Brazilian paper manufacturer, INPA, spent almost two decades selling its products to others before it decided to start making corrugated cardboard boxes – and, in the process, become its own supplier. Michael Sommers finds out how completely verticalizing its operations allowed the company to expand into new markets and double its growth.
Many upstart companies start out on a small scale. In 1961, when Indústria de Embalagens Santana (INPA), first began manufacturing paper, in the small town of Pirapetinga, Minas Gerais, it had only one machine for making plain paper sheets. Ten years later it had added a second machine for the manufacture of fine paper. However, it wasn’t until 1975 that the company’s fortunes began to take off with the purchase of a third machine – this one for making corrugated paper. The fateful acquisition led the company to venture into a whole new segment: the manufacture of corrugated cardboard boxes for storage and transportation of goods. As the company’s president Delvan Lima Telles recalls: “We were already making paper, but we wanted to grow. At the time, in Brazil, there were very few companies industrially manufacturing corrugated packaging solutions. We saw this as our big opportunity to enter a promising new market.”
The first company to manufacture cardboard boxes in the state of Minas Gerais, INPA expanded gradually, extending its reach – and client base – throughout Brazil. Without acquisitions, it grew organically, its strategy based upon constant upgrades of its plant with new and improved technology, which allowed the company to increase production volume and capacity while focusing on quality and customer service.
A watershed year came in 1994, however, when INPA built a new plant, devoted entirely to making corrugated cardboard boxes. Over the next several years, the company began importing top-of-the-line machines from France, Switzerland, and the United States, which allowed it to significantly expand the weights and types of corrugated paper products it was making. Aside from corrugated medium papers, it was now producing linerboard, Test Liner, and White Top Liner, all of which were used to make cardboard boxes and packaging accessories such as sleeves, trays, and division sets. As a result, INPA became totally verticalized and completely self-sufficient. Declares Telles: “Being able to supply ourselves with all the primary materials we require gives us an enormous amount of control over our products and a great advantage with customers.”
In 1996, a restructuring of the family-owned company that resulted in a new corporate administration was also instrumental in INPA’s winning a series of important contracts with heavyweight players in the food industry such as Nestlé, Danone, Kraft Foods, and the Brazilian meat and poultry giant Sadia. Indeed, although INPA was continually branching out, making boxes that could safely store and transport merchandise ranging from furniture, glassware and ceramics to chemicals, cleaning products, and even (most recently) Easter eggs, its most profitable sector was the food industry, in particular boxes for fresh produce and frozen food segments. “Under our new administration, we entered a phase in which we really worked hard to adapt to these new market demands that were changing every day,” say Telles. “Multinationals, in particular, have more stringent standards and we invested heavily in order to create quality products that complied with their individual needs and technical requirements, while guaranteeing immediate delivery and a price that was better than our competitors.”
One of the multinational’s biggest concerns is the environmental impact of its products. “This is truly a decisive factor,” confesses Telles. “They want to know what we’re doing with our waste and how much of our products are made from recycled materials.” Aside from obtaining its ISO: 9000 certification, INPA has taken these environmental concerns very seriously. Currently, 98 percent of the paper that it makes is recycled. The other 2 percent of its products are made from virgin cellulose fibers (bleached and unbleached) derived from renewable eucalyptus and pine forests. Moreover, instead of letting leftover fibers go to waste, INPA uses them to make roofing tiles and signs.
Investing in the Future
INPA has also worked to woo clients – particularly those in Brazil’s growing food industry – by going after specialty niche markets and creating customized products designed especially for their needs, such as boxes with protective coatings of resin and paraffin for fruits and vegetables. With this goal in mind, it opened a product development center at its Pirapetinga plant, dedicated to improvements in technology and materials. Says Telles: “Aside from new products, we’re also creating special papers for these markets. For example, we recently came up with a better quality recycled paper that allows us to diminish the weight of a cardboard box from 500 grams to 400 grams, which is a considerable difference.”
As part of its commitment to innovation, INPA is also investing in its workforce, which currently totals 920 people. In February 2007, in partnership with SESI (Serviço Social da Indústria – a nationwide organization dedicated to the education and training of workers in conjunction with the incentive of industry), it inaugurated the Centro Integrado de Desenvolvimento do Trabalhador (CIDT). Located next to its Pirapetinga plant, this training center will offer courses to 340 applicants (annually) who want to work as technicians in the growing paper-packaging sector. While students will be able to apprentice at the company, with the possibility of internships leading to permanent positions, INPA’s staff will also benefit from the center through participation in training and upgrading workshops.
Investments in both technological and human resources have paid off handsomely. Since 1994, the company has doubled its growth and currently ranks sixth in the Brazilian market. Although, (due to last year’s static domestic market), INPA only grew by 2 percent between 2005 and 2006, between 2004 and 2005, it experienced a growth rate of 13 percent. Currently, its 645,000-square-foot Pirapetinga plant produces 11,000 tons of paper and 7,000 tons of boxes a month (with a production capacity for 8,000 tons).
Meanwhile, the company has plans to spur its growth even further by significantly boosting its production capacity. With this aim, it has invested $28 million in a brand new 270,000-square-foot facility in Uberaba, Minas Gerais, outfitted with the latest top-of-the-line machinery. Scheduled to begin operations in 2008, at the outset, the new plant is expected to produce 9,000 tons a month of corrugated paper, an increase that will allow the company to almost double the number of boxes it produces.
Although increasing volume – and being able to offer more advantageous prices to its clients – is important, nothing can replace the credibility that INPA has managed to foster over the decades. “We have a very loyal clientele,” says Delvan Lima Telles. “After all, we’ve been making boxes now for 30 years and many of our customers have been with us for almost that long. Ultimately, it’s the desire to satisfy our clients that keeps us constantly seeking for ways that we can be better. This is a very dynamic market and, fortunately, there’s always something new to learn.”