Earlier this year, Sealed Air (SEE) marked the golden anniversary of Bubble Wrap, one of the most iconic and well-known packaging products. The sheets of bubbles are created by having plastic resin squeezed from long cylindrical screws over a drum with holes punched into it. After the sheet is laid in a thin layer, suction is applied to the plastic film helping to form bubbles on the film. A second sheet of plastic is then laminated over the first, helping to lock in the air, creating the sheets of poppable protection that remains Sealed Air’s most famous product.
The story behind these of air-infused bubbles begins in a small garage in Hawthorne, N.J. as inventors Marc Chavannes and Al Fielding began working on the development of plastic-based wallpaper. When this innovation failed to catch on in the marketplace, the two entrepreneurs went on the search for potential applications for their invention. Initially, they tried marketing the product toward greenhouses as an insulation alternative. Then, as the two inventors were returning to Newark, NJ on a flight, legend has it that Mr. Chavannes was staring out his window. Looking at the tops of the clouds he came upon the idea to market the cushioned sheets as an improvement over the existing paper packaging options for fragile items. After some changes the pair made to the manufacturing process, the company was organized in 1960 as Sealed Air.
Over the years the product has morphed from a niche packaging product into a pop-culture phenomenon, as the addictive nature of the popping has inspired plenty of fans. On Facebook, groups dedicated to Bubble Wrap currently have over two million fans. In spite of some inroads made by its competition, the packaging option remains the leading choice for individuals and businesses seeking to ship easily broken items. One of the more eccentric fans of the product even decided to use it as part of her wedding dress. To help commemorate the birthday of its most famous invention, the company released a golden-tinted model of the product.
Over the last 50 years Sealed Air has enhanced its offerings beyond its original product, using its expertise in plastics to expand into other forms of protective packaging. In fact, SA has become one of the leading innovators in the niche manufacturing of perishable food protection, utilizing its expertise in plastic molding techniques to ensure longer effective shelf lives for food offerings from meat packagers. One event that has put a damper on the recent celebration of the golden anniversary has been the downturn in the worldwide economy beginning in the later part of 2007.
While Sealed Air’s sales suffered during the period, falling 13% year-to-year during 2009, the company’s experience dealing with previous slumps helped it to take the necessary steps this time around. Compared to some other companies in the Packaging & Container Industry dealing with perishable food & beverage items, such as Owens-Illinois (OI), Sealed Air did a better job of reducing its production capacity and labor costs during the recent recession. The steps proved prescient, as consumption of meat and other perishable products tends to fall in line with household incomes during harder economic times. With those trends likely to reverse, Sealed Air should restore its research & development budget to previous levels, as it continues to increase its presence in the food packaging market. As such, we look for a good recovery in the company’s bottom line over the next few years, which should help this stock appeal to individuals taking a patient investment approach.