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Sonoco Products (SON - Analyst Report) has united with Bunzl Distribution and Paper Pak Industries to introduce the UltraFreshSystem for packaging fresh-cut produce.

UltraFreshSystem is a custom-designed, thermoformed Sonoco tray with an “UltraZapXtendaPak” food safety pad from Paper Pak Industries. The safety pad helps in absorbing any excess moisture forming inside the package, in addition to discharging carbon dioxide that forbids micro organisms to grow inside the packaging. Moreover, the tray has an insert that channels liquids away from the packaging.

The tray coupled with the absorbent pad extends shelf life of fresh-cut products by helping in slowing down their respiration rate. Thus, the products look fresh and firm until the use-by date.  

UltraFreshSystem is cost effective and eco-friendly. It will benefit the processors with better margins by reducing the packaging costs.

The collaboration benefits Sonoco in augmenting its product portfolio and reaching out to its extended customer base with improved services in the consumer packaging segment. The segment generates highest revenues, representing 40% of the company’s total revenues during first-quarter 2012.

Moreover, Sonoco will benefit from the reauthorization of Farm Bill 2012 that will help supporting nutrition policy among other policies by funding significantly in the fresh fruit and vegetable program. The bill will expire in September 2012. The Senate Agriculture committee recently passed the Agriculture Reform, Food and Jobs Act of 2012, marking the beginning of the company’s efforts to reauthorize the Farm Bill.

Sonoco’s objective is to be the global leader in customer-preferred low-cost packaging solutions within the targeted customer market segments. Due to the cost-competitive nature of its businesses, Sonoco regularly evaluates its cost structure, including its manufacturing capacity and also to respond to fundamental changes in its markets.

During 2011, Sonoco announced closures of a flexible packaging facility and a thermoformed plastic packaging facility in Canada, a tube and core unit in France, along with a fulfillment service center and a point-of-purchase display manufacturing facility in the U.S. In addition, the company divested two small businesses, a plastics operation in Brazil and a tubes and cores operation in the U.S, and realigned its fixed cost structure.       

However, volatile raw material prices and uncertainty among its customers are concerns for Sonoco, given the slow recovery in the U.S. and ongoing European crisis. Moreover, it faces tough competition from companies like Bemis Company, Inc. (BMS - Analyst Report) and Rock-Tenn Co. (RKT - Analyst Report).

Currently, Sonoco retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on the stock.

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