Wednesday, May 29, 2024

Wilmington’s Carter family creates a packaging giant

Surging home deliveries and more sustainable wraps accelerates the Carter family’s Atlantic Packaging. 

Photography by Andrew Sherman

Not everyone was blindsided when inflation shot up this summer to its highest level in 40 years. Rusty and Wes Carter, the father-and-son team who lead Wilmington-based Atlantic Packaging, saw it coming a mile away. 

“We saw [inflation] coming a year and a half ago and coming in double digits,” says Rusty, who is CEO. “Especially in paper, in lumber, in resin. And it has not slowed down a bit. Demand has been outrunning capacity.”

Atlantic, which celebrated its 75th anniversary last year, is weathering the storm. It’s closing in on $1 billion in annual revenue and is in the midst of its largest capital investment in two decades: the construction of a $40 million facility to manufacture air filter frames in Dallas. The pandemic era has sent filter demand soaring, with Atlantic’s sales of the paper framing expanding at a 30% annual clip compared with about 5% previously. 

“COVID put a lot of focus on clean air,” Rusty says.

With about 2,000 employees, including about 1,000 in North Carolina, Atlantic makes a lot of essential products that are rarely top of mind for the average consumer. In addition to air filter frames, Atlantic’s 10 plants churn out liners for packaged food products and the stretch wrap used for things shipped on pallets.

The company traces its origins to Rusty’s father, newspaperman Horace Carter, who started the Tabor City Tribune in Columbus County in 1946. Seven years later, the paper became the first weekly to be awarded the Pulitzer Prize, U.S. journalism’s highest honor, for its multiyear campaign to expose the Ku Klux Klan. Tabor City is a town of 4,000 that is 70 miles from Wilmington and 45 miles from Myrtle Beach.

Horace Carter parlayed his publishing expertise into related businesses printing booklets, menus and other materials for the emerging Grand Strand. When his son, Rusty, joined the business in 1971, it moved more aggressively beyond printing, adding warehouses and paper distribution and acquiring companies in related businesses and new geographies. Atlantic now ranks as the nation’s biggest independently owned packaging company, family members say. 

Rusty and Wes followed Horace to UNC Chapel Hill, with each earning journalism degrees. So did Wes’ younger brother, Scott. Leigh, Rusty’s oldest daughter, also is a UNC graduate, while younger daughter, Ellen, earned a bachelor’s at the University of Denver. Leigh is the only sibling not active in the business.

The packaging industry is huge, but not especially fast-growing. By one estimate it generated about $185 billion in 2021 in the U.S., and it is expected to reach $218 billion by 2027, roughly a 3% annual growth rate. The industry’s biggest companies produce corrugated cardboard and similar products. Atlantic is more specialized, focusing on what Rusty describes as the “highly consultative, technical” ends of the business such as paper conversion. That involves taking rolls of paper or paperboard from a mill and “converting” it into packaging products using die cutting and other techniques.

Scott, Wes and Rusty Carter share leadership at Atlantic Packaging. Photo by Andrew Sherman.

In 2017 it opened its Packaging Solutions Center in Charlotte, a $10 million, 80,000-square-foot plant that Atlantic says is among the industry’s most advanced testing and research sites. It’s a place designed to appeal to the packaging wonk, home to what Atlantic claims is the industry’s only “multi-axis transportation simulator,” an e-commerce solutions center, and “Stretch University,” where customers can learn the ins and out of stretch film used to wrap products on pallets. 

“This was a game changer,” says Rusty, who credits Wes and Scott with the idea for the center. “The ability to isolate and measure the performance of certain types of packaging allowed us to validate the outcomes. It allowed us to sell from data. This was a huge transition in our industry.”

This data collection and analysis helped open the door to Fortune 500 consumer manufacturers. “Those companies respond to data,” Rusty says. “Small numbers get spread over a huge multiplier and get big fast.”

This willingness to evolve has helped build a client base that includes companies such as Coca-Cola, Procter & Gamble, Hanesbrands and Smithfield Foods.

Surf’s up

Over the past two years, everyone from Amazon and FedEx to GrubHub and Instacart have been beating a path to the door of the U.S. consumer. This steady stream of deliveries has provided a vivid reminder of the integral role of packaging. From the first to the second quarter of 2020, the early stages of the pandemic, U.S. e-commerce retail sales grew by about 32% even as total retail sales fell by nearly 4%, according to the Census Bureau. 

On Black Friday that same year, online shopping sales increased by 21.6%, while in-store sales decreased by 52.1% compared with 2019. A Deloitte survey found that 22.5% of
respondents increased the frequency of their use of food-delivery services during the pandemic.

The Carter family still owns the Tabor City Tribune, but the focus has been on on packaging for most of its 75-year history.

But online delivery is the Russian Doll of packaging — boxes within boxes. As such, it leaves behind a trail of cardboard, bubble wrap, Styrofoam peas, air pillows and other assorted materials, some of which will be around for decades. Once this might have been met with a shrug from those on the receiving end, but no longer. Sustainability is now top of mind, almost everywhere. 

It’s around this flag that the latest generation of Carters is rallying, led by Wes, 43, who is president. An avid surfer, he starred in a company-produced video last spring announcing the launch of the “New Earth Project.” It aims to explain the impact that mostly plastic waste is having on the world’s oceans. 

To support this, Atlantic enlisted the support of a phalanx of outdoor companies starting with surfboard makers Pyzel, Firewire and Rusty, along with snowboard producer Burton. Discussions are underway with other suppliers of camping and outdoor gear. The goal is to “influence the big consumer products companies by telling the stories of these outdoor brands,” he says. “It’s a way to inspire people.”

While cynics suggest such efforts are driven as much by appearance as substance, appearance is increasingly important in a world where consumers want to feel good about the products they buy. And packaging is the face that many companies present to the public. 

“Since COVID, the awareness of plastic pollution is at an all-time high,” Wes Carter adds. “Sustainability is becoming a brand attribute. Companies understand that consumers are judging them ethically based on how their products are packaged.”

In the public company realm, environmental, social and governance, or ESG, matters are increasingly a part of how companies are perceived and valued by consumers and shareholders. “Companies are serious about their ESG strategies and their ESG scores,” he says. “Everyone now has a chief sustainability officer.” 

Waste management

Anyone who has wrestled with an impenetrable blister pack safeguarding a toothbrush understands the frustration some consumers feel with certain types of packaging. The packs often seem to be wildly over-engineered. Containers and packaging make up 28% of municipal solid waste, or about 82 million tons in 2018, according to the Environmental Protection Agency. Some of the challenge of reducing waste and improving recyclability exists on the design of products and systems.

A case in point are mailers used by Amazon and others for home delivery. Mailers have been seen as a lighter, less expensive and less wasteful option than corrugated cardboard for shipping many types of products. But their earlier iterations often included plastic or some kind of filler that was not easily recyclable. So Atlantic introduced a paper-based padded mailer that can be recycled.

“There is little doubt that they’re going to replace all those bubble mailers and plastic mailers that you can’t recycle,” Rusty Carter says.

Manufacturers, retailers and consumers are pressing for sustainable packaging that reduces environmental impact.

Scott Carter, 33, is vice president of strategic sales, which includes introducing sustainable materials to the company’s packaging line. He says companies are asking questions they didn’t ask before. “Why are you using the barrier packaging (plastic wrap to keep out moisture and oxygen in food) you’re using now? Can you move to recyclable material? That’s part of the over-engineering — this will last seven years on the shelf — but do you need that?”

Another central sector for Atlantic is palletized shipping, which makes up about 10% of sales. There are 5 billion pallets in use worldwide and 2 billion in the U.S. alone, according to Bloomberg. These 48-by-40-inch platforms are crucial to the movement of goods and play an unheralded, vital role in the global supply chain. Virtually every kind of smallish product imaginable travels on these platforms, and somebody has to wrap them. That somebody is often Atlantic. 

But the process has been less efficient than desired, including too much waste and in-transit damage. “With the right type of equipment and high-performance materials, you can use up to 20% to 30% less stretch,” Wes Carter says.

To address this, Atlantic has developed a patented program, MUST, that optimizes the use of stretch wrapping systems. The effort cut film usage 30 million pounds this year with savings of 37 million pounds projected next year. Shrink and stretch film sales were $4.6 billion in North America last year, according to a report from the Modor Intelligence research firm.

Breakage is a big problem for palletized shipping, resulting in industry losses of about $7.2 billion annually, company officials say. Improper stretch wrapping often gets the blame. “One day a light went off and we realized the money isn’t on the (production) line, it’s in the loss and damage companies experience when they ship out-of-specification product,” Rusty Carter says. Addressing that issue up front can save money and reduce waste.

This summer, Atlantic rolled out a recycling program for stretch film that would help avoid filling up landfills. It has the capacity to recycle 10 million pounds of stretch film annually. That’s a drop in the bucket for an industry expected to produce 2.8 billion pounds in 2024, but it’s a start, the Carters say.

Staying the course

The focus on sustainability represents a generational change for both Atlantic and the packaging industry, driven by increasing consumer concern for the environment. That’s fine with the 73-year-old Rusty Carter, who says he plans to continue working full time. “It will benefit the company, it will benefit our customers, and it will take us in the right direction if we help move the industry towards fiber-based packaging.” 

Many private-equity firms are active investors in the packaging industry, some of whom have shown interest in Atlantic over the years. So far, no sale. “We’re very happy being a private company,” Rusty says. “Having your family follow you in the business is extremely satisfying. I’m going to stay involved as long as Wes and Scott will let me.”

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