MN Business

MN Business

Jun 1 2014

Shape shifters

For Delkor Systems, success has meant thinking outside the box

By: 
Pratik Joshi
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Business Review

Stroll down your local grocery store’s cereal aisle and you can likely find oatmeal sold in canister-shaped packages. Though you wouldn’t necessarily know it from the label or brand, Eden Prairie–based Grain Millers — an ingredient supplier with mills in Iowa, Oregon, and elsewhere — might have supplied both the oats and the packaging.

 

To offer such canisters to its clients, the company uses machinery from Delkor Systems, a St. Paul–based manufacturer of automated packaging equipment that has focused on the food, beverage, and dairy industries since its founding in 1973. Delkor machines help customers form, pack, close, and seal cartons,

boxes, and trays.

 

“Delkor is an excellent company to work with,” says Randal Baker, vice president for consumer packaged goods at Grain Millers. He notes the machinery helps his company package efficiently and reduce its carbon footprint. It reduces shipping damage through the use of corrugated pads and shrink-wrap, which makes the product visible to handlers. It’s also flexible, allowing the company to quickly switch to different shapes and sizes of packaging. “We don’t need tools,” Baker notes. “That’s a time-saver.”

 

Innovation is driving growth at Delkor, which since 2008 has expanded its stable of automated packaging machines. But more than machines, says CEO Dale Andersen, it’s Delkor’s new packaging concepts that have endeared the manufacturer to a slew of Fortune 500 companies.

 

“The majority of our patents are not machinery patents, but package patents,” says Andersen, who has helped increase Delkor’s revenue from $30 million in 2008 to $65 million this year.

 

One of Delkor’s latest innovations is the Cabrio Case. Last year the company was working on a project to help a customer develop multiple types of packing cases, without the need for multiple machines. After many brainstorming sessions, it came up with a simple, flexible design that allowed desired loading and shipping orientation for the product, without the risk of compaction. Once the case reaches its destination, it’s transformed into an attractive retail display by simply pulling the top up in one motion, without leaving any jagged edges or rough tears.

 

“Companies are saying this is the best idea they have seen in years,” says Andersen. “It’s doubling our machinery business. It’s opening a lot of doors that we didn’t have before.”

 

The company plans to hire more than three dozen employees to handle its increased business. Andersen says the market has understood the importance of shelf-ready packaging. Mass merchandisers increasingly are looking for new packaging shapes and designs, and expecting food companies to deliver. Delkor provides not just machinery, but important advice.

 

“Delkor is not just putting machines on shop floors, but they’re providing solutions,” says Fred Hayes, director of technical services at the Association for Packaging and Processing Technologies, a trade group based in Reston, Vt. He believes the company’s knowledge, technology, and experience has helped it offer new products to existing clients while also enlarging its customer base.

 

“We assist the customer and recommend a design,” says Rick Gessler, the man behind the Cabrio Case. Having worked at Delkor for about eight years, he credits the company for its culture of creative problem-solving: “Delkor has a culture of fostering innovation.”

 

Andersen says Delkor’s focus has always been on solving the problems of its customers with the efficient use of packaging materials. The aim is to manufacture machines that can adapt as the marketplace evolves, allowing the integration of new technologies to make the machines work smarter. Providing high-quality production with minimum downtime is key.

 

Andersen helped rebuild the company after the original owner, Jim Duddleston, sold parts of it in 1990. When Andersen became CEO in 1999, Delkor’s annual revenue was about $4 million. Much of the growth that followed stemmed from the innovative Spot-Pak system, which attaches products to corrugated pads with temporary glue and then shrink-wraps the package. The system is estimated to generate savings of about $30 million annually.

 

Delkor also developed a new and faster carton closing machine with intelligent positioning technology that consistently seals flaps and carton graphics in perfect alignment. The system can make a precise correction even when it’s moving 150 cartons per minute.

 

In 2009, Delkor invested heavily in research and development despite a drop in business. It increased its R&D budget from $350,000 to about $1 million a year and developed a variety of efficient machines to address the different needs of its customers. The ongoing strategic push helped boost sales, both in the United States and abroad. Exports account for about 20 percent of Delkor’s revenues.

 

A few years ago, the company moved from its facility in Circle Pines to larger digs (115,000 square feet) in St. Paul. The state-of-the-art facility is designed for a smooth and efficient work flow, Andersen says. (It also has a fitness center, and the company brings in teachers for yoga and spin classes.)

 

Hayes believes the packaging industry will continue to change rapidly, especially given the sustainability movement and constant search for cost savings. There’s no longer a onesize-fits-all approach to the packaging world. Delkor, for one, seems to have learned that long ago.

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