Alcan invests in growing Russian packaging market
and equip two new Russian plants - a clear indication that foreign
firms are beginning to take notice of the Russian packaging market,
writes Anthony Fletcher.
Alcan says that the Moscow site will focus on flexible packaging for the confectionery and dairy markets and that the St Petersburg site will be dedicated to tobacco packaging. These projects are a part of Alcan Packaging's strategy to develop its geographic footprint in growing economies.
Russia's packaging industry currently imports some $2 billion worth of foreign packaging materials and equipment annually, and increasingly needs modern packaging materials and machinery to improve the look and quality of packaging to make domestic products more competitive with imported packaged goods. Alcan's plan to start production within the country represents a clear attempt to penetrate a growing market from a domestic base.
"The Russian packaging market represents an attractive growth opportunity and is strategically important to Alcan," said Christel Bories, president and chief executive officer of Alcan Packaging.
"Alcan Packaging has established a leading position in the Russian rotogravure food flexibles market and it is our intention to achieve the same in tobacco packaging. By creating a local manufacturing presence, Alcan aims to better serve customer needs and to deliver a full range of high quality products."
The Moscow food facility represents an initial investment of approximately $25 million for the construction of the greenfield facility and equipment to support print, lamination and die-cut capabilities. The greenfield tobacco packaging site is mainly focused on carton production, and will require an initial investment of approximately $30 million.
Production will begin before the end of April 2006 in both facilities. More than 100 people will be employed in the food flexibles plant and 120 in the tobacco packaging operation.
Although Russian producers meet as much as two-thirds of demand in the overall packaging materials market, over a billion dollars worth is still imported. According to Sergey Minko, a commercial specialist with the Foreign Commercial Service at the US Embassy in Moscow, companies that sell printed materials and packaging films are most successful in this market, selling $290 million worth of materials to Russia a year.
Foreign suppliers provide 25 per cent of the corrugated market ($75 million annually), 40 per cent of cardboard boxes ($82 million annually), 65 per cent of cardboard, 45-55 per cent of labels, and 70 per cent of label paper.
Alcan's packaging business has been performing well of late. Recently published third quarter results showed an increase in operating profit, despite historically high raw material prices. Alcan's packaging business group profit (BGP) for the third quarter was $162 million, up $73 million from the year-ago quarter.
The division is truly global, with more than 100 operations and accounting for more than $3.5 billion in annual revenues.