Article:

Transcend Packaging: growing on a rising tide of demand for sustainable products

06 September 2021

Disrupting the packaging category, Transcend is Europe’s largest producer of paper straws, producing several billion straws, cartons and cups annually. 

Supplying and partnering with major international brands with many in the quick service restaurant industry, their objective is to deliver the highest quality sustainable packaging for clients and the environment.

We spoke with Justin Bailes, Corporate & International Development Director at Transcend Packaging, featured as one of 10 The Sunday Times Fast Track 100 Ones to Watch in 2020.

We spoke with Justin Bailes, Corporate & International Development Director at Transcend Packaging.

 

Can you talk us through the growth journey your business has been on over the past 12 months?

Our business is focused on sustainable packaging, which is coming more to the forefront of people’s thinking, even amongst consumers and end users of the products. A lot of what we’re doing is driven by this change from plastic to paper and other products. We supply heavily into the food service industry, where a lot of companies have real goals to reduce the impact of the packaging of things like burgers, sandwiches and salads on the environment – to remove plastic and to make it more sustainable.

We offer a series of products that do that, from paper straws to takeaway containers to cups. Our product mix, and the fact that the markets are moving in that direction, is fundamentally lifting the growth of our business.

In 2018, our first year of published financials, we generated around £30,000 in revenue. In 2019, we did £2.7m and last year £10.4m. This year, we’ll do about £20m. So we’ve grown rapidly during the last few years. We now employ between 250 and 270 people, including agency workers.

What has worked well? What lessons have you learnt?

Managing a high growth business is like juggling knives while riding a unicycle. That’s in the best of times. In the past 18 months of COVID-19, it’s been more like juggling knives while riding a unicycle down a bumpy road with a blindfold on.

It’s been very difficult because we’ve seen enormous changes in the way consumers get their product delivered to them. Going into COVID-19, 30% or 40% of restaurants might have done delivery. Today, maybe 80% of restaurants do. Restaurants have had to massively adapt their model of business, which means the packaging they need has changed dramatically. And over the last 12 months no one has been able to forecast, with any reasonable accuracy, the kind of massive changes not only in demand but in the type of demand. That’s been an incredible challenge. The only way you can deal with it is to be very adaptable – fleet of foot. You have to make your best guess about what demand will be, and then, if it’s wrong, you have to quickly adapt to the way things actually are.

What is the outlook for your business growth in the coming 12 months?

Over the next 12 months, things are going to accelerate. You have the European single-use plastic ban, as well as the UK’s single-use plastics initiative. You’ve got plastics taxes being developed in the EU. But fundamentally, change is being driven by consumer preferences. It’s not just legislative.

It takes some time for large organisations to test, validate and launch new packaging formats into their companies. I think over the next 24 months you’re going to see a tremendous amount of innovation as there’s a big shift in the way our customers deliver their product to their customers.


To what extent has ESG and sustainability awareness driven your business’ growth?

If you looked at the top 100 fastest growing brands, 95% of them would have sustainability as one of their top three mission points, probably across every consumer-facing sector. Every one of our major customers has a plan to align themselves to that value set. Regulation helps, but that’s not what’s driving it. Regulations are the codification of what is a consumer preference –the output of a sea change in what people want and expect from companies. Younger generations are really concerned that their consumption is not coming at the expense of the environment.

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Many sectors continue to experience a skills shortage coming out of the pandemic. Are you finding it difficult to find the right people?

It’s a difficult environment to recruit employees, certainly for entry-level jobs. That’s driven by some combination of Brexit, the furlough scheme and other factors. Unemployment rates are relatively low – about 4.1% in Wales, this is compared to 4.7% in the UK currently. A lot of people in our industry are experiencing similar difficulties.

What have you found works well with attracting and retaining good employees?

It’s not just about the job. Employees like to know that the work they’re doing matters, not only to themselves, but also to the greater society at large. We have a strong mission here at Transcend. We’re trying, in our own way, to make the world a better place. We hope our employees buy into that mission as well. We hope that makes it easier to recruit people and retain them. And we’re creating a strong culture of accountability, performance and teamwork within our business.

We’re also constantly trying to improve the level of technology in our manufacturing operations. We’re in our fifth generation of technology implementation in terms of paper straw making. With each generation, we’ve massively increased productivity. The more that we automate the production process, the more each worker can move from being a basic machine operator to more of a technical operator with more interaction with the machine. We must train people and build those skills within our employee base.

How have you found the balance between thinking strategically about your business vs. dealing with operational changes and challenges presented by the past 12 months?

Ideally, I would spend 100% of my time thinking about strategy. I don’t. But the senior management team is relatively deep here and we’ve been able to ‘divide and conquer’. Some of us spend more of our time thinking about where we need to be in three, six, 12 or 24 months from now, or the next three or four years from now. Other people in the senior management team deal with the day-to-day ‘getting things out the door’. We’re lucky to have the breadth and depth to be able to do that.

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Is ESG and the sustainability agenda the main growth opportunity for your business in the coming 12 months?

We’re dealing with a shift that is global in nature and that’s principally being driven by consumer preferences. The brands we work with, the McDonald’s and the Starbucks, are looking to change their packaging to their consumers –on a global basis.

 

While consumers are driving the change through the brands – they vote with their feet and the brands are responding.  This is resonating through governments who are implementing legislation, regulation, and tax incentives to accelerate the change.  As a result, we’ve been undergoing an R&D programme over the last two years to develop new product categories that we’re going to be launching over the next 12 to 24 months that will hopefully fill these needs in the marketplace. Most of the product categories we are developing are globally applicable. These new products will be the single biggest driver of our growth.

We’re probably selling to 12 different countries today and that number will be much higher in the coming months. Then we’ll be looking at our strategy beyond Europe. How do we supply some of the same products to the same customers in different geographies? In some cases it may be through acquisition and in some places, partnership.

What do you see as being the biggest risk to your business’ growth in the coming 12 months?

At the moment, supply chains are very disrupted, with lead times on raw materials increasing from 6-8 weeks, up to 12 to 18 weeks. The two biggest risks to us are, firstly, risks of supply of raw materials and components we need to make our product. Secondly, it’s getting the right people in the door to continue to grow our business the way we want.

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In 2020, your business raised £10m from an investment round led by IW Capital. What advice could you share other business leaders interested in raising funds in this way?

It’s important as a management team that you find a private equity fund that is aligned with your growth plans for the business, that backs your type of strategy and understands what you’re going through. Otherwise, you’ll have a difficult relationship.

The due diligence process should be a two-way street.  Who they are? What do their portfolio companies say about them? What have been the challenges in the relationship? What have been the positives? Do research into how they deal with their portfolio companies and make sure that aligns with where you want to be.

Lastly, remember that private equity firms need you more than you need them. These firms need the entrepreneur of the medium-sized business, because their job is to put money to work. There’s a tremendous amount of dry powder in the private equity world today. So as an entrepreneur you should shop around. If you have a good company and a good growth story, you will have several firms interested in you. Use that to your advantage to get the best deal.

If you could share a single learning for business leaders for the coming 12 months, what would that be?

Be systematised early. If you start out as an entrepreneur, you’re used to making all the decisions and running the show; but you will not be able to grow your business beyond a certain capacity. You must systematise, develop teams of people to do roles, and have financial information systems that provide you with the information you need to make strategic decisions and course corrections.
 

Develop systems early, because as you grow it gets geometrically harder to do.


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