Royal Packaging Industries Van Leer N.V. History

Company Perspectives:

Van Leer's strategy is focused on exploiting its technological leadership and to further expand both the consumer and the industrial packaging business. Van Leer, the most global industrial-and-consumer packaging company in the world, meets the packaging needs of its customers, wherever these needs may be.

Company History:

Royal Packaging Industries Van Leer N.V. is one of the world leaders in industrial and consumer packaging. Van Leer's steel drum sales place it as the leading global manufacturer of these industrial containers. Van Leer's industrial products include steel, plastic, and fiber drums, intermediate bulk containers and other container products, as well as container closure systems, industrial films and sheeting, and metallized holographic papers. On the consumer side, Van Leer manufactures food packaging products including plastic tubs, containers, and covers, molded fiber products, including egg boxes and other protective enclosures, and tableware, including the Chinet brand of disposable dishes; much of the company's consumer products business is in the sale of printed consumer packaging products.

Van Leer's operations are divided into its two primary product segments, each with its own strategy. Representing the oldest part of Van Leer's business, its industrial products segment serves many of the world's leading oil and chemical companies. The highly competitive marketplace, and limited overall market growth prospects, have led Van Leer to focus on developing more efficient product capacity and technology. The company's entry into the consumer packaging market came with its acquisition of Unilever's 4P consumer packaging unit in 1992. Through 4P and other subsidiaries, including the Chinet brand, Van Leer has gained a leading position in the worldwide consumer packaging and printed consumer packaging markets.

A publicly traded company since 1996, Van Leer has had difficulties realizing shareholder value in a market with limited organic growth opportunities. After building scale through acquisitions--which doubled the company's sales--Van Leer itself became an acquisition target in 1999. At the end of July of that year, Van Leer announced that it had reached an agreement to merge its operations into those of Finland's Huhtamaki, creating the world's eighth largest packager. The merger, to cost Huhtamaki an estimated $1 billion, was expected to be completed by the end of 1999. The company would then be named Huhtamaki Van Leer, with annual sales of more than 2.8 billion Euros.

Packaging in the Post-World War I Era

Bernard van Leer started up a small factory outside of Amsterdam in 1919 at the age of 36. Van Leer's initial production revolved around small cans, boxes, cartons, and other packaging items for the local market. Van Leer, however, proved to be a shrewd businessman; he soon extended the company's production facilities into the industrial packaging arena. A breakthrough for the company came in 1925, when Van Leer received an order for 10,000 steel drums from the Shell Oil Company.

This order would soon lead Van Leer to focus solely on industrial packaging products and, specifically, on the production of steel drums and drum closure systems. In 1927 Van Leer adopted a new closure system to improve the reliability of its steel drums when it purchased a license to fit its drums with the U.S.-developed "Tri-Sure" closure system. Van Leer quickly built a reputation for the quality and reliability of its steel drums. American Flange, the company that originally developed the Tri-Sure system and continued to hold patent and trademark rights, would become a Van Leer subsidiary in 1988.

Another factor in the company's success was its early recognition of the need to look beyond its domestic market. With global customers such as Shell, the company reasoned that, rather than shipping its drums around the world (which amounted to shipping air, as it were), Van Leer should produce its steel drums in the same locations as its customers. Thus began the company's international expansion, bringing Van Leer to every continent, with more than 40 subsidiaries operating in 15 countries by the 1950s.

At the time of Bernard van Leer's death in 1958, the company, which remained wholly owned by the van Leer family, was posting NLG 340 million in sales per year and had grown to an operation employing 5,500. Bernard van Leer was succeeded by son Oscar van Leer, born in 1914. Under Oscar van Leer, the company saw strong growth and became a diversified, internationally operating packaging company.

Ownership--and net profits--of Van Leer would, however, gradually be transferred from the van Leer family to the Van Leer Group Foundation, which in turn attributed the company's profits to the Bernard van Leer Foundation, a charitable trust established by the company's founder to aid children throughout the world, particularly in Van Leer's countries of operation. The Van Leer Group Foundation, set up by Bernard van Leer's own children, would maintain 100 percent control of the company until the mid-1990s.

Diversification in the 1970s

The strong growth of the global petrochemicals industry in the 1950s and 1960s, as automobile use achieved its true dominance of the world transportation market, contributed to Van Leer's own growth during the period. The company's international success, and the work of the Bernard van Leer Foundation, received accolades at home, when the company was awarded the prestigious title of "Royal" by the country's royal family, a title normally reserved for Dutch companies at least 100 years old. Van Leer adopted the name of Royal Packaging Industries Van Leer in 1969.

The company's close relationship to the petrochemical market--through its continued focus on steel drums and steel drum closure systems&mdash-abled it to achieve steady growth through the 1960s. But it also left Van Leer vulnerable to downturns in the oil industry. Such was the case in the early 1970s, when the Arab Oil Crisis transformed the world's oil markets. The crisis hit Van Leer hard; by 1975, the company posted the first loss in its history.

Under Oscar van Leer, the company determined that this loss would be its last. To protect itself from the fluctuations of its primary markets, the oil and chemical industries, Van Leer decided that it needed to diversify its operations, bringing the company into new product areas and new industrial markets. Van Leer entered the plastics market, particularly in the production of plastic and fiber-based drums, and in the manufacture of industrial strength films, such as the company's Valeron brand. The company's diversification efforts involved more than adding new products, but also prompted the company to step up its research and development activities, leading Van Leer to introduce a number of product innovations to the packaging industry.

The company's diversification moves were successful. The company once again posted profits by 1976. By 1979, when Oscar van Leer retired, the company's net sales had grown to NLG 1.3 billion. Oscar van Leer would be followed by Willem de Vlugt, considered the architect of the company's success in the 1980s and 1990s.

By the 1980s, the company had grown to an internationally operating grouping of subsidiaries. The company began taking steps to streamline its organization, bringing greater efficiency to its operations, while grouping its many subsidiaries as Business Units. The Business Unit model would come to define the company's organization in the early 1990s, as Van Leer reorganized around 30 or so Strategic Business Units, each of which acted as an umbrella for a number of Business Units, based on geography and/or product compatibility. Strategic Business Units were expected to coordinate product category and geographic market strategies, guiding production and distribution, while providing budgetary oversight. At the same time, the Strategic Business Units and the Business Units were encouraged to operate independently, adapting their strategies to their specific markets.

Van Leer had by then expanded into the world's largest market, the United States. The company's U.S. implantation began in the early 1980s both through production plant construction and through a number of strategic acquisitions. Two significant acquisitions of the time were those of Keyes Fiber Company (later renamed The Chinet Company) and the steel drum business of Inland Steel, which became known as Van Leer Containers Inc. In 1988 Van Leer acquired American Flange and the rights to its Tri-Sure closure system; Van Leer thus became an important supplier to its own competitors.

Mergers and Acquisitions in the 1990s

By the 1990s, organic growth in the industrial packaging market was becoming difficult to achieve. Although Latin America and the Asian region represented some growth potential, the overall market seemed to have reached maturity, while remaining highly fragmented. Van Leer's initial response was to expand its own product lines beyond industrial packaging to the consumer packaging market, which had not yet seen its peak in market growth. In 1992 Van Leer acquired Unilever's 4P consumer packaging operations, worth some NLG 1 billion per year. The purchase would raise Van Leer's sales to more than NLG 3.8 billion for 1993 and establish the company among the world's top ten packaging companies.

The 4P purchase gave Van Leer the momentum to pursue internal growth and market expansion through a two-pronged strategy. The first continued Van Leer's long history of international presence, as the company stepped up the construction of new foreign production facilities. The second part of the company's strategy took Van Leer on the acquisition trail, as the company began a series of purchases and takeovers to complement its existing operations.

To finance its expansion drive, Van Leer went public in 1996, taking a listing on the Amsterdam stock exchange. In the transaction, the Van Leer Foundation sold off some 35 percent of its holding, reducing its participation in the company to 65 percent. With the cash inflow from the stock offering, Van Leer was able to step up both its building of new plants and its acquisitions of related companies.

Among the company's purchases was that of Uniflex Packaging Company Ltd., of Thailand, a consumer goods flexible packaging producer, renamed Van Leer Packaging (Thailand), in 1997. In that same year, the acquisition of Nyman Manufacturing Company, based in Rhode Island, complemented the company's Chinet tableware activities. A year later, the company added another U.S.-based company, Sirco Systems, LLC, a knock-down steel drum maker based in Birmingham, Alabama. Meanwhile, Van Leer had traveled to New Zealand, adding a molded fiber packaging plant in Auckland, and to Russia, adding a steel drum plant in Vologda.

At the same time, Van Leer scored a number of major new contracts, including a 1997 contract with Dow Corning to supply that company's worldwide steel drum and pail needs, as well as International Bulk Containers and other packaging products. The following year, Van Leer added contracts to supply Castrol with European steel and plastic drum requirements and to supply steel drums for Esso's international operations.

These activities helped the company raise its revenues to NLG 4.75 billion for 1997. The company also was posting steady profit growth, reporting NLG 122 million for that year. Yet Van Leer's expansion moves in the Asian market exposed it to that region's economic collapse in 1998. The company also was affected by a similar crisis in Latin America. The company's sales slipped back to NLG 4.5 million for the year, and profits barely climbed to NLG 132 million. At the same time, Van Leer's stock had long been dwindling, sliding to a low of NLG 17 per share by the beginning of 1999.

In 1998 Van Leer was said to be "desperately" searching for a new large acquisition--on the scale of its 4P acquisition&mdashø return the company to a strong growth track. Yet acquisition candidates in the packaging market had become scarce; between the large, top ten businesses such as Van Leer, and a myriad of small concerns, there seemed little opportunity for the type of takeover Van Leer needed to boost its revenues to double-digit growth.

In May 1999, Van Leer announced that it was involved in a new, large-scale acquisition: the company was being taken over by Finnish packaging producer Huhtamaki. Clashes over this move would lead to the sudden departure of Willem de Vlugt from the Van Leer leadership. By the end of July 1999, the proposed takeover had transmuted into more of a merger than an acquisition. The two companies would join operations, maintaining headquarters in Finland and The Netherlands. The proposed company, to be named Huhtamaki Van Leer, would become the world's eighth largest consumer and industrial packager, with revenues of more than 2.8 billion Euros per year. The Van Leer Foundation would remain a principal shareholder in the new entity, with 14.6 percent of shares equaling that of its Finnish counterpart, the Finnish Cultural Foundation. Approval of the merger was expected to come before the end of the year.

Principal Subsidiaries: American Flange & Manufacturing Co. Inc. (U.S.A.); The Chinet Company (U.S.A.); Nyman Manufacturing Co. (U.S.A.); 4P North America, Inc. (U.S.A.); Leopack B.V.; Leotech BV; Euro Papier Recycling B.V.; Es + Es Verpakkingen B.V.; Tri-Sure Japan Ltd.; Inpack Industries B.V. (India).

Further Reading:

• "Finnen bevoordelen Van Leer Foundation," De Telegraaf-I, July 23, 1999.
• "Van Leer Agrees to Offer by Rival," Financial Times, July 23, 1999.
• "Van Leer lijdt geen pijn in Zuid-Amerika," De Telegraaf-I, August, 26, 1998.
• "Van Leer topman loopt weg na diepgaand conflict," De Telegraaf-I, May 22, 1999.
• "Van Leer zoekt wanhopig naar overnamekandidaten," De Telegraaf-I, March 18, 1998.
• "Wat does Van Leer," De Telegraaf-I, May 5, 1999.

Source: International Directory of Company Histories, Vol. 30. St. James Press, 2000.