SWEDEN: Emerging market investment key for Tetra Pak
Packaging giant Tetra Pak has said it will invest in production in emerging markets over the next year, particularly in China, India and Pakistan, and is looking for land for expansion.
The company invests around EUR370m (US$527m) globally on a yearly basis, with China the biggest beneficiary.
However, Tetra Pak has invested EUR90m in a packaging material facility in Pakistan, which will supply the Middle East and India, and EUR30m in a packaging site in Monte Mor, Brazil to meet growing demand.
Tetra Pak CEO and president Dennis Jönsson told a conference call on the group's dairy operations, including liquid products, late last week that Pakistan is a market in which the business sees strong growth.
"Pakistan is a market where we've been investing in and are very committed to, despite the economy, because we see strong growth there," Jönsson said.
Over the border, India, the world's largest milk producer and consumer, "is still growing", Jönsson said. "What we are seeing is a tremendous growth right now and we are looking for land to buy because of that," he revealed.
India consumed 51.5bn litres of milk in 2008 and accounts for 20% of total consumption worldwide, Jönsson said.
"If we list the main markets we have invested in the past year, obviously China would be one, [then] Russia, Brazil and Italy," Jönsson said.
"We see India providing interesting growth as well. We also see the Middle East and Central and South America in the top markets. We expect Russia and the Eastern Europe area to come back from the economic problems … and get back to growth as well."
Jönsson said emerging markets are driving the growth in global dairy consumption with 96% of that growth coming from those markets in the last three years.
"This is very much because of a growth in population, and more importantly a rise in household incomes, which have really influenced consumption habits and that is something that we have been analysing very much and try to project," he added.
"One thing we are doing generally is looking very much at our innovation. This is continuously important for us and even with the present situation we took a decision that we wouldn't cut our R&D budget because we felt that this was extremely important for the future and we wanted to come out of this slump stronger than before."
Tetra Pak said it expects global consumption of milk and other liquid dairy products to increase by a compound annual growth rate (CAGR) of 2.2% over the next three years.
According to the group's Dairy Index, in 2008, global consumption of liquid dairy products, excluding soy and dairy alternatives, reached a record high of 258 billion litres. This marks a worldwide increase of 1.6% over 2007 — an additional four billion litres.
In April, the group posted a decline in sales growth for the fourth quarter of 2008 after stalling economies and the global credit crunch hit demand.
Net sales for 2008, however, reached EUR8.8bn, up 5% on 2007. Tetra Pak said its packaging sales reached EUR7.8bn in 2008 - up 4.5% on the year.
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