Driving value

Pete Watson, president and CEO of Greif Inc., talks about the recent Caraustar purchase and the company’s sourcing of green materials.

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Greif Inc., Delaware, Ohio, has long been considered a global leader in the industrial packaging sector, with 308 locations in 43 countries. Greif produces steel, plastic and fiber drums; intermediate bulk containers; reconditioned containers; flexible products; and containerboard.

The company’s recent purchase of Caraustar Industries Inc., Austell, Georgia, from H.I.G. Capital, New York, for $1.8 billion expanded Greif’s capabilities to include board and specialty products. Caraustar produced uncoated recycled-content paperboard and coated recycled paperboard (CRB) for applications that include tubes and cores and specialty products. The company also operated a network of recycling facilities in the United States, primarily in the South.

“The acquisition of Caraustar will drive significant value creation for Greif shareholders by enhancing Greif’s margins and EBITDA (earnings before interest, taxes, depreciation and amortization) and by strengthening and balancing our portfolio,” Pete Watson, president and chief executive officer of Greif, says in a news release announcing the company’s financial results for the first quarter of fiscal 2019, which ended Jan. 31. “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.”

He describes the former Caraustar as “a leader in the production of uncoated recycled paperboard and coated recycled paperboard.” And, like Greif, Watson says, the company had a history of providing industry-leading customer service.

Watson has served as president and chief executive officer of Greif since Nov. 1, 2015, but he has been with the company since 1999. During that time, he has served as chief operating officer; group president for paper packaging, land management and global sourcing and supply chain; division president of paper packaging; president of CorrChoice (a Greif division); and vice president of corrugated operations.

According to the company’s website, www.greif.com, Watson wants Greif “to be the best performing customer service company in the world” in the industrial packaging sector.

In the Q&A that follows, Watson shares how Greif is making this vision a reality as well as additional details on the Caraustar purchase, green sourcing and his new role as board chair of the American Forest & Paper Association (AF&PA), Washington.

Recycling Today (RT): Can you tell me about your vision for Greif and the progress the company has made in realizing this vision?

Pete Watson (PW): Our vision centers around our customers. In industrial packaging, [we want to] be the best performing customer service company in the world. This vision has been our focus during my time as president and CEO, and we have made great strides. We regularly solicit feedback and engage our customers to ensure we are creating value to meet their needs.

RT: How does your recent Caraustar acquisition benefit Greif and how does the purchase fit into your overall vision for the company? How has the integration process been progressing?

PW: The addition of Caraustar bolsters our leadership position and enhances our existing portfolio of packaging solutions. We look forward to delivering on the opportunities that the addition of Caraustar provides for our team, our customers and our shareholders. The enthusiasm expressed by our new colleagues is very positive, and we have made significant progress in our integration plans.

RT: Does Greif plan to rationalize its operations and close underperforming assets in the Rigid Industrial Packaging & Services (RIPS) and Flexible Products & Services (FPS) segments?

PW: While we have no current plans to rationalize existing operations in RIPS or FPS, like any manufacturing company, we will continually evaluate our global portfolio in order to better serve our customers and provide our shareholders with the highest returns.

RT: How does recycled content factor into Greif’s 2025 goal to move toward green material sourcing? What steps are you taking to achieve this goal?

PW: Our sourcing managers incorporate topics such as carbon content, recyclability and packaging improvement into conversation with many of our suppliers to identify opportunities to help us reach our 2025 goal. We have made green material substitutions to increase the use of postconsumer regrind plastic in our products. We increased our efficiency with bulk packaging and other packaging materials to increase reusability while optimizing logistical routes to reduce shipping expenditures.

In some European facilities, we have introduced a more biodegradable oil to clean our paint lines.

Additionally, we have a line of DoubleGreen COEX 10L jerry cans, which incorporates green polyethylene derived from sugarcane ethanol. The green polyethylene exceeds 50 percent of the total packaging composition. Through a life cycle assessment, we found the DoubleGreen product is able to reduce CO2 emissions by roughly 50 percent compared to traditional jerry cans.

In 2019, we will continue to identify green material substitutions and identity cost savings opportunities.

RT: How do you think the recovered fiber sector will rebound from the effects of National Sword?

PW: There is a significant resetting of recycling markets taking place due to China’s National Sword. The industry has collected fiber based on global demand that has been drastically displaced and potentially reduced. It will take some time for supply/demand dynamics to rebalance.

RT: What are your goals for your term as chair of the AF&PA?

PW: I am eager to partner with AF&PA’s leadership to advance 2019 advocacy priorities that will support our industry’s ability to grow the economy and create American manufacturing jobs.

A more resilient market-based paper recycling system, improved transportation infrastructure, free and fair trade, a competitive tax system and regulatory reforms and process improvements top our list.

All will set a stronger foundation for one of the largest manufacturing sectors in the nation to prosper as our companies apply sustainable manufacturing practices to make the products that improve everyday life.

RT: What steps must be taken to create a resilient market-based paper recycling system?

PW: It already exists. Further strengthening recycling markets will require greater consumer demand for recyclable content products. Consumers are better educated about conservation and recycling today than 20-30 years ago, when markets for some products were just developing.

This knowledge, along with a rebalancing of supply and demand will lead to a more sustainable recycling infrastructure.

RT: What is your outlook for the container and packaging sector? Why?

PW: We are bullish on our entire portfolio. Our success is predicated by delivering industry leading customer service and providing sustainable packaging solutions to our customers.

RT: What role does servant leadership play in the company’s overall business philosophy?

PW: Servant leadership is one of the four behaviors that we coach each of our colleagues to follow. As mentioned, our vision centers around serving our customers. We believe by first serving our people, our people will serve our customers.

Pete Watson is president and CEO of Greif Inc., Delaware, Ohio. More details on the company are available at www.greif.com.

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