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Mod-Pac Corp. is betting that a lot of little printing jobs can add up to big money.

And the president of the Buffalo-based printing and packaging company thinks the Internet will bring in the tens of thousands of customers that it needs to make it happen.

"The big opportunity that we see is on the Internet sales to small customers," said Daniel Keane, Mod-Pac's president and chief executive officer, told shareholders at the company's first annual meeting since the firm was spun off from Astronics Corp. in March.

At the heart of Mod-Pac's vision is the belief that the Internet can be an effective way to reach large numbers of small customers who traditionally would rely on local print shops for their envelopes, business cards or other printing needs.

By combining those higher volumes with a wide range of sample layouts and a hefty investment in the latest printing technology, Keane believes Mod-Pac can turn out small printing projects faster and cheaper than traditional firms.

So far, the results have been promising, with Mod-Pac's sales from its Internet printing venture with VistaPrint Inc. doubling last year to $6.2 million, amid expectations that those revenues will double again this year to $12 million.

"It's just a massive opportunity for us to exploit," Keane said.

Much of the Internet venture targets individual consumers, as well as small office customers. Those consumers typically don't order much, but because there are so many of them, Keane believes those little orders, sometimes numbering 10,000 a day, can add up quickly.

The company also hopes to further increase revenues from that business by recently introducing a broader range of products, including business cards, marketing brochures and presentation folders.

"It's a highly fragmented market and a very large market," he said.

What's more, the Internet gives Mod-Pac's short-run printing business global reach. Since the VistaPrint venture began more than two years ago, Mod-Pac has shipped items to customers in more than 100 different countries.

To improve efficiency and give it the capacity to handle so many individual orders and ship them out within hours, Mod-Pac has invested heavily in new printing equipment and is putting
the final touches on a new cogeneration plant to supply electricity to its Elmwood Avenue factory.

In the last two years, Mod-Pac, which has 323 employees in Buffalo and Blasdell, has spent nearly $20 million on new equipment and other improvements. "We don't want to sit on our laurels and fall behind the industry," Keane said.

But those investments, coupled with an expanding work force that has added 59 new jobs at its Elmwood Avenue facility since last June, also are driving up Mod-Pac's immediate costs. In the short term, those expenses are putting a damper on profit growth, said Anthony C. Rider, the firm's chief financial officer.

"We know we're going to have some very rapid growth," Rider said. "But our bottom line is not going to grow as fast as our top line," in the coming quarters.

That trend was apparent in the first quarter, when Mod-Pac's profits grew by 10 percent, while sales rose by 21 percent.

Despite the rising profits, Keane said he believes Mod-Pac's stock remains undervalued, selling for just 90 percent of its book value -- a condition that prompted the company to buy back roughly 200,000 shares through a repurchase program that is nearly completed.

Even so, shareholder Edward K. Duch Jr., a former Goldome executive vice president, urged Mod-Pac officials to do more to enhance shareholder value.

Duch questioned whether Mod-Pac's board of directors, where top company executives occupy two of the five seats, is independent enough and whether management should serve on the board at all.

He also questioned the company's two-class share structure, which makes takeovers more difficult by giving one class of stock super-voting rights.

Duch also questioned Mod-Pac's relationship with VistaPrint, which is run by Keane's brother, Robert. The Keanes' father, Kevin, who also is Mod-Pac's chairman, owns less than 5 percent of VistaPrint.

"I think the culture has to change," Duch said. "Let shareholder value be maximized."


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