The role of packaging and labelling in the pharmaceutical industry has grown substantially over the past decade. In 2002, the overall demand for pharmaceutical packaging reached $15 billion. This is an increase of close to 50 per cent since 1996.
Essel Propack, a leading speciality packaging company in the world, is promoted by Essel Group. Essel Propack, headquartered in India, manufacturers laminated and plastic tubes. The company provides packaging solutions to toothpaste, pharmaceuticals, cosmetics, food and industrial sectors all over the world. The company has state-of-the-art manufacturing facilities in 13 countries with 20 plants across the globe.
Nilay Guha, Director-Strategic Planning (Global), Essel Propack speaks to Reghu Balakrishnan of Pharmabiz about the latest trends in the fast growing packaging industry.
Excerpts
How do you place Essel in global packaging industry? How much is its involvement pharmaceutical sector?
It is difficult to comment on the packaging industry in general unless the scope is defined more clearly. That is, it would be different for flexibles, rigids, specialities, tubes, etc.. The laminated tube industry has been growing at about 4-5 per cent both globally as well as in India. The pharmaceutical segment contributed to less than 2 per cent of Essel's volume six years ago. Today, about 12 per cent of the volume in India is from the pharmaceutical segment. There is thus a great deal of focus on the pharmaceutical segment at Essel. Essel is the largest player in laminated tubes globally. We have more than 70 per cent market share in India and 32 per cent market share globally.
What are the latest advances in the packaging industry, especially in pharmaceutical industry?
Latest technologies are manifested in the form of new materials, new structures (substrates), new manufacturing technologies, state of the art printing and decorating systems and new manufacturing systems and processes.
For instance, Essel realized that a large portion of the tube requirements in the pharmaceutical industry is in small sizes i.e. 13mm dia to 19 mm dia. Also there are constraints on pricing of many products because of DPCO. Essel has therefore developed a revolutionary, state-of-the-art tube, manufacturing technology that is especially geared towards these smaller diameters and allows the tubes to be priced extremely competitively even when compared to aluminum tubes, which are currently used in the pharmaceutical industry. In addition Essel has developed special laminates that are not only suitable for these small diameters but are also designed to withstand aggressive ingredients. Thus Essel laminated tubes allow for hygienic and aesthetic packaging of pharmaceutical products at an economical cost while doing away with some of the problems associated with aluminum tubes, such as lacquer cracking and transit damage.
Nowadays most of the technologies mainly focus on counterfiet-proof innovations which include features incorporated from security printing, thermochromic or photochromic systems, holographic laminates, patterened shoulders (on tubes), etc. Essel has pioneered the use of all these technologies and they are currently available for commercialization.
The costs of raw materials are reportedly on the rise. How do you manage to maintain the prices of your products steady despite the high raw material costs?
Essel has state of the art R&D facilities at its laminate development centres in India and China. Essel also has strong programmes involving sharing of intellectual property and joint development with its business partners -both raw material as well as machinery suppliers. This allows us to drive and sustain our leadership position in research and innovation. It is through research and innovation that we are able to partially offset the increases in raw material prices. It should be noted, however, that the cost and consequent price of a particular structure increases as the price of inputs increases. The challenge is then to replace this structure with another structure that absorbs the full impact of the increase. In other words, if the price of apples increased then the price of apple pie would increase but if apple pie were replaced by banana pie then one could offset the price increase, provided banana pie tasted somewhat close to apple pie.
In some cases, technology actually helps to keep prices in check. In other cases, there are costs associated with innovation which could be offset by greater market share or higher penetration on the part of our customers. However, I think prices are not increasing in the same level as the prices of raw material increases.
Your annual report says your global sales have increased by 25% and international operation has contributed 67% of the total sales. Does this means you are focussing more on the international markets rather than domestic market?
That is not true. We focus on international market. But is not at the expanse of Indian market. It is true that we had separate strategy for global market. We have separate teams for each country to strengthen the business. In 1993, when we started, the 100 per cent of revenue came from India. When we expanded our business, naturally, the percentage of revenue from outside increased. Comparing to the total revenue, revenue in India has come down. That does not mean that concentration is not more on global market.
Forbes magazine in last year has selected Essel Propack as one of the best 1 billion companies in India. What are the major factors that led to Essel's achievement?
We are the world's largest laminated tube company with 20 factories in 13 countries. We have grown from very modest beginnings to our present size and scope. Almost all of the most respected and admired companies in oral care, cosmetics and pharmaceuticals are our customers.
Could you brief us on Essel's future plans?
We are manufacturing in 13 countries through 20 plants. We have firm roots in US and China and we are planning to make big in Europe also. With the acquisition of Arista, a UK-based plastic tube company in August 2004, we have expanded our capacities and now have acquired Telcon packaging, a laminated tube company. This acquisition is expected to spearhead the company's growth in the European market for laminated tubes. Our commercial operations of Russian plant have commenced in March 2005. We are investing $ 15 million for our manufacturing facility at Danville, USA. The expansion is expected to allow the company to supply laminated tubes and caps & closures to the toothpaste and cosmetic product companies in the USA. Every major toothpaste, cosmetics and pharmaceutical company is our client. We intend to continue on our path of aggressive growth and expansion.