Continued growth in a year of transition

The year 2019 was one of transition. The external environment continued to evolve, with rapidly increasing expectations on sustainability, and greater demand for customisation, both from customers and consumers. From a business perspective, we grew our net sales despite economic and political volatility, pricing pressures and increasing competition. We introduced several new industry-firsts, continued investing for the future, and pushed the sustainability and quality agenda forward.

In addition to this, we had several new members in our Global Leadership Team, initiated various organisational changes to drive efficiencies, and launched a new strategy for 2030.

Business results 2019

We ended the year with total net sales of €11.5 billion at prevailing exchange rates, growing 0.5 per cent compared to 2018 at comparable exchange rates, with good
results on cash flow and return on sales.

Net sales, however, were short of our ambitions, due to a slower economic growth (global GDP growth in 2019 amounted to 2.9 per cent compared with 3.6 per cent in 2018) and continued economic and political volatility, especially in the Middle East and parts of Europe.   

The Packaging Solutions business registered net sales of €9.5 billion at prevailing exchange rates, a growth of 0.8 per cent at comparable exchange rates over 2018. Packaging Material net sales grew for the first time since 2015, driven by growth in Additional Material.

Packaging Material volume grew 0.6 per cent in terms of number of packs (ending the year with 191 billion packs), while seeing a decrease of 0.5 per cent in number of litres, reflecting a higher share of portion packs in the mix. Advanced Formats kept growing in pace, now accounting for more than one-third of our volumes.

Packaging equipment also saw net sales growth of 1.6 per cent at comparable exchange rates, following an acceleration in the last quarter of 2019.

Our Processing solutions business closed the year at €1.9 billion at prevailing exchange rates, down 1.1 per cent at comparable exchange rates from an all-time high achieved in 2018.

Processing Equipment net sales decreased 2.9 per cent at comparable exchange rates mainly due to lower than expected order backlog into 2019 and some large projects being delayed.

The Services business recorded net sales of €1.6 billion at prevailing exchange rates, with an increase of 4.5 per cent at comparable exchange rates, a slower growth compared to previous years. All clusters were able to deliver growth, across both Packaging and Processing, driven by Parts, Maintenance and Upgrades categories.

From a geographical perspective, cluster Europe and Central Asia was the fastest growing with net sales growth of 1.5 per cent at comparable exchange rates, mainly driven by a strong double-digit growth in Equipment sales.

Cluster Americas grew by 1.2 per cent at comparable exchange rates, delivering growth across all business streams.

Cluster Asia Pacific saw an increase of 1.0 per cent, with Packaging Material growing by 3.3 per cent at comparable exchange rates, the highest across all clusters.

Cluster Greater Middle East and Africa declined by 1.8 per cent at comparable exchange rates, negatively impacted by the volatile economic and political environment in markets such as Turkey, Yemen and Saudi Arabia, as well as competitive pressure in several geo­graphies. Packaging Material net sales were the most impacted, with a negative growth of 4.7 per cent at comparable exchange rates, which was partly offset by growth in Services and Equipment.

Leading the industry – Investing for the future

I am proud to say that with the relentless focus and dedication of our teams, we were able to launch many industry-firsts, taking a long-term view of the business.

We became the first company in the food and beverage carton industry to announce full-colour digital printing on carton packages, which will deliver new levels of customisation and flexibility to our customers.

We further harnessed the power of digital technology through the launch of the Connected Packaging platform, which will transform carton packages into interactive channels and full-scale data carriers, bringing a variety of benefits to producers, retailers and consumers.

Our concept of the ‘factory of the future’ looked at revolutionising the way food manufacturing plants operate, with human and AI collaboration at its core.

The in-line standardisation analyser was yet another industry-first, providing for continuous accurate measurement and control of protein and fat in dairy products, helping customers ensure consistent product quality and strengthening their profitability.

In 2019, we signed the first Tetra Pak^® Plant Secure contract, taking forward the benefits of asset management and digitalisation to customers, driving productivity and sustainability.

Other products launched during the year included the Tetra Stelo^™ Aseptic carton package, with a smoothly rounded, easy-grip shape and a one-step opening, as well as the Tetra Classic^® Aseptic 65ml Cube package, which is designed to allow every six packages to form a cube, to optimise the use of space in distribution and storage.

There was a significant ramp-up in our category development efforts with customers, especially in protein drinks, drinking yogurt and water.

We also made significant investments in our supply chain infrastructure, with a new state-of-the-art carton packaging material factory in Vietnam and a world-class cheese production centre in Poland, reinforcing our long-term commitment to our customers.

“I’m confident that with Strategy 2030, we will have even more opportunities to make food safe and available, everywhere, and keep our promise to the world: to protect what’s good.”

New milestones in our sustainability journey

The demands on sustainability reached an all-time high in 2019, with stringent legislative developments across the world and rapidly increasing stakeholder expectations from the industry to solve pressing environmental issues. We too accelerated our efforts in this area, significantly ramping up investments in product development and responsible sourcing as well as forging partnerships with industry stakeholders.

Some of the key achievements included:

•  The launch of the first paper straws for carton packaging in Europe, which is an important step in our vision to deliver a package made entirely from plant-based packaging materials, contributing to a low-carbon circular economy.

•  We became the first company in the food and beverage industry, offering packaging with fully traceable supply chain of plant-based polymers certified by Bonsucro, reinforcing our commitment to drive transparency in our sustainability solutions.

•  Inclusion in the top 1 per cent of companies assessed by EcoVadis in the Environment and Sustainable Procurement category.

•  Surpassing the 500 billion FSC^™ labelled package mark, reinforcing the company’s commitment to promote responsible sourcing.

•  Double ‘A’ score awarded by Carbon Disclosure Project (CDP), for our leading efforts against climate change and protecting forests.

•  Finally, we launched an ambitious new initiative – Planet Positive, a programme that urges industry stakeholders to take a broader view of sustainability, ensuring that the sum total of our activities has a positive impact on the planet.

One Company initiatives

We continued to drive the ‘One Company’ approach within the organisation through various initiatives in 2019.

We optimised various functions to drive efficiencies and improve the way of working in order to be more productive and customer centric.

The Customer Experience (CX) programme completed its second year, giving us valuable customer feedback for 8 different touch points. In 2019, we proudly reported a Net Promoter score that was above the world class B2B benchmark.

The OHS Culture Change programme was rolled out to all employees in 2019, resulting in a significant reduction in our Lost Time Accident rate.

We also launched a programme on Quality across the three businesses, to create customer -centric quality attributes, take a system approach to quality ownership, eradicate critical systematic issues and drive a Quality culture and mindset.

Other initiatives included the Smart Sales pilot and roll-out, and a LinkedIn learning programme to improve employee competence and efficiency.

Launch of Strategy 2030

In order to drive profitable, sustainable growth in the decade ahead, we also launched Strategy 2030, taking a long-term view of the industry and the business.

As part of the strategy development process, we spoke to customers and industry experts about how the world might look in the next decade, and identified five key trends that will radically reshape the food and beverage value chain:

•  Growth with regionalisation: The expanding global population will create more consumers, categories and market segments, each with their own specific needs requiring customised solutions.

•  Sustainability: Climate change and resource scarcity will impact our society and the food industry like never before, requiring efforts across the value chain.

•  Technology: There will be new opportunities from digital, science and technological advances.

•  Consumer demands: With access to more information than ever before, consumers will expect the industry to pave new pathways to health and nutrition.

•  Supply chain complexity: Supply chains will become even more complex through growing connectivity to external channels and demand for personalisation.

These trends provided valuable business insights and formed the basis of our 2030 ambition, to be the integration partner for the food industry, providing leading sustainable solutions, optimal outcomes and the best customer experience.

Our 2030 strategy rests on four key pillars:

•  Deliver food safety and the best quality: Be the undisputed leader in quality in the eyes of our customers.

•  Lead the sustainability transformation: Prioritise development investments to improve the recyclability of our packaging and reinforce the benefits of a low-carbon, circular economy.

•  Integrate and optimise customer operations: Offer end-to-end solutions to guarantee outcomes, reduce risks and continuously improve results.

•  Innovate for customer growth: Deliver a constant stream of synchronised and differentiated packaging, processing, services and product innovation to create new value.

Looking ahead at 2020

The year 2020 unfortunately began with the outbreak of COVID-19, declared a pandemic by the World Health Organisation (WHO). It is an unprecedented event which is affecting communities world-wide, and its full impact on the business and economy is yet to be seen.

Against this backdrop, we remain committed towards our promise to protect what’s good, focusing on protecting people; Keeping people safe, our own employees as well as those of our customers and other stakeholders. As well as Protecting food; Ensuring we help our customers maintain food supply for communities worldwide.

To achieve this, we will continue to work closely with our customers, suppliers, govern­ments and local authorities.

We sincerely hope that with the combined efforts of the entire global community, normalcy will restore soon, and we will be able to focus on our near-term objectives:

•  Growth in all three businesses, especially with packaging material

•  Step change to provide the best quality to our customers

•  Accelerate sustainability efforts with low carbon circular economy solutions

•  Driving productivity across the board, transforming the way we work

The external environment will continue to evolve and keep throwing new challenges at us, but I strongly believe that we have the people, the customers, and the legacy to build on for a successful 2020 and beyond.

Adolfo Orive