After establishing itself in the European, Australasian, Latin and North American markets, SCA now looks for growth in the Indian market - a profitable proposition, given the rising disposable income and hygiene awareness amongst urban Indians.
To those who are not familiar with it, Svenska Cellulosa Aktiebolaget (SCA) may sound a bit of a tongue-twister. But actually, the company is a European giant, a Swedish paper and forest concern, which is now foraying into the Indian market. Jan Åström is SCA's president and CEO. The company makes hand and face tissues as well as other personal care products, including baby and adult diapers as well as feminine hygiene products like sanitary napkins and panty liners. Annual sales in 2004 amounted to 10 billion Euros ($12.5 billion).
Its packaging division produces corrugated board and containerboard, apart from designing and making consumer and industrial packaging. Its forest group churns out paper (including newsprint), pulp, timber, solid-wood products and forest-based biofuels. SCA owns about five million acres of managed forests in Sweden, but is also Europe's foremost user of recycled paper.
Europe's leading supplier of tissue and personal care products, SCA is the global market leader for incontinence products, and the third-largest supplier of away-from-home (AFH) tissue in North America. SCA is also the market leader in tissue in Australasia and second-largest in Latin America. The company also has operations in Africa and Asia. Expansion areas identified are mainly in Asia, as well as central and eastern Europe. Sales by business area are - approximately - hygiene products 50 per cent, packaging 35 per cent, forest products 14 per cent and others 1 per cent.
Incorporated in 1929 as a holding company for 10 forest industry companies producing sawn goods and paper pulp in northern Sweden, SCA is now headquartered in Gottenberg, Sweden and employs approximately 40,000 people in 40 countries. Swedish investment company Industrivarden controls 30 per cent of SCA.
SCA's consumer tissue products include toilet paper, kitchen rolls, napkins, away-from-home tissue (toilet tissue, handwiping products, napkins and wipers for industrial, food service and institutional use), incontinence products, baby diapers and feminine hygiene products (sanitary napkins, panty liners and tampons).
SCA is the market leader in consumer tissue in Europe with a 22 per cent share. It is also Europe's largest supplier of retailers' brands. Its main consumer brands are Danke, Edet, Velvet, Zewa (tissue), Libero (baby diapers), Libresse (feminine hygiene products) and Tena (incontinence products). Products in the away-from-home segment - the one being brought into India first - are sold mainly under the Tork brand.
The AFH market is the company's initial focus in India. In this sector, operations are based primarily on sales of tissue products to corporate customers in the industrial sector - hotels, restaurants, hospitals and other institutions, as well as industrial caterers. The market consists of four principal product areas: toilet tissue, hand-wiping products, napkins and wipers for industrial use. There are also various types of hygienic dispensing systems and services.
SCA's AFH operations have annual sales of approximately 1.28 billion Euros ($1.6 billion) and employ 5,300 personnel. It sells in 35 countries in Europe, North and South America, and the Asia-Pacific region. Europe and North America account for more than 90 per cent of SCA's total AFH sales.
By acquiring Carter Holt Harvey in 2004, SCA gained a leading position in Australia and New Zealand. Its presence in the Latin American market increased through acquisition of the Mexican company Copamex, also in 2004. Most of SCA's AFH products are sold under the global brand Tork, but there are also several regional brands in parallel.
Worldwide, SCA is the third-largest manufacturer of AFH tissue products, with a 16 per cent market share. The Kimberly Clark Corporation is the world's largest, with a 20 per cent market share, followed by the Georgia-Pacific Corporation, which has 19 per cent. However, it is second in the Asia-Pacific region, where it has a 6 per cent market share, compared to Kimberly Clark's 21 per cent.
One of the reasons why Asia is such an area of focus is the rapidly booming economies of India, China and the Asean countries, but also the extremely low consumption of AFH tissue products in the region. Compared to the annual per capita AFH consumption of 6.9 kg in North America and 2 kg in Europe, the Asia-Pacific region accounts for a meagre 300 g per annum, even less than the world average and Africa's consumption of 700 g. Given rapidly rising levels of disposable income, this represents an unparalleled opportunity.
SCA commercial director Reine Hagman estimates that India's potential AFH tissue market is as high as Rs700 million. Eight cities contribute around 85 per cent of the sales, with Mumbai and Delhi alone account for 35 per cent. He expects that cities with high tourist movements and hotels (in Rajasthan, Goa and Kerala) will also have a high consumption of AFH tissues.
Incontinence products - the second area which SCA is planning for its entry into India - are used for protection against mild bladder problems and more serious incontinence problems, conditions that afflict five to seven per cent of the world's population.
This includes everything, from large absorbent diapers to extremely thin protective pads. SCA is the world's leading supplier of incontinence products, with a global market share of 26 per cent. It is also the market leader in Europe with a 40 per cent share, and the third-largest player in North America, with a market share of 19 per cent.
SCA's global Tena brand continues to grow in existing and new markets. In the US retail sector, these products are also marketed under the Serenity brand.
SCA is the market leader in the Nordic region with its Libero brand of baby diapers, with a 54 per cent market share. Libero is also growing sharply in Eastern Europe and particularly in Russia, where SCA is the third-largest player in the branded products' segment.
Feminine hygiene products
Sanitary pads, panty liners and tampons made by SCA are marketed under the brand names Libresse, Nana, Bodyform, Saba and Nuvenia. A large proportion of feminine hygiene product sales take place in new markets like Latin America, Australia and South Africa. SCA is also a leading supplier in Colombia, Mexico, Australia and New Zealand. In Europe, SCA is the third-largest player with a nine per cent market.
Paper making is generally considered a 'dirty' industry which produces lots of pollutants, and SCA is proud of its impeccable environmental record. SCA products are produced nearly exclusively from renewable and recyclable materials.
For the past many years, SCA has been continuously reducing its emissions of carbon dioxide from fossil fuels relative to production levels, reducing the proportion of waste deposited in landfills and establishing procedures to ensure that wood-based materials used in its process do not come from rainforests and other controversial sources. In addition, the yearly net growth of SCA forests absorbs about one million tonnes of carbon dioxide per year.
SCA is included in the FTSE4Good Global Index, jointly managed by the London Stock Exchange and Financial Times Stock Exchange Indices, which rates companies on their social and environmental performance. It has also been accepted for inclusion in the European ethical investment register ETHIBEL. The company is rated as a 'sector leader' on the Norwegian Storebrand environmental index and No.3 on the social index.
SCA's local hygiene operations in Southeast Asia have donated products to hospitals and relief organisations to support the victims in the region. In addition, SCA and its employees are also providing direct financial aid totaling approximately 5.5 lakh Euros ($7 lakh or Rs3 crore).
The division's commercial tissues serve "away from home" markets such as hospitals, restaurants, businesses, institutions and janitorial supply firms.
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