Employees’ resilience credited in Lancaster manufacturing firm’s turnaround
Jeff Pond of Lunenberg, VT., does prepress mounting at the PAK Solutions plant in Lancaster. (Photos by Allegra Boverman)
After meeting with employees of PAK 2000, a flexible packaging manufacturer in Lancaster then on the verge of closure, kevin Powers, who has spent his working life in the industry, thought to himself, “Imagine what these guys could do with some financial backing.”
Learning the company was for sale, Powers and his cousin John Shaughnessy, who had often talked of going into business together, visited the plant not knowing what to expect. They were struck to find the dated machinery very well maintained and in good working order. And even more impressed by the dogged spirit and sound work ethic of the employees.
“It needed a lot of work and a lot of capital,” Powers said, “but we were so inspired by the people, we saw a real opportunity.”
The plant in Lancaster opened in 1990 as a division of PAK 2000, a packaging company headquartered in Tuftonboro, best known for its paper shopping bags bearing logos for stores more native to Rodeo Drive than the White Mountains. Before long its output shifted from paper to plastic and from shopping to security or tamperevident bags, fashioned to package cash, and captured 40% of that market.
In 1997, the plant was sold to Asia Pulp and Paper (APP), an Indonesian conglomerate that starved it of sufficient investment and crippled it with poor management.
Powers and Shaughnessy set about corralling investors to acquire and rebuild the company. A trustee of the Tilton School, Shaughnessy reached out to fellow board member Rob Roriston, recently retired after a long career with a private investment firm. In turn, Roriston approached the Gaudet Family Group — particularly Dennis Gaudet and his sister Donna Gaudet Hosmer — of the AutoServ family of car dealerships to complete the team of investors.
Gaudet Hosmer stressed that three families, all with strong ties to New Hampshire, had joined to rescue and revive what had been a cornerstone of the economy in one of the state’s more hard-pressed regions.
“When we saw the people and how APP had treated them, we wanted to make a difference in a community that really needed it,” she said.
36-month turnaround
In June 2017, the new owners acquired the business, re-christened it PAK Solutions and named Powers president. A year later, the company merged with Allstate Polyethylene Corp. of Alexandria, a wholesale distributor of packaging materials, where Powers had served as president for a decade.
“We developed a 36-month turnaround program,” Powers said. The plan featured recapitalizing the operations and infrastructure of the business, restoring its presence in the tamper-evident bag market, then diversifying its product offerings.
“The first thing we did was take a road trip to meet with our customers,” said Powers. “We assured them the same people would be making the same products and they told us they loved our people and our product and we’ll come back with you. And that was huge.”
The new owners have invested $14 million — $11 million in equity and $3 million in debt — in the company, more than $7 million of it to purchase state-of-the-art machinery and equipment. At the same time, Powers noted that, thanks to the efforts of the employees, only two of the machines the new owners inherited had reached the end of their working lives.
The immediate priority was to recapture the core business in the tamper-evident bag market, consisting primarily of banks, retailers, restaurants and casinos as customers. To bolster security bag production, the company upgraded the existing lines and added three new converting lines — the machinery that turns rolls of flexible plastic film into finished bags with different contours, features, artwork and labeling.
To develop new products and enter new markets, an entire room of the plant was renovated and fitted to meet the sanitary standards required to produce packaging for fresh and processed foodstuffs. Two converting lines, an eight-color press and supporting equipment are in place but not yet fully operational. Likewise, a new converting line is producing specialty bags for medical specimens, forensic evidence and the like, including bags with a film that prevents packaged items from rusting or leaking.
“It’s all about speed, about making a good product at a good price faster than anyone else,” said Powers.
The new converting lines are built to process two rolls of plastic film in tandem, producing either the same or different products and doubling the output of the old lines. “Three lines are the equivalent of nine old lines, and they’re much faster,” he said.
‘A strong selling point’
“Ninety-nine percent of our product is printed,” Powers said.
One press, 25 years old — but, thanks to Ron Demers, maintenance manager for the past 17 years, still running like a top — prints 600 to 700 feet a minute, while the new press turns out 1,700 feet a minute and can switch from one job to another in minutes rather than hours.
Wikoff Color Corp. of Hudson restructured the print room and oversees its operation on site as well as supplies the inks. “We treat our vendors as partners,” Powers said.
While competitors outsource their artwork, at PAK Solutions, Eric Boisselle, who has been with the firm for 29 years, produces it in-house. He said that he works directly with customers, either to use their own design or to fashion a new one, then runs the plates and hands them to the print shop. “It cuts the time to turn around a job in half,” Powers said, “and it’s a strong selling point.”
Patrick Judge, president of operations, estimated that productivity has increased by about 100% and will continue to increase as the full complement of the investment in machines and equipment become operational.
From left project manager Ron Demers of Berlin, Lynn Berry of Guildhall, Vt., converting department manager at PAK Solutions, and machine operator Joshua kay inspect the machinery and make adjustments while bags are being made.
Above all, in anticipation of expanded capacity, the company has steadily increased its workforce, which has grown more than fourfold, from fewer than 20 to near 80.
“We’re running three shifts around the clock five days a week, and we’re still actively hiring on all shifts,” said Judge.
“When I count 80 employees,” Powers said, “I see 80 families.”
Adapting to pandemic
Originally, the company expected that the first quarter of 2020 would mark the completion of its reinvestment program and the operation of its four business lines. With the rapid growth in sales, it projected reaching the cash flow break-even point by mid-year and achieving profitability by year end.
But then came the pandemic. “We really took it on the chin,” Powers said.
He explained the impact of Covid-19 fell on both sales and production. Sales shrank as customers were shuttered in March, April and May. At the same time, the delivery, installation and commissioning of new machinery and equipment, much of it produced in Canada and Europe, was disrupted as shipments were delayed and suppliers were hindered from providing engineering and technical support by travel restrictions.
Sales of tamper-evident bags, expected to represent more than half of annual sales, shrank as retailers, restaurants and banks were shuttered in March, April and May, halving current monthly sales while projected monthly sales to casinos fell 75%. Likewise, projected annual sales of consumer and wholesale product packaging are expected to drop by 35%.
Delays in installing and commissioning machinery and equipment have slowed production and crimped sales of medical specimen and food product packaging, which together were projected to represent annual sales of $1,115,000. The company lost $45,000 in sales of medical bags in March and April and expects projected monthly sales of food packaging of $82,500 to fall by 40%.
Despite the severity of the impact, the company has received a paucity of financial assistance from the government.
“We were boxed out,” said Gaudet Hosmer. “No Small Business Administration loan. Nothing from the Main Street Program.” She said she was hoping to receive assistance from the state’s General Assistance & Preservation Fund.
Kevin Marquis of Gorham, lead press operator, prepares the press for a run to print the graphics for bread bags in the printing press room at PAK Solutions.
The pandemic has “left us at least six months behind in reaching our financial goals,” said Powers, but sales are beginning to recover, there is plenty of inventory in stock and two more converting lines will be operating by November. He said he expected to break even and turn the corner in the second quarter of the coming year.
“We’re going in the right direction,” said Lynn Berry, now in her 18th year with the company. “This place was falling apart at the seams, but we finally have owners who care about us. And,” she continued, “it’s not just the money. They bring time and energy. We’re not only here, but we’re growing.”
Berry was echoed by her brother-in-law, Andy Berry, who left the company but was persuaded to return by Demers, his mate on the maintenance team. “It was definitely the right thing to do,” he said. “It’s great to have ownership in the house.”
“It means a lot — the confidence, the faith they put in us,” said Demers. “And they haven’t been cheap,” he smiled. “We’re very happy.”
“It didn’t make sense by the numbers,” said Dennis Gaudet, “But the people. Such a resilient group of people. Their pride came through to us. A successful company is the people,” he said.
Curtis Tibbetts of Milan, a machine operator, operates a film slitter, which takes large rolls of plastic and makes them into smaller rolls of bags that can be cut to size later. These bags are for the government and are for holding cash.
‘We wanted to make a difference in a community that really needed it,’ says an investor
