Greif Bros. Corporation
Greif Bros. Corporation
Incorporated: 1926 as Greif Bros. Cooperage Corp.
Revenues: $583.5 million (1994)
Stock Exchanges: Chicago
SICs: 2655 Fiber Cans, Tubes, and Drums; 3412 Metal Barrels, Drums and Pails; 2431 Millwork; 2499 Wood Products, Not Elsewhere Classified; 3089 Plastics Products, Not Elsewhere Classified; 2631 Paperboard Mills
Greif Bros. Corporation has been involved in the bulk packaging industry since its foundation and has evolved from the world’s largest manufacturer of wooden barrels into a relatively small, yet highly profitable manufacturer of shipping containers. In the mid-1990s, Greif’s sales were fairly evenly split between its two primary product groups: shipping containers and containerboard. The firm, which boasts that it is “the only manufacturer that offers a complete line encompassing fibre, steel, plastic, multiwall bags and cartons,” ranked as one of Ohio’s 100 largest companies in the early 1990s. Greif had operations in 30 American states and three Canadian provinces in 1995. While one class of Greif Bros.’ stock is publicly traded, the voting class of stock is held, directly or indirectly, by Chairman Emeritus John C. Dempsey, his wife Naomi, and the closely-associated Macauley&Co. After guiding the company for nearly half a century, John Dempsey retired from active leadership in 1994. He was succeeded as chairman and chief executive officer by Michael J. Gasser, who had served as Greif Bros.’ chief operating officer since 1988. At 43, Gasser was the youngest member of the board.
The company, founded in Cleveland, was initially a manufacturer of wooden staves, headings, barrels, and kegs. By 1926, Greif owned 216 manufacturing plants and eight divisional offices, as well as timberlands, logging equipment, sawmills, and cooperages.
John Raible (later characterized by William Baldwin of Forbes as “a wealthy investor with enough other interests to make cooperage only a sideline,”) took over from the founding Greif brothers in 1913. It was perhaps the worst time in the history of the cooperage industry for less than interested management. Wooden packaging, although buoyed during the first two decades of the 20th century by the rise of the petroleum industry, was devastated by the one-two-punch of prohibition and the development and introduction of 55-gallon steel drums. While Greif Bros, sales more than tripled from $11.4 million in 1940 to $36.1 million in 1946, its profitability decreased; net income only increased by 67 percent from $720,000 to $1.2 million during the same period. It was increasingly clear to some observers that traditional cooperage companies would have to diversify or die.
In 1946, John Dempsey, a 33-year-old accountant, mounted a challenge to Raible’s corporate control. Dempsey’s wife and mother-in-law had held stakes in the company, and he accumulated enough other shares to garner a controlling interest in 1946. While the new leader continued to buttress the cooperage business with the acquisition of timber acreage in the postwar era, he also tried to develop a proprietary machine to make the lightweight, disposable kraft-paper drums that were replacing old-fashioned wooden barrels in shipping.
Dempsey assigned a team of Greif mechanics the task of designing a proprietary fibre drum machine, but their attempts were unsuccessful. Faced with the imminent demise of his company, Dempsey acquired the rights to a drum winder from an outside inventor. Throughout the postwar era, he purchased the equipment necessary to manufacture steel, plastic and paper packaging and containers. The company also boosted its container capabilities with the acquisition of an interest in Brooklyn’s Carpenter Container Corp. in 1948. By the mid-1950s, revenues from the new operations had drawn about even with the original cooperage business.
Dempsey’s reorganization was costly. Sales declined by 15 percent from $31.7 million in 1946 to $26.9 million in 1949, and profits dropped by 40 percent, from $2 million to $1.2 million. In fact, it took the company more than a decade to regain the annual revenue and net income records established in the late 1940s; it wasn’t until 1959, that Greif Bros, recovered its record fiscal levels of $40 million sales and $2 million profit.
Though Dempsey eliminated half of the company’s 240 factories by 1963, he parlayed Greif Bros.’ relatively small, but widespread plants, into a competitive advantage. Having production facilities near its clients’ plants helped the company forge close ties with those customers, as well as to save on Greif’s own shipping costs. By the early 1960s, Greif’s product line had expanded to include steel drums, plywood drums, fibre drums, corrugated cartons, wire products and multiwall bags. In 1964, the company’s headquarters was moved south from Cleveland to Delaware, a suburb of Columbus, Ohio.
Greif’s sales more than doubled over the course of the decade, from $45 million in 1961 to $103 million in 1971. Net income followed suit, growing from $2.1 million to $5.5 million as the company grew accustomed to its new emphasis. The company formally recognized its exit from the barrel-making business by dropping “cooperage” from its name in 1969.
Unlike some of its larger, more diversified rivals like Continental Group, International Paper, and Mobil’s Container Corp. of America, Greif Bros, didn’t buy or build any paper mills, even though the company had hundreds of thousands of acres of timberland. Instead, the company acquired 50 percent of Macauley&Co. and its Virginia Fibre Corp. when they were created in 1974. Company namesake Robert Macauley was a “longtime Dempsey associate” and Greif Bros, board member. Dempsey believed that by limiting the parent company’s investment in this capital-intensive business he would limit its exposure to risk and debt. By the early 1990s, however, Greif had increased its stake in Virginia Fibre to 100 percent.
Greif expanded via acquisition during the 1970s, acquiring Chipboard, Inc. and Narad, Inc. Although the disposition of these purchases is unclear, it appears that they developed into Greif’s Michigan Packaging Company and Down River International, Inc. subsidiaries. Michigan Packaging was founded in 1967 and grew into a corrugated sheet board company with three plants in the eastern United States. Established in 1963, Down River started out manufacturing corrugated boxes, and evolved into a specialty producer of corrugated honeycomb filler for packaging and other applications. Acquisitions helped fuel a dramatic decade of growth. Sales nearly tripled from $103 million in 1971 to $307 million in 1981, and net income more than quadrupled, from $5.5 million to $25.2 million. This high level of profitability, combined with the stable majority ownership of the Dempsey family, allowed Greif to fund plant expansions and modernizations internally without incurring debt.
According to William Baldwin of Forbes, Greif ranked second only to Continental in the American fibre drum industry into the early 1980s. At five percent, Greif’s average annual sales increases slowed significantly from the double-digit rate of the 1970s, but outpaced the fibre can industry’s overall annual growth rate of 3.5 percent from 1982 to 1988. Annual profits increased at an average of three percent each year to a peak of $30.3 million in 1988.
But while sales continued to increase fairly steadily in the waning years of the decade and into the early 1990s, Greif’s net income declined by more than one-fourth to $22.1 million in 1990. The reduced profitability was attributed to high capital investments ($66 million in 1989 alone), raw materials price increases, customers’ price sensitivity, and increased global competition in Greif’s primary markets. The company combated these trends by concentrating more intensely than ever on customer service. In the early 1990s, for example, Greif designed an ingeniously simple new shipping drum for Kraft General Foods. The custom-made containers revised the traditional cylindrical drum shape into a cube with rounded corners, allowing vastly more efficient transportation and storage. Whereas Kraft’s trucks could hold 500 of the traditional cans, they could pack in 640 of the new drums.
Greif’s 1990s-era environmental efforts included production of recycled and reusable packaging. As of 1995, the company’s Greif Board subsidiary had been producing recycled-content corrugated board and kraft paper for nearly 30 years, and was working to incorporate more post-consumer corrugated into its products. And in 1993, Greif’s Canadian container subsidiary worked with Ingersoll-Dresser Pump Co. to develop an award-winning reusable container for chemicals and hazardous materials. Progressive efforts such as these reflected Greif’s heritage of meeting market challenges and helped ensure its place in the packaging industry.
By the mid-1980s, John C. Dempsey’s over $300 million personal fortune ranked him as one of America’s richest individuals, according to Forbes magazine. Dempsey was known among his colleagues and friends as “a deeply righteous person who gave of himself.” His strongly-held religious beliefs were reflected in an illustration that graced the back cover of Greif Bros.’ annual report virtually every year he was CEO. It was a photo of the corporate board room featuring Warner Sallman’s famous “Head of Christ” painting. Dempsey served as Greif’s chairman and CEO for 47 years, until 1994, when the 80-year-old’s failing health forced his retirement from day-to-day leadership to the honorary post of chairman emeritus. Dempsey was succeeded by Greif Bros.’ vice-president and controller, Michael J. Gasser.
The advent of new leadership for the first time in nearly half a century ushered in what the new CEO called “an era of great anticipation and virtually unlimited potential” in his first annual letter to shareholders. Gasser vowed to evaluate and reorganize Greif Bros.’ operations, and even suggested the possibility of diversification and acquisition in pursuit of “aggressive growth.” In 1995 the company applied to have both its classes of stock listed on the National Association of Securities Dealers Automated Quotes, suggesting the possibility of an equity floatation to fund expansion. The new leader noted that the moral principles embraced by his predecessor would “continue to play an integral part in the Company’s operating policy.”
Barzon Corporation; Down River International, Inc.; Greif Board Corporation; Michigan Packaging Company; Soterra, Inc.; Contenants Greif Inc. (Canada); Virginia Fibre Corporation.
Raible Division; Seymour & Peck Division; Norco Division; West Coast Division; Corrugated Products Division; East Coast Division; The Cooperage; Plastics Division; Greif Division; International Division; Corrugated Products Division.
Allen, Michael Patrick. The Founding Fortunes: A New Anatomy of the Super-Rich in America, Truman Talley Books, 1987.
Baldwin, William, “Homely Virtues,” Forbes, July 19, 1982, p. 54.
Eckhouse, Kimberly, “Shaped-up Shippers More Space- and Cost-Efficient,” Food Processing, May 1993, p. 134.
“18-Year Veteran Named Greif Bros. President,” Columbus (Ohio) Dispatch, November 2, 1995. p. 2B.
“They’re in the Money,” The Cleveland Plain Dealer, October 14, 1986, p. 1A.
—April Dougal Gasbarre