KEEPING COOL: Stephen Foster and Julie Kilgore lead Chill-Pak’s temperature controlled business. The company was born out of Engineered Products Inc., which sold this year.
Business Spotlight: The Chill Effect
The family behind veteran manufacturer Engineered Packaging Inc. made a hard right turn this year toward a budding business line of temperature controlled packaging. They say it spells the future.
A quarter century into business, Engineered Packaging owner James Stout in February sold the industrial packaging outfit to a Texas group that moved operations elsewhere, and his son-in-law moved into the pole position for the next business venture.
It’s called Chill-Pak. And like the name says, the company manufactures packaging to ship cold products that must remain chilled on arrival – down to a negative 89 degrees Celsius.
“We can hit every temperature range up to 40 C,” says Julie Kilgore, Chill-Pak’s vice president of sales.
Think of the pharmaceutical, biological, chemical and food industries. Those are the industry verticals Chill-Pak is targeting. Stephen Foster, Stout’s kin through marriage and president of Chill-Pak, says the company’s 25 active clients ship everything from insulin to cheesecake and animal vaccines to human tissue.
As a relatively newcomer to the sector, Chill-Pak is picking up its share of sales.
This year, company revenues already have eclipsed the $800,000 recorded in 2016. Foster says Chill-Pak’s on pace for $1.9 million this year, prompting projections to exceed $3 million in 2018.
He’s hanging it on anticipated growth in the biological and pharmaceutical sectors.
Multiple market studies detail expected trajectory, but the one Foster cites values the biopharmaceutical industry at $13.4 billion by the end of the year and up to $16.7 billion in 2021.
“Our segment of that market is going to grow from $3 billion to $4 billion,” he says of the packaging needs in biopharmaceuticals, based on research by The Sourcebook.
The first chill
Foster and crew developed the concept while working for Engineered Packaging. A client asked if the company could make insulated shipping containers.
“It started by accident,” Kilgore says. “We said, yes, like all good salespeople do.”
Foster and Kilgore keep the client’s name confidential, citing agreements to proprietary products, but they acknowledge it’s the company’s largest. The parties worked together to develop a unique system, and Chill-Pak was born to serve a role in international cold chain logistics.
“Once we perfected the product, the partnership opened the door to where we could see this applying to the industry verticals,” Foster says. “We needed to step away from our traditional business model. This is completely different.”
Named clients are Pfizer’s global animal health division, Zoetis, and Tracker Marine, locally. There are 10-20 packaging projects ongoing at any given time.
Chill-Pak creates four systems for shipping: carton molding; pedestal molding; shape molding for custom fittings; and knock-down molding, which are foldable coolers.
“This is where things get interesting for us,” Foster says of the so-called knock-down coolers.
He says the collapsible system allows customers to ship maybe 3,000 coolers per truckload compared with 300 in the old boxed cooler format.
“That’s the value proposition,” he says of the Ikea-like packing system.
The carton molding – essentially a cardboard box within a box with foam in between that retains the coldest temperatures – is the biggest seller at half of Chill-Pak’s orders.
Polyurethane foam is the key ingredient.
Charlotte, N.C.-based Sealed Air sends Chill-Pak about 10 containers each month filled with 275 gallons of the chemicals to produce the polyurethane foam. The solution is sprayed by hand through a hose until dried and the specified shape is filled.
“They’re mixed right at the tip of the gun as they’re poured into the mold,” says Bill Walls, Sealed Air’s executive director of strategic accounts, who works directly with Chill-Pak. “Once they touch one another, they immediately start the reaction.”
The work takes place down the road from the 1350 E. St. Louis St. corporate office, the longtime home of Engineered Packaging in a 1930s-era building that still bears its predecessor’s name. The manufacturing and warehouse space comprises 20,000 square feet.
Foster says Chill-Pak currently uses a third of the available manufacturing space, with planned expansion reserved for the 58,000 square feet in the old Engineered Packaging building.
The temperature controlled packaging industry certainly got a head start on Chill-Pak.
The sector is projected to reach $11.8 billion by 2021, representing 9.6 percent growth since 2016, according to a report released in February by research firm Markets and Markets.
Major companies identified in the report are Pelican BioThermal LLC, Sonoco Products Co. (NYSE: SON), FedEx Corp. (NYSE: FDX), AmerisourceBergen Corp. (NYSE: ABC) and Cold Chain Technologies Inc.
Those companies buy from Chill-Pak and similar companies, Walls says.
“Some of them are [sales] targets,” he adds, noting the rarity of Chill-Pak’s products in the industry. “We only have a couple of these in the United States that do what Chill-Pak does. They’re really the leader in the country with Sealed Air because they concentrate solely on cold chain shipments.”
Foster says the timing is right to carve its path, in part because shipping regulations are changing. He cites tightening requirements on life sciences product shipments and restrictions on the use of expanded polystyrene foam.
Walls agrees that the styrene cooler market is under pressure.
“Some states are outlawing those as we speak,” he says, pointing to New York and California. “As regulations move to eliminate styrene, that’s where you’ll see these companies like Chill-Pak move to a more sustainable solution.”