Packaging manufacturer Greif divests its CPG unit7 May 2020
Greif, Inc. completed the sale of the consumer packaged goods (CPG) portion of its paper packaging division to Graphic Packaging Holding Company GPK in April for $85 million. The funds will be used to repay company-issued debt. Greif has lost 30.8% of its share value over the last year, according to research by Zacks investment firm.
Greif’s CPG unit produces annual revenues of more than $200 million and includes seven U.S. carton manufacturing facilities. Although profitable, the company is shedding this division to focus on its bulk container and industrial scale packaging as it looks to develop sustainable and reusable packaging solutions. The company acquired Caraustar Industries, Inc in February 2019 and is integrating this entity as part of its push to develop sustainable, industrial-scale packaging.
“Given our industrial focus, we were not the rightful owner of the CPG business,” said Pete Watson, Greif’s President and Chief Executive Officer. The sale, he said, “refocuses our business on our core industrial franchise and strategic growth priorities in Intermediate Bulk Container production and reconditioning and containerboard integration.”
Packing is a subject fraught with questions of sustainability. Producing eco-friendly packaging that is not susceptible to environmental influences and can keep products fresh is a challenge for many manufacturers. Nevertheless, consumers are continually asking for more corporate stewardship, and, according to the Nielsen Global Corporate Sustainability Report from 2018, 66% of consumers will pay more for brands committed to implementing environmentally friendly practices in manufacturing.
Graphic Packaging Holding Co is a logical candidate to be the new owner of the CPG portion of the Greif paper packaging division as the company manufactures folding cartons for frozen and non-frozen food and beverage products. However, the company is not the most innovative company when it comes to sustainability.
According to the company’s 2018 sustainability report, greenhouse gas emissions increased 3.3% for the year, rather than declining and helping the enterprise work toward the goal of a 15% overall reduction by 2025. Similarly, the company increased its use of non-renewable energy sources by 7.7% rather than working toward a 15% reduction. Despite this, 100% of the company’s products are recyclable and the business has exceeded its 15% goal of decreasing mill water effluent by 12%.
Long term, the sustainability of this CPG packaging unit will likely depend on the company taking a turn toward eco-friendliness. Goals and promises will not remain sufficient as consumers continue to look for more sustainable packaging alternatives. A 2018 study from Neilsen showed that almost half of U.S. consumers are likely to change what they buy to align with environmental standards. That number is likely to only increase.
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