Essel Propack plans to grow beyond oral care segment3 min read . Updated: 27 Jan 2015, 01:02 AM IST
Firm targeting at least 50% of revenue from the non-oral segment in two years, says Ashok Goel, managing director
Mumbai: Essel Propack Ltd, which supplies tubes and packaging for toothpaste makers and other consumer goods firms, is restructuring operations to grow beyond the oral care segment, a top company official said.
The company is now targeting at least 50% of revenue from the non-oral segment, said Ashok Goel, managing director, Essel Propack in an interview last week. He expects the company to achieve the target in the next two years.
Two years ago, around 12% of its revenue came from the non-oral care segment.
Two analysts tracking the sector, who did not want to be named, said the non-oral care segment is a high-margin business and that the packaging industry is growing rapidly due to high consumer spending and retail growth.
“Towards achieving the 50:50 revenue ratio (from oral and non oral care segment), we have put in three building blocks successfully," said Goel. “We brought in new machines with advanced technology, we added factories in various geographies and brought in a new team in the front end," he added. Consultancy firm Heidrick & Struggles International Inc. is helping the company with the restructuring.
In the oral care packaging industry, Essel currently controls 33% market share globally in terms of volume. It has units operating in countries such as the US, Mexico, Colombia, Poland, Germany, Egypt, Russia, China, Philippines and Indonesia, apart from India. These facilities cater to diverse FMCG and pharmaceutical brands that include cosmetics, personal care, pharmaceuticals, food and oral care, offering customized solutions.
In the last fiscal, Essel Propack, part of the $2.4 billion Essel Group, sold more than six billion plastic tubes, made in 25 factories in 11 countries.
The non-oral packaging products include tubes and packages for pharmaceuticals, cosmetics and toiletries.
In December, Essel Propack inaugurated its fifth plant in China, with the commissioning of EPSL (Essel Propack Suzhou Ltd) in Suzhou (East China) for the non-oral care category.
The primary focus of the new plant is beauty and cosmetic products, the company said in a statement.
This is the first phase of investment in EPSL, which has an annual tube supply capacity of 160 million tubes, and which will be more than doubled to 380 million annual tube supply capacity, the statement added. EPSL is looking to achieve a market share of 5.1% in China’s non-oral care tube market in 2015-16, fiscal, up from the current 3.2%.
The company has also installed a new machine in Egypt with the capability to produce laminated tubes for cosmetic brands, as buyers switch from jars to tubes in personal care products like hair gels. “Cosmetic products have much better revenues, asset turn and value addition compared to the other products in our portfolio. With two decades of experience in Egypt, this new business is certainly set to complement our growth and help us achieve our target of 50% revenue share from non-oral care business," Goel said in the statement in December.
Meanwhile, the Indian packaging industry is expected to become the fourth-largest in the world with revenues of $43.7 billion in 2016, according to Firstcall Research, a unit of Firstobject Technologies Ltd.
In a note dated 10 December 2014, Firstcall Research said that flexible plastic packaging was the fastest-growing packaging category in India, achieving a compounded annual growth rate of 16.6% and that the packaging industry benefited from strong growth in the Indian retail market.
Another report by McKinsey & Co. says there will be a 10-fold increase in the middle class population in India by 2025, which will further trigger consumption, benefiting the packaging industry.
In December, Essel Propack said Subhash Chandra, his immediate family members and the entities controlled by him and his immediate family members were no longer part of the company’s promoter group as part of a modified family arrangement.
Subhash Chandra is now a non-promoter non-executive director with the company. “He will still continue to be the chairman on the board of directors of the company," Essel Propack said. Chandra, his immediate family members and the entities controlled by them together hold 3.54% of Essel Propack’s share capital.
“The company was running as an independent company for the last so many years. This is just a modified family arrangement to endorse that," Goel said.