MeadWestvaco Ideas that improve and build our customerʼs buisnesses. Media Industries Analysis: Kacey Brenckle & Erin McFadden

Packaging Consumer & Specialty Specialty Office Products Chemicals MeadWestvaco

The United States represents the largest market for Diamond Packaging of Rochester, NY, is one consumer packaging in the world. Total packaging volumes company that displays a strong ability to adapt to the increased to 472 billion units in 2002, and according to a changing face of the packaging industry. As a member Euromonitor forecast, are expected to increase over 9% to of the Global Packaging Alliance they are able to easily 515 billion units by 2007. The packaging industry, being reach a global market, and continue to invest in the latest largely influenced by changes in consumer lifestyles, has technologies enabling Diamond to maintain a strong been shifting towards convenient, functional, and portable presence in the consumer products market. Amcor Limited, packaging since 1998. Much of the traditional food based in Melbourne, Australia, is one of the worldʼs top packaging, including metal cans and glass bottles, has three packaging companies, targeting specific growth been experiencing a decrease in sales over recent years markets in the packaging industry including flexible with the increased consumption of flexible packaging. packaging, PET bottles, and closures for the food and Flexible packaging, including stand-up pouches, is beverage industries. Based on their product focus and currently the most widely used form of packaging in the global reach, Amcor will have the ability to obtain leading market as a whole, most likely due to its versatility and market positions within the high-growth segments of the ease of transport. packaging industry. Products and packaging that are able to offer consumers greater levels of convenience are expected to experience the most significant volume growth between 2002 and 2007. Health is also set to play an important part in the key developments in the market for packaged food in particular. Beverages also play an important role in the growth of packaging, with trends towards new bottle shapes, high-quality labels, and introductions of new brands. The cosmetics and personal care segment is creating new challenges for creative packaging, with increased need for high-quality labels with eye-catching graphics, and a move towards globalization that requires packages to be suitable for all markets world wide. Introduction pg 1 MeadWestvaco

MeadWestvaco Corporation was established in In 2005, MeadWestvaco sold their entire papers 2002 with the January 30th merger between Mead segment, a consistent money loser for them, to the Corporation and Westvaco Corporation. Mead was investment firm Cerberus Capital Management. The founded in 1846 by Colonel David E. Mead, originally sale included mills in 5 states, as well as 900,000 acres named Ellis, Chaflin and Company. Mead was one of the of forestland in 6 states. Cerberus set up the divested leading producers of coated , coated , business as the independent company, NewPage and consumer and office products in North America. Corporation. As a result of the sale, MeadWestvacoʼs Westvaco was founded by William Luke in 1888, as packaging segment now accounts for three-quarters of the Piedmont and Paper Company. Westvaco was their sales, with the majority of the remainder coming the leading producer of paperboard and value-added from its international operations. MeadWestvaco retained packaging for media, pharmaceutical, and consumer about 1.2 million acres of forestland after the sale. markets, as well as a producer of specialty chemicals MeadWestvacoʼs vision is “To be a global leader in and coated papers. The two already well established our markets – admired for our innovative spirit, integrity companies form a powerful combination, focusing on and stewardship.” creating new products, expanding their markets, and strengthening customer relationships. The principle markets MeadWestvaco serves are automotive, beverage, consumer products, media and entertainment, and publishing industries, priding themselves on being the worldʼs largest supplier of media packaging, number one U.S. supplier of folding to the pharmaceutical market, and second largest supplier of packaging for cosmetics. The company currently has offices operating in 29 countries, as well as global operations serving nearly 100 countries.

Executive Summary pg 2 MeadWestvaco

MeadWestvacoʼs largest market segment is packaging, responsible for 2/3 of their operations. The segment offers a wide range of consumer products packaging solutions for their customers including media, beverage and dairy, cosmetics, tobacco, pharmaceuticals, and healthcare. A variety of materials are produced by MeadWestvaco for these products including bleached paperboard, Kraft paperboard, linerboard, Coated Natural Kraft paperboard, and saturating Kraft. The companies maintain two paperboard brands, Custom Kote and Carrier Kote. Custom Kote is a high-performing paperboard with a smooth, glossy surface and high strength characteristics that ensure the integrity of the product. This is typically used to package high-value consumer products for the food, beverage, automotive, and healthcare industries. Carrier Kote is also a high- performing paperboard, but is specially designed to retain its strength in high moisture-level environments, making it especially useful for the beverage industry.

Markets Served: Packaging pg 3 MeadWestvaco

The consumer and offices products segment of MeadWestvaco manufactures, markets, and sells school products, time management products, and envelopes in North America and Brazil through retail and commercial channels. Some of their more popular consumer and office product brands include Mead, AT-A-GLANCE, AMCAL, Cambridge, Day Runner, Five Star, Trapper Keeper, and COLUMBIAN.

Markets Served: Consumer & Office Products pg 4 MeadWestvaco

MeadWestvacoʼs specialty chemical segment manufactures, markets, and distributes specialty chemicals derived from sawdust and by-products of the process. Some of these products include printing ink resins, activated carbon, emulsifiers, pine chemicals, water based polymers and asphalt innovations.

The specialty papers segment of MeadWestvaco is recognized as a leader of technology for the decorative laminate industry. This division primarily utilizes Saturating Kraft for the manufacturing of decorative laminates for kitchen countertops, furniture, flooring, wall panels, and padded stock for electronic packaging. Other applications for specialty papers include medical pouches, road signs, furniture, and masking tape. Innovative features of Saturating Kraft include the ability to line concrete forms and absorb moisture and gases without compromising important elements of color and design.

Markets Served: Specialty Chemicals & Papers pg 5 MeadWestvaco

MeadWestvaco offers a wide variety of packaging options, with the ability to use multiple substrates and materials from paperboard to plastic, as well as injection- molded plastic. They offer services from package development to systems in order to deliver a complete range of packaging solutions. A variety of printing technologies, including rotogravure, offset lithography, and flexography, along with multiple finishing options allow for their services to be utilized in many different applications and industries. Through its many subsidiaries within consumer packaging, MeadWestvaco is able to provide services from package design, to product launch, to brand protection for the global marketplace. This flexibility has led MeadWestvaco to become the worldʼs largest supplier of media packaging, the number one supplier of folding cartons to the U.S. pharmaceutical market, and the second largest packaging supplier in the U.S. for cosmetics.

Packaging Solutions pg 6 MeadWestvaco

Coca-Cola Enterprises, Inc. has a multi-year agreement to purchase the FridgeMaster refrigerator MeadWestvaco will be printing Really Big Coloring pack from MeadWestvaco. The slimmed-down soft drink Books product line as well as handling order fulfi llment container offers eye-catching graphics, superior package through their Consumer and Offi ce Products division. strength, and ease of use due to the incorporation of a MeadWestvaco will distribute the product line from their dispenser into the design. According to Coca-Cola, the Sidney, New York operations center, allowing Really Big FridgeMaster has been hugely successful, and has been Coloring Books to offer an expanded line of educational noted as the companyʼs “most signifi cant innovation in and offi ce products. packaging since the plastic contour bottle was introduced in 1993.”

Philips Lighting, the worldʼs largest lighting manufacturer, has selected MeadWestvacoʼs company MeadWestvacoʼs patented Dosepak design has Paxonix to streamline their packaging process across been adopted by Procter & Gamble Pharmaceuticals all lighting product lines in North America. The as the latest generation of packaging for their Actonel PaxPro workfl ow software, created by Paxonix, uses 35mg Once-a-Week dose. Dosepakʼs innovative design collaboration, digital asset management, and version incorporates a sealed package that provides maximum control to fully automate Philipsʼs packaging processes for child-resistance, but is still user-friendly for seniors. over 2,500 different lighting products.

Key Clients pg 7 MeadWestvaco Crown Holdings, Inc., formerly Crown Cork & Seal Company, is a leading international Recently, International Paper announced plans to sell off producer of consumer packaging, deriving a its coated papers, Kraft papers, beverage packaging, majority of sales from Europe. Their product and wood products operations in order to focus more focus includes aerosol cans, paint cans, food and on their core paper and packaging businesses. With beverage cans, plastic bottles and other containers, as similar production capabilities and product offerings, well as a variety of metal caps, crowns, and closures. International Paper can be viewed as a direct competitor Crown is currently expanding to new markets including to MeadWestvaco in terms of clients and market share. Latin America, Asia, and southern and central Europe. The metals packaging unit accounts for almost 70% of Crownʼs sales, with only 30% of that coming from the US. Some of their major clients include Coca-Cola, Pepsi-Cola, Nestlé, Weyerhaeuser is one of the largest US forest and Mars. products companies, operating through fi ve business Crown can be viewed as competition for segments: Wood Products include lumber, plywood, and MeadWestvaco due to its similar size and sales generation. other building materials; Containerboard, Paperboard, Crownʼs 2005 sales total $6,908 million with 27,600 and Recycling includes corrugated boxes, linerboard, employees. industrial and agricultural packaging, and recycling; Pulp and Paper produces pulp, coated and uncoated paper; Timberlands focus is on the management of Weyerhaeuserʼs 6.4 million acres of US forestland and International Paper is the worldʼs largest forest an additional 30 million acres in Canada; and Real Estate products company, manufacturing paper, packaging, and Related assets concentrates on developing housing plywood, and pulp; distributing paper and packaging and master-planned communities. The fi rst three segments products; and selling specialty chemicals that result from account for 80% of the companies sales. Weyerhaeuser pulp processing. The company owns 6.8 million acres is planning expansion to locations such as Australia, New of forest in the US, 1.2 million acres in Brazil, and other Zealand, Brazil, and Uruguay. smaller areas in Russia. International Paper distributes MeadWestvaco competes with Weyerhaeuserʼs products in the US through its subsidiary Xpedx, and to Containerboard, Paperboard, and Recycling, Pulp and Europe through multiple subsidiaries. The US makes up Paper, and Timberlands segments due to the ability to three-quarters of the companyʼs sales. create similar products. The international expansion of Weyerhaeuser will also generate increased competition in international markets. Competitors pg 8 MeadWestvaco

MeadWestvaco is focusing closely on their business Last year, MeadWestvaco implemented initiatives strategy: to create global leadership in high value aimed at reducing general and administrative costs as well packaging and deliver higher and more stable returns as streamlining warehousing logistics, with the expectation to their shareholders. With their fiscal year ending in of cutting costs by $200 million annually by the close of December, MeadWestvacoʼs 2005 sales totaled almost 2007. $6.2 billion, and net income reached $28 million, showing a significant increase from 2004ʼs year-end loss Packaging segment sales for the newly established of $349 million. The packaging segmentʼs profitability company are as follows: declined slightly from the 2004 year end due to higher 2005: $4,476 million raw material and energy costs, and lower shipment and 2004: $4,402 million production levels caused by the lingering effects of the 2003: $3,394 million hurricanes and the impact of market-related downtime. 2002: $2,501 million The decline in media markets was offset by growth in the cosmetics, healthcare, and tobacco markets. The packaging segment of MeadWestvaco has slightly In April 2005 MeadWestvaco sold its printing and decreased in the companyʼs total sales over the last four writing papers segment to Cerberus Management LLC for years, but has maintained steadily increasing sales since $2.2 billion in cash, as well as $100 million in notes. In the their first year as a company. fourth quarter of 2004, MeadWestvaco reported charges totaling $2.69 per share related to the sale. During the second quarter of 2005, the company used approximately $1.1 billion of the proceeds to reduce their debt, and $620 million to repurchase about 10% of their outstanding shares. During the third quarter of 2005 the company bought back an additional 2.7 million shares for nearly $80 million. The repurchasing of stocks is one way they can return value to their shareholders.

Financials pg 9 MeadWestvaco

In April 2000, Westvaco Corporation acquired AGI Klearfold also utilizes special effects printing, IMPAC Group, Inc., a global supplier of high-value including dimensional coatings, to create the most visually packaging and printing solutions for the media, cosmetics, appealing products for consumers. and health and beauty aid markets. The company soon AGI Klearfold has won several awards, including became known as AGI Klearfold, and allowed Westvaco IoPP Ameristar Awards in 2003 and 2004, Gold and to expand its creative packaging options to global high- Excellence Awards at the Paperboard Packaging Councilʼs value markets. After the merger of Mead and Westvaco Paperboard Packaging Competition for 2003 and in 2002, AGI Klearfold has remained an important asset 2004, and Grand Prize Winner for 2003 at the HBA to the company by providing packaging solutions that International Design Awards. incorporate unique services, materials, complex structures, and high-quality printed graphics. These qualities have allowed MeadWestvaco to create important relationships with companies such as Avon, EMI, Universal, BMG, Procter & Gamble, Colgate-Palmolive and Revlon. AGI Klearfold has maintained a reputation of being “the industry innovator and leader in the design and marketing of creative and visual packaging”. The company has fit in well with MeadWestvacoʼs vision of maintaining innovation, integrity, and stewardship, as they are known for listening to their customers needs and creating an original package for each product. AGI Klearfold is responsible for the development of new packages that create lasting impressions on consumers such as the Evolution Box, a less expensive alternative to the traditional rigid set box; InSight visual packaging, a new design for beverage packaging; and Durafold Security Packaging, to balance ease-of-use with theft resistance. Success Story pg 10 MeadWestvaco

MeadWestvaco has established a strong presence within the media, pharmaceutical, and consumer product markets; as they are currently one of the top two suppliers for each market. New acquisitions will keep the company at the top of their markets and continually striving to reach higher goals, while divestitures allow them to sell off divisions of the company that are consistently losing money. As a leading company in media, pharmaceutical, and cosmetics packaging, the constantly evolving product offerings, and unique and innovative package designs, successfully attract and retain key customers. MeadWestvaco has proved their ability to compete within the U.S. and global packaging industry, and will continue to update their portfolio through acquisitions of more diverse companies. In the future, MeadWestvaco will most likely focus more heavily on their packaging segment, as it is most profitable for them, and continue expansion world wide to serve as many markets as possible.

Conclusion pg 11 MeadWestvaco

Boxboard Containers International (2005). Retrieved: MeadWestvaco (2006). Retrieved January 10, 2006 from January 20, 2006 from http://boxboard.com/ar/ http://www.meadwestvaco.com/. boxboard_agiklearfold_grabs_three/index.htm. MeadWestvaco, GP Report Losses. (2005, July). Official Cosmetic/Personal Care Packaging (2005). Board Markets, 81(31), 8. Retrieved January 14, 2006, CPC Retrieved: January 13, 2006 from http:// from ABI/INFORM Trade & Industry database. (Document www.cpcpkg.com/dir/co/209/20937.html. ID: 906975871).

DataMonitor, MeadWestvaco Corporation Company MeadWestvaco Data (2006). Standard and Poors. Profile (2005 July). Datamonitor. Retrieved January 18, 2006 from Retrieved: January 14, 2006, from http:// http://www2.standardandpoors.com/. www.datamonitor.com/. Packaging Industry Structure Slides(2006). Professor Hooverʼs Online Report Builder MeadWestvaco Twyla Cummings. Retrieved from: mycourses.rit.edu. Corporation (2005). Hoovers, Inc. Retrieved: ,January 13 2006, from http://access.hoovers.com/.

Bibliography pg 12