Pioneers in the plastic packaging industry

MCG Industries is a proudly South African-owned and managed company of injection moulded crates and containers

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MCG Industries is a proudly South African-owned and managed company of injection moulded crates and containers, which has been serving the market for more than five decades
Serving diverse markets that include beer, soft drinks, agriculture, dairy, bread and poultry, the organisation’s growth has been due to strategic partnerships, keeping up with international trends, innovation, and acquiring a bigger market share within the space.

MCG was initially made up of three divisions: plastic closures, steel closures and the crates division. In October 2013, Sasfin Bank and Zico Investments bought the MCG crate division from RMB Covest. In November 2013, Ian Victor came on board as the Managing Director of MCG to run the crate organisation that was bought.

“The first objective was to assess the plant to see what its condition was. As an engineer, you need to ensure that if you are going to embark on a growth strategy, the plant or organisation meets the required demand or growth,” Victor says.

There are two plants, one in Cape Town, which has seven injection moulding machines, and one in Johannesburg, which has 24 injection moulding machines.

“The first assessment was to embark on a replacement programme of injection moulding machines in Johannesburg because they were fairly old.

“We started a replacement programme in 2015 whereby we purchased five large KraussMaffei injection moulding machines and replaced the older machines,” he explains.

The machines were primarily purchased not only to improve quality but to attract blue-chip customers whom they wanted to target as a customer base.

Once the machines were purchased, Victor approached AB InBev with the idea to install bigger machines with twin mould capabilities, which would result in better and cheaper products as well as better efficiencies that would improve service delivery.

The company agreed, from a South African Breweries (SAB) point of view, to start purchasing twin moulds from a German company called Schoeller Allibert.

“Thereafter, I approached Schoeller Allibert and we entered into a technology agreement whereby they would design all the moulds for MCG and its customers.

“When we approached SAB, we used Schoeller Allibert’s technology to actually design these twin moulds for breweries. This was the start of becoming one of the biggest suppliers to SAB,” he recalls.

This collaboration served to reduce the cost of the crates and improve service. Through this process, MCG became the biggest supplier to SAB and other blue-chip customers within the dairy and bread sector.

The objective of MCG and its shareholders was to grow the business. In 2015, they opened a manufacturing company in Windhoek, Namibia, to manufacture crates.

In June 2016, Sasfin was alerted to a company called LR Plastics, which was one of the bigger flexible packaging manufacturers. The company had gone into business rescue mode at the end of 2015 and was about to be auctioned off. This led to the purchase of LR Plastics.

“Within the first four years, we doubled the MCG Group’s revenue. By 2018, we were roughly a half-a-billion-rand company offering rigids and flexible packaging products. At the end of 2018, we had converted virtually 100% of our business from traders to about 95% end users, which is exactly in line with our growth strategy,” Victor explains.

He explains that the market has been quite depressed in the last five years and that the growth in the organisation has not been due to a very stable growing economy but because of acquiring a bigger market share, through the strategic purchasing of good equipment and by partnering with technology partners like Schoeller Allibert.

The competitive advantage

Victor is an Engineer who has worked in engineering and operations, and because of this experience, he is aware that blue-chip types of customers, such as SAB or Heineken, are always looking for a reduction in their costs.

“Packaging costs are usually expensive. Through the acquisition of the state-of-the-art injection moulding machines, I managed to reduce the costs of the crates to SAB by approximately 20%.

“This is a massive sum of money if you consider breweries, like SAB, purchasing between five to eight million crates a year. The cost saving primarily came from bringing in our technology partner and purchasing the type of machines that could run twin products, so, you could run two crates at the same time.

“This reduces the overhead and reduces costs. In the last three to four years, MCG has commanded around 55% of their allocation, so we have manufactured about 50% to 55% of the allocation offered to converters.

“There were about six converters of a similar nature to MCG in the industry in the South African market. With the market share of 50% to 55%, we have done well,” he says.

Blue-chip customers are always looking for extended payment terms. MCG is one of the first converters to assist the blue-chip customers moving from a 30- to 60-day payment term to a 90- to 120-day payment term. This is something that isn’t very easy and is a big barrier to entry for smaller players.

“From 2014 to where we are now, MCG is an extremely strong brand and through the acquisition of flexibles, we carried that brand name to enter the flexibles industry. We built a company, which had a workforce of about 100 people and, today we have 350 people,” Victor says.

Additionally, handpicking employees who are loyal to you and whom you can trust, and being a one-stop shop, where you can purchase the entire basket of products at a group price are what adds to their competitive advantage.

Trends and technology

Victor believes it is crucial to stay updated with international trends and products in order to constantly match and meet evolving customer requirements.

“We have to stay updated with technology because our customer base in this country expects it from us. All your leading brands are here as well, such as Appletiser, Coca-Cola, AB InBev and Heineken.
“This forces you to move with the trends because if Coco-Cola in America makes a decision to change to a different type of bottle, they would expect Coca-Cola South Africa to follow suit,” he says.

Victor stresses the importance of technology, research and development.

“I believe in continuously conducting your research and development and bringing technology into your plant, processes and your products.

“At the forefront of technology in our specific industry is looking at biodegradable or compostable type products. That’s the type of product that MCG is trying to market for the next century to come—products that are environmentally friendly and customer-friendly,” he explains.

Victor sits on the packaging board of Packaging SA, and they are challenged by environmental issues.

“Plastic packaging can never go away because there isn’t any real replacement for it. Thus, what we need to do is look at the sustainability of our products.

“In the crates business, this is a returnable product—when you make crates for bottles, the bottles are returned in the same crates. This is part of sustainability because you are not getting rid of these crates. Once these crates start breaking, they are sent back to MCG where they are recycled and made into new crates. Therefore, the best form of sustainability is actually a product’s return ability,” he explains.

Crates are the ideal environmentally sustainable packaging product and MCG is arguably one of the biggest recycling companies in South Africa because at least 40% to 50% of its rigid products are made from recycled material.

Being an innovative organisation, Victor explains that MCG is looking at compostable types of products.

“Biodegrading is usually when you incorporate an additive into the polymer that the plastic is made from, and is probably not the long-term solution. Compostable, on the other hand, is when the product goes into the earth and is not harmful to any form of life.

“This process is not one of putting any additives into polymers but making a polymer that is the compostable mechanism. When these products decompose, it turns back into water and gas that are not harmful to the environment.

“This is the type of technology that MCG is already busy with and will be introducing to retail sectors as well as customers,” he enthuses.

A question of leadership

In terms of the important leadership lessons he’s learnt during the course of his career, which have moulded his personal brand of leadership, this seasoned businessman says, “I believe you are born with certain leadership skills. I have always had leadership roles during my life. I think there is an element of either being born with it or being brought up in a home where you have strong leaders.”

Victor believes effective leadership is when you have people who believe in you as a leader—you show leadership skills and they trust in those skills. They believe and trust in your strategy and they drive your strategy.

“Leaders are people who can make decisions. Sometimes, you make a good decision and sometimes you make a bad decision, but effective people are clear and know where they are going to, even if they don’t necessarily know how they are going to get there. They know what their objective is and the people who work with see it as well,” he concludes. 

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