Having spent 25 years at Tetra Pak, Dennis Jönsson is steeped in the ethos of the iconic Swedish packaging giant. But dyed in the wool or not, the new CEO displays a fresh outlook and vision for the company. Dean Best met Jönsson to find out more about his plans to develop new markets and take full advantage of Tetra Pak’s green credentials.
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The story behind Tetra Pak, one of the most iconic names in the food and beverage industry, is well-known.
From its origins in the first half of 20th century, Tetra Pak, a company based on the principle of using low-cost packaging to reduce waste and improve food hygiene, grew to become a multi-billion dollar enterprise with a presence in all corners of the globe. Indeed, it could be argued that Tetra Pak changed the way food is distributed around the world.
In recent years, however, with sales maturing in its traditional Western markets, Tetra Pak has been forced to take stock of its business, while at the same time trying to stay true to the values and beliefs of founder Dr. Ruben Rausing, a man who coined the phrase: “A package should save more than it costs.”
In that sense, Tetra Laval, the holding company behind Tetra Pak, chose wisely when it named a new man to take charge of the packaging giant at the start of 2006. Dennis Jönsson has spent almost 25 years at Tetra Pak, representing the company in markets including the US and Mexico. The 50-year-old Jönsson has spent long enough at Tetra Pak to be instilled with the company’s values – but is firm in his belief that the group needs to carve out new markets to, as he puts it, “attain future success”.
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By GlobalData |
Dennis Jönsson, President and CEO, Tetra Pak |
“I’m new as CEO – but I’m not new at the company,” a relaxed Jönsson tells just-food at Tetra Pak’s HQ in southern Sweden. “Because of that, I have a lot of respect for my predecessors and what they have done and built. I am trying to live up to their vision. However, he adds: “At the same time, it is my job to highlight the weaknesses and vulnerabilities that we have as a business.”
On the face of it, Tetra Pak is anything but vulnerable. Last year, the company saw sales rise by over 5% to more than EUR8.5m (US$11.6bn) – robust growth for a group of its size. Nevertheless, that growth came from the more emerging markets of Asia, Latin America and Eastern Europe. As Jönsson admits, volumes in Tetra Pak’s “advanced markets” of the US, Europe and Japan have been, at best, flat.
In those markets, Tetra Pak has faced growing competition from plastic packaging, while the changing nature of the packaged food sector, particularly in terms of consolidation of suppliers and retailers, has placed pressure on the business.
“There has been tremendous pressure on [our] margins due to consolidation in the industry, while there is tremendous pressure that retailers are placing on its customers, which is forcing them to pass that pressure on to us,” Jönsson says. Back in 1990, some 150 customers accounted for 50% of Tetra Pak’s annual revenue; now, half of the company’s sales are made to just 25 companies.
Jönsson believes that level of consolidation has forced Tetra Pak, at least in Western markets, to really zero in on cost. “We have to find more efficient ways of providing our products and services. We supply products for what is very much a commodity-driven industry. We have to think about cost.” Efficiency and cost – two clarion calls from the days of Dr. Rausing.
A third key value from the Rausing era – to reduce waste – could provide Tetra Pak with something of a competitive advantage in the fiercely competitive markets of the West. Plastic, the chief rival to the carton, has put pressure on Tetra Pak in its two core categories – milk and juices.
However, with growing environmental concern, particularly among Western consumers, Tetra Pak is flagging up its “green” credentials. Both plastic and carton are technically recyclable but only carton comes from renewable resources. Tetra Pak has spent the last few years making it easier for consumers to recycle carton – witness the schemes with numerous local authorities in the UK – while also publicly stating its goal to reduce its carbon dioxide emissions by 10% by 2010.
Tetra Pak’s belief in sustainability goes back to the birth of the company but Jönsson believes it is vital that the company continues to follow those values. “Retailers are leading the growing environmental awareness and they are tapping into the concerns of consumers,” Jönsson says. “This is here to stay and it is something that will be part of the day-to-day way that we conduct our business if we want to remain preferred suppliers to retailers.”
While Tetra Pak is working hard to maintain a healthy position in the West, the emerging markets of the East are also keeping the company busy. Tetra Pak first signaled its ambition to expand its presence in regions like Asia and Latin America back in 1999 and Jönsson is a firm believer in the promise of such markets.
“We can’t rest on past success to attain future success,” Jönsson says. “In developing markets, there is a tremendous potential for growth. For instance, 50% of the white milk consumed today is unpacked. We see a tremendous opportunity for growth in markets like India and Pakistan.”
Jönsson points to Tetra Pak’s ability to safely package ambient milk as vital if the company is to succeed in developing markets. “In many countries, chilled distribution doesn’t exist in a way that it can be efficiently used and to build it up is a tremendous cost,” Jönsson says. “The challenge is to leverage ambient food production so you do not need the costly and difficult investment in chilled distribution channels.”
Executives at the helm of multinational companies, faced with stagnant sales in the West, often talk up the potential of emerging markets for providing new outlets for growth in the future. This potential, however, is often clouded by numerous variables – demographic change, vagaries in consumer demand, the distribution of wealth, supply issues to name but a few. Often, one is left with the impression that although the potential is no doubt there, few executives really know if their companies and products will ultimately succeed in what is inevitably a long-term game.
To be fair to Tetra Pak, it is already enjoying some success. The company’s two largest customers (by volume) are Chinese; just eight years ago, Tetra Pak was struggling to get any kind of presence in China. But in 1999, the Chinese government decided to vigorously promote milk consumption, particularly among schoolchildren.
“When you look at how many years we tried to develop the dairy industry [in China] and nothing happened… you start to think: ‘Is this possible?’” Jönsson says. “China only had juices and drinks – that’s all we saw for 10 years until we started working with the Government.”
Jönsson says such a pattern is common in most emerging markets and believes that other Asian countries could follow China’s lead – with Tetra Pak well-placed to benefit. “In some of these [emerging] markets, we really started with juices and nectars. Then, we find that there is interest from governments and you have private industry willing to bet. Then consumers catch on. A lot of Asian companies are looking at what happened in China.”
Jönsson admits that “nothing much is happening” for Tetra Pak in India at the moment but insists that there is an “opportunity” due to the rapid growth of the organized retail sector. He says: “Retail is changing very rapidly; there’s Reliance investing and that’s drawn in other companies like Wal-Mart and Metro. We see an opportunity there.”
Seeking out such opportunities was central to the very birth of Tetra Pak. And it seems that Jönsson has the capability to follow in those giant footsteps of Dr. Rausing.
