30 years in India. The market is getting wider with ethnic drinks led by Paperboat and Rooh Afza, and packaged milk market like flavoured drinks and buttermilk. Is Tetra Pak at the top of its game, now?
We are very proud to be celebrating 30 years in India this year. We brought our advanced aseptic technology for food and beverages into India because we felt this technology was made for India. Since starting our operations in India in 1987 and setting up our own manufacturing at Takwe near Pune, it has been a long and fulfilling journey built on our brand promise – ‘Protects What’s Good’. Today, we have a world-class facility at Chakan, Pune that provides integrated solutions to the food and beverage industry. We have over a hundred customers today and they are very bullish about the future of aseptically processed and packaged foods. And, success begets success – more and more new food and beverage players want to enter this exciting market. So, we have strong reason to believe, this is only the tip of the iceberg and the best is yet to come.
How was the 30-year journey? When did your investments start bearing fruits?
Our first decade was spent in seeding the market; and because we were the first carton packaging solutions company, far ahead of anyone else, there were a lot of rich learnings. We built our first packaging material factory – at Takwe near Pune in the mid-90s. We invested again in our new world-class facility at Chakan near Pune in 2013. I believe that we reached an inflection point around ten years ago – that is, towards the end of our second decade in India. Between 1996 and 2006, we grew two times, in terms packaging material volume, which is one of the key indicator of our business. Between 2006 and 2016, we grew eight times. We have witnessed consistent double digit growth in the past few years. We have introduced more than 22 packaging formats since 2010 in many sizes and at different price points to suit the needs of diverse consumer segments in India. Other than packaging, we have about 1,500 processing customers with our installed base. We could say that a majority of dairies in India would at least have some components supplied by Tetra Pak. We have invested approximately Rs 2,000 crores to date including investment in factories as well as investments in awareness-building, recycling ecosystem etc. More importantly, our customers have collectively invested more than Rs 4,000 crores in our machines and services over the past 10 years. What we produce at Chakan caters not just to India but over 30 countries around the world.
Last year Tetra Pak sold around seven billion packs in India. What’s the target this year and what are the global numbers?
We delivered 450 million packages way back in 1996, and reached one-billion in 2006. In 2016, we delivered eight billion packs in the South Asia Markets region and we are confident that we will sell more than nine billion packs this year. Globally also, we have raised the bar with every passing year. We sold over 188 billion packs in 2016 and we will reach a new milestone in 2017.
How many customers do you serve in India? Is the customer profile different from 10 years ago?
We have about 1,500 customers who have installed our processing equipment. In packaging, we have more than 125 customers and we have been adding more than 10 packaging customers every year for the past five years. Over the years we have gone from operating in two core categories – white milk and juices, nectars, still drinks – to opening up many more categories, for instance, spirits, coconut water, Oral Rehydration Solution, and dairy alternatives among others. Spirits is also a high potential category and we have a unique presence as compared to the rest of the world growing at a higher CAGR in South Asia Markets than the rest of the world. Today, our customer base is a highly diversified one ranging from brands that have traditionally been in the F&B business, to those who are looking to diversify into this industry while moving away from their core business. We have also seen an increase in interest from start-up brands which are bringing niche products to the market. Given the diversifying profile of our customers, we have also evolved in the way we do business with each of them. For example, the needs of a customer who has been with us for many years are very different from a relatively new customer who is entering the F&B space for the first time.
How has the customer demands changed over the years? What do they ask for in 2017?
In a country like India, affordability, accessibility and quality have always been top priority. Therefore, food safety is top priority for all stakeholders across the value chain. In addition to these factors, sustainability has become an important consideration for customers as well and they are looking for products and solutions that do not adversely affect the environment. Customers are also looking to increase efficiency and productivity of their plants. And this is where our end-to-end solutions approach plays a vital role. We take full ownership of the product from start to finish, including technical services and make sure that we are not only delivering great products but also world-class services. Lastly, customers are looking for a partner who is future-ready, and is prepared to partner them in the long run. This is one of the reasons behind our long-standing partnerships with our customers. At Tetra Pak, our ahead of the curve approach applies not only to investments for today, but also to our preparedness for the future. If you look at today, we are on turbo charge mode, moving full throttle on the technology and innovation that will drive the future of food. India is one of the key markets for Tetra Pak and we are already making strong strides in areas like digitalisation (apps ensuring realtime information available to our operators; remote monitoring, condition-based monitoring), automation system for better traceability and more.
What’s the process of innovation targeted at the local, rural Indian market? One of the results is the TCA pack for Frooti.
We have dedicated ourselves to understanding our customers’ needs and those of their customers, and finding the right solutions using our global resources and our local market knowhow. Before, we get into any co-creation with our customers, we try to understand the market demand gap and what is it that the end consumer is looking for whether it is affordability, convenience, differentiation or something else. The Tetra Classic Aseptic (TCA) pack and the concept of chain packs for Frooti is a great example of turning a consumer insight into a real product. Value for money is the deciding factor for over 81% consumers while making food and beverage purchases. To many Indian consumers especially in the lower economic segments, this value for money translates into affordability which is the reason for some of our offerings such as the TCA which are gaining in popularity. It is also important for the package to be attractive and visible as well as for it to be available at the right purchase points. The chain pack, for example, has been developed especially for the interiors of India where small kirana stores and carts have little space for display and the best option is to hang them over a string like sachets. All these and more factors come into play during the innovation journey.
Any other innovation?
The Tetra Fino Aseptic (TFA) is a result of an inherent need for a package that can keep food safe without refrigeration in the remotest parts of South India, and that can be made available at price-points for consumers such as fishermen, migrant laborers and others from the lower-income segments.
What are the consumer consumption trends that your research team has discovered in the C-tier pockets of the country?
The increase in disposable income is not only limited to cities or higher social classes, the increase in minimum wages and growth in rural economy is also driving consumerism in tier-C markets. Packed products have also seen demand in far-flung rural areas as an answer to food safety and spoilage issues. Even for these markets value for money and smaller packs is the key. Based on these insights the TCA format was developed which was first launched in the market by Frooti. This was a huge success for Frooti as well as for Tetra Pak to crack the bottom of the pyramid market. This set of consumer is still not very brand cautious and look for the best and safest available product that they can at a particular price point.
Remote corners of Kerala, Tamil Nadu, Andhra Pradesh where no fresh milk was available due to lack of refrigeration, now have access to UHT milk. Be it fishermen out at sea for days, migrant laborers looking for a a cup of tea in the middle of nowhere, or a mother purchasing a TFA 100 for Rs 10 to provide nutrition for her child, UHT technology has helped bring milk to millions of Indians.
Schreiber Dynamix Dairies was India’s first dedicated contract packer for foods in Tetra Pak cartons. Tell us about this partnership. Can we expect similar partnerships in the future?
SDDPL is India's first dedicated contract packer for foods in Tetra Pak cartons and uses Tetra Pak's processing and packaging technology to partner leading food and beverage players like PepsiCo, Nestle, Danone, Britannia and Hector Beverages. Currently, brands like Tropicana, Nestle and Paper Boat are processed and packed in SDDPL's plant at Baramati, Maharashtra. Through this partnership, we have been successful in meeting the ever-increasing demand for aseptic packaging in the country and also in providing a great opportunity for local players looking to enter the aseptic beverage market. We are always open to new collaboration whenever there is a strategic requirement.
Indian dairies are on the lookout for value added packaging that can take care of the milk losses due to leakage and returns for the reason of non-sale. While the aseptic packaging is a robust solution here, in the last few years’ competition for Tetra Pak has surged. There are Chinese players in the market. Uflex has set up an aseptic packaging plant in Ahmedabad. How do you look at this competition and what’s your strategy to counter this?
Tetra Pak has been here in India since the mid-1980s and our products and packages are ‘made in India’ and ‘made for India’ (and in fact, exported to many parts of the world). This is a capital-intensive and service-intensive business with food safety at its core. We have spent three decades building this industry. There will be more and more interest by other companies to enter the market and this augurs well for the consumer who will be spoilt for choice to enter, we believe that there’s enough room in terms of growth potential to be harnessed – as we are still touching the tip of the iceberg. We sincerely hope the core principles of food safety and quality will remain at the top of every player’s agenda. This is not a pricing game, it boils down to which supplier is able to deliver the best value, consistently over time.
What are the other challenges for Tetra Pak in India?
India is a fairly complex market, with a fragmented consumer base. You may have already heard about ‘Many India’s within India’. Besides geographic and demographic differences there are huge psychographic differences as well. On the one hand, you will have an upwardly mobile, ‘global consumer’ who is looking for world class quality and features from reputed brands and does not mind paying extra for quality, image and convenience. On the other hand, is a strong value seeker for whom affordability is important and who needs stronger justification for the price paid. Our markets are witnessing significant changes especially with rapid urbanisation and growing incidence of working women. Nuclearisation of families is on the rise and disposable incomes are going up, thanks to the economic growth supplemented by foreign investments. This coupled with increasing awareness about health and nutrition and food safety is moving many consumers from just functional products to higher image, safer and lifestyle products.
We visited Tetra Pak’s new plant in Pune. While the production shopfloor is undoubtedly impressive, for us the eye opener was machine renovation department, dairy processing equipment manufacturing and of course the PDIC. Are these unique to Pune plant? What was the strategy? Explain the significance of a machine renovation department for a price sensitive market like India and how successful has it been.
As a partner, if you can give customers everything that they are looking for, at every stage in their journey, they will be your partners for the long haul. We are proud to say that today we are the only end-to-end solutions provider for the F&B industry in India. This integrated approach means that we support our customers throughout their innovation journey from pre-processing to final packaging and services.
The Product Development and Innovation Centre is indeed an integral part of our integrated portfolio and is one of 7 such centres globally. With PDIC, our endeavour is to partner with our customers at every stage from recipe formulation to providing a testing facility where customers can test their products before they are taken to market, a pilot processing and packaging line and a package validation laboratory. We employ food technologists who work with our customers to formulate, conceptualise and test market new products.
The renovation centre in India, as you would have seen it at our Chakan facility, is the newest addition to our portfolio. This centre revamps old filling machines to suit local market requirements while upholding the Tetra Pak promise of high quality equipment and services. For a price sensitive market like India, these renovated equipment are the perfect solution especially when it comes to the local players who are looking for lower investment, but also a promise of quality.
What are the goals for the next two years and where do you see Tetra Pak in India in the next 10 years?
Our 30 years in India have been extremely exciting and I believe that the next 10 years will be just as exciting as we continue to expand strongly. We are confident our customer base will continue to grow and so will our product portfolio. We are adding over 10 new customers every year for the last five years. Since 2012 we have added more than 60 customers and we are confident of adding another 100 by 2020. We also foresee the introduction of many new categories like ready-to-eat foods, value-added dairy, more niche segments like ORS that will be support strongly by us. We will also bring in new technologies in India to cater to the needs of people and continue to evolve with the market. Food safety and sustainability will remain at the heart of our business as we continue to deliver on out brand promise of ‘protects what’s good’.
Tetra Pak cartons are primarily paper-based and fully recyclable. Through recycling, the intent is to make sure that the cartons don’t end up at landfills and instead, get a fresh lease of life. Recycled cartons can be used to make many useful things like desks, chairs, roofing sheets, notebooks etc that go a long way in creating a positive environment for schools for the underprivileged, and other similar initiatives.
Tetra Pak has a network of 18 collection partners and four recycling organisations nationwide that are actively engaged in collecting and recycling used Tetra Pak cartons. This network works with thousands of waste pickers, providing them with an additional livelihood opportunity.
Over the years, Tetra Pak has been able to ramp up recycling rates from zero a few years ago to more than 38% today. The company is also investing in educating consumers and others in the waste chain about the recyclability of Tetra Pak cartons.
It ran a collection and awareness drive - Your Cartons My Classroom in Bangalore and in Delhi NCR that urged the public and students of SEARCH schools to bring in their empty cartons. It collected over 200,000 used cartons across the two cities over two weekends of activation; from which around 35 school desks were donated.
Tetra Pak has partnered with Sahakari Bhandar across Mumbai and NGO partner RUR Greenlife to launch Go Green – an in-store awareness program to encourage shoppers to return their empty cartons for recycling. Under this initiative, over 20 lakh cartons were deposited and recycled, with over 280 school desks donated to municipal schools and 50 garden benches donated; buoyed by the popularity of the program, and inspired by our previous campaign Your Cartons My Classroom in Bangalore and Delhi, we launched a campaign ‘Cartons Le Aao Classroom Banao’ and even roped in the iconic Mumbai dabbawalas to help increase awareness about recycling among all stakeholders.
One of the most interesting and inspiring recycling initiative has been our collaboration with the Indian Army. The Indian army has been a big consumer of milk in Tetra Pak cartons for years. Under the arrangement, the army sets up the collection centre and takes the responsibility to bring in used cartons; Tetra Pak provides baling and compacting units and arranges to transport the baled cartons to a recycler in Uttarakhand. So far, the army has set up 10 such collection centres in different parts of the country.
Doing business in India
Over the past few years, we have seen many positive developments in the country. The recent formation of the National Food Processing Development Council is a step in the right direction in that it builds a platform for collaboration and dialogue between the Ministry and the industry.
Tetra Pak has a long-term growth view in India and certain policy and development initiatives like Make in India by the new Government have generated positive business opportunities for companies like us.
We are also encouraged by some of the recent reforms announced by the government (for instance, abolition of licensing, lifting of certain restrictions, decision to implement Goods and Services Tax, freedom for farmers to sell their produce in the free market) and the urgency being shown to accelerate the pace of reforms.
About Kandarp Singh
A graduate in Chemical Engineering from IIT, Kharagpur, and a management graduate from IIM, Lucknow
Marketing executive at HCL, Mumbai
Leadership mentoring, tennis, cycling, golf, theatre, piano
David and Goliath: Underdogs, Misfits, and the Art of Battling Giants by Malcolm Gladwell