Food Packaging Division Food Packaging improved value proposition The Food Packaging division reported sales of 103 MEUR, compared with 110 MEUR in 2014 and demonstrated that the company has been able to defend its market position despite highly competitive market dynamics. The slight decrease in sales was driven by a weak demand in Russia due to the overall economic situation, as well as by the impact of a customer phase-out decision made in 2013. The division took various measures to enable growth in the coming years, including improvements to its key account management and extending its geographical coverage. Product offering The Food Packaging division serves mainly two business segments: Food Service and Food & Consumer Goods. Food Service offers a wide range of functional packaging solutions such as clamshells, trays, cups and take-away boxes for take-away burger meals, Asian food, ice cream and others. These types of packaging is used for on-the-go food consumption requiring high barrier against moisture and oil. Growth potential is favourable in respect of large fast food chains, small and local food chains and products, and gas stations. The Food & Consumer Goods segment offers folding cartons for a wide range of products, such as cereals, convenience foods, dairy products, frozen foods, ice cream and pet food. There is also growth oportunities linked to the requirements for convenience packaging, driven by an increase in single-person households and a shift to ready meals. Highlights 2015 The acquisition of the European operations of MeadWestvaco Corporation (MWV) created new opportunities and strengthened AR Packaging’s and Food Packaging’s credibility in the market as a long-term player with strong growth ambitions. Customers have become very interested in exploring joint opportunities for innovation, growth and improved geographical coverage. New Food Service customers were acquired across Europe in the mid-sized and regional segment, including Hesburger in Finland, KFC France, Dunkin’ Donuts and LSG/Spiriant, a leading global airline caterer based in Germany. Safeboard® – a new packaging solution with an anti-grease coating used, for example, for burger meals – was launched during the year. Within the Food & Consumer Goods segment, De-Click – a new reclosable packaging for Nestlé infant formula – was launched. Other launches included a cereal carton packaging for Fazer Alku in Finland. The solution, designed without an inner liner, combined with a reclosable integrated pouring spout, was the winner of the Pro Carton ECMA Sustainability Award. Food Packaging also launched a new packaging for liquid bouillon stock – Nestlé Deli Soßen. Market and customers The overall market for Food Packaging is growing by about 1.5% annually and the market value is estimated at EUR 5 billion. Due to overcapacity and price pressure, the market is experiencing on-going consolidation, and competition is particularly intense within the Food & Consumer Goods segment. One notable development is supplier consolidation activities driven by brand-owners, aiming to leverage volumes, reduce complexity and develop strategic opportunities with major suppliers. The market for Food Service is expected to grow by 4.2%. There is a particularly strong demand for innovative packages based on sustainability, consumer perception and easy-to-use packaging features. This demand is driven by an increase in outlets such as different kinds of burger restaurants. Food Packaging is meeting this need through strong innovation and a broad product portfolio including all kinds of carton-based solutions. The main customers in the Food Service segment are McDonald’s, Burger King and Kentucky Fried Chicken. Food Service also sells to distributors and wholesalers. AR Packaging has developed an attractive offering with a more generic packaging design that enables the printing of the customers’ brands. The Food & Consumer Goods segment is fragmented and highly competitive, with pressure being exerted on prices and margins. The market for Food & Consumer Goods is expected to grow by 1.1% annually, with an addressable market value of EUR 3.2 billion. The main driver is the growth of frozen and chilled food, which is partly attributable to growth in single-person households and a shift to ready meals. An additional driver is the fact that carton-based packaging is ideal for printing the increasing amount of text and disclosure notices that are required. The main customers are Nestlé, Findus and Danone. Food Packaging is currently working on several projects to extend its product offering and broaden its customer portfolio. These include special packaging solutions developed using Futeco technology, described below. The division is also intensifying its commercial activities through its enhanced Key Account Management (KAM) organisation. Strong efforts in innovation AR Packaging introduced a new concept, SafeBoard, in which an anti-grease coating is applied to the Board. This concept is based on a new manufacturing process developed at A&R Carton in Cholet, France. SafeBoard provides flexibility and cost advantages over the competition. This new concept enhances consumer convenience and, among other applications, is used for clamshells and fried cartons. AR Packaging is continuing this type of coating development for other segments of the food market. AR Packaging’s development of Futeco (Future Technology Converting) offers customers opportunities to develop new, innovative and creative packaging solutions for premium packaging. In 2015, a number of new packages were developed, including Galaxy with printing for shiny, metallic effects. Other opportunities for the future based on Futeco include digital printing converting, 3D polar printing for holographic effects and printed ink for electronic lightening effects. Focus for 2016 An important goal for next year will be to further expand our participation with Food Packaging’s Key Accounts. With improved geographical representation in such markets as Russia and Southeastern Europe, combined with AR Packaging’s multi-technological capabilities, the company anticipates good opportunities for growth and thus for capturing market shares. Food Packaging will also devote resources to securing new customers, which will entail a strengthening of the sales organisation. In addition, Food Packaging will increase its efforts to develop new, unique products that meet customer requirements for innovative and cost-effective packaging solutions. The Futeco concept will be a strong contributor to the overall value proposition. De-Click comes with an “acoustic evidence” function, meaning that the person who closes the package hears a “click” and knows it is closed. VP Sales: Manuela Kiefer (Food) Sales (MEUR) 103 (110) Key competitive advantages for Food Packaging are: Strong geographical coverage in Europe. Broad product range in the Food & Consumer Goods and Food Service segments. Strong innovation capability, with both central and local development resources. The dedicated team operates an efficient service model for design, concept development and reproduction of branded samples delivery. In addition, the various factories have technical teams that help implement new, innovative concepts and products. High-quality service offering.