Progroup’s Unique Business Model

view of the corrugator machine in plobberg
View of the corrugator machine in Plößberg, one of 11 corrugated sheetfeeder plants that Progroup operates in Europe. Around 90,000 metric tons of corrugated board sheets are manufactured here each year.

Lots of air and paper — the component parts of corrugated board are easily explained. What is more exciting is the idea of manufacturing corrugated board in a highly productive, environmentally friendly way to deliver “just in time” to small- and medium-sized packaging manufacturers in Central Europe.

It was with this idea that Jürgen Heindl, founder and chief executive officer of Progroup, declared the aim of becoming a technology and cost leader for this commodity market segment in Central Europe. His business model is unique and extremely successful.

After 10 years of working in management roles in the packaging industry, Heindl had a very good idea of what the market was like at the beginning of the 1990s. Long before Amazon came along, the rising demand for packaging materials heralded a clear trend toward goods being delivered directly to people’s houses. There was also the growing discussion around ecology and sustainability. It was clear to him that corrugated board would be the packaging material of the future — and he was equally clear where things in the industry were not quite right. He developed a new business idea and, in 1991, he founded his own company, which was called Prowell at the time. Heindl’s vision was to change the industry and break away from the standard business model.

THE OLD MODEL

As is still common today, in the 1990s large companies dominated the whole value chain, from papermaking and corrugated board production through the manufacture of packaging. Back then, smaller packaging manufacturers only received deliveries from corrugators of integrated packaging manufacturers when there were temporary excess capacities; if there was any doubt, they needed to “make do” with long delivery times. Progroup began to supply corrugated board specifically to independent packaging manufacturers without actually competing with its customers in the precise quality and quantity that they needed, at the precise time when they needed it to be available to the customer. This is still the case today.

“The advantage of our business model is that we do not produce packaging ourselves. This means that, as a corrugated board manufacturer, we do not compete with our customers; rather, we grow alongside them in genuine partnerships that are established for the long term,” explains Heindl. “We are involved in the capital-intensive part of the value chain that is geared toward production and technology, before our customers’ business segment, which focuses more on customizing and providing a service.”

DESIRE TO LEAD THE MARKET SEGMENT

As corrugated board is in principle an exchangeable mass-produced product (commodity), Progroup needed to make the product in large quantities, with the best quality and at low cost, to be able to compete as a newcomer against large corporations. Therefore, Heindl’s aim from the start was to become and remain a market leader, an innovation leader, and a cost leader. This ambitious aim can only be achieved with pioneering technology on a greenfield site — which is why, since its founding, Progroup has relied solely on organic growth and has not made any acquisitions.

Heindl is convinced that technological innovations are the crucial levers for achieving long-term success. With this in mind, he has invested in highly automated production technology that should still be relevant even at the end of its useful life. High speed, the best quality, and product diversity all go hand in hand — and Progroup’s flexible production technology can manufacture any corrugated board sheets that are required.

jurgen heindl
Jürgen Heindl Chief Executive Officer, Progroup AG

The company’s corrugated sheetfeeder plants are linked to one another and to the central organization. All data and orders are managed centrally in one mill system. “If you want to be market leader, you not only need to grow faster than the competition, you need to be highly profitable too. Only then can you invest in more capacity, innovations, and futureproof technology,” says Heindl.

All plants contain the same machines; each is progressively developed so that they remain state-of-the-art. Thanks to the concept of the “learning factory,” Progroup’s corrugators have been available for more than 98 percent of the time over the space of two years, with the exception of scheduled maintenance and shutdowns.

INTEGRATION OF PAPERMAKING, LOGISTICS, AND POWER

Heindl is constantly evolving the structure of his business. In 2001, he commissioned Progroup’s first paper mill to expand the value chain to include the important preliminary stage to safeguard the supply of raw material. Two more paper mills followed; they supply today’s 11 corrugated sheetfeeder plants with containerboard.

A dedicated logistics company was added in 2002 to stabilize the value chain. Progroup Logistics offers a latest-generation electronic tracking and tracing system to ensure that customers receive reliable deliveries. A dedicated fleet and a long-term cooperation with established transport partners handle a large share of the logistics services for the whole group and its supply chain partners.

Since 2011, the company has operated an RDF power plant that supplies power to the paper mill at its Eisenhüttenstadt site in Germany. The impurities contained in the recovered paper, as well as the sludges produced in the adjacent public wastewater treatment plant, are thermally utilized here. This generates the process steam needed for papermaking and much of the power that is required to reduce the use of fossil fuels and CO2 pollution.

SUSTAINABILITY STRATEGY

Since the company was founded, it has had a focus on sustainability. “Growth in the future will be generated against the backdrop of climate change and scarce resources, but also demographic trends and a new environmental awareness among consumers,” says Heindl. “We only have one planet Earth and need to treat it responsibly.”

This is why he has developed his Green Hightech strategy. It is a comprehensive investment, production, and product concept based on lightweight papers, saving resources and energy, reducing CO2, and implementing sustainability measures. This culminates in investments of millions of euros in innovative, sustainable technology, as the PM3 paper mill that began operating in August, 2020, demonstrates.

Progroup’s containerboard is made entirely from recovered paper and is 100 percent recyclable, forming part of a very efficient and sustainable circular economy. The corrugated board end product that Progroup manufactures in its corrugated sheetfeeder plants is reusable and can be returned to the loop through recycling.

The corrugated board varieties that the company has developed itself are based on particularly lightweight papers that it produces with a grammage of between 60 and 90 g. New designs are up to 30 percent lighter than traditional corrugated board grades, but just as stable. Progroup’s “green” Next Board corrugated boards save on resources, water, and energy during production; their lower weight means they also reduce the carbon footprint of the finished packaging during transport.

Progroup’s development as a company has a long-term basis and is planned in strategic periods of 10 years. The goal for the current period is to double the size of the company by 2025 compared to 2015. In addition to the construction of a new paper mill, eight new corrugated sheetfeeder plants and a total of 500 new employees are also planned during this period. The total level of investment for these growth projects is around EUR1.35 billion (almost US$1.42 billion).