A growing force

Features - Cover Profile

With the acquisition of Caraustar in 2019, Greif Inc. has increased its focus on recycled containerboard and recycling.

Subscribe
January 4, 2022

Photos courtesy of Greif Inc.

For 145 years, Greif has served as a packaging producer in some format. The company was founded by William Greif in 1877 as a cooperage shop in Cleveland, making wooden barrels.

According to a timeline on the company’s website, Greif was one of the largest cooperage plants in the world in 1908. By the 1950s, the company moved its headquarters to Delaware, Ohio, and shifted its focus from cooperage to manufacturing fiber-based drums and corrugated containers. By 1978, Greif entered the containerboard business after purchasing a paper mill in Massillon, Ohio. The company has since become a growing force in that segment.

In 2001, Greif acquired Van leer Industrial, which enabled it to expand its footprint internationally. To date, the company’s Global Industrial Packaging division has a presence in more than 40 countries, while Greif has more than 16,000 employees across the globe.

The company was a relatively small player in the containerboard space, operating two containerboard mills and its CorrChoice network of corrugated sheet feeders within its Paper Packaging & Services division. That changed in 2019, when Greif acquired Austell, Georgia-based Caraustar Industries Inc., a large recycled paperboard and packaging solutions provider, from H.I.G. Capital for $1.8 billion. H.I.G., a private equity firm based in New York, initially acquired Caraustar in May 2013 in partnership with Caraustar’s management.

Combining with Caraustar

The Caraustar acquisition, which Greif announced in 2018, grew Greif’s Paper Packaging & Services division to 13 mills across North America. It also added a Recycling Group with 17 recycling facilities, and an Industrial Products Group, a producer of tubes, cores, protective packaging and adhesives that has more than 40 facilities across North America.

“That deal doubled the size of the Paper Packaging & Services business and brought us into new businesses, such as URB (uncoated recycled paperboard) and coated recycled boxboard,” says Matt Eichmann, vice president of investor relations, external relations and sustainability at Greif. “It also brought along the recovered fiber team.”

John Grinnell, vice president and general manager of the Recycling Group at Greif, joined the team with the acquisition of Caraustar. He had worked as a vice president and general manager for Caraustar’s Consumer Packaging Division, which Greif has since sold to Atlanta-based Graphic Packaging International.

He says Greif has been a great fit for Caraustar and its employees. “I think that Caraustar folks are thrilled to be part of Greif. A number of Caraustar leaders had prior experience with Greif. It was an easy transition,” Grinnell adds.

Before the Caraustar acquisition, Eichmann says Greif had significantly grown its footprint in its Global Industrial Packaging business. By adding Caraustar, he says the company was able to grow its footprint within the U.S. market.

With the Caraustar purchase, Greif also acquired a network of recycling facilities. It now operates 17 fiber recycling plants across the U.S. Grinnell says the plants receive mostly source-separated material from domestic customers, such as industrial or commercial sources. He adds that all the recycling operations include a baler, and some have ancillary processing equipment, such as sorting systems, guillotines, roll saws and hoggers.

“We handle a full range of grades,” he says, including old corrugated containers, some mixed paper and high grades, such as sorted office paper. “We’re typically buying high-quality, source-separated material and processing it into high-density bales for mill-direct delivery.”

Adding the Recycling Group also gave the company a mill buying organization and enabled more streamlined trading and brokerage.

“Brokerage is really important because it allows us to commit to a volume of business,” Grinnell explains. “Even if some of the material isn’t needed by or does not fit our mill, brokering material allows us to be a one-stop solution for a generator. Having a brokerage business allows you to keep material moving and not cause disruption to the generator of fiber. We try to differentiate by being the best customer service company in our industry, and our brokerage capabilities help us do this.”

In the company’s financial results for the first quarter of 2019, Pete Watson, president and CEO of Greif, said he expected the Caraustar purchase to drive “significant value creation” by enhancing the company’s margins and earnings before interest, taxes, depreciation and amortization. “Caraustar’s strong free cash flow, combined with Greif’s existing free cash generation, will permit rapid deleveraging and enhance our longer term financial flexibility.”

Eichmann says Watson’s initial statement on the acquisition has held true since Greif has integrated Caraustar.

“The company thought this acquisition would be immediately accretive to earnings and free cash flow, and it was,” he says. “It was a win across the board.”

He continues, “It had a great cultural fit. There were some really close operational adjacencies in terms of production processes that were attractive to us. We gained entrance to the boxboard markets—particularly URB was an attractive market to us. Vertical integration came along with the recycling business, which we didn’t have before. So those are just a couple of things that made the acquisition worthwhile.”

Grinnell says it tends to be easier for companies to acquire businesses that represent new products and services rather than those the acquiring company already is familiar with.

He explains, “If you’re talking about putting two businesses that do the same thing together, it makes it much harder because there are a lot of redundancies. Here, we were combining two businesses that were more complementary than overlapping, and that made the combination easier in many ways.”

Eichmann adds that Greif leaned on its past experience with acquisitions to guide it through the Caraustar deal.

“In the early 2000s, the company went on a real acquisition spree and purchased something like 40-odd companies in those first 10 to 11 years in the millennia,” he explains. “One of the lessons during that time was to be very intentional about your integration.”

Therefore, Eichmann says Greif worked with a third-party firm to help merge the businesses. “It was an organized and orchestrated process,” he says.

A servant leadership culture

Although Greif is growing its footprint in the recycling space and as a containerboard producer, Eichmann says it is still a “relatively small player” compared with some other companies. According to Recycling Today’s 2021 list of North America’s Largest Recovered Paper Consumers, Greif ranked eighth, consuming 1.3 million tons of recovered paper in 2020, including OCC, mixed paper, tube and core waste, box cuts, double-lined kraft (DLK) and some high grades. Greif did not rank on the previous list in 2018, though Caraustar did come in at the eighth spot. 

The company says it focuses on providing quality, value-added services that can be more difficult for larger producers to provide. Eichmann says Greif aims to offer its customers faster turnaround times and closer partnerships. He adds that the company also services more niche markets, such as litho-lamination and specialty coatings. 

For its own employees, Greif’s culture of living by the Golden Rule and servant leadership sets it apart from other firms.

“Greif has always had something known as ‘the Greif Way,’ which is, in essence, the Golden Rule—do unto others how you want to be done unto yourself,” Eichmann says. “In the last six years or so, there has been a real intentional push toward servant leadership. That’s all about leaders existing to serve the needs of their people in order to serve the needs of our customers. It’s a little bit of a different view. At other companies, it may be more hierarchical in a sense that folks work for the leader. But at Greif, it’s kind of the other way around. Leaders help to support their teams and keep them oriented toward the right sorts of things.”

Grinnell adds that the company’s motto of the Greif Way and servant leadership aren’t just talk, either.

“This is a company that truly lives by its values,” he says. “There’s never a doubt we’re going to do the right thing. That’s what is expected. Safety is at the top of the list—it’s nonnegotiable. If we’re not doing everything we can every day to keep our colleagues safe, then nothing else matters. That’s the way the company operates.”

A sustainable future

Greif has tracked and managed a sustainability program for the past 12 years, but Eichmann says he suspects it will play a bigger role in the company’s future.

“Increasingly we’re hearing from customers that [sustainability is] really important to them,” he says.

To date, the company has performed two materiality assessments to determine how it can improve on its sustainability performance. Greif most recently performed an assessment in April 2021. For that assessment, Eichmann says Greif hired an outside firm to conduct in-depth interviews and data sourcing exercises with stakeholders internally as well as externally, such as with customers, suppliers and nongovernmental organizations connected to the business.

The assessment identified three areas of sustainability for Greif to improve upon: climate strategy, product circularity and diversity, equity and inclusion.

Eichmann says climate strategy is particularly important to Greif’s customers in the Global Industrial Packaging sector that are looking to reduce greenhouse gas emissions and their carbon footprints.

With product circularity, he adds that Greif has made advances since acquiring Caraustar by adding the Recycling Group, but the study noted that the company could incorporate more postconsumer resin into packaging materials in its Global Industrial Packaging sector.

Finally, he says, the study indicated that the company could work toward building a more inclusive workforce. 

“For much of 2021, we’ve been analyzing the feedback and embedding it within our business strategies,” Eichmann says.

Besides investing in sustainability, Greif will face other changes this year.

Watson, who has served as CEO of the company for the past six years, will retire in February, and Chief Operating Officer Ole Rosgaard will step up as CEO. Greif announced the transition plan via a news release in June 2021.

Grinnell says the company also wants to increase the size of its converting businesses in corrugated products and tube and cores to increase vertical integration. “In general, we want to expand integration levels,” he says. “[The] same goes in recovered fiber. We’re working to grow our fiber basket both to support internal mills and mill customers.

“And always, every year, we have the goal to improve on safety and colleague engagement,” Grinnell says.

He adds, “Will there be other moves we make? I’m sure there will be.”

The author is co-managing editor of Recycling Today and can be reached at msmalley@gie.net.