Nov 24 2018
Delkor Systems in Arden Hills designs and manufactures machines that make packaging that turns into a display, saving retailers time and effort.
Shelf-ready packaging drives sales for Arden Hills robotic-machine maker Delkor Systems, a leader in the rapidly growing sector.
In the robotic hands of Delkor Systems, a box is not just a box.
With a little machine magic, products shipped to anxious holiday retailers no longer need elfin workers to unpack boxes and stack thousands of individual products onto shelves.
Instead, once the top is taken off, shipping boxes are also shelf displays.
The shopkeeper just has to “tear off the box hood. Once the hood is off, the [remaining] case shows the product in [neatly stacked] display trays,” said Rick Gessler, Delkor’s vice president of marketing, engineering and production.
Arden Hills-based Delkor manufactures the machines that make the new generation of shipping cases.
Dots of glue and stiff paper inserts keep products neatly in place even when jostled. The system saves time and labor at a time when profit-stressed retailers are trying to find more-efficient ways to run stores as they stretch resources to compete with online competitors.
The trend, called “retail ready” or “shelf-ready packaging” also has helped Delkor’s bottom line.
“Shelf-ready packaging is a huge growth driver,” Gessler said.
Delkor had $55 million in sales in 2012. This year, the company will hit $75 million with new orders for a host of machines introduced in the last few months, he said.
Customers include David Sunflower Seeds, Trolli gummy candy, Crystal Farms Cheese, José Olé Burritos and Fisher Nuts.
Delkor developed its first automated boxing machine for the shelf-ready “Cabrio Case” in 2015. It started as a way to help its customer Fisher Nuts and another customer that made cheese for Kroger supermarkets. Both wanted a way to simplify their packaging and ease stocking for their retail customers.
Since then, Walmart, Kroger, Costco, Aldi and other retailers requested similar shelf-ready boxes from their food suppliers.
The moves have forced food manufacturers to invest in new packaging machines, and Delkor’s phone was suddenly ringing a lot.
“We are definitely a resource that the retailers are hitting,” Gessler said. “Kroger and Walmart are totally changing the way packaging is done. It used to be the big manufacturers like General Mills and Kraft figured out what is the cheapest way I can box and ship [goods]. Now there has been a big power shift. So the retailers like Walmart, Target and Amazon are the ones with the power.”
Eric Andersen, a Delkor marketing associate, said that over two years, Walmart has driven the biggest change.
“Walmart has been really encouraging its suppliers to do this and now suppliers are conforming,” he said. “Businesses are shifting over because of these recommendations from Walmart.”
More than 55 percent of North American product suppliers saw “increased requests for retail-ready packaging in the last 12 months” from their retail customers, according to a survey done by the Association for Packaging and Processing Technologies’ PMMI Media Group.
PMMI President Joe Angel said the shift is a “hot” trend.
“Delkor was one of the early innovators in the whole [area of] retail-ready machinery,” Angel said. “They were one of the first ones to really promote this.”
Delkor has competitors in the space, including Douglas Machine Inc. in Alexandria, Minn., and WestRock Packaging in Georgia.
Mordor Intelligence estimates the box, packaging materials and equipment industry is worth about $63.4 billion today and should reach $81 billion by 2023, Angel said.
Gessler appreciates the trend. Ten years ago, he was Delkor’s 50th hire. This year, Delkor hired its 200th worker.
“We have quadrupled in size since 2010,” he said. “That is amazing growth, especially for a bunch of engineers.”
Last year, Walmart invited Delkor to talk to its shipping managers and customers. This year, Delkor introduced several new “retail-ready” packaging machines before the holidays.
Last month, it showcased the new products at the mega Pack Expo International show in Chicago. In a few months, it will head back to Walmart to attend its massive packaging summit in Arkansas.
Retired Walmart packaging director Ron Sasine, now a principal at packaging consulting firm Hudson Windsor in Bentonville, Ark., said demand for new packaging machines spread from Europe to the United States to retailers such as Target, Aldi and Walmart.
Retailers “see this is a way to immediately make their operations more efficient” and to cut labor costs.
With the technology, workers no longer have to unpack and shelve thousands of General Mills cereal boxes individually, he said. With the additional time, employees can provide customer service and other store functions.
At $15 an hour, that time savings adds up quickly, he said.
“In many ways, the folks at Delkor were sharp enough to see this trend and move on it in a way that really did expand the trend in the U.S.,” Sasine said. “This is not just a nice little Minnesota story. This is really a global retail trend.”