Playing to win
South African plastic packaging material manufacturer Astrapak is in the process of restructuring and preparing to take the leap from medium- to large-sized company. CEO Marco Baglione tells Gay Sutton how he plans to guide this transformation.
In todayÔÇÖs fast moving world, the retail industry would be at a complete loss without the flexibility of plastic packaging. From the ubiquitous plastic shopping bag and shrink wrap films, to rigid containers, PET bottles, caps and closures, plastic can be shaped, moulded and blown to complex and highly specific requirements, coloured, printed and stamped. You name it: the applications are diverse and the branding possibilities are endless.
One of the leading players in the South African plastic packaging market is Astrapak. A relative newcomer to the industry, it was formed in 1997 through the acquisition of a group of owner-managed packaging companies. One of the earliest companies to become part of the group was Pak 2000, owned by Marco Baglione. ÔÇ£Our objective at that time was to form a plastics company which would make a difference,ÔÇØ he explained. ÔÇ£We aimed to extract all the synergies of the group, take full advantage of the combined technical base, and to grow the plastics arena in South Africa.ÔÇØ
The company grew quickly through a series of acquisitions, ultimately forming a group of some 30 companies, which a market analyst once described as ÔÇÿa loosely knit bunch of companiesÔÇÖ. ÔÇ£And maybe he was right at that time,ÔÇØ Baglione admitted. The task of integrating acquisitions into a single organisation is notoriously difficult. Last year, however, as part of the succession planning for the business the existing CEO retired and Marco Baglione took up the reins, his role being to guide the company from a medium size to large.
One of the first things Baglione initiated was a complete review of the company, looking at its underlying assets, its performance and its position in the market placeÔÇöand examining all of these in the context of the rapidly changing national and global marketplace. ÔÇ£Quite frankly we established that we had very good market position, we were asset rich and we had good combinations of people. But the changes required to move an organisation successfully from a medium to a large size are considerable,ÔÇØ Baglione continued. ÔÇ£There are a lot of entrepreneurs who can run small to medium-sized operations but there are very few who can actually run big operations. WeÔÇÖve got to be very careful now to get the balance right.ÔÇØ
Based on the findings of the review, Baglione created an action plan which included strengthening and realigning the management teams, creating a much more closely knit organisational structure, and consolidating the companyÔÇÖs assets. ÔÇ£We are refocusing, reorganising and essentially creating a business model to suit todayÔÇÖs environment,ÔÇØ he said.
To begin the consolidation phase he initiated an examination of each of the companies within the group. ÔÇ£We took a view on a whole bunch of things. We wanted to establish a geographical position of note. We wanted to make sure we could extract synergies on things like materials, and we wanted to make sure we had great market position.ÔÇØ Historically, Astrapak had been structured into four divisions: rigids, films, flexibles and industrials. ÔÇ£And at the end of the day, we found that certain parts of the flexible division didnÔÇÖt answer all those questions, so we took the decision to offload those companies and focus on our core businesses within films and rigids,ÔÇØ he said. The disposal of these flexible businesses to Afripack Consumer Flexibles (Pty) Limited is currently under way and is expected to be completed towards the end of July 2009.
To address the loosely knit nature of the business and create an integrated group where every element supports the groupÔÇÖs objectives rather than those of an individual division or company, Baglione has made significant changes to the group structure. The original four divisions have now been organised as business units, each of them with a clear focus and a clear reporting structure. ÔÇ£What this has done is create a united front as opposed to divisions. I want everyone to perform well, and to perform as part of the group. All that remains to be done with this now is the fine tuning.ÔÇØ
Creating a group-wide structure based around business units has also addressed another vital business issue: how to identify and train the leaders of the future and ensure good succession planning. Previously, high flyers identified within one of the groupÔÇÖs companies would have been put in charge of one of the divisions. ÔÇ£If you take a guy running one of our companies and put him in charge of a division, youÔÇÖre asking him to go from one to twelve companies in a single step. With the best will in the world it becomes very difficult for that person to succeed,ÔÇØ he explained. ÔÇ£What we prefer to do is give him a business unit of three or four companies where he can build up his experience, and weÔÇÖll groom him for something greater further down the road.ÔÇØ
None of this, however, would work effectively without a strong management structure to drive the groupÔÇÖs objectives on a month by month basis, to ensure all levels of the business meet their targets and deliver the expected profitability. ÔÇ£I always say if you get your top team right you get your business right,ÔÇØ Baglione said. And he has tackled this issue head on by making significant changes to his executive board, drawing together a new team of 10 key individuals to head up the business units, and appointing a new COO to oversee the operational activities.
ÔÇ£When I look back on my career,ÔÇØ he explained, ÔÇ£IÔÇÖve learned that to succeed you need a team of characters who essentially want to make a difference, who really subscribe to the life of manufacturing and packaging, and have the necessary passion and drive to take the business to greater heights. And I think weÔÇÖve got a very inspirational team right now. ThereÔÇÖs a great spirit out there and the guys are doing a good job.ÔÇØ
Having created this strong and stable nucleus of managers, Baglione believes it is important to make changes at the senior management level every five years or so, not hiring and firing, but moving managers internally to keep them fresh and motivated and to build on their experiences. ÔÇ£Change is very important,ÔÇØ he said. ÔÇ£But equally, changing too much is not a good thing. So I would like to work on the 80/20 principle. Perhaps 20 percent of the current team may retire within the next five years or simply not make it as managers, and these will be replaced by progression from within the groupÔÇöthe beginning of our succession planning process.ÔÇØ
With all these changes now becoming embedded in the company, Baglione is beginning to look to future opportunities for growth. Firstly he expects to see strong organic growth. ÔÇ£And that will happen naturally through some of our larger clients,ÔÇØ he said. Linked with that there are some interesting projects coming through on the rigids side of the business, and finally he is actively looking to make further acquisitions, ones that will fit very specifically with the companyÔÇÖs overall strategy.
One of the lessons that the company has learned from the large number of acquisitions it has made over the past 12 years, is the importance of doing professional and thorough due diligence. ÔÇ£I think some mistakes were made on that particular front in the past. But in the future I will lead the team from a due diligence point of view and make sure whatever we do, is done correctly.ÔÇØ
TodayÔÇÖs highly competitive marketplace imposes huge pressures on companies to continuously improve and to reduce costs. Since his appointment as CEO, Baglione has also been rolling out world class manufacturing principles through the organisation. His first personal experience with the concept came some eight years ago when one of the companies in the rigids division which he used to manage took the principles onboard, and achieved a significant turnaround in performance.
ÔÇ£That was a great lesson to me in my manufacturing career,ÔÇØ he said. ÔÇ£I then took that program and rolled it out cautiously through the rigids division. Now, over this last year I have been rolling it out to the whole of Astrapak. The benefits are huge. It brings discipline and opens up capacity. The people on the floor embrace it and feel thereÔÇÖs a purpose to why theyÔÇÖre there, and they are excited about their functions.ÔÇØ
For Baglione, good management of the business essentially comes down to the quality of the people within it, and Astrapak has been investing a considerable amount in training its staff. The world class manufacturing initiative alone has required significant levels of training throughout the organisation, particularly on the shop floor. Meanwhile all the customer facing staff are receiving training from the Institute for Marketing Management in topics such as advanced negotiations and high level communications.
ÔÇ£I believe that if we can get good succession planning and highly skilled people in place over the next three to five years,ÔÇØ Baglioni concluded, ÔÇ£then we will be able to take this business to heights youÔÇÖve just never seen in the past.ÔÇØ
