Berry Global has overcome the worst of Covid-related supply disruptions and inflationary cost spikes as CEO Tom Salmon focuses the huge plastics manufacturer on a sustainability thrust that satisfies growing cries by Berry’s customers for recyclable and biodegradable products.
In an era of unprecedented consumer and regulatory demand for “green” plastics, over the last four years Salmon has guided the $13-billion manufacturing giant based in Evansville, Indiana, with a strategy aimed at giving Berry’s customers more ways to boost the sustainability bona fides of their products. He has modeled an approach focusing on responsiveness that other CEOs could learn from.
“One recent example is how we helped Mondelez International convert the packaging for its Swiss Miss premium cocoa from paper lined with foil to an advanced recyclable substrate,” Salmon told Chief Executive. “It helped them meet their greenhouse goals.”
Berry Global is one of the biggest plastics manufacturers in North America, with more than 47,000 employees across nearly 300 locations around the world, making plastic films, sheets and packaging for markets including consumer packaged goods, quick-serve restaurants and pharmaceutical packagers. With more than 100,000 products and more than 4,000 patents, it has made nearly 50 acquisitions over the years to complete and diversify its manufacturing footprint and market offerings worldwide.
With such diverse entanglements, Berry has been challenged by the pandemic and its aftermath. Covid-generated demand for plastic packaging helped the company post its sixth consecutive quarter of beating earnings expectations, during the second fiscal quarter, with a 17-percent increase in operating profit for the period. And Salmon now expects organic volume growth of five percent this year for Berry Global, up from his previous estimate of four percent.
But Berry has been coping with shortages of resins mainly produced on the U.S. Gulf Coast for months. The company has relied on the localization of its supply chains around the world to dodge the worst disruptions and blunt any significant impact from price spikes.
“Inflation is real; we’ve seen input costs go up,” Salmon said. “But most resin [supplies] are tied to escalator or de-escalator clauses in our contracts, so we have mechanisms in place to deal with them. [Price hikes] haven’t hurt results, and we continue to grow our company. We’re going to continue to see improvement in the availability of raw materials.”
As CEO since 2017 after rising through Berry over 14 years, Salmon has been focusing on how the company can better satisfy its customers. “We began in earnest in 2018 to pivot more and more of our investments to customer-linked commercialization opportunities,” he said. “That’s based on our relationships and our ability to vertically penetrate those accounts to understand challenges to our customers, and their unmet needs, and to align our investment strategy with them to pull that demand through.”
This focus helped persuade Berry to meet more customer demand for post-consumer and post-industrial materials by initiating a $70-million investment in new multi-layer blown-film lines that will become operational this year and in 2022 across North American sites.
“That reflects the strategic nature of what we’re doing around capital expenditures,” Salmon explained. “Every one is tied to or aligned to an end user’s unmet need with an advantaged product that we can provide and with a commitment from the end user that helps us justify the capital investment.”
Another important focus for Salmon has been what kind of raw materials Berry Global uses to feed its thermoforming and injection-molding lines. The company is investing heavily in accessing “mechanically recyclable” materials as well as “molecularly recyclable” stuff that can be reduced to “base molecular structure and repolymerized,” he said.
Berry Global works with customers to understand and harness which types of materials would be best for particular applications while helping them meet their overall goals of cutting waste and increasing the recyclability and compostability of their products. The company’s main customers are in the midst of an unprecedented push to participate in the “circular economy” as global consumers increase their expectations of purchasing products from environmentally proactive brands.
“We’re not just producing another pound of virgin [plastic] for them,” Salmon said, “but offering a combination of solutions that will give customers a choice between virgin, molecularly recycled, mechanically recycled and bio-based materials.That will increase their range of opportunities.”