CASE STUDY Media Industries Analysis Twyla Cummings February 15th, 2006 Erin O Dell Brett Lavalla

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1 CASE STUDY Media Industries Analysis Twyla Cummings February 15th, 2006 Erin O Dell Brett Lavalla

INDUSTRY OVERVIEW Professor Twyla Cummings summed up the importance of the packaging industry best when she wrote Almost every product that is shipped or consumed in the world today has a package

2 INDUSTRY OVERVIEW Professor Twyla Cummings summed up the importance of the packaging industry best when she wrote Almost every product that is shipped or consumed in the world today has a package associated with it. Globally packaging is a $433 billion industry. That number is expected to grow to $556 billion in (Swain) Packaging is the number three largest industry in America. 10% of every dollar spent in the grocery store is attributed to packaging. The packaging industry has seen huge growth in recent years. The largest end user markets of packaging are food, beverage, pharmaceuticals, cosmetics and personal care, and pet food. The food industry has seen a lot of changes recently due to recent trends. Much of the corrugated board packaging is being replaced by micro flute because it is lighter and more convenient. Folding cartons are being replaced by stand up pouches made of flexible material. These stand up pouches are more convenient, lighter weight and re-sealable. flexible packaging The beverage industry is also seeing a few changes. There are many new brands emerging and many well-known companies are releasing new products. The beverage industry is also working to produce more innovative and eye-catching package designs. Many companies have tried changing the shape of the bottle or shrink-wrapping the bottle. The cosmetic and personal care market is going international. One trend in this market is using the same package design in many different countries. This presents some challenges to package designers and printers. Many countries have different bar coding systems and languages, thus the design must differ slightly for each variable. The cosmetic industry is also moving toward more innovative package designs. Packaging is a complicated industry. The package must serve many purposes, it must house and protect the product, attract customers to purchase the product, and it must be practical and easy to use. One trend that is taking place in numerous markets is convenience. Packages are becoming lighter weight, easier to open, and resealable. Currently 10 schools in the United States offer packaging as a major. One of the biggest trends in the industry is mergers. Many of the large packaging companies are merging becoming packaging giants. Yet, this has not hurt small niche printers. ( 2

One such niche company is EarthShell Packaging. Earthshell makes environmentally friendly packages for fast food restaurants, universities and government agencies.

EarthShell started in 1998 but was not profitable until 2001 when McDonald s began using Earthshell s clamshell boxes to package their Big Mac sandwich. (www.socialfunds.

In 1978 they had just 23 employees, now they have more than 250 employees. Many of their clients are Fortune 100 companies.

They offer services such as die cutting, embossing and hot foil stamping. Diamond produces packages for: Gillette, Godiva, Coty, L Oreal, and many other companies. (www.diamondpkg.

3 One such niche company is EarthShell Packaging. Earthshell makes environmentally friendly packages for fast food restaurants, universities and government agencies. EarthShell uses starch and limestone to create their packages. These materials make their packages 100% biodegradable. EarthShell started in 1998 but was not profitable until 2001 when McDonald s began using Earthshell s clamshell boxes to package their Big Mac sandwich. ( com) EarthShell is trying to break into the hot beverage cup market, which earns $1 billion each year. ( 3M Logo Timeline We had the terrific opportunity to visit a packaging company, Diamond Packaging in Rochester, NY. Diamond packaging came about in 1911, and then they specialized in folding cartons. They have grown substantially since there start. In 1978 they had just 23 employees, now they have more than 250 employees. Many of their clients are Fortune 100 companies. They make packages for the pharmaceutical, personal care, and photography industry. Diamond aims to keep customers coming back by designing creative and cost effective packages. They offer services such as die cutting, embossing and hot foil stamping. Diamond produces packages for: Gillette, Godiva, Coty, L Oreal, and many other companies. ( EXECUTIVE SUMMARY Minnesota Mining and Manufacturing Co. was founded in Two Harbors Minnesota in At that time the company was comprised of 5 men whose mission was to mine a mineral deposit used for grinding-wheel abrasives. Come to find out these deposits were not very valuable. Thus the focus of the company shifted to sandpaper products. In 1910 Lucius Ordway took over the company and moved the headquarters to St. Paul Minnesota. It was at this point that 3M began to grow into what it is today. The company began taking an innovative approach to everyday life. 3M sought to make aspects of life easier and more efficient. It took many years for 3M to become the global giant it is today. 3M currently offers products to seven different markets, consumer and office, display and graphics, electro and communications, health 3

4 care, industrial, safety and security, transportation. The expansion of markets began in 1925 when 3M invented masking tape. In the 1940 s 3M branched out again when it began producing defense materials for World War II. The company broke into the graphic art market in the 1970 s when they began producing offset printing plates. Also in the 1970 s 3M expanded in the health care market when they began producing pharmaceuticals and radiology equipment. In the 1980 s 3M changed note taking and organization forever when they invented the Post-it note. It is this bundle of innovations and inventions that made 3M into what they describe on their website as a global technology company delivering innovative solutions to life s everyday puzzles. ( MARKETS SERVED As stated earlier 3M offers products to 7 markets. When the company was born 3M was in the industrial market, offering wheel abrasives, and eventually sandpaper. Today 3M provides products for metal fabrication, construction, oil and gas production and woodworking. With the invention of masking tape 3M broke into the consumer market. Today they create products to make homes, offices and businesses cleaner, more organized and more efficient. Examples of these products are Post-it notes, Scotch tape, Scotchgard, and Scotch-Brite cleaning products. ( Effective use of Post-it notes. KEY CLIENTS Key clients are an important part of any business; they make up a huge part of the revenue, and offer the security of repeat business. So who are 3M s key clients? After much research, it was determined that this information was not readily available. Therefore, was sent to 3M inquiring about their key clients. CFA Bruce J. responded stating...no one 4

5 single client makes up greater than 10% of our revenues. Therefore, we are not required to disclose who our top customers are per financial reporting standards. COMPETITION Because 3M is involved in so many different industries the have more than their fair share of competitors. The top three are Avery Dennison Corporation, Bayer AG and Johnson and Johnson. ( Avery Dennison Corporation is the global leader in adhesive labels used on packaging, mailers, and other items. They also make various school and office supplies such as paper hit-lighters, notebooks, binders and fasteners. The most widely known and used product however, is the US postage stamp. Avery Dennison competes with 3M mainly in the consumer and office business market. 3M s next competitor came into existence in 1897 with the invention of aspirin. Today Bayer is a leader in health care products, producing an array of headache and other over-the-counter medications. Bayer also makes diagnostic equipment. Bayer also serves in the agricultural market making crop protection and animal health products. Bayer also makes specialty materials such as, plastics and synthetic rubber. Bayer competes with 3M in the healthcare market. Johnson and Johnson is a world leader in the health care industry. They are split into three segments, consumer products, medical devices, and pharmaceuticals. Their consumer products include over the counter medicine, skin and hair care products, and fist aid products. Their medical devices include surgical equipment and medical monitoring devices. Their largest segment is pharmaceuticals. Johnson and Johnson competes with 3M in the healthcare market. ( 5

FINANCIAL INFORMATION In 2004 3M saw more growth than it s competitors reporting 8.30% compared to Avery Dennison s 2.00%, and Johnson and Johnson s 6.60%.

6 FINANCIAL INFORMATION In M saw more growth than it s competitors reporting 8.30% compared to Avery Dennison s 2.00%, and Johnson and Johnson s 6.60%. Bayer reported a loss of 7.60%. 3M is second to Johnson and Johnson when it comes to net income, 3M reported a net income of $3.16 billion and Johnson s and Johnson reported $9.45 billion in Bayer brought in $1.92 billion and Avery Dennison reported only $ million in ( yahoo.com) 3M is a financial giant they are ranked 105 on the 2004 Fortune 500 listing and are one of 30 companies included in the Dow Jones Industrial average. Their 2004 total sales were over $20 billion. The total net income from those sales was just under $3 billion. 3M reported a quarterly revenue growth of 8.30%. ( SUCCESS STORY 3M had a big success occur on December 21, 2005 when a jury ruled that Avery Dennison Corp. Had infringed upon 3M s patent. The patent is for a film that is designed to apply graphics to difficult surfaces without wrinkles or bubbles. The verdict stated that Avery Dennison could no longer manufacture or sell their EZ Series Fleet Marking Film. Damages will be awarded to 3M; the amount will be determined at a future hearing. Charles Coleman a spokesperson for Avery Dennison said about the verdict, We are disappointed with the verdict as we continue to believe the patent is invalid and not infringed. This is a major accomplishment for 3M because not only did they get rid of the competition for this product; they will also gain revenue in damages awarded to them. This patent infringement suit will also serve as some bad public relations for Avery Dennison. It makes them look like they are stealing ideas and 3M is the innocent victim. 6

7 CONCLUSION 3M has grown significantly since there start in What began as a mining and manufacturing company comprised of 5 men has grown into a global giant with billions of dollars of income and more than 67,000 employees. 3M offers innovative products to 7 markets. They serve the graphic arts and packaging industry with innovative products such as Controltac Plus Graphic Film with Comply Performance, used for wrapping vehicles. They also create many mailing and packing products such as, shipping cartons, tape, padded envelopes and innovative adhesives. 3M s mission is innovation, they are not afraid to break into a new market and they are constantly creating new products. They have been around for over 100 years and they will only continue to grow and advance. 7

8 REFERENCES Earley, Judith. (2000) Industry Focus: Packaging. Retrieved February 10, 2006 from the World Wide Web: Retrieved February 10, 2006 from the World Wide Web: Retrieved February 10, 2006 from the World Wide Web: Retrieved February 10, 2006 from the World Wide Web: Retrieved February 10, 2006 from the World Wide Web: 8

Presenter. Avery Dennison Corporation Date

Presenter. Avery Dennison Corporation Date Presenter Avery Dennison Corporation Date About Us R. Stanton Avery R. Stanton Avery invented the world s first self-adhesive label as a way to merchandise objects. He founded Avery Adhesives in downtown