Tetra Pak Analysis Tetra Pak Analysis

June 3rd 2013

Agenda
Background Key Challenges Stakeholder Analysis Risk Management Recommendations Q&A

Tetra Pak products

Tetra Pak

http://www.youtube.com/watch?v=eDodQwzfV74&list=PL10C49583D3A632AA

Background
How did we get here?
Milk consumption

What instigated the challenges?

Melamine scandal

Why does this impact Tetra Pak significantly?

Most of its eggs in one basket

How did this happen?

Highly fragmented supply chain

Key Challenges
Milk safety:
Milk producers have struggled with contamination issues Significantly impacts Tetra Pak, but TP has limited control

Competition
Substitute product of fresh milk infringing on UHT market space New entrants into aseptic packaging market; Tetra Pak losing competitive edge. (GA Packs price is about 10-15% lower than Tetra Pak) Alternative packaging methods for fresh milk

Key Challenges
Recycling:
Negative perception of Tetra Pak package recyclability Lack of infrastructure, equipment, and processes in place for extensive recycling process needed Risk of change in government recycling policy

HB Clad Plate manufactured from recycled Tetra Pak containers

Stakeholder Analysis
Suppliers
Millions of dairy farmers Tetra Pak

Processing plant (Customers)

Inner Mongolia Yili Group (Yili) China Mengniu Dairy Company (Mengniu)

Distribution

Consumers
UHT milk drinkers National School Milk Program

Stakeholders with impact on Milk Supply Chain

General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) Ministry of Health Renmin University of China (Renda Tetra Pak Dairy Research Centre) DeLaval (Sino-Sweden Dairy Industry Centre) Nai Ban (national milk office) Ministry of Agriculture Dairy Association of China (Virtual Dairy Farmers School)

Stakeholders with impact on Packaging Supply Chain

NGOs (eg. WWF) China Green Foundation State Forestry Administration Forest Stewardship Council Shandong Tianyi Plastic Co Ltd. Shandong Liacheng University (PolyAl Technology) China Packaging Federation Municipality recycling and waste management partners

Risk Management: Milk Safety

Suppliers
Training for dairy farmers and program for pastureland management to improve milk quality

Processing plant (Customers)

No impact on UHT milk processor quality control Didnt encourage product recall following scandals

Distribution

Consumers

Stakeholders with impact on Milk Supply Chain

Collaborated with DeLaval to create Sino-Sweden Dairy Industry Centre to provide Dairy Farming Proficiency training Tetra Pak and Renmin University of China created Renda Tetra Pak Dairy Research Centre to support raw milk production Launched Virtual Dairy Farmers school with Dairy Association of China and China Central Television

Stakeholders with impact on Packaging Supply Chain

Risk Management: Competition

Suppliers
Training Equipment financing Food product development

Processing plant (Customers)

Technology innovation Strategic Alliance Business Intelligence Support new plants Product diversity (primarily UHT) High packaging cost for customers

Distribution
Support for market development

Consumers
Cultivate the habit of drinking milk School milk programs Little to no impact on consumers fresh milk preference

Stakeholders with impact on Milk Supply Chain

Customers and consumers Government and government agencies (National School Milk Office, Ministry of Health, Ministry of Agriculture, AQSIQ) Risk that China may create stricter anti-trust laws

Stakeholders with impact on Packaging Supply Chain

Working with FSC, WWF, and CGF to promote the Forestry Guideline and Forest Certification for forest management. Working with CDA and government agencies to develop technicians and managers for pasture land management

Risk Management: Recycling

Working with government agencies
China Circular Economy Law The industrial standards for recycling

Tetra Pak Production

Renewable resources New recycling technologies Engineers training Evaluate performance

Collection of used TP package

Train waste collectors Higher waste prices Educate communities Collection network

Waste package processing

Technology development (Pyrolysis technology) Equipment leases Raw materials procurement

Products from recycling

HB clad plate Plastic-wood composite

Lack of infrastructure for recycling Risk of change in government recycling policy

Recommendations
Overall: Leverage stakeholder relationships to decrease risk of market share loss Milk Safety
Offer QC solution Suggest expansion of regulations

Recommendations
Competition
Further innovation with packaging Product diversification options Explore expansion of milk processor customer base

Recycling
Enhance relationship with government Work to defragment recycling supply chain

Appendix I

Appendix II
UHT packaging Company Starting Origin Entering in China market Number of employees Major Market Market Share in China Key Customers Key Advantages 1. Market leader in UHT 2. Technology innovation(IP) 1. Aseptic packaging 2. Filling machines 3. Processing solutions World's largest company of food packaging Tetra Pak 1951 Sweden 1972 22,000 170+ countries 70% (aseptic packaging) GA Pack 2001 China 2001 500+ China and European countries 9.6% (aseptic packaging) Mengniu and Yili Fresh milk packaging International Paper 1898 United States 1990 61,500 24+ 60%

Bright, Xin Xiwang, Sanyuan and Yantang 1. Market leader in Freash milk 1. Local company (i.e. lobbying government) 2. Diverse products and customers 2. Price 9% lower than Tetra Pak (consumer and commercial) Aseptic packaging World's 2nd largest supplier of roll-fed aseptic packaging Plastic lids and paper cups World's largest producer of plastic lids and paper cups

Main products Global position