Spokane Journal of Business

Pearson puts faith in new products

West Plains manufacturer focuses on new machines, service to set it apart from rivals

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Pearson Packaging Systems, a longtime West Plains-based maker of packaging machinery, says that after investing heavily in product development in recent years, its now looking at ways to market those products aggressively as it seeks to grow in a sluggish economy.

Pearson has weathered plenty of changes in its industry over the past 53 years. A few years ago, it decided that to stay ahead of the pack, it needed to revamp its operating procedures and pour money into engineering new products. Now, armed with those products and a lean-manufacturing philosophy, the company is ready to expand its presence in the highly-competitive packaging industry.

This has been a long-term play, says Michael Senske, the companys president and CEO. Weve built the foundation with these new products to drive growth, and now it will depend on how we market them.

Pearson had revenue of nearly $30 million last year, up from $27 million in 2006, Senske says. Due to the softening economy, though, which is putting the brakes on some of its customers plans to invest in new equipment, the company is expecting fairly flat growth this year, he says. Part of the companys long-term growth strategy involves taking market share away from its competitors and acquiring smaller packaging companies, he says. Its currently in acquisition talks with two companies, Senske says, but he declines for now to disclose further details.

Senske expects the companys revenue growth will pick up again in 2009. Secondary packaging, or packaging items that already have been bottled, canned, or put in boxes, is a mature industry, with machinery makers annual revenue growth falling mostly in the range of 2 percent to 4 percent, he says.

As long as we have levels of growth above the industry average, and as long as were taking market share, well be happy with our growth, Senske says. We have no debt, we have a healthy balance sheet, and weve invested in products and infrastructure in ways many of our competitors havent, so we expect well come out in better shape than them once the economy improves.

Pearson designs and assembles packaging equipment for big-name companies in the beverage, food, chemical, personal care, and general manufacturing and distribution industries. Its customers include Tyson Foods, Frito Lay, Coors, Coca-Cola, Anheuser-Busch, Procter & Gamble, and Pepsi.

Nearly all of Pearsons machinery is designed to erect, pack, and seal product cases made of corrugated fiberboard, which the companys machinery typically makes from cut, flat sheets of the material.

Pearson makes about 30 different machines within six main product lines, a huge percentage of which are ones it didnt make three years ago, Senske says. Pearson, which fell behind the curve in terms of product development during the 1990s, has plowed more money into new products in the past five years than in the previous 15, he says. It still plans to introduce new products at a rate of one or two new machines a year, he says.

One of Pearsons newest products, the VersaPack Handpack System, which it launched last week, is expected to provide a big revenue boost to the company, Senske says. The system, which includes a case erector, case sealer, and manual pack station where workers fill containers, serves a market Pearson hasnt penetrated yet, he says. It produces 15 cases a minute, which is a slower speed than many of the machines that Pearson makes.

Over the past 18 months, customers increasingly have become interested in buying complete end-of-line packaging systems, Senske says. In the past, customers were satisfied with buying equipment such as case erectors and case sealers from different vendors, but now many of them dont have the time or resources to deal with multiple vendors, he says. Pearson is taking advantage of that trend by providing total systems, even if it has to acquire some of the equipment from other manufacturers, he says.

Pearson is seeking to keep up with the rapidly changing demands of its customers by designing new machines that are more flexible, easier to operate, and able to handle a larger variety of products, he says. One of its newer products is a large robotic arm that packs containers. The company buys the arm from other manufacturers, designs the end-of-arm tooling necessary to accomplish specific tasks, programs the robotic arms, and sells them for use with its packaging machines.

Although the companys volumes have risen significantly in recent years, it hasnt had to increase its manufacturing space, thanks to the lean-manufacturing philosophy it adopted a few years ago, Senske says. The processes it has implemented have helped increase communication between its departments and have helped reduce the time and cost involved in making machines, he says. The amount of time between a customers placement of an order and its receipt of the goods is between one and two months, whereas the industry average is three to four months, he says.

Lean-manufacturing principles have freed up roughly 35,000 square feet of floor space in the companys 110,000-square-foot facility, located about two miles east of Airway Heights along U.S. 2, in recent years, even though a few years ago it was producing 60 percent of its current volume, Senske says. Part of that space was freed up when the company outsourced its parts production operation last year to Valleyford Metal Crafters and about nine other parts fabricators, he says. Pearson made the move because it wanted to focus more on engineering and assembling products, he says.

Besides increasing efficiency, the changes at its plant also have helped persuade customers to buy its products, Senske says. Most of its customers are located in the Midwest, Northeast, and Southeast. The company deals with that geographical separation by bringing its customers here to see its operations. Senske asserts that the company has a 100 percent close rate with customers when they have toured its facility.

Pearson has 125 full-time employees, plus temporary workers, down from about 200 workers, which included temporary workers, in 2005, he says. While Pearson is looking to hire a few more engineers, for the most part it doesnt plan to do any large-scale hiring of full-time employees, partly because it relies on temporary workers to fill its fluctuating needs. In addition, its operations are more efficient than they used to be and thus require fewer workers, he says.

About 110 of the companys employees are located here, while the rest are scattered across North America in regional sales offices, he says. The company started opening those regional service offices in about 2004, and now has 13, he says.

Pearson opened a sales and service office in Mexico City last year. At that time, exports made up 25 percent of the companys sales. Senske says that exports likely will make up a smaller share, or 15 percent to 20 percent, of the companys sales in the future, mainly because of the instability of Latin American markets.

Pearson is eyeing Brazil for opportunities, but the company doesnt have plans to penetrate that market at this time, Senske says. Still, he describes Latin America as a huge area of opportunity.

Within three to five years, theres no question we could grow tremendously in Mexico, he says. But, theres enough volatility in that market that growth there isnt as linear as we would have hoped.

Pearson started opening its regional offices in part because its plant is located so far from many of its customers, and it wanted to provide customers timely service. Staying on the cutting edge of product development and finding ways to serve customers better are vital in the fragmented secondary packaging industry, Senske says. The company has 10 competitors in each product line it offers. Many of those competitors are smaller, with annual revenue of between $2 million and $5 million, he says, adding that Pearson is in the top 10 percent of its industry in revenue.

Earlier this year, the company started selling spare parts and upgrade kits for its machines on its Web site, which is unique in its industry, he says. In addition, it assigns project managers to each customer to give them more personalized attention, which also is something many of its competitors dont offer, he asserts.

We are taking advantage of the fact that we have the scale and resources to give customers a complete package of products and services that others cant, Senske asserts. We decided several years ago that we wanted to be one of the people doing the consolidating, so thats why weve made these long-term investments.

The company was founded by R.A. Pearson in 1955 in his garage. He owned and managed the company until his death in 1971. Pearsons widow, Alma Pearson, was president from 1983 until 1992, and her daughter, Pam Senske, held the top position until her son, Michael Senske, took over in 2003.

Contact Emily Proffitt at (509) 344-1265 or via e-mail at emilyp@spokanejournal.com.

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