Winnipeg Free Press - PRINT EDITION

Winpak is very good at packaging success

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A little-known fact about Pringles: When you buy one of those convenient small plastic containers of the chips, you're paying more for the packaging than for the food. (I won't venture to comment on which has more nutritional value.)

That's right: The package costs more to produce than the contents. Convenience has its price.

And that is a great benefit to Winnipeg's Winpak, which two days ago announced annual profit growth of 15 per cent. In a North American economy that's not growing much, if at all, that's quite the feat.

Winpak makes a lot of different types of packaging and machines, mostly for food and pharmaceutical industries. It makes blister packaging for drug companies, plastics for cheese and meat makers, the foil on top of your yogurt container and so on.

And it does so extremely well. The company grows consistently, both organically and with small acquisitions. I've followed Winpak for years. When I first heard about the company, it was perhaps best-known for making those little coffee-creamer containers you see in cafeterias. Today it makes a lot more products (including Keurig coffee packages for single servings and, my favourite, the packaging for boar bait).

In fact, I'd say Winpak is a textbook example of how a company should be run. Although it is not in a sexy new-age industry, it prospers. It does this by investing relentlessly in technology and intelligent growth. The company spends about $13 million a year on research and technical work. And Winpak, to my knowledge, has never made a really bad acquisition, unlike most companies (including our big banks, who are renowned for making stupid purchases).

Smart companies know what they're good at and they stick to that, never venturing far afield. And they're flexible.

Winpak also has a pristine balance sheet. There's $127 million of cash and no debt. The company issues no stock options, nor does it issue more shares, so investors' stakes are not diluted.

Why, you might wonder, would a company hoard so much cash?

Because it has uses for it. Winpak will be expanding its footprint with a new facility in Chicago this year, deploying some of its cash on that project. It is also eyeing expanding sales, especially in Mexico.

CEO Bruce Berry, the steady hand at the tiller, won't take all of the credit for Winpak's success. He credits the growth in demand for packaging for much of the company's success. Pharmaceutical firms are increasingly turning toward safer (and more expensive and innovative) packaging, such as blister packaging instead of plain plastic bottles. You've probably noticed this in your local drugstore.

But a bigger benefit is the general time-poverty of the average family. Fifteen years ago or less, if you wanted a salad you bought lettuce and tomatoes and whatnot and made it from scratch. Today you are as or more likely to buy one of those pre-made salads, which come with a package of, say, croutons, cheese and dressing.

Or you might want to toss one of those Pringle's single-serve packages in your kid's lunch instead of wrapping them individually.

It also helps that Winpak is majority owned by a Finnish firm that has a big share of the European packaging market and the two co-operate in terms of technology and bulk buying.

Still, a lot of the credit has to go to Berry and his crew. You can tell from the results they like their jobs.

Winpak's, and Berry's, goal is to get the company to $1 billion in sales by 2015. Revenue was $652 million last year. That's a stretch target, but not necessarily a fantasy given the company has a lot of cash to invest in growth.

The CEO's plan is to ride off into the sunset when that milestone is met, which, as he jokes, "is encouraging people to see if we can do it a little faster."

Whatever happens, he'll leave behind an enviable and very valuable firm.

Fabrice Taylor is an award-winning financial journalist and analyst and author of the President's Club Investment Letter. Email him at:

Republished from the Winnipeg Free Press print edition February 18, 2012 B4

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