Bowing out
As Frank Gerace retires as CEO of Multi-Color Corporation after 12 years at the top, Andy Thomas looks at how he built a successful global corporation out of a company on the verge of bankruptcy
It is always illuminating and inspiring to hear successful business people talk about building companies from the ground up based on selling value and not price.
At Finat’s annual congress in
When he joined Multi-Color back in 1998, Frank Gerace took on a company on the verge of insolvency. MCC was losing several hundred thousand dollars a month and he had only a few months to turn it around. ‘I was not thinking about strategy – it was survival.’ After turning the company around, Gerace was faced with a second, more familiar dilemma.
‘We were then a $45m company, and at that stage companies have just three options – grow, sell or die. There is no such thing as staying where you are.’
Gerace quickly identified MCC’s biggest weakness as its dependency on a single label technology and one major customer.
‘In 1999 and 2000 we had one product, IML, one print process, gravure and one customer, Procter & Gamble, representing half our business in one market sector, homecare. When going on customer sales calls our selling proposition was to convince the customer that in-mold labels were the best way to decorate their products. They responded skeptically knowing it wasn’t an objective proposition. They knew that was all I had to sell.’
Gerace’s bold response was to invest in complementary technologies and build a company more balanced in terms of products, processes, customers and end user markets. ‘It was more about building a balanced company than diversification for its own sake. I thought how powerful it would be to work with marketers and designers. To say, “Show me your marketing strategy and volumes and let’s see which technology is best to solve your problem.” To be a useful supplier the customer had to believe that it did not matter to me how they decided to decorate their containers. I was there to service their marketing needs and to do what was best for them.’
This in turn presented challenges to Gerace’s own mindset. ‘I spent the 1970s and ‘80s in manufacturing implementing "simplicity". But we quickly became a very complex company and I needed to put together a team that embraced and learned how to manage complexity. In addition, I knew that creating a complex value proposition would also create a barrier to entry and provide us with a competitive advantage. It answered the question that kept me awake at night: How to construct a fence around what we’ve built? Complexity would help us do that.’
Gerace’s strategy proved highly successful, generating a consistent 15 percent compound annual growth rate for MCC over the last decade. Today MCC prints PS, cut & stack, shrink sleeve labels, IML and heat transfer labels. In terms of print processes the company uses flexography, rotogravure, litho, letterpress and most recently digital. Gerace says digital will become an increasingly important element in the process mix over the coming years.
MCC was $20m short of its sales target last year, mainly because the recession saw consumers move away from premium branded goods to cheaper store brands. But the company still scored an impressive $280m in sales. It remains highly profitable following a major restructuring operation and investment program over the last two years which has seen the merger of three operations into a single site. ‘We still grew income last year despite the sales drop – because we optimized operations, consolidated and invested.’
Geographical expansion was another key plank of Gerace’s growth strategy. While North America remains MCC’s core market, accounting for three quarters of total sales, the acquisition of Australian converter Collotype Labels gave MCC a high quality, wine label-focused operation in Australia, South Africa, and the US Sales to the Australia/New Zealand region now account for over one fifth of MCC’s sales, with South Africa and Latin America just starting to appear on the radar at 3 percent each.
The plan is to continue expansion into faster growing regions of the world, as Frank Gerace explains: ‘We see the
Diversification of customer base has also been achieved. Where in 1998 P&G represented over half of MCC sales, today this is closer to 20 percent. ‘But we still grew the account,’ says Gerace. ‘Our aim was to grow with existing customers but bring in new customers.’
There has also been a diversification in end use sectors, which now include home and personal care, food and beverage, wines and spirits and specialty (promotions etc).
Selling value
Keeping at the leading edge has involved a consistent and high profile investment program in new technology – $25m investment in the last two years alone. ‘If we do not stay on top of the technology curve we lose credibility with customers,’ explains Gerace.
Constantly bringing innovation to customers is vitally important. ‘Often customers are faced with an ‘idea vacuum’. Your competitors are bringing new innovations to your customers, so you have to stay ahead.’
How does the process work? ‘We sit down with customers on a consultative basis and discuss strategy. We put together a matrix to see which decoration route is most efficient and meets their marketing needs – we take the mystery out of the process. Purchasing at major brands is an entry-level position and many times these folks know very little about printing. They need someone to help them get their next promotion.’ MCC offers a ‘label college’ for print buyers four times a year.
Technical support for customers is seen as critically important. MCC’s team includes a sophisticated pre-press operation able to visualize and optimize graphic designs well before the production stage, as well as teams with deep technical knowledge of each print and label application process.
So Frank Gerace bows out from Multi-Color Corporation having created a highly successful business poised for further growth as it expands geographically and explores the potential of digital label technology. As for future plans, Gerace said he will enjoy being more around his extensive family – but did not rule out a return to the industry in some capacity, sometime in the future.
The good news is that Gerace has started a website: www.retired-ceos.com. ‘It will serve as a vehicle to share my past business and life experiences with whoever might be interested and also serve as a forum for others to do the same,’ he tells L&L.
The future
Frank Gerace announced at the Finat congress that his successor as president and CEO of Multi-Color Corporation is Nigel Vinecombe, who has served as COO since May 2009 and has been a director since February 2008 when he took over management of MCC’s International Business Unit. Before that Vinecombe was group managing director of Collotype International Holdings Pty Ltd for eight years.
Pictured: Frank Gerace will leave MCC after 12 years
This article was published in L&L issue 4, 2010
Click here for more stories about Multi-Color Corporation on L&L.com.
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