material that will perform well at a price they can afford. Even if Puff Pac's bags are environmentally advisable, you can't assume people are going to pay more for them. Puff Pac needs to show how it can help customers save money.
CONSULTANT
BARBARA KECK
President of Keck & Co. Business Consultants, an Atherton, Calif., firm specializing in marketing consulting for the packaging industry
Puff Pac shows many signs of being a typical company in the packaging industry. It's technology-driven, is short on planning, and has given little attention to marketing in its early stages. It also tends to give away too much margin to middlemen or licensees. Licensing agreements that seemed to provide good paths into overseas markets have often come back to bite people.
The gift-wrap business is likely to be faddish and seasonal, with a short life cycle. The industrial-packaging business is likely to be where Puff Pac's bread and butter comes from in the longer term. It will be steady but will undoubtedly have lower margins.
Puff Pac should be careful about environmental hype. Admittedly, the regulatory-legislative-awareness window is open wide now, but there are traps. Industry veterans are betting on the development of materials that are environmentally friendly and easy to recycle, which would negate any perceived advantage Puff Pac now claims.
So quality needs to be Puff Pac's religion in the industrial-packaging market. There's too much at stake for manufacturers of high-value items -- electronics, say -- to risk breakdown of their transport packaging system. The first time Puff Pac sends a shipment of bags that don't hold air is the last time it'll hear from that customer.
Overall, the company has to decide what it wants to be. A manufacturer? A licenser? Many of its imminent problems will arise from its uncertainty on this score. It's the old case-study question: What business are you in?
