Container Kraft

Last week the stockholders of Container Corp. of America received a printed postcard from their company, beginning with the well-worn refrain: "It is our policy to give our stockholders full information at all times. . . ." Prepared to slog through the usual corporate platitudes, Container stockholders opened their eyes wide at what followed: "We recognize that while matters of considerable importance will be submitted at the Annual Stockholders' Meeting in Chicago it may be difficult or impossible for many of our Eastern stockholders to attend this meeting because of distances involved. Therefore, I cordially invite you, or your duly accredited representative, to meet with me ... on Tuesday, May 26th, at the New York offices of the Company. . . . Please understand that this will be a wholly informal meeting-- simply for the purpose of acquainting you more thoroughly with some of the major subjects which, a week later, will be submitted and officially acted upon at the Stockholders' Meeting in Chicago." Signed to this startling invitation was the name of Walter Paul Paepcke, Container Corp.'s suave, able, young president. Unlike many a chief executive, President Paepcke does not make it a first principle to stay as far away from stockholders as possible. For one thing, he has less reason to make himself scarce. Container Corp. is the biggest maker of paperboard shipping containers and cartons in the U. S. Last year Container earned $1,238,000--its best showing since 1927, which was the first full year of the company's life. What President Paepcke will discuss with his stockholders this week is a longer step forward for Container than his cordial postcard. He proposes to issue 200,000 shares of new $50 par preferred stock. More than one-half of this issue will be sold at once, the rest later. With the proceeds President Paepcke will enter a field new to his company. Container will build a big kraft mill in Fernandina, Fla. having an annual capacity of some 100,000 tons. From kraft is made liner board for shipping containers, which account for about one-half of Container Corp.'s unit volume. The company now imports some 32,000 tons of kraft pulp annually, mostly from Scandinavia. In the South pulp can be made for $18 a ton from slash pine. To smart President Paepcke this means that his new Florida mill will cut Container's kraft costs by $10 per ton, save the company some $320,000 per year as its own best customer. If President Paepcke can sell the rest of the new mill's output to other kraft users on the same $10 per ton profit margin, as he hopes to do, he will have another $650,000 yearly to add to Container's earnings. Thus with relatively low production costs and modern machinery, the new mill is expected to earn nearly as much as all present Container plants put together. Not only is Container's move shrewd operating tactics but it is also shrewd merchandising. Into liner board for its shipping containers now go four parts waste paper, one part kraft pulp. More kraft means less weight. To many a big container customer an ounce less weight in its shipping boxes means a sizable cut in shipping costs. At present Container operates 13 plants dotted throughout the East from Natick, Mass, to Cincinnati, from Philadelphia to Chicago. To some 8,000 customers last year went $20,181,000 worth of shipping containers, folding boxes (for toothpaste, shaving cream, etc.), and paperboard for "set-up" boxes (for candy, shoes, etc.). Container Corp. dates from 1926, when Philadelphia Paper Manufacturing Co. was merged with the paper board division of Chicago Mill & Lumber Co., a business founded in 1881 by Hermann Paepcke. Founder Paepcke stayed on as president until his young son Walter, four years out of Yale, stepped into his father's shoes in 1921. When Container Corp. was formed, Walter Paepcke became its president at 29. For his executive vice president he had an old-line boxmaker named John Paul Brunt, onetime head of Mid-West Box, which was acquired shortly after the merger.

After a fine first year Container's earnings started to fall. The paperboard industry was feeling the effects of tremendous overproduction from new mills. Container met price cut with price cut, depending on big sales volume to make money. President Paepcke thought that quantity would be his company's salvation. But to conservative Boxmaker Brunt, whose credo was quality, the Paepcke policy seemed all wrong. Stubborn, he started a proxy fight to oust his young boss, lost in 1931. Accepting a lump-sum settlement for his salary contract, Brunt got out.

Still concentrating on big volume and low price, Container lost money that year, even more in 1932. Next year, however, prices rose enough to provide a small profit. Last year's fat earnings were made with prices of its basic products at only 65% of the 1926 figure.

Of his business since the proxy fight with Boxmaker Brunt, President Paepcke says, "It's gone along nicely." Blond, athletic, Habsburg-handsome, he lives with his wife and three daughters on Chicago's Lake Shore Drive, weekends at his 600-acre farm on Somonauk Creek outside of Chicago. Mrs. Elizabeth Nitze Paepcke goes in for stage designing for Junior League plays.

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