What’s Inside the Package for the “New” Esko-Graphics: A Conversation with Simon James

By Cary Sherburne, Senior WTT Editor

December 5, 2005 -- In September, Esko-Graphics announced that its shareholder, Kirkbi A/S, had entered into an agreement with Axcel, a leading Danish private equity company, to transfer the ownership and all packaging related activities of Esko-Graphics to Axcel. With capital commitment totaling over €800 million, Axcel invests in competitive medium-sized companies that have the potential for improvement and value creation. Axcel is backed by a group of Danish and international investors from a broad range of industries and the financial sector.

Under the agreement, Kirkbi will retain ownership of Esko-Graphics’ small-format offset activities while actively looking for an industry partner to further develop this business. The new Esko-Graphics will focus on its primary business of the development, assembly, distribution and support of software, equipment and services used to create and manufacture packaging and display materials.

WhatTheyThink spoke with Simon James, executive vice president and general manager of Esko-Graphics North America, to get his perspective on the ownership change and the future prospects of the company.

WTT: Simon, thank you for taking the time to speak with us today. In some of the materials I have reviewed relative to this transaction, Axcel notes that it interacts closely with the management team of a company in which it invests, serving as its business and capital partner to provide the resources and stability required for the implementation of a development strategy. Does Axcel have any other investments in or specific knowledge of the graphic arts industry?

SJ:Axcel is a group that has a wide range of experience in various industries, and it feels that the basics of business are the same everywhere. Having met several Axcel executives, I believe that their business expertise will be of great benefit to us. They are very bright, have already done a lot of research, and understand a good deal about our industry. I expect them to be very good indeed.

WTT: Axcel identifies four areas of focus when considering companies to acquire: Focus on Core Activities, Organic Growth, Restructuring, and Buy & Build. How do these areas apply to Esko-Graphics?

SJ: Axcel expects us to have strong organic growth, and that is certainly our expectation as well. They did a lot of research before deciding to test the thesis that we have the ability to grow organically, and they feel very comfortable that we have market leading products in most of the areas where we compete. So I would say that organic growth is the primary focus. That being said, they are very well financed, and they are keying into new business and acquisition opportunities. That is where the Buy & Build comes in.

WTT: What might the acquisition plans be? Since acquisition of related businesses was listed as one of the reasons for the Esko-Graphics acquisition, I thought perhaps there might be some specific plans in place.

SJ: It is a little premature to speculate on that. There are a number of different areas which would help us build on our portfolio, and as we have seen over the past few years, no company is out of the game. It is a matter of how we prove ourselves, and I believe that any acquisitions would be close to the business areas we are in today. We have a clearly articulated vision here in terms of our Scope workflow, and I think it is safe to say that any acquisition we make will be in line with that vision. I can’t be more specific than that.

WTT: You have stated that one of your goals is to grow sales in all segments. By this, do you mean both packaging and commercial print?

SJ: Primarily packaging. And inside packaging, we have a number of segments that we address. We are clearly innovating in both software and hardware, as well as flexo plate imaging and our Kongsberg digital finishing tables for sample making, the growth of which has escalated substantially this year. Our software applies equally well to the commercial printing side of the house, and we are making great strides there, especially as more commercial printers get interested in packaging. If they are using our Scope workflow for commercial work, they can easily transition part of their business to packaging without having to change software.

WTT: What will Kim Graven-Nielsen, your former President and CEO, be doing now? And any comments about Kim’s tenure in general?

SJ: Kim will be involved with strategic aspects of the business, but less involved with the day-to-day aspects of running the company.

WTT: I understand your new CEO is Carsten Knudsen. What was his role prior to becoming CEO?

SJ: Carsten served in a dual role of CFO and COO. He has had wide experience not only in being the financial officer of large corporations, but also in taking operating responsibility as well. Carsten has had a lot of experience in running groups larger than ours, so we feel very comfortable that he will make a wonderful CEO. He was brought on board soon after the creation of Esko-Graphics about four years ago, so he has been with us since the beginning.

WTT: You also recently announced the launch of a Design Life-Cycle Management initiative. Tell us a little about that.

SJ: The key tools in our Design Life-Cycle Management solution are based around Scope workflow products, and include DeskPack, BackStage, PackEdge and WebCenter modules. These are fully customizable to meet the specific needs of clients. All solutions are modular, allowing easy upgrades and additions over time as client needs change and evolve. The Design Life-Cycle Management initiative is designed to drive these tools to the desktops of creatives and brand managers, giving them more control over the design process.

What we bring to the marketplace here addresses the needs we have heard from the consumer product companies and private-label retail market. They have concerns in terms of the cycle time for bringing new products to market. There are various statistics out there—some 80% of all new product introductions fail, and consumer product companies rely on new products to deliver up to 30% of their growth. A big part of getting a new product to market is the design of the package. And there are between 17 and 40 people involved in the typical approval cycle. You can imagine the time it takes to get the approval and input of all of those people. In the past, everything has been done on paper. But in an increasingly busy and mobile world, people are not always at their desks and a paper-based process causes a lot of delays. Our process lets them carry out approval cycles and other collaborative efforts through the Web.

We have technology that allows brand managers, product development managers, package design professionals, and every other stakeholder in the package design process to view graphics and products in extreme detail, controlling the whole process through a database so that all of the discrete approvals and markups can be done in parallel instead of serially. This speeds the time-to-market process by up to 40%, and gives them more control than ever before.

Think of a powerhouse consumer product company like Procter & Gamble (P&G), for example. It has myriad products under its umbrella. If you can shorten P&G’s product development cycle process by close to half, you can clearly see the substantial difference you can make to its revenue and earnings. It will be able to get better-designed products to retailers and consumers faster, and at far less expense. This is the premise of Design Life Cycle Management, and we have had great reception from the consumer product companies we have spoken to.

WTT: Simon, thanks so much for taking the time to speak with us. It sounds like you are on an exciting path, and we wish you well.

This Interview was conducted by Cary Sherburne. She can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.

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