Narrow Web Profile: Multi-Color Corporation

By Jack Kenny | July 19, 2005

Successful and growing, this major player can offer every type of package decoration.

When Frank Gerace calls, owners and CEOs like to pick up the phone to hear what he has to say. Sometimes, just maybe, it's an offer to buy the company. Gerace has been getting a fair amount of practice doing that recently. The company he runs is growing rapidly, its stock price is soaring, and its visibility as a producer of high quality packaging products is high and sharp.

The company is Multi-Color Corporation, and Frank Gerace is the president. Headquarters is in an office tower in downtown Cincinnati. Manufacturing takes place at six locations throughout the United States. Since October 2001, Multi-Color has made three significant acquisitions, all of which have given the corporation strengths in diverse arenas of the packaging and product decoration market.

The most recent is the purchase of the Decorating Technologies (Dec Tech) division of Avery Dennison, one of only three companies active in heat transfer label technology. Dec Tech is a $20 million supplier of heat transfer labels in North and South America to the health and beauty, beverage and food industries.

The addition of that company to the Multi-Color stable is in line with the corporate decision to offer a broad range of labeling and decorating opportunities to customers. It was Frank Gerace who made the initial telephone call about a year ago to Avery Dennison proposing the sale. The acquisition was scheduled to be completed by the end of 2002.

The broadening of product offerings that has taken place over the past four years at Multi-Color was borne, in part, out of frustration. About a quarter century ago, the corporation joined with Procter & Gamble to develop in-mold labeling (IML) technology for blow-molded containers, a market in which it is still a powerful player. But after a while, in-mold was the only card in the company's deck.

"I felt uncomfortable selling only in-mold labels," Gerace recalls. "I would sit across the table from a customer and try to convince him that what he really needed was in-mold labels, when I knew that that wasn't what he needed at all. We just couldn't offer an objective alternative."

Gerace and his energetic and talented team of executives went shopping for a pressure sensitive label converting company, and since then have acquired shrink sleeve capability, a promotional packaging business, and now the heat transfer label operation. And that's all since 1999. Multi-Color Corporation — a public company trading on the NASDAQ under symbol LABL — will see sales revenues reach $92 million for the fiscal year that ends in March, a handsome increase from $72 million in the previous year. In the past two years, the stock price has appreciated more than 200 percent.

From prime labels to IML
Multi-Color Corporation is an old company. It was founded in 1916 as a press manufacturing company. "One of the early customers was William Wrigley's company," Gerace says. "He wanted Multi-Color to print labels on its machinery. Within a couple of years the company stopped manufacturing presses and went into the prime label printing business."

Prime labels sustained the company for the next 70 years.

In the mid-1970s, Procter & Gamble, also based in Cincinnati, got together with Owens Illinois container company and with Multi-Color to develop a new method of applying labels during the manufacture of the bottles. "That was the advent of the in-mold label," says Gerace. "By the mid- to late-1980s we began winding down our prime label business — which used offset and gravure processes."

Also in the '70s, a group of private investors purchased Multi-Color from Georgia-Pacific, which had become its owner some years earlier. At the end of the 1980s, the group put together an IPO and took the company public.

"Plodding along" is how Gerace describes Multi-Color Corporation in the latter part of the previous century. "Though the company had great technologies and a solid customer base, the financial performance was inconsistent," he says. "There was a lack of good manufacturing and operational skills in the management group."

The board of directors and the shareholders made a decision in 1998 to bring in a management team with a strong manufacturing background. "At the time, sales were about $48 million, and they needed to do a turnaround because the company was in serious financial condition."

Gerace was hired in that year as vice president of operations. "There was nothing wrong with sales," he recalls, "but we needed good manufacturing practices, quality control, production systems — things of that nature."

Multi-Color's chief executive officer left in 1999, and Gerace became president. Changes were made. "We were on solid ground, and we were doing well," he says, "so we asked ourselves: 'What should we do to grow our business, and how?' At that time, IML was 95 percent of our business. Today it's 50 percent.

An eight-station 18" Comco press at Multi-Color's Batavia, OH, plant
"The first thing I did was to look at our customers, at the other decorating applications they use for their products. It became obvious that there was a demand for pressure sensitive labels and shrink sleeves. We saw a lot of interest from these customers. There were huge opportunities to grow in pressure sensitive and in shrink sleeves."

On the acquisition trail
The new team at Multi-Color wanted to offer customers a variety of choices for their packaging decoration needs. To fulfill this goal, Frank Gerace went shopping.

- In late 1999, Multi-Color acquired Buriot International, a pressure sensitive label operation in Batavia, OH, about 20 miles east of Cincinnati. In the plant was a Comco flexographic web press and a Komori sheetfed press. Not long afterward, Multi-Color added a second Comco press.
- In June 2000, Multi-Color began offering shrink sleeve labels with the acquisition of Uniflex Corporation in the Las Vegas area.
- Toward the end of 2001, a second pressure sensitive company — Premiere Labels Inc., in Troy, OH — was acquired. This plant has five flexo presses at web widths that are smaller than the Comcos in Batavia.
- In June 2002 Multi-Color acquired Quick Pak, a provider of promotional packaging, assembling and fulfillment services to health and beauty companies, consumer products manufacturers and national retailers.
- In December 2002: Decorating Technologies, purchased from Avery Dennison. Labels at the 120,000 square foot production plant in Framingham, MA, are manufactured on narrow web gravure equipment, though Gerace says that the company is working on production using narrow web flexographic presses.

A diecutter for in-mold labels
Multi-Color also has plants in Scottsburg, IN, which focuses on IML, and its Laser Graphic Systems operation in Erlanger, KY, which produces gravure cylinders and printing plates. Additional sales offices are in California, Texas, Missouri, Toronto, and Monterey, Mexico.

"We want to provide objectivity in what is best for our customers," Gerace says. "We want to offer multiple solutions. Now we can show the pros and cons of each technology, and the economics involved in each. We can take the mystery out of it and come up with solutions.

"By the end of 2002, we have all of the labeling technologies that exist."

Multi-Color's approach to its acquired entities is to make few changes, at least initially. "We acquire a good skill base," Gerace asserts. 'We are not interested in just the physical assets of the plants, but more in the human assets. People make the business grow."

Product development
Multi-Color Corporation, one of the few in the industry with a headquarters physically separate from manufacturing, has a strong executive team. Joining Gerace are Dawn Bertsche, VP finance/CFO; John McKeough, VP operations; Tom Vogt, VP sales, consumer products; John Antonucci, VP sales, food and beverage; and Phil Courtier, director of product leadership.

This year the corporation has nearly doubled the size of the budget for its Product Development Group, the R&D arm. In fiscal 2001 expenditures were $301,000; in 2002 the amount is $554,000. The company's team of developmental engineers are working on significant physical improvements to in-mold labels to increase their durability, as well as devoting time to working with customers on technically challenging packaging issues. "As we add new technologies, we must make sure that we have sufficient technological support," says Gerace, adding that the company has "a number of patents pending" on new label and packaging products.

Multi-Color also has a Komori sheetfed offset press in Batavia.
Getting things done
"We haven't felt the economic pinch," Gerace says. "One of the main reasons, I believe, is that most of our business is connected with consumer products industries, which haven't felt the sting of the economic downturn as much as others have. They are somewhat shielded.

Everyone in a managerial position at Multi-Color Corporation is required to read Execution: The Discipline of Getting Things Done, by Larry Bossidy and Ram Charan. "This is what we're all about," Gerace says. "We focus on execution. In addition to an aggressive growth strategy, we also have an attitude about ourselves. We are not going to let external conditions get in the way."

A Comco 18" press with 10 print stations, producing in-mold labels with UV curable inks.
The next goal at Multi-Color is to increase the company's share in the food and beverage and health and beauty industries. Though the corporation does export overseas, it plans to focus on what Gerace calls "domestic initiatives." He is, however, looking into a possible partnership in Southeast Asia. "Digital printing," he adds, "is one of the other areas where we are taking a serious look at getting involved."

"This has been a lot of fun for us," says Gerace.