Thanks again for joining us. My name is Ghansham Panjabi. I'm the packaging and container executive research analyst at Baird. Next on the lineup is going to be Graphic Packaging. From Graphic Packaging, we have Mr. Mike Doss. Mike joined. I made sure this was correct, Mike joined Graphic Packaging in 1990. 10 years old or so at that time, right?
Which makes me old.
Yeah. He was Chief Operating Officer for several years, and he's been CEO since 2016. We also have Melanie Skijus, who is Vice President of Investor Relations, a great resource for the street. Melanie joined in 2019. So welcome to you both.
Thank you.
Um, Mi-
Thank you for everybody for coming today and your interest in Graphic Packaging. Great to be here.
Thank you again, Mike. Just for logistics, no one ever sends any questions in, but sessionfour@rwbaird.com, or you could simply raise your hand later. With that, why don't I turn it over to Mike? Mike, we ask all of our companies to sort of start with a high-level introduction of the company, just to baseline everybody.
Yeah. So Graphic Packaging is a a consumer fiber-based packaging company. This year, we'll approach $10 billion in revenue. If you look at our, our overall makeup of that revenue, about 75% of that is in North America, 25% of that comes outside of North America, obviously, and then the vast majority of that is in a a well-capitalized European business that we have.
Mike, last year at this conference, I hosted Steve, the CFO.
Mm-hmm.
And it was pretty obvious as to what the theme was gonna be, was massive Price Cost. The debate was how much would actually hit your P&L and-
Right.
... so on and so forth. You know, and objectively, as we think about the next year, and you're not the only one, but it's less clear-
Yeah.
... as to what the fundamentals look like. So maybe we could just start off open-ended at that point, and then we'll build up.
Yeah, look, I think, you know, the macro is a little bit more uncertain as we head into 2024 than it certainly was into 2023. You know, for us, our focus is really all around returning to, you know, our organic growth and getting back to our 100-200 basis points cadence of organic growth, driven largely by our innovation pipelines and substitution out of foam and, and plastic into paperboard. And so that's really where our focus is. We're in the middle of a big investment cycle, as you know, Ghansham, where, next year will be a high-water mark for our company in terms of CapEx as we build out our new mill in Waco, Texas. And then as we exit 2024 and into 2025, you'll see that start to ramp down.
That mill's scheduled to, you know, start commissioning around mid-year 2025, and we'll be making paper by January 1st, 2026, is the timeline that we've put out there. And then at that point in time, what you see for Graphic is, you know, a regression of the amount of CapEx we're spending more towards, you know, the 5% of, you know, sales or below. And, you know, our debt as we end up this year, as you know, winds up, you know, somewhere around 2.6-2.7x . So we've got a lot of optionality relative to our balance sheet as well.
As we sort of step back, right? The industry went through a whole bunch of chaos through COVID.
Yeah.
Inflation, just step function, higher significance. You countered that as an industry with price increases. You know, maybe dimensionalize how much in pricing across the different grades over that timeline?
Yeah.
You know, sort of from the starting point to the peak, and then what's happened since then with pricing?
If you look at over that period of time, it's anywhere, depending on the grade, and there's really four grades of paperboard. There's coated recycled paperboard, there's uncoated kraft, which is, we call it a CUK or our trademark name, SUS, which is primarily in beverage packaging. There's coated SBS, which is more high-end packaging, and then uncoated SBS, which is largely cup stock. And so we manufacture all four of those grades. And if you take a look at over that time period, really going back to kind of the start of the pandemic in March 2020, we saw, you know, pricing that, you know, increased anywhere between $350 and $500 a ton, depending on the substrate.
Now, there's been a little bit of a giveback around the margin, you know, here in 2023, $20 a ton on CUK and CRB, and a little more, almost $80 on, you know, coated SBS, which is the least consolidated, you know, substrate that we run and also the least integrated that we run at Graphic Packaging. And so, you know, if you look at the three primary grades that are making up, you know, our highly integrated platform, you know, those have been very snug. You know, our operating rates, even with the market-related downtime we've taken this year to match our supply and our demand, have been in the 90s, you know, low 90s, you know, here in the third quarter.
The one outlier for that is our coated SBS, and that's been around 70%. And that's also where we've taken the disproportionate amount of the downtime.
How much does that cost you roughly, Mike, this year?
About $100 million, you know, all in. So what that manifests itself in is under-absorbed fixed costs. You know, 'cause the, the mills tend to have, you know, the labor and, and the cost structure associated with that. But, you know, we feel that's an important strategy for us to, you know, protect our pricing and make sure that ultimately we're only making tons that we have sold.
Does that imply that more consolidation is needed in SBS?
I think, yeah, on a global basis, the FBB and SBS is the most global of all the substrates and the most, and, you know, exported, depending on what, you know, geography you're talking about. And so, yeah, and there's been investments there. There's been conversions out of printing and writing, you know, mills and into, you know, SBS paperboard. There's also been some closures that have occurred, so there's, you know, a dynamic that's going on there. But of all four of the grades, that's the, you know, probably has the lowest operating rate on a global basis. So I would expect over time that you'll see more closures occur.
So, let's build on that. So, you know, during the good old days of low cost of capital, which is two years ago.
Yeah. Right.
Um-
For a long time.
For a long time. You know, it just seemed like there was a lot of stuff, in terms of capacity that hit the market, not just in-
Yeah.
... paperboard, but metal beverage cans and other industries, etc.
Sure.
And it seems like we're on the flip side of that, whereby things are just getting a little bit tighter in terms of shutdowns and stuff like that. So if we sort of step back, because a year ago, there was a lot of concern about new capacity announcements in paperboard specific to the U.S., including European imports into the U.S. What’s happened since then?
Yeah. So if you really look at what's happened, a couple of those announcements have gotten kicked down the road, meaning that they're not taking place now as they were originally planned to by a couple of European producers in particular. And then there's also been a pretty significant closure. One of our competitors shut a mill down earlier this year. It was quite old. It was over a century old. And, you know, our theory of the case is that's kind of what ends up happening there. You, you've got, you know, supply and demand balance, and low cost wins in commodity markets, and paperboard falls in that category, not packaging, but paperboard does. And we'd expect that to continue to be the case.
The other thing that I think has happened, and you see this if you go back and look at the European producers' cost profile, is that it's changed pretty dramatically as a result of the sanctions that have gone in place relative to the, you know, the war between Russia and Ukraine. Specifically, and of course, you know, natural gas is well-chronicled. It's about 5x more expensive in Europe than it is in the U.S. But what sometimes goes a little under-reported is the impact on fiber. So if you look at all the Nordic suppliers and look through the last couple of quarters of what they pointed to, there's a structural increase in the cost of their fiber, almost 25%. So when you think about that's the...
From a variable cost standpoint, the largest variable cost in making paperboard, it actually, you know, shows you from a trade flow dynamic standpoint, it's gonna pressure their ability to export that, you know, into a market like the U.S., where we've got a lower cost structure, particularly where you're competing against people like Graphic, where you've got an integrated, you know, converting system that's well-capitalized and very geographically dispersed.
Mm-hmm. Great. In terms of demand, as you kinda think about your verticals of exposure, packaged food, beverage, food service, just take us through what's been happening there.
Yeah. So why don't we talk about the third quarter? You know, from a revenue standpoint, you know, food service was up about 8% year-on-year. You know, beverage, food, and consumer was down 6%. If you look at the volumetric impact of the quarter, it's around 4.6, 4.6%, if I adjust for, you know, day-on-day, quarter-to-quarter, which was consistent with what we thought we'd see, you know, in the, in the third quarter, pretty much on top of the second quarter.
For us, and you and I have talked a lot about this, I mean, the destocking phenomenon, if you look at 2021 and 2022 volumes and kinda look at, you know, what our customers said they did versus what we sold, there was probably close to 4%, you know, more that we sold than they sold during that period of time. So the destocking event is probably around 4%. It's kinda played through our system. And so now, you know, as I, as I said on our last call, you know, destocking is really, you know, in our rear view mirror, and any volume, you know, shortfalls that would happen by customers would be a function of elasticities as opposed to, you know, adjusting supply chain. I think they've got those pretty well nailed, you know, right now.
We gave a pretty wide range for volumes in our fourth quarter, between -2% and +2%. You know, and that's a good number still to have out there because there's just you know, uncertainty around what customers end up doing.
Yeah.
And we've had some customers talk about elongated recoveries. We've had some customers say: "No, we're back to positive growth, and we're promoting." You know, I'd like to see a little bit more green shoots around that, but my confidence level is relatively high as we go into 2024. That, for the three reasons I outlined in the call, you know, that we can return to that growth, and those three reasons, you know, really being, you know, the comps get a lot easier coming off of this year. Our innovation pipeline is very robust. We've got a long, you know, list of things that we're working on. We profiled some of those on the call.
Mm-hmm.
Whether it's Cup Noodles or the Chick-fil-A conversions. Some of the other things that we're working on, our Rainier paperboard, that, we had our first sale in the quarter on. And then, you know, the third point of that is, you know, the CPGs have just, you know, they've been taking a fair amount of hits. If you look at their index, it's one of the worst performing indexes because they haven't had volumetric growth, and they're gonna work to, work to fix that. So you put that all together, you know, I think we can return to, you know, a modest amount of growth next year. And if we do, if you look at the last three years coming into this year, we've grown 3% each one of those years, 10% on a three-year stack.
Let's say we go backwards 2, 2.5% this year, look at a 4-year stack, we're still at 2%.
Mm-hmm.
I was getting asked by a lot of analysts, not you, others, "You know, why don't you raise your number?" You know, when we were growing 3%, we said consistently, we're outperforming what we believe is the right number for us. And I remain convinced that the 100-200 basis points is the right, right target for us-
Mm-hmm.
... and I'm confident we can return to that over the medium to long term.
Building off of that, the upside in food service in terms of growth-
Yeah.
... what, what do you attribute that towards?
Mobility. I mean, you got 3.9% unemployment. So if you want a job, you can have a job in this environment. People like going through the drive-thru. They like the convenience. You know, 80% of our cups as they go are coming through the drive-thru. So, you know, in the U.S. in particular, it's different in Europe, but in the U.S., it's all about mobility and-
Mm-hmm.
... and convenience for the consumer.
Rainier, what is so unique about that product?
Well, you know, you've got, on that particular sheet of paperboard, it's 100% recycled, and you've got brightness and smoothness capabilities and specifications that rival coated SBS. And so you're, you're able to take on kind of that premium sheet-
Mm-hmm.
... or, you know, high-end, you know, cosmetics, confectionery, different types of packages that historically would have been in coated SBS and now can be in our CRB sheet.
Okay. All right. In terms of customer priorities, you know, it seems like the initial phase of destocking was just purely having too much-
Yeah.
In the channel, right? But now it seems like your customers, just like everybody else, including yourselves, are torquing on inventory to reduce working capital.
Right.
Right? Where has that been impacting you significantly?
I think they talked to us about the fact in a macro basis, they probably went from, like, pre-pandemic was around six weeks-
Mm-hmm.
in the overall supply chain. They went up to 8, maybe even 9, and now they've kind of gone back to more historical level around 6.
Mm-hmm.
That's the kind of blow-through on the supply chain that we've dealt with. So, you know, there's some variation there and depending on the customer, but I think that's pretty good, pretty good, algorithm to think about it.
Okay. All right. Do you sense your customers are gonna have even less inventory than pre-COVID? Just-
No.
No?
I think, you know, maybe some, but I think in general, they really were sensitized to supply chains that are robust enough to handle, you know, different types of shocks that could happen.
Mm-hmm.
If anything, security of supply, you know, remains a key consideration in the C-suite when they're thinking about their supply base.
Sure. Okay, all right. In terms of CPG, there's been this, you know, characterization of, at some point, our customers will promote increased promotional spending-
Yeah.
... and so on, right? But if you actually listen to them and, you know, look at their cost baskets, labor is pretty big.
Mm-hmm.
Distribution and, you know, so on and so forth, and labor is only inflating. We see all the strikes in the U.S.-
Right.
... you know, over the last few months, et cetera. I'm sure there'll be more. The unions are winning every single one-
Yeah.
... right, with higher wages. So, as you directly talk to your customers, yeah, what is the, what is the tenor out of... What do they, what do they need to see before they start to actually truly start promoting more?
Well, look, I think, like, many industries, our customers have, they really worked hard to get the pricing up.
Mm-hmm.
Pricing's been difficult for them for years, as you know, to take price in that kind of environment. So they're very reticent to, you know, take any actions that would degrade the pricing they fought hard to get. Having said that, they've got to grow their volumes, too. I think they'll be cautious. I think they'll be thoughtful. I don't think it's going to be a massive wave of things that you see, but 100-200 basis points coming off of, you bet, that's not exactly, you know, 5% or something like that. I think if I said something like that, you should look at me like, "Yeah, that doesn't make sense." But, you know, with, you know, fiber substitution in, you know, into, out of plastic and foam, that's our tailwind, you know, there.
So if we're not seeing big elasticity problems, we should be able to get that kind of growth. Now, we, like them, are taking the labor situation real seriously.
Mm-hmm.
When you look at what we're doing, we're investing heavily both in our mills and our converting plants to eliminate, you know, unskilled and semi-skilled roles 'cause we can't get them, and they're inflating. The technology's actually available, you know, to you know really automate a lot of those functions, and that's what we're doing. I expect our customers to do the same thing.
Okay, I do wanna build off of that in a minute, but in terms of Europe, the demand dynamics there, you know, a lot of companies have talked about pronounced weakness in Europe.
Yeah.
It's starting to hit everything that they went through last year with inflation and energy and so on and so forth. What are you seeing in terms of demand?
Certainly higher levels of inflation on the consumer. We're seeing more trade down in that market than we are in this market for, you know, store brand items. But in some of those geographies, like the U.K., store brand's already a big part of the overall-
Mm-hmm.
... you know, sales basket mix. You know, it's been interesting, Ghansham, for us. You know, we were asked early on when we got bigger in Europe, "Do you have to have a mill-
Mm-hmm
... in Europe?" And we said, "It's not a mandate. It would be something we'd consider, like any other investment we have." But what's been, you know, actually neat to see is how well our business has held up on the packaging side, even in a tough macro over there. Our overall demand profile is really modeled, you know, what we've seen here in the U.S., and we've got a lot less invested capital driving the revenue line.
Mm-hmm.
When you think about that, the return on invested capital in that market approaches what we've got in this market, you know, differently.
Mm-hmm.
And so, as management thinks about it, as I think about it, Steve and I in particular, and our board, you know, one size doesn't necessarily have to fit all. So I think that's been a positive thing for us to really kind of see, too.
Okay, let me, let me just stop there and see if there's any questions in the, in the audience. If not, we can keep going. Automation-
Mm-hmm.
... you mentioned that. You know, you've been very public with your large projects-
Yeah.
... as you would expect, given the-
Right.
... CapEx requirements. Maybe you could disaggregate what's been happening, you know, in terms of an update in Waco and also what you're doing on the downstream converting side?
Yeah. So what we've really been doing, and I'll take a step back to 2019 with Kalamazoo and Waco, is between those two projects, we'll invest roughly $1.7 billion and completely recapitalize our entire coated recycled paperboard platform. Kalamazoo's done. For those of you who may not be aware, it's been operating for almost two years now. It's been a huge home run for us. We're delivering about $130 million of savings on that investment. And now Waco is, you know, in the process of being built. As I mentioned earlier, we'll be finishing it up in the summer of 2025 and have paper on the reel by the end of that year. And we've said that you can model about $160 million for that.
Combination of cost reduction, where we're gonna shut down the remaining high-cost mills and machines that we have, and then some growth, roughly 200,000 tons. That's gonna be this high-quality CRB that I spoke about earlier, for the other 60, and you should model that about 80 and 80 and 2026 and 2027. Those are good enough numbers for now. So what I like about where we are is we ramp down into 2025, and head certainly into 2026, and capital reverts back to more of a lower number, call it, you know, 5% of sales, which is still very healthy. You know, we could run and operate the company on a maintenance capital basis only below $300 million. You know, our team wouldn't like it very much-
Mm-hmm.
'Cause they like working on projects that drive value for customers, but we could definitely do it. You can see the cash flow power that we'll have coming out of that. And, you know, our balance sheet's actually in as good a spot now as it's been since I've been CEO, on a much bigger company. You know, like I said, we'll finish the year 2.6-2.7x levered. So we've got, you know, good optionality there. But there's also an uncertain macro. So, you know, as we look at next year, we've got heavy CapEx next year. We'll generate a little bit of cash flow for debt reduction.
If we go a little bit below the low end of our range for a while, that's okay, 'cause I know we'll always be able to find, you know, good ways to, you know, create shareholder value, and our track record's really good at, you know, having a balanced capital allocation approach.
Mm-hmm. On Kalamazoo, you mentioned it was a home run. Where was the upside in terms of specifics?
I think just how fast the machine ramped-
Mm.
... and how well the new equipment runs. Almost everybody we hired onto that machine was new and didn't have paper-making experience. We augmented it a little bit with some of our team in Kalamazoo, but, you know, the digital controls and the way that machine is set up and the operating system on it, it came up incredibly smooth. And the quality, we thought it'd be good. It exceeded my expectations, and they were high. So we had basically a one-year ramp on a big investment like that, where we're actually above where we said we were gonna be, and quality higher than we thought it was going to be. And if you go back in history, in our industry, usually these startups are kind of messy.
Mm.
They take longer, they cost more, the overruns are significant, and, you know, you don't always get what you say you're gonna get. So that's what really emboldened myself and the board to, you know, press our muscle memory we developed in that process and take out the rest of the remaining high-cost mills, because to the point earlier around labor, we're having a big reduction. We've got... You know, many of those people were kind of getting senior in age-
Mm.
... that were working in those mills. And let's face it, you come into a small mill that's undercapitalized as an engineer graduating from a good school, that's a tough sell.
Mm.
You know, you come into Kalamazoo or come into Waco, where it's a billion-dollar asset. You know, you look at our control rooms, I jokingly talk about the fact that, we're teaching, young people who were playing Call of Duty on their parents' couch five or six years ago, now they're running our paper machine.
Mm.
They're very comfortable with those, that kind of an environment. They're not gonna turn valves or be out there on the paper machine like we have, you know, in some of our older, smaller mills.
Mm.
We're kind of building the jobs for what I believe the future will be, and I think that'll position Graphic for incredible success for years to come.
Waco, in terms of status, great state of Texas, any issues so far, or?
Yeah, I would just have to say this, that, look, Texas doesn't give you a huge amount of incentives for coming to Texas. What they do is go out of their way to make it a business-friendly environment. And anything we've asked or wanted for permitting or different things that we've needed, it's gone incredibly smooth. We're really happy to be there and, you know, it's an area... And you live there, so in that Texas triangle, you know, you're adding people every day, and when you're making recycled paper board-
Mm-hmm.
... that's a good thing because that's, you know, that generation, more fiber that we can clean up.
In terms of, you know, iterative projects, because obviously Kalamazoo is huge.
Yeah.
Waco is, you know, is massive as well. What, what does it look like, three years out? Are there those sizable projects, or are there gonna be more discrete in terms of automation that you would expect just based on trying to hit your productivity targets?
Great question. I think, look, we're gonna come out of this with six incredibly well-capitalized-
Mm.
... mills, 2 on the SBS side, 2 on the CUK side, and 2 making coated and uncoated SBS. They're all well-capitalized. There'll be some discrete projects that come with returns, but nothing like what we did in Waco and, you know, Kalamazoo. We just don't need to do it.
Mm-hmm.
And so when you take a look at our free cash flow, and what we'll be able to do is we if we do spend more money than the maintenance CapEx, it'll be returning, you know, projected or savings and productivity for, you know, our shareholders. And we'll drive that stuff down and eliminate labor and continue to automate our platform. And the neat thing about Waco and Kalamazoo, too, Ghansham, that I think goes a little misunderstood, is for the first 10 or 15 years, the CapEx requirements for those two locations are almost nothing.
Mm.
So, you know, a little bit of infant mortality, things that may go bump or maybe a project we find that would add value. But, you know, these are measured in $40 million-$50 million projects.
Sure.
They're not hundreds of millions dollars.
Inflation, you know, OCC has ticked up a little bit.
Mm-hmm.
Energy's bounced around, but yeah, just where are we on the raw material cost inflation?
Yeah. Well, right now, we're in a pretty benign inflationary environment.
Mm.
But I say that, you know, as of October 31st-
Yeah.
... as I jokingly point to, it can change in a hurry. You know, I mean, there's a lot of geopolitical things that are out there. You know, could we see some disruption that occurs and see some re-inflation? Yeah, I can certainly see that. I don't necessarily believe that we'll see, you know, significant reductions beyond where we're at-
Mm.
... based on where we're, what we're seeing and what our supply base is telling us, 'cause everybody's trying to hold on to their price, too. So, you know, I think right now that's probably a good, as good a guide as I can give you.
On 2024, you know, you don't have perfect line of sight, no one does, but you do on certain items, right?
Yeah.
Cost inflation and so on.
Yeah.
Just kind of state what you've talked about. I think you called out an $80 million headwind for-
Yeah.
... pricing, right?
Yeah.
Anything else?
$80 million headwind, offset partially by, you know, the Bell EBITDA that we acquired-
Mm-hmm.
... and synergies that'll come in there, which is roughly $30 million. A better year productivity, yeah, if we drive 100-200 basis points, 'cause we won't, don't have as much under-absorbed fixed costs.
Mm-hmm.
So that'll be a positive pickup there, which it's historically been for Graphic, and then we'll earn on the growth. So you put that all together, I think the analysts have it pretty right. It's a flat to slightly down year as we kind of sit here right now, but that's okay because we saw a huge pickup in EBITDA over that period of time. Remember, you know, we made $1.07 billion in 2021.
Mm-hmm.
And so that ramp has been pretty, pretty significant. We're holding it around the 20% EBITDA margin. We're gonna throw off a lot of cash. We'll invest it wisely in Waco and, you know, our balance sheet's at a good spot, and as we come out of that, we're well positioned to, have a lot of optionality.
The $100 million headwind from under absorption-
Yeah.
... presumably would be-
Yeah. If you, if we drive 100-200 basis, we're gonna naturally need more paperboard-
Sure.
... which means we'll run the mills more.
Which should hold pricing as well.
Correct. Yeah. It's, it really is all interconnected.
In terms of new products, you know, at the trade show, in September-
Yeah.
... you have a lot of stuff for replacing plastics, including wet product applications, like berries and-
Right.
... containers for berries and stuff like that. Yeah, what, what's been the receptivity of that?
It's been high. You know, look, I think some of these things are difficult to do. And you mentioned berries. Berries aren't easy 'cause they're packed in the field.
Mm-hmm.
But the people that are making those are very focused on trying to find an alternative solution to rigid plastic, which is, you know, not something they wanna use, you know, for the foreseeable future. But what we've really tried to do is give some good insights into kind of the base hits we're getting. Look at Cup Noodles. Cup Noodles is 15,000 tons.
Mm-hmm.
It's an incredibly sticky transition when it goes out of foam and into paper. You know, Chick-fil-A's been kind enough to let us talk about our trial we've been running with them. It's gone well. You know, that's a very big one, and if they go, ultimately, there'll be others that will have to be fast followers. And so when you think about our total addressable market there, we call it about $12.5 billion. The biggest chunk of that is cups and containers, and just overall plastic replacement behind that. You know, we've got a steady list of projects that we're working on with customers, and that really informs our 100-200 basis points of growth.
Mm-hmm. Balance sheet, it's gonna be the best since 2016 based on our math.
Yeah.
Significant optionality, as you pointed to. Where do you see... in context of the world also having changed for you, right?
Yeah.
Interest rates higher and-
Yeah.
... so on. Take us through why 2.5-ish is sort of the right terminal leverage. Why not lower? And then how should we expect cash flow to be allocated next year?
Well, being lower in 2024 and 2025 wouldn't bother us.
Mm-hmm.
You know, just given the uncertainty of the macro that-
Sure.
... well, I mentioned earlier, so I'll start with that. But, look, I think, you know, the neat thing is, for us, is, you know, our major investment cycle and our recycle platform will be behind us. So that won't repeat, and that, you know, the cash flow gives us a lot of optionality to look at, you know, smart M&A, and I think our track record's been pretty good there. We've done some tuck unders like we did this year with Bell, and some larger ones like we did with A&R. All of them come in, you know, somewhere in that 8-9 times range. Maybe that gets a little more pressured with, you know, interest rates going up, but they were never had double digits on them.
Mm-hmm.
And we've done a nice job, you know, finding synergies that come in behind the operational leverage of driving those tons through our own, our own mills behind that. You know, so, you know, those are things that we look at. CapEx is probably pretty good, around 5%, so that, you know, leaves some additional money that we can look at returning for shareholders, you know, via dividend, you know, increases and/or, you know, share buybacks, all of which we have done.
Okay. All right. In terms of M&A, most of it has been done on the downstream side.
Yeah.
Is that what we should expect?
Yeah. Yeah.
Yeah.
Uh-
Just to boost your Integration Rate?
Correct. Yeah, and again, we're a packaging company. And so for us, it all starts with a cup or a carton, and so that's our—that's at the very top of the wheel, if you will. Our focus is on growing our volumes, 'cause when our volumes grow, everything else kind of takes care of itself. And we choose to make the paperboard where our—we can make our shareholders a great return.
Mm-hmm.
But as we grow the packaging side of the business because that's kind of the wheel of the engine.
Okay. All right. In an L-shaped world, maybe you can close this out, Mike. Just give us a pitch as to L-shaped recovery, I should say, from a volume-
Yeah.
... standpoint, assuming that's the case.
Yeah.
Hopefully it's not. You know, what, how does Graphic... you know, why should investors consider Graphic Packaging?
Well, I think in an uncertain macro, a company like Graphic with broad-based exposure to both the big CPGs and a large food service business, gives you the optionality to play it a number of different ways.
Mm-hmm.
You know, if the economy's a little better, you're gonna see the food service business continue to grow. If the economy's a little worse and unemployment goes higher, you're gonna see people eat more at home. And we've got high market share in that kind of environment as well. Very stable and predictable, you know, volumes. You know, as we talked about, I mean, our volumes are down 4.6%, but that's a fraction compared to what many people have dealt with in the packaging space, and it's all tied to the fact that 95% of what we do is consumer non-discretionary. And we've really been purposeful in how we've built that, our market participation strategies out. So I think, you know, an L-shaped world, you know, we play pretty well in that environment.
We will cap it there in the interest of time. Mike, thank you for your time.
Always a pleasure.
Melanie, thanks for joining us.
Thank you for your interest in Graphic. Have a good day.