Fishy business
The Canmaker
September 2002
The emergence of the pouch as a competitor to the can proves there is a market for added-value ideas in the US tuna market, says Nick Ince, who runs the North American operations of Netherlands- based Impress Group BV.
On the face of it, Impress has most to lose from the recent acquisition of a number of tuna and petfood brands from Heinz by Del Monte, which has said it wants to expand its use of pouches for tuna.
Impress USA had been created to give Impress a launching pad to the North American market. Its initial role would be to manufacture tuna and pet food cans for Heinz, part of a ten-year supply agreement the two sides had signed when Impress acquired the food processor’s canmaking operations in August 2000.
Ince quickly realised the manufacturing capacity was in place for Impress USA to grow into a successful company. Less certain was whether the fledgling company could attract the knowledge needed for Impress to thrive in the intensely competitive business of canmaking.
“When we acquired this business from H J Heinz, we took possession of the manufacturing operations, but not a management team,” said Ince, who was named vice-president, operations, for Impress USAwhen the company was created in the summer of 2000. “We brought in people from Impress Europe to help the quality and operational sides of the business, as well as people from the financial and commercial sides, and then went on to fill these positions locally.”
Rather than take the traditional route, and fill key executive roles from the industry, Ince built a team of managers from both inside and outside the canmaking business. His strategy was watched closely because there was plenty at stake.
Those long-term plans recently took a new twist when Heinz sold its StarKist tuna and 9-Lives pet food brands—and the factories that produce them—to California- based Del Monte Foods. It’s too soon to tell how the ownership change will affect Impress USA in the long term, but there will be at least two immediate impacts that will likely both please and worry the canmaker.
The good news: While Heinz had planned to close its Californian pet food factory in Terminal Island, Del Monte said the plant will continue packing pet food into cans made at the nearby Impress USA facility.
The bad news: Del Monte will aggressively pack StarKist tuna in pouches, so fewer Impress-made tuna cans will be required. Pouches make up less than 10 percent of StarKist sales, a percentage Del Monte is determined to see grow.
That didn’t appear to surprise Ince.
“As Impress delivers the main players in the US (and not just StarKist), the development of the pouch has not had a significant impact on Impress’ sales to the tuna market,” said Ince. “We do not normally give details on the terms of the contracts between Impress and its customers... however we can say that Impress is well protected by a long term global supply agreement (that Del Monte has assumed).”
Ince said development of the pouch could spur greater improvements in the way that canned tuna is presented.
“The pouch has demonstrated that there is room for differentiated, addedvalue packaging in the US market, which up to now has been noted for its uniformity and commodity status,” said Ince. “Impress believes that there are further and larger opportunities for innovation in this market, combining new packaging styles with the core advantages of the can.
“Innovations such as Impress’Easypeel bowl have achieved mass market volumes in several European markets. Product and packaging innovations like these are far more widespread in Europe and have helped the European seafood market to achieve annual growth rates of three to four percent, well ahead of the US consumption trend, which is flat or declining.”
Of course, Ince himself has faced such challenges before. The most recent was just a few years ago when he was recruiting his current management team.
“It was a challenge, building a team from scratch, but it was also a great opportunity,” recalled the 41-year-old Ince, who was born and schooled in England, and studied at Leeds University before starting work in 1985 as plant manager at the Grantham, UK, food can plant of American Can (later Pechiney and Impress).
“We brought in three or four key people already in the industry in the US, but we also reached beyond our own business.”
That was particularly true in the supply chain and financial departments, where Ince brought in a number of executives who came from businesses much closer to the retail market. Though new to the business of canmaking, they fit Ince’s goal of building a team that could provide new solutions to old problems. Two years later, Ince likes what he sees.
“We’ve pumped some new blood into the industry with these new people,” said Ince. “When we couple that experience in the US market with the advances we have made in Europe, I believe we have a strong platform for success.”
“We started a brand-new company from scratch, and here we are less than two years later,” Ince proudly pointed out. “We have replaced the financial and (information technology). We have installed additional easy-open end capacity. We have launched new can sizes. We have opened a canmaking facility in Northern California to tap the food service industry.”
While Ince aggressively pursues new customers, Heinz—and eventually Del Monte, barring a surprising turn of events—remains the primary purpose for his presence in the US. Three-quarters of Impress USA’s production goes to the food processing giant. That explains why Impress USA is headquartered in Pittsburgh, Pennsylvania—the same city that hosts Heinz’s corporate office. Del Monte will also open a Pittsburgh office to oversee the properties that it is acquiring from Heinz.
While three of every four cans that Impress USA manufactures currently goes to Heinz, Ince is hoping to reduce that and be less dependent on one client. His ability to attract new customers and turn Impress USA into a primary supplier for fillers is as important for the parent company as it is for Ince. The US division already accounts for about 20 percent of its parent company’s total global business, which was last year reported as 1.4 billion euros.
“We’re not the biggest piece of the company, but we are very significant because this is Impress’ first US base of operations,” said Ince. “It allows us the opportunity to develop more global relationships with our customers.”
Impress had occasionally exported products into the US, he said, but those shipments were relatively small. The company had been trying to develop a strategy to capture a more substantial piece of the American market, but without a manufacturing facility, it had been difficult.
“That’s why it was such an accomplishment to establish Impress USA,” said Ince, who had filled temporary roles in the US for Impress a couple of times before returning for his current position. “It shows we are here. Customers can see our facilities.” Those customers would have to travel far and wide, however, to see the six production facilities under Ince’s control. His plants stretch from the East Coast of the US to American Samoa, a distance of more than 8,000 miles. Because his factories are so spread out, one of Ince’s first decisions was to separate his management structure into two geographical groups.
“In Impress, we prefer to split our businesses by key markets, but we have been forced to regionalise due to the sheer distance between the operations,” said Ince, noting that the regional headquarters in Los Angeles also supervises the American Samoa business. “On a day-to-day basis, our management style is to run each of those on a regional basis. Our central office in Pittsburgh focuses on providing services, coordination of the supply chain, and handling the financial administration for the entire US operation.”
Impress USA’s far-flung facilities are in contrast to its parent companies’ operations in Europe, where the proximity of the canmaking plants makes it more convenient to run the entire business from a central location.
“The distances between canmaking plants in Europe is much shorter,” Ince said. “We can get to pretty much any plant within two hours by plane.”
Compare that to the US operation, where a round-trip from Pittsburgh to American Samoa will take a week. Such inefficient use of work time is what motivated Ince to decide that managers at his key manufacturing plants would have the authority to make many of the day-to-day decisions in their facilities.
The reason for the far-flung operation is the tuna business, which is strong in the South Pacific. Heinz—which sells much of its tuna under the StarKist brand—closed its tuna processing facility in Puerto Rico in May 2001, choosing to focus its resources in the existing plant in American Samoa and to develop operations in Ecuador. That meant Ince’s attention also turned to the small US island and South America.
“We have a strong position in seafood, with tuna specifically,” Ince said. “Star- Kist is the number one producer in that industry, and we have all of their business. We also have a very strong presence with Bumble Bee and Chicken of the Sea, which are numbers two and three in the tuna market.
“We don’t have every last bit of that business, but the vast majority, up to 75 percent I’d say, is being put into Impress cans. The tuna business is very important to us because it provides a good manufacturing base for our US operation.”
The vast distances between canmaking plants isn’t the only aspect that separates Ince’s operation from Impress’ European business.
“Everything we produce in our US operation at the moment is in steel, essentially,” Ince said. “Impress in Europe, on the other hand, has been successful integrating aluminium into some of their operations.”
Ince would like to diversify his product range, as well, adding some aluminium containers into his steel can production. When the move to add aluminium is made, it likely will appear first in tuna.
“If we are able to make that transition, it wouldn’t be inconsistent with the US tuna market,” said Ince. “There is already some tuna in the US packed in aluminium, so the consumer would be accustomed to seeing the container.
“If the import restrictions on steel push prices too high, I think we’ll take an even harder look at aluminium.”
Ince has had other issues to deal with, as well. Heinz’s decision to close its tuna cannery in Puerto Rico had been expected, Ince said, though the closure took place sooner than anticipated.
“That’s the nature of business, and you have to adapt when conditions change,” Ince pointed out. “Starting this company from scratch, there was no past history for us to rely on. I think that’s one of the things I’m most pleased about. We’ve had some surprises thrown at us and we’ve responded so well.”
“There are no plans to phase out using cans. They’ll be around for a long time”
Sorry Charlie, but the consumer is king. That’s why StarKist tuna will begin appearing more regularly in pouches, rather than the traditional six-ounce cans that had been its standard package for decades.
That’s the word from Del Monte Foods, the California- based processor that is acquiring StarKist tuna and other prominent brands from Heinz USA. The deal, technically a merger between Del Monte and a spun-off division of Heinz, is expected to receive US government approval late this year.
Heinz recently introduced pouched tuna to US consumers, hoping the packaging alternative— which requires less oil and provides “chunkier “ tuna—would please existing consumers and attract new buyers. The pouch accounts for less than ten percent of StarKist’s current sales.
Del Monte intends to take the concept a step further, increasing its appeal by expanding the variety of seasonings in its pouched tuna. While integrating the pouch into its tuna lines will please consumers, the move must be a concern for canmakers. The can has long been the preferred package for tuna, beloved for its convenient size and food safety qualities.
“Satisfy, meet or exceed a consumer need and they will respond by using your product, whether it’s peaches or tuna,” said Bill Spain, vice-president of communications for the California-based processor. “That’s what the pouch (will do) for StarKist tuna, meet and exceed a consumer need. What are those needs? Three words come to my mind: convenience, quality and value.”
The metal can still has convenience, quality and value attributes, Spain notes. But consumers are indicating that the pouch has those same strengths and more. The pouch, for instance, can accommodate the public’s preference for tuna without oil, as well as tuna with different flavours and seasonings.
“We cannot overlook the opportunity to provide new flavours with the new packaging,” Spain said. “Sometimes it is easier to introduce a new style or flavour of a product when it’s in a radically different form of packaging.”
That doesn’t mean Del Monte is abandoning the metal can.
“There are no plans to phase out using cans. They’ll be around for a long time,” said Spain. He said Del Monte uses multiple packaging formats for some of its other products. “I think it’s a lot like our fruit products which are available in metal, glass and both plastic and metal cups.”
The question is how aggressively Del Monte will exploit the pouch. When Del Monte merges a handful of Heinz’s product lines, including 9-Lives pet food, it will assume the canmaking pacts Heinz had negotiated with Impress USA.
There has been speculation Del Monte is using the pouch as leverage to pressure Impress USAinto a new, processor-friendly canmaking contract. Spain, though, quickly dismissed that notion.
“I’ve not heard anything about the pouch being a bargaining ploy,” Spain said. “You can tell from my excitement about the consumer acceptance of the pouch and it’s potential that it’s for real. One would not go through what it takes to develop and introduce a new form of packaging just to leverage another form of packaging.
“The goal is to meet consumer needs. That’s why we developed plastic cups, reintroduced ‘home canning’jars, sell our S&W Bread Crumbs in a composite canister and use pull-top lids wherever possible.”
Impress USA
Created: August 2000
Headquarters: Pittsburgh, Pennsylvania
Manufacturing plants & primary operations: Mayaguez, Puerto Rico (food service cans); Pago Pago,American Samoa (food service, tuna cans); Terminal Island, California (food service, tuna cans); Escalon, California (food service cans); Bloomsburg, Pennsylvania (pet food cans); Weirton,West Virginia (shipping tin plate, producing ends)
Employees: 700
For further Information, please contact:
Impress:
T: +33 (0)243 485 100
Discover Impress on: www.impressgroup.com
