DS Smith Packaging, Price and Margin Increase Case Study
DS Smith Packaging is one of Europe’s largest fibre-based
packaging groups, which has recently reported for 2011 increased revenues of
19.5% to £2.75 billion and profits of £136 million, up 39%.
Whilst the UK corrugated packaging market grew by just 1% last year,
the UK packaging operation grew by 22% to £917 million and Group CE, Miles
Roberts, said: “The strong performance was achieved in the context of
significant increase in input costs, which we have been dedicated to
On the back of this ongoing success, DS Smith has now
purchased the majority of SCA's Packaging operations for £1.4 billion,
transforming the company into a Pan European giant.
Raw material prices, energy and other cost have escalated
rapidly over the last five years.
With paper representing often in excess of 50% of the
finished cost of goods, corrugated manufacturers have been left with little
option but to increase prices on a number of occasions during this period.
With over two thirds of UK corrugated packaging being supplied to food and
beverage manufacturers, this has been and remains a significant challenge.
Brand owners face stiff resistance when attempting to pass through
increased costs to their Retail customers and with professional buyers and a
fiercely competitive market environment to contend with, a systematic and robust
programme of preparation and training was required.
Over the last six years, PiP Associates
have worked tirelessly with DS Smith, on every aspect of price increase
methodology and training by carefully analysing current levels of performance
and then coaching management and sales teams in the tactics of value recovery
and price and margin management.
We have seen some fantastic results through both broad scale price increases
and individual account margin management programmes.
We have tailored this support to every aspect of price increases from
having a clear rationale through to negotiating deals and monitoring
has transformed the commercial teams ability to consistently deliver price and
The UK Sales Director, Mike Alvis, now describes
the UK sales and management teams as “black-belts” in price and margin
management and commenting on PiP Associates work has said:
have helped us considerably in the ongoing challenge of improving profitability
within our highly competitive industry.
From a cost/benefit point of view, the results have far outweighed the costs. PiP Associates have also
invested heavily in keeping themselves abreast of developments within our
industry, this ensures that training modules do not become static but highly
relevant and in tune with prevailing business challenges.”
With the ongoing scarcity of the
basic raw material - waste paper, prices are likely to continue to rise and the
skills and plans that have been developed will be a valuable part of the sales,
national account and management teams armoury.