In this conversation, a representative from TC Transcontinental discusses the business's evolution from being primarily a printing company to significantly investing in packaging. TC Transcontinental, known as the largest printer in Canada, has successfully shifted a major part of its business model in response to declining advertising revenues in printing. This strategic pivot enabled the company to harness opportunities in the packaging industry, which now comprises 57% of its revenue.

The talk also explores how a dual-class ownership structure facilitated the company's transformation, arguing that family-controlled businesses can effectively make swift decisions that balance short-term and long-term goals. governance is highlighted as a key strength, with the representative sharing insights on maintaining an independent and diverse board to support favorable outcomes in family-controlled businesses, despite external perceptions.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. pivot [ˈpɪvət] - (noun / verb) - A significant change in strategy or direction. - Synonyms: (shift, turn, change)

So pretty much every major news newspaper business in Canada. But you did a pivot in the past few years and we talked about that.

2. legitimacy [lɪˈdʒɪtəməsi] - (noun) - The state or quality of being legitimate, in compliance with the law or rules. - Synonyms: (lawfulness, validity, legality)

Families in business however, need to have legitimacy to control the business.

3. sustainability [səˌsteɪnəˈbɪlɪti] - (noun) - The ability to maintain or support an activity or process over the long term. - Synonyms: (durability, viability, endurance)

I would say two words, sustainability, recyclability and the benefits of plastic.

4. governance [ˈɡʌvərnəns] - (noun) - The act or process of governing or overseeing the control and direction of something. - Synonyms: (administration, management, supervision)

So good governance has been very important for us.

5. innovative [ˈɪnəˌveɪtɪv] - (adjective) - Featuring new methods; advanced and original. - Synonyms: (novel, groundbreaking, pioneering)

We launched two years ago this product, which is called RedR, which is a compilation of suppliers serving large retailers.

6. market cap [ˈmɑrkɪt kæp] - (noun) - The total market value of a company's outstanding shares of stock. - Synonyms: (market value, company valuation, equity value)

... and the company is listening on the Toronto Stock Exchange with a market cap of 1.5 billion Canadian dollars.

7. recyclability [riːˌsaɪkləˈbɪlɪti] - (noun) - The quality of being able to be recycled. - Synonyms: (reusability, renewability, conversion)

Now come with plastic is recyclability.

8. synergetic [ˌsɪnərˈdʒetɪk] - (adjective) - Involving interaction of elements that when combined produce a total effect greater than the sum of the individual elements. - Synonyms: (collaborative, cooperative, coordinated)

So for us, it's very synergetic.

9. advisory [ədˈvaɪzəri] - (adjective) - Having the role or responsibility of advising. - Synonyms: (consultative, counseling, recommending)

In Quebec you have advisory firms like iss And Glass Lewis advising against voting for family board members.

10. acquisition [ˌækwəˈzɪʃən] - (noun) - The act of gaining possession, especially the purchase of one business by another. - Synonyms: (purchase, procurement, obtainment)

The Shaw acquisition was a milestone

Isabelle Marcoux on Driving Long-Term Shareholder Value

TC Transcontinental is the largest printing business in Canada. You actually print the Globetrotter, the Toronto Star and wait for it, the National Post. So pretty much every major news newspaper business in Canada. But you did a pivot in the past few years and we talked about that. You're in packaging now and the company is listening on the Toronto Stock Exchange with a market cap of 1.5 billion Canadian dollars. Isabelle, as a Quebec based journalist, I know your company, but tell us your story because it's a family story also. But tell us your story over the past decades and stop at 2014. You'll understand why.

Perfect. So Transcontinental is a second generation family controlled business. It's publicly listed in the TSX. It was founded by my father in 1976, so 49 years ago. Our origins are in printing and we are still the largest printer in Canada today and have a sector that's evolved actually. So not traditional printing. In the years 2000, we were the largest community newspaper publishers in Canada and the largest women's magazine publisher. As we saw advertising declining, we decided to sell that business. It was a bright timing for us to exit that business and the multiples back then were still very attractive. We sold our media sector at a price that today we could not get.

2005, we had huge cash flows from our printing business and decided to invest in digital. That did not last long. We failed fast. We exited and we're faced with the decision of very strong cash flows from a printing business. So either continue run the business, the business, or reinvest those strong cash flows in a new business. So 2010 we had a decision to make and we decided to invest into packaging. So I'm stopping here, Matthew, as per your instructions.

So it's interesting because you weren't printing mainly and then you decide to pivot to say, hey, we need some kind of new business model here. What triggered that? Because you feel that printing was going to fail you at one point over time. So printing back then was declining, although it was still producing very strong cash flows. And as a public company, you're condemned to grow. So we looked at the packaging sector as a way for us to continue growing our business. Today packaging represents 57% of our revenue and is 1.2 billion dollar of revenues for Transcontinental.

So your company has a dual class ownership structure and your family controls a company. The Marcou family was it More difficult or easier to do this pivot with this structure, I would say it was easier. There's a perception that family controlled businesses are slow, are emotional, are indecisive. Is actually not my experience At Transcontinental. We do look for the long term, we do look to create long term value. However, we've been able to take decisions very quickly and act swiftly.

I'm also on the board of George Weston that owns Loblaws. Same experience. You see what Loblaw has done acquiring shoppers drug mark acquiring real estate. They've expanded, they took decision quickly, they seized opportunities. I was on the board of Rogers. The Shaw acquisition was a milestone. I'm on the board of Power Corporation of Canada. Same long term view but swift decision making. So I actually think family controlled businesses can balance the long term and the short term quite effectively.

I guess that during this pivot there were some challenges. Challenges. What were the lessons learned there during this transformation from a governance perspective? So good governance has been very important for us. Lessons learned surround yourself at the board level with great people. People from different backgrounds, from different experience. Gender diversity has been very important at our board. So we have a board that's independent. Eight board members, over 11 are independent. The three others are myself and my two siblings.

We have five women out of 11 on the TC board. We have board members that have a variety of backgrounds, whether it be manufacturing, finance, retail, marketing. We also have a lead director that act as a link between myself as executive chair, my family members, the other independent board members. So really good governance bringing decision making that is astute, fast and quick.

I want to learn more about family control businesses because we have a few in Quebec. Power corporate corporation is top of mind controlled by the Demer family. What are the benefits of those family control companies? Overall I think the benefits are alignment. So families in business are completely aligned with shareholders to the extent that they want to create value, create value over the long term, but also in the short term. The benefits also have been demonstrated by National Bank. So it's not just me saying that they have what they call their annual family advantage report and they show that family controlled businesses in Canada actually perform have superior returns.

So it's 700 billion in market cap that that family businesses represent in Canada. It's a million Canadian that work for family business. So it's really a cornerstone of our economy in Canada. In terms of governance though many shareholders, and I've talked to shareholders in New York, they have concerns about family controlled businesses. In Quebec you have advisory firms like iss And Glass Lewis advising against voting for family board members. Don't you agree that there could be some conflict of interest sometimes where a family board will not necessarily act in the shareholders interest, but their own interest? And we can see it in MA sometimes where you have a company that doesn't want to sell because they want to keep the business and the family.

So a few things on that. I think, as I said, I think family businesses are aligned with shareholders because they seek to create value. Families and business however, need to have legitimacy to control the business. And legitimacy to me stands with credibility. You have to be credible to run the business and hence legitimate. So going back to the board, it's so important to have a strong board, a board that's independent, a board where the voices of board members are heard and listened to. And that's certainly been my experience at GC Transcontinental where we have a credible board, we're legitimate to run the business and we deliver results.

Let's go back to Transcontinental. Where do you see value in packaging going forward? Talk to us about what you do in packaging more precisely and where do you see value there? It's plastic packaging, right? So it's plastic. So plastic has been demonized. People don't like plastic. However, the benefits of plastic are often underestimated. If you think about plastic, plastic, it's light, it's small. If you think about the cost of transporting plastic, it's very low. If you think about the benefits of plastic in terms of shelf life, it's unbeatable.

So 80% of our business is packaging food. We package cheese, we package meat, we package coffee, tobacco. There's nothing like plastic to extend the shelf life of these products. So there are great benefits to plastic. Now come with plastic is recyclability. Plastic needs to be recycled and that's the challenge. So how we've tackled this challenge is really investing heavily in research and development. We have a team that's second to none. We've opened a facility last month in Spartanburg where we have a film that is fully recyclable. And really we're going to the market with that film with success. So I would say two words, sustainability, recyclability and the benefits of plastic.

So plastic or packaging is more promising here than printing. Somehow I would say we have two strong factors in packaging. We're able to serve our clients with great products. In printing, we've really also pivot that business focusing on the retail sector. We've been out in the market with a new product that's called Radar. So we were traditionally a printer of flyers. Canada is a flyer country. People love deals and they look to the flyers for the best weekly deals. We launched two years ago this product, which is called RedR, which is a compilation of suppliers serving large retailers.

So we distribute today 5 billion copies of that product weekly in Quebec, the Atlantic provinces and British Columbia. So serving the retailers to help them bring their customer in the store. In printing, we also do in store management. So once customers are in the store, they need to have a great experience. In store marketing is about display into the store. So for us, it's very synergetic.

It's the same client base. So we serve Metro, Loblaws, Shoppers, Drug Mart, Canadian Tire, Wood Flyers, and in store mart management. So in print, again, we've pivoted and we see a lot of opportunities to continue growing in in store marketing. We started from scratch from zero. Today it's a bit less. It's a bit less than 300 million. It's interesting because in printing, we should not. You think about printing like newspapers, you can also print cardboards in shops. Absolutely. Many avenues that will remain despite.

Yeah, that's actually growing because retailers want to have the customers that they bring in the store. They want them to have a great experience. Most of your packaging business is in the U.S. right? So we have 26 plants in packaging. Sixteen in the U.S. five in Latin America, three in Canada, one in the UK and one in New Zealand. And most of the revenues, about 60% comes from packaging. Absolutely. So packaging for us. We entered packaging in 2014 because you had me stopped at that date. Why we chose packaging.

We were pretty good at printing on paper. We felt we could print on plastic. We were pretty good at serving large customers in Canada. And that's what we do in packaging. We do serve large customers. Coca Cola, Mars, png.

That's the profile of our customers. We were pretty good at managing a network of plant in Canada. That's what we do now in the US And Latin America mostly. And we chose packaging because it was a sector dominated by some few strategic companies, but also private equity. So there was room for consolidation. Since 2014, we did 10 acquisitions in packaging, yielding $1.2 million billion dollars in revenues.

So most of your revenues are coming from the U.S. are you more of a U.S. business now than a Canadian business? We have more revenues coming from the US and we're still very Canadian at heart. Okay, that's important.

I was looking it up on the terminal and we have the analyst consensus Rating and they are bullish on your stock with a buy recommendation. Your stock price went from $10 a year ago, now it's nearing $18. It's up YTD 30 by 30%. What moved the needle in the past year? Yeah, so we're very proud about the stock trajectory in the past year. It's been fantastic.

I would say the answer is focus. Last year we put in place a new management team, new CEO tomorrow morning I took additional responsibilities, so did our cfo and we decided to focus on three things. Profitability, lowering our debt, so cleaning up our balance sheet and having a higher roi. So increased profits, cutting sge, working on cost of goods sold and, and turning around underperforming assets. ROI obviously stronger cash flows, less CapEx, more ROI, more comparable to our competitors. Cleaning up the balance sheet that's working on working capital, selling some, some real estate which were no longer of use and allowing us to put in place a share buyback.

So I think the combination of that proved to be very powerful for last four quarter for our first last quarter were increased year over year and it's, it's been, it's been busy, busy and it pleased our investors and we're super happy about the uptick on our share price.

So you did many acquisitions over the past decade to grow in packaging and you did pretty amazing pivot there. Are you on the hunt still for M and A? So there hasn't been much in the flexible space in the past two years. Not many opportunities, not many companies have been for sale. We see a bit more activity right now. We have a balance sheet that will allow us to be a participant in the industry. We see packaging acquisition and also acquisition in esm.

We will also continue to prune our portfolio. We want to be in the higher growth, higher profitable segments in packaging. So those segments that do not correspond to those criteria, we will look to divest. So I would say we'll be active on both fronts.

Okay, and what's your number one priority in all of this? Our number one priority is to continue increasing our profits. Okay. Yeah. We're in a low growth environment. Printing is not growing at a fast pace. Neither is packaging. Packaging volumes are slightly up. However, there are pricing pressures. So we're in an environment where we need to continue increasing profitability through programs of continuous improvement, operational excellence, commercial excellence.

Great. Isabel Marcoux, thank you very much for this great conversation.

Business, Entrepreneurship, Innovation, Family Business, Sustainability, Packaging, Bloomberg Live