Jürgen Heindl once described his company as an “ambitious teenager—rebellious, critical, and impatient…” That was 10 years ago. Now, having just turned 25, Progroup continues to grow rapidly and is a remarkable force in the European containerboard industry.
In the early 1990s, an extremely determined and knowledgeable 37-year-old Jürgen Heindl was an experienced industrial engineer who, in solid entrepreneurial style, spotted a gap in the market. Having worked as a director responsible for engineering at a large German packaging company, he saw a clear opportunity for supplying corrugated sheets to smaller-sized box plants that were being neglected by the larger producers.
In 1992, Heindl left his high-level position at the German packaging producer and formed his first company, Prowell, basically on borrowed funds (importantly, while retaining a 51 percent share), and launched an all-out assault on the technical aspects of corrugated sheet production in Europe. Starting with his first corrugated sheet feeding plant in Offenbach, Germany, Heindl said at that time, “The corrugated board industry has reached the limits of conventional technology,” and he set about showing the world how it should be done by revolutionizing the production process.
THE ‘POWER OF INNOVATION’ STRATEGY
Heindl had a vision, which was underpinned by a firm strategy: he wanted to produce corrugated sheet boards as a commodity, using the very latest, bespoke technology, in the most reliable and cost effective way. He called the strategy “the Power of Innovation.” It has three pillars: the business process, the technology, and the product.
One of Heindl’s early visions was of a completely networked production environment using what we now call Big Data, Industrial IoT, and Industry 4.0, which was a technology that allowed customers to be completely connected for online ordering or reviewing of orders. Heindl also forecast, well before online shopping became the norm, that the Internet would be instrumental in the future ordering of products, leading to a mass demand for corrugated boxes.
Fast-forward 25 years and the vision and strategy combined have proved extremely effective. Progroup now has 10 greenfield sheet feeding plants, delivering corrugated sheets to customers all over Europe, as well as two paper mills producing more than 1 million metric tons of high quality corrugated board base paper. The company has a turnover around Euro 804 million (more than US$1 billion) and 1,100 employees, and the strategy of growth continues into the future.
P360 Senior Editor Mark Rushton caught up with Progroup Founder and CEO Heindl at Progroup’s 25th Anniversary celebration, which was held at the company’s Group Office in Landau, Germany.
Paper 360: You have come a long way in what must seem like a short 25 years. How does it feel to have built and achieved so much in what many perceive to be a slow-moving industry?
Heindl: Of course, I feel proved right with my ideas and the vision I had and I am very proud of our achievements. The building up of the Progroup has been exhausting and challenging at times, but developing the company together with loyal customers and dedicated employees has been a great pleasure.
For you personally, what are the most important milestones in those 25 years?
The first milestone was of course the founding of the company, followed by the second milestone only three years later when we doubled the size of our first plant. The establishment of PM 1, which represented a very important step into backward integration, and becoming a papermaker was very important.
Furthermore came the development of the 3.35m-wide corrugated sheet board plant in Rokycany (Czech Republic.) The plant increased the value-added by 35 percent, which means capacity increased to four times the average output of Western European corrugated board factories at that time.
Next, the huge investment in PM 2, our second papermaking facility and the base for our Green Hightech strategy, was a major milestone, as was the formation of our Propower energy division, an important step in the company’s development.
How has the business landscape changed in those 25 years?
In our market, the business has become much more professional as a result of our market entry; otherwise the segment would not have been able to develop. Furthermore, as in any other market, the internationalization of markets has driven much consolidation. There are fewer and fewer, but larger, providers in the market. The integration strategies of companies have also changed.
What do you think the landscape will look like in another 25 years? In the long term, what are the most important factors that will shape the industry in Europe?
From my point of view, the clever construction of business models, together with the development of highly productive plants, will be decisive. After further consolidation of the markets, an investment and modernization offensive will follow. There will be fewer but more powerful companies remaining.
In 1992, at your first press conference, you said, “The corrugated board industry has reached the limits of conventional technology.” In your opinion, what has happened since then? What is Progroup’s approach to adopting new technology? And how good are industry suppliers at delivering the right technology?
The most important step at the beginning was establishing the networking of all processes from the supplier to the customer, including all plant components. Computer Integrated Manufacturing was the precursor of Industry 4.0 at the time. This approach was revolutionary. Along with a greenfield strategy, that is, free of legacy, this was a big breakthrough. Admittedly, it was very difficult to find the right suppliers for the project. BHS, Witron for electronics and control systems, and Dücker took part in the very innovative project.
We are now going further in an effort to automate everything in our mills and plants, with more intelligent and autonomous process controls. Projects like the “three man corrugator,” developed together with our industrial partner, BHS, are important to drive the process in getting ahead of the game, and staying ahead. We have plans in place to embrace the digital transformation across the company, which includes a dedicated R&D team, complete with “future lab” to develop technology bringing in added expertise from technical universities and suppliers.
Looking to the shorter term – and having a strong business in the United Kingdom—what in your opinion will be the challenges associated with Brexit, both from a United Kingdom perspective and a continental European perspective?
I think Brexit is a catastrophe for Europe and the United Kingdom, which actually represents the economic power of the 19 smallest EU states. Economically, this means that not one country leaves the EU, but 19. The importance of Brexit for the United Kingdom is also high, especially if the financial economy suffers.
In recent decades, the economy in Britain has moved away from manufacturing and has relied on services, especially financial services. The exchange rate development will provide an export advantage after Brexit, which must be implemented as a competitive advantage in new markets. This is only possible with products. The United Kingdom will almost certainly become a stronger production location again.
You are now in the next phase of your business growth strategy, the “Two Twentyfive Strategy.” Can you tell us what we are likely to see from Progroup in terms of expansion?
Progroup will double its sales and volume over the period from 2016 to 2025.
Will we see a new paper mill? If so, where will it be situated?
Our expansion plans will certainly require another paper mill in the context of the “growth and integration strategy” of the Two Twentyfive period. The geographic location has not been decided yet.
Can you talk about your own personal plans for the next 10 years, and comment on your son, Maximillian, joining the company as deputy chairman?
First, until the end of 2022, I will still be in the operational function as the CEO and accompany my son Maximillian. From then, my appointment to the supervisory board of Progroup is planned and of course I have enough ideas how to spend time and live with my family outside of business.
Finally, can you give us your overall view of the paper and packaging industry? What, in your opinion, are the main challenges it has from a global perspective, as well as what opportunities lie ahead?
Let’s start with the opportunities: In addition to the general economic situation, the Internet and online business in particular are a major driver for our industry. So, I see good prospects. As risks I expect, as is typical for our industry, a non-functioning capacity management on the containerboard side. There will be the risk of overcapacity, and further problems in the supply of raw materials (recycled paper). We will have to monitor these expectations and developments on a global scale.
Progroup Confirms Expansion With Four Sheetboard Plants and a Greenfield Paper Mill
As Paper360° was going to press, Progroup announced further extensive expansion plans with the proposed construction of up to four more corrugated sheetboard plants between 2019 and 2021 in Central Europe. The group will also start the active phase of preparation for the construction of another paper mill for containerboard in Germany, which is scheduled to start production in 2021. Progroup is embarking on the intensive phase of its Two Twentyfive expansion strategy.
The current thinking is that the start of production for the new, state-of-the-art paper machine will provide a further production capacity of around 750,000 metric tons of containerboard, following a start-up phase. Together with the two paper factories—PM 1 in Burg and PM 2 in Eisenhüttenstadt, which are already manufacturing products in Germany—the total annual production capacity of containerboard will then increase from 1,100,000 metric tons to around 1,850,000 metric tons.