CASE 1/group 1/ 7-10/ IMM

Essel Propack : The Worlds Largest Manufacturer of Laminated Tubes

A few have noticed that the worlds largest Chandra who is ore "nown as a pro oter of

anufacturer of la inated tu!es is a low-"e# edia and entertain ent fir s li"e +ee ',

Indian co pan# $ Essel %ropac"& 'he co pan# was esta!lished in 1()* !# Su!hash and Essel -orld& If #ou loo" at the la inated tu!es used in the pac"aging of tooth paste. phar aceutical products. and cos etics. the chances are that one in three of such pac"aging worldwide is anufactured !# Essel& 'he glo!al pac"aging tu!e ar"et is esti ated at /* !illion tu!es per annu . which constitute an esti ated 001 alu inu tu!es. 001 la inated tu!es. and *01 plastic tu!es& 'raditionall#. toothpaste tu!es were ade of alu inu & 2owever. alu inu tu!es were not the !est solution for pac"aging la#er in the iddle to toothpastes and cos etic crea s& 'he la inated plastic tu!es had plastic la#ers at the top of !otto . adhesive la#ers in !etween. and a thin alu inu over alu inu tu!es 3 preserve fragrance and taste& 'he la inated plastic tu!es offer the following advantages

4a5 re ain fle6i!le. soft. and s ooth at an# stage of use. 4!5 add value to products through enhanced shelf appeal. 4c5 have e6cellent !arrier properties& 'he la inated tu!e seg ent is the niche seg ent of the glo!al tu!e 1*&) !illion la inated tu!es in which Essel %ropac" co categories which replaced ar"et esti ated at

ands /01 of the glo!al

ar"et share& A ong the end-use seg ents. the toothpaste seg ent leads the product etal tu!es with la inated tu!es& 7eographicall#. la inated tu!e penetration is concentrated in A erica and western Europe& E erging econo ies are increasingl# following the trend& Essel %ropac" !eca e the first co pan# to introduce la inated tu!es in India& E%8s first plant was esta!lished at ,asind in 1()/ with a capacit# of 97 illion tu!es per annu with technical colla!oration with A erican :ational Can Co pan# of ;SA. <arl Magerle <unscht 4<M<5 of Swit=erland. and <aito Che of >apan& 'hese colla!orations were one-ti e transfer of technolog# and after the a!sorption of technolog#. E%8 has not renewed it& E%8s second

CASE 1/group 1/ 7-10/ IMM plant ca up at Mur!ad in 1((*. third plant at -ada in April 1((0. and the fourth and fifth plants at 7oa and Silvassa. respectivel#. in 1(()& ?esides E%8. the other pla#ers in the la inated tu!e seg ent include Shree @a a Multitech 4onl# other integrated fir 5. @AS %ropac" 4a sic" Co pan#5. and ?etts& E%8s pioneering efforts to introduce and populari=e the la inated tu!es in the do estic ar"et were full of hurdles& In the initial #ears the de and for la inated tu!es in the do estic ar"et was low and the adverse foreign e6change fluctuations increased the eager profit after ta6 proAect cost !# al ost 901& 'ill 1()). the co pan# was running in loss& As shown in 'a!le 1. the co pan# started earning profits onl# after 1()( with a of @s& 9) la"hs& 'he la inated tu!es has !een a niche seg ent of the tu!e growth and high argins& Conversion fro alu iniu ar"et characteri=ed !# high tu!es to la inated tu!es has ar"et si=e of /* ar"ets&

contri!uted to significant growth glo!all#& Considering the glo!al tu!e 'hus. a conversion still holds great potential for worldwide toothpaste seg ent is 10 !illion with 0)1 of the la inated tu!e toothpaste seg ent alone offers a tu!es& ?esides. it is the ediu -ter ost profita!le seg ent as the

!illion per annu . onl# /)1 have so far !een converted into la inated tu!es

ar"et growth& 'he ar"et share& 'he

conversion potential of a!out 9 !illion ar"ets are lees seg ented& As ar"et
'() P%T '$$*T) as ( of sales /&(* 9&0) )&(7 )&9 11&09 17&0( 1B&B7 1B&/* 1/&/ 10&09 10&0/ 10&B) 10&)1 1B&11 1/&77

;nilever and Colgate account for 701 of the total worldwide output. the
#ear 1()( 1((0 1((1 1((* 1((/ 1((0 1((9 1((B 1((7 1(() 1((( *000 *001 *00* *00/ !ales 19&/* //&0* *0&0) *B&7* *B&/7 91&/( )0&01 11/&97 19*&B) 17(&(1 1)9&(/ *0(&B0 1(9&99 *97&1* *9(&/0 $et !ales 10&7B /0&() *1&0) *0&7B 1(&)0 /(&(* B0&) (0&9B 1**&/B 10B&)7 191&/B *07&)0 171&B1 **B&(* **7 P%T *s+ ,rore 0&9) 1&7/ 1&B1 *&B/ *&() )&79 19&9( *0&0) 1(&7B *9&0) *0&B/ /B&B* *(&B 0)&1 /(&)0 &perating profit 1&/* *&)7 /&*0 /&)/ /&) 10&19 1B&*B 1)&10 *0&9 *(&7B /1&1 0B&0) /0&/ 0(&79 90&)* Total fore earnings 0&B0 0&01 /&*7 0&(7 0&*1 *&(* *&7/ 0&0B 0&07 )&*( 7&B0 1(&)0 17&* 00&/* *9&

Table -1 : International e pansion has !trengthened EPLs "inancial Performance

CASE 1/group 1/ 7-10/ IMM for la inated tu!es is characteri=ed !# olgopson#. wherein the !u#er has considera!le !argaining power& 'herefore. the si=e of operation and forging of strong relationships with the clients !eco e critical to the success even in the ho e the tu!e anufacturers to co petitivel# cater to their clients in those ar"et& As toothpaste ar"ets& anufacturers are consolidating their operations worldwide. it has !eco e pertinent for

Move towards Global Markets E%8s secret of success lies in !eing ver# efficient and co petitive producer of custo i=ed printed co-e6truded we! 4the la inated tu!e ain input for a"ing la inated tu!es5 that is ar"ets. integrated capital intensive and its efficient conversion into tu!es& In the glo!al converters& 'he fir entered into international

anufacturers are less than half a do=en. while the rest are pure ar"ets with its first overseas Aoint

venture in Eg#pt in 1((/. which !eca e the first in the world to introduce tu!es using !arrier liner technolog#& 'he co pan#s glo!ali=ation spree !egan with the induction of a group of professionals led !# its erstwhile CEC C#rus ?agwadia in 1((9. who was a seasoned anager with stints at Dupont and ,oltas& %resentl#. E%8 holds )01 of the sta"e in the Aoint venture& In 1((7. the co pan# for ed a wholl# owned su!sidiar# in 7uang=hou. China& In 1(((. the co pan# set up a Aoint venture in Dresden. 7er an#. in which it has *0&(1 sta"e& E%8 set up a wholl# owned su!sidiar# in :epal in #ear *000& A aAor !rea"through ca e in *000 with the acEuisition of Swit=erlands %ropac" A7 aster# with recent develop ent of ver# sophisticated to ;niliver in China& E%8s !usiness illion in cash and F B&)7 odel illion

which was at that ti e the worlds fourth largest co pan#& %ropac" lac"ed in captive we!- a"ing. it had tu!e- a"ing %% / /00 technolog#. and geographic presence including the single-largest contract for suppl#ing 0&90 !illion tu!es per annu pri aril# involved centrali=ed production of we! in India and then transferring the sa e to su!sidiaries / >,s for conversion& In return for F 11 ar"ets and an annual capacit# of B00 technolog# in the for Another eEuit# shares. Essel gained access to the 8atin A erican. Indonesian. and Chinese illion units& ?esides. it got proprietar# achine that slashed costs !# /01& ar"ets ca e three #ears !ac" as the ar"et& %resentl#. of %%/00 $ a high- speed

aAor thrust in its effort in international

co pan# received a five-#ear contract with Cincinnati-!ased GMC7 giant %rocter H 7a !le to suppl# its tu!e reEuire ents for the entire :orth A erican

CASE 1/group 1/ 7-10/ IMM the sa e 1.00.000 sE&ft plant in the sleep# town of Danville. :orth Carolina. set up at a cost of F *0 In a strategic illion. services %rocter H 7a !le. :orth A erica& ove to cater to the European ar"et. E%8 has recentl# acEuired a ;<-

!ased co pan# Arista 'u!es through its Mauritius-!ased wholl# owned su!sidiar# 8a itu!e 'echnologies 8td. Mauritius& Arista 'u!es. ;<. was founded in 1(() and anufactured plastic sea less tu!es for cos etics. personal care. toiletries. and phar aceutical seg ents& 'he co pan# had a turnover of ;S F *0 -ith the acEuisition of Arista 'u!es. E%8 consolidated its illion and a /01 ar"et share in ;< and Ireland with an integrated facilit# at Stevenage near 8ondon& ar"eting efforts in Europe& anufacturing %resentl#. the co pan# has got *0 offices across the glo!e and 17

facilities in India. :epal. ;SA. Me6ico. Colu !ia. ,ene=uela. 7er an#. Eg#pt. China. %hilippines. Indonesia. and ;<& -ith 1100 persons. the co pan#s wor" force outside India is ore than dou!le its wor"force in India consisting of onl# 009 persons& 'he ore than 1/ nationalities co position of E%8s wor"force is trul# glo!al as it consists of

including Indian. :epalese. A erican. Me6ican. Colu !ian. ,ene=ulean. 7er an. Eg#ptican. Chinese. Gilipino. Indonesian. Costa @ican. and ?ritish& Cut of the total turnover of @s& B0(&* crore in *00/. the overseas revenue of the co pan# accounted for @s& /9B&1 crore 49)&0915& International Marketing Challenges 'he tu!e pac"aging industr# operates in a highl# co petitive during the recent #ears has undergone the following changes& Capacit# consolidation !# custo ers due to their glo!al sourcing strategies to ta"e advantage of have to anufacturing cost ar!itrage& Due to the e erging international arginali=ed& 'he# would either ar"et ar"et scenario. the regional pla#ers are !eing ar"eting environ ent and

erge with large pla#ers or e erge as niche pla#ers in certain

seg ents& It is e6pected that the rule of three-onl# three large glo!al pla#ers-is li"el# to e erge over the ne6t few #ears& Intense co petition in this seg ent has led to a rise in cost cutting !# custo ers. leading to pressure on pricing&

CASE 1/group 1/ 7-10/ IMM 'he glo!al la inated tu!e

ar"et is facing a glut due to a *01 increase in suppl# aintain growth&

and prices have !een falling !# 101 a #ear over the last five #ears& Constant technolog# upgradation and innovation is reEuired to

-hile the per capita consu ption of 1*0-gra per annu & So. fro

toothpaste tu!es in India is onl# half ar"et has slowed down to /-01 a"es up the lions

the Asian average. growth in the do estic oral care

the oral care seg ent. which even toda# is

share 4over 7915 of E%8s sales. the co pan# is !eing forced to diversif# its client !ase& As indicated in Gigures 1&1) and 1&1( the fir care a"ing inroads into non-oral *01 in *00* and /5 indicates the ar"et seg ents wherein its share has significantl# increased fro ar"et&

to /11 in *00/& the custo er profile of E%8 4'a!le $ * co pan#s increasing inroads into non-oral care A "e# e erging growth area for tu!e for low-cost well as Table - . : ,ustomer Profile of EPL .//. ;nilever -/B1 Colgate -//1 Cos etics -1/1 %har aceuticals -91 %H7 -71 Cthers -B1 other pac"aging anufacture of s all tu!es&

anufacturers !esides targeting non-oral care

applications would !e s all tu!es/toothpaste sachets. which is an effective solution 'he co pan# is also diversif#ing into anufacture of Iclosures 4caps for tu!es as

Table - 0 1 ,ustomer Profile : .//0 ;nilever -*/1 Colgate -*)1 Cos etics -101 %har aceuticals -)1 %H7 -1)1 Cthers -(1 ar"et& It is setting up

edia5 which is esti ated to !e ;S F 0 !illion

a state-of-the-art closure

anufacturing unit in the ;S& 'he vertical integration into

caps would ena!le the co pan# to provide one-stop-shop convenience to custo ers& Essel could leverage on its relationship with large glo!al M:Cs to provide closures along with tu!es that would ena!le !etter. foolproof pac"aging solutions& Essel %ropac" has !een included in the Gor!es aga=ines list of the *00 ost successful co panies outside ;S with annual sales of under F 1 !illion in *00/& Essel %ac"aging 47uang=hou5 8td. the Chinese su!sidiar# of E%8. was awarded the I ost

CASE 1/group 1/ 7-10/ IMM @elia!le Enterprise of *001 !# the %rovincial Authorit# in 7uang=hou& 'he co pan# has an a !itious vision for *000 to !e the worlds co pan# with a 901 share in glo!al ost ad ired specialit# pac"aging ar"et in la inated tu!es& Essels top

anage ent is in the process of !rainstor ing to achieve this a !itious goal&

Questions 1& -hat are the reasons that led Essel %ropac" 8i ited to enter international ar"etsJ *& Gind out the "e# reasons for the success of E%8 in international ar"ets& /& Identif# the !enefits and ris"s for E%8 in operating in a niche ar"et seg ent of la inated tu!es& Suggest easures to leverage its strengths and anage the ris"s identified !# #ou& 0& In view of the intensif#ing co petition a ong la inated tu!e anufacturers on one hand and rise in custo ers negotiating power on the other hand. how should E%8 tac"le these ar"eting challenges so as to achieve its goal of gaining 901 of worlds ar"et share in la inated tu!es in the ne6t few #ears J 9& 'est Essel %ropac" towards its a!ilit# for glo!al ar"et participation&