Engrapn, Inc.

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Engrapn, Inc.

2635 Century Parkway, N.E.
Atlanta, Georgia 30345
U.S.A.
(404) 329-0332
Fax: (404) 320-7460

Wholly Owned Subsidiary of Sonoco Products Company
Incorporated: 1936 as the Herald Press, Inc.
Employees: 1,530
Sales: $235.4 million
SIC: 2679 Converted Paper Products Not Elsewhere
Classified

Engraph, Inc., an innovative packaging company that converts paper, paperboard, and plastics into packaging material, is considered one of the leaders in its field. In the 1990s, its clients included some of the best-known national brands, including Hershey, Kodak, Coca-Cola, Pepsi, Wrigley, and Johnson & Johnson. Long an independent company, Engraph was purchased by Sonoco Products Corporation in 1993.

Engraph’s roots lie in the Herald Publishing Company, a Charlotte, North Carolina-based commercial printer that was founded on April 1, 1933, when John H. Jordan leased a failing printing company. It was incorporated on July 6, 1936 as the Herald Press, Inc. As future chief executive T. J. Norman related to the Charlotte Press, “The company never should have made it.… We had worn out, antiquated equipment. There were too many printers in Charlotte. And we were in the depths of a Depression.” But two developments kept the company afloat, claimed Norman. In 1938 the company began to produce and market paper and die-cut paper labels that were used by bakeries, candy manufacturers, and the textile industry. Second, rules were established by the Food and Drug Administration that required labels on bakery and food products with the name of the manufacturer and the products’ weight. An important early client was snack-food maker the Lance Company, which needed labels for its cellophane packages. “From Lance, we grew,” Norman said.

While on a visit to New York during World War II, Norman observed a process by which cellophane was printed on directly. “I said if too many people discover this the label business is going to be hurt.” So he borrowed money and created the Package Products Company, Inc., to print flexible packaging materials. Norman headed Package Products, which was incorporated in June of 1945, while continuing to work at Herald Press. The company’s first flexographic printing press was delivered in early 1946, and, by trial and error, the company learned to use it. Although Package Products and the Herald Press were separate entities, they remained closely allied; for example, in 1951 Package Products moved to an addition to a Herald Press facility.

On November 1, 1955, the two firms merged, and T. J. Norman headed the new company, which was called the Package Products Company, Inc. The Herald Press became a wholly owned subsidiary that served as the commercial printing and sales division. Their combined sales at that time were slightly over $3 million. In 1956 the company went public, and profits and production both rose in the coming decade. Between the year it went public and 1968, sales rose some 420 percent, from $2.38 million to $10 million. The company continued to upgrade its flexible printing operations, so that in 1962 the company could say that it was producing 84 percent more with three presses than it had with four presses in 1956. But the Herald Press was sold in 1964 to a local competitor as the company found it best to focus of printing.

By the mid-1960s, Package Products focussed on printing on flexible packaging (which meant printing on materials such as cellophane, aluminum foil, and other plastic films and papers on rolls, sheets, or bags for the customer); labels (which involved printing, die-cutting, and embossing of pressure-sensitive, adhesive-applied and other labels); and the board specialty business (which included printing, cutting, folding, and gluing cardboard containers). Company clients included Swift, Armour, Holsum, Cannon, Fieldcrest, Chiquita Banana, and Gilette. The company had sales offices throughout the southeastern United States.

Package Products soon began to grow through the aggressive acquisition of other packaging concerns. It bought the Atlanta-based Imperial Packaging Corporation in December of 1970. Next was the Colonial Press, Inc., in February of 1972; in July of that year Package Products Company became Colonial Packaging Corporation. Also in 1972 the company bought Bliskin Supply Company, a printer of paperboard products, and Standard Cap & Seal, Inc. The buying spree continued through 1973. An acquisition that would prove crucial to its future success was that of Screen Art, Inc., of Knoxville, Tennessee. With that purchase came Creative Screen Print, Inc. Both companies used silkscreen methods to transfer images.

The growing company decided to reorganize and create a management company to contain the various parts of the company, and on October 1, 1973, the name of the company was changed to Engraph, Inc. Engraph sold off Imperial Packaging in 1976 and Container-Kraft, Inc. in 1982, but purchased the Morrill Press, Inc., in 1984. T. J. Norman retired in 1981. Norman had started working for Herald Publishing in 1933 for $2 a week, when he had got a job there because he had come to know the printer while working as business manager of his high school newspaper. The year Norman left, sales had reached more than $52 million.

Norman was succeeded by Leo Benatar. Benatar, who had formerly been a president at Mead Packaging, decided that Engraph’s future was in niche packaging. “We decided we weren’t going to be packagers to America,” Benatar told Fortune. “We decided to look at what we did well and determine where there were growth opportunities and where the markets were very fragmented.” In a further effort to position itself as a national company, Engraph moved its headquarters to Atlanta in June of 1982. It was reincorporated in Delaware in May of 1987.

Engraph bought Screen Graphics, Inc., in October of 1987 and Rixie Paper Products Inc., in November of 1988. Colonial was sold in March 1988 after proving itself to be a disappointing acquisition. Soon thereafter, in January of 1989, Engraph bought the Patton division of Alford Industries, Inc., for $23 million in cash. Patton made pressure-sensitive labels and on-package coupons. This business would also blossom in importance to Engraph. Patton brought with it over $40 million in revenues and broadened Engraph’s client base in the health care and personal care segments of the industry. In July of 1990, Engraph created a joint venture with Ramallo Bros. Printing, Inc.—called Ramallo, Escribano & Co.—in Puerto Rico, where a number of health care and pharmaceutical companies had opened operations to take advantages of tax incentives there.

In 1990, Engraph restructured its operations, working to lower its costs, decentralize operations, and provide a quicker response time to customer orders. It also sold Package Products-Flexible in 1991, the core around which Engraph had originally grown, because it did not gel with the niche approach. That unit “was the root of the tree, but it was draining the company and took too much of our management time,” Benatar said. In February of 1991 Engraph bought Graphics Resources, and the next year it purchased Polaris Packaging. Despite the recession that affected many segments of the economy, business continued to grow at Engraph, which in 1992 raised $235.4 million in sales, the best year in its history and a 14 percent increase over the previous year. Its net income was $10.2 million, an increase of 28 percent. The company’s stock, which traded on NASDAQ, had risen 25 percent in the previous decade, and its sales had grown steadily since 1978.

Engraph was oriented around four sectors of the market: flexible packaging, labels and package inserts, screen-process printing, and paperboard cartons and specialties. Flexible-packaging printing was handled by Morrill Press and printed packages for candy, gum, and cookies. By this time Engraph was the largest manufacturer of candy wrappers in the world. Labels and package inserts were produced by six units: Patton, Graphic Resources, Inc., Screen Graphics, Inc., Package Products Specialty, Polaris Packaging Inc., and Ramallo, Escribano & Co. These units made Engraph one of the largest makers of pressure-sensitive labels in the United States. Customers were the cosmetics, health care, and personal care companies that used labels on shampoo, cough medicine, and bubble packages. One particularly successful technique was to label the “clear” products that were popular in the early 1990s, including soft drinks like Clearly Canadian, so that it appeared the label was painted on. Other specialty areas included point-of-purchase advertising material, decals, posters, and metal signs; particularly important were coupons, popular with cigarette makers. Labels for the health care and personal care market brought in almost 20 percent of revenue.

Engraph’s screen process printing business was centered on Screen Art, which created graphics for beverage vending machines, fountain dispensers, and delivery trucks. Engraph became a leader in applying large, colorful graphics to the sides of beverage delivery trucks, which turned them into traveling billboards. Its vending machine business represented 80 percent of the market. By 1992 Engraph also supplied all graphics materials to Coke, Pepsi, Dr. Pepper, and Seven-Up for their fountain machines in fast-food retailers. Engraph’s paperboard cartons and specialties units were Standard Cap & Seal, Rixie Paper Products, and Package Products Specialties. They produced items such as the paperboard caps used by hotels to cover glasses in their guest bathrooms; Engraph held over 90 percent of this market.

Engraph’s impressive growth and strong market position made it a desirable property in the acquisition market in the 1990s. In September of 1993 the Sonoco Products Company, an industrial packaging manufacturer based in Hartsville, South Carolina, acquired Engraph for approximately $300 million. Sonoco’s revenues in 1992 were $1.84 billion. Engraph then became a wholly owned subsidiary of Sonoco. Sonoco’s purchase of Engraph was seen as an effort to strengthen its position in the consumer products packaging market. There was virtually no overlap in the product lines of the two companies. With Sonoco’s clout, Engraph stood poised to enter the international marketplace, especially following the 1994 acquisitions of Mexico City-based Print Art (which then became Engraph Mexico, and the English firm M. Harland & Sons Limited. If Engraph proves as adept at capturing world market share as it has domestic, the future of the company should be very bright indeed.