Chicago Cubs Owner Compares Selling Bottles With Business of Baseball

Chicago Cubs Owner Compares Selling Bottles With Business of Baseball

INC. Magazine / Darren Heitner

Chicago Cubs minority owner Andrew Berlin provides tips surrounding the success of his packaging business.

The Chicago Cubs lead the Los Angeles Dodgers in the National League Championship Series (NLCS) by a record of 3-2. One more win and the Cubs find their way into the World Series for the first time since 1945 with the chance to bring home a trophy that has escaped them since 1908. It has been a long, arduous stretch between appearances and no one feels the pain (and potential joy) than those who own equity in the professional sports franchise.

One such individual is Andrew Berlin, a minority owner in the Chicago Cubs (just behind the Ricketts family). Berlin is in charge of Berlin Packaging, a glass, plastic bottles and jars supplier that has topped $1.2 billion in global sales thus far in 2016. He says that while selling bottles and jars seems on the surface to be so very different than the business of baseball, if you get below the skin, the ventures are incredibly similar.

I spoke to Berlin as the Cubs prepare to take on the Dodgers in Game 6 of the NLCS to learn about some of the ideas he has brought to the Cubs as well as tools he has taken from the Cubs and employed within his own business.

 

Success is not judged based on how fast a company is flipped

When Berlin and his father bought Berlin Packaging in January 1988, it was a company that was losing money, losing employees and shrinking, but it had a decent business model. That "decent business model" was what attracted Berlin to purchase the company.

Berlin had been practicing law for 23 months, and left the legal industry to become an executive of a floundering company at 29-years-old.

"The idea was to improve it enough to make money and maybe flip it thereafter," says Berlin. "I never got around to flipping it, because it would keep growing. We have had 28 years of record sales and earnings every year. The growth rate has been extraordinary. We have had a 33,000% net income growth since 1988, while the packaging industry as a whole only grows about 2% a year."

Berlin quickly learned that his original idea to flip the company was shortsighted. When he saw real results and no dip in sales, he reassessed that initial strategy, which has worked out well for the family. Berlin still owns the company today and has no regrets about it.

 

Adding value beyond the basics is key to customer growth

Berlin Packaging, at its core, is a glass, plastic bottles and jars packing company. Yet, Berlin knew that he could not solely depend on sales or costs of goods to differentiate his company from the competition. He shifted to a focus on the bottom-line and earnings before interest, taxes, depreciation and amortization (EBITDA). Except, the focus was not necessarily on only improving his own company's EBITDA, but that of his customers.

"We had to sell the idea that we could help customers improve their EBITDA and we turned the business model upside down," says Berlin. "We created service divisions to help do these things and then quantify how much more EBITDA was created."

For example, Berlin Packaging started a banking division that loaned money at zero interest to its customers.

"Customers would specify what they wanted to buy, negotiated cost, and we would wire money," adds Berlin. "They would pay back the money over time, but they get no-charge money. In return, we get long term supply agreements for packaging.

Berlin Packaging also started a management consulting company called E3 and staffed it with consultants that it put on payroll and loaned to customers at no charge. In return, again, Berlin Packaging acquired long term supply contracts.

"Last year, we returned about $90 million of EBITDA back to customers," concluded Berlin. The added value, well outside the core competency of a standard packaging company, has helped Berlin create a multi-billion dollar company.

 

A company needs people with the right traits, not simply strong skill sets

"You read a lot of books, and academics will tell business people that you need to figure out your core competency," says Berlin. "Our competitors thought it was packaging. Ours was recruiting. We are superior recruiters."

According to Berlin, the secret sauce it to not only focus on skill sets, but hiring people with the right traits. He pegs the traits as being imaginative, ambitious and deriving joy from crushing the competition.

"You can't teach the traits," adds Berlin. "You have to hire them that way, because they became that way in their formative years as a child."

 

Berlin has learned a bit of this information from the Cubs organization.

"One thing I can see is that the Cubs have done a phenomenal job attracting talent," says Berlin. "Not only on the field, but in the front office. I've borrowed some of the techniques the Cubs use in assessing talent, not only in intellectual skills, but character as well. It's extraordinary that people with very good character are the most successful."

 

Consistency at the top is important for long-term success

The inner workings of Major League Baseball makes it an impossibility for the Cubs to retain all their players year-to-year. However, upper management is free to remain in place as long as the contractual terms are fair and reasonable. Berlin believes this type of consistency is important in order for any organization to enjoy long-term success.

"I distinguish between managers and leaders," says Berlin. "Managers manage what is known. Leaders manage what is unknown. They have that intuition to look around that curve of the road and anticipate what is to come before it comes. They can build strategies to outpace competition and do things that even customers wouldn't think of us."

Berlin Packaging's retention rate with employees is roughly 94%. Berlin's packaging company and the MLB team in which he controls a minority interest are both enjoying the fruits derived from implementing the strategies highlighted above.