MeadWestvaco

MeadWestvaco
Ideas that improve and build our customerʼs buisnesses.
Media Industries Analysis: Kacey Brenckle & Erin McFadden
Packaging
Consumer &
Office Products
Specialty
Chemicals
Specialty
Papers
MeadWestvaco
The United States represents the largest market for
consumer packaging in the world. Total packaging volumes
increased to 472 billion units in 2002, and according to a
Euromonitor forecast, are expected to increase over 9% to
515 billion units by 2007. The packaging industry, being
largely influenced by changes in consumer lifestyles, has
been shifting towards convenient, functional, and portable
packaging since 1998. Much of the traditional food
packaging, including metal cans and glass bottles, has
been experiencing a decrease in sales over recent years
with the increased consumption of flexible packaging.
Flexible packaging, including stand-up pouches, is
currently the most widely used form of packaging in the
market as a whole, most likely due to its versatility and
ease of transport.
Products and packaging that are able to offer
consumers greater levels of convenience are expected to
experience the most significant volume growth between
2002 and 2007. Health is also set to play an important
part in the key developments in the market for packaged
food in particular. Beverages also play an important role
in the growth of packaging, with trends towards new
bottle shapes, high-quality labels, and introductions of
new brands. The cosmetics and personal care segment
is creating new challenges for creative packaging, with
increased need for high-quality labels with eye-catching
graphics, and a move towards globalization that requires
packages to be suitable for all markets world wide.
Introduction
Diamond Packaging of Rochester, NY, is one
company that displays a strong ability to adapt to the
changing face of the packaging industry. As a member
of the Global Packaging Alliance they are able to easily
reach a global market, and continue to invest in the latest
technologies enabling Diamond to maintain a strong
presence in the consumer products market. Amcor Limited,
based in Melbourne, Australia, is one of the worldʼs top
three packaging companies, targeting specific growth
markets in the packaging industry including flexible
packaging, PET bottles, and closures for the food and
beverage industries. Based on their product focus and
global reach, Amcor will have the ability to obtain leading
market positions within the high-growth segments of the
packaging industry.
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MeadWestvaco
MeadWestvaco Corporation was established in
2002 with the January 30th merger between Mead
Corporation and Westvaco Corporation. Mead was
founded in 1846 by Colonel David E. Mead, originally
named Ellis, Chaflin and Company. Mead was one of the
leading producers of coated paper, coated paperboard,
and consumer and office products in North America.
Westvaco was founded by William Luke in 1888, as
the Piedmont Pulp and Paper Company. Westvaco was
the leading producer of paperboard and value-added
packaging for media, pharmaceutical, and consumer
markets, as well as a producer of specialty chemicals
and coated papers. The two already well established
companies form a powerful combination, focusing on
creating new products, expanding their markets, and
strengthening customer relationships. The principle
markets MeadWestvaco serves are automotive, beverage,
consumer products, media and entertainment, and
publishing industries, priding themselves on being the
worldʼs largest supplier of media packaging, number one
U.S. supplier of folding cartons to the pharmaceutical
market, and second largest supplier of packaging for
cosmetics. The company currently has offices operating in
29 countries, as well as global operations serving nearly
100 countries.
Executive Summary
In 2005, MeadWestvaco sold their entire papers
segment, a consistent money loser for them, to the
investment firm Cerberus Capital Management. The
sale included mills in 5 states, as well as 900,000 acres
of forestland in 6 states. Cerberus set up the divested
business as the independent company, NewPage
Corporation. As a result of the sale, MeadWestvacoʼs
packaging segment now accounts for three-quarters of
their sales, with the majority of the remainder coming
from its international operations. MeadWestvaco retained
about 1.2 million acres of forestland after the sale.
MeadWestvacoʼs vision is “To be a global leader in
our markets – admired for our innovative spirit, integrity
and stewardship.”
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MeadWestvaco
MeadWestvacoʼs largest market segment is
packaging, responsible for 2/3 of their operations.
The segment offers a wide range of consumer products
packaging solutions for their customers including media,
beverage and dairy, cosmetics, tobacco, pharmaceuticals,
and healthcare. A variety of materials are produced by
MeadWestvaco for these products including bleached
paperboard, Kraft paperboard, linerboard, Coated
Natural Kraft paperboard, and saturating Kraft. The
companies maintain two paperboard brands, Custom
Kote and Carrier Kote. Custom Kote is a high-performing
paperboard with a smooth, glossy surface and high
strength characteristics that ensure the integrity of the
product. This is typically used to package high-value
consumer products for the food, beverage, automotive,
and healthcare industries. Carrier Kote is also a highperforming paperboard, but is specially designed to retain
its strength in high moisture-level environments, making it
especially useful for the beverage industry.
Markets Served: Packaging
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MeadWestvaco
The consumer and offices products segment of
MeadWestvaco manufactures, markets, and sells school
products, time management products, and envelopes in
North America and Brazil through retail and commercial
channels. Some of their more popular consumer and office
product brands include Mead, AT-A-GLANCE, AMCAL,
Cambridge, Day Runner, Five Star, Trapper Keeper, and
COLUMBIAN.
Markets Served: Consumer & Office Products
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MeadWestvaco
MeadWestvacoʼs specialty chemical segment
manufactures, markets, and distributes specialty chemicals
derived from sawdust and by-products of the papermaking
process. Some of these products include printing ink resins,
activated carbon, emulsifiers, pine chemicals, water based
polymers and asphalt innovations.
The specialty papers segment of MeadWestvaco is
recognized as a leader of technology for the decorative
laminate industry. This division primarily utilizes Saturating
Kraft for the manufacturing of decorative laminates for
kitchen countertops, furniture, flooring, wall panels, and
padded stock for electronic packaging. Other applications
for specialty papers include medical pouches, road
signs, furniture, and masking tape. Innovative features of
Saturating Kraft include the ability to line concrete forms
and absorb moisture and gases without compromising
important elements of color and design.
Markets Served: Specialty Chemicals & Papers
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MeadWestvaco
MeadWestvaco offers a wide variety of packaging
options, with the ability to use multiple substrates and
materials from paperboard to plastic, as well as injectionmolded plastic. They offer services from package
development to systems in order to deliver a complete
range of packaging solutions. A variety of printing
technologies, including rotogravure, offset lithography,
and flexography, along with multiple finishing options
allow for their services to be utilized in many different
applications and industries. Through its many subsidiaries
within consumer packaging, MeadWestvaco is able to
provide services from package design, to product launch,
to brand protection for the global marketplace. This
flexibility has led MeadWestvaco to become the worldʼs
largest supplier of media packaging, the number one
supplier of folding cartons to the U.S. pharmaceutical
market, and the second largest packaging supplier in the
U.S. for cosmetics.
Packaging Solutions
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MeadWestvaco
Coca-Cola Enterprises, Inc. has a multi-year
agreement to purchase the FridgeMaster refrigerator
pack from MeadWestvaco. The slimmed-down soft drink
container offers eye-catching graphics, superior package
strength, and ease of use due to the incorporation of a
dispenser into the design. According to Coca-Cola, the
FridgeMaster has been hugely successful, and has been
noted as the companyʼs “most significant innovation in
packaging since the plastic contour bottle was introduced
in 1993.”
MeadWestvacoʼs patented Dosepak design has
been adopted by Procter & Gamble Pharmaceuticals
as the latest generation of packaging for their Actonel
35mg Once-a-Week dose. Dosepakʼs innovative design
incorporates a sealed package that provides maximum
child-resistance, but is still user-friendly for seniors.
Key Clients
MeadWestvaco will be printing Really Big Coloring
Books product line as well as handling order fulfillment
through their Consumer and Office Products division.
MeadWestvaco will distribute the product line from their
Sidney, New York operations center, allowing Really Big
Coloring Books to offer an expanded line of educational
and office products.
Philips Lighting, the worldʼs largest lighting
manufacturer, has selected MeadWestvacoʼs company
Paxonix to streamline their packaging process across
all lighting product lines in North America. The
PaxPro workflow software, created by Paxonix, uses
collaboration, digital asset management, and version
control to fully automate Philipsʼs packaging processes for
over 2,500 different lighting products.
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MeadWestvaco
Crown Holdings, Inc., formerly Crown Cork &
Seal Company, is a leading international
producer of consumer packaging, deriving a
majority of sales from Europe. Their product
focus includes aerosol cans, paint cans, food and
beverage cans, plastic bottles and other containers, as
well as a variety of metal caps, crowns, and closures.
Crown is currently expanding to new markets including
Latin America, Asia, and southern and central Europe. The
metals packaging unit accounts for almost 70% of Crownʼs
sales, with only 30% of that coming from the US. Some of
their major clients include Coca-Cola, Pepsi-Cola, Nestlé,
and Mars.
Crown can be viewed as competition for
MeadWestvaco due to its similar size and sales generation.
Crownʼs 2005 sales total $6,908 million with 27,600
employees.
International Paper is the worldʼs largest forest
products company, manufacturing paper, packaging,
plywood, and pulp; distributing paper and packaging
products; and selling specialty chemicals that result from
pulp processing. The company owns 6.8 million acres
of forest in the US, 1.2 million acres in Brazil, and other
smaller areas in Russia. International Paper distributes
products in the US through its subsidiary Xpedx, and to
Europe through multiple subsidiaries. The US makes up
three-quarters of the companyʼs sales.
Competitors
Recently, International Paper announced plans to sell off
its coated papers, Kraft papers, beverage packaging,
and wood products operations in order to focus more
on their core paper and packaging businesses. With
similar production capabilities and product offerings,
International Paper can be viewed as a direct competitor
to MeadWestvaco in terms of clients and market share.
Weyerhaeuser is one of the largest US forest
products companies, operating through five business
segments: Wood Products include lumber, plywood, and
other building materials; Containerboard, Paperboard,
and Recycling includes corrugated boxes, linerboard,
industrial and agricultural packaging, and recycling;
Pulp and Paper produces pulp, coated and uncoated
paper; Timberlands focus is on the management of
Weyerhaeuserʼs 6.4 million acres of US forestland and
an additional 30 million acres in Canada; and Real Estate
and Related assets concentrates on developing housing
and master-planned communities. The first three segments
account for 80% of the companies sales. Weyerhaeuser
is planning expansion to locations such as Australia, New
Zealand, Brazil, and Uruguay.
MeadWestvaco competes with Weyerhaeuserʼs
Containerboard, Paperboard, and Recycling, Pulp and
Paper, and Timberlands segments due to the ability to
create similar products. The international expansion of
Weyerhaeuser will also generate increased competition in
international markets.
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MeadWestvaco
MeadWestvaco is focusing closely on their business
strategy: to create global leadership in high value
packaging and deliver higher and more stable returns
to their shareholders. With their fiscal year ending in
December, MeadWestvacoʼs 2005 sales totaled almost
$6.2 billion, and net income reached $28 million,
showing a significant increase from 2004ʼs year-end loss
of $349 million. The packaging segmentʼs profitability
declined slightly from the 2004 year end due to higher
raw material and energy costs, and lower shipment and
production levels caused by the lingering effects of the
hurricanes and the impact of market-related downtime.
The decline in media markets was offset by growth in the
cosmetics, healthcare, and tobacco markets.
In April 2005 MeadWestvaco sold its printing and
writing papers segment to Cerberus Management LLC for
$2.2 billion in cash, as well as $100 million in notes. In the
fourth quarter of 2004, MeadWestvaco reported charges
totaling $2.69 per share related to the sale. During the
second quarter of 2005, the company used approximately
$1.1 billion of the proceeds to reduce their debt, and
$620 million to repurchase about 10% of their outstanding
shares. During the third quarter of 2005 the company
bought back an additional 2.7 million shares for nearly
$80 million. The repurchasing of stocks is one way they
can return value to their shareholders.
Financials
Last year, MeadWestvaco implemented initiatives
aimed at reducing general and administrative costs as well
as streamlining warehousing logistics, with the expectation
of cutting costs by $200 million annually by the close of
2007.
Packaging segment sales for the newly established
company are as follows:
2005: $4,476 million
2004: $4,402 million
2003: $3,394 million
2002: $2,501 million
The packaging segment of MeadWestvaco has slightly
decreased in the companyʼs total sales over the last four
years, but has maintained steadily increasing sales since
their first year as a company.
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MeadWestvaco
In April 2000, Westvaco Corporation acquired
IMPAC Group, Inc., a global supplier of high-value
packaging and printing solutions for the media, cosmetics,
and health and beauty aid markets. The company soon
became known as AGI Klearfold, and allowed Westvaco
to expand its creative packaging options to global highvalue markets. After the merger of Mead and Westvaco
in 2002, AGI Klearfold has remained an important asset
to the company by providing packaging solutions that
incorporate unique services, materials, complex structures,
and high-quality printed graphics. These qualities have
allowed MeadWestvaco to create important relationships
with companies such as Avon, EMI, Universal, BMG,
Procter & Gamble, Colgate-Palmolive and Revlon.
AGI Klearfold has maintained a reputation of
being “the industry innovator and leader in the design
and marketing of creative and visual packaging”. The
company has fit in well with MeadWestvacoʼs vision of
maintaining innovation, integrity, and stewardship, as
they are known for listening to their customers needs
and creating an original package for each product. AGI
Klearfold is responsible for the development of new
packages that create lasting impressions on consumers
such as the Evolution Box, a less expensive alternative
to the traditional rigid set box; InSight visual packaging,
a new design for beverage packaging; and Durafold
Security Packaging, to balance ease-of-use with theft
resistance.
Success Story
AGI Klearfold also utilizes special effects printing,
including dimensional coatings, to create the most visually
appealing products for consumers.
AGI Klearfold has won several awards, including
IoPP Ameristar Awards in 2003 and 2004, Gold and
Excellence Awards at the Paperboard Packaging Councilʼs
Paperboard Packaging Competition for 2003 and
2004, and Grand Prize Winner for 2003 at the HBA
International Design Awards.
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MeadWestvaco
MeadWestvaco has established a strong presence
within the media, pharmaceutical, and consumer product
markets; as they are currently one of the top two suppliers
for each market. New acquisitions will keep the company
at the top of their markets and continually striving to
reach higher goals, while divestitures allow them to sell
off divisions of the company that are consistently losing
money. As a leading company in media, pharmaceutical,
and cosmetics packaging, the constantly evolving
product offerings, and unique and innovative package
designs, successfully attract and retain key customers.
MeadWestvaco has proved their ability to compete within
the U.S. and global packaging industry, and will continue
to update their portfolio through acquisitions of more
diverse companies. In the future, MeadWestvaco will most
likely focus more heavily on their packaging segment, as it
is most profitable for them, and continue expansion world
wide to serve as many markets as possible.
Conclusion
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MeadWestvaco
Boxboard Containers International (2005). Retrieved:
January 20, 2006 from http://boxboard.com/ar/
boxboard_agiklearfold_grabs_three/index.htm.
Cosmetic/Personal Care Packaging (2005).
CPC Retrieved: January 13, 2006 from http://
www.cpcpkg.com/dir/co/209/20937.html.
DataMonitor, MeadWestvaco Corporation Company
Profile (2005 July). Datamonitor.
Retrieved: January 14, 2006, from http://
www.datamonitor.com/.
Hooverʼs Online Report Builder MeadWestvaco
MeadWestvaco (2006). Retrieved January 10, 2006 from
http://www.meadwestvaco.com/.
MeadWestvaco, GP Report Losses. (2005, July). Official
Board Markets, 81(31), 8. Retrieved
January 14, 2006,
from ABI/INFORM Trade & Industry database. (Document
ID: 906975871).
MeadWestvaco Data (2006). Standard and Poors.
Retrieved January 18, 2006 from
http://www2.standardandpoors.com/.
Packaging Industry Structure Slides(2006). Professor
Twyla Cummings. Retrieved from: mycourses.rit.edu.
Corporation (2005). Hoovers, Inc. Retrieved: ,January 13
2006, from http://access.hoovers.com/.
Bibliography
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