Evaluating The Strengths and Weaknesses of Tetra Pak Company

With its headquarters located in Pully, Switzerland, Tetra Pak is an international food packaging and processing company. This company was founded in 1943 in Lund, Switzerland by a man of the name Ruben Rausing. In 2012 Tetra Pak did €11.155 billion in sales compared to €9.98 billion in 2010. As of 2010 Tetra Pak has 43 material packaging plants that serve over 170 countries worldwide. They have 23,425 employees and are currently the largest food packaging company in the world by sales.

Tetra Pak offers packaging solutions, filling machines and processing solutions for dairy, beverages, cheese, ice-cream and prepared foods. Along with processing, they also have distribution tools like accumulators, cap applicators, conveyors, crate packers, film wrappers, line controllers and straw applicators. They are heavily involved in environmental issues and believe in the statement “Renew, Reduce, Recycle and be Responsible: The Pillars of Environmental Responsibility and Business Sustainability. A package should save more than it costs.”

The specific customer target-base of Tetra Pak are the companies that need their foods and beverages packaged and processed. The ideology of Tetra Pak’s sustainability practices is not directly known by the general consumer even though many consumers have probably purchased a good that uses Tetra Pak technology. They are able to operate in more than one market because Tetra Pak’s functionality used for many products of a wide variety. Because each Tetra Pak package has the companies name on them, consumers in the market for a different range of goods can acknowledge this product.

Tetra Pak doesn’t have many competitors in the market; rather, it is competing against an entire market of producers that have found ways to reduce packaging costs without outsourcing. Some competitors include SIG Combibloc, a Swiss manufacturer, and a Chinese packaging company Greatview. Currently Tetra Pak dominates the market for processing and packaging goods but is currently being challenged by the innovations that producing companies have developed.

They are involved in a very niche industry and have dominated that industry because of the popularity of their products. The nature of their industry is B-to-B, where they work directly with business that need food and beverage processing and packaging. Because they don’t sell to individual customers in retail, they are able to cut marketing costs down by directly going to companies in need of their services. A handful of things can influence the business’ operating decisions. The more our environment suffers from industry, the higher need for sustainable products like this one will be needed. This market is very enticing to new entrants as there are a lack of firms in the market and a higher need for sustainable, cost-effective packaging. In the case of Tetra Pak India, as the middle class became wealthier, they had more money to spend on foods and beverages using Tetra Pak which increased company profitability.

The philosophy that Tetra Pak believes in is to reduce and recycle. Throughout their decision making plans, they consistently keep in mind how they can reduce their impact on the environment. One way they believed they could display their commitment to their four tenets of environmental sustainability was to focus on supporting post-consumer waste recycling programs. While the idea of reducing post-consumer waste is a straightforward concept, they do not have a “one size fits all” solution to recycling in every country. By 2010, roughly 20% of all their packs were recycled. Their goal by 2020 is to increase their recycling index to 40%, meaning approximately every 2 in 5 packs produced are recycled. They knew this would be difficult, so they turned to opportunities in countries where reaching this goal could be possible.

India held many opportunities for Tetra Pak. In 1988, they partnered with the National Dairy Development Board to deliver cartons of milk to the people of India. This brought them great revenues and allowed them to open 2 more factories in 2007. This can be attributed to India being the second-largest country by population and the rising amount of disposable income amongst the middle class. As more people purchased their products, the more post-consumer waste was created in India. Tetra Pak knew that recycling in India would be much different from programs in other countries; ultimately this turned out to be an opportunity where many of the advantages weighed out the disadvantages. The following are some advantages:

• Picking and selling waste was a source of livelihood for the vast majority of people living in abject poverty in the country.
• o Indian municipalities hire rag-pickers to recycle Tetra Paks and other waste which creates jobs for the lower class and increases TP’s overall recycling index score.
• Tetra Pak containers had a strong brand recognition in India which allowed for easy identification for rag-pickers.
• NGO’s in India were collaborating with municipalities to improve waste management efforts, such as sorting waste and recycling.
• o This was the first step of the waste value chain in end-to-end recycling which was segregating waste at the source.
• The hierarchy of scrap dealers and scrap collectors allowed Tetra Pak to purchase bales of PCC without having to manual extract or sort the waste.
• While Tetra Pak is committed to increasing their end-to-end recycling progress, the vast amount of TP products sold in India attribute to the majority of their recycling efforts worldwide. Implementing an efficient plan to increase their recycling index in India had a few disadvantages:
• It wasn’t worth the rag-pickers time to sort the TP cartons from the rest of the waste. There weren’t enough incentives or benefits from the scrap collectors that asked for TPs.
• TP cartons generally had residue of a sweet product, which attracted flies and rats.
• o This created health concerns for rag-pickers on top of the burdening and cumbersome physical effort required to sort these goods.
• Many manufacturers preferred burning the cartons rather than sending them for recycling, as they were concerned about fake products being sold in these cartons.

The process Tetra Pak uses to recycle these products would differ greatly in comparison to a program in another country, like Spain for example. In Spain, there isn’t a hierarchy of classes compared to that in India. In India, the untouchable class is the majority of rag-pickers, which are burdened with hard, unsanitary labor. Even though there is poverty in Spain, the average poor person would probably not be as inclined to do manual labor like that of someone in the untouchable class. Spain’s infrastructure also has better methods of waste management compared to the infrastructure in India. Ultimately, the demand per capita for TP products in Spain is significantly less than the demand in India. With less demand and better waste management policies, the environmental externalities created in Spain are exponentially lower than those in India.

Tetra Pak formed a bond with a recycling company called Daman Ganga. Daman Ganga was one of TP’s highest consumers of their recycled waste as it was used in their production of roof sheets. Tushar Shah that owns Daman Ganga almost had to shut down because he did not have a steady supply of waste to recycle. To increase the volume of feedstock to Shah’s recycling plant I would suggest increasing benefits for rag-pickers who collecthigh amounts of TP cartons. This would provide incentives for these lower class works to gather more cartons. While it would increase the cost of buying back TP bales, the cost can be pushed off to Daman Ganga in a mutual agreement about overall feedstock increase. The decrease in profit margin of recycled roof sheets caused by an increasing raw material expense would not surpass the additional gained revenue from upscaling production.

Overall, Tetra Pak is providing economic, social, and environment changes for people in India. It provides economic opportunities for those in the lower social class while promoting the idea of recycling and reusing within a country that lacks advanced infrastructure and efficient waste management programs. I take away from this case study the importance of recycling for B-to-B corporations and how the renewable resource industry is a sustainable industry.