Krystals: Generating long-term business efficiencies through a complex lease and supply agreement that revolutionised their supply chain.
Krystals is a packaging firm that has diversified into cardboard packaging after a long history of producing plastic extruded bottles for the pharmaceutical industry. They were facing increasing logistics costs because of the physical distance between them and their cardboard supplier, Pro Group, one of Europe’s leading manufacturers of containered and corrugated board. When Pro Group moved to a new manufacturing facility in Cheshire, Ellesnere Port, they agreed to let part of the building to Krystals.
Krystals took this the opportunity to revolutionise their supply chain through a bespoke system of overhead conveyor equipment to deliver manufacturing materials. To help them, we negotiated a complex 15 year lease agreement that included a supply agreement. The deal included provisions to give Pro Group a specified percentage return on the capital it invested in the new packaging plant through a complex agreement.
Commenting on the partnership, Arron Shingdia, Managing Director of Krystals, said: “Thanks to our cooperation with Progroup, we will be able to strengthen Ellesmere Port as an important production site. Our head office will remain in Lincoln.”
This supply agreement was particularly interesting because it used intricate index price models to calculate the price Krystals will pay for cardboard, taking into account fluctuating external factors such as component and utility costs, as well as fixed delivery and packaging savings based on the arrangements at the facility.
The agreement additionally allows the cooperating partners to implement a highly sustainable strategy by using technology that conserves resources and reduces CO2 emissions. Supporting sustainable practices, Maximilian Heindl, Chief Development Officer and member of the Board of Progroup, said: ““In the future, corrugated board which is conveyed via a bridge link to Krystals will require neither means of transport nor any packaging. In 2021 alone, we will thus save around 1,800 truck journeys. We will thus achieve a considerable reduction in noise and CO2 emissions.”
Taken together, these will deliver long term business efficiencies and save significant freight, delivery and packaging cost by streamlining the supply chain. Jürgen Heindl, Chief Executive Officer of Progroup, added: “We are absolutely delighted that we are able to continue this success story at the Ellesmere Port site with our long-standing partner Krystals.”