Groupe Sidel S.A.

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Groupe Sidel S.A.

Avenue de la Patrouille-de-France
Octeville-sur-Mer
BP 204
76053 Le Havre Cedex
France
(33) 02 32 85 86 87
Fax: (33) 02 32 85 81 00
Web site: http://www.sidel.com

Public Company
Incorporated: 1965
Employees: 1,690
Sales: FFr3.12 billion (1996)
Stock Exchanges: Paris
SICs: 3085 Plastics—Bottles; 3089 Plastic Products, Not Elsewhere Classified

Groupe Sidel S.A. is the world’s leading designer, manufacturer, and distributor of machinery for PET (polyethylene terephtalate) bottling and packaging. Sidel’s line of PET packaging machines, which range in speeds from 500 to 50,000 bottles per hour, have captured 60 percent of the world market for PET packaging, including 80 percent of the U.S. PET packaging market and more than 90 percent of the company’s home market, France. Sales of Sidel’s PET machines account for the large majority of the company’s total sales; however, the company has long been present in the PVC (poly vinyl chloride) and high-density polyethylene (PEHD) bottling and packaging equipment markets. In the mid-1990s, Sidel was actively expanding—primarily through acquisitions—into other packaging markets, such as shrink-wrapping machines and corrugated cardboard packaging.

With subsidiaries in Spain, Italy, Brazil, the United States, Hong Kong, Malaysia, Singapore, Mexico, Germany, and the United Kingdom, Sidel has placed more than 1,400 of its PET machines (which range up in price to some US $5 million per machine) in more than 90 countries. Exports represent more than 90 percent of Sidel’s sales, with its largest markets in Europe (41 percent) and North America (21 percent). The Far East is also fast becoming a principal market for PET bottling and packaging products, and provides 20 percent of Sidel’s total sales. A slump in the U.S. PET market led to a drop in Sidel’s 1996 sales, down to FFr 3.12 billion, from the previous year’s FFr 3.7 billion. Sidel is led by president-director-general Francis Olivier, who, together with other members of management, owns some 11 percent of Sidel’s stock.

Plastics Bottling Pioneer in the 1960s

Until the late 1950s, liquid consumer products, such as soft drinks, mineral water, and others, were packaged almost exclusively in reusable glass bottles. Yet glass bottles were expensive both for the producer and the consumer, prone to breakage and heavy to transport. Manufacturers began seeking new, disposable packaging materials. In the United States, packagers turned to metal, cardboard, and plastics. This new packaging soon caught the attention of European producers. Among the first of the Europeans to seek alternatives to glass bottling was France’s Lesieur, the leading European distributor of vegetable oils. In 1961, that company’s chairman, Paul Lesieur, met with inventor Antoine Di Settembrini, who had developed a machine for producing polystyrene containers for yogurt, cream, and other products.

Di Settembrini was recruited to develop new packaging machinery for Lesieur’s oils, and, in July 1961, placed in charge of a new ‘light packaging’ division based in the port area of Le Havre. Di Settembrini’s attention turned to a new form of plastic being developed at the time: polyvinyl chloride (PVC). This material showed great promise, with its light weight, strength, and ability to be molded into a variety of forms. While food-grade PVC had yet to be developed, Di Settembrini and the light packaging division set to work designing machinery to convert PVC into containers for Lesieurs products. By the end of 1961, the division had spent nearly a billion old francs purchasing the necessary equipment and machine tools.

The division began developing its own food-grade PVC compound, and started production of its first bottles in October 1962. That attempt proved something of a disaster, as the bottles shattered during the season’s first frost. Meanwhile, the division was having more success in creating its machines. After 18 months of preparation, the division debuted its first bottle-making machine, dubbed the DSL 3 (after Di Settembrini Lesieur). The machine was capable of producing 1,500 to 1,800 bottles per hour. By 1963, the division was ready to supply Lesieur with its first plastic bottles. Meanwhile, the division established its own research branch, and entered into a joint-venture partnership, called Doryl, with the French chemical products arm of Shell, in order to develop new plastic packaging materials.

The Lesieur machine and the plastic bottles it produced quickly caught the attention of other liquid container producers, as well as the producers of liquids, notably the French wine industry, themselves. Liquids in the bottles proved to keep as well or better than in glass bottles; at the same time, the plastic bottles weighed substantially less than their glass counterparts, proving much less expensive to transport. Lesieur briefly looked at selling its technology, selling licenses to Italy’s Massighisolfi (later AFE) and Japan’s Sumitomo. But Lesieur quickly changed course, and determined instead to manufacture and sell the machines its light packaging division had designed. By the end of 1963, the division’s newly formed commercial sales unit had sold 14 of the DSL 3 machine. The following year, sales rose to 20 machines, and in 1965 the company sold a total of 24 machines, including three of a new model, the DSL 2. Purchase price of the DSL machines was FFr 500,000. The division’s revenues reflected the growing interest in its machines, rising from FFr 6 million in 1963 to FFr 15 million in 1965—with exports already accounting for 39 percent of revenues.

The future appeared bright for the division, especially with the interest of Vittel, one of the leading French producers of mineral water, in purchasing bottling machinery. That development, however, was temporarily put on hold, as the company awaited the French government’s approval of the use of its plastic bottles for mineral water. The delay in approval, and a slump in machinery sales in the mid-1960s, put a brake on the division’s growth. The division was forced to reduce its work force, which had grown from a team of 30 in 1961 to more than 300 by 1964. Nevertheless, the division was growing out of its ‘artisan’ phase and moving to a new era as an industrialized company.

In 1965, this transition was formally recognized when the division was incorporated as an independent company, although remaining under the control of Lesieur. Called Sidel, which stood for Société Industrielle des Emballages Légers, the new company was 90 percent owned by Lesieur, while ten percent was held by Pont-à-Mousson S.A., a subsidiary of French industrial giant Saint Gobain. Later that year, Sidel received another boost, when COPLAIT, a Paris-based milk cooperative, purchased two DSL 3 machines for its pasteurized milk. Other milk producers soon followed, including such leading concerns as Bridel, Totalpac, and Unicolait.

By then, Sidel’s PVC packaging technology was among the most advanced in the world. The company’s DSL line was expanding, with the DSL 3 reaching speeds of 3,000 units per hour, joined by the high-speed DSL 4, and the smaller capacity DSL 1. The DSL 3 continued to be the company’s flagship, however, and by the end of the decade more than 150 DSL 3s were in operation around the world. In 1968, Sidel received a new lift, when the French government finally approved the use of PVC for bottling mineral water.

The final years of the 1960s were difficult ones for Sidel, however. Di Settembrini broke with the company, leading to years of litigation that would not be resolved until the beginning of the next decade. In the meantime, the company, over-anticipating the.growth of its sales, had begun hiring new employees, building a total work force of 417 people. Yet sales remained relatively modest, reaching only some FFr 45 million by the end of the decade. At the same time, the company’s research and development efforts were floundering, and a number of the company’s machines, including the DSL 4, proved flawed. In disarray, Sidel reorganized its management and operations, and began a new expansion program.

The “Black Years”: 1973-86

Sidel’s expansion plans failed however; by 1971 its sales had slipped back to FFr 40 million. The following year, Pont-à-Mousson S.A. took 100 percent control of Sidel, and the company entered what it would later refer to as its “black years.” Sidel was attached to its new parent’s mechanical division as its equipment and packaging division.

Sidel initially appeared to benefit from its new status. Its manufacturing operations were improved, allowing its production lines to develop from the somewhat makeshift quality of its early years to a truly industrialized unit. Pont-à-Mousson also invested heavily in building up the division’s research and development activities, allowing Sidel to regain its reputation for innovation. In 1973, the division debuted its DSL 3500, capable of producing 3,600 polyethylene-based bottles per hour. In that same year, Sidel introduced another new machine, the SAP 100, suited for producing small, polyethylene-based aerosol-spray containers, particularly for the perfume industry. The SAP 100 became one of the company’s biggest successes during the 1970s.

Yet Pont-à-Mousson’s plans to expand its industrial division cast a shadow over Sidel’s operations. In 1972, the parent had purchased Kaufman, a maker of industrial extruders. In 1974, Pont-à-Mousson added another acquisition, that of Billion, a maker of injection presses. In that year, the three companies were joined together with Pont-é-Mousson’s own industrial plants, and formed into a new machines division. At the end of 1974, the operations of Sidel, Kaufman, and Billion were formally merged into a new subsidiary, Société des Machines Pour la Transformation des Plastiques (SMTP). The new company was headquartered in Nancy.

Merging the different organizational structures and operations of the three companies was a difficult task. At the same time, the parent company insisted that SMTP buy its parts from Pont-à-Mousson’s own factories, which resulted in cost increases of as much as one-third. Sidel continued to produce new packaging machinery, including the first machine capable of producing PVC bottles for the important carbonated beverage market. For much of the 1970s, however, Sidel’s activities were largely eclipsed by the attention paid to SMTP’s Kaufman and Billion operations. Nevertheless, by the early 1980s, Sidel— which had been developing its SBO series, capable of producing some 15,000 bottles per hour—emerged the dominant operation of the SMTP trio. In 1984, after suffering losses totaling some FFr 72 million since the SMTP merger, Kaufman was sold to EMS; SMTP itself was restructured as Groupe Sidel. Two years later, Sidel found itself again under threat; Pont-a-Mousson announced its intention to sell the Sidel operations to the German Krupp, and its subsidiary, Corpoplast, long Sidel’s principal rival in the packaging machinery market.

The sale would have meant not only the passing of the French company into German hands, it most likely would have meant the end of Sidel’s activities altogether. Appealing to ultimate parent Saint Gobain, itself owned by the French government, Sidel’s management, led by Francis Olivier, gained an agreement to perform management buyout. Olivier put together a group of investors who paid Saint Gobain FFr 108 million to purchase Sidel. Olivier would then lead Sidel into its next phase, one of explosive growth.

The PET Conversion of the 1980s

By then, environmental pressures had long been nagging the use of PVC for product packaging. In the mid-1970s, producers in the United States had begun experimenting with a new form of plastic, called polyethylene terephtalate, or PET, which would come to rival, and ultimately surpass, PVC as the packaging material of choice, particularly for carbonated beverages. Sidel’s association with PET came rather late. In 1977, Sidel had entered an agreement to share technology with Belgium’s Solvay & Cie S.A., leading to the development of the company’s BO (bi-orientation) PVC-based machines. At the same time, however, the company, through its partnership with Solvay, determined to enter the PET market as well.

Sidel’s work on its first PET machine continued through the end of the decade. The company initially approached mineral water company Vichy to produce PET machines for that company’s carbonated water. Vichy, however, under pressure from the glass industry, balked. Instead, Sidel’s first order came from Britain’s Barraclough, a family-owned soft drink maker. Sidel delivered its first PET machine, the SBO 10, which was capable of processing 3,600 bottles per hour, in September 1980.

Sidel’s next step was to bring its machines to the United States, by far the world’s largest market for carbonated beverages. The American market held little interest for the French company’s machines, but in 1980, the company attracted the interest of Amoco Containers. The two companies reached an agreement, under which Amoco agreed to purchase Sidel machines, while Sidel agreed to increase the speed of its SBO (which stood for blow-molding) series. In 1981, Sidel debuted the SBO 24, capable of producing an industry-leading 15,000 blow-molded, 16-ounce PET bottles per hour. Amoco, however, judging that the U.S. market was not ready for the half-liter bottle—indeed, that market did not yet even exist—and backed out of its agreement with Sidel.

The company’s PVC machines continued to make up the bulk of its sales for the first half of the 1980s. Sales of the SBO series remained minimal. Finally, in 1983, the company seized on a new sales tactic: it offered the SBO 24 free for six months. If the machine worked, the client would pay. A South Carolina-based bottler for Pepsi was the first to take up the company’s offer, and bought the machine at the end of its six months. Next, Coca Cola brought on its first SBO 24 in 1984, at last opening the U.S. market for Sidel’s machines, and the 16-ounce format. When Coca Cola determined to introduce a new, three-liter format, it discovered that the only machine capable of producing these at high-speeds was Sidel’s SBO 24.

From consolidated sales of FFr 85 million in 1979, based almost entirely on the company’s PVC machines, Sidel’s revenues grew to FFr 337 million in 1986, with its SBO series of PET machines accounting for one-third of its sales. That percentage would shift even more dramatically, and, after the company achieved its independence in the mid-1980s, Sidel’s sales would more than triple by the end of the decade. The PET era was firmly underway. Between 1977 and 1990, the industry would grow from annual production of 10,000 tons to nearly one billion tons. Sidel, positioned at the forefront of the market’s technology, quickly achieved worldwide market dominance as well. By the beginning of the 1990s, the company’s machines were present in 26 countries, including Eastern Europe, the Far East and South America.

Leading the PET Market in the 1990s

Sidel’s sales passed the FFr 1 billion market in 1991. The company continued to build on its success, posting steady increases in the tempo of the SBO 24 to 30,000 bottles per hour, while extending the SBO range to include the SBO 4, SBO 10, and the SBO 16 models, providing diversity in both speed and bottle capacity. The company also introduced its very highspeed unit, the SBO 40, which boasted speeds of some 40,000 bottles per hour—four times faster than its nearest competitor. By the mid-1990s, Sidel passed the 50,000-bottle-per-hour mark with the introduction of the SBO 48/38. Sidel’s marketing approach helped its machines expand beyond the initial softdrink market. Instead of simply selling the company’s machines, Sidel’s sales force concentrated on introducing new types of packaging using PET. By the mid-1990s, Sidel’s PET machines were supplying a diverse range of some 30 product applications. The PET machines were also driving the company’s growth. Representing more than 86 percent of Sidel’s sales by 1995, the SBO series and the booming demand for the more environmentally friendly PET packaging helped Sidel’s revenues triple again, to FFr 3.7 billion.

After achieving worldwide dominance of the PET market, Sidel expanded its focus. In the mid-1990s, the company determined to diversify its operations, entering new packaging markets. Sidel began a series of acquisitions, adding purchases of such French companies as Ouest Conditionnement (shrink-wrapping machines), Héma Technologies, Rémy, and Kalix (bottling machines), and Cermex (corrugated case packing and palletiser machines). At the same time, Sidel began eyeing one of the most important markets of all, the beer market. With a goal of transitioning the beer market to PET bottles, Sidel acquired, in 1997, the operations of Gebo Industries, a leading packaging for beer and soft drink products.

For the future, Sidel could envision still greater growth; in the mid-1990s PET still accounted for less than one-third of the soft drink and mineral water markets, only four percent of the fruit juice market, and a negligible portion of the alcoholic beverage market. Sidel looked forward to maintaining its position as the PET market’s technology leader.

Principal Subsidiaries

Sidel España (Spain); Sidel Italia (Italy); Sidel Inc. (U.S.); Sidel Brasil (Brazil); Sidel Beijing (China); Sidel Far East Ltd. (Hong Kong); Sidel Singapore PTE Ltd.; Sidel de México; Sidel Industry Malaysia Sdn Bhd.