Swedish packaging and processing giant Tetra Pak entered India over three decades ago at a time when the packaging sector was still nascent. It spent the first two decades to seed the market, and create awareness about its products and services. In the last 10 years or so, the company has been reaping returns on the investments and the time that it has worked on building the market. In an interaction with Business Today, Lars Bengtsson, VP (Packaging) at Tetra Pak, speaks about the company's offerings, future opportunities, global consumer trends and the focus on sustainability. Edited excerpts:
Business Today: How many innovations do you do at any given point on the packaging side?
Lars Bengtsson: We would issue anywhere between 5 and 20 new things in a year. Our shape programme is an innovation but it's not breakthrough. So there are small ones and big ones. Then, we have filling machines behind the scenes where we work on energy consumption, water consumption and how to make them more efficient.
BT: Sustainability is getting immense focus at Tetra Pak. Are there any regulatory issues that companies like Tetra Pak are facing, and that's why you are stepping up the game when it comes to sustainability?
Bengtsson: It's not new to us. It's part of our strategy for the last 20 years. For instance, we are publishing the 20th edition of our sustainability report this year. The regulation is increasing. There's no global standard. Being a global company, we need to deal with different regulations in different countries. With sustainability being one of the global trends, it's on the top of the agenda for many countries and consumers. We are stepping up and becoming a bit more vocal about it.
BT: Which countries are more focussed towards sustainability?
Bengtsson: I am not sure if we see country by country. In Europe, US, and India, there's a lot of emphasis. You cannot really see region-wise trend. It's popping up in many different places.
BT: There are discussions around replacing aluminium with recylable materials. Where are you at this stage to find a replacement?
Bengtsson: I cannot give you a clear answer. It's something we are looking at for some time. It's quite tricky to solve it. The properties of aluminium foil are very efficient. To find a replacement that has similar properties is difficult. We are partnering with companies which are good with materials, and assessing how can we apply things in our packaging materials.
BT: Is packaging cost going up because of the push towards sustainability?
Bengtsson: We follow a value-pricing model. But obviously, some things do drive costs. In some cases, we share it, and in some cases, we try to cover ourselves.
BT: Do you think replacement of tin cans with products like Tetra Recart is going to be a big thing going forward?
Bengtsson: We have been working in this area for the past 10-15 years. We see the use of Tetra Recart increasing but at a slightly slower pace than anticipated. It's a well-established industry. While some Food and Beverage (F&B) players may not see an immediate need to change from a production point of view, but from sustainability and consumers' convenience point of view, we believe that Tetra Recart is the future. And that is what will drive the growth for F&B brands.
BT: How big is the processing opportunity for Tetra Pak globally?
Bengtsson: With the consumption increasing, there's a lot of processing opportunities. In terms of money, I would not know. But in terms of growth, there is close to 10 per cent annual growth in the processing [business]. We see a lot of investment. The industry is still growing and still investing.
BT: There are many products that are coming out on the processing side in collaboration with customers; can you name some big brands and success stories?
Bengtsson: One of the biggest brands is Vinamilk (in Vietnam) where we are supplying packaging and doing processing. Over the last 10 years, the growth in China has been amazing. In China, we have mostly local customers. If you look globally, we work with big dairy players like Nestle and Danone. In India, we have customers like Amul and KMF (Karnataka Milk Federation), which have been with us for decades.
BT: How much the industry 4.0 can bring down the costs for companies like Tetra Pak?
Bengtsson: This is a journey. Industry 4.0 is coming or it's already there. We see there will be cost savings and cost efficiencies to be done. I would not be able to put a number right now.
BT: What's high on the agenda when it comes to industry 4.0 - traceability, cost, or smarter manufacturing?
Bengtsson: It's a combination of them. With more and more requirements on everything in the value chain, it's going to drive up cost. But at the same time, traceability is important these days, and will just increase - either by consumer demand or by legislation. All aspects need to be taken into account.