With foreign investment, consolidation and pressure to keep up with retailers' green requirements, Jill Park asks how corrugated firms are adapting to a changing sector

When Sociedad Anónima Industrias Celulosa Aragonesa (SAICA) acquired SCA's 19 UK corrugated plants for £100m in June 2008 the industry expected change. With a restructuring programme and a £250m investment at Manchester, that change came. Then, in January, the Spanish firm announced a further £42m investment to bring a number of the sites up to its required levels. These investments include a 3.3 corrugator for its Wigan facilities, due to start production in October, a 2.8 corrugator at Thrapston, as well as investments in Thatcham and Hartlepool.

SAICA's investment will provide its plants in the UK with state-of-the-art technology and the ability to produce the lighter-weight ‘performance papers' that are slowly creeping into the consciousness of packaging buyers. Performance boards are created using less fibre, but with the same functional abilities - the industry defines this board as corrugated case material based on paper of 100gsm or less and fluting of 90gsm or less, which offers almost the same performance as traditional CCM in 100-105gsm.

SAICA business development director Pascal Giraud says: "This knowledge in the field of performance packaging enables SAICA Pack to offer its UK customers innovative and environmentally friendly solutions to their packaging."

But, what are SAICA's competitors doing to compete? And how are companies preparing for the upturn? DS Smith is another integrated player that is heavily promoting its lightweight boards. St Regis, part of the DS Smith group, launched a lightweight high-quality paper a matter of weeks after its newly converted Kemsley Mill entered production.

Production of K-Light started at Kemsley in January, following a £104m investment. K-Light is 100% recycled and recyclable and available with flutings at 90gsm and liners at 100gsm. It is produced on a 6.9m-wide machine that can run at speeds of just under one kilometre an hour. "The real point about Kemsley is it's a mill producing with very good technology using minimum fibre and maximum performance," explains DS Smith corrugated sector director Tony Foster.

According to Foster, mills have "sweet spots" in terms of the grammages that they can deal with. Unsurprisingly, older mills have higher grammages as standard. "What we are finding is that scores of mills around Europe, including the UK, have closed. Often these are smaller sites where the cost of reinvesting would be too high," says Foster. "Big suppliers' mills are replacing smaller mills."

More with less
The Confederation of Paper Industries' corrugated sector manager Andrew Barnetson welcomes the investments in UK mills after so many have closed. "It's good for suppliers and for the domestic economy," he says.

Barnetson recognises the role lighter-weight papers will play in the future of the sector. "It's a very important focus. We are trying to do more with less," he says. Doing "more with less" benefits the industry both environmentally and commercially.

But where is the demand that is driving these investments? Corrugated is, after all, a mature sector. "For some years we've been looking at retail-ready packaging," says Barnetson, "but more recently we've got into point-of-sale displays and pallets." Retailers have embraced RRP and the area continues to grow in the recession, unlike the electricals sector which has been hit hard.

RRP now plays an important role in the sale of a product in supermarkets. But the role corrugated plays in the supply chain is often overlooked. It is here that Foster says clever buying can reduce costs. "The real key is how good packaging design can reduce costs in the supply chain," he says. "Packaging can leverage out many times its own value."

And this is where lightweight board made from lightweight papers come in, as Giles Foden, sales manager at West Midlands-based Quantum Print & Packaging, explains. "More recently, a push from the major retailers to reduce packaging waste and weight across all sectors has also seen the use of lighter-weight materials for packaging that are not only used for transit, but also to present the product on the shelf." The benefits of which are pallet optimisation and therefore reduced transport costs, meeting retailers' targets and optimising shelf space.

PricewaterhouseCoopers' director of global forest, paper and packaging industry practice Clive Suckling acknowledges that the lighter-weight papers are where the UK market appears to be going. "From a UK basis this capacity would seem to be needed and it is towards the lighter-weight paper, which is where the market is shifting to with all these costs and environmental concerns."

Supermarkets, of course, play a big role in the push towards lighter-weight papers. "The specification is largely decided by product suppliers in conjunction with our product managers," says Tesco's packaging technical manager Stephen Pizer.

Spreading the word
Pizer says that he seeks advice from suppliers on the most suitable board. One could argue that the industry has a responsibility to inform its customers what they can do and what can be done. In the transit packaging sector, for instance, knowledge of lighter-weight boards may not be as widespread as in the more commercial RRP sector.

Some believe the industry needs to do more to change that. Corrugated is a "flexible packaging medium", says Smurfit Kappa UK chief executive Clive Bowers. "Our industry can be very insular in thinking and won't often see how versatile our product really is."

Buyers are also more willing to alter board specifications than play with graphics, explains Quantum's Foden, who has noticed that as material prices have risen, customers have asked how they can cut costs without committing to more stock. "In general, we found that customers do not want to compromise on their graphic design, but they are open to ideas on how structural and material changes can be made to their packaging to help costs."

Yet, as demand for lightweight papers increases, what impact will this have on converters? Will they need to adapt their equipment to accommodate these lighter grades? According to the CPI's Barnetson, they won't. "The whole point of lightweight papers is that they can do the same job just as easily," he says.

Therefore, the investment of the large integrated players in this new technology can be used by the industry now. This can only serve to benefit them as the country comes out of recession and consumers start spending again. SAICA's financial strength, for example has allowed it to invest during these difficult times.

DS Smith, meanwhile, has actively sought to retain its skills base and capacity as well as utilise its waste where possible.  "We've actively developed our supply chain, collecting waste and using as much of it as we can," says Foster. "The objective is to emerge stronger with all our skills and capacity intact."

In order to emerge stronger when the upturn comes, the integrated companies are making bold investments. The resulting lighter-weight papers and boards have environmental and commercial benefits and can be easily run on existing converting equipment. As SAICA's Giraud explains: "It is a SAICA policy to strengthen in times of crisis in order to be in a better position when the economic situation improves."

LIGHTWEIGHT INVESTMENTS
SAICA
Sociedad Anónima Industrias Celulosa Aragonesa (SAICA) has allocated £42m to bring its UK plants up to group level. This includes a new 3.3 corrugator at its Wigan plant, a 2.8 corrugator at Thrapston and investments in Thatcham and Hartlepool. A further £250m paper mill is planned for Manchester. However, progress has momentarily halted on this as SAICA, in its own words, negotiates costs with suppliers as well as support from regional authorities.

DS Smith
K-Light is DS Smith’s latest lightweight grade. It is 100% recycled and recyclable and available with flutings at 90gsm and liners at 100gsm and produced on a 6.9m-wide machine that can run at speeds of just under one kilometre an hour. The machine was part of a £67m acquisition of the New Thames paper mill, also on the Kemsley site, from M-Real in February 2008. St Regis has since invested a further £37m in converting the site and uniting the Kemsley mill as one.

Mondi
Mondi has commenced production on its lightweight containerboard paper machine at its Swiecie mill in Poland this year. The Anglo-South African company has invested €305m in the new PM7 paper machine, which will produce 470,000 tonnes of board a year. The machines have already started rolling, and saleable production started in October. Mondi confirmed in March 2008 that the Swiecie Mill in Poland would be the location for its new machine.