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A big business with the capacity to supply

Waqas Qureshi meets Saverio Mayer, European chief executive of Smurfit Kappa, at the corrugated giant’s Global Experience Centre to discuss new business, the impact of Brexit and innovations in the sector

What does the Global Experience Centre provide for your customers?

The Smurfit Kappa Global Experience Centre (GEC) gives customers the chance to; explore how packaging can meet their business needs in a risk-free environment, learn from leading behavioural insights, analyse supply chain trends and observe state of the art packaging and design tools such as the Shelf Viewer tool, an interactive touchscreen database of nearly 70,000 images from a variety of real retail shelves.

Describe the state of the corrugated market and the supply chain.

The market this year is very healthy – growing all over Europe above forecasts. All western European countries are growing at a very good rate – we are in a raw material tight supply situation. We have the capacity to ensure we do not let anyone down – that is one of the big advantages of dealing with an integrated system with our own materials.

Why a focus on Eastern Europe?

Eastern market is seeing even more growth. Poland, Czech Republic, Slovakia and Russia are growing at double the pace. We see this continuing and I am quite optimistic about market growth. We believe those regions will continue to grow at the higher rate than Western Europe; and as we are heavily involved with our pan-European customer base, we need to follow them – as some of them are moving their production. We need to ensure we can service them in all the areas.

For us, the way our footprint is geographically spread, we need to go for some bolt-on acquisitions – to fill some remaining small gaps because our presence is very extensive. In fact we are today working on two to three possible cases in the region.

How important is shelf-ready packaging and its development?

This is one of the most important revolutions in the last few years. Packaging is increasingly becoming recognised as the silent salesman. We have launched several years ago a product called ShelfSmart for our customers in terms of transforming their packaging to more and more shelf-ready packaging. The kind of box we are producing is changing from the brown box to a nicely printed and easy to open box which goes directly on the shelf and reduces the time in the retail environment. This is a clear trend now, with more white papers used with a better printing effect.

Describe the e-commerce sector.

Today the biggest issue for all of our customers is that from the same packaging line they need to be able to supply into several different supply chains because sometimes they need to ship straight to the consumer, sometimes the e-retailer, or pick and collect point. The distribution channels are evolving and increasing, and the difficulty for our customers is to be able to supply in all the different areas with the system and equipment they already have. Our excellent network has allowed us to build a leading logistics database which gives us the expertise which we use in our eSmart service, identifying 12 areas of consideration for e-retailers and acting on those that specifically benefit our customers’ businesses.

What about oversized packaging?

This occurs because retailers don’t have the system to allow for flexibility in adapting the packaging to the right size. Most of them are packing boxes manually with some standard boxes. We have software to analyse their shipments, to design the right packaging portfolio and ensure the packaging is fit-for-purpose. We can change it and modify it, or we can also offer Fanfold, an endless corrugated sheet and a machine that cuts the box exactly. Each box is measured through photocells and the corrugated sheet is cut to the right size. The acceleration and the growth are so big that the system is not optimised yet.

How is business in the Americas?

In Latin America we have a strong presence and strong growth. We are not so big in the US. We are very strong in Colombia, Argentina, Chile, Venezuela, Peru, Dominican Republic, Puerto Rico and all those countries.  We are really a reference point for the market there. It’s always been strategically a very important part for the group and it will remain so or even more.

Describe the effects of the Brexit vote on your business.

A Brexit backlash has not been visible in terms of activity. The UK is a very important market for Smurfit Kappa and will remain so. It represents more or less 8% of the European business and it continues to grow.  In terms of activity the currency has helped in the short term for UK export products, which need to be packed and shipped. We have not seen any real negative effect of that. We continue to invest in the UK because of the nature of the business – its proximity to our customers. We want and we need to be in the UK, and for us it’s a very interesting market and will remain so.

What are the key challenges for Smurfit Kappa in the sector?

The evolving time to market – speed is king. We are working on the capability to be flexible, agile, to respond because the delivery time is getting shorter. If you think about e-commerce, just a few months ago you were ordering something and waiting one to two days for delivery. Now it’s all about expecting to receive it in four hours.

This is of course triggering all the rest of the system – for me it’s about inputting systems for a very agile planning system in order to be capable of changing and adding new technologies in terms of machinery which allows you to reduce drastically the set up time and be much more flexible in delivering it. We use our own SupplySmart process internally to change our planning system and have dedicated some lines and specific machinery to be reactive to same-day orders.

Describe the rise of customised packaging technology.

There is a clear trend for customisation and this involves different kinds of printing. For example digital printing where we feel we are one step ahead because we have a good network of digital capability in different regions.

Is Smurfit Kappa looking towards the flexibles market?

We have already acquired companies that were producing both corrugated and flexible. And we are the number one Bag-in-Box producer in Europe. This means that we are producing the Bag-in-Box systems and we are by far the European market leader in Bag-in-Box systems. We are considering enlarging our product offering – but it has to be the right opportunity. We are considering when there are opportunities and we have some flexible business in Central America which is already part of the group.

What will the corrugated sector look like five years from now?

It will be more consolidated. We are in the middle of a technological transformation. In general, in terms of paper production and dealing with pan-European customers, there is going to be more consolidation in a few companies that are capable of offering a complete European system to supply them. The structure of the market in Europe will never get to the US type of consolidation. It’s always going to be according to the industrial locations in Europe – it’s always going to be fragmented. Here in Europe there are hundreds of family-owned companies which are very good companies, they are there to stay. There will be consolidation of some European groups but I do not see the market restricted to just a few players.

Source: PackagingNews