Pearson Packaging Systems, the West Plains manufacturer of packaging machinery, projects dramatic revenue growth this year, due primarily to two internal changes, and also is considering making its first acquisition.


The 50-year-old company, which had record revenue last year of $27 million, expects its sales to jump to about $40 million this year, triggered by a newly instituted lean-manufacturing philosophy and a revamping of its sales and marketing efforts, says Michael Senske, president and CEO.


The year 2004 yielded the highest revenue in the history of the company, and 2005 will beat it by a bunch, says Senske, who joined Pearson seven years ago after working for Microsoft Corp. He took over the top spot at Pearson in January 2003, succeeding his mother, Pam Senske, who now is chairwoman of its newly reworked board.


He projects that Pearsons revenue will grow to $50 million by 2009 and $100 million by 2014. He estimates that the companys work force, currently at about 200 full-time and temporary workers, will rise to 300 to 325 employees by 2014.


While the majority of those workers will still be based here, Pearson Packaging Systems, which was known as R.A. Pearson Co. until 1997, is looking to expand its operations far beyond Spokane.


Within the next 12 to 18 months, we are considering our first acquisition of a packaging company, and it will be outside of the area, probably in the Midwest or East Coast, which would give us a site closer to our core base of customers, says Senske. He hopes such an acquisition, which he says could be the first of many, will add more technology and manufacturing capabilities to Pearson.


We think we can apply our manufacturing best practices and add significant value to those future acquired companies, and to their customers, Senske says.


Tools for growth


As part of the lean-manufacturing philosophy adopted by Pearson 18 months ago, teams of six to eight workers from all aspects of the business now work in intense, one-week intervals to design ways to reduce the time and cost of producing packaging machines, says Senske.


Also, Scott Reed, who previously worked as a regional sales manager for Colgate-Palmolive Co., became Pearsons director of sales and marketing in 2003, and promptly hired seven full-time exclusively Pearson sales representatives in such cities as Tampa, Fla.; Chicago; and Dallas, and those hires have triggered sales growth. Pearson previously had contracted with independent reps who also sold products for other manufacturers.


Senske says the efficiency changes wont result in layoffs.


We made a commitment to our employees that there would be no reduction in staff as the process improves, he says. We look at this not as cost cutting, but as an engine for growth. Definitely, as we continue to grow we will be hiring more people. Most of the growth we have experienced in the last two years has come at the expense of our competitors, Senske adds.


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


Although the markets it serves are cyclical, much of its business lately has been with beverage makers. It also serves makers of consumer durable goods, chemicals, hardware, personal-care, pharmaceuticals, and industrial products.


Almost all of its machinery is designed to erect, pack, and/or seal product cases made of corrugated fiberboard, typically in the form of cut, flat sheets, says Senske. Pearson customizes each machine.


Stagnant to brisk


Pearsons revenues remained stagnant in the $22 million to $24 million range for seven or eight years prior to the jump to $27 million in 2004, says Senske. Included in that stretch was 2003, where the packaging industry hit a very rough time and employment at Pearsons 110,000-square-foot facility, located about two miles east of Airway Heights along U.S. 2, dipped to a low of 135.


One major contract with Coca-Cola helped Pearson weather that storm.


Senske says the industry is again healthy, and he expects sustained growth, at possibly 15 percent to 25 percent per year, over the next five-plus years.


Says Senske, We expect to see a growth in new products.


Process improvements being made this year to elevate revenues to nearly $40 million, while adding about 15 workers, will be so dramatic that theyll be accompanied by the freeing up of about 25,000 square feet of floor space in the warehouse, says Senske. That space wont go to waste.


In addition to manufacturing packaging machines, Pearson is developing a product that will transfer bales of corrugated fiberboard from pallets to such machines. It buys large robotic arms from manufacturers at a cost of about $40,000, engineers the end-of-arm tooling to accomplish specific tasks, programs the robots, then sells them for use with packaging machines for up to $200,000 each, says Senske. The company has sold six such robots and expects to make another 20 this year, he says.


It is definitely an area for growth, he adds.


In 2003, when the packaging industry was struggling, Pearson helped fill the void with a $4.5 million contract with Coca-Cola to produce 75 machines that band together two, 2-by-6 configured 12-packs of canned soda pop for shipping.


Now, wanting to avoid the cost of driver time in cutting the bands once the 12-packs reach stores, Coca-Cola, working with an unnamed technology company and Pearson, is in the process of implementing the use of an alternative adhesive that will bind the fridge packs together, then chemically break down over time so the packs separate by the time they reach the stores.


Pearson is designing and manufacturing the 20-foot-long machines that will be used to apply the new adhesive to the fridge packs. Coca-Cola is replacing all 75 machines Pearson sold it two years ago with 75 new machines priced at about $105,000 apiece, amounting to about a $7.5 million contract. The last of that order should be shipped by late September, Senske says.


The contract is fairly major in terms of dollar amount, but has a very limited time horizon, says Senske. He hopes the technology will lead Pearson to produce similar machines for others.


In all, Pearson makes about 30 different machines.


The biggest potential hurdle to growth is stiff competition from foreign manufacturers of packaging products, especially in Germany and Italy, says Senske.


Pearson is attempting to set itself apart from other U.S. manufacturers in its field by hiring managers trained outside of that field and using their skills to enhance the business, says Senske. Another major step was taken six months ago when a new, independent board of directors was named to manage the business professionally. Four of the new board members are established business professionals from across the country, while the other three, including Michael and Pam Senske, are with the company.


Although the company has ambitious plans for growth, the headquarters will always be in Spokane, says Senske.


The company was founded by Spokane businessman 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 of R.A. Pearson from 1983 until 1992, and her daughter, Pam Senske, held the top spot until Michael Senske took over in 2003.