Expansion, Worry and Tums

indexI remember exactly where I was when the insurer American International Group (AIG) collapsed in 2008–standing in Intercontinental Airport in Houston, waiting for a flight to Mexico. The news sent a shiver through me. I knew at that moment the long expansion of our economy had ended. I also concluded in an instant that we would not purchase the $4 million printing press that I had been on the verge of buying. Time to preserve cash, I figured. Get ready for reduced demand. Hunker down.

My mindset remained unchanged for the next five years. When we needed additional printing capacity to meet new demand thanks to competitors who had gone out of business we bought a used machine for $250,000. We upgraded our bag making equipment but that cost less than $300,000. One year we invested only $1 million, unheard of prior to the crash. During that time we did not touch our Wells Fargo line of credit, instead building a cash balance. I can’t say this didn’t frustrate them. After all, they make bucks when we borrow, not when we stockpile. Of course our strategy mimicked many companies. Paying down debt, holding onto earnings, avoiding investment became a wide practice. Given our anemic recovery, it remains the recipe.

This year has been radically different for us though. Rising demand has compelled us to buy a printing press,  additional finishing equipment including a laser system to perforate plastic so it breathes, a slitter to make small rolls from larger ones, a tandem laminator to produce multilayered packaging structures, and a pouch machine.  We’ve had to purchase a new building to make room for  these investments. So far we have ploughed over $14 million into our company, the largest amount in our company’s 51 year history. Most of this equipment is an extension of things we already do.

Not the pouch machine. It’ll be our first. It allows us to dive deeper into value-added packaging.  Retailers and grocers have embraced the stand-up pouch for good reasons.  They attract shoppers with dazzling graphics.  Pouches take up less space than the cans and glass containers they’re replacing. Their lighter weight allows more packages per truck, cutting carbon emissions.  Now we’ll be able to participate in this growing market leveraging the print quality of our ten and eight color printing presses.

If this isn’t enough we’ve become the beta site for a new print technology for flexible packaging called digital printing. We’re working arm and arm with Hewlett Packard  to launch their 30″ Indigo  printing press.  Our company is one of two in the country they’ve partnered with and the only one making flexible packaging.  It’s quite an honor HP chose us to help roll out this technology, which makes short run, customized or personalized packaging suddenly economic and at a quality unmatched by any other print technologies.  I know they picked us because we’re a thriving company and market leader in our industry.  But being a beta site rattles my nerves. We’ve never been the first to market with a disruptive technology before.

So the outlay of cash to move into the building along with the debt taken to buy the equipment has my teeth on edge. We’re investing while other manufacturers continue to hold back. I’m breaking my dictum that cash is king. Instead I’ve bet on the future. I’m betting customer demand will continue to grow, that all the new business we’ve accumulated will not disappear. As a pessimist — and who would dispute that economic fundamentals justify such an attitude — I worry. I worry hard. I don’t sleep.

But what saved us during the recession would kill us in the future. The failure to invest, to remain on the cutting edge of technology and have enough capacity to meet new demand, has undone many companies. I know that. I’ve seen it. So despite my anxiety our company has surged forward. I can’t claim to see the future as clearly as I did standing in Intercontinental Airport six years ago. But my gut tells me all will work out. I just need to keep a steady supply of Tums at my side. Ultimate Strength preferably.

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