Creating synergies to meet demands for sustainable packaging

Packaging Solutions

A Stora Enso interview with Hannu Kasurinen, who leads the company's new Packaging Materials division. The division was formed after combining the former Consumer Board division and Containerboard business in January 2020.

What does the market look like now and how has it been during the Covid-19 outbreak?

Demand for our renewable packaging materials has remained on a solid level throughout the Covid-19 crisis, as many of our products have critical end uses such as packaging food and pharmaceuticals. We have worked hard to ensure our materials reach these vital industries, which have been operational throughout the outbreak.

However, the demand has varied between different end uses. Due to lockdowns and social distancing, demand for packaged foods and e-commerce packaging has increased, as people have stayed in their homes. On the other hand, this has led to cafes and restaurants closing, which meant somewhat poorer visibility of demand for food service packaging materials. While a large part of our portfolio is driven by relatively stable end uses such as food packaging, global recovery will impact outlook for board consumption in the other end use segments.

How has the integration of the new division proceeded?

We aim to be the preferred supplier of fibre based packaging materials to brand owners and converters in premium packaging end uses globally. This means offering innovative products and services that meet the growing demands on packaging performance and sustainability in both consumer and industrial packaging.

We are proceeding well with establishing our new division. We now have the widest portfolio of renewable packaging materials on the market, with virgin and recycled products and a wide range of barrier coating options. Customers can find the right material for their primary and secondary packaging, and many of our customers need both. We are reorganising our sales team to leverage the portfolio and capture value from sales synergies.

Throughout the new division, we have combined forces to ensure we leverage technical capabilities and production resources to build a solid platform for growth. Now we will focus on drawing on synergies from the integration and developing our business further.

What are the synergies that you get from the new Packaging Materials division?

One focus area is to ensure our professional sales teams are well equipped to sell our entire product portfolio. We see cross selling opportunities with large customers looking for sustainable, high quality packaging materials. Also, cross-divisional collaboration with Packaging Solutions creates opportunities to offer more services to our customers.

Secondly, the new division will enable us to become an industry leader in operational and supply chain excellence. Our assets are quite similar, and we will find synergies across the mills in areas like operational efficiency and asset maintenance. In our supply chain we work on joint demand planning and digital integration with key customers.

The third focus area is innovations and collaborative product development with customers. We are strengthening our innovation and research and development capabilities through a new organisation and new ways of working, to speed up commercialisation.

How are you planning to develop the division?

We can lead the transition towards a circular bioeconomy with our renewable and recyclable packaging materials and we can continue to deliver profitable growth. We will develop our competitiveness through quality leadership and improvement in the cost positions of our mills, with a focus on production capabilities and operational efficiency.

Strong innovation and commercialisation capabilities will be key. By replacing fossil based materials with innovative fibre based products, we will be able to increase our market share and accelerate growth. A portfolio based on both virgin and recycled fibers gives us the opportunity to explore further possibilities with recycled fibers in our products.

During 2020, we will deliver on our promise to grow the containerboard business by successful implementation of the machine conversion in Oulu Mill, and we will invest significantly to reduce the mill’s environmental impact. We started commercialisation of 100% virgin fibre based three-layer kraftliner with improved stiffness and strength in early June. The new products will deliver high packaging performance with lower weight to our customers.

What are the strongest drivers of the demand for renewable packaging materials?

The total packaging market is valued at around €400 billion and growing. The addressable market size for fibre based primary and secondary packaging is estimated to be approximately 75% of that. However, plastic still has the highest growth rates. Our consumer boards typically target end uses such as food, beverages, pharmaceuticals and cosmetics, and containerboards are used in transport and industrial applications.

Population growth, GDP and urbanisation are the main drivers for packaged goods. Both packaging demand and the requirements for materials are affected by other trends as well, such as growth in e-commerce at the expense of traditional retail, increasing globalisation, and higher sustainability and traceability requirements. Most of these are expected to have a positive impact on demand for our products over the next five years.

Growth of e-commerce and globalized supply chains will create more demand for packaging as well as place different requirements on packaging performance, which we can cater for with our products. Food safety will remain a strong competitive advantage for us, and concerns regarding recycled materials create potential for the demand for virgin based containerboards to grow in food segments.

The ever growing consumer demand for sustainable products will reward brands that replace fossil based plastic packaging and fight climate change. New regulations mandate companies to find ways to commit to reducing plastic waste and single use items and increasing recycling. All this drives demand for low carbon, renewable, recyclable and recycled packaging.

Industrial end uses will also benefit, as high quality containerboards enable the lower weight and lower emissions of corrugated packaging.

We have a long history of successfully replacing fossil based plastics with renewable materials in demanding end uses on an industrial scale. We are committed to supporting our customers in choosing the right materials in the future.