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Riverwood International Corporation is an international paperboard, packaging, and packaging machinery holding company, whose subsidiaries produce coated unbleached kraft (CUK) paperboard, packaging products (including beverage carriers and folding cartons), packaging machinery, containerboard, linerboard, corrugated boxes, and lumber and plywood. Riverwood is a leading supplier of CUK paperboard--the thick, glossy paperboard used in secondary packaging&mdashø the beverage industry. The company has a strong overseas presence, operating on four continents in more than a dozen countries, with a vertically integrated strategy that links its timberlands, papermills, packaging plants, and packaging machinery operations. Riverwood owns or manages timberland in the United States and Brazil, which supply a portion of its energy and pulp requirements for its paper and wood operations. The company also leases proprietary packaging machinery, which is designed by the company and which uses the company's CUK paperboard. In June 1992, Riverwood International completed an initial public offering of about 20 percent of its common stock, with the remainder of the company's stock held by Manville Corporation.
The foundation for Riverwood's integrated paper and packaging operations was laid in 1952, when Olin Mathieson Chemical Corp. acquired Frost Industries, Inc. Frost, which had begun in 1884 as an Arkansas sawmill company, owned five sawmills and timberlands in Louisiana, Arkansas, and Texas, which Olin used to form a forest products division. Three years later, Olin Corp. acquired the Brown Paper Mill Company. Established in 1923, the Brown Paper Mill was the first American company to produce sheet brown kraft paper and Southern Pine kraft linerboard. During World War II, the mill also developed Victory Board, used in corrugated supply boxes that were dropped from Allied airplanes.
Olin consolidated Brown Paper Mill into its forest products division and moved the division's headquarters to West Monroe, Louisiana. Between 1956 and 1958, Olin Corp. acquired a Louisiana sawmill and a Brazil pulp and paper mill, while developing and producing the world's first on-machine clay-coated beverage carrierboard. During the 1960s, Olin Corp. developed the trademarked Marksman Packaging System for cans and bottles, installed the world's first paper machine specifically designed to produce the trademarked beverage carrierboard Aqua-Kote, and entered the plywood business. In 1967, Olinkraft, Inc. was established as a wholly owned subsidiary of Olin Corp. and that same year introduced the world's first solid unbleached sulfate (SUS) natural kraft folding cartonboard. In 1971, Olinkraft entered the particle board business, and, by the time Olinkraft was spun off as a separate public entity in 1974, the company had a diversified and integrated paper and wood products business that, in addition to particle board, was producing kraftpaper, paperboard, packaging products, and building materials.
In September 1978, the Johns-Manville Corp. initiated a bidding war for Olinkraft, despite the fact that Olinkraft had recently signed a merger agreement with Texas Eastern Corp. By October, Olinkraft had agreed to accept a higher offer from Johns-Manville. The following year, Olinkraft was merged into a Johns-Manville subsidiary, which was renamed Manville Forest Products Corporation shortly thereafter.
During this time, however, several lawsuits threatened to put Johns-Manville out of business. Specifically, the suits charged that asbestos building materials used in insulating fiber made by Manville had caused several serious illnesses, including lung disease, among employees and those who used the product. By 1981, around 400 lawsuits per month were being filed. That year, Johns-Manville was reorganized as a holding company, Manville Corporation, with Manville Forest Products serving as one of five wholly separate operating subsidiaries. The following year, Manville and its subsidiaries--even though still profitable at the time--filed petitions for reorganization under the Chapter 11 Federal Bankruptcy Code in a move to shield the company against losses it faced as a result of the lawsuits. By 1985, Manville had exited the asbestos-based product business entirely.
While the Manville Corporation was withdrawing from the asbestos business, it was also plunging money into equipment updates and capital improvements for other operations, including forest products, while absorbing and expanding upon former Olinkraft operations. Between 1983 and 1986, Manville Forest Products acquired a plywood and sawmill plant in Louisiana, a folding carton plant in Mississippi, and Eastex Packaging Inc., which brought three additional folding carton plants in Memphis.
In 1988, Manville emerged from bankruptcy under a landmark reorganization plan that established an independent trust, the Manville Personal Injury Settlement Trust, to which Manville would funnel as much as $3 billion to asbestos-injury victims over a 30-year period and which gave its victims majority control of Manville. In return for a shield against future asbestos-related litigation, Manville gave trust stockholders $2.5 billion in assets, mostly in the form of stock, and promised to pay its victims $75 million annually beginning in August 1991, plus 20 percent of Manville's annual income until all claims were settled.
In 1989, a holding company (later renamed Riverwood International Corporation) was created for Manville's forest products operations. The company then embarked on a plan to double its size over the next five to seven years. In September 1989, the company acquired Papelok S.A., a paper mill and corrugated container plant in Brazil. In November, Thomas H. Johnson--who had served as president of both the coated board and paperboard divisions of rival Mead Corp.--became president of Manville Forest Products.
In the early 1990s, Manville Forest Products relocated its headquarters from West Monroe, Louisiana, to Atlanta, and began plans to embark on an international expansion program. At the time, Manville Forest Products was still largely a domestic concern, with foreign operations limited to Brazil, where a new anti-inflation program was tightening profit margins. In 1990, Manville Forest Products began developing its international folding carton converting base by acquiring DRG Cartons Ltd. (renamed Riverwood International Cartons), Britain's third-largest folding carton concern serving the frozen food, confectionery, and detergent markets and reporting $60 million in annual sales. Manville Forest Products also acquired the assets of the Australian concern Visypack Pty. (renamed Riverwood Cartons Pty. Ltd.), a maker of lithographic folding cartons for the food, consumer products, and beverage industries, with five carton plants and annual sales of $140 million. Manville Forest Products also expanded its base of paperboard production operations with the purchase of Fiskeby Board
of Sweden, a European producer/converter of recycled cartonboard.
In June 1991, the company's name was changed to Riverwood International Corporation after Manville became the holding company for two subsidiaries: Riverwood, which had grown into one of two major players in the beer and soft-drink cardboard packaging industry, and Manville Sales Corp. (renamed Schuller International, Inc. in 1992), an insulation, reinforcement, filtration, and building products concern.
In a move to strengthen the company's focus on the development of packaging machinery systems, Riverwood created a packaging machinery division in 1991. Around the same time, the company began signing customers to leases for high-speed proprietary packaging machinery and, in the process, became those customers, sole supplier of paperboard used to produce beverage cartons and cases. To further develop its machinery business, Riverwood made several acquisitions, including Minnesota Automation Inc., a global supplier of packaging machinery; the JAK-ET-PAK machinery system, which included machinery, technology, patents, trademarks, and trade names; the paperboard packaging and machinery systems manufacturing operations of Jorba, S.A. and Syspack, S.A. (Syspack was later merged into Jorba), two privately held corporations located in Barcelona, Spain, with annual sales of more than $300 million; and M.E.A.D. Ltd., a Brazil company specializing in beverage packaging machinery. The company also entered a joint venture agreement with Rengo Company, Japan's leading producer of corrugated products, to market machinery-based packaging systems in Japan.
Between 1989 and 1991, a period of consolidation in the paper and packaging industry, Riverwood spent $250 million in acquisitions, as sales climbed from $774 million to $993 million, while earnings inched upward from $75 million to $89 million. By 1991, Riverwood controlled 25 percent of the overseas beverage packaging market and 45 percent of the American beverage market. Moreover, the company was the leading supplier of printed paperboard packaging to the domestic brewing industry and was second only to Mead Corp. in supplying packaging to the American soft-drink industry.
After expanding its international and machinery-lease operations, the company turned its attention to increasing its production of coated unbleached kraft (CUK) paperboard, used increasingly in the packaging industry by food and drink companies. By this time, Riverwood had successfully whittled out a profitable niche in CUK paperboard sales and was serving such customers as Anheuser-Busch, Miller Brewing Company, Coca-Cola, PepsiCo, Procter & Gamble, and Unilever.
In the spring of 1992, Riverwood announced it would offer about 20 percent of its common stock in an initial public offering designed to help finance the acquisition of Macon Kraft, Inc., a 525,000-ton linerboard mill in Macon, Georgia. As recent government allowances had granted certain banking companies reentry to the stock underwriting business, for the first time since the Depression, a bank--J. P. Morgan Securities&mdashøok the lead position in a stock offering, heading a Wall Street underwriters team that took Riverwood public.
In June 1992, Riverwood completed an initial public offering of 19.5 percent of its common stock for $172 million and raised an additional $400 million through its public debt offering. In July, Riverwood acquired Macon Kraft (renamed Riverwood International Georgia, Inc.) for $219 million, including the assumption of $169 million of debt, and began a two-year program to convert one of the two Macon plant's linerboard machines to produce Riverwood's proprietary CUK paperboard.
That year, 69 percent of Riverwood's revenues and 76 percent of its profits were generated from sales of specialized paperboard and leases of packaging machinery to beverage and consumer goods companies in more than a dozen countries. Although Riverwood's earnings rose to a record $1.18 billion, costs associated with the Macon Kraft acquisition and conversion, as well as the sluggish economy, led to an earnings decline, and Riverwood's profits fell to just $43.7 million. Before closing out the year Riverwood secured a $50 million line of back-up credit from Morgan Guaranty Trust Company.
During this time, Riverwood established a product development center in Atlanta for machinery-based packaging systems. The company also debuted its Twin-Stack packaging system, becoming the first company to offer a packaging innovation that could accommodate two-tiered can multiples of 12, 18, 24, 30, and 36. Riverwood's Twin-Stack system had numerous advantages over traditional slab packaging, offering beverage manufacturers better package graphics and expanded promotional and merchandising opportunities via paperboard pads separating two layers of cans. The new system also provided retailers improved utilization of shelf space and offered consumers a more compact and portable beverage container with handles and improved weight distribution. Working with PepsiCo, Riverwood began test marketing its Twin-Stack packaging. Four months after the first Twin-Stack pack appeared on store shelves, Mead joined the race for two-tiered packaging sales with its DuoStack system.
Riverwood continued its international expansion drive in 1993, forming a joint venture with Danapak Holding Ltd., the leader in Scandinavian carton converting, to serve the Scandinavian beverage market with packing machinery systems for beverage and foods. The venture was designed to provide beverage customers--in Denmark, Finland, Norway, Sweden, Iceland, Greenland, and the Faroe Islands--with multiple packaging beverage systems that used Riverwood's proprietary CUK paperboard, converted by Danapak into paperboard beverage cartons through Riverwood's packaging machinery.
In 1993, Riverwood also made several moves to improve its short-term financial condition, which was strained by the Macon conversion project and weak containerboard prices and international demand. Those moves included rescheduling debt payments and selling 60,000 acres of U.S. timberland for about $17 million. With earnings continuing to slide in late-1993, Riverwood undertook a series of capital-generating steps: it sold Manville additional stock which increased the parent company's stake in Riverwood from 80.5 to 81.5 percent and gave Riverwood a much-needed infusion of $50 million; it sold another $125 million in bonds in a public debt offering; it brought a former General Electric executive, George F. Varga, on board to assume the new position of chief financial officer; and it initiated a restructuring program aimed at cutting costs and streamlining and consolidating operations which had doubled in size since 1989. Nonetheless, a linerboard glut in the paper and pulp industry, coupled with conversion costs, squeezed Riverwood's profits; in 1993, profits plunged to $1.1 million on sales that remained essentially flat at $1.12 billion.
Riverwood expected its Macon conversion to be completed by late 1994. The new concern promised reduced exposure to commodity price fluctuations and would expand the company's ability to serve the growing and increasingly competitive beverage packaging industry. That year, the company's leases of proprietary machines and sales of twin-pack beverage-can packages were exceeding expectations, and the company's stock prices were climbing.
Moreover, five years of expansion efforts had left Riverwood well positioned to take advantage of three trends which began in the United States and began to develop in Europe in the 1990s: the increase in popularity of cans as the preferred form of primary beverage container packaging, the growth in popularity of CUK paperboard as a form of secondary packaging due to an increase in the size of container multipacks, and the rising popularity of CUK paperboard as a marketing and promotional tool. With packaging never before so important an element in beverage promotions, Riverwood expected to capitalize on the industry trend of using packaging as a marketing tool; industry insiders predicted that the soft drink industry would launch a promotion a week by 1995, up from six promotions a year in the late-1980s.
Riverwood's future seemed increasingly dependant on dominating the niche market for beer and soft-drink packaging, both through machine leases and CUK paperboard production and sales. Future sales to the beverage industry were expected to be paced by growth of two-tiered packaging. Riverwood's Twin-Stack, which had become better known as Pepsi's Cube, 7-Up's Double Dozun, and Dr. Pepper's Double Decker, was expected to realize the greatest profits. Future company earnings related to CUK paperboard were expected to increase substantially after the Macon plant conversion was completed.
Riverwood moved into the mid-1990s as one of a few companies in the world that had operations in all three coated paperboard packaging segments: coated paperboard production, conversion systems, and machinery systems. Internationally, the company had a strong presence in North America and Europe and a growing presence in Latin America and Asia that was expected to help international sales eventually outpace domestic sales.
Domestically, by 1994 the company was producing 50 to 60 percent of all paperboard beer containers used in the United States and 20 to 30 percent of soft-drink containers. Mead produced most of the remaining containers and was expected to remain Riverwood's principal competitor, particularly in sales of two-tiered packaging, though another competitor, C. W. Zumbiel Company, began producing its version of double-tiered packaging in 1993. Riverwood, like others in the industry, expected two-tiered packaging systems to become the standard for packaging as beverage producers move away from slab packaging, giving the company reason to believe that its Twin Stack machines, which could also manufacture slab packaging, would be vital to the industry.
Riverwood's future as a Manville unit remained uncertain in 1994. Manville's two subsidiaries had grown into highly marketable, autonomous operations, with potential for a profitable sale or breakup in the event that the Manville Personal Injury Settlement Trust needed to liquidate its holdings in order to pay $2 billion or more in asbestos victim claims. Regardless of whether Riverwood remained part of Manville, was spun off, or was sold, the company appeared poised to cart away a substantial portion of domestic and international beverage packaging sales for years to come.
Principal Subsidiaries: Agrok Agro-Florestal Ltda. (Brazil); Fiskeby Board AB (Sweden); Fiskeby Board A⁄S (Denmark); Fiskeby Board Ltd. (U.K.); Fiskeby Board S.a.r.l. (France); Igaras Agro-Florestais Ltda. (Brazil); Jorba, S.A. (Spain); Riverwood Cartons Pty. Ltd. (Australia); New Materials, Ltd. (U.K.); P.C. Empreendimentos, Participacoes E Comercia Ltda. (Brazil); Papelok S.A. Industria E Comercia (Brazil); Pine Pipeline, Inc.; Riverwood International B.V. (Netherlands); Riverwood International Canada, Inc.; Riverwood International Corporation; Riverwood International Georgia, Inc.; Riverwood International Japan KK; Riverwood International Limited (U.K.); Riverwood International Packaging, Asia Pacific, Limited (Hong Kong); Riverwood International S.A. (France); Riverwood International USA, Inc.; Riverwood Mehrstuckverpackungs GmbH (Germany); Riverwood Packaging Systems Pty. Ltd. (Australia); Riverwood Rengo Machinery Ltd. (Japan; 60%); Slevin South Company.
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