Jerome was CEO and President of Sealed Air Corporation, the global leader in food and protective packaging, from 2012-17 where he grew the business to over $7bn in revenue. He led Sealed Air’s transformation programme to regain position as industry leader and increased EBITDA margins from sub 10% - 15%. Jerome previously worked at The Dow Chemical Company for 35 years, one of the top 3 chemical producers globally, serving in a variety of leadership roles throughout the world. He spent most of his career in Dow AgroSciences, before serving as President and Chief Executive Officer of Dow Advanced Materials, a $12 billion revenue unit of Dow serving customers in more than 130 countries.Read moreView Profile Page
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.
You communicate externally and you communicate internally. Externally, you take a strong stance and say, to investors, we are the leader, we will act as the leader. Our prices are too low, we have to increase our margins. For that, we will raise our prices, because we are not in the business of absorbing cost increases, because it is not all about price; it is about our innovation abilities and capabilities. We will boost innovation, but we will increase our prices. Externally, this is a very strong message.
Internally, you pump the people up and you say, this is over. You need to pull your shoulders back. We are better than what we have done and we are the world leader in two of our divisions. We need to exercise that leadership. Then you go and tell the people what you expect from them, after having clearly understood, which is what took me about two to three months, the SWOT analysis. What are our real key strengths, our weaknesses, our opportunities and our threats? We announced price increases and our worst enemies were our salespeople. They lived in a prior culture where they did not believe that we could raise prices. In fact, they were giving lots of things away. If you give something away, it doesn’t have value.
Charge this and you will see whether your customer still wants it or not. When you maintain equipment, you can’t make the maintenance free. I used metaphors all the time. My understanding is, that when we supply equipment, it has one or two years warranty, then if a customer has an issue with spare parts, with something which is broken, we would go, charging the spare part cost, but not the labor? Is that correct? People would say, yes; that’s what we do. Next time that my boiler, at home, breaks, I will call Sealed Air. You guys come and fix it for me. When I call a plumber, he charges me for the trip to come to my home, he charges me for the spare part and he charges me for the labor. Why don’t we do this to our customers? The only answer they can find, sometimes, in companies, when you identify an issue is, but we’ve always done it like that.
This is not a good answer. Customers will take what is free, but they are not going to give you any respect for that. If you say, we have to come a few hundred miles, we’re going to spend six hours fixing this, doing the trial, they say, of course, I know it costs you money.