110 Park Street
Incorporated: 1940 as Tissue Papers Ltd.
Sales: £1.86 billion ($3.22 billion) (1998)
Stock Exchanges: London New York
Ticker Symbols: BNZL (London); BNL (New York)
NAIC: 42213 Industrial and Personal Service Paper Wholesalers; 42261 Plastics Materials and Basic Forms and Shapes Wholesalers
Our mission is to provide service of such excellence that customers always prefer Bunzl to be their supplier; support manufacturers who actively assist in satisfying our customers needs to the benefit of all; create a safe, satisfying, and rewarding environment for our employees by encouraging initiative, teamwork, and pride in the achievement of our business objectives; consistently achieve financial performance above both industry average and the minimum expectation of our shareholders.
1854: Bunzl & Biach, a predecessor of Bunzl, opens in 1854.
1927: Bunzl & Biach begins making cigarette filters.
1938: Hitler annexes Austria and Bunzl family flees to Britain.
1940: Hugo Bunzl founds Tissue Papers Ltd. in Britain.
1952: Tissue Papers Ltd. changes name to Bunzl Pulp & Paper Ltd.
1954: Bunzl establishes American Filtrona Corporation.
1957: Bunzl makes first public stock offering.
1970: Bunzl acquires its Austrian parent company--Bunzl & Biach.
1980: Bunzl divests Bunzl & Biach.
1984: Bunzl sells American Filtrona.
1997: Bunzl forms Bunzl Extrusion; reacquires American Filtrona; purchases Grocery Supply Systems.
1998: Bunzl acquires The Paper Company and Enitor.
1999: Bunzl acquires Provend Group plc.
Bunzl plc is an international group of companies active in 220 locations in 21 countries. After a period of significant reorganization in the late 1980s and early 1990s, the company has focused its operations on four key business areas. Its largest division--Outsourcing Services--is a leading supplier of food packaging materials, disposable supplies, and cleaning products to supermarkets, caterers, and hotels in North America, Europe, and Australia. Another division, responsible for supplying cigarette filters and self-adhesive tear tape through subsidiary Filtrona International Ltd., is the world's largest provider of outsourced cigarette filters. The company's Paper Distribution division is one of the most significant fine paper merchants in the United Kingdom and Ireland. In addition, Bunzl's Plastics division provides plastic protection parts to businesses throughout the world, and is the leading U.S. extruder of custom plastic profiles used in retail, transportation, and lighting.
While Bunzl was set up in the United Kingdom in 1940, it was the offshoot of a much older and larger Austrian enterprise, which began in 1854 as a haberdashery business in Bratislava, Czechoslovakia, and moved to Austria in 1883. From haberdashery it moved into rag trading, and from that into textile and paper manufacturing. The firm traded as Bunzl & Biach, and was run from an early date by the Bunzl family. By 1914 the firm was well established in the textile, paper, and pulp industries, and had branches throughout the Austro-Hungarian Empire.
In the late 1920s Bunzl & Biach developed what was probably the world's first cigarette filter. It was actually invented by a Hungarian called Boris Aivaz, but as it was made from crepe paper Aivaz needed the cooperation of a paper manufacturer. The filters went into production in 1927, and over the next ten years were sold to cigarette manufacturers in 15 countries. The idea did not catch on widely, however, and cigarette filters were no more than a sideline for the firm in the 1930s.
The business, still owned and run by the Bunzl family, continued to prosper until Hitler's annexation of Austria in 1938. The Bunzls, being Jewish, had every reason to fear a Nazi takeover and had taken the precaution of moving the company's headquarters from Vienna to Switzerland two years earlier. They also had a subsidiary company in London, Bunzl & Biach (British) Ltd., which gave them an alternative base. When the Nazi government took over the company's Austrian assets, most of the family emigrated, some to Switzerland and some to the United States, but the majority to the United Kingdom.
A Wartime Move to the United Kingdom
In this new environment the family began to rebuild its business, some concentrating on textiles and some on paper. The latter group was headed by Hugo Bunzl, who had been the first to show interest in the idea of cigarette filters. In 1940, he and several colleagues founded Tissue Papers Ltd., a company manufacturing tissue and crepe paper, together with the cigarette filters, in U.K. factories. This business remained very small during the war years, with fewer than 30 employees in 1946.
Following World War II, in 1946 the Bunzl family regained control of its Austrian business, but Tissue Papers Ltd. continued to develop independently. It took on the international distribution of the Austrian company's paper products, and in 1952 changed its name to Bunzl Pulp & Paper Ltd., but continued to manufacture its own products in the United Kingdom.
Among these were cigarette filters. In the postwar period, filter-tipped cigarettes became more popular, and this side of Bunzl's business gradually expanded. In the 1940s filters were still made from paper, and the production process was a slow one. A number of chemical companies experimented with other materials and eventually Eastman Kodak came up with a superior material, cellulose acetate tow. Filters made from this material proved to be more efficient and could be produced at higher speed. Bunzl began to use this material in 1954 and the cigarette manufacturers responded by launching more filter-tipped brands.
This technical advance coincided with the first indications from medical research that cigarette smoking could be seriously harmful. The World Health Organization published one of the earliest reports on the subject in 1955. Another ten years were to pass before the link with lung cancer was conclusively proved, but from the mid-1950s filter-tipped cigarettes began to be seen as a way of reducing whatever health risk there might be.
As a result, the new filter-tipped brands started to gain market share rapidly in all the developed countries. Bunzl rose to this challenge with remarkable speed and success for a small company. In the United Kingdom it quickly stepped up its output and became virtually the sole supplier of filters to the two companies which then controlled 90 percent of the cigarette market, Imperial Tobacco and Gallaher Ltd. Both these companies had tried making their own filters but decided when the technology changed to buy their supplies from Bunzl.
American Interests and Going Public in the 1950s
In the United States, the Bunzl family set up a separate company, American Filtrona Corporation, in 1954. This company and Bunzl Pulp & Paper had shares in each other's business but neither controlled the other. Besides supplying their home markets, both established overseas subsidiaries, some wholly owned, some jointly owned, and some in partnership with local interests. In this way the Filtrona group, as it came to be called, soon became the world leader in cigarette filters. By 1964 the group was manufacturing in five European countries, the United States, Canada, South Africa, Australia, India, Brazil, and Argentina. The companies directly controlled by Bunzl Pulp & Paper increased their filter output 12-fold between 1956 and 1964.
Meanwhile, the company was expanding in other directions. Its international paper trading business was growing steadily, and it had several factories in the United Kingdom making a variety of paper and packaging products as well as filters. In the late 1950s its profits began to rise steeply, and in 1957 the company went public. Only 30 percent of the equity was released onto the market at that stage, and the Bunzl family retained control of the company for another decade.
In its first 11 years as a public company, Bunzl's profits rose uninterruptedly, from less than £1 million a year to more than £5 million, and the company became a favorite with investors. However, its growth was mainly due to the success of filter cigarettes, which was unlikely to continue at the same rate. In the United Kingdom, filter cigarettes grew from 11 percent of the market in 1959 to 70 percent in 1968, but after that their share grew more slowly. At the same time, awareness of the health risks of smoking, with or without filters, was increasing throughout the 1960s, and governments began to impose restrictions on how cigarettes could be marketed.
Bunzl suffered its first reduction in profits in 1969. Apart from the adverse market conditions it was beginning to face, the company fell under a cloud in 1967--69, when the Monopolies Commission held an inquiry into the supply of cigarette filters in the United Kingdom. This was instigated by Courtaulds, which had been supplying Bunzl with the acetate tow it needed, when Eastman Kodak and Bunzl jointly set up a factory in the United Kingdom to produce this material themselves. The commission eventually rejected Courtaulds's complaints, ruling that although Bunzl was in a monopoly position it had not abused it. Even so, the publicity was unwelcome because it drew attention to the company's vulnerability.
Against this background of assorted threats to its main profit earner, Bunzl saw that it must reduce its dependence on the cigarette market by expanding more vigorously in other directions. The company already had a foothold in the packaging market and its first thought was to develop this area. In the late 1960s, through a mixture of product development and acquisitions, Bunzl moved into the production of polythene film and bags, self-adhesive labels, tapes, and plastic tubes.
In 1970, a much more ambitious step was taken: Bunzl Pulp & Paper took over Bunzl & Biach, its one time big brother in Austria. The U.K. company had long been selling the paper products of the Austrian company overseas and by 1970 was the bigger of the two. This takeover increased Bunzl's sales by almost half, raised its work force to more than 7,000, and put it squarely into paper manufacturing as well as merchanting. The enlarged company was split into four divisions--filters, paper, packaging, and plastics--and for a few years profits grew strongly. In 1974, when the paper market was particularly buoyant, profits reached a peak of £4 million, of which less than half came from filters.
In the later 1970s the company found that it could not sustain this progress. Inflation continued to push up turnover, but profits did not regain their 1974 level for nine years. Taking inflation into account, there was a steep decline in real terms. The main problems were in the filter market. In the developed countries cigarette smoking was declining, and cigarette manufacturers were increasingly making their own filters. Imperial Tobacco, Bunzl's biggest single customer, began to do so in the 1970s. In less developed countries there were still growth opportunities, but Bunzl was by then struggling to maintain existing sales levels.
At the same time, the company's diversification program failed to deliver the expected benefits. The Austrian paper mills faced increasing competition from Eastern Europe and were badly in need of re-equipment. After paying interest on the debts they had accumulated, there was no surplus to swell group profits. In the United Kingdom, the plastics division successfully broke into new markets, particularly pipes for building and agricultural uses, but against that Bunzl made an ill-judged entry into the data processing business which resulted only in losses.
By 1980 it was clear that the company must find a new strategy. In that year it took the painful step of selling its Austrian paper business, which it had only owned for ten years. This sharply reduced the company's turnover and work force, but improved its financial position and opened the way to new acquisitions. At the same time G.G. Bunzl, who had headed the company since 1961, handed over the chair to Ernest Beaumont, (a Bunzl by birth, who had changed his name), and a new chief executive, James White, was brought in from outside the company.
Under the new team, Bunzl was reorganized into three divisions: filters, pulp and paper merchanting, and industrial. After the sale of Bunzl & Biach, the company's work force was down to about 4,000, the majority based in the United Kingdom, and around 70 percent of its profits were coming from the declining filter business. Of its other businesses, pulp and paper trading was the next largest contributor to profits and it was decided to develop this division. In particular, Bunzl was attracted by the growing business of distributing specialized paper and plastic products to industrial customers, such as supermarkets and airlines, as opposed to trading in bulk paper and pulp.
Rapid Expansion in the 1980s
Between 1981 and 1984 Bunzl systematically bought its way into this business, first in the United States, state by state, then in Australia. Among its more important acquisitions were Jersey Paper and the PCI/Mac-Pak Group--which entered Bunzl into the market for supplying food packaging materials to American grocery stores--and there were many others. By the end of 1984 Bunzl's sales were five times those of 1980, and profits had grown from £11 million to £28 million. More importantly, the company had finally freed itself from its long dependence on cigarette filters, which contributed less than 20 percent of profits in 1984. That year Bunzl cut its link with American Filtrona Corporation.
The success of this diversification plan led the company into what Jane Fuller, writing in the Financial Times on March 28, 1990, called 'a headlong rush for growth.' In the years 1985--87, Bunzl raised capital from two rights issues, increased borrowing, and spent some £400 million on acquisitions. Around 70 separate purchases were made. In contrast to Bunzl's previous policy, many of the acquisitions took the company into fields quite unrelated to its existing business, such as parcel distribution, graphic arts supplies, food service, and electrical equipment distribution. Between 1987 and 1990, Bunzl made a series of acquisitions that enlarged Bunzl Building Supply Inc., its U.S. building materials group, which distributed products to contractors, retailers, and industrial users. Bunzl expanded the three core divisions it had established in 1980 to five, encompassing a multitude of different products.
This policy worked well in the short term. Profits raced up from £28 million in 1984 to £86 million in 1987, and earnings per share also increased. However, problems soon emerged among the acquisitions, and by 1987 the company had started to shed some of the more troublesome ones. Most of the transportation division was sloughed off in 1988, along with other company holdings, and profits made only a small advance. In 1989, the company was back to four divisions: paper, building materials, plastics, and cigarette filters. Turnover was down by six percent, and profits slumped by 30 percent. James White, who had become chairman in 1988, came under sharp attack from shareholders and admitted in 1990 that 'with the benefit of hindsight we made too many acquisitions too quickly.' Unbundling some of those acquisitions in order to bolster the company's profitability remained a Bunzl priority into the 1990s.
Refocusing in the 1990s
James White left the company as a result of a management shake-up in November 1990, and David Kendall--former managing director of BP Oil and Bunzl's non-executive director since 1988--was appointed chairman. In 1991, Anthony Habgood took the helm of the company and made the divestiture of non-core operations a top priority. In his first 18 months, Bunzl sold or closed 20 businesses. In February 1992, Bunzl exited the food service sector with the sale of Bunzl Food Service. Two months later, Bunzl rid itself of several unprofitable paper interests and in 1993 reported its first increase in profits since 1988. Not yet done, Bunzl sold its building supply arm in June 1994.
At the same time that Bunzl pruned many of its operations, it also bolstered the division that had quickly become its most profitable: outsourcing services that supplied disposable food packaging materials to supermarkets, caterers, and hotels. By 1994, this division accounted for over half of the company's profits. Supplying disposable food packaging material to supermarkets was a stable business niche, which, unlike the building materials market, was a non-cyclical and growing enterprise. Fueled in part by time-strapped Americans' appetite for ready-to-eat (or ready-to-heat) meals from supermarkets, grocery stores required an ever greater number of microwavable plastic trays, Styrofoam containers, paper napkins and cups, and bags. Consolidation in the grocery store industry also increased this market since large chains did not want to waste valuable warehouse space by filling it with disposable (and often bulky) packaging items.
Bunzl continued to expand its food packaging empire, making a number of acquisitions that further developed its outsourcing arm. In 1993, Bunzl purchased Automatic Catering Supplies and Ziff Paper, a New England distributor of paper and plastic disposables. Five paper and plastics companies were added to Bunzl's roster of operations in 1994. Three years later, Bunzl bought Grocery Supply Systems, as well as the supermarket supply business of a division of International Paper.
During its period of restructuring, Bunzl also concentrated on its cigarette filter and plastics divisions. After establishing a small U.S. filters operation in 1993, Bunzl re-acquired American Filtrona for $178 million in 1997 to help meet growing demand. As a corollary to its filter production, Bunzl also manufactured the tear tape used in cigarette and other consumer packaging, a niche it entered after purchasing P.P. Payne Companies in 1996.
Bunzl grew its plastics operations in 1997 when it added Bunzl Extrusion to its operation. In 1998 it acquired Enitor, a Netherlands-based extruder of plastic profiles. This purchase represented Bunzl's first foray into the European extrusion market. By acquiring The Paper Company in 1998, Bunzl strengthened its position as a fine paper distributor in Britain.
Perhaps the greatest indication of Bunzl's shift away from being largely a paper and cigarette company (as it had been for most of its history) occurred in 1998 when FTSE International (a joint venture between the Financial Times and the London Stock Exchange) listed the company in its 'Business Support Services' sector instead of in its customary 'Paper, Packaging, and Printing' sector. Indeed by 1998, Bunzl's outsourcing operation accounted for well over two-thirds of its sales. Emphasizing its increased presence in this area, Bunzl acquired Provend Group PLC in 1999. This strategic purchase expanded Bunzl's disposable supplies business in the United Kingdom, and also enabled Bunzl to enter into the complementary vending machine business.
Principal Subsidiaries: Filtrona International Ltd.; Bunzl Fine Papers Ltd.
Principal Divisions: Bunzl Plastics Products; Bunzl European Distribution.
Principal Competitors: Amcor Limited; Menasha Corporation; Dart Container Corporation; Rexam PLC; Jerfferson Smurfit Group plc; Sealright Co., Inc.; Sweetheart Cup Company; JPS Packaging Company; Wausau-Mosinee Paper Corporation.
August, Oliver, 'Bunzl to Widen Portfolio,' Times (London), September 2, 1997.
'Bunzl Foodservice: After a 12.5 Percent Sales Loss, the Parent Company Calls it a Day in Foodservice,' ID: The Voice of Foodservice Distribution,' February 1, 1992.
The Bunzl Group of Companies, 1854--1954, London: Bunzl, 1954.
'Bunzl's Three-Point Acquisition Strategy Keeps Business Booming,' Building Supply Home Centers, March 1, 1990.
Eadie, Alison, 'Rugby Group Buys Bunzl's U.S. Building Supplier,' Independent (London), June 18, 1994.
'Habgood Sorts Out Bunzl's Bungles,' Daily Telegraph (London), September 12, 1991.
Murray, Alasdair, 'Bunzl Spends Pounds 75m on Buying and Plans More,' Times (London), September 3, 1996.
Stevenson, Tom, 'Bunzl Cashes in on Niche Control,' Independent (London), September 5, 1995.
Source: International Directory of Company Histories, Vol. 31. St. James Press, 2000.