Five Questions With Jack Knott, Sun Capital Partners

1. You were just appointed managing director at Sun Capital Partners, a private equity firm with $8 billion under management that has more than two dozen investments in the paper and packaging industries. What do you hope to do in your new role?
Sun Capital has a very big focus on operations. The firm has recently put a lot of effort into packaging companies in Europe, and continues to do the same in North America. On a global basis, the industry is pretty consistent, so given Sun Capital’s substantial investment in packaging, I think I’ll be able to bring my 30–plus years of background and help the team.

2. Isn’t the packaging business representative of the whole economy, in that during a strong economy, people buy more goods that need to be packaged?
They do. In our part of the industry, most of it is focused around consumers, and the majority of that is related to food and medical products. Most of that is considered non–discretionary and recession–resilient. If we were to get into a recession, we would normally see consumers de–stacking their pantries, where they would just quit buying for 60 to 90 days. But then it will come back, because people tend to keep eating, feeding their dogs, planting their gardens and de–icing their sidewalks, etc. So even though packaging is a leading indicator going into a recession, we typically are recession–resilient from a demand perspective.

3. What are the most important one or two trends you’re seeing in packaging?
A big trend is the individualization of product lines by consumer packaged goods companies. You see it in pet food, for example. One brand of pet food might have 200 items at a grocery store, such as 20 pound bags of food for dogs that need to lose weight, 15 pound bags for dogs that are gaining weight and 25 pound bags for dogs that need to grow their hair back. These companies continue to individualize their packages, not only in food, but across the board. So if we used to run 200 package designs for a product line, today we’d probably run 400 and next year, probably 500. There is just a proliferation of individualized products for specific consumer needs.

The other trend I see is in the improvements in the capital equipment we’re buying today. If five years ago, you bought a printing press that ran 1,000 feet per minute, today you can buy one that runs 1,500 feet per minute. And that new printing press can run the smaller orders associated with this individualization trend. So, while we’re gaining productivity through new equipment, the needs of our customer base for more flexibility continue to grow.

4. What is Sun Capital doing with its PE investments in packaging outside the United States?
Sun Capital continues to be in acquisition mode in Europe and North America, where operations are very similar. Some of our overseas companies include Britton Group, a British–based packaging firm; Albea, a French–based maker of packaging for the perfume and beauty industry; and PACCOR, a German maker of plastic packaging. If you are packaging pet food in Europe, it’s not a lot different than packaging pet food in the United States. The underlying metrics are very similar on a global basis.

5. You are also chairman of Exopack, a packaging company owned by Sun Capital. Does Sun Capital have any thoughts about an exit strategy?
Sun Capital built Exopack through six acquisitions from 2005 to date, and it now has $900 million in revenue. We recently did a dividend recap, which closed at the end of May, so right now, with the new balance sheet in place, we’re just focused on meeting the financial expectations that were set during that process. We haven’t really started to look at an exit strategy.

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