Growth and changes were the hallmarks of 2018 for Tetra Pak. Growth in terms of business success and new solutions. Changes in terms of our external environment and internal organisation.
Pleasingly, growth was achieved in all three businesses, Packaging, Processing and Services. Overall, total net sales were €11.2 billion at prevailing exchange rates. At comparable exchange rates, net sales growth was 2.4 per cent compared with last year.
Let’s look now at 2018 in more detail.
Packaging Solutions business grew 0.5 per cent, landing at €9.3 billion net sales at prevailing exchange rates.
The growth came from the Services and Equipment business streams. Packaging Material net sales decreased 0.6 per cent despite a volume growth of 1.5 billion packs, while additional material net sales grew 6 per cent, supported by a strong growth of caps. The number of filing machines commissioned was lower than last year (463 versus 477 in 2017). Packaging Equipment net sales nevertheless increased 2.5 per cent mainly due to a favourable mix (more cash sales, less rentals) and the further deployment of external financing solutions.
Processing Solutions achieved €1.9 billion net sales at prevailing exchange rates, the highest in the history of the company with a growth rate of 12.8 per cent at comparable exchange rates. From a category perspective, almost half of the growth came from Dairy. Processing orders increased 6.2 per cent versus 2017 and reached €1.3 billion.
2018 was another strong year for Services with net sales hitting €1.5 billion at prevailing exchange rates, up 8.7 per cent from the previous year at comparable exchange rates. All categories and all clusters contributed to the growth. Maintenance net sales increased 9.2 per cent driven by organic growth across processing and packaging, and preventive maintenance, as well as further deployment of predictive maintenance and digitalisation.
From a geographical perspective, growth has been seen in four out of five clusters, with South Asia, East Asia & Oceania leading the growth at 7.9 per cent, mainly driven by Equipment and Services. In Greater China, net sales increased 5.0 per cent, with growth in all business streams.
These results have been achieved despite significant challenges as well as high volatility, uncertainty, complexity and ambiguity in the market. Economic volatility affected sales, especially in the Middle East. Competition continued to increase across several geographies. In the longer term, digitalisation and sustainability, as well as increasing competition, will continue to present both challenges and opportunities for our global businesses.
Our success lies in our ability to support customers to deliver products of outstanding quality and consumer appeal, while maintaining the highest standards of food safety, operational performance and sustainability.
In February we announced plans to change our organisation in ways that will make us easier to work with for customers and bring value to their business.
We are One Company with three businesses and we need to operate that way. In 2018 we restructured to increase efficiency and strengthen unity, collaboration and consistency across the company, ensuring our three businesses are all part of One Company, presenting a united face to the customer.
One powerful One Company enabler is the new Customer Experience (CX) programme which started in 2017. This is a vital check designed to collect instant feedback at the customer touchpoints that matter most and ensure that we respond quickly and in the right way. In CX, we now have a powerful tool that we can use to mobilise the whole organisation towards a One Company, Customer First mentality.
More initiatives were driven in 2018 to help establish a One Company mindset and enable collaboration across the organisation. The biggest, perhaps, is Smart Sales, which combines new customer relationship management (CRM), customer front-end, product configuration and marketing automation systems in a way that will revolutionise how we interact and share knowledge with customers. We believe this will facilitate collaboration and transparency, and drive standardisation.
Industry 4.0 and the idea of connected manufacturing is becoming increasingly pervasive. Over the next five years, food and beverage companies will seek to gain greater control of their respective supply chain to achieve full traceability of their products, increase efficiency and cut costs.
The digital transformation of our company and business is well underway and touches every operation and process of our organisation.
We have made a significant investment upfront and are prepared for the digital transformation, working with partners such as Microsoft, Siemens, Rockwell, Beckhoff, Avenade, and others.
In October 2018, we launched Tetra Pak® Plant Secure, a game changing plant management service that covers all the equipment and systems supplied by us and others, delivering tangible profitability results for the customer.
The new service starts with a detailed audit of all the equipment and systems across the customer’s value chain. This analysis, combined with our deep knowledge of the industry and benchmark data on food manufacturing, enables our specialists to identify opportunities, implement improvements across the customer’s entire operation. The results are tangible operational expenditure reduction and capital expenditure optimisation for the customer.
By launching this new service, we have the all-important first-mover advantages in the new territory of a connected food industry. We are determined to remain a leading partner of choice for the food and beverage industry, and we look forward to working with our customers, our colleagues and other stakeholders so that together we adapt to the changes in our industry and Protect What’s Good.
During the last year sustainability has risen higher than ever on the public agenda. Tetra Pak has a hard-earned reputation as an environmental leader, and we are committed to enhancing our leadership and supporting our customers’ sustainability agenda.
We were among the first companies to pledge support for the European Commission’s Plastics Strategy. We committed to work with industry partners to ensure that by 2030 recycling solutions are in place for all components of the beverage carton so they can be fully recycled across Europe; substantially increase the use of plastics made from renewable feedstock; and use recycled plastics, once they are validated as safe and are legally acceptable for use as a food contact material;
We have joined forces with global resource management company Veolia to enable all components of used beverage cartons collected within the European Union to be recycled by 2025;
We developed a straight paper straw and will launch a straw that is fully functional and meets global food standards. Our wider ambition is to supply the global market with more sustainable drink-from solutions while not compromising our strict food safety and ease-of-use requirements. Innovations in the pipeline include tethered caps and other integrated drink-from systems;
We were nominated for the third time on the CDP Supplier Climate A list and recognised for our contribution to sustainable forest management and supplier engagement to tackle climate change;
By mid-2018, half of our global electricity supply is sourced from renewable sources. This means we are firmly on course to meet our RE100 commitment of using only renewable electricity across all global operations by 2030;
Moreover, our packages are adding value to the customer’s environmental profile. In 2018, using our Tetra Top® package, JUST Water received the “Best Packaging Solution” award at the 2018 Global Bottled Water Congress.
We are determined to remain a partner of choice for the food and beverage industry. We believe now is the time to proactively embrace change, with speed and agility, and to strengthen our customer relationships, ensuring that we play a leading role in society as well as in the food industry.
With this intent, in October we hosted “Inside Tetra Pak”. In total, 327 customers from 149 companies in 63 countries attended. Over an intensive fortnight, we showcased our end-to-end expertise as one company, and how we are committed to adding value to their businesses.
At the same time, we are working on our long-term strategy, which will help us focus and accelerate critical success factors, both in the short and long term, supporting our ambition to meet the sustainability challenges, thrive in a digital economy and grow with our customers.
There is one final change I would like to mention. After 14 years as CEO I will step down as President & CEO of Tetra Pak on April 1, 2019. The Tetra Laval Group Board has appointed Adolfo Orive, previously our Cluster Vice President for North, Central and South America, as the new President & CEO. This is a timely moment for me to thank you, our customers, employees and partners, for our fantastic relationships over the past four decades.
I depart our company secure in the knowledge that our future is in safe hands. Adolfo has worked around the world in executive positions for us since joining in 1993, and brings a wealth of knowledge, experience and expertise to his new role. He is well respected by his colleagues, and well placed to support them and our customers in the years ahead.
I will continue to look out for news about Tetra Pak’s innovations and customer successes (old habits are hard to lose). With that, I thank my colleagues and the Board for their continued commitment, engagement and support, and wish Tetra Pak a very successful 2019.