|Herbert Forker, Siegwerk Group’s president and CEO.|
As the flexible packaging industry has become much larger, it has also spread out worldwide, with major packagers developing global operations. For key vendors such as ink manufacturers, the challenge has been to be able to supply and service their global customers.
In recent years, the Siegburg, Germany-based Siegwerk Group, the eighth-largest worldwide ink manufacturer with $380 million in sales in 2002 according to Ink World’s International Top Companies Report, has placed increasing emphasis on the packaging ink market. Siegwerk has built up operations in Thailand, South and Eastern Europe. However, it lacked substantial capabilities in the U.S. to service its customers.
All of that changed in November, when Siegwerk announced that it had acquired Color Converting Industries (CCI), Des Moines, IA. In 2002, CCI had $112 million in sales, and was the fourth-largest U.S. ink manufacturer according to Ink World’s U.S. Top 20 Report.
CCI is a specialist in packaging inks, particularly solvent-based inks for flexible packaging, and the merger of the two companies brings great promise to Siegwerk. CCI is the second largest producer of solvent-based packaging inks in the U.S. and employs more than 300 people. In spite of the low market growth rates of the past few years, CCI has enjoyed 15 percent to 20 percent growth rates over the past several years. CCI operates three production facilities: two in Des Moines, IA and one in Spartanburg, SC.
“We are very happy,” said Herbert Forker, Siegwerk Group’s president and CEO. “They have made great progress in the past few years. We believe we have some very good synergies and it will be a good fit.”
The Acquisition of CCI
The foundation for this acquisition began in 1999, when Mr. Forker joined Siegwerk and began working with Ron Barry, CCI’s founder and chairman.
“From the first day I joined Siegwerk, there has been some contact, and we always stayed in touch,” Mr. Forker said.
The companies had been working together over the years, and in recent months, Mr. Barry was considering the future of CCI in the global marketplace.
“During the past six months, we have had intensive negotiations,” Mr. Forker said. “The globalization of packaging printers is the main issue. For example, we have European customers who have subsidiaries in the U.S., and we must be able to service these accounts worldwide. We both need global coverage and that was the main driver.”
In recent years, Siegwerk has opened new facilities worldwide, but starting similar operations in the U.S. is much more difficult.
“You can build business from zero in Eastern Europe and Asia,” Mr. Forker said. “Our customers went to Asia first, and we did as well. Now it is important to cover the U.S., and that market is different. You can’t start from scratch. It relies on service and technology.
“The markets in packaging are different between Europe and the U.S.,” Mr. Forker added. “The U.S. has more water-based products as well as flexible packaging. We will definitely be transferring technologies and learning from each other.”
Their work on technology should prove to be beneficial, as one area in which Siegwerk and CCI have in common is their respective emphasis on R&D and service. Both companies work closely with their customers to develop new products for the marketplace.
Mr. Forker noted that with the exception of Mr. Barry, who has retired, the top management team of the new subsidiary, named CCI Color Converting Inc. will remain in place, led by president Dan McDowell.
“We don’t have a packaging ink operation in the U.S., and CCI has a very experienced management team,” Mr. Forker said. “CCI is successful and its customers are very happy with its service and quality.”
|Siegwerk's’ headquarters are located in Siegburg, Germany.|
While packaging ink is a major part of Siegwerk Group’s product portfolio and is the driver behind the acquisition of CCI, the company also focuses on publication gravure inks, in which it is one of only three worldwide producers. The company anticipates keeping its Lynchburg, VA publication gravure ink plant operating, and has secured new contracts in the past year.
“We have two core competencies: publication gravure, where we are one of three worldwide producers, and packaging gravure and solvent-based flexo, where we have the leading position in leading accounts,” Mr. Forker said. “We want to be one of the top two suppliers in all major European accounts. We are the leader in Germany, which is the biggest market in Europe, as well as in Central Europe and Scandinavia.”
Asia has been a strong area of growth for Siegwerk. “We have been putting increasing emphasis on our Asian operations, and have many customers throughout Southeast Asia, where toluene-based products are common,” Mr. Forker said.
While the company has been focusing on its two main areas of growth, it does offer some offset products, primarily to meet the needs of its customers who wish to have a sole supplier for all of their ink requirements.
“We have a lower market share of the offset business, which we keep because we need to supply our customers with the whole platform,” Mr. Forker said.
For the Siegwerk Group, the acquisition of CCI caps an active year in which the company opened new subsidiaries in Great Britain, Poland, Brazil and Portugal. All told, Siegwerk, a privately-held company that dates back to 1830, had 1,200 employees prior to the acquisition of CCI. The company maintained its level of sales from 2001, which was an accomplishment considering the difficult year many European ink companies had, and Siegwerk also improved its efficiency.
“2002 was a successful year for the Siegwerk group,” said Mr. Forker, Siegwerk Group’s president and CEO. “This successful economic development of the Siegwerk group of companies was even more remarkable, as many other companies in the German and European printing industry suffered steep downward tendencies in their business.”
Ultimately, the acquisition of CCI, combined with its new worldwide subsidiaries, gives the Siegwerk Group the ability to serve its customers worldwide with an increasing array of new technologies.
“The importance of the large printing groups in the print media area and the large consumer goods manufacturers in the packaging area increases steadily,” Mr. Forker said. “The increasing internationalization gives us the possibility to meet the demands of our key accounts as a globally acting printing ink manufacturer.”