Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside The ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision and global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs and harness the engine of capitalism, right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. And now welcome Inside The ICE House, here's your host, Josh King of Intercontinental Exchange.
Josh King:
When the kids aren't around and I'm hanging out with my brother, who, like me, is of a certain age, one of our guilty pleasures is to find the streaming service that's currently serving up The Graduate. Mike Nichols, 1967 classic with the Simon & Garfunkel score, starring Dustin Hoffman as recent graduate Benjamin Braddock, and Anne Bancroft as his seducer and psychic tormentor, Mrs. Robinson. But the best line of the movie, to my mind, doesn't come from Hoffman or Bancroft, it's uttered at a welcome party for Benjamin at the Braddock's Pasadena, California home, by Mr. McGuire and is portrayed in a man in the gray flannel suit fashioned by Walter Brook. And there's only one important word to the scene and I'll let you savor it, just like my brother and I do.
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What are you going to do now?
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I was going to go upstairs for a minute.
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I meant with your future. You're lying.
Audio:
Well, that's a little hard to say.
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Ben.
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Excuse me. Mr. McGuire.
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Ben.
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Mr. McGuire.
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Come at me for a minute. I want to talk to you.
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Excuse us, Joanne [crosstalk 00:01:59].
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Look at him, and I can't believe.
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I simply can't believe it.
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I just want to say one word to you. Just one word.
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Yes, sir.
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Are you listening?
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Yes, I am.
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Plastics.
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Exactly how do you mean?
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There's a great future in plastics, think about it. Will you think of that?
Audio:
Yes, I will.
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Enough said, that's a deal.
Josh King:
That's a deal. It's no understatement to say that plastics changed the world. The material revolution began in the early 20th century, but it wasn't until the 1930s, when scientists found a way to synthesize polymers from crude oil at scale and discovered polyethylene, the things that really picked up. This, coupled with injection molding, made it possible to shape and create plastics into new shapes and sizes inexpensively and at scale. After World War II, plastics became ubiquitous, the world began harnessing this new technology, democratizing access to products and tools that had once been unattainable. There was nothing plastic couldn't do, from preserving food more efficiently, helping power our homes, delivering clean water, preserving food, powering our technology and keeping our medicine and medical professionals safe, to more mundane things like providing us with more accessible tools, furniture and toys, including the Lego block. Plastics versatility and manufacturers imagination have helped shape what we have consumed for more than a century.
Josh King:
Along the way, we've also begun to appreciate the effects plastic waste has had on our environment. Scientists, producers, and consumers have turned back to the drawing board to find ways to make this material more efficient, recyclable, and reusable. Behind one of those companies re imagining the role that plastic plays in our lives, is Tom Salmon, Chairman and CEO of Berry Global. He spends a lot of time thinking about these polymers and what his customers can create with them. More recently, the company's focused on how to reduce plastic waste and help its customers do the same. Our conversation with Tom salmon is coming up right after this.
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Josh King:
Our guest today, Tom Salmon is Chairman and Chief Executive Officer at Berry Global, that's NYSE symbol BERY, a fortune 500 global manufacturer and marketer of plastic packaging products. Prior to this role, he served as the company's president and chief operating officer and headed up its consumer packaging, rigid, closed top and engineering materials divisions. Tom joined the company in 2007, with Berry's acquisition of Covalence Specialty Materials, where he led the adhesive division. Welcome Tom, inside the ICE House.
Tom Salmon:
It's great to be with you, Josh.
Josh King:
Great to have a tape man in the ICE House, it's our first tape man.
Tom Salmon:
Absolutely. Great intro as well.
Josh King:
Has Mr. McGuire's premonition always been prominent in your mind?
Tom Salmon:
It hasn't. It was a complete fluke how I got into the plastics business. Got out of college, my mom and dad shared that, "Son, you have a great personality, so get into business." And that's how I ultimately migrated that way and ended up actually selling light bulbs of all things, for GE.
Josh King:
Talking about your mom and dad, I've read that you come from this line of manufacturing workers, your dad was a plant worker and you spent your entire career in manufacturing. What did your father do exactly, and what inspired you about his work?
Tom Salmon:
He was an electroplater in a small little electroplating facility, well before things like OSHA and any type of employee safety type circumstances were taken into consideration. So always grew up with him coming home dirty after a hard day's work, and ultimately it's aligned me with the workers that are so valiant in how they serve our company each and every day. We've got close to 47,000 frontline workers, throughout the pandemic have provided the essential products that people have grown used to. And I think of my dad, every time I see them.
Josh King:
Your dad came home from a long day at work, you were attending Fairport High School, originally home of the Red Raiders, in a village on the New York State side of Lake Ontario, Fairport the crown jewel of the Erie Canal, they called it. What was it like to come of age there?
Tom Salmon:
Everybody knew one another, they took care of the kids. I mean, it was an idealistic place to work and grow up. My dad actually asked me to work with him in the summers when I was a kid. He certainly wanted me to see what it was like to work in a manufacturing environment, to inspire me when I went to college, to do more. And it showed me how people can treat one another in a workplace environment and respect people. I wanted more for our employees as I took on this job, and I learned that from my dad. I literally see my father and everybody across our factories, I want to make certain they're treated with dignity, respect and value.
Josh King:
Berry Global in Evansville, Indiana, much bigger town than Fairport. The great Evansville shipyard was the largest producer of landing craft in World War II, but has since given rise to the home of a massive Toyota plant and AK Steel, which ceased operations in 2020. What brought you from Fairport to the Hoosier state?
Tom Salmon:
A whole series of migrations in terms of work, ultimately was acquired by Berry, as part of Covalence. After serving with Covalence, we combined the two businesses together. They were both owned at that time by Apollo, Josh Harris at the time who was running Apollo, felt it was a great idea to combine these two companies, because there was common raw materials. And I continued to serve and support and run different businesses and also became the COO, and then finally the CEO over five years ago now.
Josh King:
You mentioned your time at GE Plastics and Lighting, also stints at Honeywell and and Allied Signal. How has the manufacturing industry changed over the course of your career?
Tom Salmon:
Automation, digitization, and ultimately in our business, we continue to push more responsibility down toward the work floor, to give the people that actually make the product each and every day, more responsibility in terms of quality, in terms of safety, in terms of making recommendations and suggestions on how you ultimately can improve profitability. They know it best, they're closest to it.
Josh King:
You mentioned you're a tape man, Covalence Specialty Materials, the leading producer domestically of trash bags, duct tape and niche laminated and coated products, of which I am a energetic consumer, especially in the duct tape department. You led the adhesives division for several years before the acquisition. Can you take us back to 2007 and what Berry Plastics was like when it was home to only 14,000 employees?
Tom Salmon:
Yeah, it was a huge transition because when we became part of the company, we were the largest addition that they had ever made to the company. We brought to them, a global business, we had a global portfolio and a global mindset, and that helped a lot. It ultimately took a business that was primarily North American focused and gave them a global looking glass, if you will, in terms of the opportunities that were out there and it transformed the company at that time.
Josh King:
They say duct tape has thousands of uses, what are the top ones in your department?
Tom Salmon:
It's amazing. I heard someone make the statement, they've got three tools in their toolbox, duct tape, a credit card and a phone. And I think it's pretty prevalent for most of us.
Josh King:
You spent a large portion of your career focused on Mr. McGuire's passion. We're going to get into some of the specifics of Berry Global a little bit later, but what drew you to plastic specifically, given the other things that you talked about, your dad and watching him work and the first roles that you had, and what continues to excite you about this segment of manufacturing?
Tom Salmon:
Well, it was an abstract way how I got there. I was selling light bulbs for General Electric and literally I was excited to work for such a world class company. But when I took the job, they ultimately gave me a feather duster and a pricing gun. I was going out to grocery stores at 21 years old, 22 years old and selling light bulbs and wiring devices to grocery stores well before the cell phone and whatnot. So you were going out, making these types of appointments and I thought it was just a horrible job, and how could I continue to do that?
Tom Salmon:
So I was looking outside of GE and miraculously I got a phone call from someone in Pittsfield, Massachusetts where GEs plastics business was headquartered, and said, "We'd like you to interview." And I said, "I'm happy to do it." And I remember the gentleman I interviewed with at that time, his name was Damon Canfield and he asked me one question, he said, "Tom," he said, "Boy Scouts sell light bulbs." And I said, "Who do you think sells them to the Boy Scouts?" And he goes, "You've got the job." And that ultimately began my career in the plastics business from that day forward, and I've been with it ever since.
Josh King:
Many of the roles that you held before you became Berry's Chairman and CEO, had you squarely in charge of Berry's largest businesses. Was that experience critical to helping you understand how the pieces all fit together? You said that your parents said you're a natural salesperson, but you're also learning a lot about operations in these roles.
Tom Salmon:
I was one of the few non-engineers when I worked for GE in the plastics business, as such, I befriended a lot of the technical people. The technical people worked on the floor, and that was an environment I was very familiar with because that's where my dad really gave me a start in terms of understanding how business operates. As such, I sold from the bottom up at that time. It again, it gave me a strong inclination to make sure we could drive productivity, we could embrace empowerment on the manufacturing floor and make them part of the solution. That's something that we've continued to embrace and they are our most important people that we have in our business.
Josh King:
So let's spend a little bit more time on Berry Global. Before you and I met, I went to your website and moused over the different product areas, and it is so expansive. We talked about some of them, duct tape and films and wrappers and plastic cups, but span the whole environment for us because I don't think a lot of people are familiar, while they are with the products that you make, they're certainly not familiar with the Berry brand. What exactly is Berry Global and what does the company do?
Tom Salmon:
Well, we're one of the world's largest innovative packaging companies and protective solutions providers, and an industry leader in sustainability. Supported by 47,000 employees around the world at 295 plants, serving 38 countries, one of the largest in the industry.
Josh King:
Your annual report divides the company into several segments that include consumer packaging international, consumer packaging North America, engineered materials and health, hygiene, and specialties. Who are some of the customers that you serve?
Tom Salmon:
We've got 18,000 global customers, it's basically who's who of industry on a worldwide basis. And it could be any of the major consumer product packaging companies, Procter & Gamble. Kimberly-Clark, Mondelez, you name it, any name that you use in your home each and every day, whether it's breakfast, lunch, or dinner, before bed, or when you get up in the morning, we're providing products to those solutions providers.
Josh King:
What do you think differentiates Berry Global from its competitors?
Tom Salmon:
Well, we're a sustainability leader, it's our people and it's our ability to innovate and collaborate so that we ultimately can provide solutions that not only meet the physical characteristics that they're looking for, but today especially, meet their sustainability goals and objectives.
Josh King:
Talking about innovating and collaborating, again, you go to the Berry Global website and you're met immediately by this big announcement that Berry Global, Wendy's and LyondellBasell, which is another NYSE listed company at LYB, announced that they're collaborating to move from plastic line paper cups with limited recyclability, to a single substrate, clear plastic drinking cup, that consumers will be much more easy to recycle. This is a industry first for the quick service restaurant industry and has the potential to increase the amount of recycled plastic used in the future. So I'm curious, Tom, how did the partnership come about and is this an example of how Berry works with and listens to its customers to create innovative solutions?
Tom Salmon:
Yeah. This success story is all about collaboration. Naturally, we've got a long storied history and reputation in the quick serve restaurant industry. Wendy's was looking to bolster their sustainability performance and record. We talked to them about what their needs were. We identified the opportunity to replace the paper cups lined with plastics, that were not readily recyclable, and pivot them to an all plastic solution, a mono based material that was clear. In addition to that, we partnered with LyondellBasell in what is called advanced recycling. And it's a material that ultimately is able to take otherwise difficult to recycle materials, it breaks it down to its base molecule and provides virgin like material.
Tom Salmon:
And as such, Wendy's is incorporating 20%, what's called ISCC certified plus plastics resins in all of their cups. It's going to divert over two years, 10 million pounds of waste from landfills. We're really excited about this, and this is a translation opportunity that's ultimately going to be able to convert to other QSRs nationally and around the world. So super excited about this and it's fulfilling our promise, we felt always that sustainability could be a growth vehicle for our company, and this is one great example of doing the right thing, collaborating with a partner, like Lyondell as well as Wendy's, and delivering this success.
Josh King:
Did it take Wendy's to pick up the phone and dial you and say, "We need a solution here," or were you out trying to sell it?
Tom Salmon:
We're always out trying to sell it, we try to understand what the core goals and objectives are of our companies. Obviously, sustainability is important to everyone, doing the right thing around plastic waste, keeping it from landfills, keeping it from our water systems is critically important. The more we can do to incorporate and demonstrate solutions like that, creates and encourages more investment to ultimately create more infrastructure to support those waste streams that we can then turn into viable circular products, which is the goal.
Josh King:
We're going to get a lot more into circular in a few minutes. But when you sell to Wendy's, are they saying, "Great, Tom, love to do it, want to be exclusive because we want to be doing something that Burger King and McDonald's aren't doing," or are you playing the field and open to everybody?
Tom Salmon:
We clearly are educating everyone. We think our two primary roles as one of the world's largest converters, is demand creation and education. So we're educating them in what the solutions could be to help address their problems, and then they ultimately dictate the schedule in terms of when those get commercialized.
Josh King:
Berry reported its fourth quarter and fiscal year 2021 results the week just before Thanksgiving, and highlights of your talk with analysts included net sales growth at 22% and 18% for the quarter and the fiscal year respectively. A trend across all the segments is the strong, organic volume growth. Can you walk us through how you continue to think about driving organic growth at Berry?
Tom Salmon:
It's all driven by customer collaboration. The company historically has been known to be a very inquisitive company. We've completed close to 50 acquisitions in our 50 plus year history, so we know about it and we're good at it. The one thing the market asked us to do is demonstrate your ability to grow organically. So we naturally increased our capital expenditures, but we did it in line with customers. Everything we do is customer linked, so we make certain that there's a specific demand and a specific commitment to pull that demand across the investments that we make. As such, it's generated and created this opportunity to have all of our business below single digit growers, which we're excited about. We were in 2020, we were in 2021, we believe fiscal year '22 will be our third consecutive year of organic growth and demonstrating the kind of results that we're pleased report for the quarter, but more importantly for the full fiscal year.
Josh King:
So I'm the son of a physician, so I'm slightly more aware than other folks would be, but before March, 2020, most of us wouldn't have been able to define PPE. Berry Global's surgical product suite offered healthcare workers with some of the highest levels of infection protection. I'm curious what it was like for you in February, March, 2020, and thinking about the demand that was about to come down the pike to you.
Tom Salmon:
Yeah, it's interesting, that is a business that we were very fortunate, we were making capital investments at business to support growth in China, as well as in North America, with being one of the world's largest providers of non-woven materials for PPE, whether it's surgical drapes, surgical gowns, or the masks that we've all become so accustomed for, we were poised and ready to serve the world when the pandemic hit. No one expected it could last as long as it did, but the level of agility that our team showed in terms of maintaining steady states of supply, innovating to ultimately increase that supply, and benefiting us, not only in terms of surgical drapes, gowns, masks, but also hard surface disinfectant wipes. The division has been very, very busy as you might imagine, and we continue to invest CapEx in that business because it's probably to our most global businesses.
Tom Salmon:
And it's all designed based on providing that local value delivery capability, whether it's in Southeast Asia, whether it's in South America, Europe and the United States. Very proud of how the team and the entire organization, we've been an essential provider throughout the pandemic, the plants have not shut down for the last two years, given the needs that are out there to provide these essential service services and products that we've all grown so accustomed to and needed to keep ourselves safe.
Josh King:
And bring us under the hood of that just a little bit, because in addition to all that demand and keeping up with the demand, we just did a show based on the basically one year production of full vaccine from Moderna and Pfizer and what operation warp speed was able to do in terms of innovation in pharmaceuticals in just one year. From where you stood at February, 2020, as you talk to your R&D folks and your people in the lab and thinking about, well, here's the feedback we're getting from hospitals and doctors, how do we make this stuff even better? What's happening in the R&D area?
Tom Salmon:
Sustainability's becoming again, a growing area of interest in these products. During the pandemic, we didn't make face masks, but we made the material to make face masks, and when our customers said we're in short supply, we started making face masks. Before the pandemic, we didn't make face shields, they said, "Can you guys help innovate and collaborate? Can you help make us a face shield that's ultimately going to keep our people on the floor safe?" We did that as well. That's the level of agility our team showed, and it was so impressive to see how the barriers could be broken down, and we could enable this kind of innovation across our customer set.
Josh King:
You're a manufacturing company of 47,000 people, you don't have the luxury that we may have had at the New York Stock Exchange or at Intercontinental Exchange, of saying, "Okay, let's all get onto WebEx and video and work remotely for a while." The New York Stock Exchange closed for nine weeks before we could fully make this place safe, thanks to some of those products that you were talking about. What's it like for you as the CEO, talking to your COO and your other leaders at the company, saying, suddenly we have plants and we have a lot of people in close proximity. What are we going to do to look at them squarely in the eye and say, you're going to be safe working here?
Tom Salmon:
It goes back to what I said about my dad, I think about my father, what situation would I put him in and how do I find a way to make it as safe a situation as possible? We had a divided workforce, we had our office folks that could work at home and be supported by Teams and Microsoft 360, but then we had the people in the plant that's continued to come to work each and every day. And it was important for me, I came to the office every single day throughout the pandemic, I wanted them to see my truck when they came in the plant floors each and every morning. And that was super important to me.
Tom Salmon:
We did temperature testing, we did everything that the CDC recommended to keep our people safe and then some, and we continue to do it today. We're not clearly out of the woods yet, we still have a pandemic to get behind us, but those are the heroes. Those are the heroes that came to work every day, they didn't ask for special help or special support, and we needed to do our part to keep them safe, but they're the heroes for sure.
Josh King:
What would you say is the current status of the company in terms of percentage of workforce back in their offices?
Tom Salmon:
It's probably close to 75% and it's probably an average that's going to stay, I would say. About 70% of the time, the offices are fully booked in that regard, but certainly what we've learned is certain jobs can be performed remotely, and we've embraced that.
Josh King:
What's your typical routine in terms of getting out with customers and plants around the world, seeing them pressing the flesh, talking to people face to face across the table? And how has that changed? And are you back to normal?
Tom Salmon:
Domestically, it's back to normal to a degree. Internationally, it's not. Our first international trip is scheduled for January. We go to Europe or Asia one week, every single month, and the majority of those trips are spent on the plant floor, meetings are held at the plant so we can shake hands, we can make recognitions and appreciate what these people do each and every day to really enable us to please our customers.
Josh King:
After the break, Tom Salmon, Chairman and CEO of Berry Global, and I, are going to dive deeper into the role that plastic plays in our lives, how Berry Global is thinking about ESG, plastic waste and sustainability and the future. And that is all coming up right after this.
Speaker 1:
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Josh King:
Welcome back. Before the break, Tom Salmon, Chairman and CEO of Berry Global, and I, were discussing his career, the team and work behind Berry Global and the company's recent financial results. So Tom, let's start the second half of our conversation with something that's dominating the headlines. The supply chain crisis has been a defining feature of the global economy in 2021, ships waiting to unload cargo, truck drivers, warehouse, staffers, dock workers, working around the clock to restock in time for the holidays. What role does Berry Global play in the global supply chain, and how are you managing your risks during the crisis?
Tom Salmon:
No doubt about it, everyone's been facing difficult circumstance relative to particular key raw materials that may be imported, worker availability and shortages and the like. We have issues around that, but it's been somewhat mitigated by fact that all our supply chains are local. So if we do business with you in Southeast Asia, we have a Southeast Asian supply chain, we're not importing materials from other parts of the world. Same thing in the United States, dominated by suppliers inside the United States, ultimately to serve the products that we need. We also make certain that we always have multiple sources, we never sole specify anything we do, so we've got a variety of different choice that we can make to keep this flow of materials in our customer's hands.
Josh King:
We don't mind geeking out a little bit here on Inside The ICE House. So for our listeners, going back to Mr. McGuire's statement to Benjamin Braddock, in as simple a way as possible, but feel free to geek out too, tell our listeners how plastic goes from oil extracted from the ground and finds its way into a deli container.
Tom Salmon:
Yeah, the oil ultimately is brought into refinery, refinery ultimately helps polymerize material, the polymerized material gets pelletized, the pelletized material gets melted into a part, the part gets shipped to a customer, the customer fills the part.
Josh King:
And where do most of this pelletized material come from for Berry Global?
Tom Salmon:
It's my belief we're the largest buyer of polyolefin, which is polyethylene polypropylene, in the world, we buy over seven billion pounds, and it literally comes from all over the world. Obviously, anything we source in our Eastern European or Western European region, comes from that part of the world. Same thing in Asia, and the Gulf Coast and the United States.
Josh King:
Intercontinental Exchange is famous for its grading of Arabica coffee beans. So up in Midtown Manhattan, there are people there who taste and spit out the latest beans from the bags in Africa and South America and everywhere else you get coffee. How do you test and assess the quality of the pelletized materials or the raw material that you're getting?
Tom Salmon:
I never taste it or spit out, I promise you. For sure they all have quality specifications that we require and that the suppliers ultimately certify as they come into us. Those all correlate to what physical properties the end customers want, and it's one of the cornerstones of what we do. We are material science experts, and we incorporate material science with design knowhow, to optimize the design to meet the needs, to minimize the use of the materials, to maximize function and keep costs as low as possible. We weight reduce typically in a year, about 1%. So think about that. We buy over seven billion pounds a year, and just with our own design knowhow alone, we reduce weight by about a percent a year. It's pretty significant.
Josh King:
So on that then let's spend some time talking about the elephant in the room a little bit, which is plastic waste. Consumers are demanding change and looking to companies to help them reduce the waste that they produce. How's Berry Global thinking about it?
Tom Salmon:
We embraced it. It's interesting, I just started my role as CEO in 2017, shortly thereafter, we were contemplating the largest acquisition that we had done in our history, that we would've done and we did. We closed in July of 2019, purchasing what's called a company called RPC, which is now our consumer package international business, as well as I was invited to speak at what was at that time called and still is, the world petrochemical council. They wanted me to discuss the benefits of being a converter with the advent of Shell Gas and the abundance of raw materials and low cost materials and what that meant. We chose, and I chose to take a different stance. We clearly recognized that the industry needed to think about plastic waste differently, and that's what we talked about.
Tom Salmon:
We took a bold stance in front of that group and said, "We've got to change the image of plastics." We've ultimately got to redefine how people think about our materials and address the reality that plastic waste in river systems, in landfills is wrong. Especially when we have the technology to reduce and reuse the amount of materials to ultimately reduce our dependence on fossil fuels." When we did that, it was somewhat risky, but we got a lot of credit for helping change that narrative and begin that discussion around, wait a minute, how do we convert and use this as an opportunity to grow our industry and change the narrative on the industry. And just like with the Wendy's close that we talked about, that's just one example, the more demand we can create and demonstrate how these materials can be circular and reused, the better benefits we'll have to reduce plastic waste. And we're excited about it, it is clearly a growth vehicle for our company, and it allows the consumer who desires these materials to get more of them.
Josh King:
You just did your earnings call before Thanksgiving, as you're making this transition at this point in your tenure leading the company, any of the analyst that cover the stock, who may not be as forward thinking as you, look at you, scratch their head and say, "Tom, you're killing the golden goose."
Tom Salmon:
It's going to take time, there's no doubt about it. We're in the early innings of this, but the near term demand outlook from, as I said, 18,000 customers around the world, is amazing. We just recently increased our commitment by 2030, to increase our use of compostable circular materials in our fast moving consumer packaging goods business to 30%. That's going to account for about a billion pounds as we accomplish that objective. So we're very excited about it. Again, we believe that we can grow, we can do the right thing for the environment and the consumer gets the attributes of what arguably is the most innovative raw material on the planet that we've known in the last 75 years.
Josh King:
You, Tom, are still in the straw business. I went to your website and looked at it and note that your website shows compostable, reusable and also single use products. The question for Annabel, who always looks at me cross eyed when I suck happily on a single use straw, is the sun setting on that side of the business?
Tom Salmon:
That business that you refer to, it ultimately provides certain film based products that house agricultural materials, and the fact that we have compostable offerings and sustainable offerings gives our consumers choice. And that's what we want to do, we want to give them choice. We're not going to mandate what they do, when they do it, but over time, you're going to see that migration. And the fact that more people are embracing post-consumer materials and mechanically recycled materials, as well as bio based materials, is exciting for us. And as they continue to grow in demand, the cost of those products will come down. And that's, again, what we think one of our primary roles is, be a thought leader, an innovator, an ESG enabler and give people choice through education and the fact that we can convert all these materials on our existing assets.
Josh King:
And this question, Tom, I hope is not for my son or my daughter, but your catalog also proudly proclaims your proficiency in the area of cannabis solutions. I wouldn't have thought that pot and plastics mix in the eyes of users, but prove me wrong.
Tom Salmon:
That legalized industry in certain states continues to need the attributes of plastics, to properly store it, to properly protect it from young children that shouldn't be around it, and it's a growing opportunity for us.
Josh King:
A large chunk of the company's report, and you mentioned it already, focuses on its initiatives in sustainability, ESG and social responsibility. Why are these efforts so critical to Berry Global's mission?
Tom Salmon:
It's what our consumers and our shareholders expect. The importance of ESG right now transcends just Berry, it's part of the culture of doing business today, and it makes our business better to have more diverse workforces, to have the appropriate governance policies in place, to do your role in terms of the environment. It's just the right thing to do. And we're proud of our accomplishments, we know we can do more and by measuring and tracking, you get better. You only get better that which you measure, and this is a great example.
Josh King:
Talking about doing your role for society, we hosted on the podcast just a couple weeks ago, Mark Carney, the UN's special envoy on climate action and finance, talking at the end of the COP 26 conference. Key events at COP focused on the need to address the more than 300 million tons of plastic waste produced every year and the eight million tons that wind up in our oceans. Address the criticism that I sometimes hear, that for all the efforts of companies and municipalities to gather up their plastic materials, bring them to facilities, there's only so many reuses for this material that you can find, you can't make fleece sweaters and automobile interiors forever, and some people are saying a lot of this really is not getting recycled.
Tom Salmon:
Right now, the infrastructure is still lacking. It's a great opportunity for us, and it's what the greatest need is. The single biggest impact to our growing from a sustainable perspective, as an industry, is the amount of infrastructure to support the creation of those materials. The demand is there, I assure you. Doing business with the 18,000 customers we do, the global brands that we serve, the public commitments that we've made, they need these products. That's why we've always believed the more demand that we can create, it helps monetize the problem. By monetize, it reduces the risk of you making a capital investment and generating return, and that's what we're seeing happen right now. None of our customers are talking about getting away from plastics or talking about how do I manage it responsibly, let me know the range of optionality I have in terms of the materials I consider to use, help me design it so it can be more circular and then ultimately convert it for us. And that's what we're seeing across the board.
Josh King:
You've mentioned the circular economy a couple times, it's captured the attention of the manufacturing industry. Berry announced its most ambitious sustainable packaging goal to date and aims to have 30% circular plastics across its consumer goods packaging by 2030. So for those who can imagine what you mean by circular, give a specific definition and unpack that a little bit for a listener.
Tom Salmon:
Yeah, circular products, something that's used more than once. You're ultimately taking a product, you're reconverting it basically through a reclamation facility re pelletizing it or putting it through a advanced recycling process and then converting another material from it. The demand for this just continues to grow, that's why we were excited to be able to make this new commitment, it's based on the pipeline of opportunity that we have in front of us from global brands around the world.
Josh King:
Berry Global has also been involved with the Ellen MacArthur Foundation, which is a charity started by a retired sailor, focused on engaging government, cities, universities, businesses in the transition to this circular economy. The foundation publishes an annual progress report and Berry Global is a signatory to its global [inaudible 00:33:51]. What have you set out to accomplish, and what did the 2020 report outline?
Tom Salmon:
The report outlined that we're making progress, it's not enough and it's not fast enough. And that's what we've got to focus on. And our participation in this group ultimately helps from a converter perspective and a polymer knowledge perspective, help guide those organizations in terms of making thoughtful decisions and choices that can progress the change around circularity that much faster.
Josh King:
You were recently appointed as an officer and a founding member of the alliance to end plastic waste, a global nonprofit that seeks to bring together companies and partners in their mission of ending plastic waste in the environment. Some of the alliance's projects have focused on building a waste management system in Bali, establishing an innovation platform and supporting startups to end plastic. Tom, what does the alliance seek to achieve and how is its work progressing?
Tom Salmon:
Very similar to what we did with Wendy's, this is meant to be a cross value chain organization focused on supporting education and infrastructure investments that help address plastics waste. The mode of the investments is targeted to ultimately incubate them and then ultimately scale them after you've seen success on an incubated level. And we're very excited about that. The primary target areas for us are some of the developed regions of the world today that do not have the infrastructure in place, and ultimately create that type of demand to spur more invest, investments from NGOs, ESG funds and the private side as well. And we're very excited about that, we're actually meeting in New York this week, and again, it's meant to be cross-functional, so there's brands that are associated with it, resin companies that are associated with it, NGOs, private equity funds, waste management funds and the likes. And it's all about how we collaborate around plastic waste and ultimately find solutions for it.
Josh King:
China had been thought for years as a major player in the global partnership to work on recycling and managing of plastic waste. And how has the devolution of our relationship with China affected the opportunities and plans around this space?
Tom Salmon:
Yeah, it's caused us all to be a lot more innovative and creative. And I think that's what gives me the confidence, as this industry over the last 75 years has probably demonstrated more innovation versus other substrates, than you can imagine. Just think of your life right now, in our view, given the carbon footprint, given the amount of energy waste created, water consumed, plastics is essential part for the world to get to net zero by 2050. And we believe that by driving circularity, it will ultimately reduce our dependence on fossil fuels and make that much bigger of an impact towards that goal.
Josh King:
I want to talk just for a minute about how this is coalescing right where you live in Evansville, Indiana, in the Hoosier state. You have a deep connection with Indiana, very recently invested in a sorting robot for polypropylene recycling, helping the city of Evansville use robotic sorting in a single stream recycling facility, which can sort up to 80 items in a minute and uses AI to sort recyclables. This kind of investment, along with some of the recruitment efforts in the state, show the company is really dedicated to its Midwestern roots. But take us in that plant and tell us really what you see when you walk in that door and see these robots sorting recycles.
Tom Salmon:
Yeah, it was difficult for the operators to actually sort polyethylene, polypropylene, and we incorporated in support, in conjunction with the state, an investment in optical sorting to ultimately make it easier to ultimately pull those materials. When those materials are pulled from the waste stream, they're ultimately diverted, we convert them and use them in our own manufacturing facilities. So we're trying to demonstrate the innovation that's out there and then have that be replicated by other municipalities to increase the yield from that type of investment.
Josh King:
Are they seeing new business opportunities?
Tom Salmon:
They are, they want another one, they're already ready. They love it, they want another one and they can justify it on their own.
Josh King:
And in Kentucky, Ohio, your neighboring states, are used to seeing people cross the border and looking over the fence a little bit?
Tom Salmon:
We are appealing to local governments where we reside and educating them that the states that do a better job in terms of reclamation, will have more growth opportunities because these facilities to reprocess these materials are going to go in close proximity to where the materials collected, to reduce transportation costs. And the more the states can do for that, it's a greater pipeline for growth and new jobs.
Josh King:
Any particular businesses that you find are really good at this, that we should be looking closely at?
Tom Salmon:
There's not a business out there today that's ignoring sustainability and the opportunity that it presents. Consumers want it, they value it, when they can make a choice on a sustainable solution, they feel good about it, they want to do that. And if they can do that without compromising what they're used to, even better. And that's what some of these solutions, certainly around advanced recycling and the Wendy's projects, provides their consumers.
Josh King:
Talking a little bit more about your community involvement and also sharing the leadership lessons that you've acquired over your incredible career. You're actively involved in the Evansville business community and serve on the board of Old National Bank, a community bank with more than 24 billion in assets across Indiana, Kentucky, Michigan, Minnesota, Wisconsin. What have you learned during your time on the board of a bank that started some 187 years ago on the shore of the Ohio River?
Tom Salmon:
I'm a big believer in stealing shamelessly great ideas. I was thrilled to become a member of that board because of its reputation, the communities it served, it's truly a dignified, respected, ethical company. It's one of the most ethical companies in the banking industry. And for me to be privileged to serve on that and then learn from their examples of how they serve their local communities, how they participate and not only how they care for their customers, but they care for the geographies that they serve, it was a great example for me, I'm thrilled to be part of that group.
Josh King:
So Tom, you closed the books on the third quarter in the fiscal year of 2021 on a very strong note. You're here in New York, meeting with customers, industry partners and others. As we look toward the Christmas season and the new year, what's ahead for Berry Global in 2022?
Tom Salmon:
We're going to continue to grow our company. The company's committed to grow again. Low single digits in fiscal year 2022, our business only becomes better with the capital investments that we're making, alongside of our customer partners. And again, we believe that increasing the use of recycled content, minimizing waste and improving recyclability are really keys to helping address and end and plastics waste. And ultimately how we're doing it with responsible use and reuse of these materials, is just a critical transition to the net zero economy.
Josh King:
What message do you have for consumers, for my son, my daughter, other people who are constantly using plastic in a million different ways every day, to do their own part in reducing the footprint?
Tom Salmon:
Properly sort whenever you can and use the proper receptacle, it's critical. And you're going to see more automation and innovation in that category, with ways to make it easier to sort and reclamate. This is a precious resource, it's a precious resource that can and will have multiple lives. We need the access to it, the demand is there.
Josh King:
Tom Salmon, thanks so much for joining us Inside The ICE House.
Tom Salmon:
Thanks Josh.
Josh King:
And that's our conversation for this week. Our guest was Tom Salmon, Chairman and CEO of Berry Global. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @icehousepodcast. Our show is produced by Stephan Capriles, with assistance from Pete Asch and Ken Abel. I'm Josh King, your host, signing off from the library of the New York Stock Exchange. Thanks for listening, talk to you next week.
Speaker 1:
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