Afripack Pty Ltd is today a leading player in South Africa’s flexible packaging market. CEO Arnold Vermaak talks to Jayne Flannery about the company’s evolution from being a simple manufacturer of paper sacks.
Afripack was founded in 1933 and CEO Arnold Vermaak is keen to point out that this makes it one of South Africa’s oldest packaging companies. The company began life by creating a niche in a small segment of the packaging market, namely cement sacks for industrial usage. Over the years came a steady process of consolidation and expansion. This was fuelled firstly by organic growth and then more recently by diversification and acquisition, which culminated last year in the acquisition of the flexible packaging division of Astrapak.
The R184 million deal effectively doubled Afripack’s turnover overnight and created a powerful new contender in South Africa’s R11 billion per annum flexible packaging industry. The company is now positioned as one of the most diverse flexible packaging operations in South Africa with a strong intended orientation towards what Vermaak describes as high end, added-value products.
He attributes the company’s transformation to a three pronged strategy centred on market focus, advanced technology and developing and motivating the best people in the business. Here, he takes up the story, beginning with the company’s expansion into consumer markets:
“Although we were very successful in industrial markets, particularly as a sack manufacturer, we knewwe were missing an opportunity if we did not develop a presence in consumer packaging. Our aim was to diversify, but to retain a very clear focus on flexible packaging. We were not looking for something the size of the Astrapak division, which included a total of five companies, but it was too good an opportunity to pass over,” he explains.
The acquisition of Astrapak’s flexible packaging division was finally concluded in August 2009 and Afripack has now succeeded in integrating Astraflex, Cape Wrappers, DLC, Tamperpak and Astra Repro, as well as Standard Labels in Mauritius.
The new corporate entity is known as Afripack Consumer Flexibles, or ACF, and its formation has also entailed a radical rethink of how the much bigger business should be structured. The new organisation centres on two primary clusters—flexibles, which includes the former Cape Wrappers and Astraflex—and secondly, a dedicated labels division.
The ACF Flexibles division features two dedicated consumer flexible plants situated in Durban and Paarl. The division has a total of eight flexographic presses, including an F&K gearless press, numerous modern slitters and several Nordmechanica laminators.
The ACF Labels division has three narrow web consumer flexibles plants—DLC in Durban, Standard Labels in Mauritius and Tamperpak in Gauteng. This division has several Aquaflex and Mark Andy narrow web flexographic presses, slitters, a Stanford shrink sleeve line and a Seamer. The new division has pioneered the development of shrink sleeve labelling and has received numerous awards for its innovative use of films, inks and coatings for premium brands.
At the time of the purchase, Vermaak stated clearly Afripack’s view that the purchase represented the best in people and technology, with an excellent combined customer base and strong supplier commitment. “It has given us the perfect platform from which to grow a highly successful consumer flexibles business,” he states.
The Consumer Flexibles division, known as ACF, now offers an extremely broad product portfolio geared towards premium product offerings with the flexibility to tackle both long and short run work. There are various wax paper products and a wide range of both solvent based and solvent free laminated packs. Tamper-proof banding is a particular growth area and Afripack holds the South African licence for the Fujiseal system.
A recent fire at the ACF KZN plant in Durban was quickly turned into an opportunity to improve the ACF facilities even further and resulted in another tranche of investment in state-of-the-art plant. The ACF Cape plant in Paarl is being augmented with an Uteco gearless press, as well as an upgrade of the existing F&K gearless press to 10 colours and GPS computerisation, making it arguably the premier flexographic press in the country.
Already, the Cape plant has won many printing and packaging accolades, notably the FTASA Print Excellence and Gold Pack Awards. Equally telling, Afripack is a packaging supplier of choice to the South African operations of a number of leading global brands, including Unilever, Nestlé and Cadbury.
“It is our technological advantage within ACF that enables us to print on such a wide range of flexible materials including cellulose films, PVC, polyester, polypropylene and poly-ethylene, as well as on a variety of paper substrates and their coated and metallised counterparts,” Vermaak explains.
The other plant in the Consumer division is based at Durban and this is due to see a new Rotomec gravure press from Italy installed early next year. “We see the quality of our technology as a very important differentiator,” he continues. “From a technological perspective, when our new gravure press is introduced, we will then have both the best flexographic and gravure technology in South Africa. These are First World investments which is big news here and the most significant addition to South Africa’s overall printing capability in a number of years.
“Strategically, we made a decision a number of years ago that the quality and waste reduction benefits derived from leading technology justified the higher upfront investment,” he continues. “We have chosen to buy the best brands from the best manufacturers in the world. We may not be the largest player in the flexible packaging marketplace, but when the gravure press is commissioned in January 2011 we will be able to offer the best equipment in South Africa.”
Afripack has further strengthened its position through strategic alliances which give access to an even wider range of packaging solutions—all of which share Afripack’s commitment to high-end offerings manufactured to the highest standards using the best technology available.
In 2007, an agency agreement was signed with Mondi Coating Zeltweg (MCZ) in Austria, an international producer of extrusion-coated and laminated consumer packaging materials which targets the food, pet-food, non-food and pharmaceuticals industries. As a result, ACF can supply the local market with a wide range of laminated packaging solutions. MCZ has state-of-the-art extrusion coating technology which lends itself to a complete product portfolio ranging from polyethylene coated papers to highly sophisticated multilayer laminates and high-end direct coated aluminium foil and polymer films.
Last year, the partnership with Mondi went a step further when ACF entered an agreement with Mondi Consumer Flexibles Europe. The company has extensive experience as a manufacturer and supplier of film extrusion products and flexible packaging solutions from film extrusion and printing to the converting of films and flexible packaging solutions. It means that Afripack can offer another new range of high performance solutions, including for the first time, new products like stand-up pouches to the local market. These pre-made, stand-up pouches constructed from high-performance laminates and barrier materials were previously unavailable in South Africa and represent a new and very convenient, user-friendly packaging format that is chemically and physically durable and can also be sterilised.
The other big partnership which has supported Afripack’s rapid penetration of the consumer market is with promotions company Autopack, which supplies promotional items such as stickers, tattoos and scratch cards. The company is located in Pablo Podesta in Argentina and has more than 100 blue chip clients, including Unilever, Avon Cosmetics, Wella and AGFA. Again, the emphasis is on providing a continuous stream of innovation. Autopack’s laboratories are engaged in a continuous quest to design new cutting edge campaign proposals and product offerings, constantly experimenting with different techniques and materials to achieve maximum impact on the consumer.
The overall range and scope of Afripack’s product portfolio may have a distinctly sexier new edge, but Vermaak is keen to point out that the company’s former industrial business has also been carefully nurtured. “We are still a very strong player in our original sack market, with leading edge technology and long standing exclusive supply relationships to local cement companies like PPC and Lafarge. We realised some time ago though that this was far too narrow a focus and that there were other opportunities in the industrial packaging market. In 2004, we started to take these opportunities seriously when we invested in a reel-to-reel plant with two gearless eight-colour flexography printers and an extrusion coater, enabling us to supply the paper industry with ream wrap. We have since gone on to develop extensive supply relationships with paper companies Mondi and Sappi,” he says.
Sack manufacture takes in many complex equations. From handling in the distribution chain, from the point of filling the bag to delivery at the end user, the sack is subject to many distinct forms of stress. Even the flow characteristics of the product that will go into the sack and the type of filling machine to be used bring an influence to bear on how manufacture should be approached. Afripackhas close to a century of experience in optimum sack construction—knowledge that has been complemented by investment in state-of-the-art plant.
Afripack has spent in the region of R175 million over the last decade in enhancing its industrial capability. The result is Afripack Industrial Flexibles (AIF), which is now recognised as a leading player in the industrial flexible packaging market, supplying multi-wall paper sacks and flexographic printed and extrusion coated products. The plant operates 24 hours a day, seven days a week, and relies on two fully automated, high speed sack lines supplied by Windmoeller and Holscher of Germany. These have a massive combined capacity of 140 million sacks per annum.
However, the finest machines in the world are only as good as the people tasked with operating them. Vermaak is convinced that the best long-term sustainable advantage in the marketplace is derived from having empowered and motivated people. “Our people are our most fundamental asset and we have to have the right culture in place before we start adding other elements, such as technology,” he states.
Black Economic Empowerment is a vital part of both the company’s past and its future. Until 2004, Afripack was wholly owned by Pretoria Portland Cement (PPC). The following year, the company completed a BEE transaction and the current shareholding is now dominated by Nozala, a broad-based black female group with major secondary holdings in the hands of PPC, South Africa’s largest cement company and a management consortium. All take an active interest in the company’s development.
Vermaak believes that the cultural values that have become embedded in the organisation have a particular South African slant. “Our culture is characterised by empowerment, ownership and a high degree of transparency and trust. As an organisation, we have a distinct culture and style. It features flat organisational structures and fast decision making and all of our people are involved in the day-to-day running of the business. We have total transparency when it comes to results and performance and our people understand that they are wholly accountable for the results they produce. At every level of the organisation we are performance driven and everyone shares the same belief that giving long term sustainable value to customers is what really matters,” he says.
An acquisition of the size of Astrapak’s flexibles division could not have happened without the unqualified support of all shareholders—a large portion of the purchase price was funded by shareholder funds. The Afripack motto “SISONKE”, or “we are together” seems particularly apt in this instance. Meanwhile, the new business is in the fortunate position of having funding available for further growth opportunities.
Vermaak believes that while the integration of Astrapak’s flexibles business and subsequent restructuring has effectively created a powerful cohesive entity with a single, shared vision, it is only an interim step. “We are a progressive, far-sighted company which still has much more to achieve,” he concludes. www.afripack.co.za
