CASE 3

Essel Propack: The Packaging King

This case study is based on our video interview of Ashok Goel, Co-founder, Vice Chairman and Managing Director of Essel Propack Ltd.

SYNOPSIS

It’s not easy being the number one packaging company in the world. What is more difficult and challenging is to retain this position for ten years. But this is precisely what Essel Propack Laminated has achieved and has been growing from strength to strength ever since.ⁱ This company catapulted to this position by converting the entire market of aluminium tubes in India into laminated tubes and gaining global leadership by offering competitive laminate structure and driving cost efficiency.

Today, Essel Propack (EP) has operations in 12 countries with 24 factories, including the US, Mexico, Columbia, the UK, Poland, Germany, Egypt, Russia, China, Philippines, Indonesia and India. EP manufactures 33 percent of the world’s laminated tubes business and produces more than six billion tubes per year. It has gone through mergers and acquisitions and set up both Greenfield (a new site not previously used for an industrial purpose) and Brownfield (an existing industrial area that is being rebuilt for a new purpose) plants in various countries. Its core areas of packaging business consists of laminated tubes and plastic tubes, which have a variety of uses in industries like oral care, cosmetics, hair-care, pharmaceuticals, food and more.

ESSEL PROPACK’S VISION

‘Go and grow with customers.’

EP’s Board of Directors and employees are guided by this vision to make it a global supplier by providing unparalleled value-added, innovative and sustainable packaging solutions to a range of market sectors with impeccable customer service. EP has always determined to deliver to its valued customers. This includes: ‘on time’ deliveries of high quality products, elevate their brands through decoration and brand appeal, and improved product integrity and performance through innovative designs. It also promises its stakeholders improved profitability, diversified product and market portfolio and strong cash flow and balance sheet

The Vice Chairman and Managing Director of Essel Propack, Ashok Goel said that this effective performance is possible through innovation, by being agile and hungry for growth. One had to think out of the box to come out with attractive products and explore new areas of application, while looking at new markets. The company has been doing well with sales growing from $125 million in 2003 to $335 million in 2012. Profits, however, have not shown a commensurate increase, but have been kept between $11 million to $15 million. In 2008, there was a loss of $20 million. This was primarily because of the global financial meltdown that occurred in developed countries in 2008. However, EP followed certain key strategies that helped it overcome this slowdown; the most important among them being:

• Re-alignment of its organizational structure.
• Increased investment in research and development to come out with new products and manufacturing processes.
• All-round quality improvement.
• Cost controlling measures.

Ashok Goel and his team have provided effective leadership to their competent and committed employees both in India and abroad. The company’s steady progress over the years can be attributed to the 2200 employees working in 25 countries across the world and 825 employees in India. Essel Propack has good human resource policies, which have kept their talented employees motivated. The company also has a policy of Corporate Social Responsibility (CSR) that it follows for the communities around its factories and offices all over the world.

Now the outlook in most of its regions it operates in is good. The two large and emerging markets of China and India are in their growth phase. Its strategic interventions in building innovative products augur well for the future, thus ensuring its pre-eminent position of being miles ahead of the competition. Ashok Goel is optimistic that the company will touch half a billion dollars in two to three years and when it comes to gaining further growth momentum, the sky is the limit.

INDIAN PACKAGING INDUSTRY

Most industries generate wealth, but it is the packaging industry that generates wealth and employment. The packaging industry in India can be classified according to the shape, method of packaging, contents and the material used. It is currently worth $14 billion

and growing by 15 percent every year. Packaging, as distinct from packing, plays the most visible and catalytic role in a modern economy with the widespread adoption of branding of products and development of consumer preferences. The consumer product is packaged in a manner that meets the criteria of safety, convenience and attractiveness and is able to gain market share.

Packaging as a sectoral activity boosts consumption and economic growth and in turn continues to grow due to rapid urbanization, increasing health consciousness, low purchasing power resulting in purchase of small packets and changing consumer food habits. This is also because of the Indian economy experiencing good growth prospects, rural marketing pushing demand for sachets, the large growing middle class and food and pharmaceuticals industries being key drivers.

In India, there is a fascination for rigid packaging as it ensures that the product remains intact. It is estimated that more than 80 percent of the total packaging in India constitutes rigid packaging, which is the oldest and the most conventional form of packaging. The remaining 20 percent comprises of flexible packaging. Flexible packaging contains multi-layered laminated sheets of single or a combination of substrates, such as plastic, paper or aluminium. It finds varied use because of its ability to provide strength, moisture resistance, aroma retention, gloss, grease resistance, heat retention, seal ability, printability and low odour. Flexible packaging has gained vast acceptability because of the protection it offers to the product against environmental threats like moisture, heat and chemical reaction. More so, convenience in handling the product and the cost benefits it provides are added advantages. Nonetheless, plastic, which is the most commonly used substrate in flexible packaging, is facing pressure because of issues of environmental protection and safe disposal. Laminated products including form-fill-seal pouches, laminated tubes and tetra packs are growing at around 30 percent per annum (see Figure 3.1). Essel Propack is primarily in the flexible packaging segmenting in India.

The packaging industry’s growth has led to greater specialization and sophistication from the point of view of health (in the case of packaged foods and medicines) and environment friendliness of packing material. The demands on the packaging industry are challenging, given the increasing environmental awareness among communities. As the World Packaging Organisation’s (WPO) slogan puts it, ‘Better Quality of Life through Better Packaging for More People,’ sums up the important place that packaging occupies in a modern economy.ⁱⁱⁱ

EP’s HISTORY AND DEVELOPMENT

Essel Packaging Ltd, as the company was originally called, was incorporated in 1982 and commenced its operations in 1984, by setting up a manufacturing facility for producing laminated tubes and laminates. Laminated tubes are manufactured beginning with the laminating process that is done in four phases– blown film, laminating, slitting and printing. Once these printed laminates are completed they are ready for tubing and shouldering.

In 1993, the company took its first step towards becoming a global player by setting up its first overseas plant in Egypt. In April 1994, Essel Overseas Ltd was established, which is a subsidiary of EP and is mainly engaged in export business. Not long after, it started its manufacturing operations in Goa in 1997. Essel Packaging started a wholly owned subsidiary in Guangzhou, China in November 1997. Soon the company’s fifth manufacturing plant was set up in Silvassa, India. By 2000, Essel Packaging acquired a Swiss company called Propack and it was newly called Essel Propack Ltd.

Essel Propack is part of the $4 billion Essel Group and has a turnover of over $350 million. It is the largest specialty packaging company in the world manufacturing laminated and seamless or extruded plastic tubes. The company presently operates in four regions selling more than six billion tubes per year (see Figure 3.2):

• AMESA: Africa, Middle East and South Asia
• EAP: East Asia and Pacific (China, Philippines, Indonesia)
• America: USA, Columbia and Mexico
• Europe: UK, Germany, Poland and Russia

EP caters to diverse packaging needs of consumers and includes oral care, cosmetics, personal care, pharmaceuticals, food and industrial sectors, by offering customized solutions. Creativity and innovation are intrinsic to EP and customer satisfaction is of utmost significance. This company was also the first to introduce laminate tubes in India.

EP PRODUCTS

Laminated Tubes

Laminated tubes are used for packaging across the globe in varied sectors, such as oral care, food, cosmetics, hair care, pharma and industrial applications. The oral care industry in itself contributes to almost 70 percent of the total production of laminated tubes. These tubes are increasingly being used in the cosmetics sector for their cost-effectiveness. EP manufactures laminated tubes to cater to various sectors and businesses. These tubes offer products a competitive edge in the market. With their high stability, laminated tubes are suitable for packaging a variety of products.

Customised Speciality Laminates

Essel Propack’s facilities in China and India work proficiently with their Creativity and Innovation group to customise specialty laminates. It offers new web structures for aggressive products or simply provides a distinct visual element to the material. The R&D and graphics facilities are made available to customers for development and testing requirements. The modern R&D unit uses the most sophisticated equipment for testing and new product development. From aluminum barrier laminates to custom coloured plastic laminates, the variety of Essel Propack web structures offers something special for customers’ unique product.

Aluminium Barrier Laminates (ABL)

ABL tubes have an aluminium foil barrier, which provides superior light, air and moisture barrier along with reduced flavour absorption. The material density offers a more durable tube and allows for additional dispensing of the products contents. Pastes, ointments, cream and gels typically dentifrice, over-the-counter and pharmaceutical products fare well in ABL tube packaging.

Plastic Barrier Laminates (PBL)

PBL structures are a good option for packaging that needs to maintain its form and shape. It presents a more cosmetic look and is environmental friendly. Special barriers can be provided, such as EVOH (Ethylene Vinyl Alcohol Polymer) to offer a strong chemical resistance. Standard material is offered in white or natural (clear) but specialty custom colors can also be developed.

Specialty and Custom Materials

In order to add a more unique look to different product packaging, EP provided metallic, iridescent, holographic, soft touch and custom-coloured material that does capture customers’ attention. For aggressive or hard-to-hold formulations, Essel Propack can customize the packaging material to suit product needs. It offers different barrier strengths and thicknesses in web stock to comply with various requirements.

Layer Laminate Structures

EP uses barrier layer that is made from either aluminum foil or EVOH for plastic laminate and copolymer/ tie layer and polyethylene.

Plastic Tubes

Plastic tubes are seamless tubes that are used in the packaging of high-end, low-volume products in a range of businesses. They offer enhanced shelf life for the packaged goods and create a unique product identity.

Essel Propack through its constant innovation has successfully been manufacturing plastic tubes and delivering them to new and emerging sectors. The Company acquired Arista Tubes, a leading manufacturer of plastic tubes in the United Kingdom, to put in use their comprehensive knowledge of plastic tubes.

Extruded tubes offer an attractive and durable packaging solution for a variety of product lines. From custom colored materials to high end decoration techniques Essel Propack offers solutions to have a tube option to fit the need of your brand/product.

Caps and Closures

Essel Propack manufactures caps and specialty closures for products other than tubes, such as closures for hair care and personal care product bottles. Such innovations have added a lot of ease and convenience to the lives of product users. The Company provides comprehensive one-stop solutions right from concept development and product design to the final product assembly.

NEW PRODUCT INNOVATION

Eatin^™

Etain^™ is a fully recyclable plastic packaging tube made from a combination of virgin and recycled plastic materials. With the introduction of Etain^™, EP aims to reduce the amount of virgin plastic in tube packaging. These tubes will be recycled under Code 2 norms defined by the Society of Plastic Industry. Etain contains up to 40 percent PCR HDPE plastic material. The plastic packaging tubes are typically used by FMCG companies for packaging various types of hair care, skin care, pharmaceutical, food products, besides cosmetics. Etain is made from recycled plastic material and is fully recyclable for the same recycling stream that it came from.

Etain^™ PCR (Post-Consumer Recycled) tubes were launched at the ‘Interpack’ exhibition in Düsseldorf, Germany, held on April 24, 2008. Etain^™ is highly customizable and the amount of PCR can be varied depending upon customer requirements and the nature of the product that is contained within the package. This is only the beginning, and EP plans to introduce a number of products within the same overall theme of sustainability. Though Etain^™ is primarily targeted at the European and American markets, it can also be available to the company’s Indian customers.

Etain^™ will be able to address a few crucial problems, such as:

• Growing trend towards sustainability: An effort to ensure that the lifecycle of a product does not destroy the source of the product or the environment.
• Eco-conservation: Sustainability initiative by retail giants and other companies supporting eco-conservation
• Consumer preference: Various surveys conducted suggest that consumers prefer environment friendly packaging and this influences their buying decision.

Egnite^™

Egnite^™ is a, high-luster, metallic finish plastic barrier laminate tube and is available in a variety of colour shades. Essel Propack Innovation team has devised a new process for creating a laminate structure as reflective as a metal surface but with a ‘soft plastic feel’ apart from superb oxygen and water vapour resistance properties. The metallic finish makes the foil blocking process easier and also offers advantages of striking product differentiation. Egnite^™ also facilitates complex printing and novel colour effects. There cannot be imitation of this luster, which enables counterfeiting protection.

Inviseam (Invisible Seam)

Essel Propack successfully developed a new product using Inviseam technology to make laminate tubes in large volumes for personal care products. An Inviseam is a so-called non-visible seam, i.e., the overlapping of the two ends of the laminate is kept as little as possible so that the seam is virtually ‘invisible’ after the manufacture. It is opening up new segments in cosmetics and hair colorant segments

EP’S STRATEGIC FRONT

EP followed a four-pronged strategy in order to bring about a healthy turnaround:

• It sought aggressive growth in the emerging markets.
• It fixed performance issues and losses in Europe and US.
• It drove value proposition through innovation and high level of customer servicing.
• It conserved cash through heightened cost and capital productivity.

As a consequence, EP was able to substantially reduce operation cost by rationalizing manpower and operating costs. It focussed on non-oral care business i.e., pharmaceuticals, food and cosmetics, hair- care market and increased its customer base to reduce dependence on few big customers. It also introduced new dispensation system for non-oral care customers and used alternate raw materials that was cheaper and also environment friendly.

The company has been continually expanding in existing markets and spreading its wings in newer markets. It is thus maintaining its lead over competition. Global competitors like Cebal, a French company and Betts, a UK-based company, are EP’s possible threats. It is estimated that the two companies combined hold a 25 per cent market share.. There were possible threats from new players coming into this market and dislodging ^iv EP had to look for other areas where its products could be used and reduce its dependence on oral care business. The economic slowdown, especially in the US and Europe, could affect the company, which has to look for alternative markets like India, China and the other emerging economies.

EP, however, no longer distinguishes the products between laminated tubes and plastic tubes, thereby increasing its product portfolios to all other segments of the end like personal care, cosmetics, hair care, pharmaceuticals, food and industrial products. Strategically, the company has put in building blocks to get 50 percent of its total revenue from non-oral care sector, while it continues to grow in oral care:

Operational Models: As a laminated tube manufacturer, EP employed the Hub and Spoke model. Hub and Spoke model involves main manufacturing at a particular location from which it is shipped to other locations from where specific requirements are met. For example, in India and China laminates are manufactured and shipped to places near the customer location to convert it into tubes. Also, the In-plant model was set up where the tube lines are put up within the customer premises for just-in-time delivery. This model is generally applied when the clients’ requirements are large and will facilitate quick delivery of the products.

Research and Development: EP worked with its technology suppliers and collaborated with them to introduce new products:

• Large diameter tubes with a higher decoration capability,
• Very small diameter tubes which can cater to pharmaceuticals,
• High gloss laminated tubes with metallic finish ‘eginite’ catering to cosmetics segment were introduced.

Though currently the percentage of revenue spent on research and development is small, it is being increased rapidly.

Quality: EP has been working towards achieving its quality objectives through certain policies:

• Meet and exceed all customer requirements and ensure customer satisfaction with respect to quality, prompt delivery, reliable service and cost efficiency.
• Comply with all global laws and regulations relating to quality, safety and performance requirements of governing authorities.
• Strictly adhere to EP’s Harmonised Manufacturing Policy (HMP) and Good Manufacturing Practices (GMP) to continue achieving improvement in products, processes and services.
• Work constantly towards achieving global standards.

It has achieved documented and reviewed quality objectives, process improvement activities, and staying committed to high performance standards and integrity.

Cost Control Measures: During 2009, EP was able to save $7.8 million across the packaging business against the target of $5 million, through several measures, such as:

• Operation downsizing
• Business Intelligence software
• Productivity bench-marking
• Austerity drive across the company
• High operational control on cost and material
• Conservation of energy

EP’S INNOVATIVE AND CREATIVE STRATEGY

‘The company today is re-capturing its innovative soul with single minded focus.’

— Subhash Chandra, Chairman of Essel Propack

Innovation meant coming out with new products and breaking paradigms, thinking out of the box and daring to push frontiers relentlessly. Essel Propack through innovation could create outstanding value over the years for all its stakeholders.

This innovative spirit resulted in the introduction of ‘egnite’ (an attractive metallic finish) and ‘etain’ (made out of post-consumer recycled (PCR) material). New products created to attract wide range of customers including high-end clients required different kinds of packaging. This was done using iridescent as well as fragrant tubes.

EP besides being the world’s largest specialty packaging company and producing laminated tubes, also manufactures coextruded tubes, and flexible packaging material (see Figure 3.3)^v

In India, the manufacturing units are located at Vasind, Murbad and Wada in Maharashtra, Silvassa in Dadra, Nagar Haveli in Nalgarh, and in Himachal Pradesh, Uttarakhand, Goa and Pondicherry.

EP AND THE HUMAN TOUCH

‘How we interact with the world in which we operate determines our place within it.’

EP believes that a responsible approach to developing relationships between companies and the communities they serve, global or local, is a vital part of delivering business success. Business activities have direct and indirect impacts on the societies in which it operates.

Employee Strength: The total number of employees in India and abroad is 2265 out of which 865 employees are in India and rest are engaged globally in various subsidiaries as of March 31, 2013.

Employee Contribution: The company’s human capital has been instrumental in achieving a quick turnaround in a very challenging environment. The company has been focusing on building necessary human capital for successful implementation of business strategy. Planned efforts were made to enhance the technical and functional competencies of employees and building leadership pipelines for the future, through implementation of individual development plans. Implementation of HR–Balanced Score Card is one of the key initiatives undertaken to ensure line of sight between individual, key result areas and the overall strategic thrust areas. A survey was conducted to assess the engagement level of the employees. This survey also helped to prioritize the human capital plans and programs for the company.

Industrial relations have been proactively managed during the period and initiatives, such as Six Sigma are being actively promoted at the manufacturing units.

HR Policies: Essel Propack follows global HR policies for attracting, motivating, retaining employees. These policies have been fine-tuned to meet specific local regulations. The bottom-line is motivating employees so that they are ready to give their full contribution towards the success of the organization. It has been found that the attrition rate is within the industry’s norms.

The company also believes in continuous development of its employees as a means to sustain profitable growth. For its managers and executives, most of them have gone through competency mapping workshops, career development and on-the-job coaching, including deputing for training programs conducted by reputed institutions. Other employees were exposed to Six Sigma and such like programs. Moreover, the performance management system as well as the reward system has been strengthened to generate better overall performance. On the industrial relations front, the relationships with the unions and employees have been cordial.

Corporate Social Responsibility (CSR): The Corporate Social Responsibility policy applies throughout EP Worldwide, to all the company directors and employees and governs its approach to all its activities. EP also provides stakeholders with a statement of their commitments under a family of eight Corporate Social Responsibility policies. As a member of the international business community, the company also recognizes its CSR commitments in its various roles, which include employer, customer, vendor and citizen. It endeavours to manage these in a responsible manner, believing that sound and demonstrable performance in relation to CSR policies and practices is a fundamental part of business success.

This commitment of EP is reflected in the following eight policies:

• Standards of business conduct: It is committed to ensuring that the business is conducted in all respects according to rigorous ethical, professional and legal standards.
• Customers: EP values their customers highly. Every employee is responsible for ensuring that any contact with the customers, and the public at large, reflects professionalism, efficiency, honesty and integrity and strives to provide high quality service, products, and good value for money.
• Human rights: EP respects the Universal Declaration of Human Rights and seeks to be guided by its provisions in the conduct of its business.
• Workforce: EP strives to be the employer of choice in all countries in which it operates. EP aims to deliver a competitive and fair employment environment and the opportunity to develop and advance subject to individual performance and business opportunity.
• Health and safety: Working environment, which is both safe and fit for the intended purpose and ensures that health and safety issues are paramount for all business operations is of utmost importance to EP.
• Suppliers: Suppliers are considered as valued partners who help in achieving the policy aspirations in the delivery of products and services. Specifically, EP is committed to working with its suppliers of products and services to ensure that the welfare of workers and labour conditions within the supply chain meet or exceed recognized standards.
• Community: EP strives to be a good corporate citizen around the world, recognising its responsibilities towards the community in which it operates. They extend their support to appropriate non-political and non-sectarian projects, organizations and charities.
• Environment: Essel Propack is committed to a program of management, continuous improvement and reporting of its direct and indirect impacts, which marks its contribution to improving the world.

All business units of EP are committed to achievement of its CSR policy objectives. The performance is periodically reviewed and externally verified to aid in meeting the goals. At a local level, the heads of businesses review progress at least annually. EP has formulated an elaborate philosophy on CSR as mentioned above. It should now make and implement this policy and actualize the philosophy and allocate 2 percent of its net profits to this cause.

FINANCIAL PERFORMANCE

From the graph provided in Figure 3.4, it is evident that in 2008, Essel Propack was hit by the global slowdown and the turnover was $298.23 million, and there was a loss of $20.34 million. The combined result of 2009 and 2010 show the recovery made by the company with its turnover reaching $353.93 million and a net profit of $12.52 million. Thereafter, the turnover and profits for the next three years were normal. In fact, it was almost a flat line, which indicates that there was possibly a dragging of the global slowdown. Moreover, the profits were above the breakeven point indicating possibly a rise in material and other costs. The company needs to break out of these constraints with innovative approaches and by entering of emerging countries and markets (see Table 3.1).

 

Table 3.1 shows a comparative picture of the company’s performance in terms of revenues and PBIT (Profit Before Interest and Tax) in the various regions. All regions have grown in revenues, but Europe has shown a loss in both the years, which reflects the effect of the global slowdown. However, there is an overall increase in 2013 over 2012.

Figure 3.5 shows the revenue contribution in the years 2012 and 2013. There is not much of a difference in the percentage of contribution made by the different regions marked.

INORGANIC AND ORGANIC EXPANSION

The company has taken both inorganic and organic routes to grow in both product and geography including forays into China, Europe, USA and Latin Americas.

The China Story

Essel Propack’s China story began in the year 1997. There was no large manufacturer of laminated tubes in China and this product was treated as a premium product. Essel Propack decided to set up Greenfield plant to manufacture laminated tubes and converted this product from a premium product to one for mass-scale consumption.

The first plant came up at Guangzhou in 1997 with an investment of $45 million and became the world’s largest single location plant for laminated tubes. Thereafter, the product portfolio for laminated tubes expanded into shoe polish, hand cream etc. Currently, Essel Propack has four plants in China.

Europe and USA

In 1999, EP acquired the greenfield plant in Dresden, Germany through joint venture. It also acquired Arista Tubes in the UK and a Greenfield plant in Russia in 2004. In 2005, it acquired Telcon Packaging in the UK. The company commissioned a state-of-the-art plant in Poland to cater to the requirement of its customers in Europe for plastic tubes under the brand name of Arista Tubes, UK.

In 2002, it started its operations in the US. EP also acquired a new plant in Denville for caps and closures for supplying Procter and Gamble’s (North America) operations in 2005. In 2006, the company forayed into the medical devices business by acquiring Tacpro Inc in USA and Avalon Medical Services in Singapore. These two companies were the manufacturers of medical devices, such as catheters and balloons.

In March 2008, the company expanded its footprint in US with the acquisition of Catheter and Disposables Technology, Inc. in Minneapolis, US. In September 2008, Medical Engineering and Design Inc, a company based in Minneapolis, US was acquired. In December 2009, Essel Propack has put its medical devices business based in the US and Singapore on the block as part of its plan to divest its non-core business.

AMESA

In July 2005, Essel Propack commissioned a plant at Nalagarh for manufacturing laminated tubes. A year later, it acquired Packaging India Pvt. Ltd, which is one of the largest manufacturers of specialty packaging materials. In 2007, a second plant of Packaging India Pvt. Ltd has begun commercial production in Uttarakhand, for manufacturing flexible packaging.

HOW HAS THE SLOWDOWN AFFECTED THE COMPANY

EP was affected with the global slowdown which started during 2007, with a fall in profits to $14.7 million during 2007 from $21.75 million in 2006. In 2008, despite a turnover of $298 million there was a loss of $20 million primarily because of loss in European operations and currency effect. However, the company took immediate comprehensive steps to stem the fall by resorting to the following measures.

EP had adopted a multi-pronged strategy to script the turnaround. Downsizing was just one part of it. The other part was that capital expenditure was frozen. During 2009, $5 million was primarily spent on SAP (System Application and Products) globally to improve the operational efficiency. Each element of working capital was examined and steps to optimize the process were taken, thereby releasing excess money locked in working capital. Next was to push up machine efficiency levels, which meant that from the same equipment more could be produced. This helped to release productive assets from some regions and deploy them into high growth regions without incurring additional capital expenditure. The loan portfolio was also restructured and high cost short term loans were replaced with low cost long-term loans. This helped in reducing financial costs by about 200 basic points. All these measures helped EP to come up with a healthy and profitable balance sheet.

CASE UPDATE

Essel Propack started its journey as a laminated tube company catering to oral and non-oral care segment. It believes that expanding its portfolio does not necessarily mean expanding into different product lines, but expanding into different market segments and different geographies, which offer better value- propositions. In non-oral care segments the shifts from bottles to tubes, and aluminium tubes to laminated tubes in Pharmaceuticals has also increased the overall tube market size.

The year 2012–13 experienced recessions looming over Europe, US and Japan with the resultant slow down impact in India and China. In India, there were other macro issues too that accentuated the difficult situation. The result –GDP growth rate of only five percent against the projected 6.5 percent, which by itself was substantially lower than the rates achieved in the previous years.

Despite all odds, Essel Propack has done well and is on track with its growth plans. The company– ‘Determined to Deliver’ against all odds–has never failed to seize and multiply opportunities for growth – be it products, customers or markets (see Figure 3.6).

The year 2012–13 saw an enhanced performance. The global revenue during the year grew by 15.7 percent, while the business of high value non-oral care category grew even higher.

All the four regions have delivered double-digit revenue growth and improved on profitability.

With an objective to empower and engage its employees across the globe to march towards and achieve the goal of being a $500 million company with 50 percent of revenues coming from the high value non-oral care category, Essel Propack launched ‘Mission High 5’ global.^ix

The mission would focus on:

• Effective changes in organisational structure and processes to support speed to market.
• Tighter operation systems and faster response to customer requirements and market dynamics.
• Unified key account management, including one dedicated key account manager, to deliver the best to each customer across the world to become their most preferred supplier.
• Reduction in working capital through efficient processes on the operational front.
• Training and skill development across functions to facilitate individual growth and capabilities of people to deliver targets.

The global Fast-Moving Consumer Goods (FMCG) industry has been one of the few sectors that witnessed sustained growth amidst the global economic slowdown. Importantly, the FMCG sector is expected to witness significant growth in the next few years. Changes in consumption patterns, greater exposure to global media trends, specific cultural imperatives, heightened health and beauty consciousness combined with wide spread availability is driving high growth. For companies to leverage this big opportunity, they will need to have all the building blocks in place. Their existing strengths and diverse capabilities have to converge into a unified and powerful proposition, aligned to the consumer needs by working collaboratively on a total packaging solution designed for the customers.

Essel Propack’s subsidiary in Poland has been awarded a long-term contract by a leading multinational FMCG player for supplying tubes in Europe. Upon fully ramping up, this contract will contribute annually around €15 million to revenue. To stay competitive in their respected market, Essel Propack is constantly discovering and adapting to new trends in the industry. As the biggest supplier of plastic and laminated tubes, the company can manufacture a wide variety of tubes in different sizes, materials and structure, helping to stay updated with customer demand. The newest trend for laminated tubes is different sizing, including thinner structures. The restructuring in different geographies, plus robust demand from the FMCG sector and Essel Propack Ltd. holding as a dominant position with limited competitors will lead healthy growth (see Figure 3.7).

SUMMARY

EP was negatively impacted during the financial slowdown post 2008, due to its exposure to developed markets and the currency impact. The company has taken several initiatives to be back on the growth track, which has started showing its positive results. EP is gearing itself to cash in on the opportunities available in the non-oral care segment. By making their presence felt in this segment, EP will acquire better operating margins than what it gained from the oral care segment.. Employing low-cost manufacturing facilities as a hub for catering to the other regions and expansion of customer base will provide enough fuel for the company to boost its profitability going forward. The region-specific initiatives made by the company will display better performance and thus boost consolidated earnings.

The year 2012–13 saw the spectre of recession looming over Europe, US and Japan with the resultant slow down impact in India and China. In India, there were other macro issues too that accentuated the difficult situation. The result—GDP growth rate of only five percent against the projected 6.5 percent, which was substantially lower than the rates achieved in the previous years. Therefore, the future augurs well for EP. It has shown great fortitude and resilience in the face of various global adversities. It has come out victorious through different innovative measures and timely actions.

As a proof of its excellent performances, Essel Propack has received a number of awards and accolades for outstanding performance. It has featured in the ‘Best Under a Billion’ list published by Forbes magazine for four consecutive years, from 2003 to 2006. This award is given based on criteria, which includes growth in top line, bottom line and a few other factors.

When asked when his company will reach $1 billion, Ashok Goel said that his company’s progress received a setback because of the global slowdown. However, he expects to reach a turnover of half a billion dollars in the next two to three years, i.e., by 2015. On being queried about his management mantra for success, he replied, ‘Being lean, mean and fast.’

QUESTIONS FOR DISCUSSION

1. Examine the SWOT Analysis and give your opinion on the most important aspects the Company must act on.
2. What strategies Essel Propack must adopt to counter the second global slowdown which is presently affecting all countries?
3. Is Essel Propack’s growth a result of mergers and acquisitions only?
4. What role was played by Essel Propack’s HR policies in its progress?
5. How would you rate Essel Propack for Leadership and Teamwork?
6. What do you think of Essel Propack’s Hub and Spoke Model Strategy?
7. In what way can the Company reduce its dependence on the American and European markets?
8. How can the Company reduce its dependence on the oral care market?
9. Do you agree with Mr. Ashok Goel’s Mantra of being, ‘Lean, Mean and Fast’?
10. Do you agree with Ashok Goel expectations that Essel Propack will become a One-half billion USD Company in 2-3 years?

END NOTES

1. (Essel Group n.d.)
2. (Report on Packaging Industry in India 2008)
3. (Report on Packaging Industry in India 2008)
4. (Essel Propack to rais capacity to 5.5 billion tubes 2003)
5. (Essel Propack Ltd. Annual Report 2010-11)
6. (Essel Propack Ltd. Annual Report 2010-11)
7. (Essel Propack Ltd. Annual Report 2012-13)
8. (Essel Propack Ltd. Annual Report 2010-11)
9. (Essel Propack Ltd. Annual Report 2012-13)