Interview Transcript

Jerome, let’s take a step back. You joined Sealed Air, as CEO. What did you focus on? What was the strategy, for the business, as you became CEO?

Everything has a context. Sealed Air is, was, a great packaging company. You would go and ask people in the packaging industry and they would tell you, Sealed Air is a great company. That would be one image of the company. Then I would look at the financial results and I would see that EBITDA percentage of Sealed Air, nine years out of 10, it went down, before I arrived. It was a 20% EBITDA company in 2001 and when I arrived, it was a 12.5% EBITDA company.

I would say, this doesn’t compute. A company which is the bubble wrap company. Sealed Air invented bubble wrap and, therefore, became the world leader in protective packaging; every package which protects a product, in a box. It can be bubble wrap, it can be foams, it can be all kinds of protective packaging. World leader, by far. Then the other division, the larger one, would be the food packaging division. In the food industry, the tradename Cryovac would be extraordinarily well known. So an iconic company.

My predecessor had also acquired a company, which became the third division of Sealed Air, a year before I arrived. This was an industrial cleaning company, called Diversey. When I arrived, it was 11 months after that acquisition and the stock had dropped from $26 to $12 or $13, in that 11 months, because the street and many investors had considered that Diversey was an ill-conceived acquisition. You had lots of people, internally, being like the rabbit in front of the headlights of a car, at night. Very scared of how this had happened and this great company is really not doing well. Remember what I told you, nine years out of 10, it had diminishing returns.

So when I arrived, I spent a few months, looking at the overall situation and then I had the vision that this could be, again, a great company. I wondered whether this was a specialty company, which lost it, because its product had commoditized or whether it was a company which, in fact, had to do a few specific things, but had, essentially, a morale problem. In fact, in life, nothing is binary. The easy answers don’t exist. It was not one or the other, but it was a combination of both. But it was a company which had extraordinary leadership positions, in the two traditional divisions that it had.

The mission, for Diversey, was let’s fix that division, that new acquisition and then later on, in a few years from now, we will decide whether it belongs to Sealed Air or whether there should be a better owner for that division. In that case, we will sell it. For the other two, it would be, let’s understand and accept that we are the undisputed leader of protective packaging, in the world, and the undisputed leader of protein packing, in the world and let’s have the courage of that leadership.

Having the courage of that leadership means that the leader needs to lead the industry. The leader needing to lead the industry means that you need to lead in price and you need to lead in innovation. Your customers expect innovation, from the leader, first. If they don’t find it from the leader, they will have to find it somewhere else. But price is the main obsession of the salesman, not of the buyer. When you really dissect – and there have been some very interesting studies done about this – when you dissect the purchasing criteria of the purchasing department, you will see that price comes as number 10, 12 or 13, out of a list of over 20 criteria. Number one is the long-term innovation capabilities of the company. Then the reliability, the supply chain abilities, the technical service, etc. Then comes price, at a point in time. By the way, number 17 or 18 in study that I read, some years back and I think it was from Accenture, you have payment terms.

When you ask the salesman, he’s going to tell you it’s all about price. On a day to day basis, the purchaser will make the salesman believe that it’s about price, but it’s not. Remember that a purchaser will never get fired, because he purchased something slightly too expensive. But he will get fired if his order does not come on time and if his plant shuts down, because the product is not delivered. Supply chain and reliability and quality – and he will get fired if he, systematically, buys cheap stuff, which doesn’t work and which doesn’t do the job. He will get fired for that. Not because he purchased 2% too expensive.

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