Business - The Tetrapak Story

Vinay Kamath

Roberto Franchitti gesticulates to the group to put on the headphones. “The noise will be too loud; you can’t hear anything,” he says. Franchitti, Programme Manager, Flex and Speed lines, at Tetra Pak’s R&D facilities at M odena in Italy, knows his unit like the back of his hand. The headphones have mikes as well so the group can listen and talk to Franchitti as he takes the group around the company’s latest innovation, the iLine, a new-generation integrated packaging line which reduces operational costs for Tetra Pak’s customers by up to 40 per cent.

A test run of white packages containing industrial water is on as a group of mediapersons from across several countries, in Modena at the invitation of Tetra Pak, look on. The Tetra Pak A3/ Speed iLine is operating at high speed and Franchitti points out to a sealed glass chamber where the ‘fillings’ are made and the cartons sealed. The filling could be anything, in this case just water, or it could be orange juice or milk. What look like small mechanical arms ‘pulls’ the packaging material into a carton shape and the product is filled and carton sealed and exits the chamber, all in split seconds.

Tetra Pak’s new iLine technology, which the company’s executives call a new generation of high performance aseptic carton packaging solutions, uses automation technology and integrates the packaging line better with a novel process control and information management system. A result of that, points out Franchitti, is that the A3/Speed iLine that we are seeing can churn out 15,000 family-size cartons in an hour, almost double than what was possible earlier.

Michael Grosse, Tetra Pak’s Executive Vice-President, Development & Engineering, says the heart of the automation platform is the new Line Controller 30. The LC 30 automates the interaction among all components of the packaging line, offers ease of operations in packaging line management and improves the line performance. So, what does it mean for the company’s customers, be they milk brands or juice brands? More flexibility to change quickly between different carton sizes, and because of the higher speeds, greater productivity and lower operating costs.

The iLine is the latest in a series of innovations that the €8.7-billion Swedish group, which is privately owned by a single family, has been doing ever since it first launched carton packages way back in 1951 and later aseptic packaging in 1961.

From that time to now while Tetra Pak’s brand and packaging have become internationally renowned and a way of life all over the world, the company itself is looking for new growth markets and clearly India is going to be among the mainstays, says Grosse. While China and Brazil are the two largest markets for Tetra Pak as of now, growth, says Grosse, is expected to be led by India and China.

While the Rs 750-crore Indian affiliate of Tetra Pak has a plant in Pune which makes the packaging material for its Indian customers, the Tetra Pak board has seen enough long-term potential in the Indian market to clear a €88-million investment for a second plant in the country. This, compared with a planned €90-million investment in Pakistan, €60 million in China and €100 million in Russia.

Peter Hane Weijman, CEO, Tetra Pak India, speaking to BrandLine, says there has been growth in the region surrounding India too. The present plant, set up in 1997, which has a capacity to process two billion packages (of one litre) a year, serves 30 countries from Egypt to Vietnam. Around 50 per cent of the packaging material is exported to other countries. “The new plant will service the entire region though India will show the highest growth,” he says. Tetra Pak’s plant essentially processes the packaging material with its customers’ brand and it’s sent out in large rolls to their factories where the filling of the product and sealing is done. “Our business model is focused on delivering the processing and packaging line and supplying the packaging material,” adds Grosse.

Tetra Pak is looking at different locations in the country. “It is important that we are near a port, connected well logistically with a good workforce and energy; so that’s a whole lot of criteria. Our priority is the Pune region but it’s not easy to find land here,” says Weijman.

The new plant will have a capacity of four billion to six billion packages a year. As Grosse points out, “The way we build these factories we can have capacity expansion by putting in an additional converting line which can take us up to 16 billion packages a year which is what we have in China. So, we will build to take into account future growth.” The Indian growth story for packaged drinks, driven by top brands such as Parle, Nestle, Dabur, the soft drink majors and a clutch of milk cooperatives, led by Amul, has seen rates of 25 per cent annually, albeit on a smaller base. But the potential in India is huge. As Weijman points out, India is the largest milk market in the world producing over 100 billion litres. Only 17 per cent of the total produce is packaged. White milk packed in Tetra Pak packages has grown by 30 per cent over last year.

While Grosse says the Indian market has grown on a smaller base, at the same time with the build-up of infrastructure “we see some of the signals of future growth potential in India that we see in other markets as well. On the other hand India is very different in many ways and hard to say when this turn will happen.”

India, he says, is one of those giants with a huge potential. “We are absolutely sure it will happen. We are not sure when but we are sure that we need to be there to work with our customers and work with communities to understand the market situation, have education programmes, and prepare ourselves for when the market will develop further,” elaborates Grosse.

That, essentially, has been the strength of Tetra Pak, adds Grosse, to have a long-term view without compromising short-term business perspectives. “We believe in sustainable long-term relationships with our partners; it is a long-term investment but we are confident.”

Tetra Pak India’s Weijman says the company is working with its major customers to grow the market, especially with the cooperatives with their marketing and with brand owners on their specific needs. The company also intends to unveil a TV campaign, which it has done before, to show the benefits of Tetra Pak packaging. He says that no other country has the unique milk distribution in polythene sachets undertaken by the cooperatives and weaning them away to use Tetra Pak packaging to ensure longer shelf life for the milk is a challenge.

“India is one of the countries which has the potential to outperform some of the other markets but the challenge is consumer behaviour and the infrastructure,” adds Grosse.