Case Study: Transcend Packaging

13 December 2018, 9:39am

In 2017, Transcend Packaging’s ambitious mission to provide sustainable packaging solutions to customers in the food and beverage, confectionery, and health and beauty industries began. There is increasing pressure from consumers and governments to reduce the quantity of single-use plastics in packaging, and many packaging providers have not been able to deliver. However, Transcend Packaging has vowed to make that change through innovation and a commitment toward packaging products in an environmentally responsible manner.

Transcend Packaging was founded when a mutual friend introduced Managing Director Lorenzo Angelucci to Justin Bailes at LLEX Partners, a US based finance company.  After over 20 years of working at a family owned company, Seda Group, as Managing Director for its UK and US operations, Lorenzo was looking for an opportunity to start his own company to target a segment of the market that he viewed as under served. Together, Lorenzo and LLEX established Transcend and began the process of structuring the company and raising capital. Justin Bailes, the financial director of the company, has an extensive background in finance from his time at Goldman Sachs. Gabriel Fysh, another key LLEX partner involved in Transcend, has extensive background in venture capital, EIS investments and has key family office relationships. The team now consists of  20 members and is growing.

The packaging industry is a conversion business with paperboard being the single largest cost item representing about 50-55% of the sales price. The industry is concentrated and characterised by low margins, making it difficult for a startup company to be competitive. In order to compete effectively, Transcend decided on a strategy centred on higher-end products that required the special skills demanded principally by the health and beauty segment and environmentally sustainable products that are not a focus of the larger players, combined with exceptional customer service. The company also has an advantage in being nimble while serving clients who need shorter run sizes and has the ability to pivot and pursue new opportunities when they present themselves.

The value of Transcend’s mission became apparent when the company was contacted in March of 2018 to provide paper straws to McDonald’s when it had begun the evaluation of making a move to paper straws from plastic ones. One of McDonald’s principal problems was securing a European-based supplier that could work within its procurement system. Its incumbent packaging suppliers were reluctant to commit to the supply of paper straws. Due to its principal’s longstanding relationships with McDonald’s, its production and technical capabilities and its willingness to serve the client’s interests, Transcend was given the opportunity to compete for the business. The popular fast food chain announced in June that Transcend was selected as one of two suppliers to provide paper straws to McDonald’s UK and Ireland. The announcement was heavily featured in the UK media and made news around the world, putting a small Welsh packaging company on the map.

“Transcend Packaging takes its social and ethical responsibilities seriously as we strive to create a positive environment for our employees and the clients we serve.”

Transcend is addressing a pressing problem with their own feasible solution, made up of an experienced team with unique know-how. These factors, as well as a clear sales pipeline of over £800k did not go unnoticed by the Startup Funding Club team. Startup Funding Club backed the project for the first time in March 2018 with over £100,000 worth of funds. In Spring 2018, they followed with an extra £50,000 from the Startup Funding Club EIS Growth Fund. To help the business scale-up in the eco-friendly packaging industry. The investment helped facilitate the receipts of grants as well.

Justin Bailes commented “Many venture capital investors would overlook a startup in an industry such as packaging due to a perception of stasis. Startup Funding Club was able to look deeper and see that there was an impending dislocation in the sector and there was room for a startup such as Transcend. They were an early supporter of our company and their stamp of approval was extremely important to us at a critical time. They have been a great investor and partner in getting our business off the ground.”

In addition to investment from Startup Funding Club EIS Growth Fund, Transcend received support from the Welsh Government in the form of a grant worth £534,000. The company has shown tremendous growth as they plan to soon start the production of their paper straws in the upcoming months. Wales Economic Secretary Ken Skates said, “The Welsh Government is proud to be supporting Transcend Packaging as it works to create an additional 102 jobs in Ystrad Mynach. This supports the priorities outlined in Our Valleys Our Future, to create thousands of new, fair, secure, and sustainable jobs in the Valleys.

“Not only is the company rapidly becoming a leader in its field, it is also helping one of the biggest global fast food names to slash its use of single use plastic. ”

“Transcend Packaging’s focus on decarbonisation and innovation is exactly the sort of behaviour we are trying to encourage with our Economic Action Plan and the Welsh Government is proud to be working hard to support such an ethical and forward looking business.”

According to Wales Online, a trial of paper replacements has been conducted at various McDonald’s retail locations and customers have reacted positively toward this effort to protect the environment. Multiple media outlets have supported the vision behind Transcend Packaging and the change to paper straws at McDonalds locations across the United Kingdom.

Transcend has ambitious plans for future growth. The paper straw market is in nascent with McDonald’s testing the product in several other geographies. Several American cities – such as Seattle and New York – have banned or are considering bans on plastic straws. While the paper straw is Transcend’s most-heavily publicised product, the company is working on its range of other ecologically sustainable products to continue to address the problem of single use plastics. With their initiative to reduce the impact of packaging on the environment, there is no doubt that Transcend Packaging will continue to deliver.

The full article has been provided by Startup Funding Club Ltd, which is an appointed representative of SFC Capital Partners Ltd, a firm authorised and regulated by the Financial Conduct Authority (FRN 736284)’

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